Continental’s new CEO on ancillary services, pizza, lactose intolerance

There once was a day when consumers could visit an airline website and simply purchase a flight ticket.

In North America, Air Canada kicked off the end of that simple process several years ago when the airline introduced branded fares — Tango, Tango Plus, Latitude, and later Executive First Lowest and Executive First Flexible — all with their own attributes.

Now, along comes the new Continental Airlines chairman and CEO, Jeff Smisek, who took over these posts Jan. 1, and he apparently has a conceptual vision for Continental’s future which parallels what Air Canada and other airlines have done.  But to Smisek, it’s all about pizza and lactose intolerance.

This is what Smisek told analysts Jan. 21 during a conference call about Continental’s fourth quarter financial results:

“The way I would phrase it, we have historically served sort of a pizza with everything on it, and now what we’re going do is let customers not only build their own pizza, but determine the size of their slice or whether they want the whole part, and some customers want and show reason and other don’t and cannily for the lactose intolerant, if they don’t want cheese they don’t have pay for cheese either. So, what were going to elect people do is choose the level and type of services and attribute they have in travel and pay for those things that they choose and not pay for those things they don’t choose and we think ultimately that is better for the customer and better for Continental.”

Hold the sauce, but that sounds a lot to me like branded fares and a whole lot of unbundling.

Taking a look at the big picture, Smisek says the airline industry is going through a prolonged period of structural change.

Among the changes, he says, the airline industry is going beyond unbundling products, but is “discover[ing] its merchandising power, and the ability to sell goods and services and generate ancillary revenue that has a very significant margin.”

In Smisek’s view, the industry is navigating a second structural change where customers are demanding more “self-service” in the purchase process, at the airport and during the flight.

He says technology — in the form of self-service — will lead to better and more consistent customer service and “significant cost-savings in the industry.”

Perhaps one day on a Continental flight — after paying their checked bag fees, of course — travelers will be able to place self-service orders from their aisle seats for pizza — with extra mushrooms, please.