Note: Earlier this month, we announced a revamp of the SimpliFlying Heroes initiative, giving our readers a greater say in whom we choose by adopting a transparent voting system. In a keenly contested round that saw about 3000 votes pour in over the course of a week, Pooja Dua of SpiceJet emerged the winner, having received almost half of the total votes submitted! Read more about SpiceJet’s excellent social media initiative led by Pooja below.

Even though India is the world’s fastest-growing domestic market in aviation, it is not yet known for airlines that are superstars in engaging or offering customer service via social media. Or at least, until now. Last year, SpiceJet, a leading domestic low-cost carrier in India, launched the Bombardier Q400 in a market that’s traditionally sceptical and scared of flying turboprops (popularly classified as the “planes with fans outside”).  What’s more, they chose the untested waters of social media for propelling their route-launch and tasted tremendous success, achieving over 88% load-factor in the first two weeks itself. Moreover, they also earned countless new fans, followers and increasing engagement manifold on their social media channels. So how did they achieve this? We reached out to Pooja and she was gracious enough to give us more details about SpiceJet’s initiatives, the story of its rise in social media, its plans for the future and advice for those looking to taste similar success on social media. It’s worth noting, however, that SpiceJet has a great history of meticulous brand execution, unique positioning and clear brand strategy that have been previously covered by SimpliFlying.

The road to superstardom

Pooja admits that one of the challenges on social media was the specific nature of the target audience. She believes the Indian audiences interacting with brands through social media are extremely enthusiastic. However, at times, there could be a bit more mature behavior while interacting. There are times when the audience can get extremely personal which makes the interaction more challenging. Also, most fans interacting with brands through social outlets belong to a younger demographic and it appears that they are largely interested in freebies and deals. They also seem to be less open to dialogue and resolution as compared to their western counterparts.

At SpiceJet, while digital marketing was active, the preparation to plan and embrace social media was started by commissioning ORM activities. The ORM presented the team with an idea of what the customers thought about SpiceJet’s product and services. This insight led into developing the overall strategy for SpiceJet’s social media. At the time of launching their social media initiatives, Facebook and YouTube were big in terms of the user base. They chose to target Facebook since Indian audiences were spending more hours on it as opposed to YouTube. Though Twitter arrived soon after, it still didn’t have the required user-base numbers (in terms of an Indian audience) required to reach out and engage a mass audience. Hence, Facebook became the de-facto primary channel as it provided lot of flexibility with scope for customization and custom interactions.

Internally, SpiceJet put together a cross functional team that manages various channels across social media and includes members from different departments such as Marketing, Corporate Communication, Human Resources, Customer Services  working together with their digital agency. The Marketing team defines the objectives, defining a role for the each member of the team and ensuring brand synergies.

Given that measurement is crucial to evaluation the success of social media strategies, SpiceJet has adopted several metrics to measure various parameters. In Pooja’s words, they “use an internal rating grid system for each of the parameters which is qualified on a monthly basis. Some of the core parameters measured are levels of engagement, happiness quotient, and of course translation into sales. There are custom scripts running that provides insight on traffic coming from social media and the resulting sale. Social Media is a significant contributor to direct bookings on the brand site.”

The Bombardier Q400 launch initiative

As part of its expansion plan, SpiceJet inducted a fleet of Bombardier Q400 aircraft. The fleet expansion was targeted to cater to short-haul regional sectors. The entire promotional campaign on social media spanned over 2 months. The launch was touted as the most sensational and effective launch campaign as observed by industry and marketing experts. Testimony to this is the fact that the launch delivered 88% load factor within first two weeks of operations. Here’s how SpiceJet achieved success:

Name the Plane Contest

SpiceJet has a naming convention for its aircraft – named after spices. In order to create a brand connect, fans on Facebook were invited to recommend names for the Q400 aircraft that were being deployed. This activity received over 100,000 impressions in a matter of few days and an an equally overwhelming response with hundreds of name suggestions. Apart from having the opportunity to name the aircraft, the winner was also invited to ‘Cut the Ribbon’ of the inaugural flight.

Q400 | Feature Orientation and Destination Awareness

Once the ‘Name the Plane’ activity concluded, the follow-up activity was designed to introduce Q400‘s salient features along with making the audience aware of the Q400 destinations. This was done through the aid of an app and a contest. The community was sensitised of the features through questions posted daily.

