Ultimately, airline brands should create value for both the brand owner and for the customer. Value, from a consumer perspective, is the promise and delivery of a clearly defined and differentiated experience. Value, from a business perspective, is the security of future earnings by driving demand and loyalty.
Tony Tyler, the Director General & CEO of IATA (International Air Transport Association), talks to Stuart Green, CEO of Interbrand Asia-Pacific, about some of the challenges and opportunities currently facing the aviation industry:
SG: From rapid technological advancement to demographic shifts and changing customer expectations, we appear to have entered a period of accelerated change. What are some of the specific challenges and opportunities aviation in general is facing at this time?
TT: I’m not sure I can recall a time when we didn’t think we were entering an era of accelerating change! In the last 40 years or so, when did change (at least in aviation) ever decelerate? Having said that, it’s certainly the case that aviation faces enormous opportunities. Wealth is increasing and spreading, particularly in regions such as Asia-Pacific, South America, and Africa. This will drive growth in demand for air travel. Even in mature economies, air travel is growing robustly as it becomes seen less as a luxury than as an indispensable part of modern life.
However, this growth creates its own challenges. The passenger experience has suffered because infrastructure is not keeping pace. Skies around the world are becoming increasingly crowded. Passengers face queues on their way to the aircraft. And aircraft often face queues to take off or to land. When that happens, value is lost for both passengers and airlines.
IATA has an important and unique role to play. We are building standards that will help to improve what the passenger experiences. A good example is self-service technology to speed airline processes with online check-in, automated baggage drops, self-boarding etc. And we are working with governments to try to solve the problem of security queues by introducing risk-based measures that will allow limited resources to be more efficiently and effectively deployed.
And we are trying to raise awareness amongst governments that aviation is a critical component of their economies. Investing in infrastructure—airports and air navigation services—can pay big economic dividends. Some governments “get it,” particularly in Asia and the Middle East. In Europe, where I am based, I have to say that it is a real struggle.
Aviation also faces challenges of sustainability—financial and environmental. The airline business is one of cutthroat competitiveness, which forces returns below the participants’ cost of capital. And while the industry has set responsible and challenging targets for managing its impact on climate change, governments need to step up to the task of providing the global regulatory framework necessary for the achievement of these goals.
SG: Would you agree that in such a complex sector as aviation, the perspectives of brand owners and brand users often seem at odds with each other? How would you define these perspectives and why are they so often so divergent?
TT: The experience of an airline’s customers is affected to a great degree by entities beyond the control of the airline itself. In most cases the airline is not the owner of the airport terminal facilities, for example. And they are at the mercy of air traffic control, available airspace, and even the weather for a large part of their on-time performance. Outsourced suppliers—for services such as maintenance and perhaps check-in, baggage handling and lounge services—need to be well-managed in order to align to the airline’s brand values. So, while the airline itself may aspire to the highest standards of service, and position its brand accordingly, its customers’ experience may tell a different story. Customer expectations of airlines are high—and rightly so—but even experienced passengers will associate any disappointment with the travel experience directly with the airline, rather than a different element in the value chain that is actually responsible. It’s a big challenge to airlines to get this right. And, often, service recovery can be as important to an airline’s brand as service delivery.
SG: Where do you see the primary opportunities to bridge the gap?
TT: Clearly, it’s up to each airline to deliver excellence in every aspect that is under its direct control: through its own people or its subcontracted suppliers. Achieving a quality service from monopoly providers such as airports or air navigation service providers can be more difficult, although there are plenty of examples of excellence in these industries too. IATA plays an important role in representing the collective interests of airlines with these counterparts. We help to drive improvements in facilities and service, and also develop standards and procedures for the introduction of automation and our suite of self-service “Fast Travel” options, as I mentioned earlier.
The collective work that the airline industry does is quite unique. Aviation is built on global standards many of which are developed through IATA. Airlines build a significant part of their service offering on these standards. With this, the industry has been able to make life enormously better for travelers. The e-ticket standard, for example, was developed through IATA. We take it for granted today, but that enabled enormous convenience. It not only eliminated the need to carry paper, but also enabled more efficient processes, from online shopping to what could become an almost completely self-service airport experience.
SG: For many, commercial air travel appears to have become something to merely tolerate rather than enjoy. Do you see a polarization of the industry with many carriers being squeezed between “ultra no-frills” and “ultra-luxury,” or a landscape where segments increasingly overlap?
TT: Airlines have evolved from being highly regulated into an industry that is driven by customer demand. For some customers, it’s all about price, while others want varying degrees of additional comfort and are prepared to pay for it. The range of choice in virtually every market is extraordinary and comprehensive.
However, rather than polarizing, if anything, the industry is coming together. No-frills carriers have started to offer options like seat pre-assignment and priority queues to appeal to a different category of passenger. So-called legacy or network carriers are offering very cheap fares and “unbundled” products. The demarcation lines are blurring.
SG: Many airlines are focusing on technology and innovation to enhance customers’ flying experience as the primary strategy to stay relevant. Is this a fad or a defining moment for the industry in terms of moving forward more profitably?
TT: It’s neither a fad nor a defining moment for the industry. Airlines have always been early and enthusiastic adopters of new technology: just look at the equipment we use! However, it’s certainly the case that the accelerating development of information and communications technology offers airlines new opportunities to differentiate themselves, add value to their products, and innovate—all of which can lead to better profitability if executed well.
SG: Do you see technological advancements, particularly the “inter-connectivity of devices,” materially impacting the airline industry in any meaningful way?
TT: Interconnectivity could change the travel experience in any number of ways, starting with how we buy travel. Bookings are already being made through apps and smartphones, as well as through travel agents. IATA’s New Distribution Capability could lead to huge innovation in this area. And we are already using our smartphones at automated boarding gates. Soon, we’ll be making our own connections with the aircraft to choose our inflight entertainment or shopping. As technology continues to advance and devices become more connected, our relationships with airlines or alliances will become deeper, increasingly personalized, and more integrated.
If you would like to contact Stuart Green, Interbrand’s airline sector leader, about any of the opinions or insights expressed in this article, please send an email to firstname.lastname@example.org.