How A Major European Airline Group Is Learning From Outside In
Sometimes it takes an industry outsider to see what the industry experts are missing. When Christine Wang, managing director of the Lufthansa Innovation Hub (LIH), attended her first aviation technology show, she was surprised that the airline industry had only 26 booking classes, bounded by the number of letters in the alphabet. She knew that there would be many more opportunities if the sector embraced new digital technologies.
LIH was established in Berlin in September 2014 so that Lufthansa Group and its airlines could respond to emerging travel and mobility technologies. The second office opened in Singapore in January 2019, followed by another in Shanghai in 2020. LIH’s team of 40 people came to the hub with little or no airline experience. Their expertise, like Wang’s, typically lies in technology and entrepreneurial initiatives. Before joining Lufthansa, Wang worked at Alibaba and was a venture architect at Boston Consulting Group Digital Ventures.
“There are a lot of digital interactions with different players and services in the passenger’s journey now. We are looking at this holistic and seamless experience from A to B and acting as the connector between technology players and the Lufthansa Group, exploring new businesses and revenue streams,” Wang told ATW.
An example is LIH’s RYDES transmodal reward program, a digital application that rewards plane trips along with car-sharing, bike-sharing, e-scooters and other public transportation modes in Germany on a single platform. The rewards are curated and tailored to the target audience.
Data collected from these applications allows the German airline to identify certain travel patterns and habits, such as to airports, and potentially use the data to help network planning teams to reschedule flight timings and improve connectivity.
Asia, especially China, was ahead of the curve in its adoption of advanced mobile and digital technologies, including QR codes, and Wang said part of the LIH strategy was to use Asia as a future vision for what could be done and to also test some of the more advanced innovations.
In Asia, LIH studied airline application downloads to get a better understanding of travelers’ flying preferences and understand their mindsets. Airlines in the region, for example, are introducing products like unlimited weekend passes, not only to stimulate demand in a post-COVID world but also to alleviate customer concerns about booking ahead or worrying about what happens if they have to cancel a trip.
Using the unlimited pass model in Asia, LIH developed a similar Flightpass program for Germany-based LCC Eurowings and SWISS—both Lutfhansa Group carriers—in which travelers can purchase a pack of 10 one-way tickets that can be used freely within certain periods.
Another spinoff was Compensaid, a carbon offset payment application that not only allows travelers to contribute to reforestation projects, but also to invest in sustainable aviation fuel (SAF). By January, it had received almost €1 million ($1.1 million) worth of contributions, mostly for 3.7 tonnes of SAF, or 7,554 tonnes of CO2. Wang said LIH aims to expand Compensaid to cover the entire travel journey, including ground transport.
Wang said the idea of setting up a technology incubator company might not work for every airline because it depends on the company’s ultimate innovation goals. Airlines should look at what type of information is attractive to users and apply it in the right channel, she said.
Wang also holds an unconventional view on how the coronavirus pandemic will affect the air transport industry.
“COVID-19 is not a technological disruption to the aviation industry, but rather an artificially induced coma,” she said. “The travel value chain in itself is still the way it is and there’s more awareness and openness to digital technologies. The way to look at it now is from a wider perspective and to what are some of the technologies that could also apply to the travel industry, such as engaging FinTech players as well as blockchain technology.”
She said startups have the agility, creativity and flexibility to execute new ideas rapidly, but they sometimes lack sufficient capital, networks and user bases. Large corporations, including airlines, on the other hand, may have the resources but they don’t look beyond their industries. In an ideal world, Wang believes—and what is foundational to her philosophy for LIH—the two mindsets can come together and both sides benefit.