red october columbia
TRANSCRIPT
Who we were: A domestic airline that bridges the gap between
flying business and flying private
Who we are now: A domestic airline that bridges the gap between
flying economy and flying business
Pivot
How we got here:79 interviews
Junior professionals
Senior corporate decision makers
Port Authority
City government officials
Leisure Travelers
Airline manufacturers
Remove the pain points of the business class flight experience domestically in the US by:1. Reducing time in airport2. Improving in-flight
experience (comfort & service)
3. Offering a cheaper alternative to flying private
The business class flier who wants to fly private but can’t afford it
Primary: Business flier• Flier/employee• Corporate decision-
maker• Descriptors: 1+ flight per
month, urban, time-crunched, employees of companies that promote high quality of life/culture
Secondary: Frequent flier• Business + leisure• Descriptors: High
income, urban, luxury standards
• Face-to-face meetings• Digital advertising• Mobile app• Website• Partnerships (luxury
brands, Uber)• Word of mouth
• 360-degree, seamless end-to-end experience
• Loyalty programs• Unparalleled customer
service support• Digital integration at
every touchpoint
• Subscriptions for corporations (with lower price per flight)• Flight-by-flight
• Airplane manufacturers/leasing companies
• Companies with potential fliers
• Existing airlines that can’t reach all of our destinations
• Second and third tier airports
• Food providers• Luxury brands that build
equity • Television/entertainment
providers• Technology providers
(televisions, wifi)• Mattress, desk providers
• Business Development• Marketing• Customer Service• Experience Design• Operations/Logistics
• Airplanes• Ramp space• Legal/regulatory
expertise• Business development• Client management team
Fixed:• Airplanes• Fees
Variable:• Employees• Fuel
Day 1
Key Learnings
Different channels & processes dictate flights business travelers book
Junior business travelers fly economy more than business domestically
Travelers won’t pay large premiums (business-class prices) for domestic flights
• Travel agents will be a key part of corporate partnerships
• Proceed with research of corporate channels
• Junior business travelers are less attractive targets for domestic business-class travel
• In order to capture customers we have to be price competitive or provide a unique offering
Day 1-2 Learnings/Implications
Hypothesized Product-Market Fit
Archetype
• Reduced time at the airport e.g., quick security, comfortable hub• More productivity on the flight e.g., wifi, desk space, outlets• An affordable alternative to business class that meets his company’s
budget
Value Proposition
• A comfortable experience she can rely on• Reduced time at the airport e.g., quick security, comfortable hub• An airline she can fly for business and leisure
• A more comfortable experience than economy• Affordable alternative to business class• Easy and convenient experience
Demos
Junior Professional• 28• $80K• Professional
Services
Senior Professional• 47• $500K• Executive
Management
Leisure Traveler• 31• $150K• Tech Startup
Proposed Channels
Airline Own Websites /
Apps
Online Agencies (eg
Expedia)
Offline Travel Agencies
Aggregators, eg KayakChannels
End-User Traveller Leisure Business
Corporate Travel Services
Airlines
A mix of channels are used by both leisure and business travellers, for research and purchase
Suppliers
Business Flyer:Remove the pain points of the business class flight experience domestically in the US by:1. Reducing time in airport2. In-flight experience
optimized for work and productivity
3. Offering a cheaper alternative to flying private
The business class flier who wants to fly private but can’t afford it
Primary: Business flier• Flier/employee• Corporate decision-
maker• Professionals• Descriptors: 1+ flight per
month, urban, time-crunched, employees of companies that promote high quality of life/culture
Secondary: Frequent flier• Business + leisure• Descriptors: High
income, urban, luxury standards
• 360-degree, seamless end-to-end experience
• Loyalty programs• Unparalleled customer
service support• Digital integration at
every touchpoint
• Subscriptions for corporations (with lower price per flight)• Flight-by-flight
• Airplane manufacturers/leasing companies
• Companies with potential fliers
• Existing airlines that can’t reach all of our destinations
• Second and third tier airports
• Food providers• Luxury brands that build
equity • Television/entertainment
providers• Technology providers
(televisions, wifi)• Mattress, desk providers
• Business Development• Marketing• Customer Service• Experience Design• Operations/Logistics
• Airplanes• Ramp space• Legal/regulatory
expertise• Business development• Client management team
Fixed:• Airplanes• Fees
Variable:• Employees• Fuel
High-Income Frequent Flier:
1. Reducing time in airport2. In-flight experience
optimized for comfort and entertainment
3. Offering a cheaper alternative to flying private
High-Income Frequent Flier:
• Direct & Indirect Sales• Partnerships with Luxury
Brands• Word of Mouth
Business Flier:• Travel Agents• American Express• Direct & Indirect Sales
Business Flier:• Subscriptions with Travel
Agents and Partners (eg Amex)
