Customer Centricity Instead Of Passenger Handling Increasing Revenue In The Aviation-Eco-System Bucharest, November 17 th , 2010 CONTACT DETAILS: Daniel.Catana@atkearney.com +40 (21) 304 02 20 (Office)
Air traffic is shrinking – decrease in revenue even four times higher than in passenger numbers Development air traffic worldwide(%; 2008-2009) • Decrease in revenue per PAX was three times higher -3,4 than decrease in passenger numbers • Decline in -10 average revenues mainly -13,4 due to Pax Revenue Total Revenue decreasing per Pax demand in the Business segment 1) Passenger traffic Source: IATA 09/2009 based on USD); Press releases A.T. Kearney 17.11.2010 2
Air traffic in EU27 clearly reveals potential for increase Flights per capita in comparison 3,0 Comments 2,52 2,5 EU27-target mark 2020 • Top-rank in Europe 2,00 2,0 with ca. 3.24 flights 1,51 per inhabitant is Spain 1,5 • In the U.S.A. people 1,0 fly significantly more than in the EU27 0,5 0,0 USA EU27 1) EU27 2009; USA 2009 Source: Eurostat, BTS, A.T. Kearney analysis A.T. Kearney 17.11.2010 3
While the number of flights per capita decreased in the EU during the past years, in Romania there was an upward trend Flights per inhabitant in EU 27 Flights per inhabitant in Romania 2.0 1.5 -3% 1.6 1.6 1.5 1.5 1.0 1.0 +7% 0.5 0.37 0.37 0.32 0.5 0.0 0.0 2007 2008 2009 2007 2008 2009 In Romania, in 2009, the number of flights per inhabitant was approximately 15% higher than in 2007 Source: Eurostat, A.T. Kearney analysis A.T. Kearney 17.11.2010 4
Eastern European air transport: huge upswing potential in comparison to Western Europe Travel frequency coefficient: PAX per inhabitant 2009 3.24 3.21 2.82 2.63 2.24 1.96 1.82 1.81 1.72 1.20 0.81 0.78 0.70 0.45 0.37 0.36 Spain UK Holland Austria Portugal Germany France Latvia Italy Czech Hungary Bulgaria Slovenia Poland Romania Slovakia Republic ES GB NL AT PT DE FR LV IT CZ HU BG SI PL RO SK Source: Eurostat, A.T. Kearney analysis A.T. Kearney 17.11.2010 5
Among the top-50 service providers in Germany, no transport provider Extracts from national and international service provider rankings Best Airline 1) 2009 2008 Trading companies well ahead The 50 most customer-oriented service providers in Germany 2009 1. 2. Cathay Pacific Airways 2. 1. Singapore Airlines 3. 5. Asiana Airlines 4. 7. Qatar Airways Competition Germany’s most 5. 9. Emirates customer-oriented service providers 2010 6. 3. Qantas 7. 10. Etihad Airways 8. 8. Air New Zealand 9. 6. Malaysia Airlines 10. 4. Thai Airways 2009 2008 Best Airport 1. 3. Seoul Incheon 2. 1. Hong Kong 3. 2. Singapore Changi 4. 8. Zurich 5. 5. Munich 6. 6. Kansai 7. 4. Kuala Lumpur 8. 11. Amsterdam 9. 12. Centrair/ Nagoya 10. 20. Auckland 1) In parallel an award for Low-Cost Airlines is conducted, where Air Berlin achieved rank 2, followed by easyJet on rank 3 Source: Handelsblatt, University St. Gallen, Skytrax A.T. Kearney 17.11.2010 6
The customer does not see the various actors, but his trip – the Aviation-Eco-System Holistic approach along the aviation value chain Distribution systems Intermodal traffic/feeder (GDS), Internet How much I want… I’d like to… Manufacturer Flight security Airport operator Customer Security check, Check-in, Boarding I’d love to… Ground handling and suppliers Airline A.T. Kearney 17.11.2010 7
Customer centricity leads to an increase in revenue Four levers 4 Target revenue/Customer 1 Target group Current Target Current Target 3 Flights/Customer 2 Keeping existing customers Current Target Current Target Customers x Customer Life Cycle x Flights/Customer x Additional Revenue/Customer = Revenue A.T. Kearney 17.11.2010 8
Aviation is still too centered around “handling categories” – Customer centricity means structuring services first Services – Structuring (example: scheduled airline) Services Customer service Additional service/Assistance Services included in flight Services offered on top of Additional (convenience) flight offerings to fully absorb • Transport from A to B buying power of customers • Special seat 1) • Seat • Pick-up and delivery service • (Special) catering on board 1) • Catering on board to the airport • Luggage transport 1) • Luggage transport 1) • Pick-up and delivery service • Payment methods 1) of luggage • Payment methods 1) • Shopping/Duty free • Gate entertainment (gym, • Headset for entertainment 1) massage, catering, • … • … destination downloads etc.) • Rental cars • Hotel offers Are regarded as product- Are regarded as product- Are regarded as an additional unbundled through partial bundled through partial offer and are priced extra calculation, are included in the calculation and priced extra flight fare (1) Offerings are offered free of charge (service) as well as against payment (customer service) – depending on a philosophy of airline. Source: A.T. Kearney A.T. Kearney 17.11.2010 9
Each identified customer needs to be accompanied from door-to-door – Extension of the service offering Interactional approach – Tool for identifying new service offerings Intermodal Trip Intermodal Airport /Departure Airport /Arrival Destination Boarding/Flight purchase traffic traffic € Parking P Booking € Check In Hotel Rental car € (Check In) Services € Reservation Pass control € € Transfer Events Arrival-service € € Security check € Meeting € € € Rail Transit Further offerings Entertainment Delivery- € service at Home € € Rail Transfer Shopping- Duty Free In-flight-service A.T. Kearney 17.11.2010 10
Every life situation with different needs and willingness to pay – Extension of target groups Family Life Cycle – Tool for identifying new customer target groups Children visiting Best-Ager with time 1 6 grandparents or for family and divorced parent hobbies Youth/students Parents torn 5 2 Family discovering the world between family Life and job Cycle Professionals 4 of different (Young) working 3 occupational couples in long- groups distance relationships A.T. Kearney 17.11.2010 11
Customer centricity perspective could yield a revenue increase of up to € 46bn in the EU27 Comparison of revenues status quo versus with customer centricity (Airlines, airports in region, Pax-dependent 1) 2020, € bn) • Traditional growth forecasts of 4-5% p.a. no longer maintainable • A.T. Kearney forecast sets GDP with factor 1.5 +46 EU27 • Customer centricity adds for +20 229 the year 2020 a potential for 203 revenue increase up to € 46bn 183 in EU27 • Without systematic cooperation Status Quo Customer Customer of airlines and airports a Centricity Centricity revenue increase of € 20bn is Individually System still attainable in EU27 1) Airlines: Flight revenues and Ancillary revenues, Airports: Non Aviation revenue; GACH region: Germany, Austria, Switzerland Source: A.T. Kearney analysis A.T. Kearney 17.11.2010 12
Examples for new offerings – Cooperation of airports and airlines unlocks highest potential Airlines Airports Packages with multiple flights, airport transfers (and events) Mobility-Provider to and from as („Grandma - package“ or mobility well as at the airport – ranging card, Europe-opera-sub) from terminal navigation, over electric rental cars to Rail&fly 1. Special offerings for frequently traveling non-profit-sector (congress- , „demonstrational“ - tourism) Innovation of cabin facilities or Service and product offerings on the way to and at the gate – for special services on board (e.g. self service, bars, massage) leisure and business travelers Improvement of the entertainment offering (chats, pre-ordering of movies, purchase of music) Additional services by making use of the location advantage “airport” Self navigation and information on current geographic position and (e.g. interviews with VIPs, video destination (e.g. Google maps) conferencing) A.T. Kearney 17.11.2010 13
Long-term objective: Real brands also in the aviation business Brand positioning in pure form High LOHAS 1) Premium-Business Willingness to pay Saving Adventure Low Low High Innovation potential (1) LOHA: Lifestyle of Health and Sustainability A.T. Kearney 17.11.2010 14
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