Airlines hate to be made to institute any changes in how they treat customers. They have a loathing for being required to do something by rule or law.
Mind you, they have absolutely no problem with change. Any time a change can bring about greater revenue or reduce liability, they will happily institute the change asap. Just look into how much airlines have changed their contract of carriage for what their liability is in lost or damaged luggage.
If I consider just how much the airlines shouted, stamped their feet and groaned over the 3 Hour Tarmac Rule, I have to chuckle a bit. Airlines and their CEOs in particular made viscious threats about how much this would raise costs and impact customers negatively. Even my fellow bloggers jumped on that bandwagon and decried the rules. Some people insisted that the customer really wanted to get to their destination at all costs even if it meant staying on the ground in an airplane for 9 hours.
And then the rule was instituted and these delays have largely just gone away. There really has been very little muss or fuss. After more than 2 years of this rule, we see no evidence that the customers costs are raised or that the customer is negatively impacted in a worse way.
To the contrary, airlines are planning and executing these plans to avoid storm induced problems and delays in a great way. Flights are cancelled earlier resulting in passengers being able to properly reschedule themselves. Airlines are positioning their aircraft better to recover from delays as well. Everything really got better. Few airlines have actually been fined and certainly the industry hasn’t raised airfares because fines raised costs. (Airfares have gone up, just not because of these fines.)
In fact, the fines are so rare that we’re surprised to hear about them when they do happen. \
There remains many things that are bad or negative for the industry but the actual service experience for most customers today is vastly improved over what it was just a few years ago. And largely because of the government getting involved and asking for change that resulted in a more humane, more appropriate approach on the part of the airlines.
It is rare for me to discover that I’m unaware of a development in the airline industry here in the US but . . . I am. It’s bag tracking and it ain’t sexy but it is very interesting.
The Daily Traveler via Brett Snyder Aof the Cranky Flier has this story about US Airways quietly rolling out its own real time tracking system. Now, each time a bag enters or departs a major entity (primarily an aircraft), it gets scanned and reported into the system. Delta apparently has this too!
I am thrilled about this for so many reasons. It’s not perfection in tracking as your bag still could get lost between an airplane and a baggage claim area, for instance.
But now you can see where your bag(s) are and keep things honest about what is going on with them. It has been my experience that airline employees are particularly untruthful about the location of a lost bag much of the time. Lost bags are hot button problems for passengers and baggage agents don’t want those problems.
I also think this will actually help to tighten airline responsiveness to lost baggage problems. It’s a good thing and a system that absolutely should be carried over into American Airlines asap.
I recognize that Southwest Airlines has to evolve just like any other airline in this business. I also believe that its core principles don’t have to change either. It’s not an airline that got where it is by being a Me Too! enterprise.
So what’s up with all the small but cumulatively damaging mis-steps lately? I’m talking about new CFO Tammy Romo channeling an AA executive on fees and now Southwest’s new television commercial.
[youtube http://www.youtube.com/watch?v=IKVxuBeEQTc&hl=en_US&version=3&rel=0]
What the hell? Someone found an old American Airlines commercial, filed the serial numbers off, sprayed some new paint on aircraft and re-used the same actors to create an incredibly flat commercial for a great airline.
This is not evolution and it isn’t going to attract the business travelers either. The business travelers know what Southwest looks like. THEY TRAVEL THE AIRLINE REGULARLY.
So why not espouse what the airline really is and be proud of it? My own father, a man of probably 6 or 7 million miles flown in his lifetime, prefers Southwest Airlines out of his home airport. He can afford to fly who he wants, when he wants and he’s got enough AA and UA miles to buy a 787. And he buys Southwest.
That commercial was made by someone who not only doesn’t get Southwest Airlines but who is also afraid to embrace the People Culture that airline has. Want to see what Southwest really looks like?
Airlines are pushing hard to use XML for defining and exchanging fare data instead of the current standard which is more than 4 decades old. One company, Farelogix, is showing just how smart it can be to use this because it allows airlines to define an entire fare by more than just a base price.
Airlines will be able to use this data presentation to present a more full picture of what is available and the traditional GDS (Global Distribution System) companies do not like this one bit. They want their death clutch on the data in the form of the industry proprietary standard and they want it fuzzed up.
Truth be told, I took airlines to task for trying to eliminate GDS companies from the equation a couple of years ago. Now I would like to take GDS companies to task for not being a part of the solution.
So much of the airline industry relies upon what is, at best, very much legacy IT systems. Even the most modern reservations systems aren’t so much modern as they are just not as old as others.
A good deal of my day job involves understanding the various propositions involved in IT systems for both transmitting as well as processing data. I’m on the airlines’ side.
XML is the right choice and, frankly, there really shouldn’t be debate on this question. It’s smart, it’s flexible, it’s an open standard and it’s used by every modern IT system.
Yes, GDS companies are going to have to re-engineer their entire systems. Tough. This is the kind of thing that should have been done 10 years ago and was done by many other industries.
Yes, it’s going to present more opportunities to present data in more ways tailored to a customer. Yes, it could be tailored in ways that might seem threatening. My response is that the more we encourage information and options in this system on the part of both airlines as well as GDS companies, the better things will get for a customer. Seriously.
Information is power. Why do you think a better, more open and more complete standard for data is so threatening to incumbent GDS companies?
