An Open Letter to AirAsia and Firefly: Why LCC's should adopt "Standby"

To Tony Fernandes (CEO, AirAsia) and Eddy Leong (CEO, Firefly):

Hey, I have a question for you two. Are low cost carriers (LCC’s) interested in goodwill to customers? Should they be? After all, some might say a low, low price is goodwill enough, while others might say, you can never have too much of it from your customers.

I’ll get to the point. LCC’s are famous for one thing – low prices – but notorious for another – no changes. To be precise, both Firefly and Air Asia allow itinerary changes, normally 48 hours before departure, but charge RM50 for the privilege. If you want to change within 48 hours of your departure, too bad, you’ll have to buy a new ticket.

We don’t know how much LCC’s collect from such “punishment” fees, but it has left some of us feeling LCC’s have made it a point of profiting from people’s mistakes, a science of making passenger’s losses their gains. Its bad for customer goodwill, and I humbly offer a small way for LCC’s to regain some of it back.

Both your airlines have a standard industry practice of prices going up as capacity reduces or as time gets nearer to departure, based on a proprietary formula. The challenge to maximising revenue involves striking a balance between getting the best price per seat filled, and filling all seats, since your seats are 100% perishable – i.e. their value drops to zero the moment the plane takes off and their cost cannot be recovered. Selling empty seats just before the plane takes off, even at RM1 per seat, in theory, helps to offset the cost of that flight.

This trick is being used by, of all people, MAS, which unlike you two is a Full Service Carrier (FSC). MAS is using this argument to justify its RM0 promotion – just paying the fuel surcharge is helping MAS to offset losses from its otherwise empty seats. MAS is also saying that it is selling seats that would have been unsold anyway, presumably based on mined historical data showing spare capacity on such flights. It says it is therefore not cannibalising from its full-fare paying customers. I won’t go into the details of this perhaps arguable line of reasoning, but I will argue that just as MAS is taking a leaf from the LCC playbook, so can the LCC’s borrow a trick from the FSC’s sleeve. Its called “Standby”.

“Standby”, in the FSC sense, is a way of dealing with the problem of no-shows. No-shows are people who book flights but don’t show up, and is more a FSC’s problem than a LCC’s, since FSCs allow bookings without making payment, while LCC’s have no such thing. “Standby” passengers are people literally waiting at the airport for no-shows so they can get on board and fill those seats.

I would argue for LCC’s to adopt “Standbys”, but to adapt it to an LCC form of usage. I know what you guys are worried about: you’re worried people will wait until the last minute to book, taking a chance that prices might get lower by going on “Standby”. You’re also worried about not making enough from business travellers, who are willing to pay top dollar for last minute flights. I’m here to soothe your profit-making nerves. Just adopt the “Standby” rule for ticketed passengers only who want to switch to an earlier flight, and charge them a nominal admin fee for the privilege to do so (and by “nominal”, I mean less than RM50).

You see, people make mistakes one time or another. Why hold them to account, when you can help them rectify it, make a little profit and leave them happy? Allowing only ticketed passengers to go on Standby for earlier flights eliminates the purported fear of opportunists, helps to reduce losses from empty seats, allows you to re-sell seats that had been paid for, and generates goodwill for passengers who would like to fly a bit earlier and are willing to pay (within reason) for their mistake.

There are of course other questions, such as when precisely to open the Standby window, how far in advance can the ticket be, how much to charge etc. I’ll leave that to you smart guys. After all, I’m just a poor passenger, writing this at the Coffee Bean in Bayan Lepas after having waited 5 hours for my flight because Firefly didn’t let me board an earlier one even though it was clearly not full. 5 hours which robbed me of any goodwill I might have had flying to and from Subang, but which enabled me to finish this column giving you guys free, unsolicited advice.

Just another passenger’s loss turning into your gain, I suppose.


As seen in theSun, 25th June 2008. PDF version here.

