4. klm 5. tam 7. virgin america 8. airbaltic 9. airasia 10...

9. AirAsia

2. British Airways1. Korean Air

4. KLM

7. Virgin America 8. airBaltic

5. TAM 6. Qatar Airways

3. Delta Air Lines

10. ANA

At airlinetrends.com we are continuously on the lookout for innovative products and services launched by airlines around the world as they respond to changing customer needs and industry developments. Once a year, we wrap up our findings and select 10 airlines from around the world that in our view have launched a wide range of innovative products and services in the past year – be it as part of a company culture of continuous innovation, a strategy to challenge the industry status quo, or as part of effortsto catch up after years of underinvestment.

The airlines on our innovative airlines ranking do not necessarily feature on the various ‘the world’s best airlines’ surveys. Instead, we aimed to select those airlines that have come up with interesting innovations that are an indication of the direction the airline passenger experience is heading in. Or in the words of sci-fi writer William Gibson: “The future is already here, it’s just unevenly distributed.”

airlinetrends.com monitors the global aviation industry for product and service innovations www.airlinetrends.com

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Korean Air tops airlinetrends.com’s 2012 ranking of the world’s most innovative airlines. The flag carrier of the ‘Land of the Morning Calm’ has established itself as a major hub carrier for passengers travelling between Asia and North America; its A380 flagships have the lowest seat density of any A380 operator and feature bars and lounges branded by Absolut Vodka, as well as a duty free shop. The airline also operates its own organic farm and offers attentive service amenities such as a coat storage service and a women-‐only lounge at Seoul’s Incheon Airport, which itself has been voted best airport in the world for the past six years. Incheon hub Sandwiched between the world’s second and third largest economies of China and Japan, Seoul’s Incheon Airport has become a key North East Asia hub, offering more direct flights to Japanese cities

than even Tokyo Narita, which is Japan’s main international airport. Furthermore, Korean Air is taking advantage of South Korea’s open skies policies with the US, Canada and China to target travellers flying between East Asia and North America (where it serves 13 destinations). The airline’s short-‐haul route network spans 22 cities in China and 15 destinations in Japan and the airline for example has a market share of around 25 percent in the Chinese – North American market. Well-‐positioned Because of high oil prices, a weak Korean won and the slow recovery of cargo traffic (Korean Air is the second largest cargo airline in the world after Cathay Pacific), Korean Air made a net loss in 2011. Analysts, however, are optimistic about the airline’s future prospects, noting that “it will benefit from a solid increase in inbound/transit passenger demand especially from Chinese tourists, and increasing exports of consumer electronics and automobile components.”

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Furthermore – similar to Delta Air Lines’ recent purchase of an oil refinery –Korean Air in 2007 bought a 28-‐percent stake in South Korean oil company S-‐Oil in order to secure a stable supply of jet fuel. Additionally, while many airlines across Asia are currently busy establishing their own low-‐cost carriers (LCC’s), Korean Air in 2008 launched a low-‐cost subsidiary – Jin Air – in order to compete with Korea’s high-‐speed rail network, the growth of domestic budget air travel, and the entry of Chinese and Southeast Asian LCCs. As LCCs in South Korea today account for over 40 percent of passengers on domestic routes, Jin Air is rapidly expanding its international operations. The carrier was the first South Korean LCC to offer services to mainland China and has launched a raft of new international routes in recent months. As it spreads its wings across Asia, Jin Air will also benefit from having a first-‐mover advantage compared with the relative youth of Japanese LCC’s, while Korean Air may also use its LCC unit more strategically in the future. Fleet and cabin upgrades With regard to its mainline operations, Korean Air in 2011 completed an aggressive fleet expansion and cabin refurbishment program, which saw the airline upgrade the interiors of 49 long-‐haul aircraft and take delivery of 19 new aircraft. Korean Air’s B777s and A380 feature Kosmo ‘Sleeper Suites’ (based on Contour’s Venus seat and customised by design firm Acumen) in First Class, while all wide-‐body aircraft have full-‐flat Prestige Sleepers from B/E Aerospace installed in Business Class. Korean Air was one of the first airlines to receive Boeing’s new 737 Sky Interior which also feature AVOD in all seats. Furthermore, besides Lufthansa, Korean Air is the only airline to have ordered Boeing’s new 747-‐800 passenger jet, and the carrier will be the launch customer in Asia for Bombardier’s new CSeries jet. A380 flagship The Airbus A380 in particular has given Korean Air an unequivocal image boost. In June 2011, the airline became the world’s sixth airline to receive the superjumbo and currently operates five A380s on routes to Hong Kong, Paris, Frankfurt, New York and Los Angeles.

Lowest seat-‐density With 12 First Class suites, 94 full-‐flat seats in Business and 301 seats in Economy (which offers a very generous 34” pitch), Korean Air’s A380 accommodates only 407 passengers – the fewest among A380 operators. The airline is also the first A380 operator to dedicate the entire upper deck of the superjumbo to Business Class, creating a business jet-‐like atmosphere. According to Keehong Woo – head of Korean Air’s passenger business division – the airline hopes to better market itself to international corporations seeking connections to Asia and other markets with the A380 business-‐only upper deck. “We think that in some markets like Los Angeles and New York—or big cities in European countries—we can build up our business,” says Woo. “Korean corporations such as Samsung are our biggest customers now. We are tying to diversify our customer base in the United States, in Europe and in China.” Onboard bars and lounges With fewer seats than any other airline flying the double-‐decker aircraft, Korean Air has used the extra available space to install three onboard bars – co-‐designed in partnership with Absolut Vodka. The bars sport minimal Absolut branding with no visible logos, but feature three Korean Air signature Absolut cocktail drinks and a display tower. One self-‐service bar is located in First Class at the front end of the main deck, while at the front of the upper deck there is another self-‐service bar and a four-‐person lounge area with built-‐in side tables and a magazine display. The aft lounge, appropriately called the Celestial Bar, is staffed full time with a bartender and incorporates a two-‐person sofa with reading lamps, a trio of lean-‐to cushions, and a flat-‐panel LCD on top of a magazine display. Duty free display Generating USD 201 million in duty free sales in 2011, Korean Air is seen as the world’s most successful in-‐flight retailer. As Koreans, together with the Chinese, top the list of duty free spenders in Asia Pacific, Korean Air is the first airline in the world to feature an onboard duty-‐free store, which is located in the rear part of the A380’s lower deck, just in front of the stairs leading to the upper deck.


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Designed by beauty brand L’Oréal’s travel-‐retail division Scental, the main function of the duty-‐free area is to showcase the airline’s duty-‐free offerings so passengers can get their hands on the best-‐selling items before making a purchase. The kiosk complements the regular duty free cart service and is staffed by a full-‐time sales assistant. The bottles on display have a strong magnet on the bottom to prevent them from sliding in the event of turbulence. First Class passengers are invited to browse the shop and make purchases before anyone else, followed by Business Class and then other passengers. The orders placed by passengers are delivered to their seats later. Catering Korean Air is an active proponent of Korean-‐style meals and organic produce. For example, passengers in all classes can choose to sample South Korea’s national dish – bibimbab – which is served with an instruction leaflet and ‘gochujang’ hot pepper paste. First class passengers can also opt for a lavish ‘hanjeongsik’ course. Organic farm Besides serving passengers local dishes, Korean Air also operates its own organic farm through its subsidiary Korea Airport Service. The airline’s Jedong Ranch is located 400 meters above sea level on the mid-‐slopes of Mt. Halla on Jeju, a volcanic island located off the south coast of South Korea. Here, the airline grows organic produce and raises organic ‘Jedong Han Woo’ beef and chicken for its in-‐flight meals. The organic beef and chicken are part of meals served in First Class, while passengers in Business Class can enjoy organic vegetables, salads, bread and cereals. The bottled water also comes from a volcanic mineral water spring at Jeju that is owned by Korean Air. Responding to the growing demand for a healthy food option on long-‐haul flights, Korean Air since June 2011 has offered a low-‐calorie salmon salad or noodles dish to Economy Class passengers. The packaging of the dishes prominently features the calorie-‐count of the dishes.

Service touches In addition to the innovations featured on its flagship A380s and its local and organic food options, Korean Air offers passengers some other thoughtful amenities. Catering to the growing number of female passengers who make up 45 percent of its passengers, the airline recently refurbished its Prestige Lounge at Incheon Airport. Among the lounge’s new features is a dedicated area for female travellers, which includes a restroom, sleeping room and powder room. Korean Air is also one of the few airlines in the world to dedicate bathrooms onboard for use by female passengers only. The airline’s ‘ladies-‐only’ lavatory is decorated with pink coloured wallpapers, has a diaper board for babies and provides extra cosmetics. At Incheon Airport, Korean Air also offers a coat storage service during the winter season where passengers travelling to sunnier destinations can leave their winter coat. After a five-‐day complimentary storage, a fee of KRW2,500 (USD 2.25, EUR 1,65) per day applies. Another sympathetic initiative is Korean Air’s ‘Draw Your Own Plane’ campaign, which asked kids in elementary schools across South Korea to make a drawing inspired by South Korea’s heritage. The winning creations were featured on the livery of a Korean Air B747-‐400 that operates between Seoul’s Gimpo airport and South Korea’s port city of Busan.


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For the past several years, there was a sense that if things could go wrong for British Airways (BA), they usually did: A global financial crisis set against BA’s high exposure to the premium business travel market which resulted in large losses. Endless merger talks with Iberia. Labor disputes that forced flight cancellations and fleet groundings. And who can forget the rocky debut of London Heathrow’s state-‐of-‐the-‐art Terminal 5 in 2008. With those difficult days largely behind it, BA appears to have regained its footing with several key innovative programs and plans now in motion. GBP 5 billion investment Announced in September 2011, British Airways’ five-‐year GBP 5 billion investment program encompasses several key areas of focus. Overall, it will see BA’s customers benefitting from new aircraft, updated World Traveller (economy) and World Traveller Plus (premium economy) cabins, a revamped First class, and an array of improvements to in-‐flight service, such

as a more personal service and more flavoursome catering. To Fly. To Serve. Central to this effort is BA’s GBP 20 million branding campaign, which kicked off in September of last year. The ‘To Fly. To Serve.’ advertisement campaign has the goal of re-‐igniting passion and belief in the BA brand among its customers and staff. The ‘To Fly. To Serve’ motto itself is found on the BA coat of arms and on the uniforms of its crew members. The campaign is meant to reflect British Airways’ “long, storied history as genuine pioneers of commercial aviation from its earliest days to the modern era, and to evoke a trusted image of a distinctly British brand emphasizing quintessential British traits of quiet confidence, competence, professionalism, and devotion to service.“ Created by Bartle Bogle Hegarty, the campaign was launched with a 90-‐second commercial that premiered on the airline’s official Facebook page. The supporting

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press and outdoor campaign includes different ads highlighting the experience and skill of British Airways staff. For example, one print ad features an infant swaddled in a BA jacket, to highlight the fact that staff are trained to deliver babies if necessary, while another ad features a blown-‐glass human heart to show that the airline carries precious cargo such as donor organs. Fleet and cabin upgrades In the sky, British Airways intends to keep pace with rivals thanks to orders of 12 Airbus A380s and 24 B787 Dreamliners, the first of which are expected to enter service in 2013. BA has also refitted 18 Boeing 777-‐200s to match the new cabins that are installed in its new 777-‐300ER aircraft. The updated cabins boast a new Thales IFE system with larger screens and more choices, and more comfortable seating in both Economy and Premium Economy. On BA’s longhaul 767s, the Club World seats are refurbished with new seat foams and covers, similar to those onboard the airline’s A318 London City – New York JFK business-‐only service. The upgrade project began in October 2011 and is expected to complete during the first half of 2013. BA’s next new cabin product is scheduled for 2013, with the arrival of its first A380s and B787. The carrier is also refining its catering and in October 2011 began offering Business Class meals in its Premium Economy cabin. Onboard service innovation Another central tenet of BA’s business plan is to deliver outstanding passenger service for all passengers with special recognition of its top-‐tier customers. This goal had been significantly hampered by more than two years of contentious relations with BA’s cabin-‐crew unions that had led to costly strikes. An agreement was finally reached last year with the unions. Moving forward from that, BA is investing in additional training of its flight attendants and has equipped many of them with the iPad 2. iPads BA’s crew iPads feature the ‘Enhanced Services Platform’, which consists of several apps that allow flight attendants to store and receive relevant passenger details in real-‐time, such as itineraries, meal preferences and other data items that allow for a more tailored approach to in-‐flight service.

