How do companies differentiate their product?

Recently, a senior executive of a major airline asked me what I think differentiates the product from carriers in order to guide customer choices. I admit that I suggested a moment of reflection and here are some avenues.

First of all, we will only talk about the major carriers, the only ones to compete fiercely, and their survival is at stake. The slightest failure can come at a high price, especially with business customers who, with less than 50% of passengers, account for more than 2/3 of the companies’ turnover. Very large operators are characterized by fleets of several hundred aircraft, networks of more than 100 destinations, more than 30 million annual passengers and a turnover of at least $20 billion. Suffice to say that these are very large companies, which are often grouped into even larger groups with many subsidiaries or associated carriers such as the Lufthansa Group, Air France/KLM or IAG in Europe, Delta Airlines, United Airlines and American Airlines in the United States, or Latam resulting from the merger between Lan Chile and the Brazilian TAM. Other very powerful airlines have not found the need to partner with anyone, the Gulf carriers, for example, or Ethiopian Airlines in Africa and Qantas, Cathay Pacific, Singapore Airlines and the other major Asian carriers that are reluctant to mix with others.

So what differentiates one company from another? First of all, its network is obvious. No carrier claims to go to all points of the planet, even if, with alliances, companies try to capture the clientele of mega companies that have global transport needs. For the rest, the fundamentals are strangely similar. The major airlines operate the same aircraft from only two manufacturers: Airbus and Boeing, which are eerily similar in terms of standard cabin layouts. These aircraft fly at the same speed, have comparable ranges and operate to the same major airports. So how can you differentiate yourself from your competitors? And finally, why would the passenger choose this or that carrier? On the transatlantic route alone, more than 20 airlines operate hundreds of flights every day. All major operators use the same model of transfer platforms commonly known as “hubs”.

Going into a little more detail, there are still some factors that can tip the balance for this or that company. First of all, its customization. Airlines are the true ambassadors of their country and each one reflects the personality of its origin. You can’t go wrong when you enter an aircraft between an Asian carrier and an American, a European or an African one. This is reflected in the cabin crews’ uniforms. I’m not talking about the pilots, all dressed in the same way regardless of their country of origin. So if the customer prefers a French atmosphere, he will choose Air France and if he prefers the American style, he will take Delta Air Lines or American to make the same trip. The experience of the flight will be different, if only by the language commonly spoken on board. We do not understand why air transport invented code-sharing, which consists of selling a product other than the one purchased by the customer. It’s a deception because you have to call things by their name, except that it’s legal. Who knows why!

And then there is the reputation of the companies. In this sense, respect for schedules and regularity of operation is decisive between two close competitors. In its time, the Belgian company SABENA has had the bitter experience of this. For the front classes: Business and Premiere, ground service is also a differentiating element. Trade fairs where you spend a lot of time ultimately lead to certain choices. However, the same type of product must be available in all destinations, and this is almost never the case, except for the two major Gulf carriers: Emirates and Qatar Airways, Emirates having shown originality to the point of a higher level of on-board equipment with the massive use of the A380s. The quality of the services provided is also appreciated by those used to long-haul flights, as is the electronic equipment.

The major argument remains: loyalty programs. Customers are ultimately very loyal to the carriers with which they can earn their miles, even if only 40% is actually consumed.

I’m not talking about the rates, which are so important, but they fluctuate so much at the whim of the Yield Managers that they cannot be analysed objectively.

Of course, the differences are much more noticeable for long-haul flights. As far as medium and short-haul flights are concerned, the airlines’ services are all converging towards the low-cost model, which has undoubtedly won the game.