Comparative Advertising

Years ago, the makers of Top, a washing detergent, ran a TV ad which emphasised one of its features: it was more “liquid” in viscosity and therefore would not clog up or develop residues in customers’ washing machines, unlike an unnamed but extremely obvious competitor. Some time later, the makers of Dynamo, another brand of washing detergent, ran ads which criticised an “other” washing detergent as comprising of “mostly water” and therefore did not have good cleaning power! This continued for a few months, much to the amusement of the TV-watching public, unaccustomed to over-the-air spats between rival consumer brands.

Of course, none of these commercials ever directly named the competing brand, and that is the norm, if not the law. Comparative advertising, in which competing brands are explicitly mentioned and compared, is not expressly legal here in Malaysia, whereas it is legal (under guidelines and restrictions related to avoiding misleading disclosures) in Europe, United States, Canada, Australia and many other developed countries.

Pros and Cons

The argument against comparative advertising is that lesser-known brands are riding on the reputation of the more well-known target brands when making comparisons to them. Even if the claims are truthful, they constitute a form a trademark violation. Nevertheless, it has been judged in the West that the pros far outweigh the cons. The United States’ Federal Trade Commission (FTC) asserts that comparative advertising is “a source of important information to consumers and assists them in making rational purchase decisions”. It also “encourages product improvement and innovation, and can lead to lower prices in the marketplace”.

I certainly agree. Nowadays, with Malaysia being a developed and open consumer market, I believe our priority is to give consumers more freedom to choose, and to reduce the barriers to entry for new business players. Certainly this would be helpful in combating the inflation currently sweeping through our economy.

Comparative advertising, Malaysian style

However, without amendments to our Trademarks Act (such as those done in the UK and Australia), few companies would ever dare to embark on a comparative advertising campaign here. Still, we have seen in recent years an increase in comparative advertising of an indirect sort: witness Tesco’s advertising of their lower prices, compared with two “other” hypermarket market chains (with the “other” written in their respective font types!), and Digi using two different coloured ducks compared with their yellow ducks to signify the other 2 mobile telcos.

To me, it’s kind of like making faces at the class bully when he’s not looking, and acting normal when he turns around – fun and naughty, perhaps, but ultimately pointless.

Who should do it

Let’s imagine that if comparative advertising was legal, who should use it and how should they use it? Typically, it would be new entrants or companies with low market share, but let’s highlight two examples:

1. Companies seeking to exploit overvalued or overpriced brands, such as generic drug companies who are free to produce copies of drugs whose patents have expired (e.g. “proven to work just like Lipitor – for half the price!”). Lipitor’s patent expires in 2010, in case you’re wondering.
   
2. Companies’ whose products need visual side-by-side comparison of performances with competitors to create effective differentiation (anybody who saw the video comparing the 4WD systems of the 2001 Nissan X-Trail and the 2001 Honda CR-V knows what I’m talking about!).

Two elements of success

Comparative advertising campaigns have to achieve 2 elements to be successful: first, overcoming customer scepticism over the blatantness of your comparative claims by making sure the comparison appears fair and unbiased; and second, ensuring the whole ad does not backfire by reinforcing the brand recall of your targeted, competitor brand.

Probably the most famous case of comparative advertising is the Pepsi Challenge, run in the USA in the 1980’s. Consumers were challenged to blind-taste Pepsi and Coke, and name the one they preferred. Those that chose Pepsi consistently outnumbered those that chose Coke, a fact trumpeted by Pepsi for years and which helped it steadily erode Coke’s market share in the 1980’s. The “Pepsi Challenge” even became a buzzword for a confident, in-your-face, “let’s see who’s better” kind of confrontation.

Only many years later did Malcolm Gladwell in his book ‘Blink’ point out that the kind of “sip test” done in the Pepsi Challenge favoured the sweeter flavour of Pepsi, whereas a real “drink test” would even out the odds, given that the cloying effect of excessive sweetness would have time to build and thus make the less-sweet Coke more preferable. By that time, Pepsi had long climbed to being a respectable rival to Coke in the soft drink wars.

I did say you only have to appear unbiased, didn’t I? ;-)

As seen in theSun, 4th June 2008. PDF version here.