Following a highly successful initial trial, BA provided as many as 2,000 senior cabin crew across its long and short-‐haul network with an iPad. Loading each iPad with details of the in-‐flight menu – including photos of the foods and notes on its source – is also on the roadmap. This content is also expected to make its way onto the BA website to showcase the food and wine offered on each flight. Bloomberg reports that the devices will also be issued to BA ground staff at London’s Gatwick airport. Additionally, BA is trialling a program on a handful of long-‐haul routes where a crew member is designated as an on-‐board travel advisor. Equipped with an iPad containing pre-‐loaded content about the arrival destination, the cabin crew is able to dispense travel advice and recommendations to passengers, however, because no in-‐flight Wi-‐Fi exists on these flights, reservations or other transactions cannot be made directly from the aircraft. Golden ticket BA also looks to boost cabin crew morale and reward outstanding customer service with the trial of a ‘golden ticket’ scheme. The initiative sees 3,000 of BA’s top UK customers given two golden tickets to recognise cabin crew at any time. BA managers will then be able to thank cabin crew individuals personally for their contribution in delivering exceptional service. Height Cuisine As part of a larger initiative by the airline, called ‘Height Cuisine’, BA last year partnered with English celebrity chef Huston Blumenthal to come up with new, revamped menus and innovative culinary approaches to simply make meals served on airplanes taste better. Instead of using more sugars and salts to maintain flavor at high altitudes, BA’s catering department – along with partner Gate Gourmet – were persuaded to use more umami-‐rich ingredients. In his own dishes and restaurants, Blumenthal has long used umami, a savory flavor known as the ‘fifth taste’, which occurs naturally in many foods. Best of British Looking for unique British brands to offer in its ‘Club Kitchen’ – a self-‐service galley in the Business Class cabin where passengers can help themselves to drinks and light snacks during the course of the flight – BA has recently started offering passengers popular products from upmarket UK supermarket Waitrose, as well as a


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selection of smaller artisan British brands such as The Ice Cream Union, Teonis and Beckleberry’s. And, as no other beverage is more uniquely British than tea, BA offers passengers in First an ‘Afternoon Tea by the Dorchester’ service. Consisting of finely prepared sandwiches, scones and pastries (and of course the finest tea) BA has embraced an elegant piece of British heritage to differentiate the passenger experience. The airline also recently entered into a partnership with British tea purveyor Twinings to be the exclusive supplier of teas on all flights. London 2012 Summer Olympics In anticipation of the upcoming Games, British Airways kicked off the ‘BA Great Britons’ programme in May 2011, in which top British talent were invited to submit entries in three categories: A bold British menu to be served aboard flights, an artful aircraft livery and a short-‐film to be shown on BA flights and at the pre-‐opening of the Games. In the food category, professional chef Simon Hulstone took top honors with a menu inspired by the 1948 London Olympics. Designer Pascal Anson submitted the winning entry to have his artwork that creates an illusion of a dove painted on the exterior of nine BA aircraft. In the film category, Prasanna Puwanarajah’s short-‐film starring English actor Timothy Spall garnered first place. BA also launched an airline themed pop-‐up venue – called ‘Flight BA2012’ – in the run up to the Games. Open for two weeks during April, the three-‐in-‐one art gallery, cinema and dining lounge showcased the works of the three winners. Premium Services Thanks to London’s status as a global financial hub, BA has a very high percentage of business travellers. In recent years the airline has upgraded its lounges at Heathrow and launched a new First Class cabin alongside two other niche premium concepts. With a GBP 100 million investment in its new First cabin, BA has sought to close the gap to the standards of luxury set by competitors in the Middle East and Asia, while its all-‐business ‘Club World London City’ service from London City Airport to New York JFK targets corporate travellers working in London’s Canary Wharf financial district. The business-‐only A318shave just 32 Business Class seats and offer in-‐flight connectivity provided by OnAir, a wireless ‘Club

Mobile’ portal, and the IFE consists of an iPad preloaded with movies and other content. BA subsidiary openskies, meanwhile, provides a niche, boutique flying experience on its route between Paris Orly and New York’s Newark Airport. The airline has just added an Economy cabin to its premium-‐only cabin and every passenger has access to an iPad. New growth opportunities Formed in January 2011 by the merger of British Airways and Iberia, International Airlines Group is well positioned to benefit from further industry consolidation and attract and capitalize on synergies with new partners. The company acquired loss-‐making BMI from Lufthansa in late 2011 and will use the slots at Heathrow gained from the transaction to significantly increase its service to key emerging markets (especially in Asia and South America) where it is underweight relative to its European rivals. Emerging markets BA, for example, will resume flights to Seoul in December and is widely expected to re-‐enter Kuala Lumpur with Malaysian Airlines set to join the oneworld alliance later this year. BA is also likely to deploy its upcoming A380s on its higher-‐density routes between London and destinations such as Hong Kong, Beijing and Singapore, with the 787 Dreamliners slated for potential new expansion into high-‐growth Asian markets. Currently serving three destinations in China, BA has also expressed a desire to ramp up its presence there. Deriving maximum value and yields from the slots at Heathrow are of critical importance for BA given that the airport typically operates at 99 percent capacity and there are no plans to accommodate more flights through construction of an additional runway. Other potential growth opportunities for BA parent company IAG could include an acquisition of TAP Portugal and the valuable market share stake in Brazil such a deal could bring. IAG had taken a serious look at TAP in the fall of 2011, but at present, action on any deal for TAP appears to hinge on the merger of Brazilian carrier TAM and LAN Chile that is expected to happen in June 2012 and which global alliance the new combined airline (called LATAM) chooses to join. IAG CEO Willie Walsh also recently said the company’s enthusiasm for buying TAP has “significantly waned” as the European debt crisis damps travel demand and the appeal of carriers in the region.


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Delta Air Lines has again earned a top 5 finish on our ranking of most innovative airlines, thanks to a number of ongoing and innovative investments that, in Delta’s words, have the aim of “building a better airline, not just a bigger one.” On the heels of its 2008 acquisition of Northwest, Delta’s consumer rankings suffered as passenger complaints increased. Airline mergers and their associated integration activities typically impact negatively customer satisfaction. However, Delta’s response to that in the form a USD 2 billion dollar investment program (which runs through 2013) put in place to improve the quality of its products and services deserve particular attention in our view. Customer Service As part of the multi-‐billion quality improvement program, Delta is focusing significant attention on the training of its customer-‐facing staff. The enhanced training programs and seminars are being targeted to the roughly 11,000 Delta passenger service agents and supervisors who are the day-‐to-‐day face of the airline to the travelling public. It has been over a decade since Delta undertook such a large-‐scale training effort, and the renewed focus on service standards

comes in light of Delta’s poor customer satisfaction scores in industry surveys in recent years. Responding to passenger feedback for a more personal touch on the ground, Delta has already revived its ‘Red Coats’ service agents. In their role as a ‘super’ passenger service agent, the Red Coats’ primary mission is to fix customer problems. Easy to spot in busy airports thanks to their trademark red blazers, the Delta Red Coats carry hand-‐held computers that allow them to handle an array of issues on the spot, such as helping customers make flight connections, issuing new boarding passes or providing food vouchers when necessary. Over 800 agents are currently deployed airside at airports across the US, as well as at Delta’s Asian hub at Tokyo Narita. Expanding on its customer service footprint in the social networking space, Delta became the first airline to offer dedicated customer support via Facebook, as it brought the ‘Delta Assist’ Twitter service to the social network in March 2011, providing real-‐time travel assistance. To better serve its Spanish language customers, it also launched the @deltaassist_ES Twitter channel in the fall of 2011.

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Innovative services Delta was also the first airline to roll out mobile bag tracking capabilities via its Delta app for smartphones, allowing passengers to track their checked baggage in real-‐time. The airline also quietly introduced a premium service in partnership with the German automaker Porsche at its Atlanta hub for its highest-‐tier Diamond Medallion customers. Selected arriving passengers are escorted from the plane to a waiting Porsche luxury vehicle for a ride to their cars in the parking lot or another terminal for a connecting flight. Porsche has provided the vehicles to Delta free of charge, but has placed information about the car models in the vehicles and in Delta Sky Lounges at the airport. Onboard experience In late 2009, Delta embarked on a program to upgrade its international long-‐haul business class (Business Elite) with full lie-‐flat beds. At present approximately 35 percent of its transoceanic fleet has been equipped with the new beds, including all B777s and 767-‐400ERs in service. More than 50 percent of widebody international seats will be complete by the end of 2012 and flat-‐bed seats will be installed on Delta’s entire international fleet by summer 2014. Of particular interest will be the rate of progress in the modifications to its older and larger 767-‐300ER fleet (currently 14 percent are converted) through 2012 and beyond, as the 300ER carries a significant portion of Delta’s highly-‐valued transoceanic business fliers. Delta recently announced that it would begin upgrading its 747-‐400 fleet with the new Business Elite cabins. It expects to have all 18 747 aircraft completed by October 2012. Economy Comfort Following the introduction of a new Economy Comfort class in early 2011, which offers passengers priority boarding, 4 inches of additional legroom, and 50 percent more recline, Delta is expanding this premium economy ‘light’ product – which is also offered by United and KLM – to both domestic and short-‐haul international routes. Economy passengers can upgrade to these seats for a fee that ranges from USD 80 to 160 one-‐way for long-‐haul flights and USD 19 to 99 on domestic routes, while higher-‐tier members of Delta’s frequent flier program SkyMiles have complimentary or discounted access.

