An Industry View of Airline Lounge Business Rules – Application and Its Revenue Impact

Results of a type trial between two world class carriers.

The Problem

Incredible amounts of revenues are being lost by accepting unauthorized passengers’ access to VIP airport lounges.

Unfortunately, many airlines do not have the right tools to properly identify and screen the passengers in a speedy manner. In many instances, they are allowed to use the lounge which causes issues at month-end partner billing. In many cases, the updated information on a passenger’s status is not entered or the business rules are too intricate to be applied.

As part of a trial assessment, one carrier alliance decided to measure the cost associated with lounge hopping, lounge switching and unauthorized passengers accessing lounges.

The Airlines

The trial period involved two major carriers, one Asian and one European. Both carriers are members of the same alliance and offer reciprocal lounge access to qualified passengers. The carriers offer both Business and First-Class lounges.

The trial took place in one of the busiest airports in Europe.

Flying to over 165 destinations in over 40 countries, moving more than 27 million passengers per year, and operating over 85 lounges around the world, the Asian carrier is one of the continent’s largest airlines. For confidentiality purposes, we will call this carrier AS.

The second airline is one of the 3 leading operating carriers in Europe offering service to over 180 destinations. The airline has seen an uplift of passenger year over year since 2010 and in 2016 it reported in excess of 42.1 million passengers. The airline operates 65 lounges around the world. For confidentiality purposes, we will call this carrier EU.

The Approach Proposed

The carrier alliance selected Information Engineering Group (IEG) Corp. and its VIP lounge-based solutions to facilitate the study.

The trial ran for 4 weeks (Jan 19 through Feb 15, 2014) in a key European airport terminal. Two lounges were selected to participate in the study, one from airline EU and one from airline AS.

Passenger Validation System

  • 39 out of the 46 airline EU owned and operated lounges used their in-house validation system
  • The rest used a manual tracking system (non-alliance compliant), including spreadsheet
  • The current system can only enforce internal EU policy and not their partner’s policies

Staff

  • Airline EU does not have dedicated lounge staff
  • Staff assigned to the lounge is informed of the business rule changes the day of their shift
  • Agents cannot rely on their existing system to admit or decline access, especially when traveling on other airlines

The Alliance Carrier Has Identified a list of Success Criteria

Protecting Revenue

The lounge solution should focus on 3 points:

  • Lounge Access Policy
    • Lounge Hopping
    • Lounge Switching

Reliability

Minimal or no down time

Billing & Cross-Charging

  • Real-time billing and cross-charging
  • Automatic cross-charging of all carriers using this selected airline EU lounge either directly or through the IATA Clearing House (ICH)
  • Eliminate administrative functions[1]
  • Achieve additional cost savings

Report Generation

  • Log and report required alliance carriers’ elements
  • The following data should be collected through the lounge tracking system to support the billing process: passenger name, operating flight number, class of travel, date, and frequent flyer number

Learning Curve

Minimal training required (maximum of a 1-hour session) – no classroom type disruption

Statistical Data

Staff managers need to use data to improve schedule

Business Rules Update

  • Reduce admin functions, timings and increase efficiency
  • Respect the individual airlines general lounge access rules and local agreements
  • Streamline business rules including:
    • 1 Lounge executive to identify and update rules
    • 1 Executive in airline EU or AS to update soft copy
    • 1 Agent to print, distribute and modify the business rule reference book

The Results – Success Criteria: Protecting Revenue

Lounge Access Policy

IEG’s VIP lounge solutions prevented airline EU from losing €8,730 in 4 weeks, a potential annual saving of €113,490 by simply enforcing the correct business rules and Lounge Access Policies.

Lounge Hopping and Lounge Switching Was Measured as Part of the Trial Period

Airline EU may want to investigate further the reasons why passengers switch from their own lounge to another airport lounge (perhaps a quieter area, less crowded, better food, or simply to be with colleagues). IEG’s solutions allow the staff to view in real-time when a lounge switch occurs so they can inquire further.

