The Skift Airline Innovation Report is our weekly newsletter on the business of airline innovation. We look closely at the technological, financial, and design trends at airlines and airports.
Brian Sumers writes and curates the newsletter, and we send it on Wednesdays. You can find previous issues of the newsletter here.
I do not like to talk on the telephone.
It is an odd admission for a journalist. But I have worked my entire career in the digital age, and my best sources — you know who you are — prefer to contact me via email, iMessage, Twitter, Instagram, WhatsApp, and Facebook. Public relations people may pester me via phone, but I rarely receive a call from someone with whom I wish to speak.
Yet I spend an inordinate amount of time on the phone with airline customer service agents. I’m what you would consider a high-touch customer — I book complicated itineraries and often want to upgrade or change a flight — and with most airlines, I must place a call, wait in the queue, and explain my problem. Then the agent puts me on hold to conduct some research and perhaps chat with a supervisor.
What if there was another way?
Well, my colleague Dennis Schaal spent time last week with David Neeleman, founder of JetBlue Airways, to learn more about his U.S. startup airline, coming as soon as 2021. And while they talked network, fleet, and customer experience — “I could call this airline crap and people will love it because of the way I’m going to treat them,” Neeleman said — I’m more intrigued about what Neeleman said about how he plans to handle customer inquiries.
“You don’t have to speak to us,” Neeleman said. “You won’t be able to speak to us. You’ll be able to reach out to us and you’ll be able to chat with us and we’ll call you. You won’t be able to call us because everything will be functional.”
That sounds like a great idea. Many companies, including Apple and a few airlines, already provide customer service this way. It works well for most inquiries.
What do you think? Does Neeleman have the right idea?
Stories of the Week
JetBlue Founder Reveals Details on His New Tech-Focused International Airline: Neeleman, perhaps the most impressive airline entrepreneur of his generation, met with reporters last week in New York and did not hold back. He said he is confident his startup, which will fly exclusively Airbus A220s, can withstand any competition in part because it will fly from less-crowded airports. “I’ll just do stuff they can’t do,” Neeleman said.
Lufthansa’s Low-Cost Subsidiary Blunts Profit: Lufthansa’s full-service airlines are profitable, but the company hasn’t figured out how to leverage its low-cost Eurowings arm, reports Skift Europe Editor Patrick Whyte. Eurowings lost $74 million (€65 million) during the first nine months, a loss the parent company blamed in part on integration issues after Eurowings took over pieces of Air Berlin. “In 2017 we seized a historic opportunity in the consolidation of Europe’s aviation sector,” Lufthansa CEO Carsten Spohr said. “And it was the right decision to do so in strategic terms, even if this has given Eurowings a very challenging 2018.”
British Airways Is Filling In Where South African Airways Is Fading: Regular readers know I occasionally question the business model at South African Airways. The carrier keeps trying to reinvent itself but it can’t quite shake its old reputation and cost structure. This, as our South Africa-based freelancer Richard Holmes reports, has been good for British Airways, which is rapidly increasing capacity to Southern Africa. “Africa has been a real success story for British Airways and there has been significant expansion onto our African route network and capacity in the past 18 months,” a British Airways executive told Holmes.
Kenya Airways’ New Direct Route Could Boost Tourism to East Africa: You can’t be a real airline if you don’t fly to New York, right? This has been the conventional wisdom for decades, and newish Kenya Airways CEO Sebastian Mikosz apparently subscribes to it. Will it make money? Who knows? But the link is important for the region, Skift columnist Colin Nagy reports. “The direct flight will substantially boost Kenya’s global profile as a tourism destination, but will also benefit other local nations that are striving to build their tourism business,” Nagy writes.
British Airways Owner Hasn’t Quite Given Up Hope on Landing Norwegian: The headline is about Norwegian, and that makes sense, because International Airlines Group CEO Willie Walsh is still interested in acquiring the low-cost-carrier. But Walsh had other interesting things to say last week. Among them: He believes British Airways will be fine after Brexit. “We continue to believe that and strongly believe that the arrangements post-Brexit will facilitate the continuing operation of the airline industry as we know it,” he said. “And we’re fully expecting a comprehensive agreement to be reached between the UK and in the EU.” Related: Norwegian Air’s Future Is Still a Matter for Speculation.
American Air Tells Analysts It Needs to Get Passengers to Buy More Expensive Seats: Delta Air Lines and United Airlines executives have been giddy when explaining to analysts how well premium seats have been selling. American’s premium business is strong too, but the airline hasn’t made the same investments as its competitors in technology, so it isn’t always able to show the right offer to the right person at the right time. Expect that to change. It’s a priority for American, executives said.
Alaska Is Blaming Rivals for Weakening Hawaii Business: Alaska Airlines doesn’t fly to Europe or Asia. Other than Mexico beach destinations, it barely flies to Latin America. But its crown jewel is Hawaii, with the airline building a successful franchise flying Boeing 737s from the West Coast to the islands. Now, that business is under pressure. “The only region in our system that is experiencing materially lower pricing today is Hawaii,” Andrew Harrison, Alaska’s chief commercial officer, told analysts last week. And Southwest Airlines isn’t even in the market yet.
Southwest CEO: ‘Number One Priority’ Is Controlling Costs: Southwest has been making revenue a priority, and on that front, the airline has been successful. But executives admitted last week they must now focus on cost. “All of us knew the the time would come where our initiatives would need to zero in on efficiency and productivity and just overall cost control,” CEO Gary Kelly told analysts.
Allegiant Air’s Remedy to High Fuel Prices: Buy More Efficient Jets: U.S. discount airline Allegiant is retiring its gas-guzzling MD-80s at the right time, since fuel prices are up. It is replacing them with Airbus A319s and Airbus A320s, some new, some used. None will have the latest-generation engines, but they’re still far more efficient than the planes they replace.
Qantas and Virgin Australia See Revenue Boost After Cutting Flights: Qantas is among the world’s healthiest airlines, and the trend is continuing, Skift freelancer Allan Leibowitz writes. The Qantas Group achieved record levels of revenue for the first quarter of its fiscal year, up 6.3 percent compared with the same period last year. Virgin Australia has been less successful of late, but even it is on an upward trajectory, he writes.
A New Research Report
My colleague Seth Borko, a senior research analyst, has written a new report focusing on the state of airline distribution. It’s a fantastic piece of research.
Borko, a former associate at JP Morgan, takes the time to delve into the subject, giving far more information that I can in an 800- or 1,000-word story. In the report, he analyzes global distribution system market dynamics, including customer fragmentation, technical integrations, and booking fees. He also provides an overview of the New Distribution Capability, or NDC, explaining what it is and why it is needed.
Full disclosure: You will need to pay for the report.
Skift Senior Aviation Business Editor 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 him an email or tweet him.