In-‐flight connectivity On the in-‐flight Wi-‐Fi front, Delta emerged as the leader, with 100 percent of its mainline aircraft now equipped with Gogo’s Internet service. Delta has also been a pioneer in rolling out this service to its regional jet (RJ) fleet, with virtually all RJs now outfitted with Wi-‐Fi. For those passengers that don’t want to pay for onboard Internet, Gogo and Delta in October 2011 also introduced a wireless IFE system on Delta’s domestic fleet. Called ‘Delta Connect’, passengers can access the portal for free with their own devices to learn the flight’s arrival gate number, access weather information, get help with missing baggage, order food, book a restaurant via OpenTable, or rent a car. Fleet upgrade Delta in August 2011 announced that it intended to purchase 100 Boeing 737-‐900ER aircraft for delivery between 2013 and 2018 as it retires older mainline jets such as the 757 and upgrades its fleet. The new 737s will also be Delta’s first aircraft equipped with the new Boeing ‘Sky Interior’, which boasts larger overhead storage bins and a roomier cabin with enhanced ambient lighting. Airport experience Besides installing numerous free-‐standing charging stations throughout its terminals at 18 airports in the U.S, Delta in early 2011 placed ‘wireless powerpads’ in the seating areas of 19 Delta SkyClub lounges across the US. Up to 8 devices can be charged simultaneously and the wireless power transfer works through a metal on metal contact between the pad’s surface and an adapter connected to the personal device, which is available from Delta staff in the lounge. Minneapolis-‐St Paul As part of Delta’s redesign of its terminal at Minneapolis-‐St. Paul International (MSP) airport (which began in January 2012), the airline and airport restaurateur OTG Management are upgrading the current food and beverages offerings with 12 new local restaurants and several fresh food markets. Similar to Delta’s New York JFK and La Guardia terminals, seating will be also equipped with iPads which passengers can use to order their food and beverages to have it delivered to their seat by a server in less than 10 minutes.


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Delta and OTG will also introduce a new concept, called the ‘OTG Media Bar’ in the fall of 2012. The OTG Media Bar is a virtual newsstand where Delta passengers can rent an Apple iPad loaded with the content of their choice. Passengers can flip through the iPads to see what publications, movies, and music they like, download the content of their choice, and then rent the device for their trip. Once the passenger reaches his or her final destination, a pre-‐paid postage box received at time of rental is used to return the iPad. The Big Apple From an operational standpoint, Delta announced at the end of last year ambitious plans to expand and cement its New York City presence at the expense of competitors like American Airlines and US Airways in what is the world’s largest travel market. Delta is turning New York’s LaGuardia airport into a new domestic hub, and by summer 2012 will operate 264 daily flights between LaGuardia and over 60 cities, more than any other airline. Additionally, Delta will invest USD 100 million to expand and renovate two terminal facilities at the airport. At JFK, Delta’s international hub in the NYC area, a USD 1.2 billion renovation project to upgrade Terminal 4 is underway, which is expected to complete in 2013. Ancillary revenues At its annual investor day in December 2011, Delta unveiled plans to radically grow its ancillary revenues. The airline currently makes around USD 600 million in revenue from sources such as preferred seats, upgrades, lounge access and in-‐flight Wi-‐Fi, and is targeting to grow annual ancillary revenues to USD 1 billion by 2013 through new products and enhanced e-‐commerce platforms. According to Tim Mapes, Delta’s SVP of marketing, “there are a lot of ways to make money beyond the basic sale of a seat between two points.” A key pillar of the strategy is to aggressively leverage technology through delta.com, smartphone app capabilities and Delta kiosks to allow for a more differentiated level of service and product offerings (e.g. preferred seating and other up-‐sells) that impose little or no marginal cost to the airline. To that end, Delta is in the process of finalizing a new e-‐commerce platform it expects to unveil in the summer of 2012. Acknowledging that its imposition of baggage fees

was “hostile” to customers (Delta earned nearly USD 1 billion from checked baggage fees in 2010), the airline says it aims to evolve from just imposing new fees for what once was free — checked baggage and meals — toward selling improved services such as premium economy seats and eventually selling customized or bundled offerings. Some examples of Delta’s efforts in the ancillary revenues space are its re-‐launched Delta Sky Store website, which now also includes a ‘Delta Picks’ section, which is a selection of the best travel products by Delta’s flight attendants. Delta has also partnered with LivingSocial to create date and destination-‐specific deals for passengers who have booked itineraries on delta.com, and sells access to its lounges via deal-‐site Groupon. Jet Fuel Refinery Investment In what is a first in the airline industry, Delta announced last month the purchase of a refinery near Philadelphia, PA for USD 180 million. The Commonwealth of Pennsylvania contributed USD 30 million towards the purchase, and Delta intends to invest an additional USD 100 million which will go towards increasing jet fuel production at the facility. Jet fuel is the single largest cost (approximately 40 percent at Delta) for the airline, and by taking a direct role into managing a critical piece of the supply chain, Delta hopes to better control these costs moving forward. The refinery is expected to be fully online by September 2012 and able to provide Delta with up to 80 percent of its jet fuel demands for US operations. Delta is partnering with BP and Phillips 66 to provide crude oil to the plant and has hired a management team with experience in the energy industry to oversee the refinery’s operations. While Delta is counting on the acquisition to result in jet fuel cost savings to the tune of USD 300 million per year, skeptics of the deal point out that upward pressure on global crude oil prices could end up magnifying the risk exposure to the airline. Whether Delta’s bet will pay off is of course still to be determined, but the bold step that the airline has taken will certainly be watched very closely by the airline industry and Wall Street.


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In 4th place on our 2012 ranking of innovative airlines is KLM Royal Dutch Airlines. Part of Air France since 2004, the Dutch airline is the seventh largest airline in the world in terms of international kilometers flown, and serves 135 destinations with a fleet of 157 aircraft. Having a small homebase, KLM’s strength lies in a tightly-‐knit, worldwide network, as the majority of its 25 million passengers transfers through its Amsterdam Schiphol hub, which is widely regarded as one of the best airports in the world. KLM has been an early adopter of self-‐service options such as DIY luggage check-‐in, has a strong focus on sustainability (e.g, catering, biofuel), is rapidly expanding in China, aims to differentiate the passenger experience by adding local Dutch touches, and is a frontrunner in the adoption of social media. Dutch heritage According to KLM, customers have indicated that they appreciate KLM’s typically Dutch character, and one of the ways the airline is emphasizing its Dutch origins is by partnering with contemporary Dutch designers

Marcel Wanders and Viktor&Rolf for the creation of its onboard amenities. Marcel Wanders (of Droog Design fame) has designed the airline’s Business Class tableware on short-‐ and long-‐haul flights in his signature style, while Viktor&Rolf have created the airline’s amenity kits. KLM also recently teamed with Dutch designer Hella Jongerius – known for her industrial textile and colour skills – to revitalise its Business Class cabin interior across the fleet. The new Business Class will also feature BE Aerospace-‐produced ‘Diamond’ full-‐flat beds, which will replace the airline’s current angled lie-‐flat seats. KLM’s fleet of 22 B747-‐400s will be the first to be retrofitted with the new seats and further details of the design will be announced in the second half of 2012. Delft Blue Delft Blue porcelain is also part of KLM’s Dutch-‐inspired branding. Since the 1950s, the airline has handed out small ceramic replicas of historical Dutch houses filled with ‘genever’ (a Dutch style of gin) to passengers in Business Class, that are still a popular souvenir item for

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many passengers. Furthermore, last year KLM launched a ‘Tile & Inspire’ campaign which invited Facebook users to convert their profile picture into a Delft Blue tile and add their own message. 4,000 of the most inspiring tiles were placed on the body of a KLM ‘Delft Blue’ Boeing 777-‐200. Local food Besides serving meals created by Michelin-‐starred Dutch chefs, KLM once a year organizes a ‘From Holland’ food and wine festival. For two months the airline serves Business Class passengers on long-‐haul flights out of Amsterdam meals based on seasonal home-‐grown ingredients from a Dutch Michelin star restaurant, as well as wines from Dutch vineyards and typical Dutch snacks. For the packaging of its sandwiches served on European flights, KLM earlier this year challenged design students to come up with a design that reflected KLM’s distinct Dutch character. Three of the most original designs were chosen by the airline’s Facebook fans and KLM will serve a total of five million sets of sandwiches in the ‘crowdsourced’ packaging during the second half of 2012. China China’s rapid economic growth has resulted in a growing number of business travellers to and from China, as well as an emerging Chinese middle class that is eager to travel. KLM has made expansion in China the centerpiece of its Asia focus and is the only airline to operate direct flights from Europe to second-‐tier cities in China such as Chengdu, Hangzhou and Xiamen. As China is home of no less than 160 cities with a population of more than 1 million, KLM expects to start more direct flights to second-‐tier cities in the future in order to maintain its first-‐mover advantage. Route-‐dedicated service In order to make Chinese passengers feel at home, KLM has localized elements of the onboard experience on flights to and from China. Each flight has three Chinese-‐speaking cabin crew onboard, announcements are also made in Mandarin and Cantonese, while language assistants are available to assist passengers upon departure and arrival. The IFE programming contains several Chinese movies, as well as subtitles in Mandarin, and on flights out of China KLM hands out maps of Schiphol Airport written in Mandarin. In Business Class, KLM has teamed up with

Chinese high-‐end restaurant chain South Beauty to offer passengers the choice of a Chinese menu, and a local meal with jasmine tea is also served in Economy. Social media KLM, which has over 1.5 million Facebook fans and nearly 300,000 followers on Twitter, has developed a reputation when it comes to launching innovative social media campaigns. Besides the Delft Blue tiles livery, the airline randomly surprised passengers with a personal gift based on a tweet or Facebook profile, ‘crowdsourced’ a commercial flight via Twitter, and asks Facebook fans to share their ideas to improve KLM’s products and services – to name a few recent initiatives. Social seating KLM’s most ambitious ‘social’ initiative, however, is the airline’s ‘Meet & Seat’ social seating scheme which was launched in February 2012. The service allows passengers to pick seatmates with similar interests before their flight by linking their Facebook and LinkedIn profiles to their seat number. Passengers must opt in for the service, and can adjust their privacy settings to reveal as much or as little information as they wish. ‘Meet & Seat’ is currently available for 13 destinations and CNN reports that in the first 3 months 2,200 people have shared their profiles. KLM has also just supplemented its ‘social seating’ service with a new ‘social booking’ platform called ‘Trip Planner’, which allows travellers who are friends on Facebook to coordinate and book their journey via Facebook. Marketing landscape Martijn van der Zee, senior VP of eCommerce at KLM, tells social media agency SimpliFlying that the response generated by the Meet & Seat programme is indicative of the radical change that the marketing landscape is undergoing. Engaging customers in a modern way doesn’t have to involve a lot of money, he says. “What we’re seeing is that people want real experiences, genuine messages and real actions from companies, which by definition do not cost a lot of money but require more effort.” […] “We’re open to failures and mistakes for the simple reason that if you don’t dare, you will never be able to create things that customers want.” […] “We have many people who literally say to us, ‘We buy tickets with you because of your actions in the social space. If you are able to do this the right way, you can reach millions of people and they’ll promote the airline for you,” says van


