(To locate entries scroll down this page or through appropriate month shown under 'Blog Archive' on right hand column)
COMMENT
FEB A Travel Policy’s Biggest Barrier
JAN Low Cost Airlines - honeymoon Over?
JAN Travel Supply Chain Intelligence
JAN ASK me a QUESTION
DEC A Christmas Message
NOV A London Airport Solution?
SEP So Will Airlines go Direct Connect or Not?
SEP A Distribution Prediction
AUG Do we need another Industry Association?
JUL What the Customer Really Wants? – Part 1
JUL Who is the customer around here anyway?
APR Can TMC Brain Power Still Save Money?
MAR Combined Airline Deals – Good or Bad?
MAR Travel Evolution is not just about Technology – Right?
FEB Travel Services – Buying is just the beginning.
FEB Anybody Understand the Corporate Hotel Market?
FEB Getting back to basics with business travellers
JAN What happens when TMCs become GDS
JAN Better to never have something than see it taken away?
JAN The Evolution of Air Distribution – The Story so Far
JAN What does a hotel brand really mean?
JAN Direct Connect – The first significant skirmish in a long campaign.
DEC Loyalty Cards – What value?
DEC Christmas Distribution Story - 2
DEC A Christmas Distribution Story
DEC You don’t get ‘owt for nowt’ in travel distribution.
NOV BA dispute – Pride and promises
NOV GDS/Airline issue. Coming to a head?
OCT A Take on AA Distribution Issues
SEP Data Provision - Sounds Easy?
SEP Just how much would you Disclose?
AUG Can TMCs Really Influence Business?-Switch selling...
AUG Travel Compliance – So very easy.
AUG Can TMCs Really Influence Business? – Deals
AUG Can TMCs really influence business?
JUL Why small is becoming big in Business Travel.
JUN A different approach to TMC negotiations
JUN Global Travel Programmes – Delivering?
MAY Airlines and Travel Management Companies (TMC)
APR Airline marriages? Call for Jerry Springer.
APR Travel and the Environment
MAR Do academics understand the real world
MAR Is Government Buying Wisely?
MAR Who should buy travel? (Part two)
FEB Who should buy travel? (Part one)
Friday, 13 January 2012
Low Cost Airlines - Honeymoon Over?
The other day I spoke to a friend who had always been a massive supporter of European low cost/no frills airlines. He looked pretty annoyed and moaned about the fact that many of the deals that used to be around no longer exist. He also could not understand why he now has to do a lot of the work for them such as online check-in etc yet pay for almost every extra you can think of. Why, he said should I do all the work yet more often than not have to pay an administration fee.
It seems to me that more people than just my friend are falling out of love with these airlines. One person put it quite emotionally by saying he felt ‘betrayed by these so called ‘people's champions’. Having been in the business for many years I was surprised that folk could believe that these airlines were working in anything else but self interest but I guess if one looks at some of their past marketing and newspaper publicity one might understand.
I have my own views on this sector of the market and, as he asked my opinion I gave it. This is what I said:
OK, this is how I think the low cost airline model works:
They start a route on the stack them high and sell them cheap basis. They cut their costs to the bone and undercut the prices of any competition from the big boys. This works for a year or two until they have got hold of as many passengers they can on that route. Then their problems start.
You see, like all business they need to generate increased year on year profits but where is that increase going to come from? After all, their costs have already been stripped to the basics. They struggle to increase passenger numbers because they have already cornered their share of the market. Also this share is being attacked by the major carriers who have adjusted their prices to compete on the same ‘net plus extras’ model.
So the only way to please their investors is to enter new markets (they are already established in the best ones) and get more money from existing passengers. How do you get more money from them? Well you check your stats, booking patterns, peak flights and increase fares on those services that are popular (good timings etc) up to the highest level they think they can get away with. Then they look elsewhere amongst ancillary costs such as credit card fees, airport service 'frills' and start charging for them. When the authorities catch up with those they feel unacceptable they move these charges to a grey area described as 'admin fees'. On top of this they try to sell their customers non airline services like car hire and hotels and then go to these suppliers and negotiate special commissions for giving them business.
So the issue is that they have to keep growing in order to keep their share price up. Great in the old days but hard now they are established. The only good thing about this is that, as a result prices are finally becoming much more transparent so you can choose what you are going to get i.e. you can pick poor timings on less popular routes and still pay a low fare. As mentioned earlier these companies sell through big time marketing campaigns which mean they will still offer the occasional mega headline grabbing deals here and there.
The thing to remember is these airlines work on the basis that they do not want you to pay less than the maximum you are prepared to spend and they are finding out what that sum is in all sorts of clever ways. One could argue they are more pirates than charities!
It seems to me that more people than just my friend are falling out of love with these airlines. One person put it quite emotionally by saying he felt ‘betrayed by these so called ‘people's champions’. Having been in the business for many years I was surprised that folk could believe that these airlines were working in anything else but self interest but I guess if one looks at some of their past marketing and newspaper publicity one might understand.
I have my own views on this sector of the market and, as he asked my opinion I gave it. This is what I said:
OK, this is how I think the low cost airline model works:
They start a route on the stack them high and sell them cheap basis. They cut their costs to the bone and undercut the prices of any competition from the big boys. This works for a year or two until they have got hold of as many passengers they can on that route. Then their problems start.
You see, like all business they need to generate increased year on year profits but where is that increase going to come from? After all, their costs have already been stripped to the basics. They struggle to increase passenger numbers because they have already cornered their share of the market. Also this share is being attacked by the major carriers who have adjusted their prices to compete on the same ‘net plus extras’ model.
