Plane Conversations

There is a war brewing within the online travel agency space over Google’s recent move with Google Flights and Google Hotels.

Google began positioning its new flight-finding feature at the top of general search results for airline booking information earlier this month. And its new competitors in the $110 billion online travel industry aren’t happy about the search giant crashing the party, according to a recent Wall Street Journal report.

Chasing The Market To The Bottom

Travel is hot for 2012 and beyond.  An increasing number of people say they’ll do more leisure traveling in the coming year, and even more say they’ll fly if they can find good deals in 2012. Good deals are going to be hard to find. The airlines attempted to raise prices 22 times in 2011 (and nine of those attempts were successful).

Business travel spend is expected to have grown 6.9% in 2011 compared to 2010, hitting $250.2 billion.  The forecast for 2012 is 4.3% growth in business travel spend for 2012 (or $260.9 billion).

While revenue growth in the travel sector looks promising the user experience continues to decline. Flying today is like traveling by bus with few frills and even fewer fun times.  Consider some of the recent headlines:

1. Airline Technology Leading to Customer Alienation
2. Airlines Score Lowest In Customer Satisfaction
3. 92% of Executive Unhappy With Business Travel Experiences
4. Airline Delays, Cancellations and Complaints Rise

I could go on with an endless list but by now the picture should be obvious. Current market dynamics within air travel services is propelling a race to the bottom and Google knows this.  In other words air travel suppliers have boxed themselves into competing on price and thus air travel services have become a commodity. The meaning of the term commodity is used to describe a service for which there is demand, but which is supplied without qualitative differentiation across a market.

Google knows that search has the greatest influence over consumer choices for travel services. 93% of people who seek information on travel services use search. Consumers seek ratings and reviews, news articles, word of mouth and blog post which in the end influences their decisions. When there is little differential in a market then price becomes the initial decision factor followed by “social influences”, i.e. quality of the experience.

As a result, the present online travel bazaar is very competitive and the margins are shrinking . The  tight competition led the market to compete on price rather than experience. Google recognizes this and simply stepped in and made the shopping experience better. Google doesn’t care about the price of air service they care about providing the price to consumers seamlessly.

As fortunes are made by leveraging technology to become ever more efficient, there is yet far greater wealth to be had by unleashing the discovery of new experiences and creation of new opportunities. That is exactly why we created Social Flights. We are changing the direction of the race to the top.

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The beginning of online travel created new business models that changed the dynamics and relationships with buyers.  Now with the advent of social technology the dynamics are changing again.

instead of the traditional travel site being the brand the brand has become the traveler.

As a result, the present online travel bazaar has become a race to become more social. Technology and savvy buyers have dramatically changed online travel over the past two years. The app market, for instance, has swelled from virtually nothing to billions of dollars in just a few years, and smartphone owners love their access to a gaggle of Wi-Fi finders, flight status updaters, local restaurant finders, budget booking assistants, translators and more.

Websites offering unique travel-oriented services have made a strong showing, too. They include Wanderfly, a personalized travel recommendation travel engine à la Hunch and Pandora; and GTrot, a site that allows travelers to share their itineraries with friends and get travel advice within their networks.

Applications like these will continue to grow, improving the efficiency of the overall industry by improving the connectivity of air travel information between flights and friends.

Chasing the Lowest Common Denominator

While on-line applications enable travelers to connect and collaborate, few if any do anything to improve the travel experience. Commercial airline travel experiences are abysmal and getting worse. While the efficiency of commercial air travel for consumers and businesses has diminished could there be a better alternative emerging?

Social technology will not enhance the value of on-line travel sites enough to improve pricing.  Social technology has become a “must be” rather than a differentiator and it, by itself, doesn’t change the lowest common denominator, price.  Finding “best” prices has become easy given the power of search and the recent introduction of Google Flights.  Finding the best experience and the highest value has become difficult but may change soon.

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When commercial airlines do not optimize seat sales they loose money. Historically airlines have looked for “lanes” that have high demand thus insuring increased sales of seat capacity. Now they are using social media to fill seats.

Some airlines say that social-media outlets, such as Twitter and Facebook, are beginning to disrupt the traditional sales cycle. Some airlines are sending sales out directly to customers at all hours, making pricing far less predictable each day.

Social-media sales of  airline seats has just begun and it will change the way airlines have traditionally sold seats. After all empty seats represent leaving revenue in the air.

What About Private Jet Charters?