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der Zee. “It’s the strongest marketing message you can have.” Social media hub Beyond merely engaging campaigns, the core of KLM’s social media activities is formed by the airline’s ‘Social Media Hub’ – a 40-‐member multi-‐disciplinary team comprised of channel managers, over 25 service agents, communications experts, copywriters, and a reputation manager. According to KLM, the real-‐time and public nature of social media requires an internal organization that is equipped to handle every kind of question – from simple information requests to rebooking a flight or selecting a seat – as well as “speak with one voice,” especially in crisis situations where acting quickly and consistently is paramount. Screens in the social media hub feature colorful charts that show the real-‐time sentiment about KLM and other relevant topics. KLM has deployed Salesforce.com’s Service Cloud to collect, track, and trace all social conversations in one place and to measure its brand sentiment on the Web. DestinationCRM reports that about 50 KLM employees use the system to review, on average, 1,800 tweets and 400 Facebook comments per day. All of these interactions are automatically loaded into Service Cloud, so KLM personnel can respond, as well as see earlier interactions. KLM’s social media hub has set high targets for itself, and strives to answer every customer message via Twitter and Facebook personally within an hour, on a 24×7 basis a day, seven days a week, in Dutch, English, German or Spanish. To promote the launch of the new 24-‐hour social media service, the airline in September 2011 ran a ‘KLM Live Reply’ campaign in which tweets sent to @KLM could receive a ‘live’ reply made by 140 KLM employees, who lined up and held letters, giving a ‘living alphabet’ response. iPads, apps Besides its social media initiatives, KLM has also embraced other digital media. In late 2011, the airline provideda group of 50 senior pursers with iPads as part of a 6-‐month trial. According to the airline, it feels it is essential that cabin crew have easy access to the latest information in the air, as personal contact with passengers on the ground is becoming

increasingly rare due to the increased deployment of self-‐service kiosks. As part of the same ‘pilot’, KLM also equipped 50 pilots with iPads, providing them with an extra tool during flight operations that is more efficient than the large volume of forms, briefing documentation and manuals they usually take along. KLM also just announced it will trial Panasonic’s inflight Internet on board an B777-‐300 in early 2013. For passengers, KLM has developed a series of specific apps, such as a ‘Passport’ app, which lets users record their journeys with their mobile phone and share their experiences via Facebook. The ‘KLM’s Houses’ app lists all KLM houses, so passengers no longer have to bring crumpled notes with them in order to pick their favourite house, while the airline’s ‘Movies & More’ app provides a real-‐time listing of the IFE programming onboard long-‐haul flights. Ancillaries KLM is looking to generate an additional EUR 400 million in the next few years through ancillary revenues, for example by offering Economy passengers more ways to customize their travel experience. KLM passengers on long-‐haul flights can already opt to upgrade to a seat in the Economy Comfort zone – which offers up to 10 cm more legroom and twice the recline of a standard seat – for a one-‐way fee ranging from EUR 60 to 150. For EUR12 to 15 passengers can also pre-‐order a premium ‘a la carte’ meal, instead of the usual free meal service. KLM has also been one of the first airlines to implement Amadeus Ancillary Services tool which allows travel agencies in the Netherlands to book ancillary products via the global distribution system, instead of via the airline’s website. Another innovative ancillary product is KLM’s ‘Time to Think’ option, which is also offered by Air France. For a non-‐refundable fee of EUR 10 to 15 passengers can hold a reservation at the same fare for up to 14 days.


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Established in 1976 as a regional carrier, TAM has quickly become the flag-‐carrying airline of Brazil after the demise of Varig in 2006. TAM is currently in the process of merging with LAN from Chile to create one of the largest airline groups worldwide, called LATAM Airlines Group. The merger between LAN and TAM is a response to the consolidation of the airline industry in the USA and Europe, as well as the rise of ‘Gulf Gullivers’ such as Emirates, who are increasing their presence in Latin America due to the region’s high growth perspective. Based at São Paulo’s two overburdoned airports, Guarulhos International Airport and Congonhas (domestic flights), TAM carried 37.7 million passengers in 2011 and today flies to 42 destinations in Brazil and 19 destinations internationally, with a fleet of 156 aircraft. The airline has been growing rapidly in recent years, taking advantage of Brazil’s expanding middle class, many of whom are abandoning intercity buses and flying for the first time. In 2011, demand for domestic flights in Brazil increased by 16 percent and growth is expected to

continue with 7 to 9 percent in 2012. TAM is also expected to benefit from the world cup soccer and the Olympic Games, which will be held in Brazil in respectively 2014 and 2016. Following a 22 percent revenue increase of its international operations in 2011, the airline will take delivery of 8 B777s during 2012 and 2013. Besides its rapid expansion, TAM aims to differentiate itself with innovative products and services, such as offering passengers a 1970�s-‐style retro experience onboard or letting kids help distribute candies before the flight takes off. The airline has also been the first carrier in Latin America to introduce onboard connectivity, operate biofuel-‐powered flights and will unveil an entirely redesigned cabin interior in the second half of 2012. Interior redesign In 2009, TAM hired Priestmangoode to completely redesign the entire passenger experience for the airline – from cabin architecture, seats, galleys and lavatories to staff uniforms and in-‐flight service provisions, such as

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meals. Priestmangoode has also been responsible for the design of the graphic user interface (GUI) of the Panasonic IFE system, so the look and feel of the system would be an extension of the new cabin interior. The new interior will make its debut on TAM’s Boeing 777-‐300ERs which will be forthcoming from August 2012 onwards, and TAM’s existing fleet of narrow-‐ and widebody aircraft will also be retrofitted with the new cabins. Says Priestmangoode Director Luke Hawes: “Our work for TAM is crucial to their brand development, giving them the customer experience they need as they move up to become a major international carrier. Our experience of flying with TAM is that their service is exceptional. But their brand presentation currently just doesn’t match it. The designs we will roll out across their entire fleet will present them as an important international player and give them the tools they need to compete with the world’s other major international carriers.” In an exclusive preview for airlinetrends.com, TAM Brand Manager Ricardo Cruz and Priestmangoode Director Luke Hawes share more details about TAM’s cabin interior program, which in their words aims “to put TAM on the map” and is “inspired by everything Brazil has got to offer.” Economy TAM’s new Economy cabin has received a colourful makeover and features rows of seats – manufactured by Weber – in various bright colours that reflect the carrier’s Brazilian origin: lime green, aqua blue and a brighter shade of TAM’s corporate red. TAM will also introduce a new Economy ‘Plus’ product, which offers similar seats as in Economy, but with a larger seat pitch and recline, as well as a different seat colour. This type of service class is also offered by airlines such as United, Delta and KLM. Business Class TAM’s new Business Class will feature full-‐flat seats that are designed by Priestmangoode and manufactured by Recaro. The 48 seats will have a new type of staggered design, allowing them to be placed in a 2:4:2 configuration, but making it relatively easy for passengers in the middle seats to have aisle access. The two seats in the middle are placed slightly ahead of the adjacent seatsand are meant for passengers travelling together, while on each side the ‘individual’ seat provides direct access to the aisle.

Compared with the colourful Economy interior, the Business Class cabin will have a more corporate look and feel with the aim of offering passengers a “home office in the sky.” The cabin colours in Business will be neutral with some brighter background colours accenting the storage compartments. The new Business Class seats will be available from August 2013 onwards, and TAM is planning to offer an intermediate solution to replace its current recliner seats. First Looking to provide passengers in First Class with a “home away from home” experience, TAM’s new First cabin looks to resemble a living room and emphasizes the social element. Consisting of just four seats – developed by B/E Aerospace – the ottomans of the two middle seats can be combined into a sofa, so parents can for example invite their kids to join them for dinner. For this reason, the foldable table has been made extra large. Ambient light on the floor is used to create a lightweight, elevated look of the seats, while the lack of overhead bins provides passengers with a roomier cabin. A nice design touch that reflects the ‘living room’ concept is a bookshelf built into the front wall of the cabin. The First Class cabin features neutral, natural colours that are accentuated with soft-‐green touches. Passengers in Business and First will also be served freshly brewed Nespresso coffee. To reflect Brazil’s coffee culture, Priestmangoode initially planned to include a coffee corner in the galley between Business and First, but dropped the idea because such a social zone would create too much noise for other passengers. Innovative services TAM was the first airline in Latin America to let passengers use their mobile phones for calls, sms and Internet. Provided by OnAir, the service is currently available on 31 aircraft and TAM is also the first airline to introduce a 50 percent cheaper rate for onboard cellphone use than the commonly used international roaming rates. Last year, the airline also announced it would equip its long-‐haul fleet with OnAir’s mobile and wi-‐fi service. QR-‐code TAM At the end of 2011, TAM unveiled what it calls “a new media platform,” which consists of a ‘QR Code TAM’ augmented reality app and QR (quick response) code stickers. The QR code stickers can be placed on any surface, and when a passenger aims the camera of his or her mobile device to the sticker, a virtual animation


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appears. TAM used the technology for the first time during the 2011 Christmas season, placing QR stickers on the windows of its aircraft which were linked to a virtual Santa Claus animation. The app doesn’t requires onboard connectivity as all content is pre-‐loaded when the user downloads the app or updates it. TAM Kids A very sympathetic concept launched by TAM is its ‘Comandante Kid’ initiative, which is part of the airline’s TAM Kids program. With parental consent, children up to 12 years of age can sign up for TAM Kids and receive an official ‘Comandante Kid’ badge. Children flying with TAM and wearing the badge are invited to help the crew aboard by welcoming passengers over the plane’s PA system or distributing candies before the flight departs. Kids can also visit the cockpit after the aircraft has landed. TAM Vintage Whereas most airlines paint one of their aircraft in a retro livery to showcase their aviation heritage, TAM has gone several steps further and for an 18-‐month period offered an immersive retro in-‐flight experience on two A319 aircraft flying between Sao Paulo and Rio de Janeiro. According to TAM, the goal of the ‘TAM Vintage’ project was to strengthen its roots in a time the airline is growing rapidly. Highlighting two important moments of the airline’s history, one aircraft was painted in TAM’s livery dating from the 1970’s, when the company launched its regional operations, while the other aircraft was painted in a 1990’s colour scheme, a time of great expansion and national level recognition. The interiors on both aircraft also received a retro makeover, with seat covers, carpets and curtains refurbished in the fabric and pattern of the Seventies and Nineties. Cabin crew and pilots wore retro uniforms, meals were served on old-‐fashioned disposable tableware, while the onboard safety video and safety leaflet were also done in a style that echoed therespective eras. Emerging middle class According to TAM, the middle class in Brazil has grown three times as fast as the overall population in the past decade and an estimated 10.7 million Brazilians hit the skies for the first time in 2011 – 8.7 million of whom belong to the ‘emerging classes’. However, 53 percent of the Brazilian middle class has never

