Innovative Airlines 2012-Airlinetrends

7/31/2019 Innovative Airlines 2012-Airlinetrends

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9. AirAsia

2. Brish Airways1. Korean Air

4. KLM

7. Virgin America 8. airBalc

5. TAM 6. Qatar Airways

3. Delta Air Lines

10. ANA

At airlinetrends.com we are connuously on the

lookout for innovave products and services launched

by airlines around the world as they respond to

changing customer needs and industry developments.

Once a year, we wrap up our ndings and select 10

airlines from around the world that in our view have

launched a wide range of innovave products and

services in the past year be it as part of a company

culture of connuous innovaon, a strategy to

challenge the industry status quo, or as part of eortsto catch up aer years of underinvestment.

The airlines on our innovave airlines ranking do not

necessarily feature on the various the worlds best

airlines surveys. Instead, we aimed to select those

airlines that have come up with interesng innovaons

that are an indicaon of the direcon the airline

passenger experience is heading in. Or in the words of

sci- writer William Gibson: The future is already here,

its just unevenly distributed.


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product and service innovations www.airlinetrends.com2/31

Korean Air tops airlinetrends.coms 2012 ranking of

the worlds most innovative airlines. The flag carrier of

the Land of the Morning Calm has established itself

as a major hub carrier for passengers travelling

between Asia and North America; its A380 flagships

have the lowest seat density of any A380 operator

and feature bars and lounges branded by Absolut

Vodka, as well as a duty free shop.

The airline also operates its own organic farm and

offers attentive service amenities such as a coat

storage service and a women-only lounge at Seouls

Incheon Airport, which itself has been voted best

airport in the world for the past six years.

Incheon hub

Sandwiched between the worlds second and third

largest economies of China and Japan, Seouls Incheon

Airport has become a key North East Asia hub,

offering more direct flights to Japanese cities

than even Tokyo Narita, which is Japans main

international airport. Furthermore, Korean Air is taking

advantage of South Koreas open skies policies with the

US, Canada and China to target travellers flying

between East Asia and North America (where it serves

13 destinations). The airlines short-haul route network

spans 22 cities in China and 15 destinations in Japan and

the airline for example has a market share of around 25

percent in the Chinese North American market.

Well-positioned

Because of high oil prices, a weak Korean won and the

slow recovery of cargo traffic (Korean Air is the second

largest cargo airline in the world after Cathay Pacific),

Korean Air made a net loss in 2011. Analysts, however,

are optimistic about the airlines future prospects,

noting that it will benefit from a solid increase in

inbound/transit passenger demand especially from

Chinese tourists, and increasing exports of consumer

electronics and automobile components.

1. Korean Air


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Furthermore similar to Delta Air Lines recent

purchase of an oil refinery Korean Air in 2007 bought

a 28-percent stake in South Korean oil company S-Oil

in order to secure a stable supply of jet fuel.

Additionally, while many airlines across Asia are

currently busy establishing their own low-cost carriers(LCCs), Korean Air in 2008 launched a low-cost

subsidiary Jin Air in order to compete with Koreas

high-speed rail network, the growth of domestic

budget air travel, and the entry of Chinese and

Southeast Asian LCCs. As LCCs in South Korea today

account for over 40 percent of passengers on

domestic routes, Jin Air is rapidly expanding its

international operations.

The carrier was the first South Korean LCC to offer

services to mainland China and has launched a raft ofnew international routes in recent months. As it

spreads its wings across Asia, Jin Air will also benefit

from having a first-mover advantage compared with

the relative youth of Japanese LCCs, while Korean Air

may also use its LCC unit more strategically in the

future.

Fleet and cabin upgrades

With regard to its mainline operations, Korean Air in

2011 completed an aggressive fleet expansion and

cabin refurbishment program, which saw the airlineupgrade the interiors of 49 long-haul aircraft and take

delivery of 19 new aircraft. Korean Airs B777s and

A380 feature Kosmo Sleeper Suites (based on

Contours Venus seat and customised by design firm

Acumen) in First Class, while all wide-body aircraft

have full-flat Prestige Sleepers from B/E Aerospace

installed in Business Class.

Korean Air was one of the first airlines to receive

Boeings new 737 Sky Interior which also feature

AVOD in all seats. Furthermore, besides Lufthansa,Korean Air is the only airline to have ordered Boeings

new 747-800 passenger jet, and the carrier will be the

launch customer in Asia for Bombardiers new CSeries

jet.

A380 flagship

The Airbus A380 in particular has given Korean Air an

unequivocal image boost. In June 2011, the airline

became the worlds sixth airline to receive the

superjumbo and currently operates five A380s on

routes to Hong Kong, Paris, Frankfurt, New York andLos Angeles.

Lowest seat-density

With 12 First Class suites, 94 full-flat seats in Business

and 301 seats in Economy (which offers a very generous

34 pitch), Korean Airs A380 accommodates only 407

passengers the fewest among A380 operators. The

airline is also the first A380 operator to dedicate the

entire upper deck of the superjumbo to Business Class,creating a business jet-like atmosphere.

According to Keehong Woo head of Korean Airs

passenger business division the airline hopes to better

market itself to international corporations seeking

connections to Asia and other markets with the A380

business-only upper deck. We think that in some

markets like Los Angeles and New Yorkor big cities in

European countrieswe can build up our business,

says Woo. Korean corporations such as Samsung are

our biggest customers now. We are tying to diversifyour customer base in the United States, in Europe and

in China.

Onboard bars and lounges

With fewer seats than any other airline flying the

double-decker aircraft, Korean Air has used the extra

available space to install three onboard bars co-

designed in partnership with Absolut Vodka. The bars

sport minimal Absolut branding with no visible logos,

but feature three Korean Air signature Absolut cocktail

drinks and a display tower.

One self-service bar is located in First Class at the front

end of the main deck, while at the front of the upper

deck there is another self-service bar and a four-person

lounge area with built-in side tables and a magazine

display. The aft lounge, appropriately called the

Celestial Bar, is staffed full time with a bartender and

incorporates a two-person sofa with reading lamps, a

trio of lean-to cushions, and a flat-panel LCD on top of a

magazine display.

Duty free display

Generating USD 201 million in duty free sales in 2011,

Korean Air is seen as the worlds most successful in-

flight retailer. As Koreans, together with the Chinese,

top the list of duty free spenders in Asia Pacific, Korean

Air is the first airline in the world to feature an onboard

duty-free store, which is located in the rear part of the

A380s lower deck, just in front of the stairs leading to

the upper deck.


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Designed by beauty brand LOrals travel-retail

division Scental, the main function of the duty-free

area is to showcase the airlines duty-free offerings so

passengers can get their hands on the best-selling

items before making a purchase. The kiosk

complements the regular duty free cart service and is

staffed by a full-time sales assistant.

The bottles on display have a strong magnet on the

bottom to prevent them from sliding in the event of

turbulence. First Class passengers are invited to

browse the shop and make purchases before anyone

else, followed by Business Class and then other

passengers. The orders placed by passengers are

delivered to their seats later.

Catering

Korean Air is an active proponent of Korean-stylemeals and organic produce. For example, passengers

in all classes can choose to sample South Koreas

national dish bibimbab which is served with an

instruction leaflet and gochujang hot pepper paste.

First class passengers can also opt for a lavish

hanjeongsik course.

Organic farm

Besides serving passengers local dishes, Korean Air

also operates its own organic farm through its

subsidiary Korea Airport Service. The airlines JedongRanch is located 400 meters above sea level on the

mid-slopes of Mt. Halla on Jeju, a volcanic island

located off the south coast of South Korea. Here, the

airline grows organic produce and raises organic

Jedong Han Woo beef and chicken for its in-flight

meals.

The organic beef and chicken are part of meals served

in First Class, while passengers in Business Class can

enjoy organic vegetables, salads, bread and cereals.

The bottled water also comes from a volcanic mineralwater spring at Jeju that is owned by Korean Air.

Responding to the growing demand for a healthy food

option on long-haul flights, Korean Air since June 2011

has offered a low-calorie salmon salad or noodles dish

to Economy Class passengers. The packaging of the

dishes prominently features the calorie-count of the

dishes.

