Digital Transformation and Customer-Centric Innovation

Transcript

Dennis Cary:Well, good afternoon everyone. It's a real pleasure to be here with you. It's a bit of a homecoming for me. For those who don't know, I spent about 11 years at Copa here in Panama as the Chief Commercial Officer and retired at the end of last year. So this is my excuse to come back and see all my friends. also to connect with industry colleagues. We have a really amazing diverse panel today, and I'm going to let them introduce themselves in just a second. But across the spectrum, we have different business models, different geographies, and even different tenures or lifespans for the airlines that they represent. So we have American at 100 years, my friend Carlos here now who represents the Airline Association in Panama, longtime Air Europa executive, so about 40 years that Air Europa has been around. Then we have Azul at 25 or so, 26, and then— I mean, JetBlue, and then Azul coming up on 20. And then we have BermudAir with John joining us with just 3 years of flying. So literally from 100-year legacy to 3 years. And like I said, different geographies, different business models, different expertise on the panel. So I think it's going to be really fun. If I could just ask my panelists, we'll start here with Carlos and go down to Pascual, just give a brief introduction, who you are, who you represent, and maybe one observation for your own company or others in the industry, in your case, Carlos, of where there's been an important innovation for your firm in the last 5 years, really focused on how the customer experience changes anywhere along that journey. So, Carlos?

Carlos Conde:Well, thank you, CAPA, for inviting me to join this big event. I represent ALAP, which is Airline Association of Panama. And as Dennis say, I was 2 weeks ago, until 2 weeks ago, working in Aeropa as a country manager for the region. Regarding the AI, I believe, The customer service is where we can see big changes and big evolution of how AI is working or helping airlines, you know, to deliver services and to deliver more efficient processes. And because customer service is what people can see, but on the side, in disruption in revenue management and in planning, there is a lot of help from AI also.

Dennis Cary:Right.

Pascual Alvarez:Great.

Dennis Cary:So, Ed, how about JetBlue? What's something that you would call out there?

Ed Puthier:Yeah, so I mean, for JetBlue, I'm responsible for everything loyalty. And that encompasses everything from our loyalty program, co-brand credit cards, lounges. As you mentioned, we're 25 years old. And we were really founded on the basis of innovation and customer disruption in the US industry. We have a big presence on the East Coast. We're the number 3 carrier to Latin America and the Caribbean. As you can expect, we have a very big base of VFR and leisure customers. And so we're not thinking about loyalty in the span of months. We're really thinking about this in the span of years. And, you know, we were the first airline to introduce benefits for non-elite customers.

Jason Ward:Mm-hmm.

Ed Puthier:So customers before you reach status. to give them a reason to come fly JetBlue year after year. So that was introduced about 3 years ago, first in the industry to do it. Again, long—

Dennis Cary:And what's that look like, Ed, for those of us who aren't familiar?

Ed Puthier:So we essentially call it Perks You Pick, is essentially giving customers, you know, you essentially fly once a year. If you fly once a year, you're going to earn your own sub-status. So think about early boarding, you know, what are the things that if you're a family of 4 perhaps you'd be interested in, whether it's Early boarding, priority security to get through faster with your family. Some people just want a free drink, and we give people the choice of which of those perks they want to pick so that they can develop their own individual and unique travel style in the future.

Dennis Cary:Cool. Great. John?

John Pepper:Perfect. John Pepper, Chief Commercial Officer at BermudAir. And, and I think for us, from a customer standpoint, it's really the opportunity, right? And in particular, it's the opportunity that we're building through our digital systems, our new IBE. If you think about— even if I think back a couple of years ago when we were doing the Viva transition and the IT transition that we were going through at Allegiant, you would have said pre-AI, well, you should definitely go buy that system off the shelf. In a post-AI world, right? You really have to be a lot more careful about whether you're going to build something or buy something. And the opportunity, particularly for a small company, to actually go build exactly what you need and build the functionality and be nimble to compete with a larger company exists in a way it has never existed before. And for us, that's really important. And because we don't have those legacy systems, to be able to go out there and build something that is truly competitive on top of some of the platforms that we don't want to build. For example, our booking engine in Radix. And so being able to mold that and build that going forward, to us, really the important point.