A bigger concern is the economic impact of double billing due to lounge hopping. Also, dropping off Guests in a nearby partner lounges may increase the cost of operations. Higher operating costs from lounge hopping has been measured at €15,600 annually at the EU airport lounge alone due to airline AS’ guests accessing the airport lounge without proper credentials.

Collectively, IEG’s services could potentially save airline EU over €129,090 annually (in one single terminal). The total amount saved is estimated to be 2.5 Million €[2]

Success Criteria: Reliability

Throughout the 28 days of operation, no downtime was reported by either airline (EU and AS)

Success Criteria: Billing & Cross-Charging

  • All airlines were automatically cross-charged using airline EU Lounges either directly or through the IATA Clearing House (ICH)
  • Eliminated any administrative functions related to cross-charging and billing
  • Facilitated EU to cross-charge airlines directly, which would create additional savings. However, this would represent a change in the current process.

Success Criteria: Report Generation

  • All passenger data, either mandatory or optional data were properly captured and available to reporting such as Loyalty number, Seating, Class of travel among others.
  • Alliance carriers were no longer able to reject airline EU’s invoices due to auditable billing system available through IEG’s web portal.
  • IEG’s solutions allows airline EU to be compliant in the non-airport alliance carriers’ audits. However, this could not be verified within this study.

Success Criteria: Learning Curve

  • 17 lounge staff including supervisors were trained within one-hour session
  • The rest of the staff were trained on the job (no work disruption)

Success Criteria: Statistical Data

  • Analytical reports are accessible through the web portal with graphical charts
  • Analytics are available to the 1-minute granularity as well as hourly, daily, weekly, monthly
  • Analytics facilitates roster planning and forecast trends

Success Criteria: Business Rule Updates

  • Access policy is updated at the central server and applied to the respective lounge in minutes
  • The business rules are customised on a lounge basis or at the individual workstation

Positive Feedback from Customer Service Agents Regarding System Use

A survey was sent to all lounge staff and supervisors. An overwhelming number of staff replied with positive feedback along with their recommendations and comments such as:

“Innovative and creative” — demonstrates and reinforces airline EU technology level

“Relatively simple to use” — agents have coined the solution as the “Scan & Go System”

The queues are shorter because agents don’t have to spend time looking in manuals to ascertain whether another carrier’s passenger cardholder is allowed guests or not

“More focus on eye contact and relationship building instead of looking through reams of paper on a desk”

“Increase in productivity, easy to use”

Instant information on screen in front of you, e.g., different cards allowed, and passenger information.

“I feel comfortable using IEG’s lounge system”

“No need to bother premium passengers once they are in the lounge to sign in guests, much quicker entry for guests”

“Never had to call a team manager for lounge entry problems”

“Easy to identify who is allowed to enter the lounge or not”

Team Managers also reported a reduced number of calls from agents during the trial.

Summary

Airline EU and airline AS undertook a study to measure the effect of lounge hoping, switching, and access policies. After a 28-day trial using Information Engineering Group’s VIP lounge solutions, it was demonstrated that both airlines are losing over 2.5 million Euros annually. By implement controls over access policy while enhancing the passenger experience, each airline can recuperate the majority of this lost revenue.

Both airlines have reinforced their overall passenger experience for the duration of the trial from simply having more time to engage with passengers.

This trial successfully demonstrated the importance of using a premium lounge tracking solution to implement controls over current business policy. The investment for this kind of solution whether made in house developed or via a third-party provider, is worth evaluating. Stop building picket fences as a passenger count method or mouse driven solutions with spreadsheets.  This trial clearly demonstrated that the return outweighs the investment.


[1] Airline EU Lounge Manager currently invests 2-3 working days a month on average to bill and cross charge airlines using two terminal Lounges (€ benefit in manpower savings not included)

[2] 25 locations with 100,000€ average in savings per location