Service touches

In addition to the innovations featured on its flagship

A380s and its local and organic food options, Korean Air

offers passengers some other thoughtful amenities.

Catering to the growing number of female passengers

who make up 45 percent of its passengers, the airlinerecently refurbished its Prestige Lounge at Incheon

Airport. Among the lounges new features is a dedicated

area for female travellers, which includes a restroom,

sleeping room and powder room. Korean Air is also one

of the few airlines in the world to dedicate bathrooms

onboard for use by female passengers only. The airlines

ladies-only lavatory is decorated with pink coloured

wallpapers, has a diaper board for babies and provides

extra cosmetics.

At Incheon Airport, Korean Air also offers a coat storageservice during the winter season where passengers

travelling to sunnier destinations can leave their winter

coat. After a five-day complimentary storage, a fee of

KRW2,500 (USD 2.25, EUR 1,65) per day applies.

Another sympathetic initiative is Korean Airs Draw

Your Own Plane campaign, which asked kids in

elementary schools across South Korea to make a

drawing inspired by South Koreas heritage. The winning

creations were featured on the livery of a Korean Air

B747-400 that operates between Seouls Gimpo airportand South Koreas port city of Busan.


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For the past several years, there was a sense that if

things could go wrong for British Airways (BA), they

usually did: A global financial crisis set against BAs

high exposure to the premium business travel market

which resulted in large losses. Endless merger talks

with Iberia. Labor disputes that forced flight

cancellations and fleet groundings. And who can

forget the rocky debut of London Heathrows state-of-

the-art Terminal 5 in 2008. With those difficult days

largely behind it, BA appears to have regained its

footing with several key innovative programs and

plans now in motion.

GBP 5 billion investment

Announced in September 2011, British Airways five-

year GBP 5 billion investment program encompasses

several key areas of focus. Overall, it will see BAs

customers benefitting from new aircraft, updated

World Traveller (economy) and World Traveller Plus

(premium economy) cabins, a revamped First class,

and an array of improvements to in-flight service, such

as a more personal service and more flavoursome

catering.

To Fly. To Serve.

Central to this effort is BAs GBP 20 million branding

campaign, which kicked off in September of last year.

The To Fly. To Serve. advertisement campaign has the

goal of re-igniting passion and belief in the BA brand

among its customers and staff. The To Fly. To Serve

motto itself is found on the BA coat of arms and on the

uniforms of its crew members. The campaign is meant

to reflect British Airways long, storied history as

genuine pioneers of commercial aviation from its

earliest days to the modern era, and to evoke a trusted

image of a distinctly British brand emphasizing

quintessential British traits of quiet confidence,

competence, professionalism, and devotion to service.

Created by Bartle Bogle Hegarty, the campaign was

launched with a 90-second commercial that premiered

on the airlines official Facebook page. The supporting

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press and outdoor campaign includes different ads

highlighting the experience and skill of British Airways

staff. For example, one print ad features an infant

swaddled in a BA jacket, to highlight the fact that staff

are trained to deliver babies if necessary, while

another ad features a blown-glass human heart to

show that the airline carries precious cargo such asdonor organs.

Fleet and cabin upgrades

In the sky, British Airways intends to keep pace with

rivals thanks to orders of 12 Airbus A380s and 24 B787

Dreamliners, the first of which are expected to enter

service in 2013. BA has also refitted 18 Boeing 777-

200s to match the new cabins that are installed in its

new 777-300ER aircraft. The updated cabins boast a

new Thales IFE system with larger screens and more

choices, and more comfortable seating in bothEconomy and Premium Economy.

On BAs longhaul 767s, the Club World seats are

refurbished with new seat foams and covers, similar

to those onboard the airlines A318 London City

New York JFK business-only service. The upgrade

project began in October 2011 and is expected to

complete during the first half of 2013.

BAs next new cabin product is scheduled for 2013,

with the arrival of its first A380s and B787. The carrieris also refining its catering and in October 2011 began

offering Business Class meals in its Premium Economy

cabin.

Onboard service innovation

Another central tenet of BAs business plan is to

deliver outstanding passenger service for all

passengers with special recognition of its top-tier

customers. This goal had been significantly hampered

by more than two years of contentious relations with

BAs cabin-crew unions that had led to costly strikes.An agreement was finally reached last year with the

unions. Moving forward from that, BA is investing in

additional training of its flight attendants and has

equipped many of them with the iPad 2.

iPads

BAs crew iPads feature the Enhanced Services

Platform, which consists of several apps that allow

flight attendants to store and receive relevant

passenger details in real-time, such as itineraries,

meal preferences and other data items that allow fora more tailored approach to in-flight service.

Following a highly successful initial trial, BA provided as

many as 2,000 senior cabin crew across its long and

short-haul network with an iPad. Loading each iPad with

details of the in-flight menu including photos of the

foods and notes on its source is also on the roadmap.

This content is also expected to make its way onto the

BA website to showcase the food and wine offered oneach flight. Bloomberg reports that the devices will also

be issued to BA ground staff at Londons Gatwick

airport.

Additionally, BA is trialling a program on a handful of

long-haul routes where a crew member is designated as

an on-board travel advisor. Equipped with an iPad

containing pre-loaded content about the arrival

destination, the cabin crew is able to dispense travel

advice and recommendations to passengers, however,

because no in-flight Wi-Fi exists on these flights,reservations or other transactions cannot be made

directly from the aircraft.

Golden ticket

BA also looks to boost cabin crew morale and reward

outstanding customer service with the trial of a golden

ticket scheme. The initiative sees 3,000 of BAs top UK

customers given two golden tickets to recognise cabin

crew at any time. BA managers will then be able to

thank cabin crew individuals personally for their

contribution in delivering exceptional service.

Height Cuisine

As part of a larger initiative by the airline, called Height

Cuisine, BA last year partnered with English celebrity

chef Huston Blumenthal to come up with new,

revamped menus and innovative culinary approaches to

simply make meals served on airplanes taste better.

Instead of using more sugars and salts to maintain

flavor at high altitudes, BAs catering department

along with partner Gate Gourmet were persuaded to

use more umami-rich ingredients. In his own dishes andrestaurants, Blumenthal has long used umami, a savory

flavor known as the fifth taste, which occurs naturally

in many foods.

Best of British

Looking for unique British brands to offer in its Club

Kitchen a self-service galley in the Business Class

cabin where passengers can help themselves to drinks

and light snacks during the course of the flight BA has

recently started offering passengers popular products

from upmarket UK supermarket Waitrose, as well as a


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selection of smaller artisan British brands such as The

Ice Cream Union, Teonis and Beckleberrys.

And, as no other beverage is more uniquely British

than tea, BA offers passengers in First an Afternoon

Tea by the Dorchester service. Consisting of finely

prepared sandwiches, scones and pastries (and of

course the finest tea) BA has embraced an elegantpiece of British heritage to differentiate the passenger

experience. The airline also recently entered into a

partnership with British tea purveyor Twinings to be

the exclusive supplier of teas on all flights.

London 2012 Summer Olympics

In anticipation of the upcoming Games, British

Airways kicked off the BA Great Britons programme

in May 2011, in which top British talent were invited

to submit entries in three categories: A bold British

menu to be served aboard flights, an artful aircraftlivery and a short-film to be shown on BA flights and

at the pre-opening of the Games. In the food

category, professional chef Simon Hulstone took top

honors with a menu inspired by the 1948 London

Olympics. Designer Pascal Anson submitted the

winning entry to have his artwork that creates an

illusion of a dove painted on the exterior of nine BA

aircraft. In the film category, Prasanna Puwanarajahs

short-film starring English actor Timothy Spall

garnered first place.

BA also launched an airline themed pop-up venue

called Flight BA2012 in the run up to the Games.

Open for two weeks during April, the three-in-one art

gallery, cinema and dining lounge showcased the

works of the three winners.

Premium Services

Thanks to Londons status as a global financial hub, BA

has a very high percentage of business travellers. In

recent years the airline has upgraded its lounges at

Heathrow and launched a new First Class cabinalongside two other niche premium concepts.

With a GBP 100 million investment in its new First

cabin, BA has sought to close the gap to the standards

of luxury set by competitors in the Middle East and

Asia, while its all-business Club World London City

service from London City Airport to New York JFK

targets corporate travellers working in Londons

Canary Wharf financial district. The business-only

A318shave just 32 Business Class seats and offer in-

flight connectivity provided by OnAir, a wireless Club

Mobile portal, and the IFE consists of an iPad preloaded

with movies and other content.

BA subsidiary openskies, meanwhile, provides a niche,

boutique flying experience on its route between Paris

Orly and New Yorks Newark Airport. The airline has just

added an Economy cabin to its premium-only cabin andevery passenger has access to an iPad.

New growth opportunities

Formed in January 2011 by the merger of British

Airways and Iberia, International Airlines Group is well

positioned to benefit from further industry

consolidation and attract and capitalize on synergies

with new partners. The company acquired loss-making

BMI from Lufthansa in late 2011 and will use the slots at

Heathrow gained from the transaction to significantly

increase its service to key emerging markets (especiallyin Asia and South America) where it is underweight

relative to its European rivals.

Emerging markets

BA, for example, will resume flights to Seoul in

December and is widely expected to re-enter Kuala

Lumpur with Malaysian Airlines set to join the oneworld

alliance later this year. BA is also likely to deploy its

upcoming A380s on its higher-density routes between

London and destinations such as Hong Kong, Beijing and

Singapore, with the 787 Dreamliners slated for potentialnew expansion into high-growth Asian markets.

Currently serving three destinations in China, BA has

also expressed a desire to ramp up its presence there.

Deriving maximum value and yields from the slots at

Heathrow are of critical importance for BA given that

the airport typically operates at 99 percent capacity and

there are no plans to accommodate more flights

through construction of an additional runway.

Other potential growth opportunities for BA parentcompany IAG could include an acquisition of TAP

Portugal and the valuable market share stake in Brazil

such a deal could bring. IAG had taken a serious look at

TAP in the fall of 2011, but at present, action on any

deal for TAP appears to hinge on the merger of Brazilian

carrier TAM and LAN Chile that is expected to happen in

June 2012 and which global alliance the new combined

airline (called LATAM) chooses to join. IAG CEO Willie

Walsh also recently said the companys enthusiasm for

buying TAP has significantly waned as the European

debt crisis damps travel demand and the appeal ofcarriers in the region.


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Delta Air Lines has again earned a top 5 finish on our

ranking of most innovative airlines, thanks to a

number of ongoing and innovative investments that,

in Deltas words, have the aim of building a better

airline, not just a bigger one. On the heels of its 2008

acquisition of Northwest, Deltas consumer rankings

suffered as passenger complaints increased. Airline

mergers and their associated integration activities

typically impact negatively customer satisfaction.

However, Deltas response to that in the form a USD 2

billion dollar investment program (which runs through

2013) put in place to improve the quality of its

products and services deserve particular attention in

our view.

Customer Service

As part of the multi-billion quality improvement

program, Delta is focusing significant attention on the

training of its customer-facing staff. The enhanced

training programs and seminars are being targeted to

the roughly 11,000 Delta passenger service agents and

supervisors who are the day-to-day face of the airline

to the travelling public. It has been over a decade

since Delta undertook such a large-scale training

effort, and the renewed focus on service standards

comes in light of Deltas poor customer satisfaction

scores in industry surveys in recent years.

Responding to passenger feedback for a more personal

touch on the ground, Delta has already revived its Red

Coats service agents. In their role as a super

passenger service agent, the Red Coats primary mission

is to fix customer problems. Easy to spot in busy

airports thanks to their trademark red blazers, the Delta

Red Coats carry hand-held computers that allow them

to handle an array of issues on the spot, such as helping

customers make flight connections, issuing new

boarding passes or providing food vouchers when

necessary. Over 800 agents are currently deployed

airside at airports across the US, as well as at Deltas

Asian hub at Tokyo Narita.

Expanding on its customer service footprint in the social

networking space, Delta became the first airline to offer

dedicated customer support via Facebook, as it brought

the Delta Assist Twitter service to the social network in

March 2011, providing real-time travel assistance. To

better serve its Spanish language customers, it also

launched the @deltaassist_ES Twitter channel in the fall

of 2011.

3. Delta Air Lines


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Innovative services

Delta was also the first airline to roll out mobile bag

tracking capabilities via its Delta app for smartphones,

allowing passengers to track their checked baggage in

real-time.

The airline also quietly introduced a premium servicein partnership with the German automaker Porsche at

its Atlanta hub for its highest-tier Diamond Medallion

customers. Selected arriving passengers are escorted

from the plane to a waiting Porsche luxury vehicle for

a ride to their cars in the parking lot or another

terminal for a connecting flight. Porsche has provided

the vehicles to Delta free of charge, but has placed

information about the car models in the vehicles and

in Delta Sky Lounges at the airport.

Onboard experienceIn late 2009, Delta embarked on a program to upgrade

its international long-haul business class (Business

Elite) with full lie-flat beds. At present approximately

35 percent of its transoceanic fleet has been equipped

with the new beds, including all B777s and 767-

400ERs in service. More than 50 percent of widebody

international seats will be complete by the end of

2012 and flat-bed seats will be installed on Deltas

entire international fleet by summer 2014.

Of particular interest will be the rate of progress in themodifications to its older and larger 767-300ER fleet

(currently 14 percent are converted) through 2012

and beyond, as the 300ER carries a significant portion

of Deltas highly-valued transoceanic business fliers.

Delta recently announced that it would begin

upgrading its 747-400 fleet with the new Business

Elite cabins. It expects to have all 18 747 aircraft

completed by October 2012.

Economy Comfort

Following the introduction of a new Economy Comfortclass in early 2011, which offers passengers priority

boarding, 4 inches of additional legroom, and 50

percent more recline, Delta is expanding this premium

economy light product which is also offered by

United and KLM to both domestic and short-haul

international routes. Economy passengers can

upgrade to these seats for a fee that ranges from USD

80 to 160 one-way for long-haul flights and USD 19 to

99 on domestic routes, while higher-tier members of

Deltas frequent flier program SkyMiles have

complimentary or discounted access.

In-flight connectivity

On the in-flight Wi-Fi front, Delta emerged as the

leader, with 100 percent of its mainline aircraft now

equipped with Gogos Internet service. Delta has also

been a pioneer in rolling out this service to its regional

jet (RJ) fleet, with virtually all RJs now outfitted with Wi-

Fi.

For those passengers that dont want to pay for

onboard Internet, Gogo and Delta in October 2011 also

introduced a wireless IFE system on Deltas domestic

fleet. Called Delta Connect, passengers can access the

portal for free with their own devices to learn the

flights arrival gate number, access weather

information, get help with missing baggage, order food,

book a restaurant via OpenTable, or rent a car.

Fleet upgradeDelta in August 2011 announced that it intended to

purchase 100 Boeing 737-900ER aircraft for delivery

between 2013 and 2018 as it retires older mainline jets

such as the 757 and upgrades its fleet. The new 737s

will also be Deltas first aircraft equipped with the new

Boeing Sky Interior, which boasts larger overhead

storage bins and a roomier cabin with enhanced

ambient lighting.

Airport experience

Besides installing numerous free-standing chargingstations throughout its terminals at 18 airports in the

U.S, Delta in early 2011 placed wireless powerpads in

the seating areas of 19 Delta SkyClub lounges across the

US. Up to 8 devices can be charged simultaneously and

the wireless power transfer works through a metal on

metal contact between the pads surface and an

adapter connected to the personal device, which is

available from Delta staff in the lounge.

Minneapolis-St Paul

As part of Deltas redesign of its terminal atMinneapolis-St. Paul International (MSP) airport (which

began in January 2012), the airline and airport

restaurateur OTG Management are upgrading the

current food and beverages offerings with 12 new local

restaurants and several fresh food markets. Similar to

Deltas New York JFK and La Guardia terminals, seating

will be also equipped with iPads which passengers can

use to order their food and beverages to have it

delivered to their seat by a server in less than 10

minutes.


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Delta and OTG will also introduce a new concept,

called the OTG Media Bar in the fall of 2012. The

OTG Media Bar is a virtual newsstand where Delta

passengers can rent an Apple iPad loaded with the

content of their choice. Passengers can flip through

the iPads to see what publications, movies, and music

they like, download the content of their choice, andthen rent the device for their trip. Once the passenger

reaches his or her final destination, a pre-paid postage

box received at time of rental is used to return the

iPad.