Dennis Cary:And is some of that live already at BermudAir, or is that a process that you're still going through?

John Pepper:You know, certainly some of it is. I think we've done more quicker than many other airlines our size, particularly given the technology stack that we have. The majority though are what we call our Horizon IBE, which is actually the customer interface where they actually go and make those bookings, make those purchases. That will turn on later at the end of September. So we're in testing right now. We like what we're seeing, and then it will phase out from there. But our hope by about next summer is that we really have something that is as seamless to go to BermudAir and book as going to a JetBlue, Allegiant, a British Airways. Cool.

Dennis Cary:Jason, tell us about yourself and maybe some examples at Azul in recent times.

Jason Ward:Okay. Jason Ward from Azul Airlines in Brazil. 35 years in aviation with David Neeleman Companies. So I've made the trek through Morris Air, Southwest Airlines, JetBlue, and then started the airline in Brazil. Went to TAP Portugal for 2 years.

Dennis Cary:So you've touched them all.

Jason Ward:Except for Breeze. I didn't do Breeze.

Carlos Conde:So far.

Dennis Cary:So far. Yeah.

Jason Ward:But so Azul, we have over 800 daily departures and we fly to over 120 cities in Brazil. We also have flights to the US and to Europe. But, you know, I think over the last, you know, couple of years now, what we've really tried to focus on is we've put together a CXC, a Customer Experience Center, that sits alongside of our system operations team. And using predictability models and using the intelligent agents to help us to make the best decisions for the customer experience. Now, that's also— you have to have the crew and aircraft availability as well. But I think really looking at, you know, technology, I think, is, you know, where the customer wants it. But also just making sure that when the customer needs to speak to somebody, that we're really there for them and to understand what their needs are. Cancelled flight.

Dennis Cary:Yeah.

Jason Ward:is one cancel flight, but it may impact 160 people, and those wants and needs are different for each one. And so how are we using this, the different intelligence that's there, to make— help us make the best decisions for those particular customers individually?

Dennis Cary:I love that example, and I'm sure we're going to come back to that some more because that's obviously a rich area. Pascual, how about yourself and American Airlines?

Pascual Alvarez:Well, thank you. Thank you for having me. I'm Pascual Alvarez. I'm the managing director of operations for American Airlines, South America, Central America, and the Caribbean. And a lot of the things that we do at American are all centered around customer centricity and what our customers truly want. I think over the last 5 years, Dennis, we've been heavily focused on what that experience looks like. And in the environment that we live in in the United States, where more than 65% of our customers are connecting, a lot of those come from this side of the world, minutes matter.

John Pepper:Mm-hmm.

Pascual Alvarez:And we've created in-house over the last 5 years an internal platform called Smart Gating that not only does it save in taxi time, does it save in fuel burn, but from a customer centricity perspective, it also allows for more connectivity time for our customers that are planning to make those connections. I think more importantly, over this last 3 and a half years, we've been heavily focused on ensuring that our customers not only get to where they want to get to, but at the same time get to where they want to get to with their bags. And in the environment—

Dennis Cary:Do they care about that?

Pascual Alvarez:I think so.

Dennis Cary:Yeah, okay.

Pascual Alvarez:Yeah, they're highly vocal about it. But it is important to recognise the work that we've done in that space. Smart gating has allowed us to save multiple collections, And thousands and thousands of bags that otherwise would have misconnected. So really happy for that. And more importantly, that all derives from data, and we are a very data-centric organisation.

Dennis Cary:So that's a great transition. I'm going to go to data next. But, but just so I understand, the smart gating, among the things that you're trying to solve for, is to minimise sort of the transfer of bags in those connections, I guess, right?

Pascual Alvarez:That's correct, because our platform The platform through AI dictates exactly where we should be placing that aircraft in conjunction with connecting with those other connections. And then more importantly, through the AI platform and routing, we're able to get from the runway onto our gates at a faster rate, thus saving fuel and minimising—

Dennis Cary:Time.

Pascual Alvarez:Connections.

