Air Rage originally published April, 2003
No wonder airlines are in trouble. As I write this, Southwest Airlines is offering another big sale - fly round trip anywhere in the Continental U.S. for under $200. That's a ridiculously low price. In fact, it is less than the cost of a coast-to-coast round trip ticket was almost forty years ago.
Today, airlines seem to spend most of their time complaining about the fact that they're losing money. But none of them seems to be doing anything about it. The airline deregulation of the 1980s gave them the freedom to get creative in the pricing and packaging of services offered. Instead, like a bunch of lemmings, all of them began cutting prices. This escalated into a full-scale price war. Then, as their profit margins shrank, airlines responded by cutting services - cramming more seats into each airliner and cutting passenger legroom, cutting back on meals and other services, putting fewer flight attendants on planes, etc.
UAL, the parent company of United, reorganized, offering employees a 'piece of the action' through an employee stock program. It seems to have backfired on them - producing nothing but more frequent strikes and surly flight attendants. All to the detriment of their customers - the paying passengers. Then United went bankrupt. Was anyone surprised?
Forty years ago, everyone I knew loved to fly. It was a fun adventure. Drinks were generous, meals were good and the flight attendants helped make everyone happy. (One cross-country flight actually had a piano on board with a keyboardist-in-residence.)
Today, everyone I know hates to fly. It's a stripped-down, unpleasant experience.
A recent lengthy flight on United Airlines featured a First Class dinner offering of a cold turkey sandwich served by a grouchy, uncaring flight attendant. Kind of makes the word 'attendant' an oxymoron, doesn't it? (Based on the reception I received when I asked for a refill of my wine glass, you'd think I asked her to crawl out on the wing and bring back a carafe of hydraulic fluid. And a handful of CherryMax rivets.) It was the final straw, topping off a series of ghastly experiences with this once-great carrier. We no longer fly The Friendly (sic) Skies.
This is no way to run a business. But, the mistakes made by the airlines can be offered as examples of What Not To Do in your own business:
1. Don't get in a price war with competitors. No one wins. If just a few of the airlines had responded to the first round of price-cutting by increasing their services and holding or increasing prices, the industry would be in better shape today. The hotel/motel industry offers a wide range of prices (and amenities) to appeal to distinct market segments - from the $49.99 per night Red Roof Inn/Motel Six segment to the $499.99 per night Four Seasons.
2. If declining margins are a fact of life in your industry, find a more profitable segment or get out. Once again, the hotel/motel and rental car business provide good examples. In major U.S. cities, there are rental car firms that only rent luxury cars. At luxury prices. These firms have given up on playing the apparently-unprofitable $19.95-a-day game. They've exited the low-end of the market and are concentrating on upper-end business, which, presumably, is more profitable.
3. If you cut your services to improve margins, your service-oriented customers will leave and you'll be left with a bunch of customers who only buy on price. And these are the worst kind of customers to have - a bunch of cheapskates with no sense of loyalty. They'll leave the moment a competitor underprices you by a penny. And the idea of airlines charging $25 extra for a paper ticket (which every other business calls a 'receipt') seems to me to be the ultimate outrage from an industry which has lost its way.
Emphasizing service over price remains the best way to differentiate yourself from your competitors while preserving your profit margins.
Remember the old adage: Cut your prices; cut your service; (then, you might as well) cut your throat.
Update (1/6/10): United Airlines ranked last along with US Air in the 2009 JD Power survey among traditional carriers as it posted poor results for "reservation experience", "check-in experience" and "costs and fees." "United also ranked last in a recent University of Michigan Ross School of Business consumer satisfaction survey. Research that 24/7 Wall St. examined revealed that employee work satisfaction was very low."
I guess United has yet to learn its lesson.
Come Fly With Me: In 2009, airlines experienced the steepest drop in international passenger traffic in the history of modern aviation. According to the International Air transport Association, traffic declined 3.5% in 2009, with the average plane flying less than 76% full.
Since the dawn of commercial flight, domestic paying passenger miles have increased every year with occasional light dips during recessions. In recent years, growth has been stagnant and now it's been dropping. Obviously, the harsh recession is at play but I wonder how much of the drop is due to general suckiness of air travel - stripped down airline services combined with TSA unpleasantness.
In August 2007, 55,681,501 domestic paying passenger miles were flown. By August 2010, that figure had declined to 51,435,574 miles - a drop of almost 8%.
I know we've been flying less. In the prior five years ending in 2005, we flew 50% more air miles than in the most recent half-decade.
We used to travel to Europe every four years or so. Our last overseas trip was to Italy in 2002. We don't plan to visit Europe ever again. But we'll keep our passports updated as we enjoy driving trips to Western Canada.
Much of our lessened travel is due to the disagreeableness of air travel today. When we began flying in 1970, air travel was a delightful experience, which has now disappeared along with evening newspapers, automobile vent windows and polio.
I am expecting our commercial air travel to decline even more substantially in years to come. We now do driving getaways instead. (posted 12-9-10, permalink)
copyright 2003-2010 - Joseph M. Sherlock - All applicable rights reserved
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