Tuesday, August 21, 2012

Middle Seat Pondering: Aviation’s Three Progresses & Three Dilemmas

Airline may not be the industry with most of news, surely it’s an industry full of paradox: there are both excitement and frustration; regulation & chaos; the higher operational cost & razor thin profit, the golden old days & lost decade; the higher into the sky and lower as underdog, both as economy’s barometer and milk cow for federal tax; it’s a technology business in the cloud, and the retailers with wings;  though, the industry has been running for more than half century, it still takes energy, and inspiration to find its mojo.

In last couple of years, Airline do make some modest profit and recover back to the right track, most importantly, the industry continue to make impressive progress in a few key areas matter for customers, matter for nations and matter for economy: 

 1.  Significant Operational Improvement


According to the Department of Transportation (DOT) Air Travel Consumer Report released recently, 80.7 percent of flights arrived within 15 minutes of scheduled arrival time in June 2012 – a nearly 4 percentage point improvement from the same month last year. The industry has posted year-over-year gains in each of the past nine months. Also 99.67 percent of all U.S. airline passengers had their bags properly delivered, an all-time record for any June since the government began keeping records in 1988; the previous record was set in June 2011. The May baggage-handling performance represented the 13th consecutive month of year-over-year improvement. The two areas of improvement are related: When flights are late, bags often miss their connection.  If the current pace continues, the airlines will beat their best full-year performance, recorded in 1991, when nearly 83 percent of flights arrived on time. Airline also set the highest safety record in aviation history recently.

Why do these operational improvements so matter for airlines? When flights are on time, it isn’t just good for passengers – it also helps the airlines’ bottom lines; statistically, it costs an average of $75 a minute to operate a plane. Last year, domestic delays cost airlines an estimated $5.2 billion. U.S. airlines made a combined $577 million in profit last year. Moreover, it cost industry 74million/year due to bad experiences from delays, cancellations and poor communication of changes; 58% customers’ bad experiences are caused by similar reasons, and 70% of delays and cancellations are due to factors within the control of airline

“Our member airlines are delivering levels of customer service that no other industry, given its complexity, matches and are working to make air travel even more efficient for passengers and shippers,” said A4A President and CEO Nicholas E. Calio. “Thanks to ongoing operational improvements throughout the system, airlines are delivering a strong on-time performance."


 2. Make Some Profit

The last decade is the lost decade for Airlines, due to economy tsunami, human calamity, nature disaster and flying fuel cost., etc, this is the industry faces more uncertainty, competition and complexity than any other industry, for years U.S. airlines have operated under a tax, regulatory and infrastructure environment that has made it increasingly difficult to be sustainably profitable and compete globally.

Airline took innovative approach to shape up the ancillary revenue model, go beyond the one size fitting all-take anyone from anywhere to everywhere, the change in model last two years enabled airlines to achieve razor-thin profits. For all of 2011, U.S. airlines earned less than $600 million or 81 cents per enplaned passenger. When the airlines are able to be sustainably profitable, everybody wins. A profitable airline industry can support more jobs, enable airlines to reinvest in their product with new planes and provide greater choices for customers, it enables the benevolent business life cycle for transportation and tourism industry overall.

Furthermore, Airline is barometer of national economy, an unprofitable industry will be forced to cuts routes and flights, leading to fewer consumer choices, frustration and fewer jobs,  become the burden for community & society, and directly or indirectly affect customers’ happiness index, or business’s optimism indicator.  

 3. Invest in Future


NestGen: Besides grasping current opportunity to run Airline as more healthy business, Airline also ally to advocate & invest NexGen air traffic system, According to the Federal Aviation Administration, NextGen promises to make air travel more convenient and dependable while flights remain safe, secure and hassle-free. Delays are estimated to be reduced by 38 percent by 2020, providing approximately $24 billion in cumulative benefits while saving 1.4 billion gallons of fuel and related emissions.

