Star Alliance CEO Theo Panagiotoulias discusses how alliances can transform customer experience and why they are still relevant today.
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Victoria Moores (00:23): Hello everyone and thank you for joining us for Window Seat, our Aviation Week air transport podcast. I'm Air Transport World Europe and Africa Bureau Chief Victoria Moores, and I'm delighted to welcome you on board. I'm joined this week by Star Alliance CEO Theo Panagiotoulias. I hope I pronounced that correctly there.
Theo Panagiotoulias (00:40): You did. Yep. That's very good.
Victoria Moores (00:42): So welcome to the podcast today and thank you very much for joining us. You've joined us at an interesting time for Star Alliance because you've just taken on your first new member in over 10 years, which is ITA Airways. Obviously, ITA has had a stake acquired by Lufthansa and Lufthansa is one of your longest standing members. In actual fact, Lufthansa was one of the founding members when the Alliance was formed in May 1997. So I'm wondering if we could start off by a bit of your personal background, Theo. Could you introduce what your history is and what brought you to Star?
Theo Panagiotoulias (01:13): Sure. And good morning to you as well, Victoria, and thanks for having me. My background, I've spent 25 years, I guess, in the aviation industry. I've worked at American Airlines in the past for 15 years in various commercial operational roles. Most recently, I also worked for nine years at Hawaiian Airlines in commercial international types of roles. And I also had a three-year stint at Sabre as well. Career has all kinds of different facets in the aviation industry itself. In terms of our latest edition to the network, yeah, really exciting. On the 1st of April, we were delighted to welcome ITA to Star bringing our members to 26 member carriers. I think from a network perspective, it really is a win-win for both us at the Alliance and certainly equally I should say for ITA. Obviously, Italy is one of the world's most popular tourism destinations and it's well known for a lot of the sites and sounds there.
(02:16): And from a Star Alliance perspective, the fact that we've got such an invaluable member that brings a great network in particular domestically in Italy, given the popularity of the country as a destination, but it also provides excellent connectivity into places like South America and Africa as well. So it's a great addition. It was a seamless integration thanks to the professionalism and commitment by ITA. And obviously Lufthansa took a leadership role in bringing them into the Alliance.
Victoria Moores (02:46): And I think that that's a really interesting part of Alliance developments at the moment is the fact that ITA has gone from Sky Team historically ITA's predecessor roots in Alitalia was very, very firmly Sky team and they've come across into Star. That's as a result of consolidation. At the same time, we've seen SAS become part-owned by Air France KLM. They've left Star Alliance and gone into Sky Team. How do you see those dynamics playing out in terms of consolidation and that its impact on alliances, particularly given that one of your members, TAP Portugal, is up for consolidation right now?
Theo Panagiotoulias (03:25): Yeah, I think the way I see it is these are natural evolutions in the business environment if you like. It's something that certainly at Star Alliance we don't have control over. And so we focus on what we do have control now. You quite rightly highlighted. We had Scandinavian who left as a result of consolidation. They were a founding member. They're a great partner, but these are business realities that you deal with and it's no different, I guess, with ITA who through consolidation have joined STAR. I think from our own perspective, the priorities making sure our value proposition remains strong and we continue to be the largest alliance in the world. Our global network breadth and reach is unmatched. And so you are going to have these things that occur, as I said before, as a natural business evolution. So our role is when you can't control something, you adapt and focus on what we're here to do.
(04:22): And if you've got the network, which we continue to believe we do, and I think ITA enhances it even further, then our primary focus is to make sure that we're making that customer experience as seamless as possible across all the members.
Victoria Moores (04:36): And I think we're going to come back to customer experience after this next question, which is following on from what you just shared there. Obviously one of the benefits of Alliance membership to some of your members is the participation in the Transatlantic joint venture. I understand that that was a frustration for SAS that they weren't able to access that partnership. I think it's going to be different with ITA?
