I’ve never met or talked to a person who advocated people being able to use a cellular phone on an airplane.  When the subject comes up, you always read or hear how awful it would be to have someone conducting a call next to you in a seat and how intolerable that would be.

 

Personally, I think most people would use them and most would even accept them on airplanes.  Just as they already do with people at Starbucks, restaurants and buses.  The relatively non-controversial acceptance of them onboard in Europe is simply some confirmation of my suspicions. 

 

I don’t want them on the airplane myself.  But, then, I’m also somebody who can refrain from using one at a restaurant table too.  It seems to me that the best reason to continue to ban them from US airliners is simply to reduce opportunities for conflict onboard flights.  I invite your comments.

Filed under: Airline Service by ajax
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Deregulation in 1978 was never full deregulation.  It was, instead, deregulation of the revenue side of the equation.  Airlines were suddenly free to fly routes and set fares as they wanted.  The barriers to entry on a route were no longer regulatory but, rather, business cost.  My father phrased the start of a route as “starting a new business” and I must say that that is true.  Airlines have to invest in infrastructure, new employees and market their services when entering a new city or route.  The airline is essentially starting a new business.

 

What never got deregulated was the labor cost side of the equation.  Flight crews were fully unionized (with the notable exception of Delta’s Flight Attendants) and the union approach to wages and work rules was and always has been to negotiate for more each contract.  When the game changed with regulation, the airlines were still inhibited from negotiating freely for their labor on an open market because the unions had 30 years of precedent and enormous political power.  God help the airline who had pilots striking against it because it denied *any* revenue to the company and airlines are cash intensive businesses.  They go out of business very quickly if that cash stream is interrupted. 

 

Using pilots as example, take a look at their negotiating power in 1978.  First, the barriers to entry in a career as a pilot were (and to some degree remain so) very high.  A typical pilot spent 7 to 9 years in the military flying multi-engined aircraft and when they exited, they got their ATP license and went hunting a type certificate to fly for an airline.  Once in an airline, they entered a seniority system that made it very difficult to leave because every airline had the same system.  If you started at one airline, made captain on an aircraft type and then wanted to leave, you had to start over again.  The union(s) set a contract and work rules in place that essentially made each airline a fiefdom.

 

The airline union is the lord and the pilots are the serfs.  Well paid serfs in their later years but serfs nonetheless.  Not only is there no incentive to seek work elsewhere, there were strong incentives to stay and play the game no matter what.   Even when an airline is by all measures about to fail.

 

This situation remains true for most airline unions to some degree or another.  What the government never did was deregulate labor so that airlines could compete for qualified people to fill their staffing needs.  One interesting by-product of this is that airline pilots work terrible schedules today.  They do so because it is enormously expensive to have a pilot sitting on the ground doing nothing.  Airlines fly pilots on different schedules than their flight attendants (at least at most airlines) and they do so because they want to extract all possible value from them because the cost is so high.  Ironically, a more ratioinally paid airline pilot would work an *easier* and more rational schedule that impacted their lives (both personally and professionally) far less if their pay were more in line with a free market competition.   Mind you, they wouldn’t be underpaid, just paid more in line with the demands of their job.

 

My father thinks that a free market salary for a pilot would be about $70,000 / year and there would be far less range between entry level and an experienced level.  I personally believe that number would be higher.  About $100K to $120K.  I think so because the costs to become a qualified airline pilot and the skill required still make for a rather rare person today.   The pilot still has to become qualified under FAA rules by getting time first on single engine aircraft, then multi-engine aircraft and turbine engined aircraft.   Flying also takes  talent.  Being an commercial pilot also means having a great understanding of engineering (many pilots gets undergraduate degrees in engineering for just this reason.) 

 

What the airlines needed was an opportunity to negotiate for new labor under new rules.  It would have been impractical and politically difficult to “break” the existing unions.  It would have been better to set new rules for airline unions and airline flight crew going forward.  For instance, eliminating the seniority system but making one’s qualifications and types fully transportable between airlines for the same pay would have made it more fair to both sides.  A pilot who was “captain” qualified on a Boeing 737 would be able to take those qualifications and fly at any airline for market pay.  

 

Suddenly a pilot would not be married to just one airline and have to deal with fear of furloughs and bankruptcy multiple times in their career that could reset them back to “zero” in their career.  Instead, they would be able to seek positions at other airlines for a commensurate career salary.  The same could be true for any flight crew.   It would even have the benefit of further “harmonizing” best practices among various airlines. 

