'Power Offers' in Air Travel: Should Continental Partner with the TSA?

Continental Airlines (NYSE: CAL) should explore partnering with the U.S. Transportation Safety Administration [TSA] as part of a larger effort to increase passenger satisfaction. But they better act fast because Virgin Atlantic and British Airways (BAIRY.PK)| are way out front on this one.

In my last post, Creating 'Power Offers' in Air Travel, I suggested that Continental should take more responsibility for handling the baggage of first-class passengers. The objective of a ‘Power Offer’ is to create ‘vibrant satisfaction’ among Continental's first-class passengers.

Creating vibrant satisfaction among airline passengers is no small feat. None the less, guided by Professor J.C. Larreche’s new book The Momentum Effect (plus my own air travel experiences) I proposed that Continental management create a “Certified Airtravel Valise” [CAV] program:

Whenever the carrier’s first-class travel partner flies to any domestic destination, his or her CAV flies on the same plane (without inspection) and is delivered to the hotel or other venue where the passenger is staying. This saves schlepping it from baggage-handling to the taxi and on to the hotel.

On the return trip the CAV is picked up at the hotel by the carrier and loaded on the flight to his or her local airport.

Since CAL offers travel to over forty international destinations these also should be included in the delivery of a CAV service.

MIXED RESPONSES

It’s fair to say the responses to my proposal were mixed. One comment from a world-traveling physician said:

Something that's worked for me well was, if at all possible, to keep a set of clothes, toiletries, etc , (permanently) at the frequented destinations. At one point, I was 'commuting' to Tokyo from NY almost every other week. … once I got a taste of this 'distributed clothes cache' idea, it became so seductive that I have ended up with caches in San Francisco, … Chennai (India), Geneva and London. … it may also make sense to create these caches 'locally': my Chennai & Geneva caches were, for instance, built mostly from purchases in India/Switzerland.

The comment from an airline pilot took a different direction:

The airlines have absolutely zero say in creating passenger enhancements to clearing security. The TSA has been entirely intractable in permitting any changes to ease the pain & no matter how much the airlines care, the TSA will do what it wants to do… The TSA certainly is not going to automatically permit bags with no positive control to board aircraft.

DESIGN vs. EXECUTION

At the end of my last post I concluded that it’s easier to define than to execute a power offer. Here’s what JC says about the difference in his book:

The principal difference between design and execution relates to where the two activities are conducted. Although design must, of course, be externally focused to be successful, the process is largely internal, where the firm has control over the variables. On the other hand, execution happens in the outside world, where unexpected reactions and events can make a mockery of the best laid plans and force rapid reengineering of offers that once appeared perfect. The first step in execution is to ensure that the design is properly implemented as originally intended, but that’s only the first step (p. 134).

As I see it, there are two critically important external issues to be addressed if Continental management were to consider executing a Certified Airtravel Valise program. These are:

(1) Understand the policies of the U. S. Transportation Safety Administration with regard third party participation in the boarding process. If it can’t be done, as the airline pilot suggested above, forget about it.

(2) Explore the possibility of partnering with other companies that already provide supporting services. Since our world-traveling physician found the idea so seductive, there must be companies that already provide solutions to parts of the process.

In this post I address the first issue: partnering with the TSA. Next week I’ll follow-up with the second issue by exploring other supporting partnerships.

REGISTERED TRAVELER PROGRAM

On January 10, 2008 the TSA published an extensive report on its efforts to partner with the private sector in providing enhanced air traveler services, including check-in and baggage handling. The report Registered Traveler Program Standards is available online. The introductory paragraphs that appear on the website summarize its objectives:

The Transportation Security Administration and private industry developed the Registered Traveler [RT] program to provide expedited security screening for passengers who volunteer to undergo a TSA-conducted security threat assessment [STA] in order to confirm that they do not pose or are not suspected of posing a threat to transportation or national security.

The RT program is market-driven and offered by the private sector with TSA largely playing a facilitating role. TSA is responsible for setting program standards, conducting the STA, physical screening at TSA checkpoints, and certain forms of oversight. The private sector is responsible for enrollment, verification, and related services.

