RyanAir has a new lounge at Stansted. And it’s for real!

RyanAir is known for being creative about ancillary revenues. We all know about the much-discussed toilet charge. But did you know that RyanAir has recently opened a new lounge at Stansted Airport? For under 18 bucks, you get breakfast, wifi, sofas and even showers before you board your flight. And the lounge has received some rave reviews as well.

Now this is a sort of service I’m sure many wouldn’t mind paying for – because it’s value-added charges, not charges for un-bundling, as is generally the case.

AirAsia has a shop in a mall in KL

Forget about in-flight shopping – that’s old school and increases the aircraft’s weight. AirAsia now has not one, but two “kiosks” in Kuala Lumpur. One is at the LCCT itself, and a new one has come up at Pavillion Mall. They promise even more outlets soon! Here, you can buy AirAsia merchandise like plane models, t-shirts and even hand-bags.

I wonder what’s next for AirAsia – a restaurant in downtown Kuala Lumpur serving their legandary teh tarik and Nasi Lemak? You can’t rule anything out.

Tiger Airways and Kingfisher go big on cargo

After skirting the issue for many months, a number of airlines are entering the cargo space to drive up non-passenger revenue. Tiger Airways in Singapore is testing the cargo service on a number of South East Asian routes. Kingfisher from India has gone all the way and started a separate cargo division!

But aren’t cargo levels still very low? Isn’t that still a loss-making operation for legacy airlines? Well, it seems that re-bound is near. Tiger Airways went on record to say that they’re adding this function specifically to drive ancillary revenues.

Rosalynn Tay, managing director, Tiger Airways Singapore, said: “We have just started our cargo trials and the reason for that is it is … an ancillary revenue stream, plus it helps us to optimise our profitability and aircraft utilisation.

Why creativity is good?

So what’s common about the three new methods of generating ancillary revenues that I mentioned? The passenger doesn’t need to pay more for something he was already getting. Most of the services being offered are value-added. They bring revenue for the airline, without inconveniencing the passengers.  And that means the brand is not affected negatively.

If anything, the passengers will be pleased, like with the RyanAir lounge at Stansted and the AirAsia shop in the KL mall. And that only helps the brand impression.

What do you think? Will this work? What are some other examples of airlines getting creative in trying to drive revenue, yet not hurting customer sentiment? Let’s discuss in the comments section, and over on Twitter (@simpliflying)

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Let me say this again. I think Air Asia is one of the most innovative airlines in the world today – right up there with JetBlue, Virgin, Singapore Airlines, Southwest Airlines and LAN Airlines. And today they pulled out a trump card – a joint venture with Australia’s Jetstar Airways. You can keep reading the press releases, but here’s the essence of the agreement and how it will benefit the airlines and their customers (you and I!)

What the AirAsia and Jetstar “budget alliance” means

The most significant difference is the departure from Star Alliance – type marketing or revenue driven alliances. Air Asia and Jetstar have formed a cost alliance, or what I’d call a “budget alliance” (pun intended). Here is the nitty gritty.

1. The airlines will pursue joint procurement of aircraft – This means that they will be able to leverage economies of scale while buying from Airbus.
2. Joint design specifications – since they’re going to order a lot of planes, they can demand from Airbus things like a twin-aisle A320 or more efficient engines suited for their own operations. I think this is HUGE!
3. Pooling of inventory and spare parts – both airlines operate only A320s and A330s, so this was an easy one
4. Combining Airport passenger and ramp handling services – this is crucial for cost savings as during an emergency, the airlines can use one another’s planes to carry passengers.
5. It’s a non-equity partnership – so both will work on reducing costs together, but will not share revenues.
6. There is no maintainance involved – this can get tricky, with different safety regulations in different countries and result in safety lapses. And I think Qantas has learnt its lessons with the failed partnership with Malaysia Airlines last year.

For the consumers, this means lower costs for both the airlines and benefits for all of us. Hurray!

Though, if I was working at Tiger Airways right now, I’d be worried. Especially with the upcoming IPO!

Why it’s a genius move, as shared Live at CNBC studios in Singapore

I spent this morning with CNBC’s Martin Soong & Sri Jegarajah sharing my thoughts about the joint venture Live on SquawkBox. The interview now available on CNBC’s website and I’ve embedded it here for your convenience. (Click here if you can’t view the video interview).

So, what do you think about this budget alliance? Is this the beginning of a new era for airline alliances? Will other LCCs or legacy carriers follow? Let’s discuss in the comments or over on Twitter (@simpliflying)

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At the Aviation Outlook Summit in Sydney early this month, where I delivered a keynote on airlines + social media branding, the first day was mostly doom and gloom whereas the second day was much more up-beat. Not surprisingly, executives from legacy carriers like Qantas, Air New Zealand and the European Commission spoke on the first day, and up-beat executives from rising stars like AirAsia X, Oman Air and Gold Coast Airport spoke on the second day. That got me thinking…are legacy airlines dead? I now believe they are. Here’s why.

1. Legacy airline brands come with legacy baggage

Unions, legacy systems, government bureaucracy, old planes, old workforce, high costs, bankruptcy… these are all words that can be easily associated with Air India, Alitalia, Japan Airlines, Air Canada and many more legacy airlines. And these are all aspects that do not allow these airlines to function efficiently in the current climate.

The airline industry has evolved drastically in the past decade. With each new shock (9/11, SARS, H1N1…) we see new stars emerging, which have streamlined costs, efficient operations and specifically targeted markets they go after. And they beat the hell out of monolithic airlines that legacy carriers have become. Just read CAPA’s report on Japan Airlines vs Air Arabia to get a glimpse into what I’m talking about.

2. Legacy airline brands are not agile enough

Like an elephant trying to shake off bees attacking it, legacy airlines look clumsy trying to shake off what they call threats – low cost carriers, low premium demand, fluctuating oil prices, consumers’ reactions on social media etc. In fact, these should be looked upon as opportunties. Let’s look at airlines’ approach to social media, for example.

United Airlines is still struggling with responding to “new media” sensations like Dave Carroll’s “United Breaks Guitars”, as Southwest Airlines interacts with its fans on Facebook and JetBlue helps over a million of its customers on Twitter.

Singapore Airlines is still not on social media, just as AirAsia is making merry in its backyard. And there’s no point arguing about different market segments. I’ve flown AirAsia this summer with folks in a suit with a laptop, mostly heading to Kuala Lumpur in the morning and returning to Singapore in the evening. No wonder the 777s Singapore Airlines fly on this route are flying half-full.

A lack of agility among legacy airlines results in lost opportunities. And this is proving deadly.

3. Legacy airline brands are “stuck on stupid”

At the aviation summit in Sydney, the CEO of AirAsia X caused a bit of murmur in the audience with his opening slide entitled, “Bastardising the Low Cost Model”. You want to know why? Because most airline executives are “stuck on stupid” (a term coined by Seth Godin in Tribes). They want to carry on the practices of yester-years in today’s changed environment. And that makes them look stupid. Nothing against them personally, but why can’t airlines have multiple business models? In fact, it’s the airlines which are questioning the traditional legacy model, or even the traditional LCC model, who stand to succeed. The rest will perish.

Who to look out for?

Who’s doing it right? In my opinion, airline brands to look out for are Lufthansa (and family), Qantas & JetStar, LAN Airlines (kings of Latin America), Southwest (which continues to innovate) and AirAsiaX. Airlines that have great potential, but need to wake up and smell the coffee to lead in the future too – Singapore Airlines, Cathay Pacific, Thai Airways and Delta Airlines.

So, what do you think? Is there a future for legacy airlines? What do airlines need to do to serve the customers better, and turn a profit consistently? Let’s discuss in the comments or over on Twitter (@simpliflying)

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Air India is losing about $1 billion, on revenues of $3 billion. What’s more alarming is that Air India contributes 10% of global airline losses with just 0.35% of global traffic (stat. from Bangalore Aviation). And the Indian national carrier is still struggling with its merger with the domestic Indian Airlines a couple of years back. Couple that with the global economic crises and a bloated payroll, and you know how much trouble the airline is in.

Being an Indian at heart, I couldn’t help but come up with some ideas to save this once well-regarded Maharaja brand. In fact, I know that when Singapore Airlines began operations, they heavily hired the best from Air India! I’m not sure if Air India can return to its former glory anytime soon, but these ideas should certainly help it get back on track. Or at least, I hope so.

