Driving Aviation's Future: Technology and Consumer Innovation

Transcript

Alan Polivnick:Good afternoon, everybody. We are going to talk about technology and consumer innovation, which is a big topic and clearly something that was front and centre this morning as well. What I will do, I think, first is ask Shinji-san, what exactly does consumer innovation mean to ZIPAIR?

Shinji Nishio:I think the evolution of personal devices has contributed significantly to ZIPAIR services because we do not install seatback monitors in our aircraft. Because seatback monitors are usually used for about 10 years. As a result, we rely on somewhat outdated technology. But people often replace their personal devices every 2 years or so. So we can provide more advanced service through personal devices than seatback monitor. ZIPAIR provide Starlink complementary Wi-Fi services in our own aircraft. So passenger can enjoy Netflix or YouTube or everything on their own devices with very fast and well— good techno— using very good technology. Yes, I think.

Alan Polivnick:I mean, I think it's an important example because in addition to giving people the choice and allowing them to use their own devices, the planes are obviously a lot lighter and you don't use as much fuel. Because you don't have hot TVs and in-seat units. I think one of the things that is interesting about that is the digitalization of that. Is that something that covers every aspect of how ZIPAIR engages with its passengers?

Shinji Nishio:Yes, not only in flight, but also before taking flight in the process of purchasing ticket. And thanks to latest technology, we, we could develop our own individually internet booking engine. And through the, our internet booking engine, passenger not only purchase air ticket but also purchase some souvenirs such as Wagyu beef from Japan. Or plastic models of Pokémon or Gundam. Everything we sell in our internet booking engine. And it's very good for airline to make new money, not only air ticket, but also customer purchasing every souvenirs. An interesting thing is that the price of air ticket sometimes lower than the souvenirs. It's, it's very good thing because of digital technology has advanced.

Alan Polivnick:Yeah, and I think that, that is quite an interesting point. I will check out what your souvenirs are because I'm missing something there. Kamal, if we can come to you now. I mean, SpiceJet is obviously a different focus to ZIPAIR. How does what Shinji-san has just said reflect what you're doing, where you're going in terms of customer innovation?

Kamal Hingorani:So from a digital perspective, like she mentioned, we also have— we don't have live internet on board because that's still not permitted by the government. But what we have is intranet. And it's bring your own device for the same reason, no seatback screens. And we make sure that there is enough material loaded regularly. And it's not just the entertainment bit. What we've also developed in-house is that any changes that may come in, that we need to announce on board for the customers. It could mean absolutely anything, very topical, something that happened yesterday and we want to announce on board. We can load it immediately at the backend and then there is access. Same thing goes for, and this is purely to make sure the customers are well informed and that's where we use the digital aspect of it. Mm-hm. Our crew have their own iPads on which, of course, they take care of what normal LCCs do. But sometimes at the last minute, we may get a request from a particular government agency to make some announcement. For example, suddenly a few weeks back, we had to do Ebola announcements on all our flights. It just gets unloaded into the crew portal and we don't even have to brief 600 crew beforehand. They know they have to follow a particular process during announcements and that's how they make sure that that's the process. So it becomes almost real time and we can actually do it real time as well. And that's happened purely because of the digital intervention, you know, that our back office teams do. Besides that, of course, there's a whole range of digital aspects that we use for passenger customer convenience. For example, a flight disruption, if it's information in advance to the customers, we ensure that we have the mobile number of all passengers That is a cause for concern in India because a lot of online travel agents who make bookings for passengers, especially the ones who are middle-aged or seniors, many of them do not put the mobile numbers of the passengers. So we have a challenge there. They put their own number. And that's a challenge, which is something we are still trying to struggle with. 'Cause unless you have the phone number, we are not able to keep every passenger informed. The other thing that we've lately worked on, and it's still work in progress, is really a personalized journey as far as possible, basis of course the data that we have. And we have huge data of our customers, especially the ones who've flown at least once before. And that's how it just moves on like that.