Notice that physical screening at TSA checkpoints is necessary even for registered travelers: baggage cannot be boarded without TSA inspection.

Among the services the TSA is supporting in partnership with their sponsors and service providers are:

(1) dedicated or integrated check in lines and lanes;

(2) enhanced customer service for RT participants, such as divesting assistance, concierge service for luggage, and parking privileges; and

(3) discounts for service or concessions.

The RT program has been in development for several years. Yet few carriers have committed to it. The report cited only four airline participants at the time of its publication in early 2008:

Air France (operating out of Terminal 1 at JFK);
AirTran Airways (operating out of central at LGA);
British Airways (operating out of Terminal 7 at JFK);
Virgin Atlantic (operating out of Terminal B at EWR);
Virgin Atlantic (operating out of Terminal 4 at JFK).

A TSA PARTNERSHIP?

Partnerships cost little and ancillary revenue from services that formerly were free is not the road to vibrant passenger satisfaction. Should CAL management explore partnering with the TSA to create its own Registered Traveler program? What do you think?

Correction: An earlier version of this article inaccurately mentioned the bankruptcy of ATA Airlines in reference to AirTran. This has been fixed.

Comments

[KB2]

You're confusing Air Tran and ATA...Two different airlines. AirTran has NOT filed for bankruptcy.

[C130]

If you want to gain some credibility how about at least naming the correct bankrupt airline. I am sure Airtran does not want it's name listed incorrectly since the last I heard they, Airtran, was not bankrupt. As I have always stated, most journalist know little to nothing about airlines but always call themselves the "experts". It must be very difficult to actually do a little research and actually publish the "real" truth and find out it was actually ATA, Skybus, and Aloha that went out of business in the last week. No where did I read anything about Airtran, but then I am only a worthless pilot for a major airline working for less and less but at least I can list the correct airline that went bankrupt.

[Syracuse]

You are pathetic. ATA is American Trans Air....not Air Tran. Similar yet different. Not only are you a perfect example of a whining consumer, you don't even get your facts straight and blaspheme a company that does not deserve it. One more reason why I quit my job at a major, I was tired of babysitting helpless selfish slobs who constantly reminded me how much they knew about everything.

[LongTimeObserver]

Best stick to financial reporting.

[Victor J. Cook, Jr.]

Feedback on my error,

I apologize to the shareholders and employees of AirTran Airways for my error. I also apologize to SA readers. If I had cross-checked The New York Times report on the bankruptcy of ATA Airlines (www.ata.com/) more carefully I would have discovered it was not AirTran Airways, a subsidiary of AirTran Holdings (NYSE: AAI), (www.airtran.com/Home.a...).

The SA editors have removed the incorrect references from this post. Thank you for your prompt feedback on my error.

By the way, I searched the AirTran website for information on their TSA Registered Traveler service and found no reference to it. Do you know anything about availability of this service to AirTran passengers?

Should I stick to financial reporting? Maybe I should. It's sure is a lot easier to find errors in a financial analysis of historical data than in the complex issues associated with redesigning an unprofitable business model.

~V

[Bea]

I can't conceive of a more horrifying "partnership"... than the TSA with private companies. WHY would any entrepreneur offer cover to the incompetent bureaucrats at the TSA? The TSA conducts warrantless, unconstitutional searches in which passengers are often sexually molested. No studies prove that its policies and procedures promote safe flights (there is no---repeat, NO---evidence that weapon-free flights are safer than ones on which passengers can defend themselves, and even if there were, no evidence supports the concept of checkpoints as the best way to find those weapons). Finally, its inept screeners continue to flunk every test of their performance. Partner with the TSA? Heck, no. ABOLISH IT.

