“It’s Only a Matter of Going”: Views on the Future of the Airline Business from Palm Springs

As the participants in the 8th Mega Event WorldWide Conference sat down to discuss the future of the airline business in Palm Springs, California, we too looked out across the sands. It’s a different desert: the Sonoran instead of An Nafud. And for us, the physical challenge of crossing the desert has been solved; we winged over the desert in sleek aircraft that would have been all but unimaginable in Lawrence’s day.

But the metaphor of crossing the desert was on all of our minds. As an industry, we have a strong sense of where we want to go. And we have the tools, wherewithal, and fortitude to get there.

We know that airlines can improve their revenue, competitiveness, and their customers’ satisfaction through ancillary merchandising. That’s our destination when we contemplate crossing the metaphorical desert. And we have guides, or thought leaders, that have provided maps.

At the conference, Amadeus’ presentation started with a picture of the overall landscape of airline ancillary offers, based on research from the Accenture Amadeus Alliance. Then, we moved on to discuss a few of the guides that we in the airline industry can use to navigate.

Richard Thaler, 2017 Nobel Prize laureate, guides us with the concept of ‘choice architecture,’ that the decisions people make can be influenced by the environment in which they make them. Thaler discussed this theory extensively in relation to public policy. His book Nudge, written with Cass Sunstein, has inspired policy-makers, like the UK’s so-called Nudge Unit. While governments help citizens make more rational life decisions, airlines can help customers make optimal choices about their travel by understanding the context.

Another guide, George Dantzig, may be better known on the Ops side of the business. His development of the Simplex Method represented a great achievement in the field of mathematical optimization. The method allowed for a quick and efficient way to make decisions to solve problems that could be expressed in linear relationships. Early adoption included transportation challenges, like how to allocate aircraft to schedules or crew to the aircraft. But techniques from the same source can be applied to other linear relationships, like the revenue from optional seat assignments, and output optimal prices even with all sorts of constraints taken into account.

Dantzig published the Simplex Method in 1947, 70 years before Thaler received Nobel recognition for his contribution to Economics. Merchandising benefits from the durable and timeless in addition to the new and cutting edge; Dantzig and Thaler are only two of the many other guides available for airlines looking to cross the metaphorical desert.

The insights, the understanding, and even the tools exist to reach the goals of increased revenue, competitiveness, and customer satisfaction. It’s only a matter of going.