What Keeps Giants Awake (Part 2)

Leave a reply

Well hello there. We hope you had a great weekend, and can’t resist sharing what this looks like right now in our backyard. It’s warmer than Cancun!

Despite all evidence to the contrary, yup, we love this city (in full disclosure – we attempt to live in the present, and are writing during the summer, so…)
The feedback from our last post was very insightful, so we thought we’d dig a bit deeper and be a bit more concrete with some of the terms that are standard in the airline industry.

Here we go:

ASM: Available Seat Miles

This is a measure of how far a seat flies. It doesn’t matter whether there’s a passenger in it or not. So, if you have a plane with 100 seats, and it flies from Seattle to New York (~2,850 miles), you have 2,850 x 100 = 285,000 ASMs.

CASM: Cost per Available Seat Mile

Similar to ASMs, this is a measure of how much it costs to operate one (empty or filled) ASM. As you probably can tell, this will vary per airline operation. But it’s simply:

Total Operating Expenses / Total ASMs.

PM: Passenger Mile

This is a measure of passenger travel, basically an individual in a seat flying for one mile. If Batman flies 50 miles, he’s basically generated 50 Passenger miles. And who wouldn’t want to fly with Batman?

Now let’s get to the money metrics.

RPM: Revenue Passenger Mile

This is a measure of paying passengers traveling. So if Batman pays for his flight above (assuming his BatWing is getting retrofitted), he’s generated 50 RPMs.

Yield: Revenue per Passenger Mile

This is the measure of how much revenue each passenger mile is generating. This is a function of:

Total Passenger Revenue / Total RPMs

This will also vary by carrier, as airlines charge different rates for different segments.

LF: Load Factor

This is where things get a bit complicated. Actually, not really, but you do have to tie two concepts together. The Load Factor is a function of basically how productive an airline is: it’s how much the airline is producing relative to the capacity it has available. It’s almost like miles per gallon for automobiles – how much value the aircraft is getting based on what it has available. Here’s the formula:

Total RPMs / Total ASMs

So if there were 100 seats available (100 ASMs – you’re catching on!) and only 50 paying passengers boarded (50 RPMs), the load factor would be 50%.  If every seat were filled – 100%!

RASM: Revenue per Available Seat Mile.

This is described as probably the best basic measure in the industry. You also have to tie two of the above concepts together – load factor and yield.

R/ASM = Load Factor x YIELD

 Let’s go through an example.

Here’s a Boeing 737 with a class 2 configuration, making that 180 seats. Let’s assume the following:

  • All 180 seats are filled
  • The flight is 100 miles long.
  • The airline’s total operating expenses are $1,000
  • The airline’s total revenue = $5,000

Here we go:

  • Available Seat Miles: 180 seats x 100 miles = 18, 000 ASMs.
  • Cost per Available Seat Mile: $1,000/18,000 ASMs = $5.5 /mile
  • RevenuePassengerMiles: 100 miles * 180 passengers = 18,000 RPMs.
  • Yield: $5,000 / 18,000 = 27.7%
  • Load Factor:  18,000 / 18,000 = 100%
  • Revenue/ASM: 1 * 27.7% = $27.70

These are the metrics that airlines use to monitor their operations & compete in the industry. Having these handy will help us dig deeper into what it means for customers and how airlines work to optimize the customer travel experience.

Until next time,

@flightspeak.

What Keeps Giants Awake

Leave a reply

Well hello there.

We hope you had a great weekend. We’ve been a bit busy lately - we had our launch party recently and have been prepping our next major update on the flightSpeak app. We haven’t really talked much about that, but we will shortly.

The air travel industry has also been busy – we’ve had drunk pilots (Seriously!?!?!), taxis providing runway lighting, and stepping outside the travel industry for a bit, the all-out threat of nuclear war. Not bad for April. Before we jump into talking about what we’ve been up to, we thought we’d take a look at one of the giants of the airline industry and find out what keeps them up at night. You guessed it – Delta Airlines (DAL).

DAL is massive. They currently own 574 aircraft, have ~78,000 employees, and command over 192 billion revenue passenger miles a year. That’s enough miles to travel around the world approx. 50 million times. My goodness. (By the way, our favorite group: Delta TechOps. Way cool)

Now that makes them not just big, but a BIG GIANT.

We spent some time taking a look at their annual report and tried to identify what keeps them up at night. We actually had a few surprises, as you would think that the world’s largest airline is immune to quite a few things. After all, giants have no dealings with mere mortals. What we found is actually the opposite- the giants of the industry are exposed to many of the other risks that other passenger airlines are exposed to, and even more so.

Here’s a little graphic we put together:

What We Believe is Missing.

Identifying risk factors is the first and easiest way to highlight areas where mitigation strategies need to be built and prioritized. We found something worthy of calling out though: Nowhere in the identified list of risks does DAL explicitly talk about the priority of the traveler experience, nor do they address the imperative of designing and maintaining a unique DAL customer experience that is 2nd to none.  While it seems this is a given, the omission of its mention from a GIANT like this is somewhat…mind-boggling.

