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WLCAC 2015: Keep cost control despite good times, say LFAs

“Lower fuel prices demand that we continue the discipline we exercise when fuel prices are high,” declared Vueling CEO Alex Cruz in the opening session of the World Low-Cost Airlines Congress (WLCAC) in London, underlining that just because the industry is doing well at present (“If anyone didn’t have a good summer this year, they probably need to do some restructuring”), there should be no loss of focus on the control of costs.

Cruz shared the platform with two other low-fare airline (LFA) leaders – Ryanair’s chief marketing officer, Kenny Jacobs, and Wizz Air CEO József Váradi, each doing one-to-one interviews before an open discussion involving all three.

Vueling is now fully integrated into International Airlines Group (IAG), noted Cruz, and setting about bringing in Aer Lingus. “The welcome party is about cost reduction, because the group offers a number of cost advantages. Aer Lingus already has very good cost position but being in the group will make it even better,” he declared.

Although his airline has the aforementioned fruitful summer behind it, Cruz warned that winters remain a more difficult prospect. “Our ‘sisters’ at British Airways and Iberia can look to January and predict their long-haul passenger numbers, but we have much less idea as to what will be happening in January,” he explained. “Most of us try not to add capacity in the winter.”

Innovation in the product remains a key focus at Vueling, encouraged by an environment which empowers the staff. “If you saw our staff you might think they’d be working in a trendy office in San Francisco. For example, Vueling is not a place that defines heavy web-browsing policies. We define objectives and whatever you do from there is your choice,” Cruz emphasised.

Having the ability to adopt new ideas rapidly is key to differentiation, he added. “In the ‘digital space’, IAG leads the co-ordination across the group via IAG Digital. When it comes to areas such as ancillary revenues though, each airline in the group has its own policy for what it chooses to offer.

“Conversion [of the offer to a sale] is to identify the particular moment to get it right. That’s when we go into big data,” Cruz remarked. “If we make an offer that is very specific and absolutely wrong, that shows that we don’t know anything about the passenger in question.”

With his airlines’ Always Getting Better (AGB) programme, Kenny Jacobs, CMO at Ryanair concurred with that assessment. And another phase of AGB is about to reinforce that, with the company’s new website due to be launched in October.

“It will be a better experience – all designed to get a customer to book in the fewest number of clicks,” Jacobs reported. “The Mobile app version of the website will be better as will the ‘My Ryanair’ function. And we recognise that the site needs to work well across different devices – PC, smartphone and tablet – and will make it a seamless experience across these, like Amazon.

“We will offer more content on destinations, some created by customers,” he added. “And we want to sell ancillaries in different ways. For example, we watch how customers convert to a purchase in different geographical locations.

“Always Getting Better doesn’t end,” Jacobs stressed. Asked if Ryanair was now an airline or a retailers and whether or not it matters that lines get blurred, he responded, “Perhaps you might think of us as a travel company specialising in flights. But we’ll just concentrate on doing the things we do best (a focus on lowest costs and low fares).

“I want customers to say, ‘I get more from Ryanair than just cheap flights’,” Jacobs concluded.

Wizz Air CEO József Váradi, picked up on the theme of good times for the airlines at present. “Business is pretty strong and going public has made us stronger too,” he confirmed. “Even legacy carriers which had been losing money are making money now. The big question is how you make use of this time to prepare for tougher times. At Wizz Air we are focused on low costs at all times.”

The airline’s newly-confirmed order for 110 A321neos is one element through which Váradi expects to bring cost down. “The aircraft will have 239 seats, so it’s a game changer for the costs we can achieve,” he emphasised. “Depending on assumptions on fuel costs, it’ll bring about 15% cost savings. Of course, we need to fill the aircraft and be strong in the marketplace, but it’s a new enabler.”

On the customer service front, Wizz Air starts ensures it gets the basics right. “We have always said a smile doesn’t cost money,” Váradi explained. “[From that starting point], we’ve always taken the customer experience seriously.”

The results are tangible, with Váradi pointing out that the airline has been getting €25-26 in ancillary revenues per passenger.

Going into the Q&A session, the three executives were asked about the role of loyalty programmes within a low-fare airline. Jacobs believes that these are “a lot less important in the age of digital. For example, we would not be looking at gaining points for golf clubs. There are many other incentives that we could look at.”

Cruz commented that loyalty is all about relationships. “What we know is that if you’re loyal to a brand, a company, or something else, you expect something back. What airlines must do is ensure that the customer is not just getting something back, but getting something they appreciate,” he added.

“We think the best way is that whenever people come and buy at Wizz Air then they get the best prices every day,” Váradi declared. As for a smile not costing anything, he remarked, “We are very keen to get every employee engaged with the direction of the company.”

Cruz backed up Váradi on the value of the staff. “Fuel price, aircraft, IT – it’s all peanuts. The best way to make a success is investing in and managing people. They are, above all, the key element to success,” he stressed as the session came to a close.

Photo shows (l-r): Vueling CEO Alex Cruz, Wizz Air CEO József Váradi and Ryanair CMO Kenny Jacobs.

Bernie Baldwin, editor, Low-Fare & Regional Airlines/LARAnews.net
London, UK

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