Private jet charter operators seek buyers who will pay for the entire plane regardless of how many seats are full. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

A recent New York Times Article titled “Fly a Private Jet at Public Prices” states “The dirty little secret of the industry is, about a third of our flights are empty,” said Alex Wilcox, chief executive of JetSuite, based in Southern California, which recently began posting last-minute $499 deals on Facebook for empty legs on the company’s four-passenger Embraer Phenom aircraft. “Say a Gulfstream pulls into San Francisco and is going back to Vegas empty,” he said. “A few years ago, if you were to say, ‘if I give you $500 will you take me and my family?’ you would get laughed at.” But the recession changed such attitudes, Mr. Wilcox said. Now, he said, more companies are saying, “Sure, it’ll help pay for the gas.”

Revenue Is Revenue to Some

Allen Howell, CEO of Corporate Flight Management, looks at empty legs as an opportunity to expand his market of consumers and gain incremental revenue. Allen Howell says ” If I have a plane flying empty from one city to another I am a fool if I don’t open the seats on that leg to paying customers.”  ”Think about it, the value we create by selling the seats on empty legs is five fold:”

1. We increase the potential of building relations with future charter prospects
2. We provide consumers with an experience that exceeds all expectations
3. We create incremental revenue streams that go right to bottom line profits
4. We increase and expand our circles of influence by leveraging the power of social media
5. We begin to create repeat customers that are common to travel circles we service

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Alfie Kohn, author of  No Contest:The Case Against Competition writes:

Noncooperative approaches . . . almost always involve duplication of effort, since someone working independently must spend time and skills on problems that already have been encountered and overcome by someone else.

Sound familiar?  Look around and in almost every industry you see competitors beating each other into the ground while reducing the end value to the customer and increasing cost.

Julie Browser, of IBM writes “The traditional concept of business as a “winner takes all” contest is giving way to a realization that in the networked economy, companies must both co-operate and compete. Termed “co-opetition,” this new perspective requires companies to create business strategies that capitalize on relationships in order to create maximum value in the marketplace.

“Co-opetition”– a model in which a network of stakeholders co-operate and compete to create maximum value — is one of the most important business perspectives of recent years. Internet and mobile technologies have made it even more necessary for companies to both co-operate and compete, by enabling relationships through information sharing as well as integrating and streamlining processes.

In today’s networked economy, co-opetition is a powerful means of identifying new market opportunities and developing business strategy.

Take the private aviation industry.  Everyday thousands of private jets fly empty. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

What if these private jet operators shared all their empty legs with the public and sold seats on those legs?  By cooperating they would expand their markets, create value for consumers and generate more revenue.  But many won’t do that because they view themselves as competing with each other rather than cooperating.  In the meantime revenue is lost to the air. In this case they end up doing less alone rather than more together.

Business is both competition and co-operation

In the past, people saw business as a “winner takes all” or “zero-sum” game. The networked economy moves away from these purely competitive plays to recognize cooperative relationships that leverage value created by those in the network. Competition — the other aspect of co-opetition — occurs after businesses have created new value in the market and expand the value proposition through quality and creativity.

Social Flights business model is about creating cooperation with private jet operators with the aim of expanding the market and creating new value for all parties involved. For it to work the suppliers must cooperate in order to gain increased market share through new value offered to travelers who in turn create new revenue.

So, will you consider cooperating?

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Over the past few months as I have talked both online and offline to people about Social Flights, a question has been raised about the impact of the Social Flights business model on the security of private aviation flights. A recent tweet from @tinsko started a dialogue via twitter about this issue that prompted me to write more on this issue from my perspective as an operator of charter aircraft.

In private aviation, whether operating charter flights, running a corporate flight department or flying your own aircraft, the reality of security is that we know who is on our flight. For starters, on a small aircraft carrying 4 to 12 people it would be strange to be sitting on a flight with someone you did not know, or at least know why they were on the flight. I think all of us who have experienced flying this way can say we have never been on an aircraft when we did not know who was on our flight and why they were on it.

There are ways that we as a charter operator comply with security, such as checking passengers against the no fly list and training of our employees to identify potential threats. These are all good security filters to prevent boarding a passenger who could be a threat.

What most of us will say, however, is that the best security measure is to know your passengers on a more personal level.

When I board an airline flight, most of the time I don’t know anyone else on the flight, unless I am traveling with others from my company or family members. What I do assume is that we have all gone through security screening and no fly lists, so that by the time we get on the aircraft the risk has been mitigated to an acceptable level.  All of this screening does not prevent the occasional passenger going nuts on the flight and trying something crazy. We have seen these stories lately.  Fortunately, the most anyone has succeeded at doing is getting thrown off the flight and met at the gate by law enforcement.

