Saturday, May 23, 2015

KLM’s 150 social media customer service agents generate $25M in annual revenue

Social business leader KLM, the airline that kickstarted the modern customer-support-via-social-media revolution, has 150 people dedicated to serving clients via social. And each of them represents almost $170,000 in annual revenue.

Perhaps social’s not a money sink anymore.

klm“Social is more and more becoming a profit center,” KLM’s social media manager Gert-Wim ter Haar told me today in Prague. “It’s first about service, then brand and reputation, but also about commerce … we have to make money.”

In addition to finding lost items, soothing bruised egos, and solving customer service issues, KLM social agents now can almost entirely manage new client bookings via Twitter, Facebook, or other social media. They’ll get desired flight details, timing, provide information on pricing, and, if the client is agreeable, provide a direct link to a payment page.

As soon as the credit card is processed, the KLM agents are notified and tell the client that their ticket is booked.

This is the result, ter Haar told me, of connecting social media efforts to specific business metrics — in this case revenue.

KLM started serving clients via social as a matter of necessity. After the 2010 eruptions of the Icelandic volcano Eyjafjallajökull, tens of thousands of passengers were stranded. Unable to communicate via phone or other channels, they started reaching out to the company’s outposts on Facebook and Twitter. A KLM volunteer team of about 100 people responded to customer inquiries, and a new business channel was born.

twitter learning momentToday, the airline fields 70,000 queries a week, 24/7, in 14 languages. And, ter Haar said, it’s seeing a change in how people communicate.

“We see a tendency in social to go towards one-to-few networks, places that are less public and more private,” he told me. “If you want to stay ahead of the pack you have to start there.”

That means KLM is now on WeChat, where it fields 1,000 queries a week, and is currently doing a WhatsApp pilot.

“It’s a very nice customer service channel,” ter Haar said. “People feel very safe there.”

The data that KLM collects feeds into its social CRM efforts via Salesforce, where it ties Twitter handles or other social media data to customer records. Customer service agents can see the contextualized data in real time, and air crews can see it mid-flight — and add new insights — via an iPad application as well.

All that data is increasingly being used in KLM’s marketing in order to personalize communications and offers, ter Haar said.

But the result isn’t just financial. It’s also changing the company by bringing the outside in.

“All this is driving us to be more customer-centric.”


Thursday, March 26, 2015

Your Chance of a Flight Cancellation May Depend on Who the Other Passengers Are

When airlines need to cancel flights because of weather or other problems, they’ll sometimes delete flights carrying leisure passengers, who tend to pay lower fares than business travelers and are more likely to accept a rebooking rather than demand a refund, says the Wall Street Journal. Just 20% of leisure passengers get refunds, compared with 30% of business travelers. Airlines try hard to avoid cancellations, in part because of the cost of refunds and wasted food but also because if seats are given to rebooked passengers, they can’t be sold to last-minute, full-fare business passengers.

Sunday, February 8, 2015

Split Scimitar Winglets set to become a common sight

If you think that you've been seeing some funny-looking airliners in the past couple of months, you're not imagining things. On February 18th, a United Airlines Boeing 737-800 made the world's first commercial flight by an aircraft equipped with fuel-saving Split Scimitar Winglets.

Regular blended winglets are now quite common on commercial aircraft, as they improve aerodynamics and thus reduce fuel consumption. Made by Aviation Partners Boeing, the Split Scimitar Winglets reportedly do an even better job – when retrofitted onto United's existing Next Generation 737 Blended Winglets, they should reduce fuel consumption by two percent per aircraft.

The airline plans to add the new winglets to its entire fleet of 737, 757 and 767 airliners. By doing so, it estimates that it will save "more than 65 million gallons [246,051,780 liters] of fuel a year, equivalent to more than 645,000 metric tons [710,991 tons] of carbon dioxide and $200 million per year in jet fuel costs."