Dennis Cary:Right. I've been in and around the industry for like 35 years, and I think we had COVID, and certainly many airlines went through some form of restructuring in or out of court. But I think the degree to which the industry has bounced back and gotten, for the most part, to some level of health, which in my experience has always been a precursor to having all the airlines focused on delivering for customers as opposed to just surviving, The sort of universal focus on customer experience, I think, is kind of at a level that I didn't see for much of my career. So I think that's great. But in this whole conversation, and you sort of touched on it, Pascual, you know, whether it's the smart gating or some sort of disruption management or how we're evolving how we sell and market to customers, underpinning that is depth and breadth of data that again would, you know, is beyond what we would have imagined years ago. But so before we sort of step into some of the tools and other applications and then lean into AI, anybody have something to share about how kind of collection, democratisation, enablement through data has really evolved over the last 5 to 10 years in your environment? I don't know, Ed, I see you nodding.

Jason Ward:Maybe you can start us off.

Ed Puthier:Yeah, I mean, look, I can speak on behalf of JetBlue here because, I mean, if you think about it, historically we've all had good rich data as it comes to the customer and what they're doing on board. We've spent the last, call it 5 to 10 years, working on how do you combine that with all of the rich information we get from the credit card business, from their on-board experience through their use of either internet or in-flight entertainment on board. The key is like, how do you piece that all together and put that into a place that is easily accessible for all groups? I think that's going to be the challenge as I look to the future is, is do you have a strong enough data science team and a group that's going to go out there and champion this data, champion the use of it, champion the ability for us to collect ever more? Because it's not that data is ever going to get less. We're just going to find more and more sources of it. that has a true impact on what the decision-making behavior is for customers. So we're working hard on trying to make sure that we have a good central team, our data science team, which can be the champions across the industry, push that out, give people the tools to actually access that information. That's a huge part of our transition and adoption of AI, to be honest.

Carlos Conde:Airlines have always managed a lot of data, and I think as Ed was saying, Saying is the challenge is how to connect it all and what brings that to make better choices and better decisions for the executive.

Jason Ward:Yeah.

Pascual Alvarez:And I think lastly, at American, we're very data-centric, very data-driven. I think we have a plethora of data, but the more that we learn from that data, ultimately, the more that we can become reactive to ultimately what our customers need, want, and based on that data, they— how we create new products, new ideas, and new innovation.

Carlos Conde:So.

Jason Ward:I think if I could just add to that as well, I think the data is richer in the sense that we're able to understand what truly is the challenge that the customer has. You know, it's not just maybe what they want or what they need, but what is happening within our company that's generating that frustration or generating that need. And so just the information that exists and getting it together and being able to better understand what it's telling us, and then how do we find the root cause to fix the things that can be fixed.

Dennis Cary:And presumably that's the sort of bringing together of all that customer data that, you know, us commercial types have used for selling and marketing and whatever for a long time. But again, one of the trends I've seen in the last few years is how genuinely airlines are sort of stitching that together with their operational data to know that airplane is there, these crews are there, the bags are are there and how then you proactively do something with it. So, you know, I guess the gentlemen on the end that are on the operations side, I'd love to hear how you've seen that evolve. You mentioned, you know, your gate technology. You know, maybe what are some other examples, disruption management or baggage recovery if you do have an issue, anything in that space?

Pascual Alvarez:If I can add to the AI world, Dennis, I think data continues to teach us every single day. Yeah, the results of our operation. But I think more importantly, as we think about the near future and think about AI through data, there's platforms like Computer Visions that are making our, our operations safer, far more reliable through turn-time solutions.

Carlos Conde:Yeah.

Pascual Alvarez:And that all comes from the databases that we possess, that we analyse, and then we determine the products that we ultimately need. I think computer vision is certainly a way to continue to make our operations far more reliable, more productive, and ultimately safer.

Dennis Cary:One other area, I think, on the operations side, I think when we've seen You know, major operational meltdowns at airlines across the globe over the last 10 years or so, often that's some precipitating event, but then it's the putting the operation back together of both assets and importantly crew.

