CX at the Heart of Alaska Air’s $2.6B Acquisition of Virgin America
POSTED : April 5, 2016
BY : PK

Two titans in airline customer experience (CX) are becoming one. Alaska Air Group’s decision to acquire Virgin America for over $2 billion in cash ($4B aggregate) is generating huge buzz in the industry and beyond.

Virgin took the lead in CX right from its inception, transforming the dull experiences that prevailed in the airline industry for decades. From the moment a passenger enters the cabin, cool modern lighting gives the impression of entering a hip night club. Every seat has a touch-screen placed in the headrest, allowing guests to control their experience. Virgin was the first airline in the US to offer wifi on all flights—which has since become a common service. They even took the idea one step further, allowing passengers to shop or message friends sitting in another seat.

Virgin was a perfect example of building an experience, from beginning to end, around the customer, fostering a strong customer loyalty to the brand. Even as a small airline competing with 4 major airlines who are controlling 85% of the US market—Virgin built deep customer loyalty by transforming CX.

Often when companies look to improve their CX, they immediately focus on customer pain points. While Virgin did address pain points, it also attacked points of indifference—softspots in the customer’s experience where people tend to disengage out of boredom, dullness or apathy. These are the areas that many brands ignore because their customers don’t tend to mention them directly.  A perfect example of this is Virgin’s safety video. The safety instructions at the beginning of a trip are typically dull, but they would rarely be top of mind or seen as a major pain point for customers. Virgin sees touchpoints like these as opportunities to create memorable customer moments, without having to invest a great deal.  Virgin’s safety video created a stir way beyond the cabin guests—generating over 11 million YouTube hits at the time of this article.

Alaska is also seen as a major force in CX but has always taken a less flashy or theatrical approach than Virgin. The Seattle-based carrier has become one of the most reliable airlines in the US, focusing on reduction in delayed flights, near-elimination of wait times for baggage, and speedy real-time follow-ups from customer service. Alaska is also a leader in using social media to get immediate feedback from customers—setting things right quicker than other airlines and keeping customers coming back.

There are many reasons for the take-over, from gaining important routes to accessing airport infrastructure.  What remains to be seen is how these two cultures and brands will mesh. At the heart of the transaction lies a common passion for delivering an outstanding customer experience, something that doesn’t appear to be changing anytime soon.

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