Question - Does Technology disrupt the Airline Industry?
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So, I guess I made the mistake of choosing to travel over the past couple of weeks. Wow; that was fun - not. I still have some luggage that hasn’t made it home.
OK, I know I am reacting a bit to some recent personal experiences but, if there ever was a place that could use some innovation, it is the airline industry. The airline industry seems to be in an all out race to the bottom both financially and from a service perspective. As I talk to other business travelers, folks have just come to accept travel as a cost of getting work done but almost no one actually “enjoys” air travel anymore.
Aside from safety (which is outstanding overall I would note), I am just shocked at the lack of differentiation and innovation amongst the airlines. I started traveling (for business) over 20 years ago so let’s look at the progress in the past 20 years. In my opinion, door-to-door travel time - thanks to larger airports, all of the buses and trains to get to terminals miles away, long security lines, and mandatory check in times has actually gone up! The actual speed for planes has effectively not changed in 45 years. Given the overall time costs for a flight - I now drive on any on trip less than 4-5 hours.
OK, so it takes longer to get there. There must be other
improvements, right? Well, there sure aren’t many. Is their more personal space – nope. Is the
food better? – well it is mostly gone so maybe that is an improvement. Are the
planes cleaner? – I don’t think so. Is their enough space for what you want to
carry on? – not hardly. Can they get the bags to you any faster? - no. Can they
just provide consistent power for my laptop? – nah.
One innovation I will acknowledge has been the recently introduced check-in kiosks and web check in capabilities. I will say, however, it is of marginal benefit if you still have bags to check. Also, the Kiosks are a huge labor cost savings for the airlines – this was not an incremental expense to deliver improved service.
Yes, there are some standout airlines, mostly for
international travel, but for most domestic travel, it seems to be a race to
the bottom. Whether you agree totally with this assessment or not, I think it
would be hard to say that our overall air travel experience has improved a
great deal in the last 40 years.
The airline industry, more than most, has one of the most evolved methods of being able to charge us for why we travel rather than for the value they actually deliver. This type of pricing happens to some degree in almost every market. Discounts are given for students or for people who book in advance. With airline ticket pricing, however, the differences can be extreme as it is generally pretty easy to identify a business traveler. Imagine if taking a taxi was like flying. You would hop in a cab and the driver would ask you why you need a ride and then charge 10 times the normal rate if you were going to an important meeting!
I believe that this ability to drive pricing so
independently from service has actually served to slow innovation within the
industry. Today, business travelers don’t really get better “service” for their
money. We pay more based on why we fly. We pay because we want to be with our
families on weekends and don’t stay over on Saturday.
Here is the problem that I think the airlines are going to face. Business travelers have been paying high rate and not receiving a service appropriate to that payment. The service is a commodity if I have ever seen one, yet it has highly graduated pricing. If you look at business travelers today, most would fall into the customer quadrant called “trapped” – we are not at all satisfied but really have few options.
Information Technology to the rescue?
There are a number of new technologies that are starting to
change things. From better web collaboration, to high-end video conferencing,
to blogs and podcasts, we are collaborating more and more with less and less
travel. One of my teams purchased a simple internet video conferencing system
this year with an agreement to immediately cut their travel budget by 10-20%!
I recently met the CEO of a startup that had developed a product with 17 individuals all located in different locations around the world. What was the most interesting was how seldom they actually met physically.
So, with no real air travel innovations on the horizon, airlines that charge more based on why we travel than based on a level service they actually deliver, and the simple fact that most of us would prefer to travel less and stay home more with our families, air travel could be a market on the verge of major change. IT could actually disrupt the airline industry.
What remains to be seen is if the airlines will recognize
this in time and start to close that gap between the cost of business travel
and the service delivered.
For now, I believe, business travelers will continue to seek out ways to avoid travel and information technology advances may actually prove to be a disruptor to the travel industry. I do like to travel (some) so I hope that the airlines will recognize that charging people mostly based on why we travel rather than for a delivered value is “no way to run an airline.”
Mark…
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