T H E C O M P E T I T I V E A I R L I N E E N A B L I N G O P E R AT I O N S T O C R E AT E T H E B E S T C U S T O M E R E X P E R I E N C E

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The survey findings revealed that airline executives rec-ognize the critical importance of the customer. Respon-dents identified that customer experience is their top brand promise (61%) as well as the number one mea-sure of success in disruption management (72%). How-ever, the correlation between how operations and cus-tomer experience can lead to higher profitability is not fully understood.

The good news is that airline executives recognize the role technology can play in bridging the gap between customer experience and profitability. They see tech-nology as a major deciding factor of future success. But it is more than the technology. They also recognize the importance of integrating the technology with new busi-ness processes for more collaborative decision making across the airline.

The competitive airline: Enabling operations to create the best customer experience

INTRODUCTION

For now, thanks to low fuel prices and high demand, the airlines have reached record profitability. But in an indus-try with uncertainty, including a shifting economy and more tech savvy customers, how can airlines sustain growth and stay competitive? Airline executives agree that it starts with a focus on the customer.

In today’s complex environment, disparate and siloed technology platforms and business processes are chal-lenging the customer experience. These challenges are made increasingly difficult when trying to manage exter-nal factors such as air traffic congestion, extreme weath-er patterns and larger airports.

In an effort to better understand how airline operations can leverage technology to improve customer experience and profitability, Forbes Insights and Sabre surveyed 100 operations, marketing, IT, and finance executives from the world’s largest airlines. The survey examined the pri-mary initiatives of airline operations, marketing, and IT executives over the next 3-5 years.

EXECUTIVE SUMMARY

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CUSTOMER EXPERIENCE MOST IMPORTANT TOP STRATEGIC PRIORITIES OVER THE NEXT FIVE YEARS

SIGFNIFICANT OPERATIONS’ IMPACT ON CUSTOMER EXPERIENCE

LACK OF ADVANCED TECHNOLOGIES IS TOP OBSTACLE

ADVANCED TECHNOLOGY IS TOP FACTOR FOR IMPROVEMENT

of respondents say customer experience is the primary brand promise

say the impact on passenger sentiment is the most important measure of disruption management effectiveness

to improving customer experience

to improving operational performance

to improving profitability

customer experience

operational performance

profitability

of respondents are moving ahead in customer experience, but not profitabilityof respondents are moving ahead in operational performance, but not profitability

72%

35%

52%42%38%

53%46%41%

30%

61% operational reliability

building customer loyalty

reducing operating costs

44%41%41%

The competitive airline: Enabling operations to create the best customer experience

the brand promise, the airline should consider how to balance the goals with functional departments, includ-ing operations. This will realign success criteria with customer expectations.

Customer experience is the primary brand promise for a majority of airlines. (Table1) Having traditionally com-peted on price, this highly regulated industry is now adopting new means of delivering on customer expe-rience. The Forbes Insights and Sabre survey reveals that executives are beginning to recognize this critical relationship between operations, customer experience and profitability.

Airline travelers are the same tech savvy customers who are used to Alibaba or Amazon prompting them with personalized offers and fulfillment. They have grown accustomed to seamless journeys at their fin-gertips from Uber and Lyft, and people do not change their expectations when they fly. Typically, the airlines look at their prior performance or to the performance of their competitors to benchmark their customer sat-isfaction ratings. While these ratings are higher than ever before, they are still not competitive with other industries.

“The opportunity for the airlines is not only to bench-mark themselves against other industries but to better understand and more broadly influence the custom-ers’ travel journey from beginning to end,” says Dana Jones, SVP and CMO at Sabre Airline Solutions. “One way they can do this is to use data and technology.”

Connecting to customer expectations across the entire travel journey can be enabled through common data, aligned goals and unified technologies. As it relates to

EXECUTIVE SUMMARY

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(Table1)

CUSTOMER EXPERIENCE IS MOST IMPORTANT

PRIMARY BRAND PROMISE OF AIRLINES

A vast majority of airline executives surveyed by Forbes Insights and Sabre believe that their airlines deliver on their brand promise. But do they really, and does deliv-ering on the brand also deliver financial results for the airline?

The survey reveals a disconnect between customer ex-perience, operations and profitability. A majority of airline executives (84%) believe that they are moving ahead of their competitors in terms of customer experience and operational performance (79%). However, success with customer experience and operations does not always translate into revenue or profit increases. Only 50% of airline executives think they are ahead in terms of reve-nue growth and 49% in profitability. (Table 2)

To close this gap, new thinking is required to operate in a world where disparate and siloed technologies, pro-cesses, and organizational structures are challenging customer experience and airline performance. “Leading airlines that focus on customer experience are able to see an improvement in their profitability,” says Jones.

The majority of airlines, however, still need a better un-derstanding of their return on investment in adopting new technologies and business processes. A lack of alignment across organizations and resistance to change make adoption slow. The ability to compete depends on customer service. Airlines have to balance the need to provide service to the customer and to sell more to the customer in order to drive revenue. To succeed at this balancing act, they need the right data and a common set of goals.

