Continuing last month’s theme of shorter clips and more focus … and a little late this month. Thus began June’s Off-the-Wall Comment(s) … and July’s … and now, August’s. June and July never got any further than a paragraph or two. And even August did not get out on the 31st; but with some luck, it will get shipped in the 1st week of September.
A couple of things came out of this unintended hiatus.
First, thanks to those of you who wrote to ask “where’s my OTWC?” Enough asked to inspire the August effort. Conversely, there was enough “silence” to suggest that it is also time to cull the list. If you wish to continue receiving OTWC, please drop me a note.
Secondly, this hiatus has both confirmed many of the inherited technology and cultural limitations of the legacy airline industry digitally-driven processes that I often write about – and provided a cursory education in airline survival tactics. In June, airline turn-around guru David Banmiller asked me and The Eastman Group to oversee the IT functions of Aloha Airlines as he brings the airline out of bankruptcy. David has surrounded himself with an “Over-the-Hill Gang” as Thom Nulty, Aloha’s Sr. VP of Marketing, likes to refer to the team. These few months have been a 7x24 effort (which, among other things, precluded getting OTWCs out) … and have become, effectively, my second post-graduate education – Banmiller’s “University of Aloha Airlines.” That assumes, of course, that I’m not too old to learn.
Perhaps more important from my personal perspective, this has been and is the opportunity to actually have some say in the course of applying new digital technologies as a tool in helping to transform a legacy carrier in trouble. There is the saying that “actions speak louder than words.” And responding to the transitioning IT challenges with this client is allowing me to convert my “technology talk” (i.e. words) to actions.
For reasons that should be apparent, it’s too early to share with you some of these “learning experiences.” But the origins of Off-the-Wall Comment(s) were a way for me to record my learning experiences – so I’m sure OTWCs will reflect some of this new knowledge in upcoming issues.
So … on with some thoughts and comment(s) …
Eastman's "Off-the-Wall Comment(s)"© …
Yoshimune asks < ... when … airlines do not support … paper ticketing and they only support ET, is it still mandatory for IATA agencies to be equipped with ticketing printers?
I suspect that the answer is yes-and-no.
The bigger question may be whether it will be necessary that there even be an IATA structure. Once airlines only accept/issue electronic tickets -- the reason for the IATA financial settlement process ceases to exist. Just as e-tickets are already speeding the internal processing, a fully digitized airline environment will permit electronic settlement between airlines and any representative that an airline wishes to do business with; digitally through the more cost efficient existing digital banking structures.
IATA may have a role as a "certification" source or an industry trade group for distribution outlets -- but there will be no need for any agency to be a member of IATA in order to be on-line or sell airline tickets. That authorization process will be handled by each airline independently through many different digital distribution channels.
That said, I suspect that retail outlets in whatever form they exist (and they will exist) -- will need to have printers in the immediate future. But those printers will NOT be printing any kind of entitlement document tied to the financial settlement process now in place! Instead, those printers will need to print receipts, itineraries, baggage tags, vouchers and tickets for use by non-automated travel service providers (i.e. the Grand Canyon mule ride, Great Barrier Reef kayak paddles, London Theatre tickets, etc.).
Probably even more important, those printers will create full-color brochure-like selling material of planned or customized travel itineraries that prospective customers will take home to evaluate; printed to professional quality standards that far surpass what an individual could get by downloading the material to his home computer for printing there.
I don't think the printer is likely to go away ... although its use and its role in travel will certainly change. Printers used solely for the purpose of producing tickets will certainly go away – to be replaced by printers that serve other retail travel business functions … which will likely include an ability to print a “receipt” for pre-paid travel services. But such documents will be for a traveler’s business or personal records – not a document of travel entitlement.
Still, as noted at the beginning, the bigger question is whether there will continue to be a reason for IATA to exist as a central clearing house and financial settlement solution. Other industry experiences would suggest that the existing financial and banking structures will provide a more cost effective alternative to the current IATA settlement process. Accordingly, it is important to begin assessing how your travel entity address services or functions that are provided today by IATA related business process.
Eastman's "Off-the-Wall Comment(s)"© …
If you’ve not had a chance, go to < http://maps.google.com/ > and click on the “Satellite” button. Take a look at your home or some other address. Zoom in … out. Move the satellite map with your cursor. Click on the “Hybrid” button.
Now use this experience to mentally propel your self into offering your travel product … be it an airline route structure, a hotel property, or an agent working over the phone with a prospect that wants to visit the Grand Canyon or the Great Barrier Reefs. The functionality is coming to your local interactive web... although its timing for penetration into the travel industry is unclear at the moment.
In all probability, first quarter of '06 is probably the earliest that one is likely to begin to see serious efforts to penetrate the travel market. There are … and will be … “token” efforts. But rolling out “mission level” solutions in travel will take some development time. Still, it’s imperative to recognize that this technology is likely to become a major marketing, as well as production, tool of the industry.
Google has made effective use of AJAX with its maps and satellite-picture program; but even Google still has the tool in "Beta." Yes -- it's a big "Beta" group and I'm not sure Google ever really “officially” releases anything out of "Beta" both because the level of user expectation has become much higher as more and more users adapt their Internet paradigm.
Still, the Google Maps product is symbolic of where the industry is headed -- into the point-and-click structures of interactive maps …be those geographic, architectural, route structure, itinerary or hotel property maps. It is merely a matter of (a) timing, (b) funding, (c) resources, (d) funding, (e) management recognition, (f) funding, (g) usage conception, and (h) funding -- or said slightly differently, timing, resources, management recognition, usage conception, and funding to the power of four.
