Breakthrough Customer Service with a Revenue Management Twist

1. Breakthrough Customer Service with a Revenue Management Twist A Call to Action Presentation to the AGIFORS Reservations and Yield Management Study Group Tom Svrcek, Ph.D. SVP of Technology and Planning tsvrcek@flyindigo.com

2. Outline of Discussion Introduction to Indigo Indigo’s Client Notification System Revenue management applications Call to action

3. Indigo – An Introduction • Wholly owned subsidiary of NewWorld Air Holdings, Inc. • Organized to market, operate and distribute business jet aircraft in regular and frequent commercial service • Flights operated as public charter operator under DOT Part 380 under FAR 135 Air Carrier certification • Initial target – “ultra high yield” business travelers ($3.00 to $10.00 per RPM) who have already adopted the business jet as their preferred mode of air travel • Penetrate market by offering charter capacity in select city pairs – thereby increasing utilization of aircraft, lowering hourly operating costs and making it possible to offer capacity at discounts to charter operators

4. Overview of Competitive Landscape Private Air Carrier (PAC) market is one of the fastest growing commercial aviation segments and is composed of three primary sectors Asset risk Utilization risk • Full ownership • Participants purchase jet outright • Assume all costs (e.g. fuel, pilots, maint.) • Fractional programs • Participants purchase shares (1/2,1/4,1/8) • Pay monthly management and hourly fees • Charter flights • Participants take no ownership stake in jet • Pay per trip fees that cover asset and utilization risks taken by owner/operator

5. Our Unique Value Proposition • Offer the “public” jet service, eliminating the need for high-yield travelers to take an asset position in the aircraft • Provide regular and frequent service between select city pairs through public charter aggregation of demand – reducing utilization risk by individual traveler • Utilize less crowded general aviation terminals and/or airports located in many cases closer to residential areas and regional business centers • Offer comfort, convenience and productivity of the corporate business jet without the typical entry price

6. Our Customer Service Challenge • Level of service provided by competitors is high (e.g. complete flexibility of departure/return times, highest degree of industrial security) • Benefits of general aviation infrastructure (local proximity, reduced congestion) come at risk of operational vulnerability – limited alternatives in the event of service interruptions • Need to keep passengers well informed about service irregularities to generate success for service and create lasting customer loyalty

7. Our Customer Service Challenge • Cost of notifying customers in a timely fashion via their preferred communication channel using traditional methods would be cost prohibitive • Associated costs include at a minimum outsourcing/staffing a 24x7 “notification center” for outbound calls to customers

8. Solution: Client Notification Service • Web-based, personalized notification service enabling the proactive notification of travel related events (flight delays, cancellations, waitlist clearing) • Outbound service across multiple communication channels (telephone, mobile phone, pager, fax, email, etc.) • Messages delivered simultaneously to all travelers and precisely how each wishes to be notified …True breakthrough in customer service

9. Outline of Discussion Introduction to Indigo Indigo’s Client Notification System Revenue management applications Call to action

10. Client Notification System Data stored on their servers

11. Contact Information

12. User Designed Preferences

13. Event Trigger: Flight Delay Example Flight operations Delays the departure of the inbound aircraft’s next flight Inbound flight is delayed due to weather Client Notification System Obtains “manifest” from the delayed flight to determine which passengers are affected and generates a message with “parameterized” information based on event type

14. Event Trigger: Flight Delay Example Message From: Indigo Industry: Airline Type: Delay Parameter 1: Flight 123 Parameter 2: Chicago Parameter 3: New York Parameter 4: 90 minutes Parameter 5: 7:30 p.m. Parameter 6: 9 passengers Unique identifiers ID #1 ID#4 … ID #2 ID#5 … ID #3 ID#6 … Message to be created IndigoFlight 123 from Chicago to New York has been delayed by 90 minutes. The new estimated departure time is now 7:30 p.m. We apologize in advance for any inconvenience this delay may cause you. If you would like to change your travel plans please call us toll-free at 1-877-446-3446.