 

Over the years, some airlines have made some attempts to re-negotiate this situation.  American Airlines introduced the A/B pay scales in the 1980s.  That worked very well for many years but the advantage was lost because the “B” scale employees still worked for the original union and the “A” scale employees had a vested interest in raising all salaries for everyone.   

 

There is nothing wrong with unions existing in the workplace.  However, when a union’s sole focus is on raising salaries to everyone else’s detriment, it begins to lose value.  Unions can and should enforce good work rules, good working conditions and even qualification standards and salaries.  They should not, however, distort their own labor market or their airline goes down.

 

Another way airlines have gotten around this is by starting commuter feeder airlines.  American Airlines has American Eagle for instance.  These “new” airlines have employees who are hired at “market” rates and who remain employed by unions.  Now the airlines use these airlines to fly mainline routes at higher frequencies because it is more cost effective than flying the route with less frequency but greater capacity using mainline equipment.

 

A great example of this is American Airlines and how they served the DFW – MKE (Milwaukee) route a couple of years ago.  They used 50 seat ERJ-145 aircraft in their American Eagle subsidiary and flew as many as 5 cycles a day.  What’s worse, they frequently turned away people or re-routed them through Chicago because their aircraft were either capacity limited or load limited.  The aircraft had average load factors far in excess of 85%.   The better solution would have been to fly either mainline MD-80 or Boeing 737 aircraft 2 to 3 times a day.   That would have offered better service (more reliable and not load limited), more comfortable seating and slightly shorter flights.  But they couldn’t because AA MD-80/B737 pilots for such routes would cost 4 times more than American Eagle pilots. 

 

The demand was there.  The fares actually offered great revenue opportunities (when compared to average DFW – ORD fares) but the expenses were still too great on the labor side.   So people were offered a cramped ERJ with all coach service that, by the way, eventually lost passenger traffic to Midwest Express (who flies more comfortable MD-80s and B717 aircraft) and to other mainline airlines who would service Dallas via Chicago or Minneapolis-St. Paul. 

 

Regional Jets were never built for serving such markets and they do so very inefficiently.  Regional aircraft should never be serving route sectors greater than 400 nautical miles and certainly should never be serving mainline city pairs such as MKE-DFW.    They should fly from Odessa to Dallas or Cedar Rapids to Milwaukee. 

 

Could labor be less regulated in the airline world today?  I don’t know.  It would require great political will and I frankly don’t see that on the horizon.   It would require the airline industry to be both realistic and cooperative with each other and it would require unions to recognize that not every contract means “more” but maybe it means different and more accomodating instead.  It should also offer some job security and certainty too. 

 

In the next part, we’ll take a look at how the lack of full deregulation has distored air travel in the United States and caused inefficiencies.

Filed under: Deregulation, Trivia by ajax
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This weekend I had a series of long and very interesting conversations about airline economics and deregulation in the airline industry with my father, a former executive vice president of Braniff.  I have been following the airline industry since the mid 1990’s and very closely since the early 2000’s and after this weekend I can only say there is still more I don’t know. 

 

The insight I gained on the industry this weekend isn’t easy to get anymore.  Much of what takes place today in the airline world overshadows the history of the industry.  But I thought I would share my new insight in a series of stories this week on airline economics and deregulation.  Information presented as fact comes from my father.  The opinions are mine unless otherwise attributed to someone else.

 

The first of these stories is quite naturally about the history and background of the airline industry.  What almost any fan knows is that the airline world as primarily fostered by air mail contracts originally.  It wasn’t until the DC-3 (and similar aircraft) that an airline could really earn profits from passengers and even then air mail was an essential part of earning a profit as an airline.   In other words, passengers reduced the importance of air mail but it was a long time before it diminished the importance of air mail revenue to a point at which it could be considered relatively unimportant.

 

Prior to air mail, the fastest way to move mail around was by train.  Trains had reliable schedules and a robust network of lines that made it easy, for the first time in history, to move mail in a timely manner.  Since many infant industries are heavily influenced by more mature industries, it comes as no surprise that many of the “best practices” used by railroads were “inherited” by airlines as they began to operate. 

