Loss-making Philippine Airlines (PAL) has been in the red for a few years, posting a net loss of P4.33 billion ($86 million) in 2018, P10.20 billion ($204 million) in 2019, and a staggering P73 billion ($1.4 billion) in 2020, after COVID-19 severely hit the airline industry.
An Oliver Wyman report shows that connectivity and advanced analytics can help turn this around, with increased investment helping airlines save between 2% and 2.5% on global operating costs post-pandemic.
SITA’s Air Transport Insights reveals that airlines will prioritize passenger services via mobile apps, cybersecurity, and cloud services over the next two years. This is in contrast to 2019 when airlines focused on cloud, cybersecurity and business intelligence. However, the latter seems to be more urgent for PAL at this point.
In May of this year, the carrier was reported to be preparing for a Chapter 11 bankruptcy filing in the US. No official announcements have been made yet, but operator PAL Holdings said in June that it was not aware of any plans for creditor protection and that the board had yet to approve a definite option.
The recent resignation of PAL independent director Greg Yu also sent alarm bells ringing. In a boardroom meeting on July 26th, Yu cited personal reasons for leaving. However, one source says that the resignation may have stemmed from a major roadblock in the flagship carrier’s post-COVID recovery.
What’s clear is that PAL’s boardroom can significantly benefit from increased data-driven decision making, which necessitates greater investment in data analytics and technology. The airline was already on the right track in 2017 when it moved from relying on fare-purchase data to examining customer segments and leveraging commercial analytics to optimize revenue.
The question is whether business intelligence and data analytics have increasingly figured in PAL’s plans and whether it will be a major feature of restructuring and recovery, especially considering the recent appointment of Lucio ‘Hun Hun’ Tan III as vice president at PAL Holdings. Tan III has a Master of Engineering in Computer Science Degree from Stanford University on top of a Bachelor’s Degree in Computer Engineering from the same university.
A McKinsey report on the future of aviation also highlights that airlines, despite finding themselves strapped for cash, should invest more in data analytics, IT, and digitalization. Before the pandemic, airlines allocated around a measly 5% of their revenue on IT, less than the retail industry’s 6% and financial services 10%.
They also recommend carriers invest more in customer experience. PAL, rated as a four-star airline by Skytrax, currently has a 3.5/5 customer service rating on TripAdvisor. PAL’s rating is in the lower end of neighbouring four-star airlines and their customer service ratings: Royal Brunei Airlines (4/5), Bangkok Airways (4/5), and Malaysia Airlines (3.5/5).
Improving the customer service experience, especially in post-pandemic travel, can mean many things. In April 2020, Etihad launched the world’s first new contactless self-service technology for airlines. The technology estimates the passenger’s vital signs at health screening checkpoints and bag drop areas.
Singapore Airlines has also been leading the pack in identifying customer touchpoints and rolling out relevant digital innovations, including the first digital health verification process and the first Travel Pass App based on the International Air Transport Association (IATA) Travel Pass framework.
These two leading airlines have also invested in data analytics and business intelligence, acknowledging that these are foundational to their operational success. In early 2019, Singapore Airlines formally opened its new digital innovation lab, known as KrisLab, to further enhance digital capabilities and solve business challenges.
PAL is expected to face more headwinds in the coming months due to the Delta variant, and the airline will soon have to say a word about its Chapter 11 filing. This report from ACI Insights says that PAL may already have the data it needs. In fact, airports, which also heavily rely on customer data, only need about 40-60% of data coverage to create value.
“Airlines could consider stepping up IT and automation investment now. For example, airlines can respond to the quicker recovery of domestic and short-haul flights by investing in direct sales and owning the customer relationship. Relationships with IT and distribution providers could be re-explored,” McKinsey analysts said.
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