Customer complaints can be a wonderful opportunity for existing businesses to establish a loyal customer base, but it is even more rewarding when one builds a business based on consumer grievances following years of apathy.
Husband and wife duo Pallavi and Ankur Jain did just that. Given that delays and cancellation of flights are a common occurrence in India and airlines have expressed their unwillingness to compensate the customer despite the rules requiring them to do so, the Jains decided to set up a technology platform that would help wary fliers claim compensations without hassle.
Earlier this year, the Jains founded Instalocate Inc, an artificial intelligence-powered travel assistant, which offers end-to-end services to get compensation from airlines in case of poor services. The company is registered in Palo Alto, California, but operates out of Noida.
What got them going
According to the Jains, most passengers are not aware that the Director General of Civil Aviation has laid down laws to claim compensation for delays, cancellations, damage to baggage and denied boarding. “Most people don’t know about it. We met a person flying a jet, but even he wasn’t aware of it, and this goes for a lot of other airline crew as well,†said Pallavi.
Those in the know, too, preferred to stay away from the extremely time-consuming and complex process. “It is a web of rules and regulations that airlines have created. They obviously do not want to give compensation, and do not make it easy either,†she added.
And, this is where the duo, who have dealt with the nitty-gritty of the compensation process, spotted a business opportunity. “We know the workflow well and can quicken the process. For an individual, they load you with so many web forms that you give up. Many people do it themselves, but only 1% do it on their own even after so much awareness,†said Pallavi.
The opportunity to scale the business up is also huge, feels Ankur.
Consider this: According to the DGCA, one in 100 fliers in 2015 had experienced delays or cancellations involving domestic carriers. What’s more, between May and July 2017, around 5,300 passengers were denied boarding, 46,660 fliers were affected by cancellations, and 275,750 suffered due to flight delays.
Given that Indian aviation laws allow a passenger to get a full refund of the fare or a maximum of Rs 10,000 for a cancelled flight, the average compensation for cancelled flights during the May-July period should have been at Rs 6,000. However, during this time, the average compensation by airlines stands at a paltry Rs 302 per passenger.
According to industry veterans, nearly 95% of all cases of cancelled flights is unclaimed every year. A DGCA report further adds that nearly $25 million is unclaimed each year for international flights catering to the Indian sector.
This is so because most passengers are unable to determine how much they are eligible for and are not aware of the laws governing the sector, feels Ankur. As a result, airlines can dupe the customer and reject their claims easily. “Only 2% of people eligible for compensation go ahead with the claiming process,†he said.
Business model
But how does Instalocate help people who seek their services? “We have developed a system that tracks a flight in real time once a customer shares his or her flight number, and can also predict if there are any issues that one may face,†he added.
The company tracks millions of flights to predict delays efficiently. “In case of a delay, we inform the customer about what he or she is eligible for and the person can file for it by signing a basic document,†said Ankur.
The compensation depends on a variety of factors, such as the country of origin of the airline, the starting point and the destination. Instalocate has formulated algorithms that can help check all parameters and calculate the delay, laws that are applicable in each jurisdiction and the appropriate compensation.
“One of our clients had booked an Atlanta-Amsterdam-Delhi flight, which was cancelled at the last minute. In this case the flight was booked by Delta and flown by KLM Airlines. So, there were three carriers and three countries involved, which made it extremely complicated. But we got him a compensation of 600 euros, besides $100 of vouchers from Delta,†claimed Pallavi.
In the past four months of its operations, Instalocate has filed for $120,000 worth of compensation. Currently, it takes between two to three months for the compensation money to reach the applicant’s bank account.
The company does not charge upfront for its services, but takes a small cut from the compensation once it is received by the user. It usually charges 25% of the payment made by the airlines as its fees. “Globally, $8-10 billion in compensation is unclaimed every year. So, we are only concentrating on this stream of revenue for now,†she added.
Instalocate is also talking to various online travel agencies to offer its services. “OTAs do not want to get into the hassle of facing angry customers because their operations are already limited. Though there is travel insurance, which is also a third-party service, compensations are in addition to that,†Pallavi explained.
Going forward, the company is also looking to automate the application process, and hopes that once the system is in place, it can complete the paperwork within 24 hours of getting a request.
Instalocate also runs its Facebook Messenger bot, which is currently used by 125,000 people. It lets users track flight status, check weather and book cabs, besides helping travellers manage key aspects of their journey. For instance, if Instalocate expects flight delays, it reschedules the cab services automatically.
Going forward, the founders want to create an AI-powered travel assistant, which makes the whole journey, including cab services to food preferences, seamless.