The Big Apple

From an operational standpoint, Delta announced at

the end of last year ambitious plans to expand and

cement its New York City presence at the expense of

competitors like American Airlines and US Airways in

what is the worlds largest travel market. Delta isturning New Yorks LaGuardia airport into a new

domestic hub, and by summer 2012 will operate 264

daily flights between LaGuardia and over 60 cities,

more than any other airline.

Additionally, Delta will invest USD 100 million to

expand and renovate two terminal facilities at the

airport. At JFK, Deltas international hub in the NYC

area, a USD 1.2 billion renovation project to upgrade

Terminal 4 is underway, which is expected to

complete in 2013.

Ancillary revenues

At its annual investor day in December 2011, Delta

unveiled plans to radically grow its ancillary revenues.

The airline currently makes around USD 600 million in

revenue from sources such as preferred seats,

upgrades, lounge access and in-flight Wi-Fi, and is

targeting to grow annual ancillary revenues to USD 1

billion by 2013 through new products and enhanced

e-commerce platforms. According to Tim Mapes,

Deltas SVP of marketing, there are a lot of ways tomake money beyond the basic sale of a seat between

two points.

A key pillar of the strategy is to aggressively leverage

technology through delta.com, smartphone app

capabilities and Delta kiosks to allow for a more

differentiated level of service and product offerings

(e.g. preferred seating and other up-sells) that impose

little or no marginal cost to the airline. To that end,

Delta is in the process of finalizing a new e-commerce

platform it expects to unveil in the summer of 2012.Acknowledging that its imposition of baggage fees

was hostile to customers (Delta earned nearly USD 1

billion from checked baggage fees in 2010), the airline

says it aims to evolve from just imposing new fees for

what once was free checked baggage and meals

toward selling improved services such as premium

economy seats and eventually selling customized or

bundled offerings.Some examples of Deltas efforts in the ancillary

revenues space are its re-launched Delta Sky Store

website, which now also includes a Delta Picks section,

which is a selection of the best travel products by

Deltas flight attendants. Delta has also partnered with

LivingSocial to create date and destination-specific

deals for passengers who have booked itineraries on

delta.com, and sells access to its lounges via deal-site

Groupon.

Jet Fuel Refinery InvestmentIn what is a first in the airline industry, Delta announced

last month the purchase of a refinery near Philadelphia,

PA for USD 180 million. The Commonwealth of

Pennsylvania contributed USD 30 million towards the

purchase, and Delta intends to invest an additional USD

100 million which will go towards increasing jet fuel

production at the facility. Jet fuel is the single largest

cost (approximately 40 percent at Delta) for the airline,

and by taking a direct role into managing a critical piece

of the supply chain, Delta hopes to better control these

costs moving forward. The refinery is expected to befully online by September 2012 and able to provide

Delta with up to 80 percent of its jet fuel demands for

US operations.

Delta is partnering with BP and Phillips 66 to provide

crude oil to the plant and has hired a management

team with experience in the energy industry to oversee

the refinerys operations. While Delta is counting on the

acquisition to result in jet fuel cost savings to the tune

of USD 300 million per year, skeptics of the deal point

out that upward pressure on global crude oil pricescould end up magnifying the risk exposure to the airline.

Whether Deltas bet will pay off is of course still to be

determined, but the bold step that the airline has taken

will certainly be watched very closely by the airline

industry and Wall Street.


11/31



In 4th place on our 2012 ranking of innovative airlines

is KLM Royal Dutch Airlines. Part of Air France since

2004, the Dutch airline is the seventh largest airline in

the world in terms of international kilometers flown,

and serves 135 destinations with a f leet of 157

aircraft. Having a small homebase, KLMs strength lies

in a tightly-knit, worldwide network, as the majority of

its 25 million passengers transfers through its

Amsterdam Schiphol hub, which is widely regarded as

one of the best airports in the world.

KLM has been an early adopter of self-service options

such as DIY luggage check-in, has a strong focus on

sustainability (e.g, catering, biofuel), is rapidly

expanding in China, aims to differentiate the

passenger experience by adding local Dutch touches,

and is a frontrunner in the adoption of social media.

Dutch heritage

According to KLM, customers have indicated that they

appreciate KLMs typically Dutch character, and one of

the ways the airline is emphasizing its Dutch origins is

by partnering with contemporary Dutch designers

Marcel Wanders and Viktor&Rolf for the creation of its

onboard amenities. Marcel Wanders (of Droog Design

fame) has designed the airlines Business Class

tableware on short- and long-haul flights in his

signature style, while Viktor&Rolf have created the

airlines amenity kits.

KLM also recently teamed with Dutch designer Hella

Jongerius known for her industrial textile and colour

skills to revitalise its Business Class cabin interior

across the fleet. The new Business Class will also feature

BE Aerospace-produced Diamond full-flat beds, which

will replace the airlines current angled lie-flat seats.

KLMs fleet of 22 B747-400s will be the first to be

retrofitted with the new seats and further details of the

design will be announced in the second half of 2012.

Delft Blue

Delft Blue porcelain is also part of KLMs Dutch-inspired

branding. Since the 1950s, the airline has handed out

small ceramic replicas of historical Dutch houses filled

with genever (a Dutch style of gin) to passengers in

Business Class, that are still a popular souvenir item for

4. KLM


12/31



many passengers. Furthermore, last year KLM

launched a Tile & Inspire campaign which invited

Facebook users to convert their profile picture into a

Delft Blue tile and add their own message. 4,000 of

the most inspiring tiles were placed on the body of a

KLM Delft Blue Boeing 777-200.

Local food

Besides serving meals created by Michelin-starred

Dutch chefs, KLM once a year organizes a From

Holland food and wine festival. For two months the

airline serves Business Class passengers on long-haul

flights out of Amsterdam meals based on seasonal

home-grown ingredients from a Dutch Michelin star

restaurant, as well as wines from Dutch vineyards and

typical Dutch snacks.

For the packaging of its sandwiches served onEuropean flights, KLM earlier this year challenged

design students to come up with a design that

reflected KLMs distinct Dutch character. Three of the

most original designs were chosen by the airlines

Facebook fans and KLM will serve a total of five

million sets of sandwiches in the crowdsourced

packaging during the second half of 2012.

China

Chinas rapid economic growth has resulted in a

growing number of business travellers to and fromChina, as well as an emerging Chinese middle class

that is eager to travel. KLM has made expansion in

China the centerpiece of its Asia focus and is the only

airline to operate direct flights from Europe to

second-tier cities in China such as Chengdu, Hangzhou

and Xiamen. As China is home of no less than 160

cities with a population of more than 1 million, KLM

expects to start more direct flights to second-tier

cities in the future in order to maintain its first-mover

advantage.

Route-dedicated service

In order to make Chinese passengers feel at home,

KLM has localized elements of the onboard

experience on flights to and from China. Each flight

has three Chinese-speaking cabin crew onboard,

announcements are also made in Mandarin and

Cantonese, while language assistants are available to

assist passengers upon departure and arrival. The IFE

programming contains several Chinese movies, as well

as subtitles in Mandarin, and on flights out of China

KLM hands out maps of Schiphol Airport written inMandarin. In Business Class, KLM has teamed up with

Chinese high-end restaurant chain South Beauty to offer

passengers the choice of a Chinese menu, and a local

meal with jasmine tea is also served in Economy.

Social media

KLM, which has over 1.5 million Facebook fans and

nearly 300,000 followers on Twitter, has developed areputation when it comes to launching innovative social

media campaigns. Besides the Delft Blue tiles livery, the

airline randomly surprised passengers with a personal

gift based on a tweet or Facebook profile,

crowdsourced a commercial flight via Twitter, and asks

Facebook fans to share their ideas to improve KLMs

products and services to name a few recent initiatives.