Theo Panagiotoulias (04:58): Well, it's an interesting question and I get to ask this question quite a bit, actually. I think at the end of the day, when it comes to alliances and joint ventures, the joint ventures are an evolution from within an alliance to a large extent. And the really important thing about that is joint ventures are all about specific geographical cooperation between carriers. There's antitrust immunity that's granted by various governments. It's very, very specific. From an alliance perspective, we certainly do not get involved in those commercial bilateral or trilateral arrangements that are organized by carriers, nor is that our role, quite frankly. And I think what may happen with ITA moving forward is something that will be determined by the joint venture partners. And so from a commercial perspective, we leave that to the member carriers to coordinate and resolve and negotiate amongst themselves. Our mandate and our role, which is crucial, is making sure whether it's joint venture partners or whether it's the broader membership across the airlines that they have the ability to be able to intertwine themselves from a customer experience perspective as least disruptive and as effortless as possible.
(06:12): I used the word seamless before, which is a word that gets thrown around a little bit. And I don't want it to be a buzzword because I don't think it is. I mean, at the end of the day, you want to be here to serve what the customers want and the customers want to have control of their own destiny. If you think about the premise of an alliance, the premise from the days of its origins was all about one airline cannot serve every market around the world and therefore you want to be able to leverage partner networks to fulfill that commitment to customers. Well, now that we've got that network, we've pivoted very, very focused on a customer experience perspective where we say to ourselves, okay, how do we integrate? How do we make that experience across multiple carriers as effortless as possible? And as I'm sure you can appreciate, there's a lot of touchpoints that we are trying to solve problems.
(07:04): And that is the focus, that is the priority, and that's what is going to work from a customer perspective.
Victoria Moores (07:10): You mentioned there about the passenger having control over their own destiny when they're in what is objectively an incredibly complicated system. I mean, the number of players involved in getting a passenger from A to B is absolutely huge. So I guess Star Alliance's mission is to make the very, very unseamless experience of travel seamless between your various members. I'm wondering whether the advent of consolidation, the advent of technology, which also is aiming there to make the passenger journey seamless, does that impact the value of alliances, particularly in an age where you show up at an airport, you probably, depending on what level of class you're flying, you don't end up seeing anybody right the way up until the gate. So is that still relevant when technology can take you through the experience directly in theory?
Theo Panagiotoulias (08:05): It's very relevant. Now the point you're making about technology, actually leveraging the technology is ensuring that we do stay very relevant. So I think they both work hand in hand together. And let me give you an example of that. I think when you think about the industry that we work in, you made a really important observation, which I completely agree with is we are in a very complex business and so many things can go wrong and technology is at the heart of resolving a lot of those problems or issues that may arise. And when you think about how customers use technology these days, in particular from mobile devices, I talked a little bit before about having control of their own destiny. It starts with that device and giving them the ability to be able to choose a seat to track their bags, to be able to accrue and redeem the frequent flyer miles they may have earned.
(09:03): They want to be able to utilize technology and do that quickly and efficiently. And so from our point of view, the technology sits at the heart of that. Now, our member carriers are exactly the same as that way. They understand this as well. Where do we step in? We step in from a point of view of offering services functionality in ways that the airlines themselves cannot do on their own. And so when we're talking about something as simple as bag tracking, we have the bag tracking app, which allows a customer that may be originating out of Frankfurt on Lufthansa connecting to United Airlines through Chicago and being able to track their bag through the one app across both carriers. That's one example of where you're leveraging technology to enable a customer to feel like they are seamlessly going from one destination to the other as if they were flying one airline.
(10:00): That's where the technology is at the core of being able to provide those services. So whether it's the booking experience, the airport experience, the connecting transfer experience or the recognition experience, they're the four pillars that we actually use because that's the actual journey that people go on. We look across those touchpoints and say to ourselves, what problems are there that we can solve leveraging technology? And I can assure you there are a lot.
Victoria Moores (10:30): I can imagine when you've got a system as complex as this, absolutely.
Theo Panagiotoulias (10:35): And that's what the member carriers expect of us and we know that's what our member carriers customers expect. And so we are doing work that focuses on that, that can make a tangible difference and change the way people travel and make it much more efficient, much more user-friendly, tying back to the point that I made before about allowing the customer to actually control their own destiny, which I'm a very passionate, big believer in.