XML defined data open up possibilities for more efficient IT systems using the latest in protocols such as DDS (Dynamic Data Distribution) to be built. This means IT systems get less costly for airlines, more robust for consumers and if GDS companies want to remain in the game, they can figure out how to add value just like the rest of us in the real world.
This really is what we want as consumers and we would be well advised to break this GDS hold on this data.
Several days ago, I wrote about new Southwest Airlines CFO Tammy Romo making comments about perhaps putting restrictions and/or fees onto the Wanna Get Away fares of Southwest. Today, I was told that she also was asked at the JP Morgan Conference if Bags Fly Free was an essential part of Southwest’s brand and her answer was “no”.
I disagree vehemently. Not only has it been an acknowledged huge revenue driver for Southwest Airlines, it is the component that keeps Southwest Airlines on the right side of “customer friendly” as a brand.
Get rid of this feature and you have just lost the ability to distinguish between Southwest and the other members of the Big 4 going forward. And I think CEO Gary Kelly knows that.
So is CFO Tammy Romo going rogue in the attempts to drive policy and make a name for herself? I might expect that of someone who was new(ish) to the company but Romo has 20 years with Southwest.
So is someone sending a trial balloon up to see how both customers and analysts react to the idea? This isn’t really SWA’s style but I suppose anything is possible.
Or has crazy broken out at Southwest Airlines and we’re about to witness the demise of greatness?
William Swelbar has a white paper posted on his blog about small community air service and the merger of American Airlines and US Airways that has inspired me to some thoughts. The essential point (of interest to me) among his many well thought out points is this: It isn’t the LCC carriers that provide this service. It’s the network carriers that do so and we have lately denied that air service through slot divestitures to LCC carriers.
On the one hand, he’s entirely right. On the other hand, I question who “deserves” air carrier service in today’s world. My own view of the history behind this is that there are cities where such service is, in my opinion, not justified today.
Let’s not forget that small communities were originally served with some regularity in the past due to a few primary circumstances which are very different today.
First, fuel costs are monumentally more than they were even 20 years ago. Low fuel costs allowed for a competitive fare to these communities via available aircraft that just doesn’t exist today. Airlines are constrained by the fact that sub-50 seat jets are un-economical to use in just about any circumstance today and there are no desirable replacement aircraft in that category on the way.
Second, those many of those communities needed that air service because overland transport to major cities was very poor and even non-existent at that time. Today, we have not only a full major interstate highway system but every state in the continental US has an excellent secondary highway system. It’s difficult to find a place in the continental US today that is truly remote. In most cases, people are no more than 1 to 2 hours away from air service at the worst.
Third, we don’t encourage this service the right way. We do subsidize it under certain circumstances and do so for routes that, in my opinion, defy imagination as to why their subsidized. At least quite frequently. What we don’t do is subsidize industry to come up with a cost effective, profit earning solution to providing the service. Even airlines receiving subsidies today look at those routes and realize that even if they are earning a modest profit, greater profits can be earned elsewhere and they go to earn those.
I think we need a program that encourages an airplane manufacturer to come up with what I would call the Essential Air Service Airplane. This is an aircraft that require no greater than 500nm range fully loaded and no more than 30 seats and should travel at speeds comparable to ATR and Q400 aircraft. They should be ruggedly reliable for dispatch so that they do not strand themselves at outstations and they should be capable of rough weather service.
Survey the network airlines and ask them what such an aircraft looks like to them in definition. Create a government RFP for such an aircraft and contract the network carriers into committing to a minimum number of purchases and let the markets go to work. Frankly, I would like to see Bombardier and/or Embraer work this problem themselves because I think such an airliner has potential in places such as Africa, India and parts of Asia and Australia. Small and efficient can be very profitable if it is reliable. Look at Azul in Brazil and you’ll see just how that works out.
In these conversations, I pick on cities here in Texas like Waco quite often. Waco does not justify high frequency flights to DFW airport (and Houston Intercontinental) with 50 seat jets. It’s far too close to Dallas for that. But if you had a small essential service airliner defined above, that airliner could actually serve the frequencies that exist today as fast or, possibly, faster than the 50 seat jet and potentially with greater reliability.
Don’t build this aircraft with too much range. Keep it simple and constrained to true regional routes. It can’t be a mistress to the short haul, small community markets and also mistress to the long and thin markets.
Make it large enough to inspire confidence and I think we know enough about building such aircraft today that we can make it possible to walk an aisle in this aircraft without feeling like you’re crawling into a cave. Make sure it can serve these routes from hot and high locations such as Denver, Salt Lake City and Phoenix. That means some slats and flaps most likely but do not make this aircraft a STOL aircraft. The airports it would serve today are all adequate for a small aircraft configured to meet these needs with efficient wings. STOL aircraft sound great until you realize they are rarely needed but they always have the penalty of being built with draft that can’t be avoided.
If I’m Embraer or Bombardier, I would look to build this aircraft in Wichita, Kansas. There is enough expertise there, enough facilities and I’ll bet that Kansas would be looking to make a heck of a deal on taxes these days. Use modern avionics but design it to be simple and easy to qualify on. Make it the airliner that future jet pilots start on. Make it forgiving which will help some in making it rugged and reliable. Use as many Commercial Off The Shelf components as possible and go to Garmin to build your flight deck instead of going with a pricey system from someone else.
Make it so that a network airline and/or regional airline can purchase this aircraft and operate it profitably with oil at $130 / barrel right from the start. Offer loans at low interest rates to ensure capital costs are low enough to be attractive to these same airlines. Get airports to offer low cost fees for using such airliners to their airports. Convince those same airports that these airliners are their future and not their shame. Keep the jet ego out of this conversation.
