Changing the game: a different approach on customer marketing at KLM Royal Dutch Airlines

The airline industry has reached the crossroads. Today’s fiercely competitive and efficiency focused economic environment ensures that airlines are struggling to gain market share and sustain profitability. This is partly due to the global turmoil, the economic slowdown in the European region, the volatile demand of air traffic, the increasing number and strength of (lower priced) competitors, fluctuating fuel costs and more diverse and specific passenger needs. As a result, airlines have come to know that cost containment and financial strength are more important than ever.

This forces airlines to develop new manners to manage their customer relationships better in order to optimize customer loyalty and revenues. As proven in the past, airlines’ immediate focus is often on cost reductions in achieving more efficient operations. This reality mainly stems from the fact that fixed costs are enormous in the airline industry. Unfortunately, as is with many airlines, most have failed to recognize that their customers and the relationships they maintain with their organizations, are at the core of their business strategies and KLM Royal Dutch Airlines (KLM from now on) is no exception.

The main problem that KLM faces is that they have a limited view of who their customers truly are. The reason is that customer relationships have so far been primarily of a transactional nature. E.g. A customer searches for a ticket, makes the booking, takes the flight, and once the flight is over, the relationship basically ends. Unless, the customer is member of the frequent flyer program ‘Flying Blue’, but the fact remains that there is no guarantee that KLM will ever see this customer again. Partly due to the lack of relevant customer information and poorly integrated information systems, it is difficult for KLM to allocate marketing resources effectively and make more personalized product or service offerings from a customer’s perspective. Currently, new technologies and The Internet provide customers easy access to huge amounts of information. The customers have been taking advantage of that and are using these technologies to find and compare competing products. Most importantly, customers started to communicate with each other via review sites, blogs, social media, and etcetera. These customers are increasingly avoiding pushy marketers and revert to other customers for information to help them in making their purchase decisions. In this new era of customer engagement, organizations must do more outside their own traditional organizational boundaries. Whether organizations like it or not, customer power is growing. Customers have increased access to information, more alternatives, more simplified and direct transaction, control over contacts and most importantly, increased communication with other customers.

Therefore, this researcher argues that KLM should adopt and implement a different customer strategy, aiming to build mutually beneficial relationships with its customers, based on trust, transparency and openness. As relatively old strategies, customer centricity and customer advocacy can lead KLM to achieve this. These strategies are based on the realization that the path to success and profitability, is helping customers make the best decisions in their purchase decisions. If the organizations truly helps the customer, they will learn about their needs and interests, and can provide honest, open and transparent advice, even if this means to recommend competitive products (e.g. the Auto Choice Advisor of General Motors). In this sense, the organization truly advocates for its customers. In turn, the customers will advocate on the organizations behalf, stimulating customer trust, loyalty, repurchases and most important, positive word of mouth towards other customers. As a result, the organization may enjoy a larger customer base, more satisfied, truly committed and more buying customers.

In line with this reasoning, this research aims to identify and evaluate ways that will help KLM on its possibilities to become more customer centric and turn their customers into advocates. To address the research problem, the general research question is as follows: Can KLM Royal Dutch Airlines migrate from a product oriented towards a customer oriented organization and develop a customer advocacy strategy?

Sustainable Infrastructure Development – A Socio-economic Impact Analysis of Airport Development in Vietnam

hanoiAirport operation and development in Southeast Asia is at a crossroads. In order to maintain high levels of socio-economic development and improve national competitiveness within an increasingly globalized economic system, governments throughout the region are investing heavily to modernize their outdated and frequently under-dimensioned aviation facilities. While these processes have been found to benefit countries at the national and regional level, the associated socio-economic impacts on people living in the vicinity of major airports have seldom been documented in academic literature.

The research uses a case study of Noi Bai International Airport in Hanoi, Viet Nam, to examine how the access to available livelihood assets can influence the adaptability of local households to processes of change related to airport operation and development. Using surveys from airport employees and local residents, complimented by expert interviews, the research explores the airport-related socio-economic spillovers which reinforce vulnerability and marginalization among low-income households in Soc Son District. The aim of the research is to illustrate the need for innovative, context-specific, and sustainable models of airport development that can mitigate negative spillovers while fostering economic growth and sustainable development at the local level.

The Spatial Dimension of Domestic Route Networks of Russian Carriers (2002-2008)

The Russian airline industry has been considerably transformed since the collapse of the Soviet Union in 1991. The dissolution of the Soviet Aeroflot paved the way for creation of new private and government-owned carriers. Yet, the airline industry in Russia has not reached the stage of development equivalent to the state of sectors in the United States and the European Union member states. However, the lack of deregulation does not necessarily mean that the airline industry in Russia stagnated over the last decade.