Social seating

KLMs most ambitious social initiative, however, is the

airlines Meet & Seat social seating scheme which waslaunched in February 2012. The service allows

passengers to pick seatmates with similar interests

before their flight by linking their Facebook and

LinkedIn profiles to their seat number. Passengers must

opt in for the service, and can adjust their privacy

settings to reveal as much or as little information as

they wish. Meet & Seat is currently available for 13

destinations and CNN reports that in the first 3 months

2,200 people have shared their profiles. KLM has also

just supplemented its social seating service with a new

social booking platform called Trip Planner, whichallows travellers who are friends on Facebook to

coordinate and book their journey via Facebook.

Marketing landscape

Martijn van der Zee, senior VP of eCommerce at KLM,

tells social media agency SimpliFlying that the response

generated by the Meet & Seat programme is indicative

of the radical change that the marketing landscape is

undergoing.

Engaging customers in a modern way doesnt have toinvolve a lot of money, he says. What were seeing is

that people want real experiences, genuine messages

and real actions from companies, which by definition do

not cost a lot of money but require more effort. []

Were open to failures and mistakes for the simple

reason that if you dont dare, you will never be able to

create things that customers want. [] We have many

people who literally say to us, We buy tickets with you

because of your actions in the social space. If you are

able to do this the right way, you can reach millions ofpeople and theyll promote the airline for you, says van


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der Zee. Its the strongest marketing message you

can have.

Social media hub

Beyond merely engaging campaigns, the core of KLMs

social media activities is formed by the airlines Social

Media Hub a 40-member multi-disciplinary teamcomprised of channel managers, over 25 service

agents, communications experts, copywriters, and a

reputation manager.

According to KLM, the real-time and public nature of

social media requires an internal organization that is

equipped to handle every kind of question from

simple information requests to rebooking a flight or

selecting a seat as well as speak with one voice,

especially in crisis situations where acting quickly and

consistently is paramount.

Screens in the social media hub feature colorful charts

that show the real-time sentiment about KLM and

other relevant topics. KLM has deployed

Salesforce.coms Service Cloud to collect, track, and

trace all social conversations in one place and to

measure its brand sentiment on the Web.

DestinationCRM reports that about 50 KLM

employees use the system to review, on average,

1,800 tweets and 400 Facebook comments per day.

All of these interactions are automatically loaded intoService Cloud, so KLM personnel can respond, as well

as see earlier interactions.

KLMs social media hub has set high targets for itself,

and strives to answer every customer message via

Twitter and Facebook personally within an hour, on a

247 basis a day, seven days a week, in Dutch, English,

German or Spanish. To promote the launch of the new

24-hour social media service, the airline in September

2011 ran a KLM Live Reply campaign in which tweets

sent to @KLM could receive a live reply made by 140KLM employees, who lined up and held letters, giving

a living alphabet response.

iPads, apps

Besides its social media initiatives, KLM has also

embraced other digital media. In late 2011, the airline

provideda group of 50 senior pursers with iPads as

part of a 6-month trial. According to the airline, it

feels it is essential that cabin crew have easy access to

the latest information in the air, as personal contact

with passengers on the ground is becoming

increasingly rare due to the increased deployment of

self-service kiosks.

As part of the same pilot, KLM also equipped 50 pilots

with iPads, providing them with an extra tool during

flight operations that is more efficient than the large

volume of forms, briefing documentation and manualsthey usually take along. KLM also just announced it will

trial Panasonics inflight Internet on board an B777-300

in early 2013.

For passengers, KLM has developed a series of specific

apps, such as a Passport app, which lets users record

their journeys with their mobile phone and share their

experiences via Facebook. The KLMs Houses app lists

all KLM houses, so passengers no longer have to bring

crumpled notes with them in order to pick their

favourite house, while the airlines Movies & More appprovides a real-time listing of the IFE programming

onboard long-haul f lights.

Ancillaries

KLM is looking to generate an additional EUR 400

million in the next few years through ancillary revenues,

for example by offering Economy passengers more ways

to customize their travel experience. KLM passengers

on long-haul flights can already opt to upgrade to a seat

in the Economy Comfort zone which offers up to 10

cm more legroom and twice the recline of a standardseat for a one-way fee ranging from EUR 60 to 150.

For EUR12 to 15 passengers can also pre-order a

premium a la carte meal, instead of the usual free

meal service.

KLM has also been one of the first airlines to implement

Amadeus Ancillary Services tool which allows travel

agencies in the Netherlands to book ancillary products

via the global distribution system, instead of via the

airlines website.

Another innovative ancillary product is KLMs Time to

Think option, which is also offered by Air France. For a

non-refundable fee of EUR 10 to 15 passengers can hold

a reservation at the same fare for up to 14 days.


14/31



Established in 1976 as a regional carrier, TAM has

quickly become the flag-carrying airline of Brazil after

the demise of Varig in 2006. TAM is currently in the

process of merging with LAN from Chile to create one

of the largest airline groups worldwide, called LATAM

Airlines Group. The merger between LAN and TAM is a

response to the consolidation of the airline industry in

the USA and Europe, as well as the rise of Gulf

Gullivers such as Emirates, who are increasing their

presence in Latin America due to the regions high

growth perspective.

Based at So Paulos two overburdoned airports,

Guarulhos International Airport and Congonhas

(domestic flights), TAM carried 37.7 million

passengers in 2011 and today flies to 42 destinations

in Brazil and 19 destinations internationally, with a

fleet of 156 aircraft. The airline has been growing

rapidly in recent years, taking advantage of Brazils

expanding middle class, many of whom are

abandoning intercity buses and flying for the first

time. In 2011, demand for domestic flights in Brazil

increased by 16 percent and growth is expected to

continue with 7 to 9 percent in 2012. TAM is also

expected to benefit from the world cup soccer and the

Olympic Games, which will be held in Brazil in

respectively 2014 and 2016. Following a 22 percent

revenue increase of its international operations in 2011,

the airline will take delivery of 8 B777s during 2012 and

2013.

Besides its rapid expansion, TAM aims to differentiate

itself with innovative products and services, such as

offering passengers a 1970 s-style retro experience

onboard or letting kids help distribute candies before

the flight takes off. The airline has also been the first

carrier in Latin America to introduce onboard

connectivity, operate biofuel-powered flights and will

unveil an entirely redesigned cabin interior in the

second half of 2012.

Interior redesign

In 2009, TAM hired Priestmangoode to completely

redesign the entire passenger experience for the airline

from cabin architecture, seats, galleys and lavatories

to staff uniforms and in-flight service provisions, such as

5. TAM


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meals. Priestmangoode has also been responsible for

the design of the graphic user interface (GUI) of the

Panasonic IFE system, so the look and feel of the

system would be an extension of the new cabin

interior. The new interior will make its debut on

TAMs Boeing 777-300ERs which will be forthcoming

from August 2012 onwards, and TAMs existing fleetof narrow- and widebody aircraft will also be

retrofitted with the new cabins.

Says Priestmangoode Director Luke Hawes: Our work

for TAM is crucial to their brand development, giving

them the customer experience they need as they

move up to become a major international carrier. Our

experience of flying with TAM is that their service is

exceptional. But their brand presentation currently

just doesnt match it. The designs we will roll out

across their entire fleet will present them as animportant international player and give them the tools

they need to compete with the worlds other major

international carriers.

In an exclusive preview for airlinetrends.com, TAM

Brand Manager Ricardo Cruz and Priestmangoode

Director Luke Hawes share more details about TAMs

cabin interior program, which in their words aims to

put TAM on the map and is inspired by everything

Brazil has got to offer.

Economy

TAMs new Economy cabin has received a colourful

makeover and features rows of seats manufactured

by Weber in various bright colours that reflect the

carriers Brazilian origin: lime green, aqua blue and a

brighter shade of TAMs corporate red. TAM will also

introduce a new Economy Plus product, which offers

similar seats as in Economy, but with a larger seat

pitch and recline, as well as a different seat colour.

This type of service class is also offered by airlines

such as United, Delta and KLM.

Business Class

TAMs new Business Class will feature full-flat seats

that are designed by Priestmangoode and

manufactured by Recaro. The 48 seats will have a new

type of staggered design, allowing them to be placed

in a 2:4:2 configuration, but making it relatively easy

for passengers in the middle seats to have aisle

access. The two seats in the middle are placed slightly

ahead of the adjacent seatsand are meant for

passengers travelling together, while on each side theindividual seat provides direct access to the aisle.