Getting the business plan in order

I frankly feel that Air India has only survived as long as it has due to two reasons – offering extremely low fares, and getting government funding. But having fares that hardly cover your costs are not sustainable, especially in the face of tough competition. Emirates now operates almost 200 flights out of India per week, much more than Air India. There’s an urgent need to revitalize the business plan.

The AirAsia + AirAsia X model for Air India

There are a number of business models that can work for Air India and I think the AirAsia model may be a viable. AirAsia operates as a Malaysian budget carrier serving South East Asia. This can be paralled with the domestic service of AirIndia, which can be turned into a budget-only.

Most flights within India tend to be less than three hours and budget airlines are thriving there, much more than full-service carrier. Domestically, Indians tends to be even more price sensitve than internationally, as can be seen from the success of Indigo, SpiceJet and Deccan before them.

Internationally, though Air India now has good, new planes with a world-class product, their bad on-time performance and a reputation for poor service still stalks them. It’s one of the reasons I still refuse to fly with them, no matter how cheap their tickets get. But Air India can leverage on their new product as an asset – by creating a “blue ocean” and not competing on the same turf as their competition. And that’s where AirAsia X comes in.

AirAsia X is not trying to replicate the Ryanair model to long-haul travel, rather trying to apply the Singapore Airlines model to budget carriers. The key? Low cost base, and connectivity. AirAsia X is charging people for services like food (which really tastes good!) and for a business class seat, and yet cutting overhead costs by not providing lounges or priority check-in. I think it’s a model Air India is close to and can replicate quickly.

Their in-flight service is nowhere close to exceptional, whereas the product is good. So, why not just set the expectation with the customer that he will have to pay for additional service, but he will receive a good product (seats etc) at the low price he pays. That would put the airline in a league of its own when targeting those traveling to India. But the big challenge for Air India is to bring down costs drastically.

It’s the execution that matters

The biggest worry that I have is that Air India is run for and by “babus” – India government and administration officials. With all due respect to them, it is indeed their meddling in the airline’s affairs that have resulted in such rut. Otherwise, who in their right minds would operate a route like Dubai-Srinagar regularly, even when the plane is less than half-full? This has to change (and I know that here… talk is cheap)

Having a capable management team to the lead the execution of a renewed business plan is a must. Air India needs people who’ve run international airlines successfully, not Indian Administrative Services folks who often do not have a clue about running an airline (though I have tremendous respect for the current CEO). They need to hire at least a professional COO, who can take over the reigns from the de-facto COO, the Minister for Aviation. Air India needs to reduce dependence on the government, hence its involvement in the airline’s affairs.

At the end of the day, I see no point in running an unsustainable business entity. And to keep pumping in government money is to have good money chase bad money.

Air India probably has its last chance to learn some lessons from the likes of AirAsia, or it might be too late. What do you think? What can this battered airline do, to emerge from the shadows? Let’s discuss in the comments or over on Twitter (@simpliflying)

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Starting the first week of July, Malaysia Airlines’ subsidiary FireFly will be starting routes from Malaysia to Singapore. Of course, to get to heart of the matter, I met up with their Head of Marketing, Angelina Fernandez, who sheds light into the makings of this new airline and what makes it special. They call themselves the community airline, and offer free snacks (cookies!!) on-board even flights that last as little as 20 mins (Singapore – Melaka).

What makes FireFly special?

FireFly is being positioned as a community airline, “connecting the ethnically-similar communities spread across South East Asia“, as Angelina explains. Targeted at the business traveler – due to quick turnarounds (they fly ATRs), and proximity to the city center in Kuala Lumpur, as they operate out of Subang Airport. The airline also intends to build on Malaysia Airlines’ schedule through flight timings that are complementary.

For the un-initiated, till recently, Singapore-Kuala Lumpur was one of the most heavily protected air routes in the world. Since liberalization, connectivity has increased multi-fold, with airlines like low-cost AirAsia, Tiger Airways, JetStar Asia and now FireFly sometimes offering prices even lower than the bus fares. Enjoy Angelina’s interview (just 3 mins) and then read on for my take on this new airline.

What should the FireFly brand do to survive in the long-haul?

