Facing unprecedented market conditions caused by the Covid-19 pandemic, airlines recently decided to relax fare conditions to address travel restrictions introduced by local governments. In most cases, these relaxed fare conditions are temporary and are adjusted from time to time based on the severity of pandemic cases and local government advice. However, long-term uncertainty related to travel, especially during summer 2020, may ultimately cause consumers to change plans: under the assumption that ground transport is less risky, most airline customers may decide to spend their vacations this year driving to the countryside or training up the coastline. With the majority of planes still grounded, airlines are facing the ultimate question: when restrictions are lifted, how do you regain customer trust, mitigate uncertainty over future travel conditions and simultaneously get customers on board?
The answer may lie in revamping fare rules for flexibility and developing insurance products to ensure customers have the option to feel their purchase is secure.
Extending flexible fares product
In our previous article, we discussed the issue of a frustrating rebooking and cancellation process. It is indeed a pressing issue for consumers as many airlines have these processes poorly implemented from a user experience perspective, and offer limited self-service rebookings options. While booking flows are sometimes subject to technological limitation, in many cases, it is a business decision to prevent modification to a purchased ticket. Therefore, customers are often doomed to overloaded call centres – especially during massive disruption like Covid-19.
Bringing permanent flexibility to fare rules
Implementing changes to fare structure and policies which introduce greater flexibility in booking modifications could restore consumer confidence in booking trips far in advance.
Before the pandemic, flexibility was one of the most expensive elements of the fare rules and was usually tailored as a product for business travellers. This is no longer the case. Tackling the problem of reluctance requires introducing flexibility across all traveller segments as a basic element of the fare conditions, and with effective price discrimination allowing for affordable prices in lower classes. Extending flexibility products will provide customers with a level of security in case their plans change unexpectedly.
From an airline perspective, cancellation is probably the most controversial service. In many cases, there is no simple online option for cancellation, or, when there is an option, the refund process is fully manual and tedious for customers. There are often both technological and business-related obstacles to expanding cancellation options. The former is caused by a complex process hailing from outdated, legacy reservation platforms. In the latter, removing the online cancellation option and pushing through offline channels can deter customers from making refund requests.
However, to offer a truly customer-first cancellation service and stabilise cash flow, airlines could provide an incentive plan for handling involuntarily cancelled flights. Customers purchasing cheaper (currently inflexible) fares, could be still offered the cancellation option, but only with the refund to voucher or credit account maintained in user profiles. On the other hand, customers who purchased an expensive fare should have the option for a full refund in cash; however, an airline could also further incentivise customers to choose a voucher. Opening up cancellation options will build consumer confidence in airline fair practices, as well as encourage stronger loyalty.
Adding more flexibility through ancillary product development
This relaxation of fare rules can also be applied by a broader and more affordable offering of flexibility fees as both stand-alone ancillary service and as part of the fare bundles. There is also a space for new product development, especially with insurance partners that can also cover consumer’s needs for more protection during times of uncertainty. Insurance products usually require less workload to be implemented in the short term in comparison to completely revamping the entire fare structure and strategy.
Obviously, the downside offering flexibility through insurance products alone is that an airline doesn’t control the claim process and therefore acts only as a merchant, removing their influence on the partner customer care unit. Therefore, a negative experience with an insurance partner will reflect back poorly on the airline’s reputation at the end.
Nowadays, customers require more empathy on the part of airlines, as their future decisions regarding travel will mostly be based on consumer confidence in both being able to fly, and the perception that they are taking less risk in doing so.
If an airline takes the customer-centric approach and shows understanding regarding the change to consumer travel plans, it may pay off. Greater relaxation of the fare rules, not just for Covid-19 restricted times, but also permanently after the pandemic, will decrease customer insecurity regarding air travel in the uncertain future. This relaxation does not necessarily create gaps in revenue for airlines, as this approach would also generate additional revenue from a broad offering of ancillary services tailored to assure that the customer is always protected against unforeseen circumstances. It will also generate sustainable volume if it is not simply an exclusive product, but differentiated across the traveller segments to be affordable for even the most price-sensitive customers. Mitigating uncertainty also presents the opportunity for product development with current insurance partners as customers will most likely seek more protection.
We may assume that this is not the last time we face such massive disruption caused by pandemic disease or other unforeseen circumstances, but by taking steps now to introduce flexibility and protection for customers, airlines and their customers will be better prepared for the next time crisis hits.