Compared with the colourful Economy interior, the

Business Class cabin will have a more corporate look

and feel with the aim of offering passengers a home

office in the sky. The cabin colours in Business will be

neutral with some brighter background colours

accenting the storage compartments. The new Business

Class seats will be available from August 2013 onwards,and TAM is planning to offer an intermediate solution

to replace its current recliner seats.

First

Looking to provide passengers in First Class with a

home away from home experience, TAMs new First

cabin looks to resemble a living room and emphasizes

the social element. Consisting of just four seats

developed by B/E Aerospace the ottomans of the two

middle seats can be combined into a sofa, so parents

can for example invite their kids to join them for dinner.For this reason, the foldable table has been made extra

large. Ambient light on the floor is used to create a

lightweight, elevated look of the seats, while the lack of

overhead bins provides passengers with a roomier

cabin. A nice design touch that reflects the living room

concept is a bookshelf built into the front wall of the

cabin. The First Class cabin features neutral, natural

colours that are accentuated with soft-green touches.

Passengers in Business and First will also be served

freshly brewed Nespresso coffee. To reflect Brazilscoffee culture, Priestmangoode initially planned to

include a coffee corner in the galley between Business

and First, but dropped the idea because such a social

zone would create too much noise for other passengers.

Innovative services

TAM was the first airline in Latin America to let

passengers use their mobile phones for calls, sms and

Internet. Provided by OnAir, the service is currently

available on 31 aircraft and TAM is also the first airline

to introduce a 50 percent cheaper rate for onboardcellphone use than the commonly used international

roaming rates. Last year, the airline also announced it

would equip its long-haul fleet with OnAirs mobile and

wi-fi service.

QR-code TAM

At the end of 2011, TAM unveiled what it calls a new

media platform, which consists of a QR Code TAM

augmented reality app and QR (quick response) code

stickers. The QR code stickers can be placed on any

surface, and when a passenger aims the camera of hisor her mobile device to the sticker, a virtual animation


16/31



appears. TAM used the technology for the first time

during the 2011 Christmas season, placing QR stickers

on the windows of its aircraft which were linked to a

virtual Santa Claus animation. The app doesnt

requires onboard connectivity as all content is pre-

loaded when the user downloads the app or updates

it.

TAM Kids

A very sympathetic concept launched by TAM is its

Comandante Kid initiative, which is part of the

airlines TAM Kids program. With parental consent,

children up to 12 years of age can sign up for TAM

Kids and receive an official Comandante Kid badge.

Children flying with TAM and wearing the badge are

invited to help the crew aboard by welcoming

passengers over the planes PA system or distributing

candies before the flight departs. Kids can also visitthe cockpit after the aircraft has landed.

TAM Vintage

Whereas most airlines paint one of their aircraft in a

retro livery to showcase their aviation heritage, TAM

has gone several steps further and for an 18-month

period offered an immersive retro in-flight experience

on two A319 aircraft flying between Sao Paulo and Rio

de Janeiro. According to TAM, the goal of the TAM

Vintage project was to strengthen its roots in a time

the airline is growing rapidly. Highlighting twoimportant moments of the airlines history, one

aircraft was painted in TAMs livery dating from the

1970s, when the company launched its regional

operations, while the other aircraft was painted in a

1990s colour scheme, a t ime of great expansion and

national level recognition.

The interiors on both aircraft also received a retro

makeover, with seat covers, carpets and curtains

refurbished in the fabric and pattern of the Seventies

and Nineties. Cabin crew and pilots wore retrouniforms, meals were served on old-fashioned

disposable tableware, while the onboard safety video

and safety leaflet were also done in a style that

echoed therespective eras.

Emerging middle class

According to TAM, the middle class in Brazil has grown

three times as fast as the overall population in the

past decade and an estimated 10.7 million Brazilians

hit the skies for the first time in 2011 8.7 million of

whom belong to the emerging classes. However, 53percent of the Brazilian middle class has never

travelled by air and still travels long distances by bus, as

a lot of people in Brazil work outside their home state.

In an effort to make air travel more accessible to the

general Brazilian population, counter growing

competition from low-cost airlines such as GOL and

Azul, and increase the volume of passengers at off-peak

hours, TAM in 2010 launched an innovative new retailproject which is aimed at reaching the new mass class.

Says Lbano Barroso, CEO of TAM, The strengthening of

the Brazilian economy over the past few years

increased the consuming power in the country. It is

necessary to prove to this new middle class that the

privilege of flying no longer is limited to just a few.

High-traffic locations

TAM is targeting the emerging middle class with novel

sales channels. For example, the airline sells tickets viadiscount retail chain Casas Bahia in Sao Paulo, which

caters primarily to low-income customers and most of

its outlets are located in poor neighbourhoods.

Customers can buy air tickets at the stores and have the

option to pay for them through a maximum of 12

interest-free installments, with the minimum

installment being R$ 20 (USD12; EUR9). Rival carriers

Gol and Azul also offer similar payment plan options.

Since August 2011, TAM operates 5 staffed subway

station kiosks in Sao Paulo and Rio de Janeiro, and hasalso signed an agreement with Princesa do Agreste a

bus company that serves 29 north-eastern cities to

sell the bus companys tickets at TAM stores in return

for selling air tickets at the bus stations. Says TAMs

Marketing Director Manoela Amaro, We cant expect

the passenger to come to the airport or one of our

stores to buy a ticket. We have to be where they are.

Travel advice

TAM staff at the kiosks also help novice flyers in

choosing the best travel options, flight hours andfinancing at the point of sale. They also explain air travel

procedures, such as advanced arrival to the airport,

check-in options, rules for luggage dispatch, etc.

Additionally, customers receive a printed booklet with

useful information when flying for the first time. The

airline also launched a microsite Como Viajar (How to

Travel) where people can familiarize themselves with

air travel, as well as the English terminology commonly

used. At the airports, both the check-in staff and flight

crew are trained to help those new to flying.


17/31



With the Gulf Region having firmly anchored itself as a

global aviation crossroads, it comes with little surprisethat Qatar Airways is on our list of airlines to watch in

2012. The national carrier of Qatar has experienced a

rapid ascent to become one of the few 5-Star Airlines

in the sky and was named Airline of the Year 2011

by Skytrax which cited its roomy Economy cabin and

Business Class product including the Premium

Terminal at its Doha hub as key drivers for the

ranking.

Compared with Gulf-based competitors Emirates and

Etihad, Qatar Airways takes a more low-key approachin designing its passenger experience. Says the

airlines CEO Akbar Al Baker in an emailed statement

to airlinetrends.com, We believe that our key

innovation is not so much one particular product or

service, but rather our commitment to blending the

latest technologies, trends and styles with the best

aspects of air travel as it used to be, including plenty

of space, inspiring cuisine and a warm, personal

service.

We provide an experience, not sell a commodity.

Continues Al Baker, Although our premium seats offera high degree of comfort and privacy we do not see the

need to feature gimmicks such as walls or doors in any

of our designs.

Onboard Experience

Qatar Airways fleet of widebody aircraft offer a

Business Class product that features 180 degree flat bed

seats in a 2-2-2 configuration, a seat pitch of 78 inches,

15 inch IFE screens (17on its B777s) with over 1,000

entertainment options, and a-la-carte dining with all

meals prepared at time of order.

In Economy, the standard seat pitch is up to 34 inches

(significantly more than on other airlines). Passengers

also receive a complimentary toiletry pouch and the

airline has teamed up with wellbeing guru Deepak

Chopra to produce a Tips to Fly Healthy guide that can

be found in the seat-back pocket. All seats also offer in-

seat power and a 10.6 inch IFE screen.

6. Qatar Airways


18/31



B787 Dreamliner

Qatar Airways expects delivery of its first Boeing 787

in Summer 2012 (it plans to have five 787s in service

by the end of the year) and the airline will be the

launch customer in the Middle East for the aircraft.

Qatar will initially operate the 787 on intra-Gulf routes

to provide flight crew with training hours before it willdeploy the aircraft on the DohaLondon Heathrow

route in late August. Bloomberg reports that Qatar

also plans to start flights to Atlanta, Chicago, Boston

and Detroit within the next year as it begins receiving

its 787s.