This airliner can be built and it can be profitable for the manufacturer and the operator. It needs a sponsor and while I readily admit that it might not offer as much net profit as a 737 sold at list, just how many of those 737s do we think are selling for list prices anyway? It is entirely possible that Boeing and Airbus are now making profit on lease deals rather than on the sale of an aircraft.
This aircraft needs someone of vision and leadership to see it done. That person needs to be able to go to 8 to 10 airline heads in the US and convince them that not only can it be done in a timely manner, it can be done cost effectively as well. Those guys still exist but they are a bit harder to find. And it doesn’t have to be Bombardier or Embraer either. This could be Cessna or maybe even the new Beechcraft. Maybe it needs to be a partnership between the two companies. Partnerships have been very good in some instances. I point to the GE/SNECMA relationship as just one example.
Airlines are dysfunctional organizations. You won’t get them to provide that air service by offering them the chance to break even or make a modest profit. They won’t necessarily band together and ask for a new airliner either. But if you deliver that baby on their doorstep, they just might adopt it and call it their own.
Each time two airlines merge, there are Great Debates on competition in the marketplace among airlines and those debates usually start in Congress and among pundits for the airline industry. It’s a valid concern but there is something that gets ignored in the debate.
Airlines are presumed to be competing openly in perfectly competitive markets throughout their business structure. They are assumed to be gaining some advantage through ownership of fortress hubs but we know that such fortress hubs are not always as “fortress-like” as we might believe.
With so much emphasis on airline competition, I do wonder when we focus on another part of the competition equation in the airline industry. That would be airports.
We do very little foster competition at most airports even when there is a demonstrated desire by an airline to enter a marketplace and lower fares. In fact, many airports simply do not cooperate nor do they ask for cooperation on the part of existing airlines to bring in new airlines except when that airport is a ghost town (think Pittsburgh).
American Airlines has more than 80% of the traffic in and out of DFW airport these days and will be approaching 90% after its merger with US Airways. This airport won’t get scrutinized by regulators because there is nominally some gate space available for airlines to use.
Consider this: American Airlines effectively controls 4/5ths of DFW airport today. It has full control of 3 very large terminals (A, B and C) and effective control of Terminal D. The only terminal it doesn’t control is Terminal E, the least optimal terminal for an airline to operate into and out of. And by far the terminal most in need of a refresh (it’s getting that now and that is long overdue.)
But what if an airline would like to start substantial operations at DFW? Is there space today? Not really. It would be possible to find two or three gates at best and that doesn’t not exactly invite airlines to enter the market. If airlines want to share space, they can but it’s up to them to figure out how to do it.
Will DFW build a new terminal for new entrants? No, not without a very substantial commitment from an airline to help pay for those facilities. Yet, without new space and flexibility, DFW can’t begin to hope to add new airlines except on a small, ad-hoc basis.
That new terminal space is exactly what would attract more competition into this airport. People wonder why Southwest doesn’t give in and use DFW but this is one very big reason why: DFW actually can’t provide adequate gate space for a substantial operation run by Southwest . Consider that for a few minutes. . .
Competition isn’t just controlled by airlines, it’s controlled by those operating the airports. Those airport boards feel very beholding to large incumbents and often do not accommodate anyone else due to unspoken (and sometimes not so unspoken) threats by those owning the fortress hub.
Take a look at how United (Continental) Airlines treated Houston after it allowed Southwest to build a 6 gate international terminal at Houston Hobby. It was unseemly and unwarranted.
If you want more competition, you have to make it possible for new entrants to gain a foothold in a market and you have to make it possible for them to grow a little too. I realize (and so does everyone else) that there are a few airports where that has to be governed a bit differently such as NYC’s La Guardia and JFK and Newark Airports. In fact, those are about the only places where it has to be done a bit differently. Everywhere else things could be done more attractively and more efficiently than is the case today.
I saw today’s Cranky Flier mentioning a pretty disturbing incident experienced by Matthew of Live and Let’s Fly Blog. This isn’t a case of United beating the stuffing out of a guitar or American Airlines picking a fight with an actor. This is, in some ways, worse.
Because it wasn’t a mistake. It was abuse of a passenger.
I’ve witnessed this kind of bullying. While I’m unaware of the exact flight attendant or captain, it’s symptomatic of what is a general trend in the airplane these days. Control by bullying.
This passenger presents a potential challenge for me because he’s knowledgeable about what he can and cannot do and he’s willing to question my authority on certain issues. Off he goes by any means possible. Captains are now very reticent to tell flight crew to grow up and act like adults because there is a bit of a culture of protection that exists among flight crew that can result in blow back on him.
I believe the blogger and while the Captain and Flight Attendant in this situation might have a different viewpoint of sorts in all of this, they don’t really have an excuse, do they?
This wasn’t done to this gentleman out of an abundance of caution. It was done to punish and control and it was an abuse of authority. Is that what we pay for when we buy a ticket to travel somewhere?
And if this kind of thing happens to high mileage frequent fliers who write blogs, what is happening to economy passengers that is going unreported?
People who lie to control their own customers are abominable and should suffer consequences within this company. People who don’t exhibit courage enough to arbitrate a situation involving a customer that clearly has not gone out of control are abhorrent and should be retrained in leadership before being permitted to command an airliner again.
The US Airways / American Airlines merger should inspire Southwest Airlines to search for opportunity in this union. Southwest’s ability to do business in the Dallas Fort Worth area has been constrained by American Airlines for more than 20 years.
The argument that Southwest has rid itself of the Wright Amendment at Love Field may come to mind, I would argue that they remain fairly constrained at Love Field and particularly so when compared to other high density metropolitan areas such as Chicago.
For instance, the maximum number of gates at Love Field were reduced from 32 to 20 and Southwest is limited to using just 16 of those gates. The other 4 go to SuperLegacy airlines (of which American Airlines is one.) Furthermore, if Southwest were to introduce any services at DFW airport, it would lose gates at Love Field.
It’s a deal with the devil that got made because of political considerations instead of reality. I wouldn’t criticize Southwest for making the deal but I would urge that the deal be revisited at this point.
Frankly, I would urge that Southwest being penalized for instantiating services at DFW be changed. The truth is that Southwest has been boxed into this area for decades and while a successful strategy for Southwest, it has impacted competition in the DFW area. American Airlines owns DFW as an airport like few hubs are.
Southwest is now seeing competition from both ULCC carriers such as Spirit and SuperLegacy such as American Airlines. It fills a niche that more would like to enjoy. But the idea that people in Fort Worth avail themselves of Love Field for Southwest fares is a bit amusing to me at this point. They just don’t.
The legacy airline playing field will be leveled with this latest merger. In fact, 4 airlines will dominate the landscape when it is completed:
Delta Airlines
United Airlines
American Airlines
Southwest Airlines
I think it’s time we stop listening to the economic arguments made by the first 3 now that they all enjoy costs that are as low or lower than Southwest. Instead, let’s start promoting competition between those airlines like we never have before.
OK, OK. I realize that the US Airways name goes away but I like the double strong US flavor in my made up name for the merger.
Many people will point out many potential trouble areas in this merger. I’ve got some that I think may get overlooked a bit in the conversation.
First, American Airlines’ employees desperately need to be focused on over the next year. This is a group of people who are very sour on their own company and they didn’t get there in a day. It is extremely rare to meet an AA employee who isn’t pretty bitter about their company, at least in private conversation.
A big part of the problem has been leadership neglect but it’s also been a lack of clear, direct communication (which is arguably a part of leadership) on a very regular basis. In fact, historically, the company hasn’t really said much to its employees unless something hit the news or something was about to look bad. I’m reminded of how Gerard Arpey would make communications that would spin the company in odd ways just before he and his executive staff were about to be awarded yet more stock options for a lack of performance.
As an employee, you can take that weirdness now and then and let it go. When it just assaults you for years, you lose hope.
So this is a chance to instill hope in these people and it’s a chance to show them that it is a new day by delivering on promises. I’m actually not worried too much about Doug Parker’s ability to do this but I am worried that between now and the deal closing (6 or more months most likely), he’ll be effectively silenced and the old regime will continue on the same path. I hope that communications at both companies are clear, concise and voiced with equal fervor and I truly hope that Tom Horton dials back his presence in this in the very near future.
There is a deal. Each party has its roles defined. Everyone needs to speak with one voice.
I’m actually not worried about how this team harmonizes the systems. I think they’ll figure that out without much problem. What I do worry about is how they create a new identify. This isn’t going to be US Airways and this isn’t going to be American Airlines and that’s that. This team has to decide what the new airline really will look like and what’s consistent with the marketplace. They have to identify core strengths and value propositions that exist today and figure out how to bind them together into a product that the customer wants.
In addition, they have to truly fix the basics of the operation at AA. There is a lot of underperformance going on and turning that around is no small task. At the end of the day, the customer wants flights that leave on time, flights that arrive on time and baggage that shows up on time. Then they want a value oriented price.
The truth is, new planes don’t fix the inability to operate as advertised. People fix that. Until the New American is operating in a consistent, predictable way across the system, leave out the branding hype.
Finally, get rid of that new branding. At least the livery. Pause *everything* in that area asap. Wait until the operations are fixed and wait until you have decided what the New New American really should look like. Then, take what’s good and go get a re-design on what isn’t.
Your corporate branding should very clearly reflect what you are selling to the customer.
American Airlines had 14 aircraft delayed on the tarmac at DFW airport as a result of a minor snowfall in the Dallas / Fort Worth area. 9 of these flights were American Eagle flights and 5 were American Airlines flights.
No doubt American Airlines will moan and groan over this and claim the weather precluded them being able to do anything. Sorry but when you control 3/4ths of the airport terminal capacity and it isn’t a major storm with lightning, you don’t have many excuses here.
The weather was miserable on that day. Light to medium rain fell until around the noon hour and then snow fell for several hours following that. The snow fall didn’t accumulate fast and certainly didn’t completely kill visibility. Delays such as these at DFW airport on the part of American Airlines just doesn’t compute under most circumstances. It was possible to disembark people and park aircraft. It’s notable that Christmas Day actually isn’t even a very heavily traveled day.
United Airlines has managed to improve its on-time rate to a record 82.8 (Domestic) and 80.5 (Foreign) for January and it’s handing out $100 bills to its employees for the achievement. Incentives such as this have been a big deal in the former Continental culture and it is nice to hear that they are being continued today within the United structure.
It’s nice just to hear United succeeding at something like this because you don’t get those numbers unless your organization is working together. Clearly, they are working together better.