EXECUTIVE SUMMARY

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MOVING AHEAD OF COMPETITORS IN THE FOLLOWING AREAS:

84%1

2

3

4

5

6

7

8

79%

75%

52%

Customer experience

Operational performance

Service delivery reliability

Cost control

Revenue growth

Profitability

Innovation

Technology

50%

49%

44%

39%

(Table 2)

WHY IS THERE A DISCONNECT BETWEEN CUSTOMER SERVICE, OPERATIONS AND PROFITABILITY?

The competitive airline: Enabling operations to create the best customer experience

The Forbes Insights and Sabre survey shows that ex-ecutives believe operations technology helps improve customer experience. (Table 3) Recognizing the crucial role of technology, they perceive it to be the top en-abler of operational airline performance and customer experience. (Table 3) A lack of technology is shown as the biggest obstacle to achieving such goals. (Fig. 4) However, investing in technology is expensive and is not necessarily being prioritized over business perfor-mance. Only a third of surveyed executives (32%) con-sider introducing advanced technologies to be a priori-ty, paying much more attention to improving customer experience and operations.

The technology now exists to enable airlines to operate on a whole new level, and it is critical that executives think about how to use data and to align their organiza-tions so they are making more informed decisions quick-ly. For example, if a flight is off schedule, is burning more

fuel or arriving late the better choice? Even if fuel costs are high, an airline needs data to consider the financial and customer impact of a schedule disruption vs. the cost of on-time arrival. With the investment in technol-ogies, driven by a unified set of solutions that provide visibility into all of these data (e.g., connecting flights, NPS, fuel cost for on-time arrival, etc.), airlines can make better operational decisions, resulting in pos-itive customer experience, profitability, and revenue protection.

The survey reveals that operations executives have begun to think about the day of operations in a differ-ent way. “What they need now is to have the integrat-ed technology and business processes to make sure customer information is part of the fabric in which they operate. Insights from that data in real-time al-low airlines to balance priorities between customer service, operations, and profitability,” says Jones.

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OPERATIONAL PERFORMANCE CUSTOMER EXPERIENCE PROFITABILITY

TECHNOLOGY 42% TECHNOLOGY 52% TECHNOLOGY 38%

BUDGET LIMITATIONS 25% LACK OF INFORMATION SHARING 28% LACK OF VISION 26%

HUMAN RESOURCE LIMITATIONS 25%

INABILITY TO ACHIEVE CONSENSUS ON COSTS AND BENEFITS 25%

LIMITED ACCESS TO ACTIONABLE DATA 25%

UNIFIED TECHNOLOGY IS CRITICAL FOR CUSTOMER EXPERIENCE AND OPERATIONS, BUT IS IT A BLIND SPOT FOR AIRLINES?

OPERATIONAL PERFORMANCE CUSTOMER EXPERIENCE PROFITABILITY

ADOPTING ADVANCED TECHNOLOGIES 46% ADOPTING ADVANCED TECHNOLOGIES 53% STRONG LEADERSHIP 50%

INFORMATION SHARING 27% MORE SKILLED EMPLOYEES 33%

ADOPTING ADVANCED TECHNOLOGIES 41%

INFORMATION SHARING 27% ABILITY TO REACH CONSENSUS ON COSTS AND BENEFITS 23%

STRONG LEADERSHIP 26%

EXECUTIVE SUMMARY

(Table 3)

(Table 4)

TOP OBSTACLES TO IMPROVING AIRLINES PERFORMANCE (TOP THREE)

TOP FACTORS THAT WOULD IMPROVE AIRLINE PERFORMANCE (TOP THREE)

The competitive airline: Enabling operations to create the best customer experience

Improving disruption management is dependent upon unified technology and actionable insights from data. It allows organizations to connect the dots about who the customers are, where they are in the travel jour-ney and how the airline can best serve them. Such data can, for example, help lead to an informed de-cision about which flights to cancel based on infor-mation about high-valued passengers. With real-time data, the airlines know how many passengers are on the flights, how many would lose connections de-pending on the decisions about cancellations, and the value of the customers to the airline. As a result, an airline may decide to hold a flight for its most valu-able customers. Balancing the cost of the disruption and the operational impact with the insight on which customers are impacted translates into revenue pro-tection and profitability.

The best way to take good care of the customer is to recover smoothly from disruptions. Any disruption, ma-jor or minor, is an opportunity for an airline to improve its customer experience and financial performance. Re-al-time data can provide the decision support needed to recover from disruptions with speed and accuracy.

The Forbes Insights and Sabre Survey revealed that dis-ruption management is closely correlated with the brand promise—the most important factor for measuring the effectiveness of disruption management is impact on passenger sentiment (72%). (Table 5) Additionally, 79% of operations, marketing, and IT executives combined saw flight optimization and disruption management as the most important initiatives to improving operational performance.