Business Class

Qatars 787 Dreamliner will seat 254 passengers in a

two-class configuration with 22 seats in business class

and 232 in economy. In Business, a generous 121

configuration provides each passenger with directaisle access. The airline has also opted to remove the

overhead luggage bins from the middle of the

Business Class cabin, providing an even more spacious

feel.

The flat-bed Business seats are made by B/E

Aerospace and are placed in a reversed herringbone

formation, which angles the two middle seats towards

each other, while the solo window seats offer a high

degree of privacy. Armrests of the seat can be

adjusted to different heights and passengers can dineand work on large, wood-trimmed sliding tables and

when dining begins, passengers have room to rest

their laptops on s ide tables. IFE screens have a size of

no less than 17 inch.

Economy

Seats in Economy are configured 333, which

surprisingly is one extra seat per row than the 2-4-2

setting offered by other B787 operators such as ANA

and JAL. Seat pitch of the Recaro CL3620 light-weight

seats is 32 inches and in what is one of the firstintegrated IFE-seat deployments all IFE providion is

installed in the seats by Recaro before they go to the

airframes.

TouchPMU

Qatar Airways new 787 will be the first aircraft to

feature Thales new TouchPMU handheld, an iPhone-

like device that allows passengers to multitask and for

example watch a movie on the seatback screen while

using the handheld to check the current flight position

or local weather. The Android-based TouchPMU canalso store a wide range of apps, making it easy for

airlines to add new features. The 787 will also be Qatar

Airways first wide-body to offer full wi-fi and cellphone

connectivity, although the carrier said voice calls will be

disabled to minimise passenger disruption.

Narrowbodies

While rival Gulf Gulliver Emirates moves in on newroutes with widebody B777 aircraft and even operates

an A380 between Dubai and Manchester Qatar

Airways tends to take a more cautious approach when

adding a new destination to its network. For example,

the airline has extensively deployed narrow-body

aircraft which makes up 40 percent of its fleet on

new routes to Eastern and Northern Europe. The

airlines A320s feature 12 angled lie-flat seats in

Business Class, 132 seats in Economy, and personal IFE

screens in all seats. Qatar has also equipped several of

its A320s with OnAirs cellphone connectivity.

Ground experience

Qatar Airways USD90 million stand-alone Premium

Terminal in Doha, which opened in 2006, features a

restaurant area, a delicatessen, cocktail bar, spa, and a

business centre. The airline has just also opened its first

airport lounge outside Doha at London Heathrows

Terminal 4, as it operates five flights per day to London.

The 750m2 facility is designed to resemble a private

members club rather than a conventional airport

lounge, and Qatar recruited lounge staff from five starhotels and restaurants to work in the theatre-style

brasserie kitchen and delicatessen.

New Doha International Airport

As an efficient and high-quality hub is key to Qatar

Airways network strategy, the airline is a key

stakeholder in the construction of the New Doha

International Airport (NDIA), which is scheduled to open

in December 2012. Dohas current crowded airport

currently handles over 18 million passengers a year,

while NDIA will initially have a capacity of 28 millionpassengers a year and 50 million by the time the

airport is fully operational beyond 2015. The new

USD15.5 billion airport is being constructed four

kilometres from the existing facility and Qatar Airways

expects to start operating from NDIA in early 2013.

Expansion

Opening 24 new routes in the past two years, Qatar

Airways currently operates a fleet of over 100

passenger aircraft (up from 57 in 2007) to more than

100 destinations. Receiving a new aircraft every 2 to 3weeks on average during 2012, the airline is continuing


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its expansion in 2012 with 13 new routes and by 2016

plans to serve 170 destinations with a fleet of 170

aircraft. Furthermore, the airlines outspoken CEO

expects the Gulf region to only have two dominant

airlines, suggesting that Abu Dhabi-based Etihad will

not be on that list.

In total, Qatar Airways has over 250 aircraft on order

worth more than USD50 billion at list prices which

include 10 A380s (first aircraft to arrive in 2013, but

possibly delayed because of the superjumbos wing

cracks issue), 30 B787s, 80 A350s (of which Qatar will

be the launch customer) and 50 A320neos. The state-

owned airline has delayed its earlier planned IPO with

at least 5 to 8 years, saying it feels it will take a very

long time to recover from the economic situation that

the world is in today.

Niche markets

A hallmark of Qatars growth strategy has been its

focus on niche and second-tier destinations. In Europe

the airline already flies to 30 destinations, including

Eastern European cities such as Budapest, Bucharest,

Sofia, and the Scandinavian capitals of Copenhagen,

Oslo and Stockholm. As these second-tier destinations

have limited direct long-haul flights, passengers have

to make at least one stop-over to reach their final

destination, which could be just as well in the Gulf

instead of in Europe.

Speaking at last years Dubai Air Show, CEO Al Baker

said that the airlines mission has been to operate

to key business and leisure destinations around the

world, but also to underserved markets where others

dare not venture into. We take bold decisions to serve

certain markets because we believe it makes strong

business sense. 2012 route launches by Qatar

Airways will include Baku (Azerbaijan), Tblisi (Georgia),

Benghazi (Libya), Kigali (Rwanda) and Mombasa

(Kenya), while Latin America and underserved Africaare targeted for future expansion.

China

Qatar Airways has also been very public about its

intentions to expand in China, which is home of no

less than 160 cities with a population of more than 1

million. The airline plans to double the number of

flights to China from the current 35 to 70 a week by

2013 and in December 2011 launched its fifth Chinese

destination to Chongqing.

Says Al Baker, Chongqing is a prime example of a city,

with its large industrial base and population of almost

30 million people, not having sufficient international air

access that it so well deserves. Qatar Airways looks

forward to developing our network further in China,

with particular focus on inland Chinese cities where

demand for air travel is just as high as the traditionalcoastal gateways.

Qatar Airways also states it will not stop its expansion

worldwide, despite the effect the debt crises in the U.S

and the eurozone are having on the global aviation

industry. Some weak airlines will not exist, but airlines,

like us, with strong financial capability, can still grow

during an economic downturn, said Al Baker, adding

that international trade is still continuing and the

demand in some markets, including China and countries

in Africa, is still increasing.

Acquisitions

Furthermore, part of Qatar Airways growth may also

come from the acquisition of troubled European

carriers witness Etihads recent purchase of a 29

percent stake in airberlin. In recent years, Qatar Airways

has been linked as a strategic investor in the likes of

Olympic Airways (Greece), TAP (Portugal) and SAS, and

the airline in early 2012 pulled out of advanced talks

with now-bankrupt Spanair after Spanish regulators said

state aid given to the loss-making carrier had to be

repaid.

Although any acquisition is ruled out in the near term

by CEO Al Baker, Qatar Airways is also interested in

investing in India when current foreign ownership

limitations are lifted by the Indian government.


20/31



Number 7 on 2012 our list of the worlds most

innovative airlines is no-frills chic carrier Virgin

America. Easy to recognize thanks to its iconic cabin

lighting and hip and forward-looking approach toairline travel, Virgin America has firmly established

itself as a favoured choice among the urban, tech

savvy flying demographic.

The un-official airline of Silicon Valley is also the only

U.S. carrier to install power and USB outlets in all

seats, and was the first U.S. airline to offer in-flight

Wi-Fi on all aircraft in the fleet. True to its brand

image, one of the aircraft in the fleet pays homage to

the late Steve Jobs by painting his famous quote Stay

Hungry, Stay Foolish on the side, while anotheraircraft is named #nerdbird, thanks to the large

number of Wi-Fi users travelling on the San Francisco-

Boston route.

Based out of San Francisco International Airport,

Virgin America has expanded from its initial focus on

domestic long-haul point to point service to now

include intermediate routes as it adds more

destinations in the US. It also now flies to three

popular holiday destinations in Mexico. The privately-

held airline (an IPO is planned in 2013) airline hasstrived to transform the standard domestic air travel

experience from something that often is a mass-

produced purely functional experience into something

much more evocative and stylish. Starting with the

check-in areas at many Virgin America terminals (suchas at LAX), one immediately notices the soft beat of club

music and distinct lighting that set the tone for a unique

travel experience.

