Flight Compensation: Time is Money.

Compensating The Right Customers In The Right Way Following Flight Disruptions

Whenever irregular flight operations occur, travelers on affected flights must be compensated in some manner. This is a primary tenet of good customer service. Turning a negative experience into a positive one is key to retaining customers. Therefore, the process for compensating travelers should be closely linked with an airline’s plan for recovering from irregular operations.

It is certainly not news that time is money. And in the air-transportation sector, customers expect to reach their destination on time. Therefore, when irregular operations occur, a growing number of customers expect to be compensated in some manner, because time is the one thing that can never be recovered.

Schedule disruptions can have a considerable negative impact on many of the onboard passengers as well as on those waiting for them at their destinations. Fortunately, in the airline industry, there are ways to limit the impact of delays and disruptions, and every carrier strives to do so. However, some disruptions simply can’t be avoided.

Air-traffic-control delays, ground holds, bad weather or just overly congested skies — any and all of these adverse factors can disrupt a flight schedule. Inevitably, there are going to be times when a carrier simply cannot arrive on time due to circumstances beyond its control.

Well-seasoned travelers understand it is going to happen occasionally, and they accept it as part of the travel experience. Still, that does not make it any more enjoyable for an airline or its passengers. Passengers must scramble to get as much information as quickly as possible so they can rearrange their schedules. For their part, airlines must evaluate the situation, choose the best alternative, reaccommodate passengers and offer them compensation when appropriate.

Positive Customer Experience

There are a number of reasons a flight is delayed or cancelled, such as bad weather, overly congested skies, ground holds and air traffic control issues. The sooner an airline reaccommodates and/or compensates the passenger, the greater the chances he or she will have a positive experience, regardless of the disruption.

Sometimes it isn’t the delays themselves that create a negative customer experience. It’s often the way airlines handle passenger reaccommodation, and even more so, compensation.

When reviewing customer compensation, it is helpful to approach the subject from a historical perspective. In the early 2000s, airlines started experimenting with “unbundling” many of their services in a twofold effort to lower costs and, when possible, sell those ancillary services back to customers to generate incremental revenue.

And this trend continues. Today, customers can pay extra for a specific seat, boarding priority, checked baggage, in-flight entertainment, food and other amenities.

But at least a few carriers have failed to grasp that with the added revenue potential comes the added responsibility to deliver on the promise of a pleasant and uneventful trip. And customers, as one can readily discern from reading trip reports on Twitter, Facebook and other social-media outlets, are quick to voice their sincere discontent when their expectations aren’t fully met.

Within seconds, anyone with Internet access can share his or her experience with exponentially more people worldwide than they could have just a couple of years ago.

Consider Twitter, which has more than 500 million registered users that “tweet” an average of 58 million messages a day. That is 58 million opportunities daily for Twitter users to share their experiences — good, bad or indifferent.

Passengers comment not only on delays or interruptions and how they were handled, but also about any and all other experiences with an airline. Was the entertainment system working? Did the passenger’s bags arrive with him or her? Was the wheelchair at the passenger’s connection? If not, it will be broadcast all over social media. And by the way, how long was the passenger’s flight waiting on the runway to depart?

In the United States, the Passenger Bill of Rights was instituted to ensure that all carriers adhere to certain levels of service and compensation. To hopefully dissuade passengers from painting an airline in a negative light, while at the same time meeting potential legal obligations, a carrier must respond to customer feedback as quickly and effectively as possible and keep costs in check.

This is often difficult to achieve unless an airline already has a plan of action in place, as well as the means to carry it out.

An airline can choose from among countless approaches. But in the end, the goal is always the same: minimize passenger discomfort and get them to their destinations as quickly and cost-effectively as possible. In the process, an airline can hope to retain their loyalty and turn their negative experiences into positive ones, which may very well require some sort of compensation.

Time Is Money

When an airline customer buys his or her ticket on an airline, the expectation is that the flight will arrive on time. When it doesn’t, most customers expect to be compensated for the time they have lost and can’t get back, regardless of the cause of the delay or cancelation.