Alan Polivnick:I mean, it is interesting when you talk about that. I think one of the things that occurred to me from listening to what you were saying this morning is that we're almost at a sort of 2-level, a 2-tiered system for passengers. We have a lot of tech-savvy passengers who don't want the human interaction and they want to know everything in real time. And then we have other people who feel more secure, more comfortable knowing they can go to the airport, they can give someone their luggage, someone will give them a boarding pass. And I think, I think what is interesting about that, I was thinking about my journey to Sapporo on Tuesday. I booked my ticket on an app. I checked my bag in without interacting with a single human being. I went through immigration without interacting with all the machine. The first time that I dealt with an airline employee was at the boarding gate when they checked that I had the right entry permit for Japan. That was really almost literally at the door of the plane. In the meantime, before that, the airline had sent me offers to bid for an upgrade, a reservation for a meal, car hire, hotels. So there were a number of touchpoints there. And one of the things that occurred to me about this is in the context of that relationship with the customer who becomes the passenger, In a digital environment, who owns that passenger and, and who is responsible when something goes wrong? I mean, for example, the airline that I flew here offered me a car rental. It's not their car rental, it's a completely separate company. If I turned up at the airport and the car wasn't here, I've booked it through their app, I've paid for it through their app, um, where do I go? Is that a challenge? Is that something you are working with now, or do you take the view that this is our passenger and if you do something through our app, we will deal with it?

Shinji Nishio:Shinji-san? Yes, I think airlines can choose which way to go. ZIPAIR will choose digital way. No staff in check-in counter, only self-baggage drop. And immigration should be digital and boarding gate should be facial recognition or something. And our first touchpoint should be in cabin. It's okay. But as Kamal said, some people would like to have person in the airport. Yeah. So there are several ways for customers, then several ways for airlines. It's, I think, more than full-service carrier and low-cost carrier, but also digital airline and non-digital airline, I think.

Kamal Hingorani:To answer your question on the third-party services, which obviously brings A very important aspect of ancillary revenue to airlines. At times we don't make money. You said the airfare is lower than the product you sell on board. With us, at times the airfare is, is, you know, so low that no matter what else we sell, we won't make money on that passenger. But having said that, You know, we've had this car ready for you and things like that. And this is how we communicate on WhatsApp with the passengers. How do we manage that if a car doesn't show up? We've learned with our experience over the last, over 10 years that our contracts have to be very, very well documented. with the third parties, the passenger will blame us as an airline, always. Not just because contractually he's bought the ticket, he's paid for it on the app, but even otherwise, for an average customer, it's very easy to target the airline because airline is a big— Entity. And they know that if they get onto social media and start targeting us, somebody from our back office will immediately call them, and especially if they have X number of followers, and process their refund even if it's not our fault. That's the reality. Okay. That's how, That's what social platforms have done to us as airlines, and more so in India because, you know, I'd like to share that we have, we probably have the single largest payment digital transactions a day. Why I mentioned that is because we've enabled something, the government has enabled something that We have 250 billion financial transactions last year in India, which is almost 600 million a day. We're the highest in the world. I'm not aware of China. China could be higher, but this is definitely the second highest if China is the highest. 600 million digital financial transactions a day, just as of last year average. And from a passenger perspective, the digital identity that we talk about, we have 100 million passengers who are digitally mapped and with 38 airports in India. So like you said, like you said that you reached the boarding gate, without meeting anybody. In India, at every airport, at the entry of the terminal, you need to show your identity and the ticket. You can't enter a terminal building, and we have 146 airports, 151 if I'm not wrong last week. You can't enter any terminal building Unless A, you're a passenger, and B, you've shown your identity and proof of your ticket. So that's the first point. It's a cost to the government who provides that security, and ultimately that cost boils down to the airline because at the end of the day, the airlines end up paying most of the costs. So that is then prevent it through this digital interface. This is called DigiYatra. And we started it about 3 or 4 years back and 100 million passengers are already digitally connected. This is for domestic. Of course, we have to work on international. So from a digitalization perspective, I think India has really advanced a lot and evolves fast. And that, while has an advantage of what I've just mentioned, the huge downside to that is that when you get trolled or you get blamed for your reason as an airline or not, you know, you face that music.

Alan Polivnick:Yeah, I mean, I think the flip side of all of this innovation is the fact that you are dealing with problems in real time, and often they are being dealt with live on social media platforms. Um, I guess that's probably a bit of a flip side to, to all of this. Um, one of the things that, that I see dealing with, with social media issues for airlines is people want instant resolution. They want instant outcomes. They don't want to wait. They want to know right now, I've put this on Instagram, where is my refund? Where is my upgrade? Where is my, you know, apology? Um, and it's very much about what's happening in this moment. And I think certainly my view on this is some of the people that you've saved by digitalizing your check-in now end up doing social media and customer relations. Is having that back-office human touch still important even for a digital airline like ZIPAIR?

Shinji Nishio:In the back office?