The respondents with the right answer were provided with a numeric digit – which eventually at the end of the contest helped the fans crack the launch destination. The numeric digits / keys acted as the clue which revealed the Pin / Zip Code of the launch city when put together in the correct sequence.

This contest received close to 350,000 post impressions, along with 29% increase in the number of fans and 33% increase in post feedback.

The making of Q400 contest | Post Launch

Once the operations commenced, fans were presented with a poser – a random array of visuals which captured the different progressions of the aircraft assembly.  Fans were encouraged to sequence the visuals in the right progression.

The contest received about 400 entries with over 375,000 post impressions. There was 42% increase in the number of fans and 46% increase in post feedback.

This activity was followed by releasing the official video of ‘The Making of Q400’.

The brand’s bottom-line was impacted positively with a load factor of 88%. The Social Media campaign for the Bombardier Q400 Launch was picked up by the media (Huffington Post and AFAQs), demonstrating the impact of the idea and execution. In addition, the campaign also made it to the second position in the “Top 11 marketing and social media innovations by airlines in 2011” published by Simpliflying.

Looking at the future and the success formula revealed

Pooja says SpiceJet’s biggest bet for 2012 is to strengthen and expand customer support on social media. SpiceJet has been carefully studying the patterns of customer interactions and has found social media to be a critical channel for redressals along with being a guiding light for customers through booking and travel planning. Internally, SpiceJet chalks out plans for each quarter in advance. This provides the required flexibility to accommodate both platform changes as well as aligning to objectives & goals.

Tips for those looking to taste success? Pooja says the following are essential:

1. Channel Selection – there exists a plethora of options, but it is always critical to select channels that are apt for your business model and geography. Also, the ability to sustain something you start is crucial.
2. Being transparent and honest – Address any customer issues openly in the respective forums and your audience will appreciate it a lot.
3. A well-defined objective, planned in advance, is critical.
4. Content Strategy is Key – Avoid the temptation of using these channels as a corporate communication tool. Pooja recommends having a  unique content strategy for each of the channels you wish to engage.

Pooja signs off by saying that  ‘consolidation’ will play a big role in the near future. There are new technologies emerging everyday: With internet connected televisions becoming popular, building social experiences leveraging Twitter, Facebook and Youtube on mobiles and tablets around video content will become preeminent. At SpiceJet, they’re “waiting and watching” and expect the coming phase to be a huge leap that will support their expansion plans.

Let us take this opportunity to congratulate Pooja and SpiceJet once again. We look forward to many more exciting initiatives from them in the months to come!

Disclosure: SimpliFlying worked with Bombardier on the social media strategy for this project, which was fabulously implemented by the talented Marketing team at SpiceJet and their agency – iVista Solutions.

Loved what SpiceJet did? Thought they could have done anything differently? Tell us in the comments below or tweet us @simpliflying.

• How SpiceJet launched Bombardier Q400 in India through social media and achieved 88% load factor
• Results announced: The SimpliFlying Hero for January 2012 is Pooja Dua of SpiceJet!
• A revamped SimpliFlying Heroes initiative – Vote for the Jan 2012 Hero now!
• [Video Tour] Bombardier CSeries cabin and cockpit setting new standards at Dubai Air Show #avgeek #dxb11
• Top 11 marketing and social media innovations by airlines in 2011

Almost everyone reading this blog books most of their airline tickets online. Without question, it is the easiest and most cost-effective way (for all parties involved) to make a booking. So it makes sense that a start-up airline would focus its distribution strategy around direct online sales. However, imagine if you were tasked with launching an airline in a market where only 10 percent of the people have reliable Internet access. And of those, a small percentage trusted online payment systems. What would that do to your customer engagement and distribution strategies?

I had the great opportunity to interview Nico Bezuidenhout, the CEO of South Africa’s Mango Airlines who faced the exact challenge described above, at Aviation Outlook Africa Summit in Johannesburg. I have highlighted different topics we discussed below, with the full video interview available at the end of this post.

Starting up is only half the battle…

Mango was launched in 2006 with a very specific task: expand South Africa’s aviation market. In what was already a relatively small market to begin with, Mango was diving into direct competition with both an established legacy (South African Airways) and low-cost carrier (Kulula) that seemed to have both ends of the market covered. So Mango built a cost structure that made air travel accessible to South Africans to whom it was previously just a dream, and therefore was able to elbow its way into the crowded market.

