Europe’s low-cost airlines once mocked the air miles programs run by flag carriers as expensive relics of a bygone era. However, after watching wide-eyed as customer databases were valued at billions of US dollars, they are scrambling to catch up.
Europe’s two largest low-cost carriers — Ryanair and easyJet — have both swallowed their pride in the past year and launched customer loyalty schemes and both have announced significant investments in data analytics.
Their aim is to ape retailers like Amazon.com and Tesco in driving profits by leveraging data from vast online customer bases to create highly personalized offers and adapt services to customer preferences more quickly.
“This has transformed retail and it’s going to transform airlines,” said Kenny Jacobs, a former Tesco executive spearheading Ryanair’s digital drive as chief marketing officer.
He has overseen the hiring of 150 information-technology specialists since he was appointed two-and-a-half years ago.
“Airlines are not good at this. We’re still crap compared to what retailers do,” he said.
EasyJet chief executive Carolyn McCall, who last year appointed the company’s first head of data science to oversee a team of 25 data analytics specialists, has described data as “incredibly important” for the airline.
A spokesman for easyJet described the potential benefits from digitization and data analytics as “exponential.”
Both airlines have promised a detailed breakdown of their digital data drives and the financial returns in the autumn.
Ryanair and easyJet are taking different approaches, with Ryanair focusing squarely on selling optional extras, while easyJet sees ticket pricing at the heart of its data drive.
EasyJet was first to move, investing in artificial intelligence over the past few years to drive the algorithm that determines seat pricing in real time depending on demand.
Its computers track more than 1 billion searches on the easyJet site annually to see what prices, destinations or travel times prompted them to book or leave the Web site and adjust all three as soon as possible.
Spokesman Paul Moore said that kind of data more than compensated for the airline’s later collection of personal information through its Flight Club loyalty scheme.
“We don’t have the legacy frequent flyer systems the legacy carriers have, but we have been selling online far longer and at a far greater scale than they have,” he said.
“The data we have on purchasing patterns and flight patterns is, we suspect, larger and richer by some way,” he said.
Ryanair, whose business model is to cut fares as far as possible to fill planes and make money selling optional extras, was a little later to the game. It has spent much of the past two years overhauling its Web and telephone offerings, and is preparing a push to get more of its 100 million customers to register for its My Ryanair loyalty program.
Alongside increasing sales of tickets and ancillaries, better digital infrastructure can also enable innovations like automatically rebooking customers after canceled flights and sending stranded passengers hotel reservations to their mobile phones.
Ryanair’s primary target is to use highly personalized marketing to boost ancillary revenues — charges for extras like checked-in bags, premium seats, fast track security clearance, which accounted for 24 percent of Ryanair’s revenues last year.
Ryanair in the past employed a low-cost scatter-gun approach, offering every service from car hire to travel insurance to new luggage to every customer, irrespective of whether they had bought them in the past.
“It’s more about profitability than market share,” Jacobs said. “You’ve got a Web site that’s getting so many visits, how do you monetize that? How are you getting those customers to buy more?”
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