In today's Finshots we talk about the metaverse and airlines
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Now unless you spent the last year completely disconnected from the world, you’ll have a fair inkling of what the “metaverse” is. But if you don’t, think of it as a parallel reality that exists only virtually. You can interact with people, buy land, build houses, dress up, and even get married. So pretty much everything you do in the real world, you can do in the metaverse too.
And companies like Meta (remember Facebook?) are going all out to build a presence in the metaverse. In fact, JP Morgan expects the metaverse to have a deep impact on every business and they peg the market opportunity at some $1 trillion. Nobody wants to miss out on this.
And one industry, in particular, is looking at this latest digital revolution with a keen eye. We’re talking about airlines.
Emirates, the state carrier of Dubai, is the latest entrant and plans to invest $10 million to build its signature brand experience in the Metaverse. And it’s not just them. All the biggies like Singapore Airlines, Lufthansa, Qatar Airways and Qantas too are trying to get a piece of the metaverse.
Now before we get into how exactly airlines are playing the metaverse game, we probably need to understand why the metaverse is so important for the aviation industry. Right?
Well, like most things these days, the answer is the coronavirus. The global pandemic decimated the industry and in 2020 alone, McKinsey estimates that aviation suffered losses to the tune of $168 billion! Many of the carriers needed an infusion of funds or a bailout just to survive. But it wasn’t just about dealing with the current predicament. Airlines were facing an existential crisis since more people turned to virtual meetings. They weren’t flying as much anymore and the aviation industry needed to reinvent itself.
And that’s where the metaverse could come in. How’s that, you ask?
Well, let’s take the frequent flyer programme for instance. People who fly a lot (think business travellers) tend to fly with the same airline for one simple reason — “points”! Because when you fly, airlines reward you with “loyalty points” for being a loyal customer. And when you accumulate enough points, you can redeem them to get free flights and cabin upgrades. So, it becomes quite an attractive proposition to stick to the same airline company for all your travel needs.
But here’s the thing — this business of frequent flyer miles is actually quite lucrative for the aviation industry. How so? Well, in a lot of cases airlines sell these points to partner businesses. Say a credit card company or a bank. These financial institutions can then offer consumers the opportunity to accumulate those very same points by using their credit cards more often. Now you’ll look at this and go — “Oh great, that’s a nice way to accumulate airline points which I could then use for those free flights and cabin upgrades.” And in the process, you become a valuable customer for the credit card company.
Everybody benefits. But ultimately the loyalty program is a cash cow for the airlines' company. Not only do they make money by getting you to stick with the airline for the long haul, but they can also sell the points to credit card companies who always want to offer their customers more benefits.
Take American Airlines for instance. They used their frequent flyer program as collateral to borrow money from the US government. And while the airline is valued at $12 billion, its passenger loyalty program is estimated to be worth a whopping $24 billion.
But in a post-Covid world, if people aren’t flying as much, this important source of revenue could also dry up.
And that’s where the metaverse could help turn things around. Imagine that you’re someone who loves “airports” and the “flying” experience. You love the lounge access. You love shopping at the airport. You love dining out at the airport too. You get the drift. But you’re not travelling as much on business and you miss this experience. Now, what if you could still accumulate frequent flyer miles to experience all this in the digital world? You could network with fellow travellers in the lounge. You could shop for e-books in the airport mall.
It’s the entire experience, only digitally.
For example, Qatar Airways recently ventured into Metaverse. The airline launched QVerse- a virtual reality program that allows passengers to look inside the aircraft from the comfort of their homes. The experience starts with a virtual tour of the premium check-in area and ends with a detailed display of the cabin. Also, the airline launched the first Meta-human cabin crew to engage customers and to provide virtual tours of the business and the economy class.
Now once again, you could argue if this is actually useful and whether customers will burn loyalty points to experience some digital universe. But they’re giving it a shot.
Also, some of them are turning to NFTs — those unique tokens that represent you own something in the Metaverse.
Now airBaltic recently announced plans to launch an NFT series called “Planies”. With just 10,000 tokens available, it’ll be linked to the Club Loyalty program with buyers getting access to exclusive points and benefits. Even Emirates Airlines has plans to launch its NFT to boost its frequent flyer program.
Once again, this isn’t something revolutionary. The benefits were already there. It’s just the whole packaging. Some airlines are even exploring special edition NFTs. It could put you on an exclusive flight — a first voyage, retiring aircraft, exotic destinations, or a specially themed flight.
The point is — The metaverse is opening up a whole new digital economy. But will it entice travellers enough? You tell us.
Gimmick or not?