Carlos Conde:Mm-hmm.

Dennis Cary:And I think crew has been sort of crew communication, crew management has been like the weak link in many of those headline instances. Any experience or improvements you see there with some of the tools that are coming out? And again, this richness of data to be able to put the operation back together when there is a major disruption? Jason, Pascual, anyone? Oh yeah, John.

John Pepper:Yeah, if I could comment on this. It's less so at BermudAir, but of course my career, the data teams were part of the portfolio at Allegiant. Just sort of how I, I view AI in general, um, and, and also some of the investments that I've made in, in data companies. Um, look, AI has a— one of the things I would actually argue the industry has not been great at, um, is, is modernizing the technology stack, right? And, and if you look at the different platforms for even an operational space, right, that make those decisions You know, they may be more modern than some of the commercial systems, but you're still talking about technology that's— and ideas that are 30, 40 years old. Whereas in other areas of manufacturing, if you will, there's been a lot of advancement. And I think, like, there's a couple of things that can come together that can really make a difference, right? One, getting all this data in one place. AI is only as good as the context that you give it. And so you got to have a data portfolio that backs that up. And then the second one is really using AI to build those systems, right? So, so if you can dream it today, you can probably go and build it in a way that, that was not true 5 years ago, certainly not 10 years ago, even a couple of years ago. The, the, the learning curve and the speed at which these models are pacing and producing and being able to execute content's incredible. But it's really putting that whole entire system together from the vision To the, the input data piece. And then it's also having the people and the teams, to your point, to actually go and, and execute that. And, and I think that's going to be really the opportunity. Um, and then I think what, what comes from that though is, is like, do we end up with a set of systems in each individual airline, or do some of the vendors go and say, you know what, I'm going to do this and I'm going to put these pieces together and we're actually going to have something that's a little bit more standard? Because That's a potential outcome from this, is that we, we gain a lot on individual airline level, but we lose some of the standardisation that has been an important improvement for the industry as well.

Dennis Cary:Yeah, for sure, for sure. So I don't know, any more on the operations front from you guys?

Ed Puthier:I just want to kind of dig a little bit deeper into one of the things you said, because look, at the end of the day, the airline business is a people business, right? It's a hospitality business. And I probably ascribe more to the view of AI as, you know, let's call it cyborg versus android. How do you use AI to make your people better, more effective, more efficient?

Carlos Conde:Yeah.

Ed Puthier:Sorry, Jason, I'm going to steal what you said earlier because we had a side conversation and Jason said something really interesting, which was, you know, sometimes the decision between cancellation and delays is, is customer dependent. And you don't know if that customer is, you know, trying to get home for his son's birthday Or has all the time in the world. And I think that's the missing piece as well as we talk about data is that's the missing piece of customer intent, what they're trying to do and what really would change the dynamic of these operational decisions.

Jason Ward:I think, I think also just, you know, the number one factor in NPS scores is the customer's on-time performance. So I think if, you know, we focus very much on having a great operation, on-time performance in Brazil, we have an advantage there. All the carriers do an amazing job. But, you know, if your operation is not flowing well, it doesn't matter how nice you are, how cool the tools are and all that. The customer just— your core business has to be number one priority.

Dennis Cary:And so have, as you know, you guys have had that focus and a lot of success over a long period of time now. Do you see evolution of some of these tools and capabilities affecting that and making it more reliable for Azul?

Jason Ward:Preventive maintenance is, you know, is key.

Ed Puthier:Yeah.

Jason Ward:But also, how do we, you know, each day we look at how the fleet launch was and what are the indicators that show that what lines of flying are going to be the most difficult and how can we get ahead of that? And so instead of waiting for that to happen, we start, you know, whether it's a cancelled flight or a changed flight or delayed flight or fix a crew, something that's being anticipated later on in the day. You know, we've seen our— the improvement go on a day-to-day basis based on those factors. Using information, the historical predictive modeling is one thing, but also helping us with our crews. What days of the week, which crew members, and what bases have more predictability of calling out sick or having issues, or what teams are playing, what tomorrow's morning is going to look like with those teams playing. So just helping us to make better decisions so that it doesn't suffer in the operation.

