Venture Air

From an economics perspective, the airline industry is unique as it’s one of the clearest examples of an oligopoly. Meaning, it’s one stop short of a monopoly due to incredibly high barriers to entry and moderate competition. High overhead (costly planes), operating expenses, and competition make competition via price difficult. So, airlines compete via soft differentiation: experience, brand, and incentives. Think about how marketing campaigns, branded credit cards, and frequent flier programs (I love you Delta Sky Pesos) all compete for your travel dollars.

While the travel industry is a great topic to explore on its own, I want to examine the recent phenomenon of Corporate Venture Capital amongst airlines. JetBlue and, to a certain extent, American Airlines and Delta have already entered the corporate venture game. JetBlue Technology Ventures is based in Silicon Valley and has made 19 investments (a la 2020) according to CrunchBase. There’s a symbiotic relationship to be had and it’s fun to explore.

Why should startups see airlines as a venture partner?

The obvious: either free or discounted travel. T&E is the bane of any organization no matter their size. However, statistically face-to-face meetings yield higher success rates. Therefore, enabling startups to affordably create more such encounters is a tall value proposition to enable Sales teams. Cheaper travel not only extends the reach of sales but talent pools. Distributed teams are better stitched together when travel costs are a lower barrier. This in tunr allows teams to incorporate higher quality talent from afar. All said, this is a tall value proposition for cash conscious ventures.

The most important offering airline’s have is their customer channel. There are nearly 24K commercial flights comprising 2.2M passengers daily in the United States alone. Passengers are strapped in, generally without WiFi, for hours on end just twirling thumbs. This is a great opportunity to market potential users through mobile or in-seat entertainment systems. Furthermore, flights are rarely ever homogenous; offering a good split of consumers from all walks of life. Certain routes could be targeted pending their destination, for example: gaming products could target flights involving Las Vegas or flights to Europe/Asia for travel offerings. First class passengers could be targeted as well for higher end consumer offerings.

The in-seat entertainment systems themselves are basically Point of Sale (POS) systems presenting another opportunity. Boutique retailers such as Foxtrot or Huckberry come to mind who could disrupt the still paper-based Sky Mall concept. Throw in a mile for every dollar spent while wheels-up to further incentivize purchases and you’ll see oodles more pairs of Gucci loafers sold!

Why airlines should be involved in the venture game?

Again it all comes down to experience, brand, and incentives.

Providing access to the latest and greatest games, content, and applications makes for a greater experience and incentive to choose a different carrier for the same destination. Employing said tactics is key to unlocking the ever-so-elusive millennial market, whom are experience driven. Incorporating the latest gaming apps, VR offerings, or any other tech novelty in turn increases the brand of said airlines associating them as more “tech”. One example of airlines already moving in this direction is Delta Air Lines whom has publicly stated they are working towards becoming a tech company with an airline platform.

What kind of technologies might airlines invest in?

Regarding the in-flight experience: gaming, virtual reality, and interior design (feng shui, anyone?) are at the top of the list. Anything improving the process of flying, from check-in to baggage claim are of significant interest as they improve the customer’s experience. These techs range the gambit from facial recognition software, blockchain, and AI-messaging systems to back office IT systems. Better equipping and enabling front-line workers (i.e. flight attendants, baggage handlers) with AR/VR, and exoskeletons could improve efficiencies. Finally, in the age of self-driving cars airlines would be interested in 100% autopilot technology which retrofits their existing fleet.