 

One good example of this is how engineers on trains were (and still are) paid.  It was based on time, distance and weight.  An engineer who operated a long, heavy train on a transcontinental route quite obviously was going to A) Be away from home. B) Need skills and experience to operate that train over different terrain. C) Be able to know how to stop such a leviathan in an emergency without completely destroying the train itself. 

 

The engineers were paid a scale of wages that took into account their skill and experience as well as punishing time away from home and long duty hours required to push that train to its destinations.  In other words, an engineer who had to stay on duty for 12 hours a day driving a 1/2 mile long train over a mountainous area would be paid much more than an engineer who drove a feeder line over a short distance delivering boxcars to factories in an industrial area.  Quiet naturally, this kind of thinking was quickly adopted by airlines and airline pilots. 

 

Very early in the game, airline pilots were paid according to the size of their aircraft (a DC-3 pilot earned much more than a pilot of a Ford Tri-Motor) and the distance they traveled.  They are paid in the same manner today.  A pilot who flies a Boeing 737 on 4 or 5 flight segments for 10 hours is paid less per hour than a pilot who flies a Boeing 777 for one flight segment that takes the same time.  The argument is and always has been that the B777 pilot is responsible for a larger aircraft, more souls on board and therefore works harder for those same hours. 

 

The reality is really quite different.  Most of the work a pilot incurs is on takeoffs and landings, not during cruise flight.  It requires no great difference of knowledge to fly a B777 or a B737 and, in fact, it may be easier to fly the B777 with its more sophisticated flight management computers.  The number of souls on board sounds like a good argument but, as my father pointed out, is it?  After all, in almost any aircraft crash, the pilot(s) are the most certain to be casualties.  So, isn’t it in their best interest to fly that aircraft as best they can no matter how many others are on board?  Of course it is.  Practically speaking, we regard it as a tragedy if 20 or 200 people are killed or injured in a crash.

 

So, who should be paid more?  If it is about how hard the work is, then many regional feeder pillots should be paid far more than the B757 pilot who might only fly 3 or 4 segments in a day.  That same feeder pilot might work twice as hard for the same duty time because he or she is making 5 or 6 or even 7 landings and take-offs per day.  Both pilots have to know a complicated set of systems.  Both planes have just 2 engines.  Both airplanes have to navigate the same kind of airspace and altitudes.  Who is working harder?  The regional jet pilot is.

 

But he or she is also the least paid.  Regional jet pilots just starting out make as little as just $20,000 to $25,000 per year.  A B757 pilot is likely making 5 to 8 times that much money for the same or less duty hours. 

 

All because airlines adopted the same pay models that railroads used.  It suddenly becomes more clear why airline managers often resent pilots the most.  In the mid 1970’s, a Braniff 727 captain made as much as 50% more than a senior Braniff executive.  Did the captain work more hours?  No.  In fact, if he worked 80 duty hours a month and if you allowed a 20% bump in hours for time worked but not paid, he or she still only worked 96 hours in a month.  That same airline executive was paid for 160 hours per month and probably worked about 200 hours per month.   The airline can’t run profitably or reliably without either person so who was overpaid?  The pilots, of course.

 

In the next part, we’ll take a look at how pilots (and other aircrew) distorted the the 1978 deregulation of the industry.

Filed under: Deregulation, Trivia by ajax
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In the early 1950’s, Juan Terry Trippe of Pan American noticed that many executives of major corporations had begun to travel by private airplanes (just as he did in a converted B-23 bomber).  He reasoned that these men (and it really was almost singularly men in that age) would not be flying on his aircraft and inside his route system.

 

The Business Jets Division of Pan American was formed and they wrote specifications for a new jet and contacted Dassault, a French Aviation Company, about building such a jet.  This new jet would be comfortably furnished, have dual wheel landing gear (to ensure that larger margin of safety) and be powered by new turbo-fan jets instead of turbo jets.  It was originally called the Mystere 20 and later renamed the Dassault Falcon.

 

Pan American marketed this new service as an alternative to flying their commercial aircraft and routes when it was inconvenient.  If you couldn’t fly their schedules, you could still fly their jets and use their airport facilities.

 

Variations of this aircraft exist today and, coincidentally enough, are a mainstay of today’s business jet companies such as NetJets.  The Dassault Falcon 50, 900 and 2000 are sold and operated today but all derive their heritage from that original airplane conceived of by Juan Trippe and Pan American Airways.