Retrofitting Split Scimitars into existing blended winglets involves adding strengthening spars, aerodynamic "scimitar tips," and a large ventral strake (the bit that points down).

Yesterday, Southwest Airlines announced that it had also started using the Split Scimitar Winglets on one of its 737-800s. The company plans on retrofitting 52 existing planes, and having the winglets pre-installed on 33 new aircraft.

Numerous other airlines have placed orders for the winglets, so expect to start seeing them on a runway near you soon.


Tuesday, February 3, 2015

A crash course in probability

GULLIVER will soon fly from Heathrow to Milan on a British Airways Airbus A319. That flight has a one-in-4.8m chance of crashing. Shortly after he is jetting from Heathrow to JFK on a Virgin-operated A330. Chance of crashing? One in 5.4m. That means that he could apparently expect to fly on the route for 14,716 years before plummeting into the Atlantic.

These figures come courtesy of “Am I Going Down?”, a recently released iPhone app that claims to calculate the odds of a disaster on a particular flight. Users input three variables: the departure and arrival airports, the airline, and the type of plane used. The app's maker hasn't responded to requests to give a little more detail of its methodology, but one presumes that it is a simple weighting of the proportion of crashes associated with each of those variables in the past.

There are, of course, countless holes in such a simplistic approach. How does one decide the relative importance of the make of plane, airline or airport? Is past performance really an indicator of future performance? Does, for example, a Malaysia Airlines flight being shot out of the sky by Russian separatists make this event any more likely to happen again in the future? Is the calculation based on miles flown or the number of journeys? (As the take-off is the most dangerous phase of a flight, a 10,000 mile flight isn't twice as risky as a 5,000 mile one.) What about other important variables, such as the weather?

The 14,716 years figure caused us a bit of confusion. But reader guest-isjswsa jumped in on the comments thread to shed some light on it. It’s the average length of time people will fly before crashing, if lots and lots of them do it every day. An alternative way of expressing it would be to say that if you were to arrange to fly this route every day for the next 10,210 years, your chance of dying would be 50%. And if you wanted to book enough flights to be almost certain of crashing, you reach a 99% probability at 67,833 years of daily flights. (For those interested in the maths, there is more here.)

But perhaps this is a bit churlish. The idea behind the app is laudable, if not mathematically sound. Nic Johns, its creator, says he wants to reassure nervous flyers that they are all but guaranteed to reach their destination in one piece.

Of course, we all know this deep down. In real terms, it makes no difference if the chance of crashing is one in 1m or one in 9m; the likelihood is so small as to make the difference irrelevant. But there is a special place in our psyches for the fear of big, unlikely catastrophes. According to David Ropiek, author of "How Risky is it, Really?", the deadliest plane crash in history occurred in 1977 in Tenerife when 583 people were killed after two jumbos collided on the runway. Yet, that many people die from heart disease in America every eight hours. As Mr Ropiek explains, air crashes are considered catastrophes while heart attacks are not, because they fulfil three criteria:

A catastrophe has to be big, it has to happen all at once, and something about it has to be calamitous—disastrous—really bad.A plane crash certainly qualifies. It kills a lot of people all at once, in one place, and in a really horrific way. But heart disease [...] meets only one of those criteria. As awful as heart disease and stroke and diabetes are, they don't kill people in such vividly awful ways as plane crashes.
It bears repeating just how rare such deaths in the air are. Safety statistics collated by IATA, an airline association, show that in 2013 more than 3 billion people flew on commercial aircraft. During that time there were 81 accidents and 210 fatalities. What is more, this figure has been falling for years (although the two recent Malaysia Airlines disasters will mean a blip when the 2014 figures are released). By way of comparison, the World Health Organisation says there were over 1.2m road traffic deaths around the world in 2010. It is the leading cause of death among 15-29 year olds. The University of Oxford calculates that in 2006, Brits had odds of one in 36,512 of dying in a motor accident and one in 3.5m dying in a plane crash.