Though it was inevitable that Malaysia Airlines was going to do something to grab a pie of the low-cost market that its competitors have tapped on so well, I personally feel calling FireFly a “community airline” is a bit confusing for the uninformed. Instead of making that as the mainstay of the brand, the airline should emphasize further other aspects that’re already part of its positioning.

• Play up the fact that they’re flying smaller aircraft (ATRs) and hence there’re no middle-seats. Also, due to smaller numbers, boarding and alighting should be faster – something businessmen would like.
• Play up Kuala Lumpur’s Subang Airport, since it cuts the travel time into the city by half, as compared to KLIA. And this would appeal to many business as well as leisure travelers.

Subang Airport – the double-edged parang (ok…sword)

The fact that FireFly flies to Subang and not KLIA is a double-edged sword. The downside is that it’s the only airline operating out of that airport, and hence it might lose out on passengers wanting to connect internationally and on to other airlines. That means it must drive a lot of o/d (origin-destination) point-to-point traffic to fill up its planes. For this, the airline must use innovative marketing techniques to create a groundswell and drive demand to its destinations.

For inspiration, it need not look too far. Just learn from its parent Malaysia Airlines, and close competitor AirAsia, both of whom have tapped on social media marketing to directly connect with their customers and get them to fly.

Running an airline is no easy feat, that too in a highly-competitive environment. FireFly must think innovatively and do things differently if it is to succeed in the long term. Having met most of the executives at the helm, I can say that the airline has got an intelligent management. Now, it’s a matter of applying their energies in the right direction and making this venture a success.

What do you think? Will FireFly survive in the long haul? Or will they fizzle? What can they learn from others? Let’s discuss in the comments below or take the discussion over to Twitter.

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Singapore Airlines has created probably the most well recognized airline brand in the world. The Singapore Girl has done great wonders for the airline and the nation over the years. Even ardent competitors like the CEO of AirAsia, Tony Fernandes, openly claim to be learning from the airline.

But the recent tough times have hit the airline hard, just like other premium carriers like Cathay Pacific. Singapore Airlines has decided to cut over 200 flights and is experiencing low load-factors in its premium classes – where it makes most of its money. So the big looming question is what should the airline do now? Change strategy? Probably not. How about using social media to soften the impact, by engaging the customers and employees real-time? Why not?

You can run, but you can’t hide

In my conversations with folks over at Singapore Airlines (quite a few of them!), I’ve sensed educated-nonchalance when it comes to adopting social media to pursue its business goals in this downturn. Not only are they hardly present on social media outlets, the airline seems unconvinced about the importance of a two-way conversation. SIA doesn’t have a blog, Twitter account, Facebook page or even social-media-friendly press releases (I had to download a 4mb image to try to put in this article, and I didn’t). From a brand that has done an excellent job of top-down positioning, where it tells its customers what it’s about, it’s fair to expect careful treading of new waters. But getting into social media for an airline brand is not about why, but about how. And it has to be now.

Why time is running out for Singapore Airlines?

Cranky Flier blog’s Brent Snyder published an intriguing article on the importance of social media for airlines yesterday, and here’s what he had to say,

“For all those airlines who still don’t think embracing new media is a good thing, well, there’s not much I can say to you except you should pull your heads out of your a***s”

I couldn’t agree more.

One of the arguments I often hear from executives at premium airlines is “I’m not targeting the teens on Facebook” or “my customers are not on Twitter”. What’s wrong with those comments? They concentrate on the tool, not the strategic goal. Getting into social media doesn’t have to start with a Twitter account or a Facebook page. It needs to start with determining what’s the opportunity to achieve strategic goals – like engaging the customer or enhancing existing touchpoints with social media. Then figuring out what tool to use.

What if we start with the goal of providing value adding service to SIA’s premium customers?

It is indeed not very realistic to expect SIA’s high-paying customers to be on Twitter or Facebook. But a mojority of them carry iPhones and Blackberries. How about creating simple apps for these devices that allow them to perform common tasks like check-in, date change, seat-change or booking of a flight using miles? And this idea is not very far-fetched, since SIA’s competition like Cathay Pacific has done a great job with CX Mobile (their iPhone app). Others like British Airways, Qantas, LuxAir and Lufthansa also have similar initiatives.