Dennis Cary:And are you guys building most of those tools yourself? Sort of going back to John, it feels like most Airlines are kind of trying to do it themselves because so far anyway, it doesn't seem that—

Jason Ward:Using, yeah, using the tools, I think, you know, everybody does, whether it's, you know, Claude, we have Snowflake that we use as well. But, you know, a lot of this stuff is coming internally. You know, we, you mentioned the beginning, 18 years, we, we have, you know, almost 2 decades of systems. So we're kind of stuck with the systems that we have and the challenges with that. And, you know, so now it's a lot of the impact that we have with new systems is trying to get them all talking together, making sure the left hand knows what the right hand's doing. And it's, you know, a lot of times it's more challenging than just getting something new. It's trying to incorporate it.

Dennis Cary:Building it's one thing, actually integrating it into the ecosystem is sometimes completely different.

Pascual Alvarez:Yeah, and if I may add, I think Jason's spot on. I think reliability becomes the greater portion of how our customers rate our product So NPS certainly takes a dive when we don't perform to the level of the expectations of our customers. But obviously predictability in our industry becomes far more important nowadays through the tools that Jason mentioned and the opportunities that we have. And if I, you know, we're 100 years in our company, but I think this last 5 years have drastically changed through AI models, et cetera, and will continue to evolve even further over the next coming years. And I think the airport experience really becomes the major part of the product. And those airlines that ultimately have better predictability of what's going to happen in the future, I think ultimately that's what's going to drive the bigger portion of the loyalty. So I think we're slowly on our way there.

Dennis Cary:Great. So shifting gears maybe from, you know, the operational and travel journey part of it more to the, you know, shopping, buying, loyalty, sort of commercial aspects. You know, over the last many years, I think airlines have been focused on making sure they have control of their distribution, of having more direct links, more of their links with their customers being direct. Having partners where it makes sense. And so that's been the journey. And then the industry for the last several years and probably into the next several years have been talking about, oh, we're going to shift into a modern platform of offers and orders and get away from the very idiosyncratic PNRs and tickets and all the things we've lived with for lots and lots of years. And to me, it seems like we have that still somewhat fledgling path developing. Yeah. While we have what appears to me to be a freight train of the consumer-based AI chat tools, ChatGPT, Claude, et cetera, that now some of the big tech companies are enabling booking and servicing. There've been some fits and starts in that, but I'm curious how, you know, particularly my commercial colleagues on the panel think, like, what's going to come of that? Is offers and orders going to become a thing, or is that going to get abandoned to try and deal with this new reality that's coming? What do you think?

Carlos Conde:I believe that the big change is in maybe 2, 3, or 5 years. It's not the people looking for a flight, it's their AI agent looking for a flight. Airlines need to feed that and to understand that. to get more reliable and profitable. It's a game changer. It's a complete game because it's not only people, it's someone, which is the ChatGPT or you name it, it's doing the searching and planning the trips and flights and vacation and everything.

John Pepper:Look, I think this is maybe the fundamental question right now. One of the things that I think about a lot is, How do I make sure that when someone says I want a premium vacation, premium leisure trip in the Caribbean, that South Caicos or Anguilla pops at the top of those results instead of Barbados or Antigua, right? And, and I think that particular piece right now, that's happening a lot quicker than, than we expect. I saw some of the stats that were shared earlier today. The other piece of that is that It's not necessarily in the AI company's best interest, at least with sort of current compute, to go to every individual airline's website to do that transaction, right? From an inference standpoint and from a cost standpoint, it's better for them to go to Skyscanner or Google Flights or another aggregator to do that transaction because you can do one search and get those results back and process that in an easier fashion. And so that has the potential to undo a lot of what's been done over the last 20 years. And you see that already with Skyscanner today being embedded in OpenAI. You see that as a huge advantage in what Google's doing with their agents and Google Flights. And so, you know, a real potential change. And then also, you know, to the point that was just raised, being relevant within those results when you do get to a point where agent is shopping and what factors are they considering? Are they considering reliability? Are they considering, you know, bundling and things like that, ancillaries that are harder for a human to compute today but very easy or trivial for that agent? And so, you know, brave world out there from that particular perspective right now.