travelled by air and still travels long distances by bus, as a lot of people in Brazil work outside their home state. In an effort to make air travel more accessible to the general Brazilian population, counter growing competition from low-‐cost airlines such as GOL and Azul, and increase the volume of passengers at off-‐peak hours, TAM in 2010 launched an innovative ‘new retail project’ which is aimed at reaching the new ‘mass class’. Says Líbano Barroso, CEO of TAM, “The strengthening of the Brazilian economy over the past few years increased the consuming power in the country. It is necessary to prove to this new middle class that the privilege of flying no longer is limited to just a few.” High-‐traffic locations TAM is targeting the emerging middle class with novel sales channels. For example, the airline sells tickets via discount retail chain Casas Bahia in Sao Paulo, which caters primarily to low-‐income customers and most of its outlets are located in poor neighbourhoods. Customers can buy air tickets at the stores and have the option to pay for them through a maximum of 12 interest-‐free installments, with the minimum installment being R$ 20 (USD12; EUR9). Rival carriers Gol and Azul also offer similar payment plan options. Since August 2011, TAM operates 5 staffed subway station kiosks in Sao Paulo and Rio de Janeiro, and has also signed an agreement with Princesa do Agreste – a bus company that serves 29 north-‐eastern cities – to sell the bus company’s tickets at TAM stores in return for selling air tickets at the bus stations. Says TAM’s Marketing Director Manoela Amaro, “We can’t expect the passenger to come to the airport or one of our stores to buy a ticket. We have to be where they are.” Travel advice TAM staff at the kiosks also help novice flyers in choosing the best travel options, flight hours and financing at the point of sale. They also explain air travel procedures, such as advanced arrival to the airport, check-‐in options, rules for luggage dispatch, etc. Additionally, customers receive a printed booklet with useful information when flying for the first time. The airline also launched a microsite ‘Como Viajar’ (“How to Travel”) where people can familiarize themselves with air travel, as well as the English terminology commonly used. At the airports, both the check-‐in staff and flight crew are trained to help those new to flying.


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With the Gulf Region having firmly anchored itself as a global aviation crossroads, it comes with little surprise that Qatar Airways is on our list of airlines to watch in 2012. The national carrier of Qatar has experienced a rapid ascent to become one of the few ‘5-‐Star Airlines’ in the sky and was named “Airline of the Year 2011” by Skytrax – which cited its roomy Economy cabin and Business Class product – including the Premium Terminal at its Doha hub – as key drivers for the ranking. Compared with Gulf-‐based competitors Emirates and Etihad, Qatar Airways takes a more low-‐key approach in designing its passenger experience. Says the airline’s CEO Akbar Al Baker in an emailed statement to airlinetrends.com, “We believe that our key innovation is not so much one particular product or service, but rather our commitment to blending the latest technologies, trends and styles with the best aspects of air travel as it used to be, including plenty of space, inspiring cuisine and a warm, personal service.

We provide an experience, not sell a commodity.” Continues Al Baker, “Although our premium seats offer a high degree of comfort and privacy we do not see the need to feature gimmicks such as walls or doors in any of our designs.” Onboard Experience Qatar Airways’ fleet of widebody aircraft offer a Business Class product that features 180 degree flat bed seats in a 2-‐2-‐2 configuration, a seat pitch of 78 inches, 15 inch IFE screens (17”on its B777s) with over 1,000 entertainment options, and a-‐la-‐carte dining with all meals prepared at time of order. In Economy, the standard seat pitch is up to 34 inches (significantly more than on other airlines). Passengers also receive a complimentary toiletry pouch and the airline has teamed up with wellbeing guru Deepak Chopra to produce a ‘Tips to Fly Healthy’ guide that can be found in the seat-‐back pocket. All seats also offer in-‐seat power and a 10.6 inch IFE screen.

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B787 Dreamliner Qatar Airways expects delivery of its first Boeing 787 in Summer 2012 (it plans to have five 787s in service by the end of the year) and the airline will be the launch customer in the Middle East for the aircraft. Qatar will initially operate the 787 on intra-‐Gulf routes to provide flight crew with training hours before it will deploy the aircraft on the Doha–London Heathrow route in late August. Bloomberg reports that Qatar also plans to start flights to Atlanta, Chicago, Boston and Detroit within the next year as it begins receiving its 787s. Business Class Qatar’s 787 Dreamliner will seat 254 passengers in a two-‐class configuration with 22 seats in business class and 232 in economy. In Business, a generous 1–2–1 configuration provides each passenger with direct aisle access. The airline has also opted to remove the overhead luggage bins from the middle of the Business Class cabin, providing an even more spacious feel. The flat-‐bed Business seats are made by B/E Aerospace and are placed in a reversed herringbone formation, which angles the two middle seats towards each other, while the solo window seats offer a high degree of privacy. Armrests of the seat can be adjusted to different heights and passengers can dine and work on large, wood-‐trimmed sliding tables – and when dining begins, passengers have room to rest their laptops on side tables. IFE screens have a size of no less than 17 inch. Economy Seats in Economy are configured 3–3–3, which surprisingly is one extra seat per row than the 2-‐4-‐2 setting offered by other B787 operators such as ANA and JAL. Seat pitch of the Recaro CL3620 light-‐weight seats is 32 inches and – in what is one of the first integrated IFE-‐seat deployments – all IFE providion is installed in the seats by Recaro before they go to the airframes. TouchPMU Qatar Airways’ new 787 will be the first aircraft to feature Thales’ new ‘TouchPMU’ handheld, an iPhone-‐like device that allows passengers to multitask and for example watch a movie on the seatback screen while using the handheld to check the current flight position or local weather. The Android-‐based TouchPMU can also store a wide range of apps, making it easy for

airlines to add new features. The 787 will also be Qatar Airways’ first wide-‐body to offer full wi-‐fi and cellphone connectivity, although the carrier said voice calls will be “disabled to minimise passenger disruption.” Narrowbodies While rival ‘Gulf Gulliver’ Emirates moves in on new routes with widebody B777 aircraft – and even operates an A380 between Dubai and Manchester – Qatar Airways tends to take a more cautious approach when adding a new destination to its network. For example, the airline has extensively deployed narrow-‐body aircraft – which makes up 40 percent of its fleet – on new routes to Eastern and Northern Europe. The airline’s A320s feature 12 angled lie-‐flat seats in Business Class, 132 seats in Economy, and personal IFE screens in all seats. Qatar has also equipped several of its A320s with OnAir‘s cellphone connectivity. Ground experience Qatar Airways’ USD90 million stand-‐alone Premium Terminal in Doha, which opened in 2006, features a restaurant area, a delicatessen, cocktail bar, spa, and a business centre. The airline has just also opened its first airport lounge outside Doha at London Heathrow’s Terminal 4, as it operates five flights per day to London. The 750m2 facility is designed to resemble a private member’s club rather than a conventional airport lounge, and Qatar recruited lounge staff from five star hotels and restaurants to work in the theatre-‐style brasserie kitchen and delicatessen. New Doha International Airport As an efficient and high-‐quality hub is key to Qatar Airways’ network strategy, the airline is a key stakeholder in the construction of the New Doha International Airport (NDIA), which is scheduled to open in December 2012. Doha’s current crowded airport currently handles over 18 million passengers a year, while NDIA will initially have a capacity of 28 million passengers a year – and 50 million by the time the airport is fully operational beyond 2015. The new USD15.5 billion airport is being constructed four kilometres from the existing facility and Qatar Airways expects to start operating from NDIA in early 2013. Expansion Opening 24 new routes in the past two years, Qatar Airways currently operates a fleet of over 100 passenger aircraft (up from 57 in 2007) to more than 100 destinations. Receiving a new aircraft every 2 to 3 weeks on average during 2012, the airline is continuing


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its expansion in 2012 with 13 new routes and by 2016 plans to serve 170 destinations with a fleet of 170 aircraft. Furthermore, the airline’s outspoken CEO expects the Gulf region to only have two dominant airlines, suggesting that Abu Dhabi-‐based Etihad will not be on that list. In total, Qatar Airways has over 250 aircraft on order – worth more than USD50 billion at list prices – which include 10 A380s (first aircraft to arrive in 2013, but possibly delayed because of the superjumbo’s wing cracks issue), 30 B787s, 80 A350s (of which Qatar will be the launch customer) and 50 A320neos. The state-‐owned airline has delayed its earlier planned IPO with at least 5 to 8 years, saying it feels “it will take a very long time to recover from the economic situation that the world is in today.” Niche markets A hallmark of Qatar’s growth strategy has been its focus on niche and second-‐tier destinations. In Europe the airline already flies to 30 destinations, including Eastern European cities such as Budapest, Bucharest, Sofia, and the Scandinavian capitals of Copenhagen, Oslo and Stockholm. As these second-‐tier destinations have limited direct long-‐haul flights, passengers have to make at least one stop-‐over to reach their final destination, which could be just as well in the Gulf instead of in Europe. Speaking at last year’s Dubai Air Show, CEO Al Baker said that the airline’s mission “…has been to operate to key business and leisure destinations around the world, but also to underserved markets where others dare not venture into. We take bold decisions to serve certain markets because we believe it makes strong business sense.” 2012 route launches by Qatar Airways will include Baku (Azerbaijan), Tblisi (Georgia), Benghazi (Libya), Kigali (Rwanda) and Mombasa (Kenya), while Latin America and “underserved” Africa are targeted for future expansion. China Qatar Airways has also been very public about its intentions to expand in China, which is home of no less than 160 cities with a population of more than 1 million. The airline plans to double the number of flights to China from the current 35 to 70 a week by 2013 and in December 2011 launched its fifth Chinese destination to Chongqing.

Says Al Baker, “Chongqing is a prime example of a city, with its large industrial base and population of almost 30 million people, not having sufficient international air access that it so well deserves. Qatar Airways looks forward to developing our network further in China, with particular focus on inland Chinese cities where demand for air travel is just as high as the traditional coastal gateways.” Qatar Airways also states it will not stop its expansion worldwide, despite the effect the debt crises in the U.S and the eurozone are having on the global aviation industry. “Some weak airlines will not exist, but airlines, like us, with strong financial capability, can still grow during an economic downturn,” said Al Baker, adding that international trade is still continuing and the demand in some markets, including China and countries in Africa, is still increasing. Acquisitions Furthermore, part of Qatar Airways’ growth may also come from the acquisition of troubled European carriers – witness Etihad’s recent purchase of a 29 percent stake in airberlin. In recent years, Qatar Airways has been linked as a strategic investor in the likes of Olympic Airways (Greece), TAP (Portugal) and SAS, and the airline in early 2012 pulled out of advanced talks with now-‐bankrupt Spanair after Spanish regulators said state aid given to the loss-‐making carrier had to be repaid. Although any acquisition is ruled out in the near term by CEO Al Baker, Qatar Airways is also interested in investing in India when current foreign ownership limitations are lifted by the Indian government.