If SIA waits too long, there’s a chance its competitiors might start taking away market share, due to superior engagement outside the aircraft. And that can be damaging.

I believe that if SIA decides to go ahead with a social media strategy, it has the potential to surpass all of its competition, because it has a genie – the Singapore Girl! How? Go figure =)

What do you think? Is there a place (or need) for a premium brand like SIA to be on social media? If so, what’s the best way? Let’s discuss.

By the way, Tweepitition is still running and are still 3 more autographed copies of the book to on SIA be given away, and a 4GB Apple iPod. You too can be a winner, just by re-tweeting a comment from SimpliFlying or leaving a comment on this site. Learn more here.

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I read an article about Tony Fernandes, the CEO of AirAsia, in The Economist today that got me thinking. Thinking about the last few articles I’ve written about United Airlines, RyanAir and Southwest Airlines – on how they make money off their customers – what what works and what doesn’t.

There’re a lot of airlines in the US and Europe can learn from Tony Fernandes and AirAsia (+ Azran and AirAsiaX). Here’s how the article in The Economist ended.

“Mr Fernandes says that he came to the industry with no preconceptions, but found it rigidly compartmentalized and dysfunctional. He wanted AirAsia to reflect his own unstuffy, open and cheerful personality. He is rarely seen without his baseball cap, open-neck shirt and jeans, and he is proud that the firm’s lack of hierarchy (very unusual in Asia) means anyone can rise to do anyone else’s job. AirAsia employs pilots who started out as baggage handlers and stewards; for his part, Mr Fernandes also practises what he preaches. Every month he spends a day as a baggage-handler; every two months, a day as cabin crew; every three months, a day as a check-in clerk. He has even established a “culture department” to “pass the message and hold parties”.”

I wonder when Glenn Tilton last flew Economy Class on United Airlines and when Michael O’leary helped load the baggage on RyanAir…if they did, they probably would learn not just a lot more about their employees, but also their customers, don’t you think?

I wonder why is it that the concept of servant leadership is lacking in the airline industry?
Especially in the Western world. We know that exceptions like Southwest exist, but why don’t others do it too, when they see this working out well?

I’d love to hear your thoughts in the comments.

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On Wednesday another bid to make a success of long-haul, low-cost flying takes off from Kuala Lumpur, destination – London Stansted.

AirAsia X has been selling seats for as little as £99 each way, though after making a series of test bookings it seems a more likely one-way fare is £200. In true low-cost fashion, “you’re only buying the flying”. Checked luggage costs £12 each way for a 20kg bag, with meals a further £7 per flight (and you get a discount if you book before-hand).

But…AirAsia X is different

Did you know that to optimize aircraft utilization, AirAsia X planes will land in London at different times on different days? And though that’s out of the norm, as a passenger, I only care about my flight timings, not the next day’s flight timings. Hence, I personally quite admire this move.

Did you know that AirAsia X CEO, Azran Osman-Rani, regularly writes on the AirAsia blog, Just Plane Thoughts. And he does so in a very candid way too. Moreover, he’s not the only one, but part of a much larger team of bloggers (many first-timers) formed of people from all over the airline.

In my interactions with Azran, he mentioned that AirAsia X is not taking the existing low-cost model long haul, rather it’s unbundling the current full-service long haul model and trying to figure out where costs can be cut and money made. Increasing aircraft utilization, a great example of this thinking. And it’s this willingness to question everything, to not take anything for granted, that makes AirAsia X different, and poised for success.

Why it’s unlikely to go the way of Oasis HongKong

Very simply, because low cost long-haul carrier has the support of AirAsia and the blessings of Sir Richard Branson. Moreover, Oasis HongKong and most other airlines that went bankrupt last year did so amidst record-high fuel prices and a shortage of talented staff. AirAsia X has the advantage of low oil prices, and is probably spoilt for choice when it comes to hiring people in this current economic climate.

And AirAsia X knows how to make money!

The airline is not leaving any stone unturned when it comes to ancillary revenues. It’s charging people for baggage, for food (you can’t bring your own on-board) and has even got an XL-class, which promises to offer Business Class seat comfort at a price just a bit higher than Economy class on full service carriers. In the future, you can expect many more in-the-cabin innovations from AirAsia X, which would charge the customer for value addition. I don’t see them going down the Ryanair-way, but certainly be a Southwest, when it comes to building a LCC brand.

