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The Skift Airline Innovation Report is our weekly newsletter focused on the business of airline innovation. We will look closely at the technological, financial, and design trends at airlines and airports that are driving the next-generation aviation industry.
We also provide insights on developments in passenger experience, ancillary services, revenue management, loyalty, technology, marketing, airport innovation, the competitive landscape, startups, and changing passenger behavior. I write and curate the newsletter, and we send it on Wednesdays. You can find previous issues of the newsletter here.
To redeem a paper voucher on American Airlines, you must call the airline’s 1-800 number, where — on one day last week — you might wait 50 minutes for an agent to answer.
When she picked up, you would explain your situation. You cancelled a refundable ticket last year, and wanted to use it to pay for another trip. The cheery agent would take your information, ask which flight you wanted to book, and issue a new confirmation number.
But it did not end there.
She would then spend a minute giving instructions. You would mail the voucher to an address in Pensacola, Florida, including a paper with your name, date of travel, and flight number. On the envelope, under your return address, you would write your travel date. That information would help American decide how quickly to open your mail. And while American was saving space on your preferred flight, it would not ticket the reservation until a human processed the paperwork.
You then learned you someday would do this again. Because you hadn’t used the entire voucher, you discovered American would mail you a new one with the residual amount. Redeeming it would require the same process.
This happened to me last week. I’m a sophisticated traveler and even I was shocked at this time warp to 1985. How can American still rely on paper vouchers?
I called American to find out. I learned American uses electronic vouchers for customer service issues — if, for example, your business class seat is broken, it might give you a certificate you can redeem online — but for most ticket exchanges, paper is still used. Travelers can, in some cases, have credit returned to the original form of payment, but I hadn’t selected that option.
I asked American spokesman Ross Feinstein why this is such a time-intensive process. Most other airlines now have electronic vouchers. I learned American would like to copy its competitors, but since its merger with US Airways in 2013, the world’s largest airline has prioritized other IT projects. It just recently started allowing customers to rebook themselves on the mobile app during irregular operations — functionality Delta Air Lines and United Airlines have had for a long time.
“We know this is not a great experience for customers,” Feinstein said. “This is on a priority list to get done. We plan to focus on it in 2018.”
Are you surprised American still uses paper? Do you think this is a disservice to customers? And how time-consuming do you think this process is for American employees?
Let me know your thoughts by sending me an email — firstname.lastname@example.org.
— Brian Sumers, Airline Business Reporter
Stories of The Week
The Airport Lounge Business — An Insider’s View of How It All Works: Airport Lounge Development, which is owned by Collinson Group, is among the largest independent airport club operators in the United States. In this interview, a senior executive shared some secrets, such as how lounge managers keep customers from taking food out of the lounge. She also shared some basics about the business model.
Airport Retailer Hudson Group Is Seeking an IPO in 2018: Almost everywhere, retailers are losing sales to Amazon and other e-shops. But not at airports. Terminals have a captive audience, and Hudson Group is betting that’s a competitive advantage. Did you know the company sold $572 million last year in beverages, candy and food? That’s about one-third of its revenue. Skift’s Sean O’Neill has the story.
Pilot Shortage Issue Splits European Airline Execs: Is there a pilot shortage in Europe? Skift’s London-based editor, Patrick Whyte, tries to find out. One person not convinced there’s a pilot shortage? That’s IAG CEO Willie Walsh. “I started in this industry 38 years ago as a pilot. I heard then that there was a shortage of pilots,” he said. “Thirty-eight years later, I still haven’t seen this.”
Delta and Partners Will Charge for Checked Bags on Cheapest Transatlantic Fares: For at least five years, Delta has been the first U.S. airline to announce just about everything, from a revenue-based frequent flyer program, to basic economy, to new transatlantic fares on cheap tickets. It seems almost certain American and United will copy these bag fees, but how quickly can they do it?
Ryanair Pilots in Dublin Threaten a Holiday Strike: Ryanair pilots finally have leverage, and it looks like they’re interesting in using it. Do you blame them? Few pilots anywhere work under such convoluted employment schemes.
WestJet Thinks It Can Please All Flyers With Dual Strategy: Is WestJet a premium airline? Is it a low-cost carrier? Or is it an ultra-low-cost carrier? At its investor day last week, it promised to be all things to all people by 2019, when its first new Boeing 787s arrive. Can it succeed? Maybe. But this is a complicated model for a relatively small airline.
United Airlines Public Relations Chief to Leave After Tumultuous Tenure: Jim Olson arrived at United in January 2016 with so much promise. He had led communications teams at Starbucks and US Airways, and he was supposed to be what United needed — an executive who could improve United’s public image. He had some successes, like the recent goodbye tour for United’s Boeing 747 fleet. But there was one massive misstep. He led United’s bungled response to the Dr. David Dao dragging incident.