Of course, many more people drive than fly; hence it is not easy to compare the two types of travel in a meaningful way. It is not known how many car journeys people take around the world, but even if it was, one would have to decide whether to compare the number of discrete trips or the overall distance travelled (that is an important distinction because if you were travelling from London to Edinburgh, for example, you might reasonably choose between driving and flying). Suffice to say what we all know: the fear of flying is incommensurate with its risk. And, as this chart from an Economist piece last year highlights, that’s before we compare it to the really dangerous modes of transport, like using stairs.


Sunday, January 18, 2015

Airlines to public: please ignore this blog post

THERE’S nothing like a pair of big corporations suing a 22-year-old kid to turn an obscure loophole into a viral internet sensation. On November 17th United Airlines, one of the three giant American carriers, and Orbitz, an online travel agency, filed a federal lawsuit demanding damages “in excess of $75,000” against Aktarer Zaman, a recent college graduate and the creator and owner of the website Skiplagged. The service enabled users to discover cheap airfares that did not appear on competing engines’ searches by utilising a tactic known as “hidden-city ticketing”, which takes advantage of occasional anomalies in airlines’ pricing algorithms.

Ever since America deregulated air travel in 1978, the leading carriers have developed “hub-and-spoke” route networks, which require passengers to connect through a few strategically located airports en route to most destinations. This system has vastly reduced costs by allowing airlines to pack the same number of travellers into far fewer flights. There might only be three people a day who want to go from, say, Albany to Albuquerque, but there are enough people heading from Albany to anywhere else, and from anywhere else to Albuquerque, to support one or two flights a day between those two cities and a central hub. A side effect of this model is that each carrier tends to dominate the market at its hubs, which gives it significant pricing power. Delta, for example, transports three-quarters of passengers at Cincinnati/Northern Kentucky International, a big reason why that airport is the most expensive to fly through in America. In contrast, non-hub cities, as well as markets so big that no airline can afford to ignore them, such as New York and Los Angeles, tend to offer much more competitive fares.

Because the costs of operating a flight (plane, fuel, and crew) are mostly fixed, airlines have a strong incentive to fill their planes. And since most leisure travellers decide which airline to fly based exclusively on price and convenience, airfares have a very high demand elasticity. This leads to brutal price competition. To make the hub-and-spoke system work, airlines usually need to come close to matching the lowest fare from a rival on every route. And when their competitors have a direct flight and they can only offer a connecting one, they often need to undercut it by a meaningful margin.

These straightforward economics sometimes lead to a bizarre consequence. In certain circumstances, airlines charge less for a multi-legged flight than they do for the first leg of the same route by itself. To illustrate with an example, let’s stick with Cincinnati. At the time of writing, Delta’s cheapest one-way fare from Atlanta to Cincinnati on February 6th is $252. However, to get from Atlanta to Dallas-Fort Worth with a connection through Cincinnati—on that same initial flight—costs just $197. This is because Delta is the only airline to fly direct from Atlanta to Cincinnati, which are both Delta hubs, and so it can charge what it likes. Two other airlines, meanwhile, operate flights between Atlanta and Dallas. This limits Delta’s pricing power. For anyone wishing to fly to Cincinnati, therefore, the best bet is to book the connecting flight and walk out of the airport in Cincinnati (the “hidden city”), simply failing to show up for the second half of the trip.

Hidden-city ticketing is no free lunch—in fact, it is both selfish and economically harmful. The passenger merely saves the difference between the direct and hidden-city fares ($55 in the example above). The airline, however, loses both that revenue and the value of the empty seat on the second leg. Travellers might not shed a tear over denying precious income to big bad airlines who pack them in like sardines. But the fact is that these companies still operate on slim profit margins. If hidden-city ticketing became widespread, the airlines’ first response would surely be to raise prices on connecting itineraries, leading to higher airfares across the board.