Quality instead of size

Virgin America continued to drive significant growth in

2011, expanding its fleet from 34 A320s in January 2011

to 51 aircraft in May 2012. The airline has not turned in

a profitable year since beginning operations in 2007 and

experienced a net loss of USD30.8 million for the fourth

quarter of 2011 in which revenues rose 45 percent toUSD276.8 million.

Nevertheless, Virgin America has aggressive expansion

plans in mind and is targeting a number of new

destinations in key US metropolitan areas. According to

the airlines CEO, David Cush, Virgin America was

designed to be an airline for business travelers and, as

such, wants to be present in the primary and dominant

US business markets. Cush cited the influence of

frequent flyer programmes and corporate sales

programs as being the two greatest hurdles for agrowing company like Virgin, but stated that, despite a

7. Virgin America


21/31



tight economy and stiff competition, he believes that

Virgin will prosper because of its unique services and

amenities.

Virgin America currently flies to 17 cities mostly

from SFO but is seeking to reach as many as 30 or 40

destinations within the next five years. The airline isplanning to more than double its fleet to 111 aircraft

by 2019, and in early 2011 announced it had placed a

60-plane order which makes it the launch customer

for Airbus new A320neo jet, with deliveries scheduled

to begin in summer 2013.

At the same time, Cush states that a critical

component of its approach will be to not outgrow the

airlines current business model, and therefore

perhaps limit the carrier to a fleet probably no larger

than 150 aircraft.

In-flight entertainment

A key service differentiator for Virgin America is its

sophisticated in-flight entertainment and

communications (IFEC) platform, known as Red, which

may very well be the worlds most feature-rich IFEC

system. The 9-inch high-definition touch screens on

each seatback feature live satellite television, the first

ever seatback digital shopping platform, an open tab

service, and interactive Google Maps with terrain view

that tracks the flights location.

Passengers can also use the system to chat with other

passengers, play 3D games such as Doom, offset

carbon emissions for their flight, or purchase snacks,

meals, and beverages from their seats via Red. Flight

attendants receive the orders via a tablet device and

bring the ordered items to the seat

Hybrid platform

Further upping the ante, Virgin America has selected

Lufthansa Systems new BoardConnect platform forthe next iteration of its Red system. Besides offering

entertainment via larger high-definition touchscreen

seat-centric monitors, the hybrid IFE&C platform

which is slated for a late 2012 release will also offer

passengers wi-fi connectivity through their seatback

system and their own personal devices, as well as

offer wireless access to content stored on an onboard

server.

Virgin Americas CEO David Cush says the new Red

system will allow the airline to offer passengers thebest of both worlds. [] We want to give our

travellers more options instead of fewer, including the

ability to multitask across platforms just as they do in

their lives on the ground, he said.

San Francisco T2

Virgin America operates its San Francisco hub out of the

airports totally renovated Terminal 2, which opened inApril 2011. The features of the terminal in many ways

match the airlines corporate ethos and its goal of

remaking the travel experience through innovation,

design, and a focus on technology with an eye towards

eco-friendly sustainability.

Re-built on the site of the old international terminal, T2

is the first LEED Gold-certified airport terminal in the US

and re-used about 90 percent of the materials from the

original building, including terrazzo flooring made from

recycled glass chips. Other sustainable buildingtechniques include walls of windows that makes most

daytime artificial lighting unnecessary, a dedicated

water bottle refilling station, and a new ventilation

system that requires 20 percent less energy.

Brand partnerships

Describing its passengers as influencers, buzz

generators and trendsetters, who work in innovation-

oriented industries such as fashion, film, media,

technology, design, Virgin America has been quick to

team up with brands for product placement. Followingearlier brand partnerships with the likes of eco-friendly

cleaning products company Method, and lingerie brand

Victorias Secret, Virgin America last year teamed up

with Google to allow passengers to test-fly the tech

giants new Chromebook laptop computers for free.

Virgin Americas passengers could use the computers

onboard their flight and at select airport gates from July

2011 through January 2012. Flyers who borrowed a

Chromebook also received a free Wi-Fi session onboard.

The machines had to be returned at the arrival gate andGoogle staff was available to assist passengers at the

Google Chrome Zone at SFO.

In December 2011, Virgin America and Banana Republic

held a holiday surprise for passengers waiting for their

luggage at SFO airport. Inspired by a similar promotion

done by Spanair, gift boxes with Banana Republic

apparel arrived on the luggage belt passengers of flight

VX837.


22/31



Social media

Virgin America has also been a frontrunner in the

digital and social media arena and often one of the

first to experiment with new social media tools and

platforms.

Twin Tested

In September of last year, a promotional campaign

from Virgin America used identical twins to reveal the

benefits of its service over other airlines. Called Twin

Tested, each twin was asked to travel alone on

different flights; one person travelled with Virgin

America and the other with an undisclosed

competitor. A video diary was made for each journey

and the twins reconvened afterwards to discuss their

individual experiences. The videos are part of the

promotional website called Switch to Virgin America

which also features games and coupons forconsumers.

Groupon

In February 2011, Virgin America was the first airline

in the U.S. to initiate a campaign on Groupon to

promote its new Chicago to San Francisco and Chicago

to Los Angeles services. The offer was a USD 77

discount on the USD 350 fare for those that spent USD

7 on the coupon. In typical Groupon fashion the offer

sold out in just 8 minutes in Chicago and in 45 minutes

in San Francisco and Los Angeles. Spurred by thepopularity of its Chicago offer, Virgin America offered

another deal in early March for flights out of Dallas

Forth Worth. Nearly 3,000 people signed up for this

deal.

Gilt City

In November 2011, Virgin America partnered with

luxury deal site Gilt City to offer the public a roundtrip

charter flight anywhere Virgin America flies in the US

for USD 60,000. In addition to the flight, the purchaser

would get to name the airplane for the Virgin Americafleet.

Additional trailblazing efforts in the airline social

media space have included offering free tickets to

higher-profile Twitter influencers via a partnership

with Klout, Twitter scavenger hunts that offered the

reward of discounted fares and other special hashtag

sales events that have donated certain proceeds to

charity.


23/31



Latvia-based airBaltic stands out as an airline whose

innovations have been featured many times on

airlinetrends.com. In recent years, the carrier has

transformed from a point-to-point low-cost carrier

into a hybrid LCC, turning its Riga North Hub into a

transit point for travellers between Northern Europe,

Eastern Europe, Southern Europe and Central Asia.

AirBaltic offers passengers connecting through Riga

25-minute connection times, while other hybrid

features of the airline include services that are staple

of mainline carriers, such as a separate Business Class

cabin, an airport lounge and a frequent flyer program.

AirBaltic further boasts a cost per-average seat

kilometer that is on par with the likes of Easyjet and

Norwegian and 30 to 40 percent lower than Finnair

and SAS.

Restructuring

AirBaltic has been growing its network quickly in recent

years and currently serves over 60 destinations from

Riga. The airline carried around 3.3 million passengers

in 2011, compared with 1.4 million in 2006. However,

airBaltics ambitious hub strategy (50 percent of

passengers transits at Riga) has not yet materialized

into a profitable operation for the airline. According toairBaltics new CEO Martin Gauss, 2011 losses hit more

than EUR 85 million.

In particular, airBaltics relatively older, fuel-inefficient

fleet of B737-3/500s and Fokker 50s (the latter will be

phased out at the end of 2012) are are a drain on the

airlines operational cost performance. Furthermore,

the financial situation of the airline led to a public fight

last year between airBaltics two shareholders, former

CEO Bertolt Flick (who owned 47 percent of airBaltic)

and the Latvian government (52 percent share) forcontrol of the airline.

8. airBaltic


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After a long-running saga, Flick resigned from the

airline in October 2011 as part of an agreement to

increase the companys share capital by the Latvian

government, which also used the bankruptcy of one of

Latvias banks to take full control of the airline.

AirBaltics new CEO, former Malev boss Martin Gauss,

has just launched a restructuring plan, which will cutcosts by reducing the number of aircraft and

modernising the carriers fleet. AirBaltic will also move

away from a stringent focus on transfer traffic over its

North Hub Riga to a more point-to-point approach.

A delegation from Latvia has also recently visited the

Gulf Region as part of an investor roadshow to

present the airl

Documents

Innovative Airlines 2012-Airlinetrends