U.S. to Discuss Open Skies Issues With Gulf Carrier Governments: The Trump administration seems to have as little interest in taking a tough stance against Gulf carriers as the Obama administration. Yes, the U.S. State Department plans to bring up the subsidy issue in talks with the United Arab Emirates and Qatar. But they’re expected to be relatively informal discussions.
Airports Are Losing Money as Ridehailing Services Grow: Parking garages have long been revenue-drivers for airports. But that’s drying up as more customers take Uber and Lyft, The New York Times reports. At many airports, the ride services pay fees to use terminal roadways, but that’s not enough to offset parking revenue.
Thoughts on China
A little more than two years ago, with considerable promotional flair, United Airlines announced plans to fly from San Francisco to Xi’an, a city in interior China with more than eight million residents.
No U.S. airline had ever flown there, and it wasn’t clear if a market existed. But this was part of a long-term bet for United. In 2000, with a San Francisco-Shanghai route, it had been the second U.S. airline to fly from North America to China nonstop — Northwest Airlines had been the first in 1996 —and over time United’s China franchise has became a major strength for the carrier. An early investment paid dividends.
Under Brian Znotins, who ran United’s network from 2012 to 2016, United emphasized secondary Chinese cities, adding Chengdu, Hangzhou and Xi’an, all from San Francisco. Znotins wanted United to get in early, betting the routes eventually would become money-makers, even if they didn’t start that way. “It’s still a huge, hot economy,” he told the Wall Street Journal in May 2016. “The middle class is really booming. And the secondary cities are the growth engine.”
Now, with United’s network under new management, the airline is altering its strategy. Last week, it told employees it will cut Xi’an, which it had flown three times per week from May through October.
“Corporate traffic between SFO and XIY has not increased as fast as originally forecast,” United told employees. “After careful analysis, we determined this route is not currently meeting our expectations and is no longer sustainable.”
This news comes after United stopped flying to Hangzhou in October for similar reasons, leaving only Chengdu. It may remain — anecdotally, we hear it’s a better performer than the others — but it sounds like United’s secondary China strategy is over.
United might be more focused on tried-and-true routes — it is apparently considering new routes from Los Angeles and Denver to Frankfurt — over long-term plays. (Asked about the possibility of the two new Frankfurt routes, a United spokesman said, “We are always looking at new opportunities in markets that make most business sense.”)
Znotins could get another chance. He now runs the network for Calgary-based WestJet, which will take its first 787s in a little more than a year. At WestJet’s investor day earlier this month, the airline shared a world map showing routes it might fly. In China, only Beijing and Shanghai made the list. But that could change.
What do you think? Should United have stayed Hangzhou and Xi’an as a long-term play? Or was it smart to leave?
Release of the Week
On the bottom of Virgin Atlantic’s upper class salt-and-pepper shakers, the airline has printed a message — “Pinched from Virgin Atlantic” — presumably to discourage passengers from taking them off the plane.
But between December 21 and 26, Virgin Atlantic is introducing special commemorative red holiday shakers, and the airline is encouraging passengers to bring them home. That’s the news highlighted in what ordinarily would be a boring press release.
But in this release, Virgin Atlantic’s PR team shared the items most often stolen from its planes. According to the airline, they are:
- Salt and pepper shakers
- Mugs in upper class and premium economy
- Blankets from all cabins
- Hand wash and hand cream (from the bathrooms!)
- Safety cards
- Motion sickness bags
Insiders often joke about how often passengers steal from planes — one told me recently that passengers take bedding and pillows “even when they’re bad” — but most say they don’t mind when travelers take stuff. For some, they’re a memento of a good trip, and perhaps a subtle reminder they should book another on the same airline.
“If a couple of our Big Love spoons end up on the Thanksgiving dinner table, I wouldn’t mind,” a Delta executive told Bloomberg earlier this year after the airline announced it would use red spoons made by Alessi.
What’s the most unusual item you’ve stolen from a plane?
For the next installment of my Airline Insiders series — that’s my question and answer feature with an executive from an airline, airport or vendor — I’m featuring architect Pat Askew, global director of aviation at HKS.
He had some interesting anecdotes, some related to Doha’s airport, which he helped design. He worked with Bechtel, the global engineering, construction, and project management company.
“If you know Bechtel, they had the prime contract,” Askew said. “It’s funny, the guy who ran the Bechtel thing said, ‘There’s two challenging types of clients. One with not enough money, and then one with too much money.’ They kept wanting to make it bigger and bigger, and Doha, if you’ve seen it, it really is magnificent.”
Look for the full interview soon.
Skift Airline Business Reporter Brian Sumers [email@example.com] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send me an email or tweet me.