[RG1217]

Whew! Normally the comments to your very insightful articles are themselves quite knowledgable and informative. Don't know what happened this time (I think the GoogleNews link might have something to do with it), but you end up with a bunch of the type of comments that make the web so un-interesting - you know, folks who (rather insultingly) like to point out secondary errors and ignore the gist an argument. (As if calling him AJ Simpson makes him any less guilty.) Or wnat to hang their personal political obsession on your hook - the web always seems to sprout at least one writer who thinks wandering around armed is the solution to everything. As someone who flys twice a week, every week, the last thing I want is Shootout at the OK Corral while cruising at 40000 feet!
Now to your actual points. Great ideas!
Most of the hassle of flying, as anyone who flys regularly knows, occurs on the ground. The airline that addresses this issue wins. The RT program is a good example. Just get me in a security line with experienced travelers only, and my entire flying experience is improved. The irritant is that guy who can't seem to get through the screening without repeatedly removing one item of apparel at a time. First the shoes - everybody knows about the shoes - then the cap, then the jacket, finally the 4-inch steel belt buckle. Or that woman who is carrying $300 worth of cosmetics in her carry-on, all in 8 ounce bottles. This is why we need to arrive at the airport hours before boarding time. Get me out of their line; get them out of my way!
Everyone complains about this, but you have addressed the complaint with a productive and potentially profitable approach. Why are only 4 airlines - none domestic legacy carriers - in this program? Who wants the frequent flier's business enough to acknowledge their value by actually making a "power offer"?
When I fly international, I always book Business or First and any airline that will offer me concierge baggage service as you propose would have a clear competitive advantage.
Thanks for this thought-provoking series.

[Victor J. Cook, Jr.]

RG,

Your comment is a welcome voice for change in replies to recent posts in my series on improving the air travel experience. I was beginning to think I was the only one who believes that most of the hassle of flying occurs on the ground. And more important, that removing those hassles would create a “power offer” that would be far more appealing than frequent flyer miles.

It also came as a surprise to me that none of the domestic legacy carriers are involved in the TSA Registered Traveler program. So I thought they must be in process. Apparently not. I just searched for the phrase “Registered Traveler” in the Q3 and Q4 07 earnings call transcripts on Seeking Alpha for CAL, DAL and UAUA. Guess what? Not a single mention of this TSA program in any of them. These being three of the biggest domestic carriers in competition with Virgin Atlantic, BA and Air France you would think they might be exploring this option.

Right now I’m working on the next post in this series for Sunday April 13, 2008. It takes the notion of a “power offer” to the next level by reviewing two privately held companies that offer supporting ground services in cooperation with the TSA. It turns out that Virgin Atlantic, BA and Air France already have partnered with one of the as well. But not CAL, DAL or UAUA. I guess merger mania has blinded senior management of these carriers to even the possibility of offering a more appealing and profitable service. I also wonder why we don’t hear more from the pilots on this possibility. They have as big a vested interest in more appealing and profitable air travel experiences as anyone else.

Thanks for your thoughtful comment.

~V

[RG1217]

I think your remark about executive disinterest hit the nail on the head.

Business models that achieve growth through merger and aquisition require significantly less creativity to manage than those which are based on organic growth. If you view your position leading a company as short- or even medium-term, the path of least resistance will be the preferable approach. I myself have seen balance sheets that are fundamentally upside down. Companies whose businesses are actually contracting yet showing bottom-line increases due to merger or acquisition. Boards are happy, CEO's get their bonuses, but *oddly*, employees and customers never seem to much benefit from these firms doing "well."

This "three-card monte" management style is not confined to the airline industry and to my mind is probably a significant underpinning to the general alienation most Americans feel towards the businesses that employ them and to whom they turn for goods and services.

For the airline industry, the corollary of abandoning organic growth is a limitation in the vision of that business' boundaries, leading to this seemingly unfathomable dismissal of an opportunity to exploit an already in-place (!) system which can markedly improve an airline's best customers' experience of flying with them.

In a cuthroat competitive environment, one of the major carriers' executives should surely see the advantage here. A low-cost, essentially process-neutral, differentiator. It's really a no-brainer! If, in fact, there are bureaucratic hoops to jump through to implement RT, that effort would then position the business as even more singular. Maybe I'm missing something, but I can't find the downside.

I look forward to your next article, and hope that those who can change the direction of their business are also reading, however to the extent that airline executives see their business as a dispatch service for airplanes rather than as actually providing a transport service for passengers, I fear even an argument as succinct, cogent, and elegant as yours may fall on deaf ears. As a regular flyer, I can only hope I'm wrong.