It’s no secret that Google has been moving to profit more from travelers researching and booking flights. But it is rare to hear a top airline executive speak openly about the airline industry’s fraught relationship with the search giant.
So ears perked up late last week when David Cush, former chief executive of Virgin America, talked candidly about this issue.
Cush was speaking at a conference in San Francisco run by venture capital firm Thayer Ventures. Given his decade-long track record as chief of the U.S. carrier, he had been invited to share his thoughts with a few dozen limited partners in Thayer’s investment funds about what he saw during his time at Virgin America. (He left the company late last year after its sale to Alaska Airlines was closed.)
Google was not the main focus of his talk, but it was one topic he touched on as he discussed the trends that he says many U.S. airlines face today.
Searching for an answer to Google
Cush said one of his frustrations at Virgin America was the issue of direct marketing on a tight budget:
“A couple of years ago, one of our sources of frustration was right around when the higher number of visits to our branded website went down. So basically what we’re looking at primarily is the natural search business. Organic searches were declining.
Our challenge was, how do you persuade travelers not to book through Expedia, which, to use round numbers, costs us $18 a reservation, and instead come to us direct — whether it’s by clicking on a Google ad or by typing in the name of our brand — which is, say for argument’s sake, five bucks or less?
As we started analyzing it, we saw, very simply, that these organic referrals that we used to get in these high search result positions were being scooped up by Google.
The first result was a Google-sponsored ad for Virgin America. When users click on that, it costs us some amount of money. It’s a very cost-efficient channel, but it does cost us more than free.
The second one is essentially a giant ad for, of course, Google Flight Search. That costs us more. Competitors are then bidding on our keywords for the follow-on results under that widget.
So our organic website direct link wasn’t even coming up till the second page of results on the tablet sometimes. Now there wasn’t a heck of a lot we could do about it. We could go on and buy the space ourselves and bog them down. That was about it.
Fast forward to today. This morning I went on my tablet, landscape orientation, and I typed into the search bar the name of each of the best-known airlines in the U.S., one by one.
American and Southwest are doing something. I can’t quite explain what it is. They’re not buying any space but they are still the first things that pop up on the screen organically, so this is probably search engine optimization, which costs money, or some deal.”
The battle for primacy on search engine listings, especially on mobile devices, will continue to be fought, Cush predicted, especially as voice-internet becomes a more common way for users to search.
The deal was a capstone for Cush’s long tenure as the top boss of the U.S. carrier, which leveraged British entrepreneur Richard Branson’s Virgin brand. Cush had guided the company to a listing on the public markets and its first profits.
While only the ninth-largest U.S. airline by traffic, Virgin America punched above its weight through a savvy use of digital technology.
Before joining Virgin America, Cush held a variety of jobs at American Airlines over a couple of decades.
With that length of service, thoughts of the airline industry never stray far from his mind.
Airlines need a data-first mentality
The biggest tech issue facing the airline industry is how is it going to handle all of the data it is generating, Cush said:
“Every part of the business is generating performance data. If you can interpret that data correctly, that would be great. It might let you go longer between maintenance cycles and thus save money by more accurately predicting when a part is going to fail.
But no one in the airline industry knows what to do with the data. One study found that only about 25 percent of the data generated on an aircraft is digitally collected by the airline, on average. That needs to go way up.
So, that’s the next interesting thing I see in the airline industry: Making the insights on data actionable.
For instance, someone has to go take the data and use it for more predictive maintenance, rather than routine periodic maintenance, and then convince the FAA, of course, that that’s a better way of doing it. On the cost side, that’s probably the biggest opportunity out there going forward.”
Cush added: “What I will say about the current FAA is that they are very open to things like innovation. The fact that they came out with their rules on drones so quickly suggests they would be open to embracing other reforms to deal with the new technological realities quickly.”
Mobile payments as a differentiator
Cush said payment systems are a consumer-facing area where airlines are lagging in innovation. As consumers become accustomed to one-touch mobile payments for routine retail purchases, they also become frustrated by the lack of easy fingerprint authorization for booking flights through the airlines’ cumbersome systems.
“I’ll give you an example. Between United and American, I think American’s website is better. But one of the things I like about United’s mobile app, which I was using recently, is the broad options it has for payment,” he said. “United let me pay with my fingerprint on my phone, the most secure way of paying in the world. On American, I still have to go pop in a CCV security code from the back of the credit card.”
Cush said he finds it “irritating” that many brands have not integrated one-click mobile payment or faster ways of filling in other data into their apps.
“Fingerprint authentication and automated form-filling will be differentiators going forward,” he said.
Virgin America was not able to add one-touch mobile payment, Cush said, adding that the inability was “a source of frustration.”*
Cush spoke at the event as a favor to a partner at Thayer, who ran the conference to spotlight its new $100 million travel technology fund.
His public comments aside, Cush seemed to have no interest in becoming an all-purpose airline pundit. In past five or six months, Cush has taken several leisure trips, including a couple of weeks crossing Cuba by car and a few weeks in Australia “hanging out.”
Cush said he will continue traveling until he settles upon his next project.
Meanwhile, Alaska Airlines will drop the Virgin America brand by 2019. Yet Alaska’s CEO says he may keep some of the Virgin signatures, like purple mood lighting and digital device savvy, post-merger.