Before becoming a start-up consultant, I used to work in the energy industry. To be more specific, I helped large companies with over $100 million energy (or fuel) budget manage their price risks. One of my favourite customers were airlines. Not only because I wanted to become a commercial pilot after graduation but also because they operate in a truly cutting edge field, a fiercely competitive market and with high stakes.
The level playing field
I don’t think there are many industries operating in the similar conditions as the airline industry. The planes, seats, fuel, meals, airports, crew (certification), booking systems etc are all standardised. Even if they want to push the boundaries, it is one of the most strictly regulated industry preventing you from operating the airline in non-standard ways. Thanks to all these rules and standardisation, it is a very safe mode of transport, providing the abilities to millions every year to expand their horizons, conduct businesses and meet friends and families. Unless you live on a remote island, most of us usually have an abundance of airlines, routes and combinations of them, when taking a trip abroad.
What is the decision making process when purchasing a ticket on a highly competitive route? The airline, departure time, cost, duration, connection and even the lounge are some of the details that we go through when deciding who to fly with. So, what does the “best product” mean in the airline industry? It is probably the combination of all of these things. Most of us do not care what aircraft you will fly, how many flight hours the pilots have, the cruising altitude, the fuel supplier etc and the industry has learned this point long time ago. The typical customer does not care about these things. Rather, the industry concentrate on the packaging. The things that doesn’t cost a lot of money yet they seem to have a huge impact on the profitability.
The lesson I take from the Airline Industry is the ability to create value proposition from a seemingly impossible situation. In the aviation industry, through packaging, a few airlines have successfully differentiated themselves from the rest, even if the entire trip experience is technically the same. Through innovation, you can package a dull experience, like a 12hr flight in the economy class, seem sexy. Imagine a situation where British Airways and Virgin Atlantic offered the same price for the same long haul route. An easy choice isn’t it? So, go on and give the customers what they want, not what you want to give them.