A big question today- Are airlines striving for survival or customer retention?

Well, the answer is complex and confusing. The pandemic has hit really hard on the Aviation industry. Though, passenger travel has picked a snail pace in October 2020, as airlines are slowly resuming their operations. But,  things are not as rosy as they look like.

Air travel witnessed a massive boom in 2018 and 2019 as the traffic volume increased drastically. Tourism had been the top reason for many to explore the nooks and cranny of this beautiful world. While the air travel growth was expected to grow double in 2020 as people across the globe had done massive bookings and purchasing for future travels, the COVID-19 virus made its uncalled appearance, and halted everything almost to the point of stagnation. Things went worst to the point where companies, either had to file for bankruptcy or they reached at the verge of it.

Survival was the Game of the Hour

Due to borders closures and air travel restrictions, all booked flights got cancelled till further notice. The airports, once a place of hustle and bustle, laughter of joys and fun, excitement went quite and gave a deserted look for almost 7-8 months. The small players gave up immediately since they did not have the capacity to survive the operational cost let alone the salaries of the air and ground crew. Refund of cash to customers was history in their case. The customers had no choice, but to surrender.

Deserted passenger terminal (LAX-South West)

Legacy airlines however, managed to survive by virtue of their financial reserves. Though, many of them came to the point where their respective governments had to pitch in money to ensure their survival. While, some of them have taken a slow pace, many of them are still struggling. The cash reserves had to be maintained for the survival. So many airlines, instead of refunding the tickets, converted the cash value of those bought tickets into various loyalty programs or air miles for future travels. This way, the cash stayed with them and they managed to escape bankruptcy and liquidation. On the other hand, furloughs had already started in the beginning which eventually ended up in layoffs. Hundreds and thousands of people lost their dream jobs. At the end of the day, airlines think about their survival in the aviation market.

Read More: Hong Kong Airlines receives a cash infusion

Customer is also ‘Right’ and Needs Compensation

Customers belong to the same world, and they were equally affected by the financial crises.The also got laid off and most of them are still remain unemployed. Some of them were lucky to get the refunds in one way or another. Some airlines have not refunded the cash back to the customers despite lawsuits and media pressure.

Customer Loyalty Programs

What is actually happening now?

Presently, the prime focus of the airlines is about pivoting around their financial survival. They come up with a strong argument that refunding money back to the customers for the cancelled flights is actually asking for a major financial risk. Customer, on the other hand, has run short on cash due to sudden unemployment. Every penny matters to the customer at this very moment. This is indifferent to the amount of money a passenger is owed.

The situation is therefore, both perplexed yet ethically unfair for the customers.Keeping in view the extraordinary circumstances of COVID and its implications, a full or even a partial refund is a good gesture on the part of the airlines for better customer retention.

Customer Retention

Strategic Myopia

It is a phenomenon where companies only focus at one aspect of a problem while forgetting the others. In aviation business, when airline executives fail to show concern for their long term relationship with the customers, they are actually under the restraints of the strategic myopia. It is happening the same.

Strategic Myopia

This myopic approach is a major impediment for a company’s ability to foresee future challenges because most of their efforts are only focused on immediate survival. Amidst such strategic planning, businesses shift their prime  focus from competitive goals of long term profitability,  bigger market share, customer loyalty and trust, retention and repeat purchases; just to ensure their immediate survival at any cost. It is also very important for the airlines to realize that failure to respond to market and consumer shifts can threaten the survival of any successful company.

Read More: Stakes of TAP Air Portugal at stake.

Work Around

In my view, a better work around at the moment, when things have started to gain some momentum, could be refunding a substantial percentage of the ticket amount in cash, back to the customer. This would be the first anchor to get hold of the lost customer base. The airlines must realize the fact that their survival ultimately lies in the hands of the revenue passengers. Since airlines are flying only at 30-40% of  their capacities, and they have also laid off thousands of their employees, they can manage to bring back their loyal customers through better strategic planning.

Customer Engagement

As a result of restricted travel, some of the airlines have come up with a new concept in commercial flying. Singapore Airlines has started the ‘Flycation’ Program. The flight hovers around the country borders for few hours while extending in flight services to the customers; just to give the similar experience in normal point to point flights and then lands back at the same airport. The ticket is also not too expensive. The idea is to keep customers engaged in some way or another. Qantas followed the suite in the similar fashion. Thai Airways is thinking on the same lines. My idea to the airlines is to earn revenue through such improvised programs. The fares should be low and attractive. A percentage of total fare may be adjusted from the un-refunded tickets, and the remaining  amount may be charged to the customer. It will help the airlines sustain, and the people working for those airlines. On the broader sense, it will also help in building lasting relationship with the customer.

Because, ‘Customer’ is the ‘Source’ to drive the commercial aviation industry.

SIA ‘FLy to Nowhere’ – Flycation Program

 

 

 

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