Alan Polivnick:The customer support, the customer engagement, customer complaints.

Shinji Nishio:Some area we need human support in the, in the thing disruption happens, but normal, normal situation we don't need human support. I think AI agent can answer every question from our customers. So then, our staff can do another job, not only for customer service, but also our own, our staff, staffing or something. Then in Japan, workforce is not enough in the future. So we have to shift our forecasting point from customer support, customer front, Kamal, what do you—

Alan Polivnick:what's your view on that?

Kamal Hingorani:So we've had a very large pool of human resources, at least until 10 years back when the digitalization was not as good. And, but in the last decade, or definitely after COVID, We reduced that cost. Fortunately, the cost of labour in India is not as high as most parts of the world. But having said that, for a low-cost airline, every unit cost matters. We introduced bots. This is about 8 years back. And then when social media became very, very prevalent, use of social media by customers, We got criticized just because we were using bots to answer their queries. And fortunately for us, so we actually had to get more people on board who we had cut down, remove the bots. And fortunately in the last 2 and a half years or so, AI has done extremely well for us. And actually the customers don't get to know who's on the other line, whether it's a human or it's an AI assistant. Having said that, we still have a set of people who are handling the back office from a customer support perspective, depending on case-to-case basis. And honestly, depending on if you care get very bad press on the social media channels. So because a lot of passengers, because they are so tech savvy, they come to know that this is not a human being and they insist, I want to talk to a human being and not a robot and what have you. Yeah, so

Alan Polivnick:yes, I have experienced that myself.

Kamal Hingorani:We all have.

Alan Polivnick:Peter, let's come to you now. We've had a little bit of a discussion about the airlines are on, on, on sort of technology and consumer innovation. You work a lot with airlines, you provide a lot of services in the sort of travel booking space as well. What's Cover Genius's view on, on sort of consumer innovation?

Peter Smith:Yeah, thank you. I think innovation only really matters if it helps to build trust with customers, because ultimately if a customer trusts you They're gonna come and they're gonna buy more from you. And trust therefore is ultimately what drives loyalty. But the thing is with trust, trust is really built in the moment that things go wrong. So we talked about disruptions and we talked about how we handle disruptions here. How about a scenario where your flight's delayed and you're frustrated, you land 2 hours late at the airport and You're deeply frustrated, you've missed your meeting, and you have a certain view of that airline, of your experience. But what if before you even reach the luggage belt, you receive a notification on your phone to say, hey, we've tracked your flight, we can see you were delayed by 2 hours, click here now for $150 straight into your account. Your view then of that delay, your perception, is changed. You're now, instead of thinking, I'm going to make a complaint, you're now thinking, this airline really cared about me. And actually, that's the moment that things change with the customer. Because if they feel like you really care about them, that starts to drive that emotional loyalty. And emotional loyalty is something that's really, really difficult to compete with. And that's when customers will come back to you. So when we think about innovation, we have to think about how innovation can drive that sort of level of experience, build trust, build loyalty, and through doing that, ultimately you're going to drive long-term value and revenue for your airline. And so we think about it slightly differently, and the way in which we help airlines to do that is we have one single global infrastructure via one single API that an airline can embed that offers any product protection and insurance in any market, fully licensed in over 60 countries around the world and with an instant claims process. And so if you're working with— I'll give an example of Turkish Airlines. They're the largest airline in the world by markets they serve. Before working with COVID Genius, they had had to integrate several different APIs. Whenever they wanted a new product, they had to do more tech work. Whenever they wanted to roll out a new market, they had to do more tech work. And that's not scalable. So by working with COVID Genius, with— through that single digital platform, we're able to roll out at pace new markets, new products, new innovations, and back that with a claims experience

Alan Polivnick:that's That's very interesting, and I think, I think the part that I find most interesting about that is we talk about customer innovation in the passenger-facing part of this, the bit that you or I see when we're a passenger, but a lot of the innovation actually really is at the back end of all of this. It's, it's that having that app which says your flight's been delayed, you've missed your connecting flight, we've rebooked you on this flight in 3 seconds. It's, as you say, that offer, we know your flight was delayed, here's a $100 voucher. Yeah. $150, and, and those things happening very quickly. Now that doesn't sort of just happen on the front end of this. So I think that is part of where we need to be looking, and certainly I think that sort of customer innovation is front and back end of this. We— you raised very rightly the point about loyalty, and in fact we've just had a question come through which I'm going to ask our 2 airline panelists about. It's about building brand loyalty by becoming where you are increasingly digital. So I think the idea here is where the interaction is impersonal, it's very much on a phone or a tablet or something. How do you ensure that you are still building loyalty? Does that make your brand more important? Is it much more important for you to have an advertising presence, sponsorship, social media? Shinji-san?

