4 Lessons for Global Mobility Leaders from the Low Cost Airlines Industry
The Global Mobility and Relocation market is in the same position as the airline industry was in the 1970’s, before the revolution of Low Cost Airlines Carriers or, as they are more widely known, Low Cost Airlines (LCAs). The introduction of low cost airlines changed the aviation industry forever; there’s no going back, and it’s impossible to imagine the aviation industry without them.
LinkedInThe Global Mobility and Relocation market is in the same position as the airline industry was in the 1970’s, before the revolution of Low Cost Airlines Carriers or, as they are more widely known, Low Cost Airlines (LCAs). The introduction of low cost airlines changed the aviation industry forever; there’s no going back, and it’s impossible to imagine the aviation industry without them.
The drivers behind the low cost airlines revolution were changing trends in travel preferences, in decision-making factors, in technology, and in younger generations, as well as an obvious increase in mobility. These same factors are now impacting Global Mobility and Relocation. The next step is for employers to evolve accordingly and to adjust to the needs of their mobile talent.
There are 4 important lessons for HR leaders to learn from the low cost airlines revolution, in order to ensure their companies succeed in attracting, converting, and retaining the best talent. Those who do not evolve will stay behind.
Lesson 1: Lower costs = More usage
Low cost airlines enabled more people to travel than ever before. The additional capacity and affordable seats they provide didn’t replace first class or business cabins, they added an alternative. The result is more people flying and more frequently. People who couldn’t afford to travel suddenly can, and businesses with small travel budgets can now use it for more meetings, more conferences, more flights, and have a better return on their investment. Providing a low cost option gave an alternative to those who needed it.
In America, when Southwest launched at T.F Green Airport, passenger traffic grew by 85% in just one year. These were all people who wanted to fly but couldn’t afford to before the low cost solution was introduced. The result was more people flying, and more often.
This is not just happening in America, in Europe, Ryanair has become the airline flying the largest number of passengers. While Legacy airlines such as British Airways have been growing steadily year over year at the same rate as the general population, whereas Ryanair has attracted customers who didn’t travel often previously, and have consequently grown 3 times faster.
In 2016, 2 of the 5 largest airlines by number of passengers were Low Cost Airlines. This means 40% more people could now afford to fly.
The same opportunities are there for Global Mobility. Recent research conducted by Benivo shows that up to 50% of moves within a company are not supported by Global Mobility, because the costs of delivering traditional relocation support are too high. We call these employees the ‘out-of-policy moves’, and their numbers are growing by the day. Even when you just consider new hires, there is a large population of unsupported talent - 20% of new hires need to relocate for work, but the majority of them are not supported due to budget. Globally, that’s 50m employees per year.
The conclusion is clear; lower cost relocation solutions will enable employers to support a larger population of their employees and will result in more moves and the acquisition and retention of better talent.
Lesson 2: Rethink the business model
When low cost airlines began challenging the traditional model, they took a new approach. They started with nothing and simply asked: What is the bare minimum need for someone who is flying? The answer: to get from point A to point B was the answer. All the rest are extra.
By focusing on the core needs and rethinking the business model, a number of opportunities evolved:
First, low cost airlines found that passengers were paying an average price in order to cover the costs of the service but not everyone used all services. The results showed passengers paid for services they didn’t use or were not relevant for them. That’s a waste which results in higher prices. For example, as part of their plane ticket, every passenger covered the costs of having a glass of champagne. But do passengers want champagne every time they fly? Wouldn’t it be easier to pay $5 for a glass of champagne only when you actually want it and not pay for extras that you don’t need? Low cost airlines saw this as an immediate cost saving opportunity. Everyone enjoys a free glass of champagne; until they realize how much they pay for this ‘perk’. It’s all about transparency and managing expectations.
A second example is aircraft types. Low cost airlines operate only 1 type, compared with legacy airlines, some of which operate up to 20 different types. By sticking to only one type of aircraft, the costs go down, and the savings are passed on to the passengers. There is less maintenance, less training, fewer skills required, and there’s even less complexity in managing schedules.
The same logic applies to Global Mobility. Traditional relocation services are delivered with a hand-holding, one-to-one approach. It is not only expensive to deliver, but also irrelevant to the needs of an increasing number of employees. They might not have a family yet, or many household goods to ship, or even wish to spend in-person time with a relocation specialist. Even if they did, early career employees will most often not receive relocation policies that entitle them to prepaid, expensive relocation services vendors. Hence, the traditional market offering does not cater well to the needs of growing employee segment. On the other hand, to just provide an amount of money with no accompanying support service is a poor employee experience.
Technology can change this. New business models can challenge this.
Lesson 3: Low cost doesn’t have to mean a poor experience. In fact, it’s the opposite
Let’s look at the facts:
Research by Academics at the University of Missouri conducted research on whether Low Cost Airlines or Legacy airlines deliver a better passenger experience. The study collected 5 years’ worth of data and identified 4 key factors: on time arrival, passengers denied boarding, mishandled baggage and customer complaints. The results are clear - Low Cost Airlines deliver a better customer experience.
Let’s look at the example of Southwest Airlines, a Low Cost Airline. Southwest Airlines were ranked as the top customer experience airline in the 2017 Temkin Experience Ranking. They didn’t do it by spending money on perks or luxury services. Instead, they focus on the core value to the passengers (on the 4 key factors mentioned above), and provide a better experience by empowering their employees. The popular videos of Southwest Airlines flight attendants demonstrating their personal skills and personality have gone viral and done their bit to promote the company without Southwest Airlines spending a single extra dollar.
The lesson? It’s possible to deliver a better experience at a lower cost by focusing on the most important factors to the customer. At Benivo, we see a 50% improvement in our clients employees’ experience and employer brand appreciation by providing a better experience for their mobile talent, all without breaking the budget.
Lesson 4: No-one can do everything. You need to choose a defined focus to succeed
When it comes to low cost, to be the best requires specialization. It can’t be just one more service provided by a company, it requires a completely new approach to business. It requires a dedicated DNA that does not seek to maximize profits by increasing prices, but instead maximizes efficiency, improves the customer experience, and reduces prices.
13 legacy airlines have launched a low cost subsidiary (which includes a British Airways service). None of them survived:
The Lesson for Global Mobility? Low cost requires know-how and a focused state of mind. Choose someone who specializes in it or just don’t do it. You can’t have it all in one box.
4 important lessons, 4 opportunities to deliver a better experience to more relocating employees at a lower price. What do you think would happen to the number of relocations and to the company’s employer brand when they’ll support 100% of the moves in the organization instead of just 50%? Can you afford to have your competitor doing it?
About the author:
Nitzan Yudan, CEO of Benivo - helping employers of choice make every relocating employee welcome, without breaking the budget. Clients include Google, Microsoft, Bloomberg, Vodafone, and Hertz.