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Number 7 on 2012 our list of the world’s most innovative airlines is ‘no-‐frills chic’ carrier Virgin America. Easy to recognize thanks to its iconic cabin lighting and hip and forward-‐looking approach to airline travel, Virgin America has firmly established itself as a favoured choice among the urban, tech savvy flying demographic. The ‘un-‐official airline of Silicon Valley’ is also the only U.S. carrier to install power and USB outlets in all seats, and was the first U.S. airline to offer in-‐flight Wi-‐Fi on all aircraft in the fleet. True to its brand image, one of the aircraft in the fleet pays homage to the late Steve Jobs by painting his famous quote “Stay Hungry, Stay Foolish” on the side, while another aircraft is named #nerdbird, thanks to the large number of Wi-‐Fi users travelling on the San Francisco-‐Boston route. Based out of San Francisco International Airport, Virgin America has expanded from its initial focus on domestic long-‐haul point to point service to now include intermediate routes as it adds more destinations in the US. It also now flies to three popular holiday destinations in Mexico. The privately-‐held airline (an IPO is planned in 2013) airline has strived to transform the standard domestic air travel

experience from something that often is a ‘mass-‐produced’ purely functional experience into something much more evocative and stylish. Starting with the check-‐in areas at many Virgin America terminals (such as at LAX), one immediately notices the soft beat of club music and distinct lighting that set the tone for a unique travel experience. Quality instead of size Virgin America continued to drive significant growth in 2011, expanding its fleet from 34 A320s in January 2011 to 51 aircraft in May 2012. The airline has not turned in a profitable year since beginning operations in 2007 and experienced a net loss of USD30.8 million for the fourth quarter of 2011 in which revenues rose 45 percent to USD276.8 million. Nevertheless, Virgin America has aggressive expansion plans in mind and is targeting a number of new destinations in key US metropolitan areas. According to the airline’s CEO, David Cush, Virgin America was designed to be an airline for business travelers and, as such, wants to be present in the primary and dominant US business markets. Cush cited the influence of frequent flyer programmes and corporate sales programs as being the two greatest hurdles for a growing company like Virgin, but stated that, despite a

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tight economy and stiff competition, he believes that Virgin will prosper because of its unique services and amenities. Virgin America currently flies to 17 cities – mostly from SFO − but is seeking to reach as many as 30 or 40 destinations within the next five years. The airline is planning to more than double its fleet to 111 aircraft by 2019, and in early 2011 announced it had placed a 60-‐plane order which makes it the launch customer for Airbus’ new A320neo jet, with deliveries scheduled to begin in summer 2013. At the same time, Cush states that a critical component of its approach will be to not outgrow the airline’s current business model, and therefore perhaps limit the carrier to a fleet probably no larger than 150 aircraft. In-‐flight entertainment A key service differentiator for Virgin America is its sophisticated in-‐flight entertainment and communications (IFEC) platform, known as Red, which may very well be the world’s most feature-‐rich IFEC system. The 9-‐inch high-‐definition touch screens on each seatback feature live satellite television, the first ever seatback digital shopping platform, an open tab service, and interactive Google Maps with terrain view that tracks the flight’s location. Passengers can also use the system to chat with other passengers, play 3D games such as Doom, offset carbon emissions for their flight, or purchase snacks, meals, and beverages from their seats via Red. Flight attendants receive the orders via a tablet device and bring the ordered items to the seat Hybrid platform Further upping the ante, Virgin America has selected Lufthansa Systems’ new BoardConnect platform for the next iteration of its Red system. Besides offering entertainment via larger high-‐definition touchscreen seat-‐centric monitors, the ‘hybrid IFE&C platform’ – which is slated for a late 2012 release – will also offer passengers wi-‐fi connectivity through their seatback system and their own personal devices, as well as offer wireless access to content stored on an onboard server. Virgin America’s CEO David Cush says the new Red system will allow the airline to offer passengers “the best of both worlds.” […] “We want to give our

travellers more options instead of fewer, including the ability to multitask across platforms – just as they do in their lives on the ground,” he said. San Francisco T2 Virgin America operates its San Francisco hub out of the airport’s totally renovated Terminal 2, which opened in April 2011. The features of the terminal in many ways match the airline’s corporate ethos and its goal of remaking the travel experience through innovation, design, and a focus on technology with an eye towards eco-‐friendly sustainability. Re-‐built on the site of the old international terminal, T2 is the first LEED Gold-‐certified airport terminal in the US and re-‐used about 90 percent of the materials from the original building, including terrazzo flooring made from recycled glass chips. Other sustainable building techniques include walls of windows that makes most daytime artificial lighting unnecessary, a dedicated water bottle refilling station, and a new ventilation system that requires 20 percent less energy. Brand partnerships Describing its passengers as “influencers, buzz generators and trendsetters, who work in innovation-‐oriented industries such as fashion, film, media, technology, design,” Virgin America has been quick to team up with brands for product placement. Following earlier brand partnerships with the likes of eco-‐friendly cleaning products company Method, and lingerie brand Victoria’s Secret, Virgin America last year teamed up with Google to allow passengers to ‘test-‐fly’ the tech giant’s new Chromebook laptop computers for free. Virgin America’s passengers could use the computers onboard their flight and at select airport gates from July 2011 through January 2012. Flyers who borrowed a Chromebook also received a free Wi-‐Fi session onboard. The machines had to be returned at the arrival gate and Google staff was available to assist passengers at the Google Chrome Zone at SFO. In December 2011, Virgin America and Banana Republic held a holiday surprise for passengers waiting for their luggage at SFO airport. Inspired by a similar promotion done by Spanair, gift boxes with Banana Republic apparel arrived on the luggage belt passengers of flight VX837.


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Social media Virgin America has also been a frontrunner in the digital and social media arena and often one of the first to experiment with new social media tools and platforms. Twin Tested In September of last year, a promotional campaign from Virgin America used identical twins to reveal the benefits of its service over other airlines. Called “Twin Tested,” each twin was asked to travel alone on different flights; one person travelled with Virgin America and the other with an undisclosed competitor. A video diary was made for each journey and the twins reconvened afterwards to discuss their individual experiences. The videos are part of the promotional website called “Switch to Virgin America” which also features games and coupons for consumers. Groupon In February 2011, Virgin America was the first airline in the U.S. to initiate a campaign on Groupon to promote its new Chicago to San Francisco and Chicago to Los Angeles services. The offer was a USD 77 discount on the USD 350 fare for those that spent USD 7 on the coupon. In typical Groupon fashion the offer sold out in just 8 minutes in Chicago and in 45 minutes in San Francisco and Los Angeles. Spurred by the popularity of its Chicago offer, Virgin America offered another deal in early March for flights out of Dallas Forth Worth. Nearly 3,000 people signed up for this deal. Gilt City In November 2011, Virgin America partnered with luxury deal site Gilt City to offer the public a roundtrip charter flight anywhere Virgin America flies in the US for USD 60,000. In addition to the flight, the purchaser would get to name the airplane for the Virgin America fleet. Additional trailblazing efforts in the airline social media space have included offering free tickets to higher-‐profile Twitter ‘influencers’ via a partnership with Klout, Twitter scavenger hunts that offered the reward of discounted fares and other special hashtag sales events that have donated certain proceeds to charity.


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Latvia-‐based airBaltic stands out as an airline whose innovations have been featured many times on airlinetrends.com. In recent years, the carrier has transformed from a point-‐to-‐point low-‐cost carrier into a hybrid LCC, turning its Riga ‘North Hub’ into a transit point for travellers between Northern Europe, Eastern Europe, Southern Europe and Central Asia. AirBaltic offers passengers connecting through Riga 25-‐minute connection times, while other ‘hybrid’ features of the airline include services that are staple of mainline carriers, such as a separate Business Class cabin, an airport lounge and a frequent flyer program. AirBaltic further boasts a cost per-‐average seat kilometer that is on par with the likes of Easyjet and Norwegian and 30 to 40 percent lower than Finnair and SAS.

Restructuring AirBaltic has been growing its network quickly in recent years and currently serves over 60 destinations from Riga. The airline carried around 3.3 million passengers in 2011, compared with 1.4 million in 2006. However, airBaltic’s ambitious hub strategy (50 percent of passengers transits at Riga) has not yet materialized into a profitable operation for the airline. According to airBaltic’s new CEO Martin Gauss, 2011 losses hit more than EUR 85 million. In particular, airBaltic’s relatively older, fuel-‐inefficient fleet of B737-‐3/500s and Fokker 50s (the latter will be phased out at the end of 2012) are are a drain on the airline’s operational cost performance. Furthermore, the financial situation of the airline led to a public fight last year between airBaltic’s two shareholders, former CEO Bertolt Flick (who owned 47 percent of airBaltic) and the Latvian government (52 percent share) for control of the airline.

8. airBaltic


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After a long-‐running saga, Flick resigned from the airline in October 2011 as part of an agreement to increase the company’s share capital by the Latvian government, which also used the bankruptcy of one of Latvia’s banks to take full control of the airline. AirBaltic’s new CEO, former Malev boss Martin Gauss, has just launched a restructuring plan, which will cut costs by reducing the number of aircraft and modernising the carrier’s fleet. AirBaltic will also move away from a stringent focus on transfer traffic over its ‘North Hub Riga’ to a more point-‐to-‐point approach. A delegation from Latvia has also recently visited the Gulf Region as part of an investor roadshow to present the airline to potential investors, which included Etihad and Qatar Airways. Other airlines rumoured to be interested in the airline are Turkish Airlines and Hainan Airlines from China. Innovations Despite all internal turmoil, airBaltic continues to churn out attention-‐grabbing innovations. Along with differentiating its Business Class by serving passengers a 3-‐course meal based on organic, seasonal products from local Latvian farmers, freshly brewed Nespresso coffee, and complimentary iPads onboard and in its Riga lounge, airBaltic has come up with a host of innovative ancillary products, creative marketing campaigns, and the airline is one of the first carriers to launch a ‘social seating’ service. Social seating Following earlier initiatives by KLM and Malaysia Airlines, airBaltic has just launched its own ‘SeatBuddy’ social seating service, allowing like-‐minded flyers to sit next to each other. On the airline’s website, passengers can opt to choose from their ‘flight mood’ – social (business talk, easy chat) or non-‐social (work, relax) – and whether they’d like their seat neighbour to be like them or different. The concept uses Facebook, LinkedIn and Twitter to find the best matches, assigns seats and passengers get a message saying what they have in common with their seat pal. Customer information is collected in a secure database and the closest match available on the same flight is identified automatically without disclosing passenger identity or any personal data. For now, social seating servie is free of charge, and airBaltic SVP sales and marketing Michael Grimme said “future commercial potential” is being explored. The first test

flights using the service will launch at the end of June 2012. Ancillary revenues In recent years, airBaltic has rapidly grown its ancillary revenues. According to airBaltic’s Vice President of Communications Janis Vanags, extra revenue per passenger exceeded EUR 12 last year – compared with as little as EUR 2 in 2007 – and the airline‘s percentage of ancillary revenue as part of total revenues is approaching 15 percent. The main sources of ancillary income for airBaltic are checked bag fees, payment fees, add-‐on products (insurances, warrantys, hotels), and buy-‐on-‐board products. Travel Megastore According to Vanags, airBaltic’s approach towards ancillary revenues is to operate as a ‘travel megastore’, where customers can buy everything necessary for the journey before the flight, during the flight, and after the flight. Says Vanags, “As a customer you can buy everything you want in our Travel Megastore. You start with a ticket, then add a hotel booking, car rental and go on to buy sunglasses for your beach holiday, a travel bag or add flowers for your girlfriend 11 km up in the sky.” […] “People can pick up their sunglasses on the plane, as they would in a shop. The flight ticket is just the entrance to the megastore – and the cheaper the ticket is, the easier it is for them to come in and the more they can buy.” airBalticBag A prime example of an innovative ancillary product is the airline’s airBalticBag. AirBaltic normally charges passengers in Economy a fee of EUR20 to 30 per checked bag per one-‐way flight. However, instead of just another mundane transaction, regular flyers with the airline can purchase an airBaltic-‐branded Samsonite suitcase that comes in two sizes (EUR169 and EUR181 respectively), and carry it as free checked luggage on an unlimited number of airBaltic flights for twelve months. Passengers are required to register for airBaltic’s BalticMiles frequent flyer program in order to receive a personalised ‘free baggage tag’ with their full name and BalticMiles number, which must be attached to the Samsonite suitcase and correspond with the name on the flight ticket. BalticTaxi Stretching the airBaltic service to journeys both to and from the airport, the airline in 2010 established its own taxi company, BalticTAXI, as taxi drivers in Riga often


