Some airlines are already experimenting with rolling hubs. To fully realize the cost reduction opportunities created by this approach will necessitate fundamental changes to airport operations.
• Implement Tailored Business Streams (TBS) to simplify ground-based operations for the majority of passengers. In practice by other industries, TBS’ basic principle is to segment operations into distinct business streams: Specialized processes are created to handle routine and complex activities separately, and to match the capabilities of these distinct operations with the value for which customers are willing to pay. That often entails standardizing or “industrializing” the routine and stable processes, while segmenting and isolating the parts of the operation that are more complicated and variable.
|“With a lower cost structure, the large airlines would be better positioned to launch a marketplace battle against low-cost carriers.”|
The point is most passengers do not need long, multiple interactions with airline staff, and they would appreciate getting through the airport rapidly. Passengers would arrive at the airport, check in themselves and their baggage with minimal assistance from airline staff — or, even better, not need to check in at all — pass through security, and board the plane. Dedicated processing staff would deal with the very small percentage of travelers who need to change itineraries, connect to a different airline, or request other special services. And customers requiring such extra services (except for perhaps the most frequent flyers) would potentially pay for them. Such new procedures would be system-wide, cascading from reservations to front-line staff functions. Significant cost benefits would arise from the reduced check-in and gate staff. Overall, the resulting product would be no less valuable, but the organization delivering it would become much more streamlined.
• Create separate business systems for distinct customer segments. While simplifying their business model, large carriers have to be careful to retain the loyalty of their most profitable and loyal customers by providing more differentiated amenities, lounges, and services than they offer today. This could mean separating both airport and onboard experiences into two (or more) classes, focused on either leisure or business passengers. The purpose would be twofold: to provide more specialized services and to achieve pure business streams. Experiences in other industries suggest that mingling complex and simple operations that have distinct objectives and missions often results in a migration to the highest cost level and lowest service standard. At the extreme, this differentiation might involve distinct aircraft and terminals for the two types of customers; at a minimum, it would likely require a greater degree of product demarcation than is currently provided.
|“It will be important for large carriers to retain the key service advantages they have over low-cost carriers, including destination breadth, superior loyalty programs, and cost-effective onboard amenities.”|