So the only way to please their investors is to enter new markets (they are already established in the best ones) and get more money from existing passengers. How do you get more money from them? Well you check your stats, booking patterns, peak flights and increase fares on those services that are popular (good timings etc) up to the highest level they think they can get away with. Then they look elsewhere amongst ancillary costs such as credit card fees, airport service 'frills' and start charging for them. When the authorities catch up with those they feel unacceptable they move these charges to a grey area described as 'admin fees'. On top of this they try to sell their customers non airline services like car hire and hotels and then go to these suppliers and negotiate special commissions for giving them business.
So the issue is that they have to keep growing in order to keep their share price up. Great in the old days but hard now they are established. The only good thing about this is that, as a result prices are finally becoming much more transparent so you can choose what you are going to get i.e. you can pick poor timings on less popular routes and still pay a low fare. As mentioned earlier these companies sell through big time marketing campaigns which mean they will still offer the occasional mega headline grabbing deals here and there.
The thing to remember is these airlines work on the basis that they do not want you to pay less than the maximum you are prepared to spend and they are finding out what that sum is in all sorts of clever ways. One could argue they are more pirates than charities!
Thursday, 5 January 2012
Travel Supply Chain Intelligence
It has never ceased to surprise me how little time the chain studies its partners, clients and perceived competitors. They are all intertwined in activities right the way from the traveller to the front end supplier yet history demonstrates that they do not understand the people they depend on or those they want to replace.
A good example would be say an airline that wants to replace a TMC or GDS which is quite topical at the moment. Now the black and white capability is there in the shape of enabling technology but the real world is in colour and of different shades and complexity. Technology systems are the beginning of the road not the end of it, an enabler not the solution. But some folks just plough on anyway and seem genuinely shocked at the push back
I am convinced this happens because the players have not set the right priorities into understanding all of the things the other components do. Instead they blindly follow their ‘ideal scenario’ strategy and attempt to bludgeon it into the marketplace. Sometimes this just might work in parts but the risk of fall-out is great with the potential of lasting commercial or competitive damage. They should also realise by now that the other members in the chain are anticipating their moves and building detours and opportunities around them.
These thoughts are not here to try and dissuade the chain from evolving and diversifying, after all that is progress. What I am saying instead is that this industry needs to understand itself and its component parts a lot clearer. For example, has any airline ever taken the time (and at the right level) to examine what it’s ‘partners’ do in detail? To sit down and better evaluate the chain reaction of planned strategy and thereby have answers to the issues that will surely arise? They might even find ways that benefit, or at least soften the blow to the rest of the industry.
The way some current players go about change is simply not savvy. They know what they want and charge at it, usually with disappointing results. A bit more thought, understanding, broader knowledge and early dialogue just might form a better basis for progress. And for heavens sake remember that the world has multi markets, technologies languages and cultures. Head offices in their ‘ivory towers’ in the USA, UK, Germany and The Far East can pontificate and plan as much as they like but to little avail if their decisions simply are unworkable elsewhere. Instead they can do major damage.
So my plea is to stop, think, research a great deal, understand the players/competitors better and look way beyond the first hurdle and towards the end-game. I still maintain that the major industry bodies should be driving this understanding. Perhaps if they had less back slapping, money making, selling type conferences and more distribution, supply chain summits they would make a bigger contribution.
A good example would be say an airline that wants to replace a TMC or GDS which is quite topical at the moment. Now the black and white capability is there in the shape of enabling technology but the real world is in colour and of different shades and complexity. Technology systems are the beginning of the road not the end of it, an enabler not the solution. But some folks just plough on anyway and seem genuinely shocked at the push back
I am convinced this happens because the players have not set the right priorities into understanding all of the things the other components do. Instead they blindly follow their ‘ideal scenario’ strategy and attempt to bludgeon it into the marketplace. Sometimes this just might work in parts but the risk of fall-out is great with the potential of lasting commercial or competitive damage. They should also realise by now that the other members in the chain are anticipating their moves and building detours and opportunities around them.
These thoughts are not here to try and dissuade the chain from evolving and diversifying, after all that is progress. What I am saying instead is that this industry needs to understand itself and its component parts a lot clearer. For example, has any airline ever taken the time (and at the right level) to examine what it’s ‘partners’ do in detail? To sit down and better evaluate the chain reaction of planned strategy and thereby have answers to the issues that will surely arise? They might even find ways that benefit, or at least soften the blow to the rest of the industry.
The way some current players go about change is simply not savvy. They know what they want and charge at it, usually with disappointing results. A bit more thought, understanding, broader knowledge and early dialogue just might form a better basis for progress. And for heavens sake remember that the world has multi markets, technologies languages and cultures. Head offices in their ‘ivory towers’ in the USA, UK, Germany and The Far East can pontificate and plan as much as they like but to little avail if their decisions simply are unworkable elsewhere. Instead they can do major damage.
So my plea is to stop, think, research a great deal, understand the players/competitors better and look way beyond the first hurdle and towards the end-game. I still maintain that the major industry bodies should be driving this understanding. Perhaps if they had less back slapping, money making, selling type conferences and more distribution, supply chain summits they would make a bigger contribution.
Tuesday, 3 January 2012
ASK me a QUESTION
If any or all of you have any questions that you think I might be able to answer then do not hesitate to ask either via the response facility below or direct to me on mike.platt@mpaassociates.co.uk
If I can I will give an educated and useful response. If not then I will tell you so.
Should you not want to share a discussion then simply email me and mark it as confidential.
No snags, no advertising no nothing. I just love travel and still want to contribute something if I can.
If I can I will give an educated and useful response. If not then I will tell you so.
Should you not want to share a discussion then simply email me and mark it as confidential.
No snags, no advertising no nothing. I just love travel and still want to contribute something if I can.
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