Should we give Jeff Smisek a $100 bill if he turns a profit for Q1 2013?
Alaska Airlines and American Airlines announced an expanded code share agreement between the two airlines on Monday. The focus is on American Airlines putting its codes on Alaska Airlines routes from the San Francisco Bay Area and Alaska Airlines putting its codes on American Airlines routes from the Los Angeles area.
Alaska is ready to do business with anyone that it makes sense to do business with. For them, this is about expanding options with another airlines to gain incremental benefits.
For American Airlines, this is about more than just gaining some incremental benefits. This is about expanding a partnership with an airline on the West Coast and making the argument that the current AA leadership team is ready to work on the airlines’ revenue problems with a bankruptcy exit.
The next step for AA will be announcing an expanded code share with Jetblue in the Northeast.
Will it work? Well, personally, I think not. Code shares like these are what you actually make of them. To date, American Airlines hasn’t really made much of its domestic code shares because it has always preferred to capture the all the revenue for itself in most domestic situations. They don’t mind the incremental benefit to their foreign route network and anything that puts a passenger on a flight for a good fare is OK with them but it isn’t their focus. Other airlines often try hard to drive sensible synergies with their code shares but American’s team just doesn’t seem to do this much.
Financial analysts aren’t fooled by these moves nor are those on the unsecured creditors committee. What existing creditors and bondholders want is an airline that has long term viability for realizing profits that look a lot more like Delta’s. A patchwork plan of code shares doesn’t get them there.
There are a couple of very striking things I notice about the world’s powerhouse airlines and particularly those who are not only surviving but thriving: They are heavily engaged in building global networks and constantly tweaking their domestic and/or regional networks to support these global networks.
Witness these airlines: Delta Airlines (who is arguably doing it better than anyone else at present), Emirates, British Airways, Air France | KLM, Lufthansa.
These airlines in one form or another have acknowledged that change in their regional networks is a constant process and that reaching around the globe is necessary.
What the US Airways / AA merger won’t have is a truly global network.
American Airlines has relied upon its Oneworld partners to provide this to them and that has reflected poorly on American Airlines. Domestically, it makes them appear to *need* these partners rather than being the case of providing a seemless service product around the globe. The only routes in which AA works on itself are to Europe and those routes involving the UK have been half maintained by British Airways still.
Consider that British Airways supplies almost half the seats between DFW and London Heathrow and this is on a route to and from AA’s most valuable hub. Chicago to London sees British Airways supply more than half the seats. In the New York to London market, British Airways supplies 7 of the 12 flights and even a greater proportion of the seats.
On the Pacific routes that AA does have, the partnerships of flights and capacity with Oneworld partners is a bit more equitable. Partners do about half of the capacity from my look into things. But it is notable that it took QANTAS to put a 747-400ER on a route between Dallas and Australia and that it is QANTAS who is enjoying that revenue far more than American Airlines is.
AA has some good core strength to Europe and South America. US Airways has the same strengths. There will be consolidation in this area. Expect New York, Philadelphia and Miami to be the gateway cities in this merger.
Expect Charlotte, NC to be downgraded to a domestic hub. Charlotte’s few European routes will transfer to Philadelphia and/or New York and/or Miami. Charlotte’s Caribbean and South American flights will transfer to Miami (and rightly so) and a some to DFW.
Expect Los Angeles to be the West Coast gateway city and Phoenix will be downgraded to a domestic hub with passengers route to Dallas for flights over the Atlantic and to Los Angeles for Pacific flights.
But that is what I expect them to do with the resources they have today. What they will also need to do is build core strength to new destinations with aircraft freed up from consolidation. USAmerican Airlines will need to deploy more strength to Asia and it should strongly consider operating flights to the Middle East and Africa. They will even have an opportunity to perhaps explore South Africa as an opportunity through its South American flights.
And whoever gets the 787 first, QANTAS or USAmerican, direct routes to Sydney and Melbourne need to be established from DFW. There should be multiple frequencies here.
Make no mistake, I do think Parker & Company is the right management team but they need to find a risk taker on the AA side to do strong business development in the above named areas. This is a weakness on both sides but much more so among the US Airways team. If the entrepreneurial spirit for this business development does not exist on either team, they need to hire it as soon as possible. I would hire a senior level executive from a multi-national airline as fast as possible and give him or her a budget of resources and money significant enough to build a strong revenue stream from these weak spots.
And I wouldn’t wait to do it. The longer USAmerican waits to address these core foreign route weaknesses, the more Delta will capitalize on them and the more chance there is that United will regain momentum.
Consolidate these foreign strengths quickly and immediately go to work on route development to destinations outside my core strengths. I would also stop relying upon Oneworld partners to give me circuitous and service unequal routes to these places.
Delta Airlines has announced changes to its frequent flier program that will make it vastly more revenue driven. Their intent is to get a minimum spend from a flier before granting status in the program.
There are others who can discuss the nuances of the changes. I want to talk about what is more of a fundamental change than I think most appreciate.
This is a statement by a major airline, the second such statement to be made, that says your status is going to be connected more strongly to how much you actually benefit us (the airline) on an annual basis.
Southwest Airlines did this with its new, much more complex points system in its own program. If you buy full fare tickets and fly long distances (which are presumably more expensive than short distances), you’re going to be awarded far more points.