Back to charter flights. As our business model for Social Flights develops, people will self-aggregate around travel intentions and charter flights. They will board a small jet together and go to a common destination. Before that flight they may not have met each other in person, but I am convinced they will know more about each other than they know about the person they share space with on an airline flight.

With the explosion of social technology in the past seven years, most of us now know so much more about the rest of us than we ever have before. We all have put ourselves out there on Facebook, Linked In and Twitter and we have a history of interaction with each other. A history that says way more about who are than a security screening or a government list.

So before I share a Social Flights ride with you I will know a lot about who you are, who your friends are, who your business associates are, and what you have been up to recently. And based on that knowledge I can make some pretty good assumptions about what level of threat you might impose on me and our fellow passengers when we fly together.

Nothing is completely fail safe and our society can never completely protect ourselves from bad actors who are intent on harming us. But our intelligence agencies have proven that good information is the best basis for preventing acts of terrorism.  

I would propose that getting to know each other before we share a ride on a jet might be one of the best security measures we could use. It has never been easier to develop that trust than it is today with the advent of social technology.

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Social Marketing has revolutionized business.  The ability to reach, communicate, and build relationships with customers has never been more accessible (at little or no cost) than it is today.  Far from a “flash in the pan” gimmick, social media marketing using tools such as Twitter and Facebook are here to stay, at least for the foreseeable future or until the next generation of marketing emerges.  The company that engages in intentional social media marketing is vastly extending its reach and its potential client base.

Today consumers research and engage businesses online long before they click “Order” on a product or darken the door of a business.  A 2009 study by Pew Research showed that people with higher income and/or education levels were the most likely to research online –87% of college graduates and 88% of those earning more than $75,000.1  This demographic is very much in line with the income and educational levels of those likely to involve themselves in flight training and other aviation related products and services.   Specifically in regards to social media, the same Pew study demonstrated that nearly half of Americans use social media sites such as Facebook and LinkedIn.2   Additionally , a recent Nielson survey reported in Entreprenuer magazine found that almost of quarter of consumer’s online time is spent on social networks.3

If our goal is to raise visibility and awareness of our products and services, then it follows that social media should not be neglected.  Simply put, if we want to be where the customers are and then we should be in the social media marketplace.

Are you ready to engage?

1.  http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=136747

2.  Ibid, mediapost.com #1

3.  “Baking, Listening & Selling” Entrepreneur Magazine, February 2011, page 61

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Maybe this most recent economic crisis wasn’t Armageddon, but I think I saw a Guernsey or two fall somewhere over central Mississippi.

The technology and practices of our industrial world are changing at a mind-boggling pace.  Since we started blogging just over a year ago, the advancements have been staggering, allowing us to begin developing a “wouldn’t-it-be-cool-if” idea into a “isn’t-it-be-incredible-that” reality.  However, if we had kept believing that we already knew it all, we would still be sitting on the porch, whittling, rocking in our chairs and wishing for a brighter reality. 

This Big Idea is a gamble, to be sure; Big Ideas always are.  But, to take our industry into its next great phase, we must accept that, “There are more things in heaven and earth, Horatio, Than are dreamt of in your philosophy.” We must reject bad managerial habits that keep us trapped in a paradigm which ceased to be profitable years ago.  Aircraft operators are frustrated by rising fuel prices, rising training costs, rising salary and benefits costs.  Equipment is getting older.  Remaining competitive means newer equipment, higher standards and better practices.  Meanwhile, many charter brokers insist on lower pricing, sometimes to the point of incorrectly educating the end-user on the actual cost of operating aircraft to the highest standards.  Sadly, even some operators have been willing to operate below cost just to produce the cash flow.  Reputable operators know what it costs to run a quality operation.  Reputable brokers also know this and are willing to support the operators’ reasonable pricing structures to their own clients.  But I digress.  My point is this: charter operators are frustrated with rates which are not keeping pace with rising costs.  Even with this frustration, we hamstring ourselves by acting conservatively out of fear of making mistakes and by avoiding anything new until it’s better understood.  Neither habit is bad altogether, but the over-application of either of them can be deadly. 