Victoria Moores (11:00): Absolutely. Just one specific question on that technology front and that's about Wi-Fi connectivity. Just to use it as an example, you've got lots of different airlines that are offering lots of different products with different features. It's part of what you're doing as you're bringing together different experiences, making them as harmonized as possible. Is that something that you've looked at at all for your premium flyers, making sure that they can get similar levels of connectivity, seamless connectivity on their own devices across all of the various airlines?
Theo Panagiotoulias (11:28): Yeah. So that's a really good example of an important investment that most of our members are making when it comes to the onboard experience. And those decisions are made individually by the member carriers based on their business plan, their priorities, the communities they serve, et cetera. So they are individual decisions that the member carriers make. Now, as that builds up in scale, there may be a world in the future where we may be providing a service in a way that the member carriers cannot do individually on their own. I don't know what that may be at the moment because I think it's an onboard product that's specific and individual to the member carriers. But if you think of the lens of Star can provide us with through technology connectivity hubs, for the lack of a better term, that allows our member carriers to connect into Star and then give them reach across all the other carriers in a seamless manner.
(12:20): So that's why I'm saying, I don't know if the Wi-Fi one is necessarily the right example, but the ones that I gave you before as an example were bag tracking the seat selection, whether it's free, whether it's paid seats as part of ancillaries. So it's the instant redemption or the accrual of miles, all that stuff. The member carriers, we've got these hubs within Star where our member carriers connect into each other and give them the ability to do that. The big initiative that we are about to commence on right now is coming up with an irregular operations solution. Now, when you think about irregular operations, that is a massive pain point. It doesn't happen often, obviously, although if you're impacted, it feels disproportionately bad as it should. This is something that we want to spend a lot of time on because it has a disproportionate impact on the customer, obviously, but then obviously it impacts the members from a cost perspective, from a reputation perspective, et cetera, et cetera.
(13:20): So leveraging technology, that will be something that we're looking at right now, which will give us the ability to use that technology to have the members support each other for reaccommodating passengers in an automated fashion, providing solutions in an automated way. So by the time a customer arrives at a certain destination, if the flight is arriving late and is going to misconnect already reaccommodated, there's so much opportunity there to make life easier. So that's how you would leverage the technology. So it's a bit of a long-winded answer, but the point I'm trying to make to tie it back to the Wi-Fi issue, a Wi-Fi product being offered by the individual carriers is part of that hard product, obviously. Our role is to provide services that the airlines are not going to be otherwise do on their own, especially when it's mixing across the carriers in the journeys.
Victoria Moores (14:12): Yeah, I can see that it's how do you integrate at a level that is beyond any individual airline's capacity to integrate?
Theo Panagiotoulias (14:20): Yeah, that's
Victoria Moores (14:21): Right. Bring the focus to the here and now and maybe to the next 12 months off the back of that project that you just mentioned, obviously airlines are on the brink if not entering a very, very challenging time in terms of fuel prices with geopolitical tensions escalating. I guess this is a two-part question. The first one is, is there any support that they get through the alliance in times like this where things really are quite challenging and operations are disrupted beyond, I'm talking more at a operational level rather than at a passenger disruption level. And also are you still pursuing any joint purchasing initiatives, anything like that, which is much more on the collective bargaining power, I guess, of your members?
Theo Panagiotoulias (15:06): Yeah. So let me answer the last part. I think in terms of joint purchasing, we don't really pursue that anymore. I think it was something that was explored in the past and I think in theory it makes a lot of sense, but in practical outcomes, there was very minimal value in that regard. So we learned pretty quickly collectively that that's not going to be an area where Star's focus. And where we have clearly identified from perspective is let's get the network right, which we're very comfortable as I was outlining before, we are the largest, we've got the coverage. So we've got the network and then the next step is what can we do to make that customer experience more seamless, more effortless, et cetera, that we just touched on. So that's where our core focus is. The first part of your question was how member carriers may be helping each other.
(15:53): I think that's done more on a bilateral basis where possible. What you said before about disruption, I think there's a lot of cooperation and coordination and support amongst the carriers to be able to reaccommodate where there have been cancellations or impact or disruptions to operations where they help each other. So there's certainly a lot of that going on. But by and large, I mean, this is a very challenging environment. You touched on it. Fuel prices are at levels now that clearly are not sustainable in jet fuel prices. When you include the crack spread, you now up around the $1.71-$1.80 mark, and it hasn't really dropped below that. As you've seen the fluctuations in the oil market, jet fuel has stayed at that elevated level and that it is not sustainable. So we need a resolution to this sooner rather than later as an industry collectively.
