In this episode, we chat with Industry Veteran Kevin Knight, President and CEO of Aerostar Advisors, about transformations of the airline business model and the importance of the customer experience.
Kevin has been in the travel industry for many years. He recalls that in the past, airlines used to offer a single product, whereas now they focus more on the customer and how to develop products that the customers want, as well as provide a unique travel experience. He predicts that airlines will become more customer-focused in the short-and long-term, as airlines are looking not just at data but at developing relationships with their customers.
In This Episode
[0:40]: Shifts and Trends in the Travel Industry
[1:50]: Obstacles to Bringing Better Customer Experience to Life
[4:35]: Current Disruptors to look out for
[8:47]: Where should airlines focus?
Aditi: Hello and welcome to PROS Travel Podcast Series, the view from 30,000 feet. I'm your host, Aditi. In this episode, Kevin Knight, President and CEO of AeroStar Advisors sits down with my colleague, Stanislava, to talk about the transformation of the airline business model and how customer experience is a never-ending journey. Let's listen. ...
Stanislava Yordanova: Hello everyone. I'm Stanislava Yordanova, and I'm part of PROS Travel Marketing team. I'm excited to have Kevin Knight with me.
Kevin Knight: Thank you. It's a pleasure to be here today. It's great conference and-
Stanislava Yordanova: Great to have you.
Kevin Knight: I'm Kevin Knight. I'm President and CEO of AeroStar. Prior to that, I worked at Etihad Airways, United Airlines, so a lot of years in the industry.
Stanislava Yordanova: Yeah, so you've seen a lot of shifts and a lot of evolution in the travel industry. Can you share your observations? You talk to many airline executives. What trends do you see currently impacting travel in the way airlines sell their products?
Kevin Knight: Yeah. It's really an exciting time in the business today because what we're seeing is we're seeing a fundamental shift in the business model itself. Historically, and when I started many, many years ago, the airlines basically offered a single homogeneous product. It was transportation to get you from point A to point B. What we're seeing today is we're seeing kind of a transformation of that whole business model to one that is much more focused on the customer, one that seeks to understand who they are, what they want, and then to develop the products, the services that they're looking for and really to provide that unique travel experience whether it's in the air, on the ground, really throughout the entire travel experience.
Stanislava Yordanova: Yeah. It's really interesting times for the industry. What do you think are the major obstacles to bringing this better customer experience to the passenger? How are airlines looking to keep up with the pace of how passenger expectations are shaping?
Kevin Knight: Well, it is the airline industry, so challenges are plentiful and many, but I think some of the major challenges that the industry faces today, first and foremost, focus around technology. For many airlines out there today, the technology that they're using was really developed, in some cases, decades ago. It's very rigid and inflexible. It's not easy to use for the customer, and it certainly doesn't satisfy the desires and the expectations that customers have today. So, I think that that's one of the major challenges. Another one I think is this is a changing business like all businesses, and so just dealing with that change and the rapid pace of change, I think, is again, one of the major challenges that businesses and airlines face today and will continue to face going forward.
Stanislava Yordanova: You mentioned technology, but is it only about technology? Is there a challenge when it comes to the mindset within their organization and how departments work and interact with each other?
Kevin Knight: Yeah, absolutely. It's more than technology. Technology is the enabler, but it really is a cultural shift for any organization. It's a change of mindset to how they're going to view the customer, how they're going to view their business, and how they're really going to go to market.
Stanislava Yordanova: Yeah. So, where do you see airlines being headed short term and long term? What is on their agenda that's keeping them up at night?
Kevin Knight: So, that's an excellent question. I think short term as well as longterm, I think we're going to see airlines and the whole industry space kind of evolve. As mentioned, it's going to become much more customer-focused. Whether you're a low cost carrier or you're one of the full service legacy carriers, I think up and down the stream, customer and customer focus is going to be a key component. With that, I think, is going to be a very intense focus on data, really understanding the marketplace, understanding who the customers are, understanding what their individual and collective needs are, and then really developing the products and services around that, that they can deliver to those customers to develop a true relationship with them. Not just a transaction but a true relationship with them.
Stanislava Yordanova: What should airlines look out for? Who are currently the disruptors on the market that are impacting the way airlines do business?