EXECUTIVE SUMMARY

5

72%1

2

3

4

48%

43%

43%

Impact on passenger loyalty or sentiment

Total operational cost of the disruption

Time required to bring the operation back to plan

Impact on passenger connections

5 37%Displaced revenue

6 23%Completion factor (cancelled flights)

DISRUPTION MANAGEMENT IS KEY

MOST IMPORTANT FACTORS FOR MEASURING EFFECTIVENESS OF DISRUPTION MANAGEMENT

The competitive airline: Enabling operations to create the best customer experience

(Table 5)

also balancing the goals of cost and business perfor-mance across the airline. As the Forbes Insights and Sabre survey shows, the use of advanced and unified technologies leads to continued improvement.

However, as the research also indicates, airlines are not yet transforming holistically. Sixty-five percent of executives say that their airline is transforming across multiple functions and processes, while the same is true for only 43% of departments. In today’s connected enterprise, this means that new thinking has not always superseded fragmented thinking.

“It’s important in a disruption that airlines focus on the right customers. They protect their revenue when they don’t displace them onto another airline for instance, which helps their financials. Delivering on the custom-er experience and optimizing costs, so they can get the operation back on schedule as quickly as possible, have a fundamental impact on an airline’s bottom line,” says Jones.

ACHIEVING OPERATIONAL EXCELLENCE REQUIRES COLLABORATION

The challenge airlines have had is getting access to data in a meaningful, real-time way, so that they can act on it. Using a technology platform that provides the right data to the right people is not only key to en-abling better decision making within operations, but

EXECUTIVE SUMMARY

The competitive airline: Enabling operations to create the best customer experience

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The main barrier to process change is fighting existing processes and technologies (58%) and user-base resis-tant to change (46%). While more than half of all execu-tives agree on the importance of resources for aligning customer experience with operations, more marketing executives look to technology as an enabler for this alignment (80%) than do operations executives (49%).

So as executives recognize the need for the technology, they also need to think about the business processes. Integrating technology with new business processes can ultimately lead to measuring everyone on a common set of customer and profitability metrics.

For example, aligning operations, marketing, and IT is a high priority for most individual departments (39%), but few executives consider it the top priority for the airline (16%). Increasing passenger revenue per available seat mile/kilometer (PRASM/PRASK) is the lowest on a list of priorities, both for the airline and specific departments. (Table 6) It is crucial for all functions to coalesce around common goals.

Operations executives agree that aligning priorities with other functions is one of the most important factors in successful operational performance (46%). But recogni-tion of the importance of collaboration and new technol-ogies is not enough. These executives need to continue fighting the obstacles, inertia being obstacle number one.

EXECUTIVE SUMMARY

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MOST IMPORTANT PRIORITY FOR DEPARTMENT FOR AIRLINE

BUILDING CUSTOMER LOYALTY 35% 49%

ALIGNING OPERATIONS, MARKETING AND IT 39% 16%

43%

22% 28%

53% REDUCING OPERATING COSTS

INCREASING PASSENGER REVENUE PER AVAILABLE SEAT MILE/KILOMETER (PRASM/PRASK)

(Table 6)

TOP CURRENT PRIORITIES FOR DEPARTMENTS AND AIRLINES

The competitive airline: Enabling operations to create the best customer experience

an enabler to helping airlines operate fundamentally differently,” says Jones. “Unified technology and data would provide a single version of the truth, allowing multiple functions and departments to effectively work together to execute on customer service and increase profitability.”

Overall, airline executives’ primary issues are with oper-ational reliability (44%), building customer loyalty (41%), and reducing operational costs (34%), their top three strategic priorities over the next five years. (Table 7)

The vast majority of airline executives (73%) expect sig-nificant transformation to the entire customer journey over the next 3 to 5 years, more so than to individual phases, such as booking and in-flight. Airline executives recognize that to succeed at creating a unified journey for the customer, they need to have unified processes, technologies and goals. Sixty-one percent of airline ex-ecutives say that transformation will originate from col-laboration across multiple functions.

To continue transforming their customers’ journeys, air-lines will need to overcome their biggest internal chal-lenges, which executives recognize as enterprise-wide continued improvement of processes (23%) and using insights from data and analytics (21%). “Technology is

EXECUTIVE SUMMARY

8

44%1

2

3

4

5

6

7

8

41%

41%

36%

Building customer loyalty

Operational reliability

Service delivery reliability

Expanding the size of the business or network

9 Expanding the size of the business or network

Introducing advanced technologies

Gaining market share

Increasing passenger revenue per

available seat mile/kilometer

29%Improving the customer experience

LOOKING AHEAD

TOP STRATEGIC PRIORITIES FOR AIRLINES OVER THE NEXT FIVE YEARS

The competitive airline: Enabling operations to create the best customer experience

(Table 7)

Based on a survey of 100 executives from the world’s largest airlines conducted by Forbes Insights and Sabre in the first quarter of 2016. All executives came from airlines that carried more than 500,000 passengers over the last 12 months. Out of that, 51% of airlines survey carried between 1 million and 25 million passengers, 15% carried between 25 and 50 million passengers and 21% more than 50 million. 33% of executives repre-sented operations, 32% sales, marketing and customer service, 16% IT and the rest came from other functions. 46% of survey respondents were from the Americas, 37% from EMEA, and 17% from Asia Pacific.

METHODOLOGY

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