Filed under: Trivia by ajax
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Northwest Airlines shareholders approved their merger deal with Delta Airlines this morning.  Delta shareholders meet to approve the merger this afternoon. 

 

While this is for most purposes a pro forma part of the process, it is another step forward in this merger.

 

What I continue to wonder about is the new corporate identity.  Will Northwest’s heritage and history survive in some small way?  I’ve seen some concepts done by people that turn the Delta “widget” into point on a compass.  PlaneBuzz has some images that show it looking something like THIS.

 

And I must say I like the concepts.  I do think the circle on the fuselage is a bit busy but it works on the tail just fine.   I suspect, however, that the Delta identity will remain the same and Northwest’s identity will fade away as airplanes and uniforms are changed over.

Filed under: Airline Fleets, Airline News by ajax
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USA Today’s Today In The Sky is reporting that Frontier Airlines has gone to their bankruptcy judge and asked him to break the Teamster’s contract in order to allow some heavy maintenance to be done off shore (Central America most likely.)

 

 I’ll confess that I have so far been surprised at Frontier’s relatively smooth, up to this date, reorganization.  This latest development seems to indicate that all is not as it seems and they may only just now be working on the hard stuff.  The hard stuff is, quite honestly, renegotiating labor contracts and getting commitments from all the stakeholders to play nice in the emergence from bankruptcy. 

 

They remain on my death watch simply because they continue to be squeezed on both sides by Southwest Airlines and United Airlines in Denver.  In addition, they no longer have any fuel hedges (they had to be given up on going into bankruptcy) and while oil prices are lower than their peak just a couple of months ago, they remain volatile. 

 

Even with renegotiated labor contracts and concessions from lenders, they still have to compete with their system based in Denver and that’s a tough market.  Denver really isn’t large enough to support 3 major airlines battling it out in the long run.  A quick look at what happened in Hawaii between go! Airlines (A Mesa Airlines subsidiary), Hawaiian Airlines and Aloha Airlines (who went into liquidation) is all you need to read the tea leaves.  Whoever has staying power wins and, right now, that would be Southwest and United.

Filed under: Airline News, Death Watch by ajax
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I received some photos of a United 737 taxiing through high water at Chicago’s O’Hare Airport when it was inundated with rain from the remnants of Hurricane Ike.

 

This is the photo:

 

 

I can only imagine how those engines were babied as they moved through the water.  And I can only imagine just how miserable it must have been to be working as ground crew too.

 

I’m back from a brief vacation trip and I’ll be posting regularly again.

 

 

Filed under: Airline News by ajax
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The Dallas Morning News Aviation Blog just had this post.  United Airlines has just made it known that they expect some rather heavy losses in their fuel hedging program.  Fuel hedge are common practice among airlines to make fuel prices predictable (rather than necessarily always cheaper) and therefore allow airlines to financially plan for their needs.   Southwest Airlines is arguably the most successful at this strategy.

 

A fuel hedge is a kind of bet.  An airline purchases contracts and options to buy fuel oil (not jet fuel but fuel oil which tracks in line with jet fuel prices) at a specified price.  If an airline thinks fuel prices will go up, they will buy options and contracts for these fuels for a current market price for delivery some time in the future.  If in fact the prices go up, they sell these contracts for a profit and use the money to offset their jet fuel costs.   If the prices go down and the airline bets that they’ll go up, they suffer additional losses and the cost of their fuel goes up against their plans.

 

Since hedging is a risky business, a wise airline only hedges a portion of their fuel costs per quarter so they are not completely exposed to the risk of having bet wrong.  In addition, they’ll bet conservatively on prices so that the risk they expose themselves to is minimized as much as possible.  To manage all of this properly requires an army of financial analysts and hedging experts. 

 

The problem with hedges is you can both make and lose a lot money with them.  When you make a lot of gains, it becomes intoxicating to any airline.   The temptation is to hedge more and more and bet on directions that seem pre-ordained.  Just 1.5 months ago, everyone was betting that oil might go as high as $200 / barrel.  Just this last Monday (September 15, 2008), oil was trading at $97 / barrel.   United bet wrong and now has to report that they have had both real and unrealized losses involved with the trading.  Unrealized losses require them to hold cash in reserve to meet those potential costs.   That is “restricted” cash.