But creating the airline and flying the planes is only half the battle. How did Mango sell enough seats to become successful, considering the majority of those potential first-time flyers fell under that 90 percent of the population without online access?

Engaging Customers on their level

For most of the world, we know of a few ways to book air travel. If we can’t do it through an airline’s website, we know of other online booking engines we can go to. If that doesn’t work, we probably know of a local travel agent, or an airline’s local office. But would you ever consider adding an airplane ticket to your grocery list?

Because Mango knew that many of it’s desired first-time travelers were not online, they went to where these people did congregate—selling tickets through grocery stores and other retail outlets. Because only 10 percent of the South African market has a credit card (another challenge), it also developed an innovative credit scheme where it would accept credit purchases through some of these retailers. As a result, Mango was successful in doing exactly what it set out to do—make air travel accessible to people to whom it previously was not—effectively creating a new market segment.

What about social?

Despite this innovative distribution strategy, Mango has also ironically established quite a reputation for its deft use of social media—for brand recognition, to communicate special deals, and even as part of its recruitment strategy. But does this make sense when Internet access is available to so few, as pointed out earlier?

Of course it does. As Bezuidenhout points out, while only 10 percent of the population has Internet access, that also overlaps 93 percent of the current aviation market. In other words, almost everyone who can afford to fly, or does so regularly, is also part of that 10 percent of people online.

A SUCCESS STORY—HAUTE FASHION!

One of Mango’s best social accomplishments to date was the dress pictured below, which was modeled at this year’s Vodacom Durban July—a horse race that doubles up as one of the premier social and fashion events in South Africa. Created almost entirely from discarded boarding passes, the dress created a huge viral buzz for Mango, sending a message to the world that Mango is both an environmentally-conscious and fashionable airline. Through photographs that were tagged on facebook and eventually picked up by blogs, as well as the traditional media mentions that those led to, the dress generated millions of impressions for Mango.

A CULTURE BUILT FROM ENGAGEMENT

Whether through retail partner sales outlets or its innovative social media efforts, Bezuidenhout is big on relationships, and it shows. Managing an airline that succeeds on cost structure means that Mango obviously cannot offer customers some of the luxuries that legacy carriers do. However, Bezuidenhout and his staff go to great lengths to differentiate by engaging its customer base, being responsive and truly listening to understand what makes Mango customers happy.

See my full interview with Bezuidenhout below! It’s a little quiet, so turn up the speakers and listen carefully …

Click here to view the embedded video.

• [Video] Two Paradigm Shifts in Travel and Three Ways Airlines Can Drive Engagement – Presentation from Aviation Outlook Africa Summit
• Can Jet Airways survive the recession (and what does the Kingfisher alliance mean)?
• SimpliFlying launches fortnightly Marketing Strategy podcasts for airline and airport marketers
• Travel agents can differentiate by displaying online reviews
• Three ways airlines can brand themselves in a recession

I have to admit that I’m a big Singapore Airlines (SIA) fan, and when someone says “you’re a great way to fly”, I can almost sing the SIA melody in my head.  But even I was surprised when SIA announced that they will be launching a low-cost long-haul airline, on the lines of AirAsia X and Jetstar.

Yes, Singapore Airlines is no longer the most profitable airline in the world (Cathay Pacific took over that title), and yes they’re losing market share to the likes of Emirates and AirAsiaX (to a lesser extent), but to go with a business model that’s hardly proven was a surprise move for a brand that’s been risk-averse of late.

While the initial reports stated that a good amount of analysis has gone into the decision and a “largely untapped market” exists, it’s safe to say that SIA is playing catch up in a market carved out in its backyard by AirAsia X and Jetstar. While the key success factor for SIA till date has been its endearing Singapore Girl brand, that’s exactly the dilemma they need to address – whether to extend the brand to the low cost airline or not.

Will the Singapore Girl fly budget? Probably not.

One big question everyone is wondering about is whether the Singapore Girl would fly this new airline. For those who’re familiar with SIA, they know that the airline is very protective of its brand icon. And multiple questions will be raised if the same Singapore Girls walk the aisle of the new airline.

