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4 travel disruptions factors affecting OTAs and airlines
Flight disruption costs airlines between $25B and $35B annually. Taking into account the estimated cost to travelers, corporations, and the rest of the ecosystem, that number goes up to $60 billion.
Given the magnitude of this, it may be surprising to know travel disruption events are often managed manually.
From our study with industry research and customer interviews, we found out the four leading factors that put pressure on TMCs, OTAs, airlines, and the corporate bottom line.
1 The human factor — Travelers expect more
Disruption is a huge source of frustration for travelers. It can become such a headache for business road-warriors that they choose to leave a job to avoid frequent business travel.
A J.D. Power study found that 42% of travelers identified disruption management as the single most important area for improvement.
To look at the impact of all of these factors, this last year we conducted and sponsored surveys, held meetings and looked at the latest research into the disruption puzzle. We’ve identified, with the help of our customers and partners, several key steps to effective disruption management, and they include:
- Get the right information, to the right people, at the right time
- React quickly and efficiently
- Involve your TMC
- Make on-time performance part of your program
So, as we’ve learned, travel disruption is a long-standing issue in the industry. Understanding disruption is important, however, it’s not safe to assume there are optimized solutions to manage disruption related issues. Stakeholders including business road warriors, enterprise travel programs, and, airline and TMC operations’ centers still struggle to communicate during disruption events.
Some disruptions are uncontrollable, but when a disruption event happens, the traveler experience can vary a lot depending on how they are managed by TMCs. Delayed re-accommodation can lead to traveler stress and decreased loyalty, re-accommodation can also lead to duty of care gaps for business travelers. Travelers now expect both timely notifications of disruptions, and self and full-service options. Finally, the difference between a proactive re-accommodation service and a reactive one can be the deciding factor for a TMC to retain a loyal customer, or lose one for good.
Most airlines and TMCs understand that the traveler experience is not only at the point of sales, but also pre-trip and during the trip. Therefore, having the ability to intelligently monitor flights within trips to alert agents and travelers in the timeliest manner possible, and offer proactive re-accommodation services, will not only greatly enhance the traveler experience, it will also put companies ahead of their competition.
The good news is we’ve recently seen an uptick in innovative approaches implemented, to pro-actively manage disruption. For example, there have been new efforts to audit the hidden costs in corporate travel programs, to then ID those most affected by disruption, and to implement solutions which intelligently connect platforms and stakeholder communications.
2 The cost factor — Travel budgets under pressure
Disruption increases costs for everyone, so while flight disruption is not a new problem, it is a very expensive one. We highlighted the cost of flight disruption at the beginning of this article:
- Flight disruption costs airlines between $25B and $35B annually – about 5% of airline revenue.
- If you include the estimated cost to travelers, corporations, and the rest of the ecosystem, that number goes up to $60 billion (about 8% of airline revenue).
Increased call volume, both from agencies to airlines and travelers to airlines, means increased costs for airlines and TMCs. The untimely distribution, inefficient delivery and unstandardized terms of travel waivers also create additional operational and time costs for TMCs.
For airlines and airports, apart from the increased costs from more calls, disruptions also cause additional operational and labour costs.
To further complicate matters, disruption events often spread virally, because the flight that was cancelled in one city was supposed to provide the aircraft for a departure from another city. We’ve all experienced the consequences of these “viral” delays in the system. But, have TMCs, airlines operation centers and corporate travel managers added in the hidden costs? Some hidden costs of disruption include:
- Lost productivity and missed business meetings
- Un-planned hotel stays, meals, rental cars and other expenses
- Traveler stress & frustration
- Employee turnover
- Increased traveler risk
3 The load factor — Planes are flying full
Travel disruption is any deviation from the original plan of any trip. Disruptors include flight delays, cancellations, and diversions. We also need to consider increases in the average passenger load, which results in fewer empty seats. This then translates into a decrease in re-booking options over time.
IATA announced 2018 global passenger traffic results last month, showing that demand (RPKs) rose by a healthy 6.5% compared to full-year 2017. It was another year of above-trend growth. Full year 2018 capacity climbed 6.1%, and load factor edged up 0.3 percentage point to a record 81.9%.
According to IATA, Asia-Pacific led the growth, driven by robust regional economic expansion and an increase in route options for travelers. Capacity rose 6.4%, and load factor ticked up 0.7 percentage point to 80.6%.
Among 12 major carriers in Asia-Pacific, passenger traffic climbed 8.3%, and passenger load factor rose half a point to 81.5%., Cirium data shows.
Source: Cirium data
Cancelled flights lead to a larger increase in passenger trip delays under high-load rates than under low load rates. Small disruptions may have non-linear, exponential affects in the complex world of operations, with multiple factors converging, such as call centers’ operators, the load capacity and even time of day! Delays late in the day lead to much longer re-accommodation when re-booking options are tighter.
4 The delay factor — Delay categories
Let’s take a closer look at delay categories and how the nomenclature may lead to misreading the impact of disruption. The US Bureau of Transportation Statistics’ data shows that half of delays are “air carrier delays”, while only 8% are caused by “extreme weather.” However, when we look deeper at those numbers we find they can include things like late arriving aircraft. But why did it arrive late? One of the reasons was probably weather!
*US data only
Another category is called ATC weather delays, meaning aircraft were still flying, but delays accumulate. For example, fog at San Francisco is common and dramatically reduces the takeoff and landing rate at SFO. That’s a weather-caused ATC delay.
16% of flights equates to about 3 million delayed or cancelled flights every year globally.
Find out more at Cirium.com