Dennis Cary:And how do you see airlines playing in that world but resisting losing distribution control kind of all over again? I'll say maybe it'll be a different version But like, you know, as a longtime commercial guy in the airline business, like that would be keeping me up at night. So how do we be relevant where that consumer's going, but also not, you know, find ourselves, you know, subject to new masters?

Jason Ward:Yeah.

Ed Puthier:I mean, look, that's the thing I probably worry about most, especially from a loyalty perspective, because I don't want my customers going and just searching and getting an answer that's not defined necessarily by the airline, but by someone else. And I think you said it really well, John, is like it's not in the interests of these AI companies to make it a fair, balanced playing field. And they're going to do what's best in their best interest. Look, I think one of the challenges that we'll have to the adoption of AI overall is just trust. And so as we kind of look forward, for me, it's how do we build more of these tools in-house, or how do we make more of these tools accessible to our customers to give them less of a reason to go somewhere else for this, and then be able to focus more on the experience, on what we're offering to the customers, to know that the brand is there for them. There's not as much reason for them to go and look elsewhere.

Jason Ward:I think also, you know, who owns the customer? I think we talk about distribution, selling. If a customer finds great fare, great package to Bermuda or wherever, you know, that's, that's part of the deal. I mean, my concern is, you know, that's— what about post-sales? I'm like thinking Portuguese, pós-venda, right? Post-sales.

Dennis Cary:Yeah.

Jason Ward:Is it's, you know, that's, that's really where the customer really starts to panic when they say, well, wait a minute, now I have a problem. Who's going to help me? Is it AI? Is AI going to help them? Is it this third-party distribution? You know, and I think a big concern too is just the cost. Does cost creep back in with that? If it can be done at little to no cost, I think that's fine. But then how do we make sure we have the right contact information for customers so that we can be in contact with them along the journey as they, as they're flying and we need to communicate with them as well?

Dennis Cary:It also seems in these early days like that, that's been a couple of the false starts, right, of what we've seen maybe in the last 12 months. Like, you know, AI company X and distributor partners Y, Z, and A get together and now they're going to be able to do end-to-end booking. And then it's like, well, what about the payment part? And then what about the servicing part? And then like, Yeah. they back up a little bit. So I'm not saying that they will abandon forever, but clearly that end-to-end service part that the customer wants, they've realised is hard in our industry, and it's been one of the things that maybe has slowed it down a bit for adoption.

Jason Ward:I think, you know, Ed, you know, obviously pointed out loyalty, because when I buy a ticket on a carrier, you know, I go to their website, and now I just go to their app, and it's all done in the app, and the customer journey is all done through the app. And so are we going to ask customers that If you've flown various airlines, to always get logged in and onto those apps, or is there someone who constantly travels your airline, it's a lot easier. But someone who travels a couple of different airlines, it's going to be—

Pascual Alvarez:Yeah.

Dennis Cary:And so tying that together, as long as the conversation from the consumer is, go book me the flight to São Paulo next Tuesday at 2 o'clock, and I want my usual aisle, like, as long as it starts with the direction that I have that brand loyalty, we're great. the, hey, I'm interested in a Caribbean vacation in, you know, in November, then, you know, we sort of risk losing the ownership of the customer, back to your point.

Pascual Alvarez:Yeah. And if I can just add one more thing, I think I was really blown away this morning about the statistics used for customers that create their journeys through ChatGPT or through Claude, et cetera. The amount of decision-making that takes place during that interaction. And I think airlines are beginning to explore that same avenue. We don't want customers to go any— to use any other platform other than ours. And ultimately, we began already exploring opportunities to create vacation packages or business trips or or just simple ideas of what the customer truly wants through our own AI platforms. And I think that's certainly an evolution for the near future for any one of our airlines to truly acquire and simply say, come chat with us, as opposed to using the chat, other chat options.