The thesis aims to examine three aspects of domestic route networks of Russian carriers: (i) the distribution and concentration of seat capacity (measured by the normalized Gini index); (ii) the morphology of networks (measured by the Freeman centrality index); and (iii) the centrality of airports (studied by means of the Bonacich centrality analysis). The first two aspects are meant to investigate airline networks from macro-level, whereas the third is focused on examination from micro-level. Thus, this thesis does not look at domestic route networks of Russian carriers only in their entirety, but it also takes into consideration their individual parts.

The research findings tend to suggest that the majority of carriers operated networks with concentrated or very concentrated distribution of seat capacity in 2002 and 2008. Moreover, numerous Russian airlines allocated a substantial number of seats to routes to and from Moscow during the period of analysis. In regard to the morphology of networks, the predominance of carriers seemed to operate single-radial networks in 2002 and 2008. The utilization of spatially deconcentrated networks was rather scarce. During the period of analysis, the proportion of carriers reorganized their networks and adopted a multi-radial network configuration in order to complement a network of parent company or utilize airports in the Russian capital as bases. The results of the centrality analysis confirmed that Moscow’s airports occupied rather central position in domestic route networks of Russian carriers over the last decade (2000 – 2009).

The Motivational Drivers of Horizontal Integration Strategies – The Airline Business Case

By B. Broekmeulen

Industry consolidation or horizontal integration in the value chain has been a trend in the airline industry since its deregulation. Indeed, most of the national orlegacy airlinesflying today are a product of one or more mergersin the last decades. The need for consolidation in the airline industry is mainly attributed to the desire to offer a global and seamless service; many customers today (especially business passengers) demand a seamless service ‘from anywhere to anywhere’. Two types ofstrategies are used to achieve this goal: cooperative and integrative strategies. Although these two strategies share the same objective many different forms are being used within
those strategies.

The objective of this study is to find the motivational drivers behind these choices. The study is of qualitative nature and consists of two parts. The first part provides the theoretical background of the topic in order to create a conceptual model. The second part explains the differencesin motivational driversthrough the use of two business cases. This latter part tests the model of the first part. It appears that both strategies are motivated by drivers at the same levels(environmental, firm and relational) but the importance of the levels and the driving factors within those levels differ. In the first business case the alliance strategy seems to be chosen from a more defensive standpoint and out of necessity (competitive pressures and financial uncertainty), and the M&A strategy in the second case seems to be chosen from a more offensive point of view in order to increase market power. However, both strategies are motivated by the attractiveness ofthe assets involved, especially the route network and airports. An important drawback of this study is the extensiveness of the conceptual model, which in turn limited generalizability because only one case for each strategy could be tested.

Business on the Move: How globalisation is changing the travel plans of European executives

Please find below a new report that was published today by Cranfield’s Air Transport Management Group on their Facebook page. It’s entitled “Business on the move: How globalisation is changing the travel plans of European executives”, written by the Economist Intelligence Unit. It looks at how the economic downturn has affected corporate travel at businesses headquartered in Western Europe, and how global business and economic trends are set to transform business travel in the future.

The Design of a Large Scale Airline Network

world-airline-routes-map_5091826b7f654.jpgBy Rafael Bernardo Carmona Benítez

Fundamental changes in the air passenger transport system have occurred as a consequence of the government and customer requests for opening new services in new markets. Airlines have to analyze and decide what new routes to operate. First, countries and states with high increments of gross domestic product (GDP) are more attractive to open airline services (i.e. China, Brazil). Second, the level of deregulation at different countries allows airlines to find new routes and new networks to invest in other carriers or open services (i.e. Copa and Continental Airlines). Third, low fares, offered by low cost carrier’s (LCC’s), appear to be the main cause of the increase passenger flow worldwide [Carmona Benitez, 2012]. Fourth, the evolutions of the LCC’s have increased the possibilities of airports to increase their revenues and pax flow by opening more routes operated by LCC’s. Finally, points one to four will occur in many countries after their Civil Aviation Authorities eliminate restrictions on routes and fares giving the opportunities for airlines, airports, federal governments, states and investors from other countries to find new opportunities by identifying the right networks to serve.
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Assessing the impacts of Aligning the Conformity Assessment and Certification in EU Aviation Security

This paper aims to provide the outcomes of an impact assessment of the conformity assessment and certification (CAC) of security in the European aviation. The impact assessment conducted was part of a study led by Ecorys on behalf of EC DG Enterprise and Industry. At first, the background of the study is explained and importance of reliability of the overall aviation security system is underlined. Need for economically sound decisions is addressed. Next, specific aspects of the aviation security system are discussed. A distinction is made between continuous and disruptive security. The methodology used for the impact assessment is described and the aviation related results are presented. Finally, conclusions are drawn on the need for aligning the regulations and common recognition of conformity assessment and certification in aviation security in view of the outcomes of the impact assessment conducted.
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Disclaimer: “In accordance with Article II.10.3 of the Framework Contract ENTR/2009/050, any opinions expressed in that SECERCA study are those of the Contractor (i.e. ECORYS) only and do not represent the Commission’s official position”.

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