Low-cost airlines bet on data to drive profit

Europe's low-cost airlines once mocked the air miles programmes run by flag carriers as expensive relics of a bygone era. But after watching wide-eyed as customer databases were valued at billions of dollars, they are scrambling to catch up.

Europe's two largest low-cost carriers, Ryanair and easyJet have both swallowed their pride in the past year and launched customer loyalty schemes and both have announced significant investments in data analytics.

Their aim is to ape retailers like Amazon.com and Tesco in driving profits by leveraging data from vast online customer bases to create highly personalised offers and adapt services to customer preferences more quickly. "This has transformed retail and it's going to transform airlines," said Kenny Jacobs, a former Tesco executive spearheading Ryanair's digital drive as chief marketing officer.

He has overseen the hiring of 150 IT specialists since he was appointed two and a half years ago. "Airlines are not good at this. We're still crap compared to what retailers do."

easyJet chief executive Carolyn McCall, who last year appointed the company's first head of data science to oversee a team of 25 data analytics specialists, has described data as "incredibly important" for the airline.

A spokesman for easyJet described the potential benefits from digitisation and data analytics as "exponential".

Both airlines have promised a detailed breakdown of their digital data drives and the financial returns in the autumn.

John Walton, who writes for online aviation publication Runway Girl Network, said that from the customer's point of view, they and other airlines had some way to go.

"I see few visible signs of European airlines — or indeed other airlines — using the rich data they hold to drive bookings and revenues," he said, citing a lack of useful, targeted offers from any of the half a dozen airline loyalty schemes he held.

Ryanair and easyJet are taking different approaches, with Ryanair focusing squarely on selling optional extras while easyJet sees ticket pricing at the heart of its data drive.

easyJet was first to move, investing in artificial intelligence over the past few years to drive the algorithm that determines seat pricing in real time depending on demand.

Its computers track over a billion searches on the easyJet site annually to see what prices, destinations or travel times prompted them to book or leave the web site and adjust all three as soon as possible.