Kevin Knight: Well, that is the multi-billion dollar question, right? Unfortunately, my crystal ball isn't that good, but clearly, you've got companies like Google, you've got companies like Amazon that are, I think, can become much more active in this space. Just in the last week, we saw Amazon announced the launch of booking product in India, one of the fastest growing travel markets in the world. They clearly have the capabilities. They clearly have access to market given their wide and varied customer base. So, I think we need to keep an eye on them. Beyond that, I'm sure that there are a lot of small companies, individuals out there that are asking good questions about, why does the business do things the way they do today? Is there a better way to do it? So, I wouldn't be surprised to see a disruptor come out of left field and surprise us all.
Stanislava Yordanova: Yeah. It's an exciting time for the industry. So, we'll be seeing all those changes happen in the next couple of years.
Kevin Knight: We will.
Stanislava Yordanova: So, there will be a lot of place for innovation for airlines. What technologies do you see them embrace so that they perform better?
Kevin Knight: So, it'll be a combination of things. Again, we talk a lot in this conference about AI, about machine learning, about optimization. Those are all areas that I think we're going to see rapid development in as businesses kind of embrace big technologies and big data and analyze it and utilize it. Those are the areas, I think, that you're going to see companies focus on.
Stanislava Yordanova: You mentioned personalization. Do you think those innovation will be around personalization or also when it comes to the airline being more efficient and optimizing costs?
Kevin Knight: I think it'll be both. So, I think what you're going to see is I think you're going to ... Before true personalization, I think you're going to see a focus kind of on segmentation. You're going to see a focus on identifying key segments that airlines serve and then trying to satisfy the needs of those segments, but then I think you're going to see it rapidly move from segmentation into personalization. These are businesses, so at the end of the day, it's all about return and profitability. So, in that process is going to be a clear focus on revenue optimization and cost minimization. How can these new technologies, these new processes, this new way of thinking, how can they actually generate new efficiencies that go to the bottom line?
Stanislava Yordanova: In this context, do you see direct distribution being an enabler for that, being more efficient, closer to the customer?
Kevin Knight: Yeah. Direct distribution is a key enabler. It's the first step, I would say, in really the journey that businesses are going to go on in this kind of evolution. Direct is critical because you need that direct relationship with your customer. You need to be able to communicate with them directly. You need to be able to offer them products and services directly in a way that's meaningful to them. Unfortunately, the industry in the past and even today has kind of outsourced that distribution, that relationship to some degree with their customers.
Stanislava Yordanova: Yeah. That was the model.
Kevin Knight: So, one of the battles that's going on right now, quite honestly, is the battle for the customer. Who's going to own the customer, and who's going to have control over the product? Who's going to have control over what's offered, to whom it's offered, and when it's going to be offered?
Stanislava Yordanova: So, your advice to airlines, what should they change first? Where should they start, and what about the how?
Kevin Knight: That's another excellent question. Every organization is a little bit different, and they're all kind of in different places. So, I think the first thing to do is to kind of step back and take a candid assessment of where you are as a business. Who is your marketplace? What are your current capabilities? What are your strengths? What are your weaknesses? What are the greatest opportunities for you in the near term and over time? Then, focus on a few, and I mean a few key actions or initiatives that you can deliver relatively quickly and demonstrate success.
Kevin Knight: Demonstrating success in an organization is critical because with that success, you can energize the entire organization, and you can demonstrate to them what the value is of these new actions and this change that they're undertaking. It's a journey. It's not a project. Getting from where we are today to the airlines and the businesses we want to be in the future is a never-ending journey and one that's going to require some fundamental change on the part of leadership as well as down through the organizations.
Stanislava Yordanova: Great advice. So, start small, but be quick to realize the vision of tomorrow.
Kevin Knight: Be flexible. The journey is going to take many twists and turns, so be flexible.
Stanislava Yordanova: Great. Thank you, Kevin. Some great insights from you.
Kevin Knight: Thank you very much. Pleasure.
Aditi: Thank you for listening and a special thanks to Kevin Knight from AeroStar Advisors for taking the time to talk with us. This podcast is brought to you by PROS Travel and was recorded at our Annual User Conference in Las Vegas. At PROS, we help airlines on their journey toward offer optimization and digital transformation. For more information, please contact PROS.