From Transaction to Trust – what actually drives airline customer behaviour today

Transcript

Peter Smith:So it's wintertime in New York City. It's the 10th of December, 2025, and it's -5 degrees outside, and I'm stood there With no hat, no gloves, no jacket, no coat, no boots, no socks, not a toothbrush, with nothing. Because the airline on the way out lost my luggage with 5 days' worth of packing in. And in that moment, I wasn't thinking about the airline's schedule or their seat plan. Or their loyalty program, I was thinking just one thing: is this airline actually going to take care of me? And for airline execs, how you answer that question in that very moment, the moment when things break, is critical to how your customers will view you for many, many years to come. For decades you've spent time optimizing the transaction, the ancillary upsell, seating plans, what you sell, what you don't sell. I think that the next decade gets won on trust because customers have changed not only what they buy But they've changed what they value. For decades, we bought things. We bought cars, TVs, stuff that you could pack in your garage. But as you can see, over the years, that slowly changed. If you think about your own life, 10 years ago, a big purchase was probably one of those items. It was a material object. But as times moved on, our purchase habits have also. We're much more likely now to pay money on a vacation, on an experience, on a concert, on something we can remember forever, on a memory that we can treasure. There was a small blip in this graph, as you can well see, and that was something called COVID. You may have heard of this. During that time, we actually went back and we went back to buying material objects. We bought office equipment, we bought Pelotons, gym equipment. How many of you in this room have your gym equipment now up in the loft or back in the garage? I know certainly I do. But when the world reopened and that blip was overcome, we saw a real resurgence in people again spending money on experiences. And here's what really matters: people will pay to protect those moments. Because when a customer flies with you, they're not buying seat 14A or 14B, they're buying a honeymoon, They're buying their child's first trip to Disneyland, or a grandparent meeting their grandchild for the very first time. And the problem is with that is that because those things are so cherished, if something goes wrong, they'll never forget it. If a once-in-a-lifetime trip falls apart, they will remember the brand that was responsible for that. Which is what this chart is really about. It says embedded protection at the top, but this isn't about protection. It's not about insurance. This is about behaviour. Because nobody wakes up really eager to go out and buy insurance. What do they actually want? Is certainty, and they'll pay to take away their worries. You can see by the numbers, in 2020 people spent $70 billion on embedded protection. By 2030, just 10 years later, that's going to reach a trillion dollars, more than a tenfold increase. And that's not about Insurance all of a sudden becoming really popular. It's about people wanting to feel safe. So let's be clear, customers— what customers are really buying, it isn't protection, it's confidence that the thing they've waited for for many, many months or years actually goes ahead and happens the way they expect it to. But there's a huge contradiction, and it's really quite a big one. We surveyed over 1,300 travellers. 86% of those travellers think about risk when they book, so the awareness is clearly there. And yet only 30% actually buy any protection at all. 86% of people worry, but only 30% actually covered themselves. And that's the gap. This gap really fascinated us at Cover Genius when we took a look. Think about the last time you booked with an airline and they offered you protection. Was it hidden in the checkout? Was it a pop-up? Was it in tiny print? Because if it was, that's not really an offer, that's an obstacle. So this isn't a demand problem. Customers don't reject protection, they reject friction. Products that feel bolted on at the last second. And that doesn't only go for protection, it goes for any third party. That you work with. But the beautiful thing for all of you in this room is that is the opportunity. The growth is not in squeezing the extra dollar from the fare. It's closing this gap. So how do we close it? I'm going to talk about 2 things today from everything we're seeing. I'll take them one at a time. Okay. And I'm ready for the groans in the room now because you've all heard this word a million times before— personalization. How many times have we heard about this? Let's just try and bring it to life a little bit. Think of 2 bookings: a family booking a ski trip to Colorado for $5,000, and then somebody spending $500 on a weekend city break. One of them is absolutely terrified that the trip they've been planning for months is hit by a blizzard and goes wrong. The other one is just after something really quite cheap and easy. And yet, what do we do? We offer them exactly the same product, the exact same pricing logic, the same wording, and then we wonder why they don't convert. Because customers don't reject protection, they reject irrelevant protection. And real personalisation is more than just recommending a product. It's about what I call the 5 Ps of personalisation. It's placement— where you put the offer. It's the product itself. The pitch— like how you sell that offer. And then how you present it, and of course we all know the price. But importantly, all tuned to that person in that moment. The very same policy can be peace of mind for one customer or a really sort of interesting upsell for another. Same product, different context, different story. And we saw this really clearly when we broke it down and we started to go deeper into the research of these 1,300 travellers. We saw across all trips, trip cancellation was the top purchased protection. But underneath that, motivations changed. Younger travellers all these younger generations you see on the left, for them, they wanted to protect the actual trip, the experience that they'd purchased. Whereas older travellers, baby boomers, for them the number one thing was medical cover. And the interesting thing that sits behind this, and it's really quite important, is that people don't buy products. They're buying reassurance about whether the thing that they're going to do is actually going to happen, about the thing that they're most afraid of losing. That's what they want to protect. If we go a little bit deeper, generation by generation, we can see that Gen Z— 73% of this generation love contextual trip-specific offers. For them, recommendations are completely normal. Think Netflix, TikTok, Spotify. They're completely