Shinji Nishio:Yes, no need to sign. It's in Japan, but we are in CAPA, so please call me Shinji. And I'd like to— I'm not sure to meet exactly to the question, but we are focusing on new technology is like brand itself. Right. Doing new thing and adapting new technology means us to creating new brand as ZIPAIR Tokyo. And ZIPAIR Tokyo should be a brand adapting new technology. So I think we would like to do every new challenges, and then it will be our brand.

Alan Polivnick:What's your view on the loyalty question?

Kamal Hingorani:So brand loyalty is very important, especially if you are in a competitive environment. How we engage with the customers, especially digitally, is we make sure that we roll out offers during almost every festival. We have Plenty, at least one big festival a month in India in different parts of the country. And because we have the personalized data, we can target which part, because India with 1.45 billion people, it's like a continent. And the North India and South India are like 2 different parts of the continent. So we need to, what we do is we personalize. If you're from South India, then there are some things that appeal to you which may not appeal to North India and vice versa. So the marketing that we do online is targeted to that particular ethnicity. And that is something which relates that customer with us. Of course, when the flight gets disrupted and the passenger is not informed of the delay and he's reached the airport, even though his phone number was not correct with our— on our records, he will still blame the airline. Okay, so what if I bought the ticket from the travel agent? It's not my fault that he did not update my mobile number on your system. So it's very easy to blame the airline, you see, rather than any other third party. But having said that, and because we do have to navigate these challenges almost every day, Yeah. In India. You can't make every customer your brand loyal 100%. We try in various ways that we can, and one of the most important things, especially for an Indian market, is price sensitivity. For ₹200, they will change their flight online. And so we just have to navigate that and walk that tightrope and see how best we can retain our customers.

Alan Polivnick:Yeah, I think that's quite interesting because I think both you and ZIPAIR Tokyo focus on the price. It's not a, you know, it's very much about that price-sensitive market. One of the things that I'm interested in is there's a lot more technology these days to be able to go online and compare. So for example, if I wanted to fly from Delhi to Bangalore, I can go on an app and it'll tell me the prices of, of every airline flying that. Um, how, how does that influence how you price your products? We'll start with you.

Kamal Hingorani:So you don't, I don't know. Uh, you ask ChatGPT that question and they will give you the best comparison. Yeah. Even better than any of the international online platforms that exist. I may be slightly off the mark, but that's something that's so easy for every customer. And we possibly can't offer the lowest price every day on a particular city pair. It also has to make economic sense to us depending on how much inventory is sold, what's the expected. So for example, Just to go back to your earlier thing on how— what do you do at the backend? We have an internal development software developed which predicts demand on every flight. I'm sure a lot of airlines do. And with us, it's worked so well in the last 3 years that we've had a zero no-show on our flights. What? A near zero no-show on our flights because otherwise you pay denied boarding compensation. you have a disgruntled passenger, etc. And so from that aspect, I think what we invest at the backend ultimately benefits the customer. Hmm. So anything that's done at backend, not anything, a lot of things that's done at backend of course helps the customer. A few I've mentioned already. A lot of things that we use digital for backend stuff helps us reduce our operational cost, our unit cost, which ultimately enables us to offer a lower price. So indirectly, it impacts the buying decision of the customer.

Alan Polivnick:Did you, Peter?

Peter Smith:Yeah, if I may offer a slightly differing perspective, we surveyed 1,400 travelers just to figure out sort of what their buying habits are and what drives their behavior when it comes to purchasing travel flights. And you would expect the price would come out pretty near the top. Interestingly, it really didn't. So what, what came out top was that customers want certainty that the thing that they've saved money for and that the thing that they're buying, the trip that they're purchasing, is is secure if things go wrong. And it wasn't quite as cut and dry as that, but when you look at the research outcomes, that's what it said. And I guess to back that with another stat, the embedded protection— so embedded insurance within airlines, for example— that market is going to be worth $1 trillion within the next 5 years. That's a tenfold increase over a decade. And that's not about insurance all of a sudden becoming popular. Nobody wakes up excited to buy insurance. It's about customers wanting to feel safe and secure. And we found in the same research that 76% of customers would actively switch brands and travel with another travel company or airline if, for example, they had instant payouts when things went wrong. And so I don't know if that offers a little bit of comfort that it's not purely a price-driven market.

Alan Polivnick:It's interesting you say that, thinking about what you were saying. One of the things that I've been looking at is people who catch taxis and pay for them in cash and people who use an app. And one of the interesting things that comes out of that is people prefer an app because they feel they're in control. They know what the driver— who the driver is. They know what route they're going to take, and they know how much it's going to cost when they get in. And I think some of that certainty point is knowing that if something does happen, there is a way for me to be in control. I know I'm going to get this compensation. I know I have this remedy. And I think the other part of this, and this I guess comes to perhaps what ZIPAIR Tokyo's model is, is I'm getting on the plane, I want this meal, and I'm going to pay for it, or I don't want a meal, so I'm not going to pay for it. Yeah. I want the entertainment, I'll pay for it. I don't want it. And some of that is about the fact that by using all of these apps, we do have this feeling that we are much more in control of what's happening than if we simply got on the plane and said, do you want the meal? Do you want the entertainment? Would you like this? So I think that to me is kind of where some of that is going. One thing that, Kamal, I wanted to touch on, and I think I'll ask Shinji first about this, is We're talking here now about a lot of personal information, a lot of data about passengers. Some of that belongs to you, some of that will belong to Cover Genius when you work with them, some of that will belong to the car rental company. What do you see as the biggest challenge with having all of that personal data?

Shinji Nishio:Yes, I think the biggest challenge is to keep the personal data, to treat passengers' data accordingly. Because cybersecurity is very important issue for us, not only ZIPAIR, but all in the aviation industry. So the treating data, Precisely, it's a very big issue for us. It's more and more important when we face— when we adopt new technology and getting tech airlines. So it's, I think, a very important thing.

Alan Polivnick:Yeah, I think, I mean, one of the things about all of this innovation is it doesn't happen without knowing who your passengers are, and I think that comes back to, for me, who owns the passenger and what does that mean? Peter, can we perhaps talk not necessarily about the data, but what you see as kind of where the airlines go with that information? Because obviously the products that you offer rely on them being able to say, we are carrying X number of people from point A to point B, 50% of them are OD, 50% are connecting, and so on. Yeah. Where do you see the role of that data in what you offer?

Peter Smith:Yeah, that's a really interesting question. I guess, look, cybersecurity, it's a hot topic, particularly in the world of AI now. It's probably even hotter. We take cybersecurity very seriously. And I think any company inside or outside of travel, we work with big banks, global credit card companies, as well as the biggest OTAs and airlines in the world. And so it's very important to them, particularly if you're working with a bank for example, to ensure there are no data breaches and everything's kept really, really tight. And so one of the ways in which you can do that as an airline, for example, to ensure that it's as safe as it possibly can be is reduce the number of partners that you have to work with, still enabling the right products that you want to serve your customers. And so because every new touchpoint that you add or every new integration that you add brings risk, okay, because that's data that's transferred. So if you can consolidate that risk into, for example, one global infrastructure that can serve multiple products, multiple markets, then automatically you're reducing your risk down. And so I think for an airline So long as you're not scaling your number of partners beyond the speed of the way in which you're securing the data, then that's okay, right? And like I say, one way to do that is through consolidation.

Alan Polivnick:Thank you. Um, we have about 2 minutes left. Are there any questions from the floor? Okay. All right.

Kamal Hingorani:Can I just add one thing? Sure, with pleasure. Of course, the data, which is our data as an airline, we are responsible and we make sure that it's not compromised, barring any cybersecurity attacks or whatever. But I think going forward, what we all are aspiring is, and I would say this for all most airlines, the interoperability from airline to airports to immigration to the digital identity, governments have to get involved. We will have more partners or stakeholders in the journey of the passenger. So it's important for all stakeholders to ensure there are enough firewall, if I may use that term, built, you know, to ensure that At no stage should that be compromised because if it's compromised at any of those 5, 6 stages, I think the passenger will still blame the airline because we are the softest target to get any kind of compensation.

Alan Polivnick:Certainly the regulators will probably take the same view as a first step.

Kamal Hingorani:Yeah, so, so that's something that, you know, I would request every stakeholder to make sure that we work as hard as we can on that.

Alan Polivnick:Thank you. Um, allow me to say thank you to our panel. Thank you very much for your attention, ladies and gentlemen. Thank you. Thank you.

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