Still, the funding will come … because people increasingly live in a “sound-bite” world; where sellers-of-ideas must communicate whole concepts in very short snippets of graphical/sound exposure.
Eastman's "Off-the-Wall Comment(s)"© ...
There is a bit of a sobering note about the fuel issue and/or “time to panic.”
Still, fuel is a cost that can/should/must be passed along to buyers of the product – in the airline industry’s case, an airline seat. In fact, fuel is a cost that is fairly consistent for all carriers over time. Yes, some carriers’ hedge fuel … but hedging is sound business practice in situations where your core profit competency is not dependent on the commodity hedged.
High fuel cost results in higher costs … which drives seat ticket prices higher. And while I’m focused on the impact of fuel costs on airlines at the moment – the axiom is valid for any travel product using fuel; which is most in one form or another (hotels buy fuel to heat or cool their properties, buses, ships, trains, etc., to provide their services, etc.)
The point is that higher fuel prices are like a rising tide. All boats rise with the tide. Some boats not tied too tightly to the dock rise more easily than those tightly bound. But they all rise. High ticket prices may force travelers to not fly as much … and accordingly, reduce the number of travelers taking to the sky. But the impact of rising costs will be generally felt across all carriers with equal intensity.
The degree to which fuel prices impact what carriers charge for tickets comes back to some well tested axioms …
1. How well is management controlling its internal costs?
2. How well is management responding to the demands and expectations of its travelers?
Virtually all other aspects of running an airline funnel back to these two issues. And while fuel is a cost … it is an external cost over which an airline has limited control.
The current pain is real and the jockeying around rising fuel costs is helping to sort out which managements are performing better than which other managements – but in the end, a certain number of travelers will continue to have to travel by air … and the airlines that prove to have the best management teams will be the airlines that end up providing those services.
While I’m as concerned about fuel prices as virtually everybody, I also think that all the “fru fra” generated by the cost containment induced by these added costs is just that – “fru fra.” The high fuel cost is separating the wheat from the chaff … forcing airlines to hone their competitive product offerings. Auto gas prices have similarly skyrocketed … and while the “squawk level” is getting high, people are still filling their SUVs and buying big gas consuming cars.
To paraphrase Bob Crandall, “… an airline can only be as smart as the dumbest competitor in the market.” But it seems to me that rising fuel prices are simply driving home the issue that there are a fair number of airlines out there that have been “doing things as we’ve always done them” … implementing inefficient and ineffective 1960’s automation and embedded business processes in a business and automation world that is otherwise a half century further along.
And under that scenario, using Mr. Boyd’s logic, I become either a < … media gadfly,[or an] intellectual bantam-weight academic ….>. Of course, there are those that would argue in favor of such claims in my case … whether I was discussing airline fuel or Service Oriented Architecture for digital solutions. Still, I suspect that Mr. Boyd is more of a financial theorist rather than a practicing business person.
Nowhere is it written that airlines are a “protected” industry. No where is it written that just because you are an airline, you get to keep on being one (although I’ll grant you, there may be some bankruptcy judges that may have that belief). No where is it written that that the past is good for the future.
It isn’t the fuel costs that are the problem – it’s the decisions (or lack there-of) of the managements. Mr. Boyd tries to make this point … but reverts to the premise of the hub-and-spoke network structures. While hub-and-spoke networks will serve some travelers … it will not and cannot serve all travelers – just as nodal network LANS, virtual private, and now, web services networks that you find in modern business communication infrastructures are replacing the centralized hosted “hub-and-spoke” platforms that served modern information systems in the past. To claim that one model or the other model represents the future of the airline industry is ludicrous.
There is an ever-growing expectation of point-to-point services; an on-going rejection of hub connections. As aircraft and information technology evolve and DOT rules come to reflect those technology enhancements, you won’t be addressing markets of 100,000 passengers or more – but rather, 20,000 or less.
If contemplating passenger expectations, needs, financial resources at-the-moment, and other motivating drivers were all that easy – there would be no need for open markets or competitive enterprise.
The industry is headed toward some sort of evolving blend of hub, point-to-point, and air-taxi transport structure. That is quite different than what Mr. Boyd suggests in his essay. The major inhibitors are, in my view, the embedded culture and processes stemming from legacy past and the DOT/FAA rules and regulations that serve that embedded culture and its processes.
That is not to say that those embedded beliefs, processes, and regulations are necessarily bad – only that they currently limit preclude effective funding of innovation that will enable a more effective and lower cost transition. There are no avenues of low cost alternative innovation. Essentially, the industry and its flying public are paying disproportionately to support a dying aviation infrastructure while also inhibiting innovation of cost-effective travel alternatives.
Still, It all comes back to the key point noted above – management. People still pay to travel by air. More and more people will continue to pay to travel by air as it becomes increasingly more cost effective … in both dimensions of air travel – short haul and long haul.
It won’t make much difference what the cost of fuel is … because if fuel gets too high, alternatives will be found. It won’t make too much difference with business model management uses to implement its flying service … because applied correctly to the demands and expectations of the buyer, travelers will use the service that best serves their needs. The only difference will be in management … the people that manage the airlines … that best respond to the varying and changing cost dimensions … that effectively offer travel solutions reflecting what buyers perceive as best meeting their specific traveling needs.