No one likes throwing away money. Certainly not airlines. While customers regularly complain about everything, airline
professionals know the stress of operating an extremely low-margin business.
The Wall Street
Journal reports that the largest seven airlines took in a profit of just
$17.75 per passenger in 2017. In the airline business, every dollar matters.
Which leads me to wonder, why are airlines leaving millions of dollars of
profit on the table?
Let’s dive in.
Offline and outdated
Almost every airline in the world sells a special product to
groups of 10 or more passengers flying together. Group air contracts allow tour
operators, schools, sports teams and agencies the ability to reserve large
blocks of seats, modify seat amounts and defer payment.
Now here is the insane part - and while you read this, do
remember it is 2019: Over 95% of the world’s airlines sell group airfare offline. (Please reread for emphasis.)
In the age of automation and instant fulfillment, airlines
have invested major time and energy into creating seamless user experiences.
Download almost any major airline app, and experience expert design. Yet, the
group sales sector of their business has not been touched by the innovation
wand.
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If a teacher needs to book 80 seats on a flight for an
upcoming school trip, she has to call each airline individually to inquire if
seats are available.
Should the airline have availability and a reasonable
price, contracts are sent back and forth via email, without even a digital
process to sign the contract in most cases.
Airlines have gotten good at selling single tickets in a
multitude of channels; yet, they are reluctant to transform their group product
and distribute offers online.
Airlines do their best to be counted among innovative,
user‐centric companies like Apple, Amazon and Airbnb. But for the small part of
their business that is group airfare, it seems they are channeling Blockbuster
(we all know how that ended).
Selling group airfare in a siloed, offline manner is not
only a lackluster customer experience, it also has a huge financial impact on
an airline.
Based on our experience, below are six insights and
recommendations to our friends in distribution, strategy and revenue management
around the world.
Invest in automating
your group sales process, and get ready to publish group offers online.
Several years ago, Lufthansa took a major step forward in
digitizing their group sales process and allowing agencies the ability to see
real-time pricing and availability for group flights.
Creating a digital group
product opens doors and presents airlines with more options. We will talk about
where and how to distribute those offers later.
Change your
psychology. Group airfare is a premium product; treat it like so.
Group customers have special needs. They need a large amount
of seats on a plane.
For a relatively small investment, an airline can bring group sales online, delight their customers and turn a sizable profit in the process.
Kenny Totten - Bacarai
Consider the example of a high school band marching in the
Macy’s Day Parade. If they can’t get 80 seats on a plane together, they may not
go!
In selling single tickets, the airline needs the customer. In selling group
tickets, the customer needs the airline.
Also, group contracts have awesome benefits. Customers can
reserve space with a refundable deposit and delay the final balance (usually)
until 30 days. Customers can even change names for free on most carriers up
until 72 hours prior to departure.
Those are some amazing terms. Treat your
group product like the premium product that it is.
Charge a $50
nonrefundable fee for people to hold group space.
The airlines have no idea they are getting raked over the
coals. Their travel agent customers are abusing them, holding space unnecessary
with little to no intention to fill all the seats requested.
Travel agents regularly call three to four airlines and hold contracts
with all of them. A request for 50 seats would often cause 200 seats to come
out of inventory, across multiple airlines.
Customers will compare flights and rates. The lack of a
central marketplace or means to quickly get quotes means agents have to hold
space as they shopped.
Airlines get abused by multiple and duplicate requests
every day, and it costs them millions.
Charging $50 to hold space would qualify the buyer and
eliminate waste. Airlines also field hundreds of thousands of requests, so the
$50 fee would help profitability.
NDC is growing up,
and so should your profit margins.
Technology continues to advance as airlines develop the
ability to sell more products to consumers. The revenue opportunity is clear
for an airlines group program.
Group passengers want to buy more products!
Citing internal research, over 23% of all groups would pay for advanced seat
assignments, pre‐pay bags, purchase lounge access and more.
Because the airlines rely on an offline, call-center model
to do their sales, there is no chance at selling groups ancillaries.
At
Bacarai, we are exploring using NDC connections to further upsell group
passengers. As more capabilities are added, the airlines can make millions more
off their groups should they choose to evolve their groups programs.
Did airlines forget
time is money? Distributing group airfare offline is expensive.
In the airline industry, every dollar, every pound and
every minute counts.
The average group contract takes an airline about 14 to 20
minutes to produce for the customer, and this is with extremely low conversion
rates.
Automating your group sales and publishing offers online frees up your
agents to handle higher-level tasks and reduces the overall cost of your group
program.
Let your people handle the people. Leave the data retrieval
to the machines.
After you bring your
group air program online, get smart about where to publish offers.
Let’s get something straight. Customers are going to price
shop. Period.
In fact, the airline industry has made it very time-consuming
to price shop for group airfare. Yet, 95% of all customers booking group
airfare call and hold space with multiple airlines as they compare rates.
When customers price shop offline or in a siloed manner, it
hurts the airlines, as cancelation rates run rampant.
Last summer, Delta shuttered access to their group program
due to high cancelations.
So, while automating your group program
will decrease costs, improve the customer experience and eventually allow an
airline to sell more products - it isn’t a total solution, as it doesn’t solve
the cancelation problem that plagues the industry.
In the immediate future, group airfare will be single
channel. In the long term, group offers will be published to a central
marketplace.
Conclusion
The future looks digital for group airfare - which means
higher yields, better efficiency and lower costs.
Offering a digital shopping experience for group airfare
lowers operating costs and increases operational efficiency, all the while
providing new revenue opportunities and exposure.
Group airfare will likely follow a similar evolutionary path
as single tickets. Airlines will realize the potential, put group offers online
in a single channel and then start to distribute offers in multiple channels.
Airlines perform miracles every day. It’s nothing short of
amazing to watch a 500‐ton airplane dart into the sky. Airlines can surely make
a solid business decision and invest in modernizing their group programs.
For a relatively small investment, an airline can bring
group sales online, delight their customers and turn a sizable profit in the
process.
Sounds like a win for everyone.