 

Lately you hear airlines talk about how much unrestricted cash they have on hand.  Southwest Airlines, American Airlines and others will have quite literally billions of unrestricted cash.  That is the money for which there are no real or potential obligations attached.  Going into a period of economic uncertainty, having a large amount of unrestricted cash is good because you can suffer short term losses and still operate sensibly.  If you have too little, you’ll quickly be forced to constrain your operations which quite often leads to a cycle of contraction for an airline.  Because they don’t have the cash, they become smaller and because they’ve become smaller, they have even less cash.

 

American Airlines continues to survive these industry contractions because they have a huge amount of unrestricted cash held in reserve.  It gives them maneuvering room and they are probably the best in the business when it comes to managing their finances.  That is one reason why they did not have to go into bankruptcy in the post September 11 industry crisis.

 

To return to hedges.  A hedge becomes risky when you are buying contracts that approach the forecasted market price of the fuel.  Ideally, you want to have options and contracts that are substantially lower than your current year’s price of fuel.  That way, if fuel prices drop your contracts will still realize a gain.  If you buy too close to market prices, particularly in a volatile market such as what oil is experiencing, you run a very real and damaging risk of being obligated to buy those commodoties at prices that are higher than the current market rate.

 

Hedges have often been described as an insurance policy against high fuel prices.  They aren’t.  They are a way of smoothing the peaks and valleys of fuel prices.  If you smooth those peaks and valleys, you can more accurately plan your financial obligations and that potentially allows you to make more money available for purchasing goods and labor.

 

The losses reported by United Airlines are just one more reason why I watch them carefully.  You can’t suffer those kinds of losses very often and, once again, it appears that their business plan is not accomodating the current market conditions in the airline industry. 

Filed under: Airline News, Death Watch by ajax
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The Fort Worth Star Telegram Sky Talk blog reports today that American Airlines has, in fact, won a reprieve from starting their Chicago-Beijing flights until 2010.  While this approval wasn’t unexpected, it is disappointing.  I wrote about this in a previous entry  and detailed my own objections to granting these delays.  Citing economic conditions for a delay is not, in my opinion, a satisfactory justification.  These airlines made rosy promises and commitments to serve these routes and to simply throw up your hands and ask for the status quo to be maintained is both unjustified and unfair to other airlines.

 

There are plenty of airlines who wanted these authorities and, quite frankly, got shoved aside in favor of airlines already serving China.  I could certainly understand and approve of a short delay if planned equipment remained unavailable due to delivery problems from an aircraft manufacturer but that isn’t the case here. 

 

US Air has also asked for delays on their Philadelphia – China route (and cited economic conditions as well but I suspect that the fact that they have been unable to source aircraft for that route also plays a part in things.  The aircraft that makes the most sense for them, an A340, is an expensive and fuel inefficient aircraft (when compared to A330 and B777 aircraft.  They don’t want to add yet another aircraft type to their fleet and they don’t want to lose the route so they have approached the current economic climate in the airline industry as a blessing on this route.

 

When the Department of Transportation grants these requests for the stated reasons, they maintain the status quo and that means that airlines are not forced to either re-tune their operations and they are not required to truly compete with each other.  Neither consumers nor the nation have anything to lose by forcing the airlines to adopt business models that are realistic for themselves.  If they cannot serve the routes, someone else who is willing to try should be given a chance.

 

Filed under: Airline News, Airline Service by ajax
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Today in the Sky, a USA Today Blog, has posted THIS story about United Airlines doubling their 2nd checked bag fee from $25 to $50.   Citing volatile oil prices and the fact that oil remains almost double what it was a year ago, United Airlines is raising this fee for a 2nd checked bag with the usual disclaimers (elite frequent flier members, business class passengers, etc don’t pay the fee.)

 

While the checked bag fees may be working for some airlines, it still strikes me as dishonest.  What United is saying essentially is that it costs them $50 to carry that second bag in addition to all the other fees you are now charged for flying their airline.  Not really true.  What they want is more revenue to fly profitably and I’ve no objection to them asking for that.  But to couch this as necessary for checking bags is just silly and fosters resentment from passengers. 

 

This fee affects a relatively small portion of travelers and will likely have the effect of simply reducing the number of 2nd bags checked.  Travelers will instead stuff more into a carry on and 1st bag. 