Once an airline has determined it is appropriate to offer some type of compensation to a passenger, it must do so wisely, considering the value of the customer and the circumstances of the situation. A blanket approach to compensation may at first appear to be the easiest way, but it doesn’t necessarily mean the airline will automatically realize any real qualitative or quantitative value or benefits for its efforts. Further evaluation, then, is needed. Utilizing a fairly simple data analysis, it is possible to determine which customers drive more value than others.

An airline’s most valuable customers include those who:

  • Drive additional revenue through the purchase of ancillary services and upgrades;
  • Have a rich flight history, encompassing their travel frequency, average ticket price purchased and routes flown most frequently;
  • Are likely to recommend the airline;
  • Possess a combination of the above factors.

In addition to customer value, an airline should consider the following factors when selecting the type of compensation to offer a particular customer:

  1. Identify the location — An airline should be able to obtain information quickly about the location of the service disruption. Not all disruptions involve flight delays. Sometimes a problem with in-flight entertainment or meals, or an unpleasant situation that develops onboard, can have as great an impact as a delay.
  2. Identify the right passengers — Not everyone on a given flight is going to have the same experience, especially if the disruption isn’t a delay. By identifying the passengers who were truly impacted, an airline can focus its efforts on those with the most leverage. Every flight also has a different mix of passenger types, from the first-time flyer to the road warrior and everything in between. Utilizing a blanket approach to compensation, while easy, may not be in the carrier’s best interest.
  3. Determine what/how to compensate — Profit margins in the airline industry differ from those of packaged goods. If a carrier has made a profit based on the fare of any particular passenger, it needs to retain as much of that margin as possible. Providing monetary compensation is a simple way to make most travelers temporarily happy, but it won’t change the situation or help the airline pay its bills. Consider other forms of compensation, such as vouchers, amenity coupons, frequent-flyer miles or credit in a travel bank account for future travel.
  4. Determine the right compensation tool — A compensation tool should enable the airline to quickly respond to passenger concerns by specifying who, when, how and what level of compensation is appropriate for each situation. Because it has the power to provide financial benefit, it is also a tool that should be closely controlled and monitored.

Customer Compensation

Airline customers expect occasional flight disruptions. It is not the disruption itself that creates a negative passenger experience. Rather, it is the way the airline handles the situation, how it reaccommodates its customers and, more importantly, how it compensates them.

On a continuing basis, Sabre Airline Solutions® works with carriers to meet the challenges involved with improving the guest experience when their operations go awry. Flight Compensation, a solution within SabreSonic® Reservations, was designed for precisely this purpose.

The decision-support solution enables airlines to issue compensation for passengers on flights impacted by customer-service failures that are normally within an airline’s control. By providing the ability to compensate an entire flight — or a portion of a flight — it helps airlines decide how to address compensation quandaries.

Carriers can issue, edit, approve and apply compensation to a passenger’s travel bank account — or issue vouchers — as well as review the compensation issued and the specific reason it was issued.

Through seamless integration with other solutions, Flight Compensation can retrieve, validate and pre-populate flight information stored in a local database. Flight Compensation also communicates with the Customer Insight system to retrieve the passenger’s travel bank account information.

Future plans include interface integration with IROPS Reaccommodation, which helps identify flights and passengers involved in a situation in which service was disrupted, providing up-to-date information to the airline regarding who should potentially be compensated.

Whether a carrier is new or has been flying for decades, its future is dependent on customers. While transporting those customers from point A to point Z and everywhere in between is every carrier’s primary function, it will ultimately be judged by the total travel experience it offers.

This is the experience travelers will remember when planning their next trip. If the experience was positive, an airline is far more likely to see them onboard its flights in the future.

When service disruptions occur — and they will — airlines that act quickly and appropriately compensate passengers for their time may be able to turn a negative experience into a positive one.

Time is, after all, money. And the carrier that plans for unexpected events and compensates customers accordingly is one that understands the true value of its customers.

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