As I discussed the Big Idea with a few operators this week, I was discouraged at the response of many of them.  If the Idea is flawed, I would expect rejection and would hope that someone would point out the fatal flaw; but, that’s not why it was rejected.  Their rejection of the Idea stemmed from “I’ve never thought of that” and “We’ve never done it that way before,” not from the Idea’s merits or demerits.  It’s one thing for an industry to suffer or fail due to catastrophic and unforeseen market changes, but that isn’t the case here.  The market has been changing for at least the last 10 years.  As operators and brokers began aggressively selling one-way trips, introducing our product to a wider audience, the market has been changing.  As the global economy was reeling, our market changed further with more aggressive pricing, air taxi services, and ride sharing.  I often here people lamenting the loss of the “good old days.”  Let’s face it: the good old days weren’t all that great either.  We still struggled.  We still worked on narrow margins.  I don’t think we worked any less hard, but maybe we worked a little less creatively.

While we’ve gotten more creative, it’s time for us to make a big creative leap now.  Sharing flights is a creative way to broaden our market.  Using social technology to share those flights is a creative way to work smarter.  It’s the next Big Idea.

So, yes, 150 years ago, everybody knew man couldn’t fly.  70 years ago, everybody knew that supersonic flight was deadly.  And 15 minutes ago, you knew that shared flights would never work.   Once we accept that we don’t know our market as well as we think we do, we allow ourselves to adapt our industry to the new marketplace.  When we use social innovations like Social Flights to tap into that new marketplace, we broaden our reach.

If we can learn all of that today, embrace the Big Idea of flying socially, imagine what we’ll know tomorrow.

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Anyone in the aviation industry is familiar with the success of Southwest Airlines.   We have heard the stories of both employee and customer satisfaction that seem to represent an anomaly among the large air carriers.  Many reasons are given for their success including the use of one type of plane, emphasis on simplicity of service, or use of less congested airports.  Several bestselling books have focused on the leadership of Herb Keller and the Southwest team.  In her well-researched book, The Southwest Airline’s Way, Jody Gittell demonstrates that while all these are indeed factors, there is another underlying and more foundational reason for SWA’s accomplishments –its ability to foster and sustain relationships.  She writes:

“Southwest’s most distinctive organizational competency is its ability to build and sustain relationships characterized by shared goals, shared knowledge and mutual respect.” 1

In short, it is about the human network.

Other companies, large and small, are now learning this valuable and often overlooked lesson.  Relationships are how we do business.  Relationships that are (forgive the often-used buzzword) authentic, can truly make a real difference in how we attract, sustain, and build business.

Sales used to be stereotyped by the iconic image of the used-car salesman.  Fair or not, the image often conjured by mentioning this is one of a greasy, manipulative, and patently untrustworthy individual who views customers simply as walking dollar-signs.  There is a low-level of trust between the salesperson and the customer and many people avoid this type of exchange if at all possible.  In a recent Gallup poll the sales professions ranked in the lower 10 percent of professions that foster trust in the public eye.2  Why?

Because more and more, we are choosing to do business with those we know and trust, particularly with high-involvement products such as cars and yes, aviation related purchases.  Research has shown that while we may indeed seek the absolute lowest price for a box of cereal, most people are willing to pay more for an expensive item or service when they sense that the person or company has a relational connection to their product or service.  Certainly price is a factor, there is another set of factors at work in our businesses –the relational.

Think about Apple computers.  The base-model Apple Computers are clearly more expensive than a comparably equipped PC.  Why do these computers regularly have strong sales, even in a down economy?  It is the connection Apple has created in our culture.  In his book What Americans Really Want… Really Frank Luntz discusses this culture Apple has been able to create:

“Mac people want you to know they are Mac people.  You’ll see the Apple logo on cars or on the backpacks of college kids.   Thousands of people attend MacWorld….People who own Macs want you to know that they are part of that community of people…People are prepared to pay an Apple premium because their products satisfy all our other needs (fewer hassles, longer lasting,  fewer worries and less stress.)”3

It’s the connection with the human network and a clear message about how this meets more than the real need (computing).  Their products also meet the felt needs of our modern society, connection and relational trust.

There is a lot we can learn from this in the aviation community whether we sell multi-million dollar aircraft, charter, or flight lessons.  We need to examine our place in the human network and our ability to demonstrate our ability to foster trust and real relationships among the people we work with and the people we serve.

Historically (Southwest being a notable exception) we have not been great at this in the aviation industry.  The true value of the products we offer can only be built where we take the time to build relationships of trust.  In a recent article on sales and trust Todd Duncan puts it simply when he says, “Sales are made when trust exists.”4

While our goal will certainly be to make our companies strong by working hard to make sales, may we not neglect the lessons of trust and the human factors that enable us to establish it.  When we take the time to build an authentic human network, we may well discover an increase in affinity for, and interest in, the great products we have to offer to the aviation marketplace.