 

Please note that Southwest Airlines continues to charge no fees until the 3rd bag is checked.  All of these additional fees just leave a foul taste in one’s mouth over legacy airlines in general.  How long before they suggest tipping flight attendants in order to reduce their salaries?

 

 

Filed under: Airline News, Airline Service by ajax
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My brother brought this site to my attention yesterday.  It is Continental Airlines’ PDA website and it has some handy features in a simplified format that make checking reservations and flight status, for instance, very easy.

 

http://pda.continental.com

 

Every airline should make it this easy.

Filed under: Travel Hints by ajax
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Given the semi-success of the all business class airlines that formed around flying from NYC to London, I’ve wondered if there wouldn’t be a demand for such service between Los Angeles and NYC.  Frankly, I wonder if an all First Class service between those two cities wouldn’t be in demand. 

 

I could see an airline such as American Airlines or Delta Airlines or United Airlines fitting out a 737-800 or A320 with their international business class or first class product and offer a customized service from the curb to the airplane as well.  If one flew from LAX to EWR, it would be as convenient as convenient gets and serve industries such as the entertainment business with near private jet service. 

 

The airlines would simply need 2 or 3 dedicated aircraft refitted and could draw upon senior staff for such flights.  With lie flat seating, the airline could offer both morning and evening departures from each city and by flying into EWR, put their customers close to Manhattan.  They likely could charge a small premium (10 to 20%) over their existing product just to allow people to avoid flying with the masses and the associated delays that come with more people on one airplane. 

 

That is the one city pair that could support such service.  I do believe it could have potential for profitability but I also believe it would raise the profile of the airline as well.  

 

 

Filed under: Airline Service by ajax
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In 1959, an almost new Braniff L-188 Electra II aircraft, Lockheed’s first jet powered turbo-prop airplane, was flying from Houston to New York via Dallas.  After its brief stop in Dallas, the Electra II approached a line of thunderstorms near Buffalo, Texas.   At about 11pm in the evening, the aircraft suddenly disintegrated in the sky. 

 

A Northwest Airlines L-188 crashed a few months later over Indiana and there were peculiar similarities between the two crashes.  Both airplanes were essentially brand new and both lost their wings and disintegrated in the sky and rained parts of the aircraft over a large area.  People began to speculate that the L-188 was a death ship and some even made jokes that tickets weren’t sold on Electra flights, just chances.

 

These events and others made people afraid to fly the aircraft and there was a movement to ground the airplanes until the cause was found.  Instead, speed limits were imposed and a crash program initiated to find the problem or problems with this aircraft.  Nonetheless, Lockheed saw its good fortunes change to bad and the L-188 never saw the kind of commercial success that was Lockheed’s custom.

 

It was eventually discovered that the airplane had a problem with “whirl mode” flutter.  Because of the way the engine was mounted, certain gyroscopic movements of the engine weren’t adequately damped by the engine mounts and wing structure.  When these movements “coupled” with other harmonics of the airplane, the engine tore the wing apart in just seconds.  Ironically, the problem was solved primarily by placing weights on strategic parts of the mounts which then both dampened and changed the harmonic vibrations.

 

Despite that, a version of this airliner flies today as the P-3 Orion maritime patrol aircraft.  What is more remarkable is that NOAA flies two of these aircraft as “hurricane hunter” airplanes.  These planes have the mission of flying directly into and out of hurricanes at a variety of altitudes and speeds.  When a hurricane such as the one approaching the Florida Keys right now (Hurricane Ike / 2008) come along, these aircraft fly this mission into violent winds and rapidly changing conditions several times a day and they are not specially reinforced to withstand any greater loads except on their deck and only to hold the heavier loads of their instruments.

 

Ultimately the Electra II survives to still fly more than 50 years after its first flight and more than 45 years after its fatal flaws were discovered. 

Filed under: Trivia by ajax
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As an experiment today, I decided to go through the process of booking a flight and estimating the cost of the ticket and fees that might be associated with that trip.  To be fair and give a reasonable representation, I’m going to assume that I’ll enjoy a couple of beverages (but not liquor or beer since I don’t drink on flights as a general rule) and that I’ll be hungry.  To make it interesting, I chose to fly from DFW (where I live) to EWR (Newark Liberty International Airport and where my brother lives) and I’m going to choose 2 airlines for comparison.