Hear it from the horse’s mouth

Here’s Azran himself, speaking about the importance of branding for low cost carriers, and revealing some exciting developments at AirAsia X.

The most important reason why I think AisAsia X will be a success – the team is having fun while running the business!

What do you think? Is AirAsia X poised for success? Will the long haul low-cost model work? Or will it fail, yet again? Let’s hear it in the comments section.

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In the last part of his three-part interview, Joe Crump,  the VP of Strategic Planning at Razorfish, reveals that instead of fearing the recession, airlines around the world can use it as a catalyst to build strong brands. Joe believes that “incredibly narrow constraints usually present the biggest opportunity for innovation”. I couldn’t agree with him more.

Companies like Apple, GE and Toyota have emerged stronger by just doing that in the past. In fact, the airline industry is full of success stories from the recession as well, like AirAsia and JetBlue. Right now, Virgin America in the US is doing a fabulous job at building a strong brand by offering great value in the recession.

Digital investments = greater ROI

Joe makes a startling revelation in his interview below. He shares that contrary to popular belief, investments in product upgrades on-board an aircraft, as well as other “hard” invesments like frequent flier lounges seldom match the return possible from “soft” investments like online media and a solid SEO (search engine optimization) strategy.

As I’ve stated in my previous articles on the topic, investments in building a strong digital brand presents a tremendous opportunity for airlines in a recession. Just the effeciency of the medium is often far beyond traditional mediums and investments that Joe mentioned. It’s something airlines should be seriously considering. Joe states that “airlines can use digital to drive loyalty, by using the medium to add a voice to the airline”.

Predictions for 2009

As shared in my first article of the year, Joe is looking forward to surfing the internet on-board airlines and is curious to see what opportunities arise from this developement. Moreover, he believes that “transactions” and “advertisements” will become much more seamless than they are right now, in 2009.

Here’s Joe Crump, un-cut. You can view all three parts of his interview here. 

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Canadian playwright Raymond Hull is famously quoted as saying that “he who trims himself to suit everyone will soon whittle himself away.” Laura Reis has aptly applied this concept to airline branding, and concluded that airlines need to “do one thing and do it well” to build lasting brands.

Laura Ries is a world renowned branding guru and is the president of Ries & Ries, an Atlanta-based marketing strategy firm that she runs with her father Al Ries – the person who coined the term “positioning”. Together they have consulted with many Fortune 500 companies, including leading airlines. Hence, it is an honor to feature her exclusive interview on airline branding at SimpliFlying.

The power of focus

In this Part 1 of 2 interviews, Laura and I discuss the importance of laser-sharp focus for airlines. She shares the example of American Airlines – whose latest campaign is “we know why you fly”. “Who doesn’t know why a person flies!”, Laura exclaims. American Airlines is a textbook example of unfocused and diluted branding, where a company is trying hard to please everyone, and in the end achieving little.

On the contrary, airlines like Southwest and AirAsia know very well the segment they serve and cater their product and brands specifically to this group – budget travelers. At the other end of the spectrum are airlines like Singapore Airlines and Virgin Atlantic, which have a strong focus on high-end travelers. All of these are extremely successful.

The value of simplicity

Something else Laura points out is that very often the “complicated price structure infuriates the passenger”. They might see a $29 airfare, but adding taxes makes the figure balloon up to over $150. In addition to that, they might still end up paying baggage fee and for other peripheries at the airport.  Laura believes that unless the passengers understand the cost logically, and are told about it upfront, their trust in a brand decreases over time. Hence, it’s in the airlines’ favor to keep things simple, especially ticket price structures.

I shall not dive into more details, and let you listen to the first part of SimpliFlying’s exclusive interview with Laura Reis. Part 2 will be out on Friday, 12 Dec (where she talks about deriving brand value from mergers and why no one will join social networks by airlines).

What do you think? Is focus a good thing or bad? Will airlines lose out if they focus too much on a niche? Will having simplistic pricing structures result in a loss of profits? What can really enhance the airline brand? Let’s hear it in the comments section.

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