1. How to ensure that people know SIA and the new LCC are different, yet have the same flight attendants?
2. Will service failures like flight delays or cancellations be dealt in an SIA manner, or Tiger Airways manner?
3. Will SIA Economy Class passengers transferring on to the LCC be offered free meals and amenity kits?
4. What baggage allowances will people get if they are transferring from one airline to another?

Close brand association between the two airlines might prove to be too risky for both brands. Hence, it’s likely that SIA will dis-associate itself completely from the new brand. For example, when things went bad for Tiger Airways in Australia, no one boycotted SIA – the latter still holds its reputation for impeccable service. SIA’s greatest leverage will be that they’ve run a long haul airline successfully, with a very low cost base.

Learn from the competition, then fight on your own turf

While SIA’s track record is an asset, it is also a reason for concern. The airline already has a very low cost base – how would they reduce it further, if operations are to be based in Singapore? One of the reasons for the success of AirAsia X and Jetstar have been the feed from their short haul operations. Interestingly, SIA is a purely-long haul airline, hence feeding the network for this new long-haul airline would depend on SilkAir and Tiger Airways. These and other factors will require SIA to re-think its commercial strategies for the new airline, learning from the competition.

1. SIA till today only sells airline tickets on its website (trying to book a hotel will take you to an external site). Whereas on AirAsia’s RedTix website, I can even buy Justin Beiber concert tickets! So the new LCC SIA sets up must re-evaluate what businesses it gets in and how best to leverage the brand
2. SIA’s frequent flyer program, Krisflyer, also currently only allows burning or miles on SIA flights. This is in stark contrast to Qantas’ Frequent Flyer program, where I can redeem and earn miles by shopping for groceries! Krisflyer will also have to evolve, just like Jetstar has been introduced into the Qantas’ program.
3. SIA’s new long-haul LCC can expect very stiff competition from AirAsia X and Jetstar. Moreover, the competition has one year to sharpen its knifes before SIA launches the new airline. While Jetstar would want to start routes Melbourne-Singapore-Athens flights sooner, the Malaysian government has even more reasons to grant AirAsia X coveted routes like Sydney. SIA needs to run two steps ahead to out-think the competition.
4. SIA also needs to learn from mistakes made in its Tiger Airways venture – running the new airline like a Ryanair may not work, especially in long-haul. They need to ensure high customer service standards, like they have with themselves.

A golden opportunity to co-create the brand with the customers

To provide exceptional customer service, SIA will also need to understand that the customers of the new airline more like those of Tiger Airways’ than its own. And they need to deal with them in a different manner. What do I mean?

Currently, SIA has no official Facebook fanpage. No official Twitter account. Or any other new medium engagement channels. All this when AirAsia, right next door, has become the first airline outside the US to reach 1 million Facebook fans. Tiger Airways’ social media interaction isn’t something to speak of either.

SIA needs to hire manager who believe that the brand is no longer about control. Rather, it’s about influencing a certain behaviour, and engaging with customers using mediums they’re familiar with (I still have to fax in certain requests to Krisflyer!). They can no longer be in a state of educated nonchalance about these new ways of building a brand, as I had mentioned earlier.

Singapore Airlines has a rare opportunity to involve the potential customers in the brand creation process of its new low-cost long haul airline brand. For starters, they can look at how the best airlines in the world are crowd sourcing ideas. And then wholeheartedly embrace the customer.

Given their track record, I think Singapore Airlines is going to do a good enough job setting up this new airline – what remains to be seen is whether they are able to sustain profitable operations in the face of changing customer realities and fierce competition. Exciting times ahead! What do you think?

(Special thanks to Khoa Huynh and Anthony Prsakasam – my two aviation geek friends who helped seed some of the ideas in this article)

• Australia’s Qantas Airways – the world’s most agile airline brand?
• AirAsia X: a brand with a huge potential, but remember, “you’re only buying the flying”
• Five reasons why budget airlines in Asia are successful
• Malaysia Airlines launches FireFly to Singapore – a community airline brand. Interview with Head of Marketing
• Is Premium Economy here to stay? A brand review of All Nippon Airlines

This is a guest post by Jonathan Haysom, who is a respected marketer and business development strategist. Currently working for Australia’s number 1 telco and number 1 company by brand value, he is responsible for maintaining and growing a multi-billion dollar product portfolio focused on next generation products. He has recently received awards for innovation in marketing and accolades for his social media campaigns and brand strategies.