• Flight-by-flight
High-Income Frequent Flier:• Flight-by-flight
Day 2
Day 1 changes
Key Learnings
There’s more opportunity to improve the economy
experience
Passengers are also unsatisfied with the airport
experience
There is WTP for improved economy but people aren’t willing to pay 2-3x the price
for business
• Refocus interviews on economy domestic travel
• Explore the international premium economy model
• Prioritize pain points across airport and airplane experiences to determine key opportunities
• Determine which features are biggest drivers of WTP
Day 2-3 Learnings/Implications
PivotPivot
27% of revenue is attributable to business class travel
Overall Market (Economy + Business)
$250.6B
Served Market$67.6B
716M passengers boarded planes domestically at ~$350
Assuming we can steal 2.5% of Served Market
Target Market$1.69B
Overall Market (Economy + Business)
$250.6B
Target Market$1.69-6.27B
Assuming we can steal 2.5% of both economy and business markets
New Proposed Market
Before: Market for Business-Private Gap
Now: Market for Economy-Business Gap
Willingness to Pay
We asked interviewees how much they would pay for a flight that usually costs $257 if it solved their top two pain points.
• 50% would pay $310 (20% more)
• 30% would pay $330 (30% more)
• 20% would pay $360 (40% more)
Next step: Test willingness to pay across higher ticket prices
REDOCTOBER
Global US Carriers US Low Cost/Regional Carriers
Global Foreign Carriers US Private Jet Charters
New Competitive Landscape
Prod
uct
Class
Strate
gyNetwork
Convenience
Business Flier:Remove the pain points of the business class flight experience domestically in the US by:1. Reducing time in airport2. In-flight experience
optimized for work and productivity
3. Offering a cheaper alternative to flying private
3. Offering a cheaper alternative to flying business
Business flier:The business class flier who wants a better experience without paying business class prices• 1. Junior-level• 2. Senior Level• 3. Decision Maker• Descriptors: 1+ flight per
month, urban, time-crunched, employees of companies that promote high quality of life/culture
Leisure flier:The economy flier who is willing to pay a premium for a better experience• Business + leisure• Descriptors: High/upper-
middle income, urban, luxury standards
• 360-degree, seamless end-to-end experience
• Loyalty programs• Unparalleled customer
service support• Digital integration at
every touchpoint
• Subscriptions for corporations (with lower price per flight)• Flight-by-flight
• Airplane manufacturers/leasing companies
• Companies with potential fliers
• Existing airlines that can’t reach all of our destinations
• Second and third tier airports
• Food providers• Luxury brands that build
equity • Television/entertainment
providers• Technology providers
(televisions, wifi)• Mattress, desk providers
• Business Development• Marketing• Customer Service• Experience Design• Operations/Logistics
• Airplanes• Ramp space• Legal/regulatory
expertise• Business development• Client management team
Fixed:• Airplanes• Fees
Variable:• Employees• Fuel
Leisure Flier:1. Reducing time in airport2. In-flight experience
optimized for comfort and entertainment over the Economy class
3. Offering a cheaper alternative to flying private business class
Leisure Flier:• Direct & Indirect Sales• Partnerships with Luxury
Brands• Word of Mouth• Social Media
Business Flier:• Corporate Partnerships• Travel Agents• American Express• Direct & Indirect Sales
Business Flier:• Subscriptions with Travel
Agents and Partners (eg Amex)
• Flight-by-flight
Leisure Flier:• Flight-by-flight
Day 3
Day 1 changes Day 2 changes
Key Learnings
Travelers are so used to the status quo they can’t
imagine a better alternative
Business travelers are also leisure travelers, providing
opportunity to capture more share of wallet
Seat comfort and time are the most consistent pain points across segments
• Educate consumers on potential for improvements through marketing
• Use partnerships (Uber) to educate and build equity
• Explore Blackberry model of acquisition
• Need to determine similarities/differences between the business/leisure and leisure market
• End-to-end service and efficient are must-haves and a compelling selling point
• Comfortable seats are a quick-win
Day 3-4 Learnings/Implications
Pivot Pivot
Leisure Business & Leisure1) Seat Comfort & Leg
RoomSeat Comfort & Leg Room
2) Time (incl. Commuting and Airport )
Time (incl. Commuting and Airport )
3) Amenities (wifi, outlets, desk space)
Amenities (wifi, outlets, desk space)
4) In-flight service In-flight service
Top Ranked Pain Points, by Segment
While seat comfort is a functional benefit we can easily provide, it’s already available at a premium from competitors (premium economy)
Time is a value proposition that other domestic airlines haven’t marketed or offered to these segments and may struggle to replicate (scale and legacy)
Testable Implications
Top Pain Points
Customer Relationships
Get
Keep
Grow
• Website booking• Social media advertisements• Corporate partnership (contract
with major company)• Brand partnerships (Uber)• Guerilla marketing• Aggregators (Expedia, Kayak)• Word of Mouth
• Digital integration at every touchpoint (mobile boarding, etc.)