BioFuel: fuel becomes key factor to make and break an Airline these days. Forward-looking, global leading Airlines also pioneer to experiment on biofuel, it takes cross-industrial collaboration and global collective value chain on shared quest to advance sustainable biofuels. Airlines also promises to look at advancing biofuels that will support sustainability standards, collaborate as part of the group with top organizations to create biofuels certification criteria, and advance making aviation biofuels more attractive in the market. It will significantly benefit industry if the solutions can be found to make alternative fuel available at commercial scale and secure a sustainable future for aviation, it’s also one of many recent initiatives it has engaged in to promote more environmentally friendly air travel.

Regardless such impressive progresses made by Airlines, it still faces more dilemmas to achieve true operational excellence, customer satisfaction and high-performance result.

Below are some dilemmas facing Aviation:

1.   From “Leg Room” Pitch to Elevator Pitch


Airline has its own unique pitch which is widely accepted as the standard. Airlines front-to-rear space is measured by "pitch," defined as the distance between any given point on a seat to the identical point on the seat in the next row forward or to the rear. Airline can adjust pitch in one-inch increments, regardless of airplane model, so the legroom you get is strictly up to each individual airline . Pitch is a totally accurate way to measure how much front-to-rear space you have, for your legs and at reading-working level.

However, the dilemma is: Airline should both be good at leg room pitch in the plane and elevator pitch in board room, not only should Airlines be masters at changing cattle into sardines, but also they need be the change agent to deeply discover the business purpose, industry mission and service value, Airline is not only in the transportation business to send passenger from A to B, but also in the information business to understand the whole business picture and economic dynamic.  

2.   Delight Customer & Make Profit at same Time

That-FEE—keeps business survive, even with chance to thrive, it has also repeatedly top the list of passenger complaints, as the industry still suffers from low customer satisfaction,

Therefore, aviation faces another dilemma: how to delight customers and make profit at the same time?

  • Optimize Overall Customer Life Cycle Experience: Services that consumers pay for should be better than services they get for free. Via the progresses made by Airline we discussion earlier, It’s consistent with consumer result: “Ever since baggage fees were introduced, baggage service has improved considerably," the report said. "By charging fees, once neglected baggage service departments have become star revenue performers for airlines" that generates millions in revenue.", on the other hand:  baggage service may have improved,  but the boarding process has not, as everyone now tries to carry on their bags and jams the boarding area to get on early enough to get room for them, airline may just need continue to improve and optimize business processes, to make customers feel the service worthy of fees. . Don’t damage your brand by nickel-and-diming, focus on overall experience.

  • Enhance Customer Loyalty: You must first know who your customers are — not those who pay, but those who get others to pay. Then you must instill loyalty in these people, which is a tricky business when you have just destroyed your brand with a code-shared flight: Book on you, fly on them; Be generous with the little thing, pay attention to details which matter, be proactive to create upsides from negative; be creative to enchant customer; be sensitive about social influence and be open for customers’ opinions and feedback.

  • Make better choice with Reasonable Cost: The report, "Shocking News: A la Carte Shopping is Good for Consumers," calls add-on fees "the ultimate compliment for the consumer" because they give passengers the right to choose how they want to fly; and provide freedom of choices for customers who are able to pay for the services they value most.

  • Educate Travelers: The truth of the matter, air travel is the most efficient, safest and most affordable that it's ever been, to gain customers heart & pocket, Airline also need continue to educate travelers either via real life experience or social influence, to amplify good effort and behavior, and cultivate more advocates or travel influencers to inspire Aviation’s growth, this is not just a legacy industry, it’s an exciting travel partner to lift up human’s body and spirit.


3.   NexGen Mindset, Culture, Process with NextGen Technology

The Airlines need continue their journey in operational excellence by taking advantage of better technology: Airlines are flying newer planes with fewer maintenance problems. New tools track the boarding of passengers and loading of baggage onto individual flights, make more realistic schedules, the analytics tools to make fly smart, and social tools to engage customers and employees.

The dilemma here is: Airline can not just sit to wait for the NextGen technology ready, they need well prepare the convergence of nextGen mindset, culture, process and nextGen technology.

Airline should cultivate the open mindset, the culture of innovation, the fresh talent pipeline, and more optimized business processes to differentiate competitive uniqueness; Invest in tomorrow, and focus on today, well balance the long term perspective with short term win, continue to modernize legacy infrastructure, realize higher levels of satisfaction & loyalty, and deliver high performance result.

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