Still, the practice is not yet particularly widespread, for several reasons. First, opportunities to deploy it are fairly uncommon: an airline has to have significant power over a route (as Delta does with Cincinnati-Atlanta) to make it viable. It also involves myriad limits and risks. Hidden-city ticketers either have to buy one-way fares or save the trick for the second half of a round-trip, since once they fail to show up for a flight any subsequent segments on the same itinerary will be cancelled. What is more, they can’t check luggage, which would be sent on to their stated final destination. In addition, they run the risk of being rebooked on a different route to their official destination in the event of a delayed flight or bad weather. And since most airlines’ conditions of carriage expressly forbid the practice, people who do it often enough to attract the company’s attention can have their frequent-flier accounts suspended, miles voided and any elite status revoked.

Yet despite these obstacles, the savings from a hidden-city ticket can sometimes justify these risks and inconveniences. So perhaps the biggest reason why the practice is not more common is that even though there have been numerous articles published on the topic—Nate Silver wrote a primer back in 2011—it is still something of a trade secret among the most dedicated fliers. This is where Mr Zaman enters the picture.

As a college student, he learned about the loophole from Mr Silver’s article, which told readers that the way to find hidden-city fares was to hunt individually for “phantom flights into airports that are more competitive” than fortress hubs like Cincinnati and Atlanta. Seeing a problem that called out for automation, Mr Zaman set up Skiplagged, which listed hidden-city options alongside conventional fares (with a “NO CHECKED BAGS” disclaimer), and linked to Orbitz to reserve them. The airlines and Orbitz demanded that Mr Zaman stop, and sued him when he did not. In a remarkable display of youthful naïveté, Mr Zaman failed to set up a company before launching the site, meaning that he could be held personally liable for any damages. However, in an equally impressive demonstration of youthful resourcefulness, he has set up a campaign on GoFundMe, a crowdfunding website, and already raised nearly $65,000 for his legal defence.

The airlines’ desire to keep the hidden-city ticketing genie more or less in the bottle is certainly understandable. In fact, it probably benefits everyone in the long run. However, United’s decision to haul Mr Zaman into court now looks spectacularly shortsighted. First, his right to disseminate information about hidden-city itineraries is protected by the First Amendment. The only legal issues at stake in the case are whether he was entitled to use data from Orbitz or airline websites, and to provide direct links to them for purchases.

Moreover, even if Skiplagged vanished from the internet tomorrow, the automated hidden-city lookup tool Mr Zaman sought to offer already exists, thanks to none other than Google. With just a little know-how, it is easy to find hidden-city flights on Matrix, the search giant’s advanced airfare site (see guide below).

As long as sites like Matrix exist, United was never going to prevent determined travellers from finding hidden-city tickets. But by turning Mr Zaman into a martyr for free speech, the airline unleashed a tidal wave of interest in the practice. Since the lawsuit was filed and the media got wind of the case, Google search traffic for “hidden city ticketing” has risen 25 times over. As a result, countless thousands of people who had never heard of the practice will probably try their hand at it. Indeed, had United simply left the harmless Mr Zaman and his rather user-unfriendly, occasionally buggy website to his own devices, the how-to guide below would never have been written.

How to book a hidden-city trip on Matrix

Click on the “One-way” tab and enter your departure city and travel date. Then click on the “Advanced routing codes” link, and in the “Enter outbound routing codes” field, type “X:” followed by the three-letter airport code of your destination city (e.g. “X:CVG” for Cincinnati). Finally, in the “Destination” field, pick an airport that’s centrally located in the region you’re flying in (I use St Louis for the United States), click on “Nearby”, choose “2,000 miles” in the “Within” field, press “Select all”, and then hit “Search”. This will hunt for all trips from your origin to all airports within 2,000 miles (3,200 km) of the fake destination city you’ve listed that include a connection through your chosen hidden city. This process takes about 15 seconds. Once you’ve identified an itinerary, you can book it directly on the airline’s website.

Note: Booking such hidden-city tickets is against many airlines' terms and conditions.