Dennis Cary:So, you know, starting with Pedro's interview this morning all the way up until now, I think, you know, there's common things, themes that those of us who've been around the industry for a long time know and have sort of embedded and taken to heart. Pedro said it and Jason said it, you know, customer experience starts and sometimes even ends with reliability. Like, if you don't have reliability, nothing else matters. If you have reliability, then you can layer on top of it, right? And so if you think about the historic fundamentals of managing your costs, being reliable, delivering the service the customer expects, being reliable not just on time but getting their bags and all the other sort of fundamentals of the business, but also, you know, again, managing that balance between cost competitiveness and, you know, making the right investments for your airline in product and service. Are these topics we're talking about here going to change the competitive dynamic of who wins and loses in the airline business? Or is this, you know, another set of tools to perhaps allow airlines to be better at managing those historical levers of what determines who wins and loses? Like, are we going to see a winner in the next 10 years who just did this better, and it—

John Pepper:or what?

Carlos Conde:I think that— sorry, the basics of the businesses cost to be reliable planning and services. I think that that wouldn't change in the future. What is going to— I don't think win or lose, but who can adapt better to the tools that AI brings to the airline, and then they can accelerate or not. Your processes, your decision-making, and, and everything thinking in the customer, because the customer is more and more and more depending on, uh, agent or ChatGPT or you name it. So the fundamentals of the business is the same, but the thing that we're going to change is how to use the AI to, you know, improve your, your decisions and to put your service that you get Yeah, and I agree with Carlos, by the way.

Pascual Alvarez:I think to your question, Dennis, I think the airline that really gets all of that combined is the airline that ultimately wins loyalty. But I think all of us in this that are sitting in these chairs understand that we don't operate 100% on time, nor we're 100% reliable. So I think The predictions through AI and what's going to win loyalty in the future is who predicts when things are going to go wrong and who anticipates that. And more importantly, through AI channels, is who humanises that experience and makes it seem natural, organic, rather than just a simple headache for a lot of our customers.

Carlos Conde:Sure.

Pascual Alvarez:So I think loyalty stands on operating well, reliable, but when things go wrong, it's humanising that experience through AI platforms, and ultimately that's going to win the loyalty in the long term.

John Pepper:You know, I think for me, over the short term, there could be some ability to— for certain companies to use this as a disruptive technology. I think over the longer term, though, it's hard to overcome sort of like intrinsic advantages, right? If you're playing in the US market, The fact that American, Delta, United, and to a large extent Southwest get about $50 plus per passenger in direct credit card subsidy, that's a huge impediment that is really, really hard to change.

Dennis Cary:Pascual, you're not going to let him use the word subsidy, are you? Come on, that's hard-earned money, right?

John Pepper:We're going to get something going here. Hard-earned money, but when you're up against that wall of of loyalty, it's difficult.

Dennis Cary:Yeah.

John Pepper:Rest of the world, it's, it's, it's, it's, you know, could potentially be more disruptive, particularly where people are using the agents to search. But ultimately, I think the, the game sort of resets back just like post-internet where you maybe had a couple carriers that had a short-term advantage, but long-term it just becomes the new, the new normal. The other thing I was gonna say though is, is it's, it's also a balance between all those, right? So I want really good reliability, but But also the reality is that it doesn't start impacting customer lifetime value till I get to 240 minutes. And really customers don't get— at least leisure customers are not— do not get super upset on delays until it hits 60 minutes. That may be very different for a business customer, right? But, you know, how much do I really care about that 80% versus that 70% on-time performance? Because each incremental percentage It's really, really expensive, especially when you're a day like today where oil's sitting at close to $110 per barrel, right? And, and in same way, I, I can generate a really, really good commercial schedule, but I've got to actually be able to operate it, and I'm going to— I got to be able to operate it in a cost-efficient manner, right?

Dennis Cary:And have it be resilient when things inevitably go wrong.

John Pepper:That, that's, that's, that's right, right? And, and, you know, certainly for us, as we, as we scale too, and scale from being 4 airplanes to 20+ airplanes, right? Like, it can't— I can't go to 12 hours of utilisation on day number 1, right? I've got to ramp to that. And so, like, finding that balance between those factors is really, really important as well.

Pascual Alvarez:Interesting.