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Virgin Blue, after fighting hard as a “renegade” brand for a slice of the Australian carrier market is tipped to undergo a marketing face lift and re-invent itself as a full service brand. Some of the purported changes include the introduction of a new business class product, integrating the other brand properties (Polynesian Blue and V Australia) as well as the introduction of wide body aircraft on trunk routes between capitals.

(Image credit: ABC News)

Virgin Blue going upscale?

It is apparent from the changes the new CEO, Ex Qantas Senior exec John Borghetti is primarily going after the lucrative corporate segment of the market, one which Virgin Blue has traditionally struggled to break into due to Qantas’ having a strong and loyal customer base.

The biggest hurdle here will be to ramp up the company’s loyalty programs to make them attractive to corporate clients. The easiest way Virgin could do this besides upgrading it lounge system is to integrate with a global airline alliance, such as SkyTeam or Star Alliance, to boost its loyalty offering and expand code share operations.

It’s not going to be easy to attract new the new corporate business without impacting the most loyal customers who were attracted to the “renegade” brand. The shift away from competing head to head with other low cost carriers such as Tiger and Jet Star will surely allow it to focus more on its new customer acquisition path and deliver a more differentiated product. However it’s a delicate balance between attracting a new segment and not turning away the loyal customer base who share an affinity with the current culture and image.

Virgin Australia Airlines?

The other issue facing Virgin’s re-birth is the long-standing agreement between Virgin Atlantic Airways and significant shareholder Singapore Airlines prohibiting it from using the Virgin moniker for international flights.

I’d hasten to say the use of Virgin Australia Airlines, which was registered several years before the 2008 launch of V Australia will be the primary candidate to encompass all 3 brands.

Mr Borghetti has also recently swept the brands senior leadership team under the one reporting structure, not only implementing a few commercial side changes but also positioning Martin Daley as Product and Guest Services lead across the single carrier brand. Martin was one of the early Virgin Blue culture “creators” and will be integral to ensuring a consistent and on brand culture across all brand properties.

Finally, rationalisation of loss making routes across brands should also be on the cards as part of the marketing change out with yield being a primary focus of V Australia. A focus on greater diligence on revenue generation across the house of brands will be imperative once it becomes a branded house to ensure one branch of its network does not impact another’s profitability.

With most of the changes to come in before the end of the year, do you believe they can shake the low cost carrier moniker, bring the brands together and attract one of the most loyal market segments away from Qantas? Sounds like a big task, so let’s wish them all the best. And watch this space.

• Why a Qantas and British Airways merger is good (and why Qantas + Cathay Pacific will be even better!)
• The “Jetstar-isation” of Qantas is not over yet. Is the LCC taking over the legacy parent brand?
• Australia’s Qantas Airways – the world’s most agile airline brand?
• Talking airline business with Virgin Atlantic VP, Paul Charles
• Why LiveTV is a great idea from JetBlue Airways, to help them fly through a recession and keep the brand alive

Last week, I wrote an article for CNBC, which talked about the agility of Qantas that keeps the airline in profitable territory. The article resulted in a lively debate with a number of Aussie aviation experts down under, and one of them kindly offered to write a detailed Guest Post on SimpliFlying on how it’s actually Jetstar that’s keeping Qantas afloat.

Grant McHerron (aka Falcon124) is an opinionated aviation enthusiast & co-host of Plane Crazy Down Under, Australia’s only aviation podcast. He is an online/digital project manager and perpetual student pilot who can often be found crewing hot air balloons, working airside at Avalon Airshow and plane spotting at airports around the world. He graciousouly hosted me when I visited Melbourne last year, and we almost watched the sunrise in his hot-air balloon Enjoy!

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The latest half-yearly results from QANTAS continue to show an airline that is hemorrhaging cash on its mainline, full service routes. While QANTAS are certainly showing signs of agility, the primary factor keeping the group afloat is the success of their Low Cost Carrier brand Jetstar.

The creation of Jetstar

Towards the end of the 1990′s, QANTAS saw the writing on the wall as customers moved towards the Low Cost Carrier (LCC) model, sacrificing as much as possible to chase cheaper airfares (yet still complaining strenuously about lack of service despite paying next to nothing, but that’s a whole different article Like other airlines they decided to create their own LCC, launching Jetstar in 2004 by rebranding the Impulse Airlines LCC operation that QANTAS had previously purchased in 2001. Re-branding Impulse Airlines was important as it allowed QANTAS to utilise their equipment and, most importantly, their staff agreements.

