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May 2018: ICF – Winning new routes and developing air services

Edward Shelswell-White, principal of airport customer strategy and air service development at ICF, tells Chloë Greenbank how airports can drive consumer demand for their service, by using next generation Air Service Development and big data analytics. But, the bottom line comes down to knowing your customer.

You have an extensive background as an innovator when it comes to planning for the aviation sector, can you expand on your own working background and the airport projects you have worked on?

I previously worked at Southwest Airlines for 22 years, and every position I held had something to do with the intersection of airports and customers. Yet I noticed that when airports came to our headquarters to talk about service opportunities, little of what they told us was anything we didn’t already know about the market, and so it tended not to affect our decisions. Occasionally, an airport would tell us what they were doing or seeing that would make the market more intriguing to us than what we could see in the data alone. Those meetings were effective, but exceedingly rare. So, when I left Southwest to get into consulting, I wanted to help more airports be effective in their efforts to develop air service, by helping them focus on the things that make a difference to how airlines plan their networks. In the six years since I left Southwest, I have worked on projects for airports as large as Los Angeles International (LAX), and as small as San Angelo, Texas. While their sizes and situations have little in common with each other, the principles for each are the same: focusing on what the airport can control or affect to increase passenger demand, and by doing that, increase airline appetite to add capacity.

Describe ICF’s services in a nutshell and how airports (particularly regional hubs) can benefit from your services?

ICF has a broad range of airport services, including strategic planning; transactions advisory; passenger experience; and air service marketing and development (including passenger and cargo). All these areas complement each other to help airports compete more effectively in today’s hyper-competitive environment.

What really sets us apart though is our deep, technical understanding of what is required to optimise an airport and the passenger experiences within it – and the partnership we bring with good people who have implemented these changes in the real world before. For example, by using data to better understand passenger behaviours throughout the travel experience, ICF can provide strategic counsel that effectively addresses customer pain points. From deciding where to best place a restroom to understanding the different passenger personas moving through an airport, ICF uses research and expertise to help airports better accommodate travellers’ needs and truly elevate the passenger experience.

Why is ICF’s approach different from other strategic planning methods?

ICF’s facilitative approach to strategic planning establishes a common direction and goals with wide organisational buy-in, and a manageable number of actions with accountability and cross-functional coordination. Our team includes seasoned experts in strategic planning, organisational development, and governance, with real-world experience in all facets of aviation – including airlines, airports, aerospace and more. And unlike some other consulting firms, we not only delivers strategic advice and planning, but also partner with clients to execute our vision and implement the programs.

How is ICF’s approach to Air Service Development with ASD 2.0 unique?

Standard Air Service Development (ASD) is a necessary part of an airport’s efforts, but today it’s no longer sufficient to deliver results for any but the largest airports. This is because it relies on trying to persuade airlines to do something the data already are telling them, most of the time, not to do.

Just as standard ASD does, ASD 2.0 uses industry data; but rather than using data to persuade airlines of anything, we use it to understand them – how they see the market; how profitable their service is; what would have to change to make the market more attractive to them. Then, we layer in primary consumer insights research to baseline the attitudes, perceptions, and preferences of airline target passengers’ (the ones airlines most want to serve) toward the airport. Finally, we help airports design and then drive multi-year commercial strategies and annual tactical plans to help attract the passengers their airlines want to serve. When more and better paying passengers demand an airport’s service, one or more airlines will tend to provide it. Rather than putting the airline in control of ASD (by asking them to provide service based on existing data), ASD 2.0 keeps the airport in control of ASD by helping it to focus on what it can control or affect to make additional air service more attractive to airlines.

One other thing that’s different about ASD 2.0 is that it doesn’t try to predict which airlines will serve the market. It isn’t that we don’t have specific dialogue with targeted carriers about certain routes, but rather that we’re trying to maximise the success of the market overall, not just a particular, centrally-planned route. We believe that if we maximise the viability of the overall market – something the airport is uniquely positioned to do – we don’t have to worry so much about predicting which carriers will fly which routes, with what equipment, how often – something the carriers are uniquely positioned to do.