Ed Puthier:I mean, it's my hope, my hope that all of us here in the industry use AI to improve the customer experience, right? I mean, as far as we've come over the past 10 to 20 years, I think in the US at least, the 2 worst-rated industries are still like cable television and airlines, right?

Jason Ward:That's right.

Ed Puthier:So we're not viewed as like this great customer-friendly industry. This is where I think AI can be of utmost use for us. In the shorter term, like you said, I think there's going to be some arbitrage between who figures out how to utilise it best and how they can integrate that into the human factor of flying. Because You know, despite the fact that, you know, we could probably have autonomous flying tomorrow, we still as customers need to have 2 pilots. We need to have in-flight staff because that makes us feel safe. That makes us feel seen. Right. And so how do you use AI to make everyone else's job easier so you're not dealing with the mundane, but you're actually able to spend time with the customer and create that human connection?

Jason Ward:I think, you know, Talk about your partners, right? I mean, whether it's airports, whether it's the handling companies, you know, how do we use the collective information intelligence together? Because we're so interdependent on— for that customer journey. And, you know, John mentioned too, just, you know, the conflicting priority. Well, he didn't say that, but that's what I heard him say. You know, the priorities of where we're going to invest or what we're going to do. I think AI's created some anxiety, you know, just wanting to do everything or They heard somebody else, this airline's doing that. But, you know, really as executives, understanding what all the options are and what we truly want to do and how we're going to go about doing it, and then being committed to doing it and not being impacted by the new toy or the new thing or everything that's happening.

Dennis Cary:Right. So maybe final thoughts from each of you, you know, a hot take on what will be the most different 5 years from now because of this new technology that will affect customers in a in a positive way, kind of with the theme of the conference. So what do you think is going to be different 5 years from now, Carlos? What's the most different from a customer perspective?

Carlos Conde:I already said it. I think that people more commonly will use AI, you know, to make decisions, to plan a trip, to book a flight.

Dennis Cary:So their personal assistant sort of managing their travel life for them.

Carlos Conde:That's right. Yeah. They're going to, you know, trust in what ChatGPT are saying to them and they will follow them.

Ed Puthier:I mean, look, if AI has not completely transformed the entire reservations part of the business to make that seamless and easy and take some of the human element out of it, then we've failed. So like, it has to, it has to solve that for us.

Pascual Alvarez:Okay.

John Pepper:Yeah, easy and more personalised. And hopefully that personalisation, maybe it's not our personalisation around the price, But because they've got the assistant, it's, it's a more personalised experience for them. And I think if it's done in the right way, that could really, really help the perception of the industry. You know, the flip side is there's been a couple of Senate hearings in the US, um, I really laser-focused on the fact that these personalised pricing and people, people already hate that about the airline industry, right? And, and I think it's hard to have offer-order conversation without that. And so, you know, that, that's going to be the balance. Does it Does it end up easier, more personalised because of AI and their agents in there, or is it, you know, something that ends up not that good because it goes down a different path?

Carlos Conde:Right.

Dennis Cary:This is great or it trips the ick factor, right?

Ed Puthier:Yeah.

Dennis Cary:Jason, what do you think is going to be different?

Jason Ward:I think any airline or whoever figures out the boarding process, you know, how to get all the bags, do we know before We all know random is best, right?

Dennis Cary:Just customers hate it. So, yes.

Jason Ward:If we can finally figure that one piece out, take that stress out of everybody's day-to-day. That's great.

Dennis Cary:Pascual, last word. What do you think?

Pascual Alvarez:Well, in conclusion, I think we're not moving robots on airplanes. We're moving humans on airplanes. And people like to be cared for and spoken to and communicated with. So I think long-term, those airlines and those companies that truly master the ability to humanise that communication amongst data, tablets, and cell phones, and so on and so forth, make it a natural communication channel—

Dennis Cary:Through the human staff. Through the human staff.

Pascual Alvarez:—is the airline or the companies that ultimately win that greater level of loyalty. Loyalty and, and have more volume.

Dennis Cary:Super. Yeah, uh, please join me in thanking all our panelists here.

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