These agreements have allowed Jetstar to pay their crew less and utilise them more than QANTAS mainline staff who are covered by agreements that are the result of decades of union strength and bargaining. This low cost base provides Jetstar with more room to reduce fares and compete against other LCCs.

Image Courtesy of stuff.co.nz

Jetstar complementing and competing with Qantas

Low fares have not been the only factor that has allowed QANTAS’ baby to survive & grow, unlike other LCC offshoots, such as MetroJet & Song. Competing with Virgin Blue and Tiger Airways, Jetstar are also taking over unprofitable routes from the QANTAS mainline brand, including the routes run by Australian Airlines, the low cost international operation that QANTAS had launched in 2002 but eventually folded in favour of Jetstar.

In response to Tiger Airways starting a Melbourne to Sydney service in 2009, QANTAS allowed Jetstar onto the route in direct competition with their own “City Flyer” high-frequency services. The route between Melbourne & Sydney is the world’s third busiest and features high numbers of corporate travellers commuting between the cities. QANTAS reasoned that with fares falling further thanks to Tiger’s arrival, they might as well try to capture the discount travellers and keep them “in house” rather than lose them entirely.

It was this introduction of Jetstar onto one of QANTAS’ domestic cash cow routes that spurred Alan Joyce to famously state there would be “no further Jetstarisation of QANTAS.” If only that were true.

The Jetstarisation of Qantas

Jetstar’s growth has survived challenges such as the Bird Flu epidemic, Swine Flu and now the global financial meltdown. In fact, the current crises appears to have helped drive more traffic to Jetstar as business travellers and other frequent flyers have had to face reality and reduce the size of their travel budgets.

QANTAS recognised the surging “flight to value” as their First Class cabins drained down into Business Class while business travelers wound up back into Economy Class. Many passengers were lost to other airlines on some routes in the mid 2000′s, apparently fuelled by QANTAS’ lack of any Premium Economy offerings. Many of us in Australia were wondering why QANTAS was slow to realise that frequent travelers often want space & comfort, something certainly not encountered in the cramped conditions of cattle class.

QANTAS did eventually introduce a premium economy service in April 2008, slowly expanding to most of their international routes by the end of 2008. While this helped retain customers, it was becoming clear that high-end premium traffic was not only down but may, in fact, never come back to QANTAS. With high end premium traffic down and growing competition from the top quality First Class offerings at Emirates and Singapore Airlines, QANTAS have taken the wise step and are removing first class from their remaining 747-400s and 8 of their A380s (those arriving in 2012 & beyond). They will still have a First Class offering on 12 of their A380s but are reducing the number of Business Class seats on those aircraft to provide space of more Premium Economy and Economy seats.

This is yet another step along the Jetstarisation of QANTAS, even though the aircraft are still under the mainline QANTAS brand. Additional steps towards Jetstar’s dominance include their current push into Asia and their intended use of 787s to open up Europe. It is perhaps no surprise that all the new jet services & routes that QANTAS is adding (or re-opening) appear to be under the Jetstar brand, not QANTAS itself.

Qantas for Business, Jetstar for everyone else?

Over at the Plane Crazy Down Under podcast, this ongoing movement towards Jetstar has us making reference to “QANTAS, a member of the Jetstar group.” We have also joked that the ultimate end point for Jetstar will be flying JQ branded high density A380s across the Pacific and into Europe. As Ben Sandilands has pointed out in a recent Plane Talking entry, this may very well become a reality if the 787-9 does not live up to original expectations.

If current trends in domestic & international airline passenger transport continue, it is clear that Jetstar will continue to gain market share as QANTAS reduce their mainline aircraft to only those routes that still have a good market for business class. It seems likely that Alan Joyce will eventually regret his comment that the Jetstarisation has ceased as it appears to be, if anything, speeding up.