Delta didn’t quite go this far but it is saying that it wants a minimum amount of revenue from a customer before it grants status in its program. It’s no longer about how many points you’ve earned, not entirely anyway. Points aren’t that hard to acquire (although I would argue that acquiring is silly in the first place in most cases) and airlines are granting upgrades and free tickets to many people who fly quite infrequently and at the lowest economy fare possible.
Not only do I think Delta will stick with this change, I think we’ll see other airlines edge towards similar changes over the next 2 to 3 years.
Why? Because our airlines have made a clear decision to ensure that they are earning the cost of their capital and they don’t want or need anyone bleeding them of freebies without some basic level of revenue being paid.
Hawaiian Airlines has made an order for the A321NEO which, I think, causes trouble for Boeing. It’s a validation of the A321 as a 757 replacement that, I think, Boeing didn’t need showing up given its desire to sell the 737MAX-9. It is increasingly clear that the new A321 isn’t going to be the dog that the current A321 has been. Good on Airbus.
Hawaiian is clearly going to make trouble for a couple of airlines with this purchase. The first is Alaska Airlines. When Hawaiian takes delivery, it can start to compete with Alaska on the smaller routes such as Bellingham to Hawaii. Hawaiian succeeds quite well in this area when it goes up against other airlines with its Airbus A330 and Boeing 767 aircraft. It knows how to attract the right passengers at the right fares.
The other airline that, I think, will be a surprise to some is Southwest. It’s clear that Southwest has been eyeing the Hawaiian markets for some time and it has even talked about its need to gain ETOPS experience in order to do this. I think Hawaiian is responding to this threat by bringing its games to the kinds of markets Southwest might be tempted to enter.
And that brings me to a criticism I have for Southwest: This airline isn’t responding in a very agile way to opening up new markets and opportunities. By the time it studies and prepares for new flying outside its comfort zone, the opportunity is often gone. Witness its vaunted codeshare deal with WestJet and Volaris as more evidence. Southwest could have been flying those Hawaiian routes as soon as this year but the conventional wisdom is that Southwest won’t have itself ready for this challenge until 2015 or about 2 or more years from now.
About a year ago, a few airlines started to enter the DFW market and that made me thrilled. For all too long, American Airlines has dominated virtually all routes from Dallas / Fort Worth to all other destinations. It’s even been able to manage keeping its pricing up on intra-Texas flights against Southwest. The last time a truly competitive fare was found in Dallas was when Delta was still here operating a hub.
I saw the entrance of Virgin America on routes between DFW and LAX/SFO as a great start and American Airlines clearly didn’t like the competition because it did what it always does and tried to scare away the airline. Virgin America CEO David Cush has never said anything but glowing things about VA’s performance to and from DFW.
JetBlue came to town as well with 3 flights to and from Boston. Boston is a route that is, again, dominated by American Airlines and which had very high fares and by all reports, those flights do very well, too.
Spirit Airlines has come as well and they’re killing it. Spirit has been adding routes and now is adding a crew base in Dallas because it’s discovered an untapped demand that is the result of very little competition in Dallas. Hey, folks who live here like a good deal as much as anyone when it comes to a leisure destination.
But a year later, I see two airlines (JetBlue and Virgin America) maintaining their status quo. I wonder what it is about the middle of the United States and Texas that scares these two airlines so much. Particularly when you have a major legacy carrier sitting here airling and another LCC carrier (Southwest) raising fare prices in this market considerably. There is some low hanging fruit.
If I had been Virgin America, I would have targeted Dallas for routes on LAX and SFO for sure. I would also have laid on flights to New York City and Washington D.C. I would have opened up a gate in Chicago and connected LAX, SFO, NYC, Washington, D.C. and DFW to Chicago in a heartbeat.
If I had been JetBlue, I would have added flights to New York City, not just Boston and I would have looked at some point to point flying to its Caribbean destinations as well. We’re as close to the Caribbean as anyone in the Northeast and it’s a popular vacation destination for this area.
But it hasn’t been done. A year later, these two airlines sit with their timid schedule into and out of Dallas from their strongholds while AA prepares to come out of bankruptcy as a cost competitive airline that potentially is mated with US Airways. I would have spent the last year building loyalty on routes that those airlines could serve well by offering the fares people want here and getting them just a little too addicted to excellent service on modern aircraft.
It’s disappointing to me, the consumer, because I think that DFW is a destination where a lot of “upstart” airlines could succeed more. The fear towards AA and SWA defies my imagination at this point. And there is Spirit Airlines who is taking advantage of the moment and growing like crazy. Go figure.
Airfarewatchdog.com has a survey indicating that American Airlines has the rudest employees followed closely by United Airlines and then to a lesser extent Delta and US Airways.
It comes as no surprise that the legacy airlines would have these higher “rudeness” ratings given the trials that their service staff have been through in comparison to others.
But there is more to it, in my opinion. These top dogs are legendary for being micro-managers of their service staff. There is no empowerment at these organizations that permits employees to solve problems and win customers. There is a fear that employees will give away the farm if permitted to do so.
Curiously, that has never been the case at Southwest Airlines where employees are quite empowered. Employees know when someone is trying to scam their airline and generally will defend the airline and its values quite well when given the chance. Employees know that just handing things out to placate people isn’t the answer in many cases and they do know that the more they hand out, the more impact it has on the profitability of the company and therefore their salaries.
But I also think that legacy airline infrastructures just don’t care very much about service. They see themselves as selling a commodity rather than a service.
Is an airline trip a commodity to you? Or a service you’re buying?