(16:49): But in the meantime, our member carriers, like the broader aviation industries, they're taking actions in terms of making capacity adjustments where possible to mitigate the impact from a cost perspective. And there are a lot of cost focus now to mitigate the impact, including from our point of view. As an organization, we've got our own focus to see how we can minimize costs for our members as well.
Victoria Moores (17:12): So what I'm hearing there is that you don't necessarily take a hands-on role in terms of collecting together the members to discuss crisis situations like this one or monitor them. It's much more on that technology, seamless travel, travel integration side rather than on the practical ops now.
Theo Panagiotoulias (17:30): I think that's right. Yeah. I mean, we leave that up to the airlines. They're the subject matter experts. They're the ones that have got the resources and the expertise far more than we ever could to be able to resolve that. And that's why, as I was sharing with you, they do that more on a bilateral, trilateral basis where there's commonalities with member carriers. But our role is very minimal in that regard.
Victoria Moores (17:55): My final question before we wrap up is looking forwards to the next 12 months, you mentioned that irregular operations project that you're working on. I already mentioned that question over what might happen with TAP in Portugal over the next 12 months. What do you see as being the biggest ticket items in summary for the next 12 months for
Theo Panagiotoulias (18:15): Star? I think from our point of view at the risk of sounding repetitive, it is those customer experience initiatives that we're focused on. I touched on obviously IROPS, but there's a bunch of different initiatives that we are working on within the airport environment that can make the experience more effortless. We are still rolling out our paid seats initiative, which gives people the ability to be able to choose a different seat or even upgrade on other members, if you like, on their journeys. So when I look into the future from our point of view, our core focus continues to be that. Now we've also got other customer experience initiatives that are not necessarily related to technology, but rather related to lounges. So we're about to open our new lounge in Guangzhou in China that'll be happening next month. We've also got plans to open up a new lounge in Incheon in Seoul.
(19:12): And so they're two other important customer experience products, if you like, as opposed to technology that people are very keen to experience in those markets. On top of that, we're continuously focusing on things like GoldTrack where we have priority security at over 140 locations globally, still exploring additional ones to add to that. So if you think about what our focus is for the remainder of the year, as I outline some of those examples, it's very much geared around customer experience. And as narrow as that may sound in some ways, it's actually quite broad. And it's also something that the reason why we're so passionate about it is because customers truly value this. This is a differentiator. If we can find ways to help our members make the life of the customer much more effortless, give them control, give them information to keep them better informed, I think you'll find that there is a disproportionate return on investment both from an efficiency perspective, but also quite frankly, from a customer satisfaction perspective.
(20:22): And we measure that really, really closely across our members.
Victoria Moores (20:25): Like you say, I mean, the idea of being able to transit across multiple airlines to travel in what is a complex environment and to have that all go smoothly and seamlessly, I think more and more airlines are focusing on that as being part of their core strategy is just to simply get the basics right and to create a smooth journey for the passenger. And it sounds so that's very much your focus.
Theo Panagiotoulias (20:49): Yeah. And look, it's been our focus. I've doubled down on that since I joined almost three years ago and we get great fulfillment and satisfaction when we see the results coming through. We measure this really clearly and carefully through NPS data and net promoter score data and the scores continuously go in a positive trend and it shows us that we're making an important difference and it resonates with the customers based on that feedback. And so from our point of view, as I outlined at the start, there are so many touchpoints that you can resolve. So it's not like we don't have work, we've got lots of work and it requires lots of investment. But what's really exciting and great about it is our members are fully engaged and fully supportive of this strategy, which is clear, focused, and has absolute purpose in what we're trying to achieve.
Victoria Moores (21:42): Theo, thank you so much for joining us today. And I'd also like to thank our producers, Guy Ferneyhough and Cory Hitt. And of course, a huge thank you to you, our listeners for following Window Seat. Make sure you don't miss us each week by subscribing to the Window Seat Podcast on Apple Podcasts, or however you listen. For now, this is Victoria Moores disembarking from Window Seat.
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