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charge foreign visitors too much for rides and airBaltic felt this was harming the image of its hub. BalticTAXI’s fleet of Toyota Corolla vehicles are staffed by professional uniformed drivers, and a fixed price is charged for the journey from the airport to any location in Riga. Passengers can purchase pre-‐paid taxi vouchers onboard airBaltic, and members of the airline’s BalticMiles loyalty program receive a 10 percent discount. To promote the taxi service, ads for BalticTAXI can be found in airBaltic’s in-‐flight magazine and a cabin crew announcement is made after landing in Riga. iPad rental AirBaltic also rents iPads to passengers travelling in Economy on flights longer than 2 hours and 30 minutes for a fee of EUR 9. Up to 10 iPads are available on each flight, which airBaltic rents from catering company LSG under a profit-‐sharing agreement. Upgrade option, delayed arrival warranty Two other innovative ancillary products launched by airBaltic both include an element of gambling and chance. For an EUR3 fee, passengers in Economy can participate in an OptionTown ‘lottery’ to qualify for a cheap last-‐minute upgrade to Business Class. AirBaltic’s ‘Delayed Arrival Warranty’ meanwhile lets passengers bet against a late arrival of their flight. For a non-‐refundable fee of EUR24 per one-‐way journey, passengers receive a double refund of their ticket price if the airline arrives one hour behind schedule at their destination. Discounted tikets, TV sets, cars, holiday houses Taking its ‘travel megastore’ concept quite literally, airBaltic in the past two years has held several onboard retail campaigns in which it offered passengers the option to buy discounted flight tickets, flat screen tv sets and even a custom-‐designed Mini Cooper car in airBaltic colors and sporting the text “I Love Flyin.” So far, results of the onboard retail campaigns have generally been mixed. The airline noted that the direct sales of TV sets on board were lower than anticipated, though several people have bought a EUR50 voucher that gives them the option to purchase a Mini Cooper. Despite the modest sales results, the deals have created significant buzz for the airline. The next campaign may offer passengers the chance to buy a Latvian manor house or beach villa onboard, in a

promotion dubbed ‘Castles in the Sky’. Says airBaltic’s Vanigs, “These products add a lot to our visibility and expand the brand. It’s often not the technology, but creative limitations that restrict new ancillary revenue generation. We are not afraid to experiment, despite the fact that success is not guaranteed.” Experiental marketing AirBaltic’s creative streak can also be seen in its promotional activities, where the airlines seems to have a preference for 3-‐dimensional, moving concepts. Shoevertising Last year, airBaltic launched a new advertising campaign that featured several airline-‐themed shoe designs branded in the airline’s colours. The shoes were meant to illustrate the various reasons behind a consumer’s decision to take advantage of a promotional fare and were featured in print ads, outdoor billboards and online banners. The shoes themselves created such an amount of interest by the general public that people began asking airBaltic via Facebook and Twitter where they could buy the shoes. AirBaltic was quick to embrace this marketing opportunity to gain some free exposure and turned one of the designs into an actual limited edition shoe, which for EUR55 can be purchased at the airline’s online shop and in duty free stores at Riga Airport. BalticBike In 2010, airBaltic launched a BalticBike bike sharing scheme in Riga and in the seaside resort of Jurmala to promote an inexpensive and eco-‐friendly way for visitors to get around town. Registered members can pick up one of the 150 bicycles at 19 locations in Riga and 3 in Jurmala for LVL0.70 (EUR1.00) per hour with a maximum of LVL8 (EUR11.40) a day and EUR 100 a month. To rent a bike, members call the phone number printed on the bicycle to receive a code that unlocks the bike. Bikes can be returned to any station and another call completes the rental. Says airBaltic’s Vanags: “BalticBike makes a marginal profit, but it is hugely popular among the city residents and tourists, and hugely visible, and so irreplaceable in advertising.”


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At In 2001, when CEO Tony Fernandes bought AirAsia for a token MYR1 plus MYR40 million (USD 12.5mln) debt, it was a failing state-‐owned regional carrier with only two aircraft. In just a decade, the Kuala Lumpur-‐based low-‐cost carrier (LCC) has become a pan-‐Asian airline group serving over 75 destinations with a fleet of over 100 aircraft. In June 2011 the airline signed an USD 18bn deal with Airbus for the delivery of 200 A320s over 15 years. Besides owning a stake in its long-‐haul sister airline AirAsiaX, AirAsia has local subsidiaries in Thailand and Indonesia, joint ventures in the Philippines and Vietnam, while an agreement with All Nippon Airways will see AirAsia Japan take to the skies in August 2012. One of AirAsia’s key advantages lies in being in the right place at the right time. The airline’s pace of growth – which has made it Asia’s largest LCC with a market capitalization of USD 3 billion – is underpinned by emerging regional Asian economies, whose average annual growth rates of around 7 percent are continually lifting millions more people every year to

an economic level at which budget airline flights are affordable. Positioning AirAsia’s stated goal is to be “the lowest cost airline in every market they serve” and its rigorous focus on expenses saw the airline charging a fee for passengers who want to use check-‐in desks at airports. While this now only applies to domestic passengers, it’s just one example that has led AirAsia to operate with the world’s lowest unit costs (in terms of available seat kilometres), which are lower than both Southwest Airlines in the US – who invented the low-‐cost model – and Europe’s ultra low-‐cost carrier Ryanair. In the air, AirAsia is a classic LCC that offers few additional frills. AirAsia’s fleet of more than 100 A320 aircraft all have 186 leather seats and passengers pay for checked bags, can reserve their seat for a fee and buy their food and beverages onboard.

9. AirAsia


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On the ground at its hub at Kuala Lumpur International Airport, however, AirAsia has added more hybrid features such as a ‘Fly-‐Thru’ transit service for connecting passengers with flight transfers of at least 90 minutes. In March 2011, the airline launched a ‘Red Carpet’ service at 8 airports, including Kuala Lumpur, Singapore and Jakarta, where for a fee of approximately USD35 passengers can make use of priority check-‐in, fast track through security, lounge access, as well as priority boarding and luggage arrival. Additionally, in 2011, AirAsia launched its own frequent flyer program and is also trialling one of the world’s first onboard immigration processes. Like many LCCs, ancillary revenue is a big cash-‐generator for AirAsia. In 2010, the airline recorded 18.7 percent of total revenues coming from ancillary sources, making them some of the higher percentages in the LCC space. Long-‐haul, low-‐cost Launched in November 2007, AirAsia X has been one of the pioneers of the long-‐haul low-‐cost concept. The airline, which is owned by several investors – including AirAsia, its founder Tony Fernandes and Richard Branson’s Virgin Group – currently operates a a fleet of 11 Airbus A330s and A340s with 20 A330s and 10 A350-‐900s on order. In recent years, AirAsia X has opened routes to Europe, Australia, China and India, but over the past year has scaled its network back. Citing high fuel costs and increasing airport charges as two main reasons, AirAsia X has suspended its London, Paris, Christchurch, Abu Dhabi, New Delhi and Mumbai services. According to AirAsia X CEO Azran Osman-‐Rani, the airline will refocus on core markets in Asia-‐Pacific where it has sufficient scale and can be profitable. As part of its renewed focus on the high-‐growth Asian region, AirAsia X plans to add flights to Japan and open routes to Adelaide, Fukuoka, and Busan. Onboard experience AirAsia X offers passengers in its premium cabin an angled lie-‐flat business class seat – a better product than rival long-‐haul LCC Jetstar’s ‘Premium Economy’-‐style recliners – and an unbundled long-‐haul economy product with, among other features, paid catering. The airline also announced it will trial a wireless IFE system in 2012, with some of the content available for

free to passengers. The system, provided by Tune Box – which is part of AirAsia’s parent Tune Group – will employ Samsung’s Galaxy Tablets. Ancillary revenues At USD41.60 per passenger, AirAsia X boasts the industry’s highest ancillary revenue per passenger. Its latest product is what it calls an ‘empty seat option’, developed for the airline by a company called Optiontown. The empty seat option promises passengers a chance to reserve one or two empty seats next to them for a nominal fee when they sign up and pay a small fee (ranging from USD 10 to 16). AirAsia X will email the status of empty seat(s) availability to the customer between four and 72 hours before flight departure. If empty seat(s) are ultimately booked by other passengers, the fee will be refunded automatically to the customer. Not only do unused seats generally make the travel experience more comfortable for passengers, but they give the airline an opportunity to generate some revenue on seats that are normally non-‐productive assets once the airplane doors are closed. The airline estimates earnings of up to USD 1 million in 2012 with its empty seat option. Social media AirAsia is also one of the most active airlines on the social web, with an extensive presence across the standard platforms of Twitter (over 350,000 followers) and Facebook (over 1.4 million fans), as well as China’s Sina and RenRen. Social media rating agency Eezeer has consistently rated AirAsia as one of the most actively tweeting airline accounts and perhaps more importantly, one of the most active ‘listeners’ to customer opinions on the social web. Another big part of AirAsia’s social strategy is the implementation of the industry’s first social CRM platform – called ‘Ask AirAsia’ and accessible via AirAsia’s website and Facebook page – where customer service is provided via live chat, webmail, twitter and intelligent automated responses. The airline recently has closed its telephone-‐based service channel, redirecting all customers to the Ask AirAsia online channels instead. AirAsia x Malaysia Airlines In August 2011, AirAsia’s parent Tune Air took the unprecedented move of acquiring 20.5 percent of Malaysia’s national carrier, Malaysia Airlines (MAS) in return for a 10 percent holding in both AirAsia and