1.  Gittell, Jody Hoffer The Southwest Airlines Way (McGraw Hill, New York, NY, 2003) page 12

2.  Duncan, Todd “The Velocity of Trust” Success Magazine, January 2011, page 20

3.  Luntz, Frank What Americans Really Want…Really (Hyperion, New York, NY, 2009) pages 19-21

4.  Ibid, Duncan

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An industry in crisis is an industry ripe for transformation.

America’s air travel system is in crisis. In response to rising fuel prices, air-space congestion and industry losses during the recession, airlines have cut capacity and raised rates. These challenges follow on the heels of delays and hassles that have cost the nation almost $33 billion in the past year alone, according to a recent study commissioned by the FAA / DOT.

Some blame the problems on government regulations over airlines and the lack of modernized air traffic control infrastucture. Others see the problem as dysfunctional management of the airline system.

Could it be that “the system of air travel” is being re-engineered before our eyes and all the current problems are part of the process?

I remember when airline travel used to be a social experience. Today it is anything but social, with the majority of passengers frustrated by the experience and loss of productivity.  Yet air travel is necessary for both leisure and business purposes.

How big is air travel and its impact on the economy here in the US?

Research from the US Travel Association says:

1. About 42 percent of U.S. adults reported traveling by air for leisure trips.  The percentage of air travelers increases to 48 percent among U.S. adults who traveled for business purposes in the past year.
2. A study by the U.S. Travel Association revealed a deep frustration among air travelers that caused them to avoid an estimated 41 million trips over the past 12 months at a cost of more than $26 billion to the U.S. economy.
3. Business travel in the U.S. is responsible for $246 billion in spending and 2.3 million American jobs; $100 billion of this spending and 1 million American jobs are linked directly to meetings and events. For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits.
4. The Internet was used by approximately 90 million American adults to plan travel during the past year with 76 percent of online travelers planning leisure trips online.

The Social Market of Travel Is Hot Every other day or two, you hear about a new travel app, a travel related company, or a mega travel player partnering, acquiring, or developing the next industry killer app. Consider some of the recent developments in the travel space over the last year:

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Many of us who work in business aviation wonder if people would be willing to share their travel plans, share a flight together, let others know what they are up to, so they can meet up on trips, share rides from the airport to the hotel and so forth.

In other words, will business aviation travel go social?

One of the terms used for the aircraft we operate is “private” which does not exactly line up with “social” in a public sense.  We fly “private jets.” Private sounds like I don’t want the public to know what I am doing, where I am going and I most likely do not want to share my private ride.

Sharing is already happening in the world of airline travel and the events that drive travel; maybe to ease the pain inflicted on travelers by the airline system.

As I have looked around on the internet for social media platforms related to travel some really interesting ones have started showing up.

• Planely (www.planely.com) allows airline travelers to share their flight itinerary with the hope of connecting with others on the same flight. If this builds critical mass it could become a valuable tool.
• IMGuest (www.imguest.com) allows travelers to share their hotel location and plans in order to meet up face to face with others at the same or close by hotels, and expand their network.
• Plancast (www.plancast.com) is a site that is really done well, allowing people to post their plans for attending conventions, local events, music events, etc. and easily see who else is attending. A great way to make connections both locally and at away events.
• TripIt (www.tripit.com), which just announced its acquisition by Concur (Nasdaq: CNQR), was one of the first travel sites allowing travelers to share their itineraries that gained a mass adoption. Concur is a leading provider of integrated travel and expense management solutions and apparently thinks TripIt is on to something based on the acquisition price.

These sites allow you to sign up and use them for free, and in some cases check in through your Facebook or Twitter accounts. The Facebook check-in creates an instant profile for fellow travelers to see plus it gives the site access to your Facebook information.

So the question asked again: Are travelers willing to share their travel plans in the hope of making the experience more social? The answer seems to be yes, as travelers are signing up to these social technology platforms in droves.

What about personal and business travel in private chartered aircraft?

What is the value in sharing travel plans with others you don’t know too well? Is it too risky?  Most of these sites tout the value proposition of networking and meeting up with people you would not otherwise meet.

The value of each of us knowing where others are going can go beyond just networking.

If you and I find out we are going to the same places, we can get together and come up with new solutions for getting there more efficiently by sharing costs and buying travel collaboratively. Eventually we may even be able to drive the market to offer better solutions that fit our needs, versus what suppliers of air mass transportation offer us today.

It would great if we could go when and where we really want to go in the most efficient manner as opposed to being pushed and shoved through a system that is not designed to really meet our intentions.

When that happens can the private aircraft, and the industry that supports it, be a possible solution?

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