• Unparalleled customer service (social media, call centers, attendants)
• Content marketing (recommendations on destinations)
• Incentives for completing surveys
• Loyalty program (free flights)• Promotions (seasonal discounts)• Add-ons (on the ground
concierge)• Sale of customer data
Business Flier:Remove the pain points of the business class flight experience domestically in the US by:1. More comfortable flight
experience (seats)2. Reducing time in airport
wasted end-to-end time3. In-flight experience
optimized for work and productivity
4. Offering a cheaper alternative to flying private
5. Offering a cheaper alternative to flying business
6. Providing end-to-end service
Business Flier:The business class flier who wants a better experience without paying business class prices• 1. Junior-level• 2. Senior Level• 3. Decision Maker• Descriptors: 1+ flight per
month, urban, time-crunched, employees of companies that promote high quality of life/culture
Leisure Flier:The economy flier who is willing to pay a premium for a better experience• Business + leisure• Descriptors: High/upper-
middle income, urban, luxury standards
• Get: Website, social, corporate & brand partnerships, guerilla, search, WOM
• Keep: Digital integration at every touchpoint, unparalleled customer service
• Grow: Loyalty programs, promotions, add-ons
• Airplane manufacturers/leasing companies
• Companies with potential fliers
• Existing airlines that can’t reach all of our destinations
• Second and third tier airports
• Food providers• Luxury brands that build
equity • Television/entertainment
providers• Key events (Art Basel,
SXSW, Sundance)• Technology providers
(televisions, Wi-Fi)• Mattress, desk providers• Department of
Transportation & State Regulatory bodies
• Seat manufacturers• Transportation providers
(Uber)
• Business Development• Marketing• Customer Service• Experience Design• Operations/Logistics
• Airplanes• Ramp space• Legal/regulatory
expertise• Business development• Client management team
Fixed:• Airplanes• Fees
Variable:• Employees• Fuel
Leisure Flier:1. Reducing time in airport
wasted end-to-end time2. In-flight experience
optimized for comfort and entertainment over the Economy class
3. Offering a cheaper alternative to flying private business class
4. Providing end-to-end service
Leisure Flier:• Direct & Indirect Sales• Partnerships with Luxury
Brands• Word of Mouth• Social Media
Business Flier:• Corporate Partnerships• Travel Agents• American Express• Direct & Indirect Sales
Business Flier:• Subscriptions with Travel
Agents and Partners (eg Amex)
• Flight-by-flight• Bundled add-ons
Leisure Flier:• Flight-by-flight• Bundled add-ons
Day 1 changes Day 2 changes Day 3 changes
Day 4/5
Day 4 changes
Final Summary
We now know that:
1. We’ve found a viable market (economy-business)
2. The leisure-business segments have significant overlap and increased WTP for improved experience
3. Must-have value propositions are seat comfort and time saving
What we still don’t know Next Steps to Validate
Revenue StreamsWillingness to pay premium remains constant across domestic flight
Run customer tests for a variety of flights and price points
Cost StructureMore precise flight economics, fees, etc. with focus on seat comfort and time saving (back of envelope calculations have been completed)
Project revenues and profits on select routes across potential aircrafts and compare with findings from pricing analysis (above)
Key ActivitiesAdditional understanding of regulatory and legal restrictions
Continue to validate legitimacy of business with Department of Transportation, FAA and local governments
Customer RelationshipsUnderstanding cost of acquisition, switching costs, and role of loyalty across channels
Additional interviews with target consumers, research on historical switching campaigns by competition, benchmark competitor acquisition costs
Next steps