I’m often struck by how many successful investors have often described their choices in who to invest in being based upon their own personal experiences with a product. Time and again, one of these people tries a product and realizes that someone has something worth betting on.
For those who may invest in American Airlines and particularly at this time, I would ask that you try the product out. Read my trip reviews found HERE and HERE.
Don’t fly in First Class. Don’t schedule a trip known to AA management. Buy an economy class ticket for a flight of a duration of 2 hours or more and make a decision based upon your experiences and contrast those experiences with those on other airlines.
American Airlines may have largely fixed its cost problems but it hasn’t addressed its service problems at all. Service will be what determines the airline’s ultimate success. Service is what attracts revenue, not cost cutting.
Consider the value proposition AA is offering in comparison to other airlines and particularly those it is competing against.
US Airways may have its problems but it doesn’t have AA’s problems. It attracts customers on price and it keeps them by doing what it contracts to do. It competes against the likes of Southwest and Delta all the time and it makes money. It makes money because it does deliver on the service and value propositions.
Ask yourself if the status quo that exists today at American is the status quo that wins in the marketplace here in the United States. Consider that despite having a very senior and very well paid service staff and crew, Southwest accomplishes what AA can’t every day. It does it day after day and has expanded its revenue growth and still has managed to earn a profit.
Contrast the experiences with Delta who is arguably kicking everyone’s butt in the business currently. It is these intangibles that have always determined the success of an airline.
Yes, it’s important to be competitive on costs but you can’t win if you can’t compete on the service and value side.
Now, ask yourself if the status quo is who should be running American Airlines going forward out of bankruptcy. Some say that the executive team has changed and that it is leaner and more responsive. I would argue that we simply have Version 3.0 of the same leadership the airline has enjoyed for 15 years and that this version shows no evidence of being anymore sensitive to the service and value side of the business than the previous regimes.
AA needs new leadership and it needs leadership that can change those service and value propositions. Even if that leadership is not US Airways management, those in charge today need to go and new people need to come in and change the airline to a model that wins.
Let’s get on with the second part of this trip review:
American Airlines Flight 1905 (EWR – DFW)
Scheduled Departure Time: 05:05pm Actual Departure Time: Cancelled
Scheduled Arrival Time: 08:10pm Actual Arrival Time: Cancelled
Yes, it was cancelled. Here is the actual flight:
American Airlines Flight 2705 (EWR – DFW)
Scheduled Departure Time: 07:10pm Actual Departure Time: 07:49pm
Scheduled Arrival Time: 10:05pm Actual Arrival Time: 10:24pm
I was monitoring my flight status from the start of the day as well as the flight status of several family members. My flight suddenly showed cancelled at around 1pm of that day and I had to call AA to find out what was going on.
After spending yet another frustrating 10 minutes fighting through the goo that is AA’s voice activated system for determining what you don’t want to do, I got a reservations agent. After a couple of minutes of working with this agent, she determined that she couldn’t help me because the trip was booked on AAdvantage Miles. So I got transferred to a new agent.
I did not find this funny. To battle an automated system for 10 minutes and then to work with a reservations agent for another 10 minutes only to be told “please hold while I get you the AAdvantage desk” is just not amusing.
The next woman indicated that I had been re-booked on the next flight out. I was OK with this since it meant I was still departing the same day and just a couple of hours later. I wasn’t amused by the fact that my seat had changed from 10A to 25E.
Me: “Let me get this straight. You’ve cancelled the flight and think I’m happy with sitting in seat 25E which is in the back of the aircraft and in the middle?”
Res Agent: “Sir, it isn’t in the back of the aircraft. It’s actually in the middle of the aircraft.”
Me: “I’ve flown the MD-80 aircraft since you guys put it into your fleet. Seat 25 is just a couple of rows from the rear galley and a middle seat isn’t amusing to a man who is 6′ 2″ tall and 270lbs.”
You be the judge. Here is the SeatGuru map. I’m just going to note that row 25 has 24 rows in front of it and 7 rows behind it. But apparently AA thinks it is in the middle of the aircraft.
After an interesting exchange between myself and the AAdvantage agent which involved holding for a while while she checked on things, I got Seat 12A offered to me. Much better.
Arrival at EWR (Newark Liberty International Airport) found me once again stepping into the swirling mess that is AA right away. The gate agent found it difficult to print 2 baggage tags for my bags because, at first, she couldn’t find me on the flight at all.
TSA had a Priority Access lane that, once again, didn’t save me any time at all. Particularly so when TSA is permitting people left and right to claim imminently departing flights and by-pass the line. After several had done this, I began to suspect that locals have figured out that this is the real way to have Priority Access. I can’t prove it but I do suspect it.
As I arrived at the gate, I checked my flight status app on my phone and saw that the flight had a new flight plan filed for a delayed departure. I approached the gate agent and asked about the delay and was told that I didn’t know what I was talking about and of course the flight would leave on time.
Roughly 10 minutes later, maybe less, this same agent was announcing that there would be a delay in the departure because the aircraft suffered a bird strike on the inbound approach and had to be inspected prior to going back into service.
It was another 25 minutes before I saw any mechanics go out to the aircraft to look at the airplane.
Once we boarded, the exact same Dance of the Privileged Passengers took place. In fact, it was as if I was back in Dallas leaving for Newark 2 days earlier.