15. The Messaging Engine

16. One-to-Many Personalized Notification Telephone Message created IndigoFlight 123 from Chicago to New York has been delayed by 90 minutes. The new estimated departure time is now 7:30 p.m. We apologize in advance for any inconvenience this delay may cause you. If you would like to change your travel plans please call us toll-free at 1-877-446-3446. Message is delivered simultaneously to all appropriate users according to each’s preferred notification method The result is breakthrough customer service at a fraction of traditional costs Mobile phone Pager Email Fax

17. Other Scheduled Airline Applications Event Sample messages The departure time for Flight 232 from Chicago to Boston on Friday, February 4th has been updated from 8:00 p.m. to 7:50 p.m. Please make a note of this change. Schedule changes Your upgrade on Flight 2201 from Chicago to Dallas-Fort Worth on Friday, April 21st at 6:00 a.m. has been confirmed. Your seat number is 3B. Upgrade notification The departure gate for flight Flight 1701 from Houston to Phoenix on Friday, February 4th has been changed to H11. The expected departure time remains 11:30 a.m. Flight dept./arrival info. Your luggage from Flight 345 from Atlanta to Charlotte with ID# 1234567 has been located. To arrange a messenger, please call us toll-free at ... Lost luggage tracking Frequent flier status Congratulations! You have reached the highest status level in our frequent flier program. As a way of saying thank you for your continued loyalty, we will be sending you two first class upgrades good anywhere on our system ...

18. Outline of Discussion Introduction to Indigo Indigo’s Client Notification System Revenue management applications Call to action

19. Summary • Once adopted by a critical mass of travelers, new preferences can be added to further improve the level and type of information flow between airline and traveler • A “flight switching incentive” is one feature that could be added to encourage travelers, under certain circumstances, to switch flights voluntarily in exchange for voucher compensation • By using profile information and varying incentive levels, airlines can proactively manage such events as aircraft down gauging, oversold flights and ad hoc group requests • The result should be lower recommendation costs per passenger and improved customer loyalty

20. New New Preference Introduction • Description • Included in the Travel Related Preferences section of the user’s profile • Allows traveler to identify their threshold compensation to switch to a different flight • As with other events, allows traveler to specify how he/she wishes to be notified Travel Related Preferences Flight switching incentive Notify me if switching incentive is at least Method 1 Method 2 … $100 Mobile1 Office1 New product can be incorporated seamlessly into a traveler’s existing messaging preference profile

21. Aircraft Downgauge Example Event Trigger Smaller aircraft re-assigned when bookings already exceed capacity of new aircraft Or, D3 optimal solution is not feasible due to excess bookings on one flight Message created The aircraft originally assigned to American AirlinesFlight 123 departing from Chicago to New York at 7:00 p.m. has been replaced by one with fewer seats. We are currently in the process of trying to re-accommodate passengers on other flights. If you would consider moving to a different flight, we are offering an incentive of $50. Please call us toll-free at 1-800-843-3000 to rebook your itinerary. You are one of 10 passengers who are receiving this message.

22. ” ” ”= 50 Ad Hoc Group Request Example Event Trigger Group request is received for a flight having just less than the required AU level needed to accept the request (e.g. 50 with AU of 45) Message created An opportunity for you to switch airline flights and receive voucher compensation has been created. You are currently booked on United AirlinesFlight 123 departing from Chicago to New York at 7:00 p.m. on Friday, April 21st. If you would consider moving to a different flight, we are offering an incentive of $200. Please call us toll-free at 1-800-241-6522 within the next 5 minutes if you are interested in rebooking your itinerary. You are one of 10 passengers who are receiving this message. but AU(Groups) = 45