• Australia’s Qantas Airways – the world’s most agile airline brand?
• Is Premium Economy here to stay? A brand review of All Nippon Airlines
• Five clever ways to earn frequent flier miles for upgrades
• Is business-class travel going extinct? Part 1 of 2
• The business of business class

This article was first published on the CNBC blog
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Qantas announced today a net profit after tax of A$58 million for the first half of the financial year, down from $210 million a year earlier, although the airline did recover from a loss in the second-half of last financial year. This 72% dip in profits resulted in the shares falling by up to 7.2% in early morning trades. However, Alan Joyce, the CEO, says the carrier has done better than most of its rivals. And it has, indeed, thanks to its agility.

Agility through smart cost-cutting

Although revenues dipped by 13.4%, costs were slashed by 16.2%, which shows Qantas’ diligence and discipline in reducing expenditure in the past year. The cutting of frequencies to unpopular routes and grounding of older aircrafts was key to these cost savings.

Load-factors have been the highest in five years – at 82.4%, on flights that carried a lesser number of total passengers as compared to the past year.

This simply means that flights were more full than in the past, despite the recession. Of course, the downside was that this was achieved by offering very low fares on certain routes, which are unsustainable in the long run. Alan Joyce eluded to this fact as well, by indicating that the industry’s survival depends on higher fares.

Agility in re-configuring the cabin

Qantas was one of the first airlines to add a Premium Economy cabin to their flights. Now, they’re standing by their decision by overhauling their cabins. Qantas will be removing First Class on most of its long-haul routes, with the exception of London and Los Angeles, and adding Premium Economy to their widebody jets.

This not just reflects the growing sentiment that Premium demand will change in the coming years, but also the fact that there are more First Class seats in the market than required. For example, from Sydney to London, a passenger has the choice to fly on First Class Suites on board Singapore Airlines, Emirates, Etihad, Qatar Airways and Qantas. Certainly a case of over-capacity.

Qantas is one of the first airlines in the world to remove the First Class in a systematic fashion, and change their long-haul plane configuration to Business, Premium Economy and Economy classes. This effectively increases the number of seats and hence reduces the cost per seat even further. Such agility will pay off for Qantas in the long term.

Leveraging on Jetstar

It’s a known fact that the two brand strategy, growing Jetstar aggressively, gives Qantas Group a very valuable option that few others can match. Jetstar’s profits tripled in the past year and continue to provide Qantas a very valuable asset to leverage on low-yielding routes. The two-brand strategy has also ensured that the Qantas Group doesn’t lag behind LCC competition from Virgin Blue and Tiger Airways.

Moreover, the recent Jetstar-AirAsia cost alliance should also help the airlines reap additional benefits in the near future through by tapping on each other’s scale and synergies.

In conclusion, even though profits have dipped, Qantas remains one of the most agile airline brands in the world and it’s this quick-thinking that will keep them ahead of most competition in the coming times. What do you think? Let’s discuss in the comments, and over on Twitter (@simpliFlying)

• The “Jetstar-isation” of Qantas is not over yet. Is the LCC taking over the legacy parent brand?
• Is Premium Economy here to stay? A brand review of All Nippon Airlines
• Five clever ways to earn frequent flier miles for upgrades
• Why a Qantas and British Airways merger is good (and why Qantas + Cathay Pacific will be even better!)
• The business of business class

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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• Five reasons why budget airlines in Asia are successful

Dear SimpliFliers,

As most of you are aware, a couple of weeks back, I delivered an expert address in Miami, Florida at the Low Cost Carriers Americas Summit, at the intersections of three topics – airline branding + social media + budget airlines. My ideas were very well received by the audience of key executives from LCCs in North America and South America. And I thought I’d share a video recording of my speech with all of you as well.

I’m keen to hear your feedback on my ideas, whether you find them feasible and how we can help airlines adopt these well. You may go through just the slides here.

Regards,
Shashank

• 5 insights on social media, which airlines must tap on – presentation from IATA Wings of Change at FIDAE
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• Ancillary revenues and airline branding webinar slides (with video!)
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• Airlines 2.0: Using technology for branding through the recession – webinar slides

This is a guest post by Rob Mark from Jetwhine.com in Chicago. We’ve decided to begin a little cross-posting here at SimpliFlying and at Jetwhine.

A commercial pilot and journalist, Rob has been writing Jetwhine as the blog of “aviation buzz and bold opinion,” for two and a half years. His posts are never dull because you never need to try to figure out where he and his co-writer Scott Spangler stand on an issue. Enjoy.

