Argentina's national airline calls on consulting firms to reshape loyalty program

19 June 2018 Consultancy.lat

Argentina’s largest airline Aerolíneas Argentina has put out a call for an international consultancy to remodel its loyalty program. After a call in the country’s official news outlet, the Official Gazette of Argentina, which stated that no local firm had the technical experience to perform the overhaul, AeroLíneas Argentina announced that it was opening a bid to external and international consulting firms.

An audit of Argentina’s national airline’s air miles loyalty program Aerolíneas Plus has brought to light that it is underperforming in comparison to regional and global peers. The program is outdated in terms of the technology and rewards redeemable and, according to the audit, is inherently immature and belated.

The document which was released by the Airline earlier this month was well received by industry officials, who see admitting to the problem as the first step to fixing it. Aerolíneas Plus earns well below the global average for frequent flyer programs, taking in an annual profit of $2,800 as opposed to a $10,800 average. “We are well below the global average in the sale of miles," said a spokesperson for Aerolíneas Argentina. 

The Aerolíneas spokesperson touches on the issue of outdated frontend technology which allows the Aerolíneas Plus passenger to spend their miles. “We also have to improve the website where we offer the products and the processes to make the air miles exchanges. It’s currently done in three steps however we require eight.”

This is a sentiment that the internal audit shared, stating that the technology was severely outdated and that it does not allow for customers to access a dynamic range of redeemable options. The airline references middle-range perks which are not including flights, which are usually purchased when flights are not obtainable and miles are close to expiration. 

Argentina's national airline calls on consulting firms to reshape loyalty program Aerolíneas Plus

“It is difficult for businessmen to make tangible the benefit of free passage with the use of accumulated miles. When not perceiving a real benefit, the program ceases to have a weight in the purchase decision, does not fulfil its loyalty function and, as a consequence, the allies (i.e, banking entities) do not see real value in investing their economic resources in the purchase of Aerolíneas Plus miles to deliver these benefits to their customers,” the company states. 

The airline’s call to foreign companies to revamp the air miles program is a contentious issue as the airline itself is run by the Argentine government. After a series of economic downturns, the state renationalised the Spanish-owned company in 2008, and by 2014 it was completely state-owned. This creates the necessity for the airline to look to local firms first and can only search outside in the case of extreme circumstances.

The report states that foreign firms or professionals may only be contracted “in exceptional cases, [and must be] previously approved by resolution of the competent ministry, which can only be based on the lack of local technical capacity in the matter of the service or consultation, and impossible to supply by subcontracting.” 

Included in the airline’s call for consulting firms was a list of possible candidates which featured Accenture, A.T. Kearney, Bain & Company, KPMG, The Boston Consulting Group, Deloitte Consulting, IBM Global Business Services, McKinsey & CompanyErnst & Young and PwC. Whilst there has been no contracts signed, it is credible that some of these companies are in the process of bidding for the tender.

"We want to have the best loyalty program in the country. For this we have to get technical advice from abroad as there have not been any competitive programs developed by airlines within the country,” the Airlíneas Argentina spokesperson said, adding, “We currently do not offer services that the competition does, such as the possibility of exchanging miles for non-air products (buying a TV, for example). This is something that we have to do.”

Brazilian airline Gol teams up with KLM-BCG partnership

15 April 2019 Consultancy.lat

As part of its strategy to digitize its internal operations, Brazilian airline Gol has teamed up with Dutch national carrier KLM and management consulting firm Boston Consulting Group (BCG).

In June last year, KLM and BCG revealed that they had developed an offering that helps airlines leverage technology to streamline their operations “in an unprecedented manner”. The two companies have been working together for over a decade now across KLM’s business, in recent years also focusing on enhancing internal operations through emerging technologies.

Among the projects deployed successfully to date are using internet of things (IoT) and artificial intelligence (AI) to improve Maintenance Repair & Overhaul (MRO) delivery, utilizing digitization to bolster back-office processes (crew resourcing, ground services, supply chain, etc) and using AI to optimize inter-airline network planning with Sky Team partners such as Air France (Frane), Aeroflot (Russia), Delta (US) and Middle East Airlines (Lebanon). 

Flyers, meanwhile, are reaping the benefits of this back-office digitization. Baggage delays – which often have a domino effect and create major headaches for thousands of passengers – have been reduced, flight transfer routing has been optimized for cross-border passengers and information provided has been personalized and tailored to individual customer experience journeys using digital channels. 

Having deployed the offering – branded as ‘Digital Airline Operations’ – successfully within KLM, the airline and consulting firm last year formally launched their offering externally. “Sinds doing so at the IATA-conference we have received positive reactions on our proposition from all corners of the globe,” said René de Groot, chief operating officer at the Dutch carrier company.Brazilian airline Gol teams up with KLM-BCG partnership

Brazil’s Gol has now become the first Latin American client of KLM and BCG’s joint venture. Commenting on the decision, Gol chief operating officer Celso Ferrer said, “We are delighted that we can work together on ‘Digital Airline Operations’. This will allow us to improve our on time delivery to our customers, while keeping our cost per available seat mile among the lowest in the industry. KLM and BCG have developed solutions in the field of advanced artificial intelligence and optimization that we can adjust entirely to meet our specifics. All in all, it will enable Gol to develop a strong competitive advantage.” 

With a fleet size of around 130, Gol is Brazil’s largest international airline, ahead of local rival Azul, and one of South America’s largest players. The airline carries more than 33 million passengers annually and operates 750 flights daily to 73 destinations in Brazil and in South America, the Caribbean and the United States. In comparison, KLM has a fleet size of around 160 aircraft, carrying more than 40 million passengers. The firm is however part of the Air France-KLM Group, which has a total fleet size of over 500 aircraft. 

“Based on artificial intelligence, machine learning and advanced analytics, we help airlines grow, accelerate innovation and streamline operations,” said Nicolas Boutin, head of the global Airline practice of Boston Consulting Group. 

Asked how the KLM-BCG offering differentiates itself from the many digital-led solutions in the marketplace, Dirk-Maarten Molenaar, a partner at BCG said: “We distinguish ourselves from standard IT suppliers by our focus on integrated planning & management, data-driven decision-making in the event of disruptions, the use of our tools by frontline teams and the development of internal digital functions to help improve services.”

Related: KLM partners with BCG to bring artificial intelligence to the skies.