Airlines’ first job is to get revenue back wherever they can get it
Interview with Captain Mike Premo, CEO and President of ARC
Qiniso Dhlamini, CEO, Eswatini Air
As the CEO and President of ARC for over a decade, Mike Premo was responsible for many sweeping changes in the way ARC functioned and expanded. When he was at the helm, the Corporation’s revenues grew 44 per cent and added many new products to their portfolio. A leading trade publication named him among the ‘Most Influential People’ in the industry in 1995 and again in 2009. Though he retired a year ago, Premo continues to be active in the sector working as a consultant.
In this exclusive interview Premo talks about the relevance of ARC, the aviation industry in general, the revival underway as well as his own relatively peaceful days – only relatively.
You recently retired from ARC, but you are still quite active in the industry. Do you miss all the hectic action as the head of ARC?
I certainly don’t miss all the ‘work’ things – commuting, meetings, wearing my bowties. Of course, I miss the people – my team, the terrific and talented employees and working to bring airlines and agencies together to solve important problems. Lots of wonderful people on both sides of that equation. Retirement is a gift – being truly able to spend time with my wife and family without checking email is heavenly!
'There will be newer types of air travel'
You recently retired from ARC, but you are still quite active in the industry. Do you miss all the hectic action as the head of ARC?
I certainly don’t miss all the ‘work’ things – commuting, meetings, wearing my bowties. Of course, I miss the people – my team, the terrific and talented employees and working to bring airlines and agencies together to solve important problems. Lots of wonderful people on both sides of that equation. Retirement is a gift – being truly able to spend time with my wife and family without checking email is heavenly!
During your stint at the helm, ARC underwent a momentous transition from being a service organization to being a leader in enabling air travel retail. Looking back, what are your thoughts? Would you have done anything differently?
You’re very kind! When I joined ARC in 2006, we were only at the earliest stages of developing a meaningful data business which was my initial focus. But in 2008, when the oil crisis at that time (guess we’re having another one now!) opened the airlines’ eyes to the potential of ancillary revenue, we saw that as a real opportunity to grow both our data and settlement business. As such, we worked hard to enable agencies to sell more of those products, but I have to admit with pretty limited success. After I became CEO in 2011, it also became clear that customers, by which I mean passengers, wanted a more seamless type of buying and servicing experience and our omnichannel retailing work led to significant investments there. We’ll have to see if those will bear fruit or not – the pandemic pushed a lot of initiatives there back. As to doing things differently, there are always a lot of smaller things you wish you would have done or not done. But as to the overall strategic direction to help airlines and agencies do more business together more efficiently, I think we got that one right.
During the pandemic, what kinds of support do you think the airline industry needed most? What support was provided by ARC to your travel partners – both airlines and travel agents?
Good question! The big thing in the first six to nine months of the pandemic was refunds. ARC processes credit-card refunds and whether or not airlines enabled that was between them and the credit card organizations. We had a modest role there. But on the cash form of payment side, we were critical. I still have nightmares when I think of those early weeks when settlement went upside-down. That is to say, we were processing more refunds than sales. I was anxious that we would not have the funds to honor cash refunds and what that might mean for agents, their passengers and, of course, for ARC.
We were always there to make that happen. The unsung heroes were our settlement team who were in constant contact with airlines, letting them know how much cash we needed from them every week and our technology team who tweaked the system to give more flexibility in the event a carrier failed to make good. We had some challenges with a handful of mainly smaller airlines, but we obtained the vast majority and made good on billions of dollars of cash refunds. Not a scenario I ever imagined.
The aviation industry has undergone a lot of churning in the recent past, but a revival is round the corner. How long do you think this is going to take?
I don’t believe in betting against human nature. Those who say people will lose their curiosity about the world, stop needing to see family or ‘get away from it all’ or that businesses will never travel to the extent they used to are making that bet against human nature. Clearly some travel will shift especially in business travel – but I think more remote workers will generate much more in terms of new types of travel. Even with a remote work-from-home team, leaders are going to want to bring folks together two, three or four times a year for training, team building and such. That’s all new because formerly teams didn’t need to travel to do those things – you all worked pretty much under the same roof. Obviously, ‘black swan’ events like those in Ukraine are another dampener in the recovery especially for international travel, but don’t underestimate the power and desirability of travel. If you doubt me, try putting airline seats on a terrific discount and see what happens! As to how long this will take, it’s just going to depend on where you’re situated and who your key customers are. If you’re a lower cost, domestically focused airline, you’ve probably already recovered. If you’re an international airline from a developing nation, you’re going to need to be patient and get the best help you can to make every sales opportunity count.
I think, generally speaking, that trends that were happening pre-pandemic will continue post-pandemic. In the near term, things like omnichannel (making processes seamless for passengers whether they booked via the airline or via an agency) will be slowed down. Airlines’ first job is to get revenue back wherever they can get it – they have a lot of financial and balance sheet recovery work to do to get anywhere near as healthy as they were pre-pandemic. But that doesn’t mean nothing will happen. Even in the midst of the pandemic, some airlines were funding better technology solutions to support enabling corporate direct booking, for example. I expect some early adopters on the corporate side to experiment with that – just as some were starting to before COVID. To give you three continuing trends I think will go on:
1. Emphasis on health, wellness, and safety. These were formerly ‘table stakes’ in terms of aircraft safety, but passengers have seen a pandemic-inspired difference in the cabin, gate and airport measures taken and will expect high standards for the future.
2. Competing via mobile apps. Airlines have invested heavily in their mobile presence and a great app drives big gains in satisfaction and improves direct booking share – even in corporate travel.
3. Ancillary revenue. This became hugely important after the 2008 oil crisis and hasn’t really slowed since. Only some change fees have ever really been rolled back. And the current oil crisis may push airlines to even more creative ideas here.
Well-deserved awards indeed! We always valued the way in which the AirlinePros team helped airlines that were new to ARC understand how to get the most from the ARC relationship itself (data, settlement services) but also from the US agency community. In the near term, ‘cash is king’ and understanding where airlines can go to work with agents who can sell their product is simply vital. Even for existing client airlines, taking a fresh look is going to be essential – the market has changed a lot since Covid and will change more with the events of recent weeks. Bringing your understanding of how to best exploit those opportunities and market shifts has been a core competency of AirlinePros and one that’s perhaps more valuable than ever!
AirlinePros and ARC
AirlinePros was contracted by Airlines Reporting Corporation in 2006 to do Joint Promotions to global airlines for ARC’s Area Settlement Plan Products. AirlinePros in conjunction with global partners was instrumental in bringing in excess of 25% of the ARC participating carriers, that is 60+ airlines from around the world. For its efforts, AirlinePros received the ‘Partnership Excellence Award’ twice by ARC.
AirlinePros is a global network providing Representation, Distribution and Commercial Solutions for the aviation and tourism industry. Our ethos is to partner with professionals who share our principles to provide unparalleled value for our clients. The success of our customized ARC Coordination Services enabled us to expand our product offerings to IATA BSPs, and Airlines for GSA and Advisory Services. At AirlinePros we love what we do, and we do what we love!
