The last few years have been tough for airlines. It’s not just because of the pandemic, but certainly, that made things even more challenging for an industry with historically low margins as travel ground mostly to a halt.
United, for example, had a particularly rough year, losing more than $7 billion in its fiscal year 2020. The trend continued in 2021, though it managed to narrow the losses to $300 million last quarter.
Asked recently how United plans to climb its way out of fourth place, the company’s CEO, Scott Kirby, told the Skift Aviation Forum that his focus is on being better than the other airlines–especially Delta.
“We will win customers on quality,” Kirby said.
We’re going to come back to that last word “quality,” in just a minute. It’s a pretty important strategy, but not just because every company should be making a quality product. In this case, it means something more, and that single word could be a brilliant way to beat the competition.
The problem for United, however, is that it trails its peers in almost every metric that airlines measure. For example, United is behind Delta, American, and Southwest Airlines in market cap and passengers carried. Both Delta and Southwest are more profitable, despite United generating almost twice the revenue of the latter.
Maybe more importantly, from a business standpoint, United is behind Delta in margin. For every dollar Delta generates, it keeps a larger percentage. Delta is able to make more every time it flies a customer. If you’re an airline, that’s obviously a good thing.
One of the reasons is Delta’s focus on updating its premium service offerings and investing in its hubs. Those two things make for a better overall experience for customers–which is something they are willing to pay for.
That’s evident in the difference between the Net Promoter Score (NPS) of both companies. In November, Delta’s NPS was 52, a pretty good score, especially for an airline. United’s was 7, according to the website Comparably.
NPS is a measure of customer satisfaction and loyalty. It’s essentially a measure of whether customers are willing to recommend a particular brand to others. As such, it’s an indicator of how those customers feel about the experience they have with a company. It seems pretty clear that United has work to do, especially if it plans to catch up with Delta, which Kirby says is his goal:
Delta is great and they do a great job. I have immense respect for Ed (Bastian, Delta’s CEO) and his team, what they have done and do. I just think we have better raw ingredients… We’re going to compete aggressively with each other. And I think there’s room for both of us to do really well but I think we win because we just got a better hand of cards. They got a head start and they’ve been doing it–they deserve a lot of respect, but I do think we will ultimately catch and surpass.
There are two things interesting about Kirby’s responses. The first is that he is very confident for the CEO of the company staring quite a ways behind the competition. That’s actually a good thing, by the way. You’re never going to get there if you don’t recognize that you have the “raw ingredients” you need, and have a plan to put them together.
The other thing goes back to that word–quality. Kirby believes that the way United can beat Delta is by winning over customers with quality. For an airline, there are a few different ways you could define quality.
Obviously, quality means that the planes are safe and are able to fly you from one place to another. But, I think that what Kirby is really getting at is that if United is going to beat Delta, it has to do more than that and provide a better overall experience.
Sure, getting you to your destination on time is an important quality factor. So is not losing your bags. But, those are the basics. That’s just what customers expect–or at least should be able to expect.
For United, it’s about having flights to the destinations customers want to visit without having to make extra connections that take extra time. It means having planes that offer a better experience for longer flights. It means taking fewer flights on small regional jets that no one wants to fly on.
Travel is an experience. That means that airlines are measured by the experience they provide. The reality, however, is that’s true for every business. Your customers are looking for an experience, even if they’re coming to your store to buy something a lot less expensive than a plane ticket.
Winning means providing not just the best product or service, but the best experience. It means delighting your customer by being better than what they expect. Yes, if you get on a plane, you expect it to land at the destination printed on your ticket. But, to really win you over, the airline has to do more than that–it has to provide a great experience. That’s the most useful definition of quality I’ve heard yet.
Source : Inc.com