Posted on Thursday, 30-October-2008 at 21:04 GMT.
Related Categories: Passenger Value, Service
Adjust prices, purge the excess, merge with rivals and defend your turf at all cost – these are today's airline survival tactics we call the new root structure. The first part of our series looked at the purging and merging within the industry that may leave us with fewer, but leaner airlines. This segment will focus on the latest ways airlines are defending their business and how they see ancillary fees as a way to survive, if not prevail.

Tactic 3: Find new battlefronts to defend your turf

Put aside clashes over routes, flights and fares. They seem passé compared to the battles now taking place in the electronic arena. Defending every last bit of possible revenue, some airlines are targeting Web sites that display their schedule and fare information by a process known as screen scraping. Late this summer, Ryanair threatened to cancel all bookings made through screen-scraping Web sites. The airline insisted that the sites in question displayed its fares and schedules using Ryanair.com and then processed bookings on their own sites with added fees. Some European officials condemned the low-cost airline for its effort to block screen scrapers from its Web site. Ryanair maintains that regulators should instead work to stop these sites from what it considers unlawful and excessive practices and charges.

Another fight is being waged by American Airlines against kayak.com. American has asked kayak.com to cease displaying the airline's information. The airline says that kayak.com has displayed fares from American Airlines but has then allowed customers to book using links to rival sites such as Orbitz.com. American objects to being exposed to fees owed to kayak.com and Orbtiz.com that it would not have to pay if customers booked through the American Airlines Web site. Kayak.com maintains that it has always been about offering customers multiple choices to book the fares it displays. The battle is now in state court.

What to look for:

Be aware of the information a Web sites offer you. It's usually best to compare the results of these Web sites with actually airline sites. Though this tends to counteract the convenience of receiving aggregate information, consumers don't always know about disputes and other goings-on between travel sites and travel providers and may not be seeing all the information available. Sometimes, as Ryanair alleges, fees may be added depending on the site you eventually book through. Some sites take you directly to an airline's Web site to book the fare displayed, while others may steer you toward a preferred site. Screen scraper sites access an airline's reservations data which often slows the systems down. If the end result is not profitable for the airline, it's a cost to the airline, and we know exactly who eventually bares the brunt of extra costs.

Tactic 4: Welcome to conditioning. You'll get used to it.

If a frog is placed in boiling water, it will jump out; but if it's placed in cold water that's slowly heated, it will never jump out. This expression is often used to illustrate how changes, subtly implemented over time, can condition us to accept things more easily without feeling much pain. Many airline customers feel as if they are being made to accept new airline fees and other service changes in the same manner. The process starts with cuts in staff, capacity and service. The implementation of new or additional fees for mileage awards, amenities and other services raises the temperature a bit more. What many of us forget is that this slow boil began long before fuel prices spiked. Take a look at an airline ticket receipt and add up the user fees, airport fees, ticketing fees, security fees and more. Without much of a fuss, we've slowly accepted these add-ons to our tickets because, until recently, we've considered most initial fares to be reasonable enough to purchase. Now we're talking about fuel surcharges that aren't moving downward much despite a drop in fuel prices. Do you feel the water getting warmer?

What to look for:

Airlines have always cited competitive reasons for amending prices and services. With industry turmoil in full swing, carriers are now declaring their own survival as reason enough for the changes. What about the drop in fuel prices? With few exceptions, airlines are insisting that they need to keep fuel surcharges in place to make up for the times they didn't have them. So, where will they look next as they pursue new revenue streams, stronger alliances and favorable market conditions? Once the airlines have charged for everything that can be charged, maybe some small service enhancements that passengers truly value could be a differentiator. In-flight access to the Internet seems to be a popular choice, even with the fees attached. On the other hand, we might have set our expectation levels so low that even the slightest service improvement might make us feel as if the industry has turned the corner. What we will see is more à la carte pricing schemes where you fill your base price with all the goodies you want included. So, the airlines keep their fees but you get more ways to choose which ones you're willing to pay for. One way to look at it is this: our slow boil will be a bit more user-friendly and we'll get to do it ourselves!

The airlines' recent health scare will surely change the industry for good. While some of us yearn for the days of more regulation, better service and the return to the glamour of air travel, others will be happy that at least a safe landing is still regulated and doesn't cost extra. The new reality is that an entirely new business model is emerging. Just as the Internet changed consumer behaviour over the course of a decade, airlines are stumbling through a transformation of their own, and no one really knows what it's going to look like once it's done. The good thing is that consumers, or the lack of them, will tell any business when it has overstepped its bounds. If seats stay empty and/or competition remains strong, the lower oil prices might give the airline enough breathing room to offer the odd sale every now and then. We can hope, right?
Comments: