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The second session at the Randy Peterson Executive Summit was all about the loyalty programs themselves. To read about the session with the loyalty credit card issuers read this post. I had to step out for part of this second session, but I had my friend take notes for me the whole time, so here are some snipits from the presentation entitled “Planes, Trains, and Automobiles”.
On the panel:
Bob Crandall (former CEO American Airlines), Jeff Robertson (VP, SkyMiles, Delta Air Lines), Greg Brown, (Vice President Loyalty and Relationship Marketing, Choice Hotels), Avis, National Car Rental and Hertz, Tim Doolittle, Avis Budget Group VP CRM/Marketing Analytics
- Bob Crandall said that after the AA/US merger you should “see an airline that has a lot more to offer.” There are some cons such as retraining that takes time.
- When asked about the merger from a competitors perspective Jeff Robertson from Delta was realistic in stating that this is a different time than when the Delta/Northwest merger took place. He noted that at that time all the airlines were in the same boat just trying to survive and build reputations. Now, it is harder to merge and work through the changing dynamics of the industry. United and Delta are very strong, so there is a different air of competition and economic environment for them to work through.
- Bob Crandall passionately stated that airlines are “hosing the customer.” He said ancillary charges are the fundamental mistake of the airlines right now. It does not cost the airline $200 to change your flight, so why should it cost the customer $200 to change it. He stated it would be better if airlines raised their base prices to a realistic level instead of relying on ancillary charges. Later in the session, he was asked what he though the dollar amount on that raise would be. He did say he has long been out of the industry to know those numbers but after figuring the profit the airlines were expected to receive this year he thought it could be in the 4% range.
- Jeff from Delta said the reality is Delta will probably profit their best year ever this year with a lot of that being due to ancillary charges – bag fees, upgrade fees, change fees, etc. Without those fees though Delta would actually be losing money. To balance out they need to raise prices or have ancillary charges. They need to make a profit to continue to provide a product people want.
- Regarding the partnership between Delta and Starwood, the Delta rep said it was added as something that would make the customer happy, and give them an opportunity to earn something beyond just airline miles. There needs to be more incentive and working with a hotel gets the airline out there in a way that is making people happier and giving them more options. Targeting “affluent, high business traveler” seems to be a goal of this partnership. He didn’t rule out other similar relationships in the future, but they are still in the early evaluations steps of seeing how this will play out.
- Choice Hotels was posed with a question about whether his program would ever seek an alliance. He points out that back in April, Choice did start an alliance with Bluegreen Vacation Club but no desire in the near future to team up with an airline.
- A question was posed about how to make the whole travel experience easier for the customer. Jeff from Switchfly answered that the biggest problem is separation of interface points. There are too many programs that don’t work together and there needs to be integration of those platforms that allow suppliers to do what they do best which is get you on your flights, get you in the best room, get you in your desired rental car, without hassle to the customer.
- Mr. Crandall brought up the issue of $9 rental car gas, and there was a discussion about what happens when you return your car gives you a lasting impression of the company. There was a mention of it being possible that rental car companies would make more by allowing you to pre-pay by the quarter of a tank or similar.
- Bob Crandall said that some folks still believe that Southwest is a low cost airline, but that is not the reality.
Overall the tone was pretty interesting – especially toward ancillary fees. Most seemed to agree that they tick customers off, but on the other hand they come in at a high margin for the company. I very much agreed with Bob’s tone that travel companies should want to make travel easy and enjoyable so that customers want to do it more…not less.