 

To start, I visited American Airlines’ website because AA is, after all, the dominant carrier in my home town and most likely to offer a variety of flights that are non-stop.  A reasonable person seeks out non-stop first, right?

 

I found a flight leaving on a Friday morning and a flight returning on a Monday morning so that I could visit for the weekend.  After entering my preferred criteria, AA shows me a set of flights that, to my surprise, are labeled as being $164.00.  I’m feeling good suddenly.  I chose the outbound flight and it then asks me to select a return flight.  Hmm, there is that same fare so I choose an early morning return for the same price.  It felt like my roundtrip fare was $164 the way it was presented even though I actually know better from my own extensive experience.  The presentation gets one’s hopes up I suspect.

 

It wasn’t.  It was $164 each way for total of $328 and that, my friends, was as super saver fare.  The standard Economy saver fare (still not the full economy fare and therefore still subject to some restrictions) was $876 each way for a total of $1752. 

 

Now, my super saver economy fare was to also be taxed $21.00 for fees levied by various governments.  Now I’m up to $349.00.  Mind you, that’s what it has cost to simply book the flight and let me note that if I want a paper ticket (which would be unreasonable today but wasn’t just 8 years ago), I would pay an additional $25 and I would only have that option *if* I lived in a country where paper ticketing was required such as a Latin American nation.  Yes, they’ll let you pay $25 to receive a ticket if you live in a country where e-ticketing isn’t permitted. 

 

Now, since I’m flying to visit my brother, I plan to bring him a few things and since we tend to go out and enjoy ourselves, I’ll be taking my larger suitcase and need to check that bag.  The first checked bag fee is $15.  In some respects people have been seeing that as almost reasonable.  How reasonable does it look when you realize that you pay that fee EACH WAY?  Yup.  $30 for roundtrip baggage check of my bag.  If I were traveling with two bags to be checked (unreasonable), it would cost a total of $80 each way to transport two bags (and they still have to be under 50lbs each.)

 

So, just to plan, I’ll need to find out what my food and beverage costs will be for this trip.  I’ll be wanting a couple of soft drinks or cups of juice each way and it turns out that on AA, this will be complimentary for me.  GREAT! 

 

Both of my flights will be morning departures and it would be nice to eat a meal enroute so that I don’t empty my brother’s cupboard or force him to stop at a Nathan’s as soon as I get there.  It doesn’t have to be a big meal or a hot meal, just a good sandwich or something similar for a breakfast item.  Checking AA, I find that I have these options for my morning flights:

Snacks for $3.00

• 4oz of mixed nuts
• A 4oz MegaCookie (i’ll be choosing this.)

 

Snacks for $4.00

• Cheese and crackers (not for breakfast!)

 

Breakfast Sandwiches for $6.00 each.

• Breakfast Bagel Sandwich
  Enjoy a plain bagel topped with slices of roasted turkey breast and mild muenster cheese. This sandwich is served with a side of Hellman’s® mayonnaise and dijonnaise mustard.
• Club Croissant Sandwich
  Savor a freshly baked croissant topped with thinly sliced roasted turkey breast and aged cheddar cheese, garnished with crisp green leaf lettuce. Hellman’s® mayonnaise served on the side.

 

Neither of those sandwiches are very appealing but let’s assume I’m hungry enough to get one.  My meal costs each way will be $9.00 for a total of $18.00 roundtrip.  But, hey, I get a free Coca Cola right?

 

So, to take this trip on American Airlines, it will cost me $397 and that doesn’t seem too bad all in all.  However, let’s say my brother and I have just too good of a time and I want to return a day later.   That would cost me a whopping $150 change fee *and* the difference in fares.  Since it would be a morning flight, it’s safe to assume that I’ll be paying full economy fare and that would mean a one day change would cost me $1137. 

 

Now, let’s take a look at taking a different airline.  Since I have done this trip once before on Airtran, I’ve chosen them as my economy option.  It will require me to connect through Atlanta but my departure and arrival times are actually quite close to the non-stop AA flights so I’m happy enough with that.

 

First, I discover that my travel fare options include a super saver fare for $164 each way or a total of $370 roundtrip with taxes.  The taxes and fees for this choice were a stunning $43.00 higher.  Not a good start.  There is some good news though.  Airtran will let me check that first bag for free so I save $30 and find myself at this point with a total cost savings of $9.00 over AA right now.