familiar with this, and to them a good suggestion doesn't feel intrusive, it feels useful. Millennials go even higher, 77%. It makes sense, right? If you think slightly later stage in life, probably bigger purchases, families, higher stakes, and And when the stakes go up, relevance matters even more. For them, a good recommendation doesn't feel like you're selling them something. It feels like help. And then on to my generation, Gen X. Still positive, but slightly lower, 62%. But they're a little bit more guarded now. They start asking, hang on a second, using my data, how did you know that about me? And finally, baby boomers, just 39%. The easy conclusion here would be to say they, they don't want personalisation at all, which is absolutely not the case. They really actually want hyper-relevance, but without surveillance, without feeling like you're watching them, you're using their data. They just want to know that you can help them. For example, if you say to a baby boomer, based on everything we know about you, they're just going to go, whoa, that's a little bit creepy. Whereas if you say you're travelling in hurricane season, You might want some cover for that. They're like, oh, actually, yeah, that really helped. Thank you. So same data, different context, completely different feeling. So really the playbook splits in 2. Younger travellers lean into hyper-personalisation because it converts. Use the data points available to you and associate the delivery of the product to exactly what it is they're booking. For older travellers, stay relevant but ease right off the intrusion. It's not about doing less personalisation, it's about being really transparent in your offer. Because in the end, the line isn't technology, it's not data. The line, we all know, trust. And that takes us to our second shift. Once you've earned the customer's trust, how do you earn even more trust? Here's the thing, airlines are already sitting on one of the most powerful trust assets in the whole of travel. And yet many of us in this room have never really thought of it that way. You've spent billions on building out loyalty programs, and the logic's always been very simple: fly more, spend more, earn more points. But something really interesting is starting to happen. Customers have stopped treating loyalty as a reward, and they've started thinking about it as stored value. As a currency. Think about that shift. Points used to be about a free flight. One day when I finally collect enough points, I might get a free flight. But now people see that as money they've already earned and money they would happily spend to worry less. We asked the same travellers what really drives their decision to buy protection. And honestly, this answer surprised me. I'd have bet on best price, clever technology, single-click checkout, but it wasn't the case. The strongest pull was value they already owned. It was points, rewards, membership. And let's look at those top 2 drivers together. Paying with points and having protection built into membership combined are the single biggest motivator we found. Bigger than any piece of tech. So points aren't a discount anymore. They're stored value and people want to really spend that on feeling more confident in their future travels. Not only on seats and upgrades. So the question isn't about whether loyalty matters. It's about how you can make it much more strategic. Historically, loyalty and protection have lived in 2 completely separate worlds. On one side, points, and on the other side, protection and peace of mind. And most businesses, most of you, still keep them completely separate. But I think there's a bridge in between these 2 worlds which is a really significant opportunity, and it comes down to 3 things when you're offering protection. First, keep it native. Don't send customers off to another website or to a pop-up. Do that and you've immediately lost them. Second, mix points and cash. Hotel brands do this very well. Quite often you can combine the two to purchase a hotel room. And third, build protection Into the membership, into their loyalty program. Because the best purchase is the purchase you never actually have to make. It just happens. Imagine that in practice. A customer books a flight right now, and then there's no new page, no new login. They just see, add peace of mind, 1,200 points. Or add peace of mind, points plus cash. One tap, done. That's the bridge in action and actually working. Get that right and something changes. You stop just rewarding the past and you start shaping future buying decisions. Picture a traveller thinking, because I fly with Peter's Airlines, I know I'm covered if things go wrong. That's not transactional loyalty, that's emotional loyalty. And emotional loyalty is very, very hard to compete with. But even loyalty has a limit. The real test comes, of course, when something goes completely wrong. And this to me was one of the most striking findings In our research, 73% of travellers said they'd buy more if payouts happened automatically. And 70% said they'd switch airlines for it. Just think about that for a moment. Not for a better seat, not for a cheaper fare. They change airlines if they know you're going to look after them. When things go wrong. We spend billions fighting over seats, schedules, price, and yet customers are quietly telling us, look after me when things go wrong and I'll switch my business to you. Picture it, the customer lands after a 4-hour delay and before they've even reached the baggage belt, tired, and frustrated. Their phone buzzes. They take it out of their pocket and it's the airline. We know you've been disrupted. We've sent $150 to your wallet. No forms to fill in, no telephone calls to make, no having to prove what we know has already just happened. That doesn't feel like insurance. That feels like somebody actually cared about them. And in a world where everything else is pretty much carbon copy— the seats, the schedules, the price— that feeling right there becomes your moat. Think about what that does to your brand. The delay still happened, but the story that customer tells about you is completely different. They talk about how you showed up in the moments that mattered the most to them. So let me bring it home to you. Everything we've talked about here today points to exactly the same place. This was never really about protection or insurance. It's about knowing your customer, using loyalty differently, And showing up in the moments that matter the most. Because in an experience economy, the airline that owns the moment things go wrong owns the relationship. Look after people when it truly counts and they won't just fly with you, they'll trust you and they'll stay with you for a long time. Thank you very much. Thank you.

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