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WAEA 24th Annual Conference & Exhibition
9-12 September 2003
Washington State Convention & Trade Center

Session Articles

KEYNOTE: Tilton Pushes for Innovation & Economics

"It's all about the customer and all about customer choice," Glenn F. Tilton, Chairman, President and CEO of UAL Corporation and United Airlines, emphasized in his keynote address yesterday.

Notwithstanding the challenges facing the airline industry, Tilton stressed that we now have the chance and the responsibility to open new technologies, such as the development of the next-generation infrastructure to create new ways of working together to deliver an enhanced customer experience at even more competitive costs.

New Partnership Model
This could be accomplished by developing "partnership paradigms that are going to be successful for the long-term," Tilton said, including creating a common standard and technology for IFE systems and driving down costs through collective purchasing.

Tilton sees these partnerships moving away from the model "where airlines simply pay vendors for services and products" to create partnerships that sustain the needs of carriers, vendors, and passengers. Entertainment content providers "are hungry to get their products in front of consumers," and airlines carry a valuable audience every day, he stated.

In Tilton's proposed new business structure, technology companies would handle system installation, maintenance, and upgrades. A variety of sources would provide video, audio and interactive content-some at a cost to the airlines, some offset by barter or advertising revenue. All revenue generated by services for which passengers pay would be shared by all participants.

Tilton cited UAL's partnership with Verizon Airfone as a model for the industry. This relationship enables the airline "to offer our customers onboard access to e-mail and updated news, weather, and sports information at a reasonable price-point, while essentially eliminating implementation costs for United." UAL and Verizon Airfone share in revenues generated by the service.

Airlines must balance the air traveler's desire for more options and greater control with the airlines' mandate to be more disciplined with costs and more entrepreneurial in generating revenues.

"To provide this, we need flexible, but affordable IFE systems and new partnerships to bring these dreams into reality."

UAL on 'Connectivity'
In an exclusive interview with WIN, Tilton acknowledged that passengers want real-time access to news and information while inflight, and being out of touch is becoming increasingly frustrating.

The Verizon Airfone service functions only on domestic US flights, and UAL is "continuing to explore opportunities in this arena," using Star Alliance partners Lufthansa German Airlines and Singapore Airlines "as a laboratory and resource" for feedback determining what works on long-haul international flights.

The question going forward, he said, is to determine how much customers are willing to pay for this service and to develop a business model that works for the airlines, technology providers, interactive service and content providers, as well as passengers.

Low-Fare UAL Carrier
Tilton also told WIN that United is moving forward with plans to launch a low-fare carrier first quarter 2004. The original plan has been modified to a smaller scale, with a fleet of 40 aircraft of a single, narrow-body type projected. A launch-hub, chosen based on a spectrum of criteria such as its demographic and access to potential markets, will be selected in 30 to 45 days.

The airline is exploring "what has been offered to customers, what customers respond to, and what they don't. We are taking our time to use the experience of others and to do research with our own customers onboard," Tilton said.

Real-time broadcast television is "certainly an option being considered. JetBlue is getting some significant positive feedback for their offerings, so we are taking a hard look at that."

No conclusion has been reached concerning cost and price-point; however, Tilton has observed "an interesting passenger marketing phenomenon: passengers flying to leisure destinations are willing to spend money to treat themselves."

Intuitively, people came to the conclusion that low-fare meant no frills, and the demographic of that customer wouldn't be inclined to treat themselves.

"What seems to be so is they are very judicious about what they spend their money on."

Although IFE is not the key driver in determining airline selection, UAL's research shows that it is one of the top-10 factors influencing customers' decisions.

The WAEA, he offered, can promote the future health and stability of the industry by "continuing to drive for innovations that will increase the onboard entertainment and information services available to customers while reducing the total costs of ownership for IFE systems and content."