Thursday, 20 July 2017

Is Airline Hubbing At Low-Fare-Low-Quality Sustainable? Are easyJet and British Airways Testing the Limits of Passenger Tolerance?

When a low fare airline chose to set its main base at one of the most congested world airports, and a major legacy airline based at one of the most congested world airports starts offering low-fare services to its customers, it doesn’t need think tanks to say that they have chosen a very risky path ahead. These are the paths of two major carriers: the low fare easyJet ('big@Gatwick'), and a legacy, Heathrow based British Airways, aspiring to bring lower fares to its customers. 

These strategies came from a desperate need to ensure growth and stay competitive, while trapped in a capacity constrained environment. Unable to strike the right balance, they put the expansionist strategies and short term profit before quality. After all, the elements of quality require more time and effort to measure, and are not officially recognised as a performance metrics.

To get closer to reality, let’s briefly examine some of the consequences of submerged quality issues that strongly impact operational and business performance, and learn some lessons from the most valued passengers who are near to becoming very disloyal to their once most favoured airline. 

easyJet

EasyJet shows its pride in being a major Gatwick carrier, which is their biggest base airport. Its share in departure seat capacity has grown quite rapidly between 2010 and 2015 - from 26.1% to 42.1%. This has inevitably resulted in an unprecedented drop in service quality, especially punctuality (shown below), with deeper implications on easyJet’s overall performance.  




This didn’t come as surprise. It is a notorious fact that short turn times, load factors above 90%, high aircraft utilisation, and low fares cannot fit well into the schedule of the world’s busiest single runway airport which has no slacks to absorb even the smallest disruptions, disrupting the travel of millions of passengers annually. Not only does the company disregard most of its passengers’ complaints, but it expects them to bear the high costs of disruptive travel. It looks as the attitude of ignoring passengers experiencing delays and cancellations is deeply ingrained in company culture and encouraged by the following strategy mission:



No wonder that the mainstream and social media are flooded with unflattering stories about easyJet customer experience, complaints, and airline refusal to compensate delayed passengers. easyJet has been named as ‘airline that is difficult to deal with’, ‘the most complained about airline’ and often listed as one of the ‘world’s worst airlines’.

The airline is about to face a drop in annual profit for the second year in a row, despite low fuel prices and no significant external disturbances that wouldn’t affect other airlines. There is more to be done to put easyJet back to its feet than counting the increase in aircraft, flights, passengers, and load factors, which in this case proved to be counterproductive.

On the good side, the strategy chart has recently been transformed to include ‘customers and operational excellence’ the effect of which may need time to show up.

British Airways

Despite the fact that the BA low-fare low-cost experience is at its early stage, there are strong signals that this strategy may pan out not to be as good as originally expected. This may not be reflected in BA financial and operational results yet, but signs of a drop in quality haven’t passed unnoticed by BA’s most valued customers who shared their experiences publicly. Some of them provided insightful comments and suggestions, like Martin Geddes, a frequent flier, loyal BA customer, Executive Club Member, and Executive Club Gold card holder whose connection with BA is partly emotional (his father worked for BA for 34 years). As a frequent flyer, Martin is often in a position to experience operational and service mishaps, especially those affecting full fare passengers. His views about recent changes in BA service quality and how they affect business passengers are described in his post ‘Brand suicide case study: British Airways’. This is a rare chance to learn about quality pitfalls and disjointed services at various stages of journey of an airline passenger which is not unique to British Airways.

Another valued BA customer, Executive Club Member Scott Martin, MD Costa Express, has given up on BA after two decades of loyalty. This followed the recent drop in quality which he found unacceptable and has already taken over 15 business flights with a BA competitor in 6 months. His experience is described in ‘Have British Airways Lost the Plot’?

So, BA have already lost Scott and is on the way to lose Martin. It may have difficulties to compensate for the loss theoretically equivalent to 500 low-fare passengers in six months. How many more passengers are sharing the same experience? If their numbers start growing exponentially, how realistic it would be to replace them with more of lower fare passengers considering already high load factors? And how long will it take for the new low-fare passengers to realise that their disrupted journey can cost them much more in money, time, and anxiety that they are willing to bear.

As airlines don't measure impact of quality issues on overall business performance, they can grow unabated and come more costly than anyone can perceive - they can wipe out many of locally confined cost savings. 

Until the emerging methods for measuring quality become ingrained in standard practices, there are the elements of quality that could be improved without hard investment, something human and simple, things that Seth Godin described in his post ‘Maybe your customer isn’t trying to save money’:

Perhaps she wants to be heard instead.
Or find something better, or unique.
Or perhaps customer service, flexibility and speed are more important.
It might be that the way you treat your employees, or the side effects you create count for more than the price.
The interactions in the moment might be a higher priority.
Or it could even be the sense of fairplay and respect you bring (or don't bring) to the transaction.

All this prompted me to think: wouldn’t it be good for airlines to occasionally invite passengers like Seth, Martin, Scott, or other fresh thinkers to inspire leaders stuck in daily routines and bring them closer to real life?