One of our fundamental beliefs here at flightSpeak is that we believe that the traveler deserves a stronger voice in the travel experience. That means they get center stage and should expect not just to be chauffeured from point A to point B, but rather to have an unmatched experience in the sky. With so many carriers, that should be what keeping these giants up at night. We think of the fundamental questions such as:

  • Are our passengers happy?
  • Are they delighted with the experience?
  • Will they come back?
  • Will they bring friends with them?

We believe that there can be a measure of customer delight…and that’s worth losing sleep over. In our eyes, any sleep lost should be over YOU.

@flightspeak

Venti Feedback Please. Stat.

Leave a reply

Hello there. We hope you had a great weekend.

We believe that all good products should solve a problem in a way that is unique, cost-effective, and now a new emerging requirement – have a mixture of beautiful design, simplicity, and fun.  Whether or not we’ve fully embraced these is yet to be seen; however, we do know that we started with a problem we observed. Let’s step back a bit.

The Air Consumer Travel Association (http://www.dot.gov/airconsumer ) is a part of the Department of Transportation that monitors consumer complaints. Here’s a description of what they do:

The Office of the Assistant General Counsel for Aviation Enforcement and Proceedings, including its Aviation Consumer Protection Division, monitors compliance with and investigates violations of the Department of Transportation’s (Department) aviation economic, consumer protection, and civil rights requirements. The Office also provides legal review and support on aviation economic licensing matters.

Beyond the funny super long name (27 syllables at our first count), this group plays an important role in capturing passenger feedback, especially when as a traveler, you don’t see recourse in getting help with your challenge. There are very many outlets for venting; however, it’s difficult to assess which one of these is particularly effective. It’s safe to say that this team has a lot to improve on, as the mode for reaching out is a web form: http://1.usa.gov/10LOLvP . We’re glad to see they have a separate process for safety and security issues.

The agency puts out a report each month about passenger complaints. We were able to dive into January’s report and with a little help from infogr.am, here’s what we built:

These resonate pretty well with our flying experiences as well. First of all, the majority of feedback from folks is in the complaint category. With only 2 compliments, there’s definitely room to improve.

Here’s what the breakdown of those comments are:

 

The Challenge

The challenge that airlines have is that the consumer experience is just one of the many things they have to deal with. (We’ll talk about this in an upcoming post). We believe that they actually do care about the feedback coming their way. However, that feedback is incredibly large, very unstructured, and comes from multiple sources. This makes reaching out to customers and correcting issues extremely difficult to act upon. The feedback process is asynchronous, and as such, makes it difficult to react to customer feedback quickly.

We’ll go into more detail in our next post. Until then, we’re proud to share that v1.0 of How Was Your Flight? is now available on the Android Marketplace! You can find the link here: http://bit.ly/14tm0HK!

Until next time,

@hwyflight

 

It’s A Pleasure To Meet You.

Leave a reply

Hello World. This is our first blog entry, on what should (fingers-crossed) be the last week of product development before our app hits the app store.

So what’s the hoopla all about?

Good products solve a problem. Great products and services see that gap and create a simple and creative way to fill it. Hopefully that filler kills the mind the gap announcements (Ha!) and also provides value at the same time.

It started with a something simple – a love for travel. As we worked to conquer our wanderlust, there were three things that we observed:

1. Most people purchase their tickets by price. Even frequent flyers and business travelers have become price-conscious buyers, and while loyalty programs are excellent benefits, switching costs are extremely low in the airline industry.

2. What people pay for is directly proportional to the experience they expect. Nothing’s more true when it comes to airfare and air travel. If I’m going to pay a first class fare, by golly I better get a first class experience. If not, expect me to pack my bags and go somewhere else. Similarly, if I can eke out a $99 ticket to my destination, I literally count myself the luckiest traveler on the planet for finding that fare and the minimum I expect is that the airline will get me to my destination safely, and *hopefully* my bags will arrive.

These two dynamics are subtle but fascinating – there’s a huge match between the experience people expect and people pay for. But should that be the case? To a certain extent. However, we think differently on what the baseline of a great flight experience should be.

3. What’s taking soooo long? Everyone that has traveled has experienced this. From the moment you land and are once again bathed in the warm embrace of being able to use your electronic device, to when you’re actually able to leave the plane, there’s the awkward looong wait. We see that wait as an opportunity.

4. Dude – it’s so great to see you! The last piece is what we used as our north star in naming the product, as it’s the first thing that your friends/family/colleagues ask. You guessed it: “How Was Your Flight?”. Soon after that, the flight experience sharing begins.

That brings us to our product – get ready for marketing speak.

“How Was Your Flight?” is a free smartphone application that allow travelers to rate their flight experiences, share them with their friends, and discover local offers in the destination city.

That’s our app in a nutshell. It’s great to meet you too.

Our next post: what the problems are, and how we think we can help solve them.

@hwyflight.