How can airports incentivise airlines and how can they best demonstrate their potential to gain new air services?

There’s a role for incentives in an airport’s ASD arsenal, but that role isn’t to act alone to attract new service. An airline’s appetite for incentives is far larger than any airport’s ability to pay them, and airlines know this. What they really want to see is a market that is performing well enough with existing service, so that they can project a successful new service. At that point, incentives can make sense if they lower any barriers to entry or reduce friction. For example, the costs to set up the operation or market the service to gain baseline awareness and trial. But ultimately, airlines want to see that the market can sustain itself over time.

The best incentive for new service, for any airline worth attracting to your airport, is to show that your existing service is performing well. You do that by maximising passenger demand for the service you already have. Do that, and new service will follow more surely than by any other means.

No matter what size they are, airports face numerous operational obstacles. How can passenger analytics help with addressing these challenges?

Big data analytics can help in several ways. A couple of examples:

  • Identification of passenger flow issues, especially as it pertains to security checkpoints. With big data we can determine passenger show-up profiles and then work with the airport and Transportation Security Administration (TSA) to analyse staffing performance and staffing requirements by hour/day/day of the week, etc.
  • Identification of demand peaks and valleys at individual retail locations. Over time, trends may become visible that allow airports to gain insight as to the products and services different customers prefer, not only by time of day, but by flight arrival and/ or departure. This sort of customisation is something that smaller airports especially can use to their advantage, to leverage one of the main assets – customer experience – they tend to have versus their larger competitors.

The rise of LCCs has meant that ancillary revenue sources have become increasingly important to operators and investors. With this in mind, how do you recommend airports capitalise on the commercial potential of their passengers?

Airports, especially in the US, tend to lag other industries in understanding and segmenting their passengers. Whatever trends are in play today or in the future, understanding how they affect your customers is the key to capitalising on them; because passengers, like any customer, exist for us to serve them.

Take Transportation Network Companies (TNCs), for example. They are significantly threatening airports’ revenue streams by reducing demand for airport parking. All too often, airports respond initially by limiting if not prohibiting the services, then eventually, by allowing them, sometimes while wondering how to raise parking rates enough to compensate for the lost parking revenue. All of this misses the point, and the opportunity.

As any marketer knows, happy customers spend significantly more money than other customers. People love TNCs; and they’re using them to come to your airport. Airports should work with TNCs to ascertain what kinds of arrival and departure experiences their mutual customers would most want to have, then provide them, and become the most TNC-friendly (and therefore customer-centric) airport around. Passengers will respond, and you’ll benefit.

What measures do you recommend airports should consider when looking to enhance the passenger experience?

There are two kinds of measures: lag measures, and lead measures. Lag measures are the ultimate measure of success – revenue, profits, relative market share, etc. But by the time an airport knows what these measures are, they can’t do anything about them. They’ve either hit them or they’ve missed them. So, it’s hard to manage them effectively.

Lead measures, on the other hand, have two characteristics that lag measures lack: they are influenceable, and predictive. Influenceable means that they are within my immediate control to affect. If I do “x”, “y” happens. Predictive means that, although they are not the lag measure, we believe that if we manage to this lead measure, we’ll produce the lag measure we want.

To enhance the passenger experience, airports should focus on measures that are influenceable and predictive. Aside from regular consumer insights research, which we believe is essential to commercial success, one of the most powerful ones we know is Net Promoter Score (NPS). It asks a simple question – based on your experience with our product today, how likely are you to recommend our product to your friends, family, and colleagues? You can also then ask people to tell you why they responded as they did, to give you insight into how to improve. It’s influenceable, and predictive. If I could only have one measure, this would be it.

What are your three top tips for smaller regional airports when looking to plan for future growth?

  • Use industry data to understand how airlines see your market.
  • Use primary consumer insights research to learn what you can offer airline target passengers to increase demand for your airport’s service.
  • Design and relentlessly implement a plan to grow passenger demand based on what you can control or affect.

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