23. Ted Botimer Revisited: Overbookings for Sale Event Trigger Flight is in an “over-oversold” situation Message created - (Conservative) Continental Airlines Flight 123 departing from Chicago to Newark on March 4th at 6:00 p.m. is in an oversold situation. There are seats available on flights departing at departing at 7:30, 8:00 and 10:00 p.m. If you would consider moving to a different flight, we are offering a voucher incentive of $100. Please call us toll-free at 1-800-525-0280 if you wish to be placed on the waitlist. Your name will called at the departure gate for your original flight if we need to re-accommodate you. You are one of 10 passengers who are receiving this message • Possible causes • Overaggressive sales reps, airport agents, etc. trying to accommodate their “best customers” • Higher than expected consolidator sales • Special event not anticipated by rev. management system

24. Overbookings for Sale Message created - (Aggressive) Continental AirlinesFlight 123 departing from Chicago to New York on March 4th at 6:00 p.m. is in an oversold situation. There are seats available on flights departing at departing at 7:30, 8:00 and 10:00 p.m. If you would consider moving to a different flight, we are offering a voucher incentive of $100. Please call us toll-free at 1-800-525-0280 if you wish to be rebook your itinerary now and collect your voucher. You are one of 10 passengers who are receiving this message • Choice between conservative and aggressive management may depend on • Degree to which “booked” exceeds capacity or target AU (possibly fare class specific) • Cost tradeoff between voluntary DBs at the gate and going out with empty seats

25. Logical Extreme -Notification Based RM • Factors to consider • Intangible benefit of increased customer satisfaction of both the high fare passenger and the passenger who elects to switch • Incremental revenue of greater “high fare” acceptance, though must be considered on a “net” basis, including the recapture rate of the high fare passenger • Costs associated with • System development • Notification • Incremental inbound calls made by interested “switchers” 1. Event trigger Request comes in for a high fare (though still capacity controlled) bucket that has already sold out. 2. Switching opportunity Contact currently booked passengers with designated switching thresholds to see if any are willing to move to another flight, thus opening up the higher fare class AU. 3. Description of decision to be made Is the incremental revenue the airline receives from being able to accept the higher fare passenger greater than the cost of finding someone to switch and paying their threshold compensation.

26. Ingoing Hypotheses • Creation of a reverse auction among travelers willing to switch for voucher compensation will lower average cost of re-accommodation per passenger as well as carrier’s overall expenditure on denied boarding • Proactive notification will reduce the overall volume of complaints related to lack of information, leading to a decrease in overall customer service costs while increasing loyalty • For major US carriers, estimated savings related to fewer DBs and fewer complaints could be in the millions of dollars annually

27. Outline of Discussion Introduction to Indigo Indigo’s Client Notification System Revenue management applications Call to action

28. Summary • Long term success of the Client Notification Service is contingent upon attracting a large community of travelers • A large user community benefits both message creators (increased chance of finding travelers willing to switch flights) and end users (convenience of maintaining a single profile) • The larger the community, the more likely other message creators (credit cards, rental cars et al.) will be inclined to define events and notification • Client Notification Service offers new venue to service customers and encourage loyalty

29. Highest level of customer service comes from the single profile model • Costs of maintaining multiple profiles • Slower consumer adoption due to increased “hassle” of creating and more importantly maintaining multiple profiles • Data reliability issues if user does not update all profiles in the event of a change in his/her contact information Profile for AA Profile for Indigo Profile for CO Profile for NW Consumer Benefits to a Single Profile

30. Service Improves with Scale and Scope Two-day rental is overdue Suspicious activity on your card Credit Cards • Benefits to traveler • As community grows, more message creators are likely to adopt the service • Travelers can then enjoy as much (or as little) information flow as they desire • In each case, user gets to define how he/she wants to receive content Rental car Hotel Airline You have cleared waitlist for March 4th

31. Increased FF adoption Accelerated web traffic Leapfrog competition Leapfrog competition Additional Benefits of Adoption • Non – FF members who want to benefit from notification are more likely to join – particularly if they are “seamlessly linked” • Once profile is built, users return to site to • Modify contact information and preferences • Learn about new event-driven services • Increased traffic increases the likelihood of online bookings click-throughs to service partners etc.