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For as long as I can remember, Southwest Airlines, now the largest U.S. domestic airline, created in the 1970s by Herb Kelleher and Rollin King, has been the low-cost airline others most want to emulate. The need to copy isn’t just about money, although Southwest has a profit history better than any other airline in the world. Most Southwest look-a-likes have, in fact, been dismal failures.

Southwest has a record of solid labor relations – despite last week’s pilot contract rejection – and a culture of customer fun in an industry that most others have never been able to duplicate. Southwest simply delivers a solid, consistent service at a fair price that keeps passengers coming back. To me, an airline that actually still responds in writing to a customer complaint says quite a bit.

The airline’s no hidden fees policy has also carried it quite a long way at a time when competitors have tried charging for everything short of breathing space. True, Southwest did appear to break with tradition last week when it announced some new fees, but charging for the work related to managing unaccompanied minors as well as pets carried in the cabin is something the average man or woman on the street will most likely never notice.

On to Ireland

When Ryanair opened for business in 1985, many analysts thought the Dublin-based carrier could evolve into a European airline modeled on the success of Southwest. Having had the opportunity to fly Ryanair a few times, I can tell you that the Southwest folks probably have very little to worry about on that front, something my first flight on the European airline confirmed. At Southwest, boarding is by group to bring some sort of order to the process of putting folks in their seats. In fact, we spoke to Southwest’s Doug Lawson about just that topic last year.

When boarding at Ryanair, they essentially open the terminal doors, aim passengers at the airplane and yell “go.” It’s every man, woman and child for themselves to find a good seat using both the front and rear doors. There was nothing even remotely funny about watching people run like crazed dogs for the Boeing while I tried to make sure they didn’t mow down my family in the process. To me, Ryanair’s business model is not so much about low cost as it is about being cheap. Even ads for the airline tout “cheap.” And when a company is cheap, consumers should beware.

In March, Ryanair CEO Michael O’Leary made news by suggesting pay toilets might be a good idea aboard his airplanes where flights are often no more than an hour per leg. In the U.S., we laughed, especially when O’Leary’s press officer confirmed that the CEO often makes this stuff up as he goes. Then last week O’Leary confirmed he’s in talks with Boeing to find a workable pay toilet solution, one that will help Ryanair remove two of the three lavs on the Boeing 737 to make room for more seats.

Making passengers pay to use a toilet is sure to become one of the largest revenue losers in the history of the airline business. But it also opens the door to a discussion about how Ryanair is fast become an airline at which the wheels have finally begun to come off the wagon. The company has clearly crossed the line between what passengers will accept and what they will not. O’Leary just doesn’t seem to realize it because he’s in business to make money, not run an airline.

I always thought no one could be less customer-focused than United Airlines. Clearly I was wrong. The only thing that really worries me is that some airline bean counter here in the states might think Ryanair is on to something. They are of course. It’s just not anything good for airline passengers. And if you do fly Ryanair in the future, you just might want to bring along a can of Lysol to kill the germs. It’s going to get messy over there.

• King of ancillary revenues, RyanAir offers €1,000 for best idea on making money!
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• Airline Baggage Fees : The Airline Industry’s Financial Salvation?

Over the past year, I’ve had the opportunity of interviewing a number of senior airline executives. Here’s one with the CEO of SpiceJet, Sanjay Aggarwal, recorded in Dec 2008, which left me mesmerized by the man’s wisdom, simplicity and frankness. These are qualities difficult to find in an airline CEO these days – and he puts them to good use too – running one of India’s most successful airlines.

Making SpiceJet one of India’s best airlines

In his interview, Sanjay reveals a number of gems that have made SpiceJet so successful. His clarity of thought is evident in this sentence:

“We want to focus on what we do well, and we will do it better than anyone else out there – which is to provide a quality, safe, clean and reliable transportation.”

Lessons from Marriott

Having worked at Marriott, Sanjay sums up its philosophy as to take care if its people, and ultimately they’ll keep the customer happy. And with 150,000 employees, they still maintain their culture. And this is the culture Sanjay is trying to re-create at SpiceJet, by “finding the right people and motivating them to deliver an unmatched in-flight experience”.

I’ll let you enjoy the succint interview. Please feel free to share your thoughts in the comments.

• What makes Indigo Airlines one of the best budget carriers in India?
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• Announcement: February will be “Indian Aviation Month”