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AirAsia X by Khazanah, Malaysia’s sovereign wealth fund and the majority shareholder of MAS. The share swap was aimed at helping the carriers compete against multibrand competitors such as Scoot/Tiger Airways/Singapore Airlines and Jetstar/Qantas once the Southeast Asian open-‐sky policy comes into effect in 2015. Furthermore, many of Malaysia Airlines’ domestic and regional routes would be picked up by AirAsia, while MAS itself will be left to focus on the premium long-‐haul markets, which would reduce overlap and allow MAS to cut expenses and shore up its balance sheet. However, the cross-‐ownership agreement between the two airlines has recently been cancelled because of strong opposition to the deal from the 15,000-‐member Malaysia Airlines Employees’ Union on concerns about job losses and the dominant influence of AirAsia. Both airlines now plan to collaborate in key operational areas such as ground handling, training and MRO. Entrepreneurial Tony Fernandes In addition to founding AirAsia and AirAsia X, AirAsia CEO Tony Fernandes also runs Tune Group, AirAsia’s parent company, which, like Richard Branson’s Virgin Group, has ventured into businesses as diverse as hotels, an online travel agency (Expedia Asia, courier services, a cell phone company (Tune Talk), financial services (Tune Money), entertainment (Tune Tones) and sports (Tune Sports). Fernandes has also been dubbed the ‘Asian equivalent’ of Donald Trump and Sir Alan Sugar, with appearances in the first edition of The Apprentice Asia, which will air later in 2012. Furthermore, Fernandes is rumoured to be setting up a new premium regional airline, likely to be called Caterham Jet. The name comes from last year’s purchase by Fernandes of British sports car manufacturer Caterham Cars, which has lent its name to a rebrand of Fernandes’ Formula 1 racing team Lotus to Caterham Racing. Caterham Jets – which has yet to be granted an operating licence by the Malaysian government – is expected to fly out of Subang Airport, Kuala Lumpur’s former international airport, which is located considerably closer to the city centre than the current KLIA airport in Sepang.


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Last year’s 2011 Innovative Airlines ranking awarded All Nippon Airways (ANA) with a second place thanks to its ‘Inspiration of Japan’ cabin and service concept, the opening of a new international terminal at its Tokyo Haneda hub, its business-‐class only ANA Business Jet service, the MyChoice ancillary revenues program, as well as passenger-‐friendly amenities such as women-‐only toilets onboard, sleep support kits on late night departures, and wireless mobile phone chargers in its domestic lounges. Bold strategic moves Aiming to fill the void left by the restructuring of Japan Airlines, ANA – which is currently the ninth largest airline in the world by revenues and the largest in Japan by passenger numbers – seeks to become one of the major airlines in Asia. Cornerstones of this ambitious strategy are plans to expand international capacity by 22 percent in the next two years by capitalizing on its new Boeing 787 Dreamliners, of which it will have 20 in operation by March 2013. Furthermore, the airline is targetting new customer segments by launching two low-‐cost carriers in 2012.

Boeing 787 Dreamliner The first airline to receive the B787 Dreamliner in September 2011, ANA so far has received the first six aircraft of 55 B787s on order, which it says is key to its expansion in Asia and Europe. The 787 is a twin-‐aisle airplane that can accommodate up to 250 passengers on flights up to 8,200 miles (15,200 km). As the first large passenger jet to have more than half its structure made of lightweight composite material instead of aluminum, the fuel-‐efficitnet 787 is the only mid-‐size airplane capable of long-‐range routes, making so-‐called ‘thin routes’ economically viable. The interior of the 787 Dreamliner provides passengers with a more spacious experience than on other twin-‐aisle planes, because of a ‘vaulted’ 8-‐foot ceiling, large windows with electronic shades, while passenger comfort is improved by higher levels of humidity and maintaining air pressure at the equivalent of an altitude of 6,000 feet (1,800 meters) in comparison to 8,000 feet on other aircraft.

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Inspiration of Japan ANA’s 787s feature the airline’s ‘Inspiration of Japan’ cabin (launched in early 2011) and have two classes – Business and Economy. The capacity ranges from 158 seats (46 full-‐flat Sicma Skylounge business seats, 112 Sicma AIRgonomic FX seats in economy) for aircraft flying long-‐haul routes to 222 (42 Sicma cradle seats in business, 180 economy) on short-‐haul routes. On ANA’s long-‐haul routes the full-‐flat beds in Business Class are configured in a staggered layout (1-‐2-‐1 and 1-‐1-‐1) that allows aisle access from every seat. In the Economy cabin, passengers are seated in fixed-‐shell seats that recline inwards. All classes feature AVOD LCD screens, in-‐seat power, and USB ports. ANA’s 787s also sport a self-‐service bar, as well as a Toto ‘washlet’ toilet in each class, which are commonplace in Japanese homes. ANA currently operates its 787s on domestic routes in Japan and in January 2012 deployed the aircraft on its first long-‐haul service from Tokyo Haneda to Frankfurt, and just launched a new service from Tokyo Narita to Seattle. ANA will deploy its Dreamliners mostly to cities that are served by a limited number of direct long-‐haul flights, because they don’t have enough demand to support large aircraft. In the second half of 2012, the airline will start services to San Jose in California, while in Europe, ANA has also indicated it plans to start direct service to second-‐tier airports such as Brussels in April 2013, with Dusseldorf and Barcelona on the radar as well. Peach, AirAsia Japan Competition in Japan’s air travel market has long been restricted by a lack of landing slots at major airports, high landing fees and, until deregulation in 2008, restrictions on the amount of discounting allowed. Furthermore, the focus on high service has been used as an excuse for why low-‐cost carriers (LCC’s) could not gain a standing in the country, which is the third largest aviation market in the world and where market share of LCC’s is less than 10 percent. As a growing number of South-‐Korean and Chinese LCC’s – as well as long-‐haul low-‐cost carriers such as Jetstar (routes from Australia and Singapore) and AirAsia X (routes from Kuala Lumpur) – are taking advantage of the liberalization of the market in Japan, ANA and Japan Airlines are entering the LCC segment as well. Furthermore, Japan’s extensive high-‐speed

rail network has also made profits for ANA’s domestic operations hard to achieve. To cut costs, ANA in 2010 introduced paid catering (which includes fresh-‐tapped beer and Starbucks coffee) on domestic flights, but in order to make air travel a a competitive alternative, as well as to attract a new customer segment, ANA has just launched a low-‐cost operation in Osaka and will launch another low-‐cost carrier in Tokyo later this year. Peach ANA in March 2012 launched a new low-‐cost subsidiary, called ‘Peach’ – which happens to be an anagram of ‘cheap’ – in partnership with Hong Kong-‐based First Eastern Investment Group. Peach currently operates flights between Osaka’s Kansai International Airport and Fukuoka, Sapporo, Nagasaki and Kagoshima, with Seoul and Tapei to follow later in 2012. With fares that are some 50 percent lower than those offered by ANA’s mainline operation, Peach aims to stimulate additional demand for air service. Peach’s fleet will consist of 10 A320s by the end of 2012, and the airline aims to carry 6 million passengers annually within 5 years of operation. Operating independently from ANA, Peach has started on a good note: the carrier enjoyed an average load factor in its first month of operation of 83 percent, exceeding its own 75 percent forecast. Peach’s A320s accommodate 180 passengers and feature leather seats with covers in two colours: purple and black. Peach’s offers a simple two-‐tiered fare structure: The ‘Happy Peach’ fare includes only the basic seat and one piece of carry-‐on luggage, while the ‘Happy Peach Plus’ fare includes checked luggage, selection of basic seat, no fees to change flights and reduced cancellation fees. Buy-‐on-‐board catering is also available – but no (portable) IFE – and extra-‐legroom seats can be booked for an additional fee of around USD10. Commenting on the proposition offered by Peach, aviation consultancy CAPA said, “While Peach’s offerings may be underwhelming for those versed in LCC commercial strategy, they will still come as a shock to the Japanese, who have broadly not experienced a home-‐grown LCC.” AirAsia Japan ANA has also teamed up with AirAsia to form AirAsia Japan, a new low-‐cost carrier that will be based at Tokyo’s Narita International Airport. It will start flights


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to Fukuoka, Okinawa and Sapporo when commencing operations in August 2012, with international flights to Busan and Seoul to follow in October. AirAsia Japan is counting on AirAsia’s pan-‐Asian operations and marketing to help it carry 10 million passengers annually within five years. Said Shinichiro Ito, CEO of ANA, “We decided that the fastest way for us to establish a LCC was by utilising AirAsia’s know-‐how and brand. By combining AirAsia’s business model and brand with ANA’s depth of knowledge of the Japanese market, we aim to bring new value to our customers […] and generate new demand.” Adds AirAsia Japan CEO Kazuyuki Iwakata, “We’re aiming at families who want to enjoy the weekend or people who play Pachinko and we want them to be able to think about taking a flight as easily as they would hop on a bus.” […] “The introduction of low-‐cost service will give people another option for the weekends.” AirAsia Japan also plans long-‐haul services to Thailand, Singapore, Indonesia, Hawaii, Guam, Australia and New Zealand once it introduces A330 widebody aircraft to the fleet from 2013 on. AirAsia CEO Tony Fernandes has also indicated that the AirAsia Japan hub at Narita may serve as a connecting point between Southeast Asia and the United States for AirAsia. Multibrand strategy Commenting on the launch of two LCC brands, instead of one, ANA said that it has been seeking opportunities to launch a new low-‐cost business based at Tokyo Narita and, after analysis, has concluded that partnering with an existing low-‐cost carrier was the best option. Furthermore, with a population of 20 million, the Kansai region around Osaka is large enough to accommodate another LCC (Peach). Following its entry into LCC business, ANA will also adopt a new corporate structure by April 2013 to reflect its position as both a full-‐service airline and a low-‐cost carrier. ANA, AirAsia Japan and Peach brands will operate under the holding company, which ANA believes is a more optimal organizational structure for building a multi-‐brand strategy between the existing ANA brand and the new LCC brands. For a more elaborate take on what the launch of two LCC’s will mean for ANA, see this article by CAPA.

Authors Raymond Kollau | Founder of airlinetrends.com and a regular contributor to Airline Passenger Experience and Onboard Hospitality magazines. Raymond has also been quoted as an industry expert by media such as CNN, MSNBC and The New York Times.

Brian Pillsbury | Brian is a commercial aviation enthusiast and a veteran business traveler based in Los Angeles. His contributions for airlinetrends.com focus on trends and innovations at airports around the world, as well as airlines from North America.

Vivek Mayasandra | Vivek is an airline enthusiast and industry professional with experience in marketing, branding and operations. In addition to his writing at airlinetrends.com, Vivek created the Take Flight Project to bring together stories of inspiring people who’ve taken flights to change their world.

About airlinetrends.com

Airlinetrends.com is an independent industry and consumer trends research agency that is monitoring the global aviation industry for commercial innovations launched by airlines and airport in response to industry trends and changing consumer behavior.

We report our findings via a free monthly newsletter and public speaking engagements, as well as in-‐house trend sessions and commissioned trend reports.

For more information, please visit www.airlinetrends.com or contact us at [email protected]

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