Let’s take a moment to reflect on what it means to carry your luggage on to the aircraft. I am an ardent supporter of checking bags on flights. Baggage doesn’t go getting lost with any meaningful statistical frequency. I have been flying since 1968 and in all of that time my baggage was lost exactly once. I’ve guessed that I have traveled roughly 3 to 4 million miles in that time. It isn’t worth taking your life’s possessions on board, it really isn’t. I can’t tell you how often I arrive at an airport, wait for my bag at the baggage claim and then find myself walking past those who didn’t check bags as they wait for their rides curbside. This makes you people look silly.
But if you insist on carrying your luggage onto the aircraft, observe the rules. For instance, one personal item (purse, briefcase, etc) and one bag means that. It doesn’t mean, for instance, a purse, an oversize rollaboard that doesn’t fit and 2 large boxes from Macy’s. And, no, I won’t remove my small briefcase and light jacket from the overhead bin so you can park your possessions in various places throughout the aircraft.
American Airlines: If you’re going to have rules, you’re going to have to enforce them. Or remove the rules and let the games begin. I actually think you would earn more revenue and experience fewer delays if you charged someone $25 to bring their rollaboard into the aircraft. Seriously, charge *those* people for carrying luggage. You’ll stop the chaos in boarding and earn more money, I would wager. Offer one free checked bag, charge for additional checked bags and charge for a carry-on.
After the flight took off, we had another Chatty Captain who described in painful detail how we were going to fly the entire route and that we would be pushing against the jetstream the entire way so we would likely run very late. In fact, the return trip took about 1 hour longer than the one going to Newark.
The truth is, my trip back to Dallas was very similar to the one to Newark. Right down to lethargic flight attendants doing a beverage service. Out of sheer curiosity to find out what would happen, I asked for a sandwich again. This time, I did get one (Roast Beef) but only after taking the chance to remind the flight attendant I had asked for one when she leaned over my seat to reach the person behind me.
The sandwich was . . . OK. Nothing special but I could taste meat and other items and it was filling enough. About what I expected for my money. I was satisfied with it and would argue that a better sandwich would, in fact, require a higher price.
Arrival at the airport found us disembarking from a gate that was inexplicably many, many gates away from an open entry/exit point in Terminal A at DFW. While walking towards the indicated open exit point, I asked some service agents how much farther did I have to walk to the exit, 6 or 7 more miles, and they just laughed heartily. What is annoying is that I checked the gates near the open exit point. All but one were empty. In other words, AA could have parked their aircraft near an open exit point and prevented a long hike late in the evening.
Once I had my baggage and walked past those who had carried all theirs onto the aircraft, I was able to flag a Parking Spot van immediately and get to my car in just 8 minutes. I was home just 50 minutes after arriving at the airport and I live a great distance from DFW airport in the Metroplex.
Summary:
Boarding experience: B-
Flight Crew experience: B- (hey, I got my sandwich)
Onboard Seating experience: D (Because there is no reason for this discomfort on a airliner today)
Departure / Arrival experience: C+ (routing your flight through the jetstream was just stupid.)
Final thoughts:
On both flights I was struck by one thought over and over again. I don’t ever experience this kind of poor attitude, poor behavior, and awful service when I fly Southwest Airlines.
Nominally, when you fly American Airlines you are supposed to be flying a full service airline. When flying Southwest, you’re supposed to be flying a cut-rate airline. In fact, the opposites are true. Let’s compare:
Aircraft Quality
Southwest has clean, well maintained and fairly new 737 aircraft.
American Airlines has some new 737 aircraft but after having them for over 10 years, I’ve yet to have flown on one. I am always on a MD-80. That isn’t chance, that is because they can fly them from DFW to just about all points in the US and because AA has a stranglehold on the DFW O&D market, they know they can impose this condition on its customers.
Aircraft Seating
Southwest has extremely comfortable leather seating with more average seat pitch than just about any legacy or SuperLegacy airline. Yes, they’re updating their seats to fit more on the aircraft and I will say that time will tell if these are as comfortable. They could be and I do have some faith that SWA knows it’s wise not to diminish the seating experience for their customers. American Airlines on the other hand just has the most outdated, uncomfortable seating available. It’s that simple. There might be some seats on the 737s or 777s that are better but that doesn’t describe the vast majority of the fleet.
Service Staff
Southwest’s staff tends to be moderately friendly, fairly interested in solving a problem and ready to help. Onboard, their flight attendants are usually the right combination of “in charge” and “service oriented”. Yes, they’re only serving a minor snack and beverage but they somehow make it seem important that it be done timely and right. American Airlines service staff are surly, resentful and fairly uninterested in solving a problem or even having the correct facts about a flight. Flight attendants onboard tend to be very senior and very resentful of passengers and their situation. They are clearly uninterested in serving beverages or food. I’ve had more than one scold me with “We’re hear primarily for your safety!” No you aren’t. You’re there to be in service of the customer and to act in the event an emergency requires strong supervision of passengers. 98% of the time spent performing your job is to keep the passenger happy.
Value
Look, Southwest isn’t “cheap” anymore. That said, they are competitive on price and when you consider the experience, the convenience and the ability to get someplace on time, they’re high value. They don’t charge for checking bags and what they do charge fees for makes sense and are priced appropriately. American Airlines is just bad. Their fares are high, their service value is the worst around presently. It’s that simple. There isn’t a value proposition to flying AA in my opinion unless you’re burning unused air miles.
Tomorrow: A suggestion for investors in American Airlines