 

But I will be hungry so let’s check out the options on Airtran.   Hmmm, no food except a complimentary snack of pretzels (which I only know from experience as it is not shown on their website.).  I’ll have to buy some food at an airport and I think that if we assume that I’ll purchase something resembling breakfast at McDonald’s, I’ll probably pay about $4.50 for a couple of sausage biscuits or breakfast burritos (and I’ll enjoy them more too just from my own experience.)  Let’s call my food charges an additional $10 just to be safe. 

 

My all in price on Airtran will be $380 vs AA’s price of $397 for a savings of $17.00 overall.  Now, which would I actually choose?  That’s tough to say.  Airtran offers XM satellite radio which I like a lot but I do own a MP3 player and I would very likely bring it along anyway so that doesn’t compel me towards Airtran.  I do prefer Airtran’s seating, particularly on their 737’s which use a Recaro seat that is a great deal more comfortable than AA’s economy seat.  That *might* compel me to choose Airtran. 

 

However, Airtran also offes a business class upgrade at the gate for pretty cheap prices per segment.  Assuming I could get it for 2 of the 4 segments, it would only cost me $69 each segment or a total of $138.  That is compelling.  In my experience, you need only arrive about 1.25 hours before your departure time and you can usually get these seats.  Flying Business Class gets me a nice seat and that is it though.  For a man like me at 6’1″ with long legs and weighing 275lbs, it’s nice to be a bit more comfortable and I would probably take that upgrade for two flight segments.  So, I would pay $518 total to fly travel an extra hour but be comfortable.  You might choose otherwise. 

 

My point here is that cheap economy fares are pretty much the same no matter what the airline.  At least on trunk routes.  It might be possible to save a dollar here and there but more often it isn’t.  Airtran’s approach strikes me as more honest in that while I do pay the same base fare, I don’t pay for the first bag checked (reasonable) and I do have some upgrade opportunities to a better seat.  I don’t get food but, then again, do I really want food from the airline?  In the real world I do not.  I’ll happily buy a burger or a breakfast at the airport because the food is not only cheaper but a bit more appetizing. 

 

Just for the record, I planned a similar trip from DFW to PDX (Portland, where my mother lives) for the same dates on both AA and Southwest Airlines.  Using the same criteria, here are the all in prices:

 

American Airlines:  $527 (including $21.00 in taxes and fees) for the ticket and a grand total of $575.00 (checked bag fees and meal prices included).

 

Southwest Airlines:  $469.00 (including $76.94 in taxes and fees) for the ticket and a grand total of . . . wait for it. . . $469.00.  Southwest has no baggage fees and they do not offer food.  Would I take SWA?  Nope.  Because it requires me to fly from DAL (Love Field) to ABQ (Albuquerque) and then to SLC (Salt Lake City) where I changes planes and fly on to Portland.  That’s a whipping and it’s just worth it to fly on AA’s decrepit MD-83 for only 3.5 hours to get there. 

In general, low cost carriers such as Southwest and Airtran are providing a slightly lower fare than the legacy carriers.  The difference in fares are mere dollars but that is because we examined economy super saver fares.  Want to know why those airlines soundly trounce legacy carriers?  Take a look at their business class fares.

 

DFW to EWR

AA:  $2902.00 all in.  Since it is business class, there will be no baggage fees and a decent meal will be provided. 

 

Airtran:  $1070.00 but since we’ll still have to buy a meal, let’s call it $1100.00 even. 

 

That is a savings of over $1800.  And it is the biggest reason why airlines such as American Airlines are doing everything possible to hold on to their valued frequent flier.  Sure, Airtran takes about 1.25 hours longer but if I’m running a business, my guys will be flying Airtran because with a savings of $1800, I don’t mind if they lose 2.5 hours of productivity. 

 

This is the real reason airlines such as American and United resent low cost carriers.   Low cost carriers set the price for the “fill” of the aircraft.  Which is the revenue they would not earn if they didn’t sell a seat at a discount price.  In addition, low cost carriers such as Airtran, Jet Blue and Frontier (and to a lesser extent, Southwest) are now competing for those business class passengers at prices legacy carriers can’t come close to. 

 

 

Filed under: Airline Service by ajax
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The Dallas Morning News had This Story this morning.  It seems that Continental Airlines has found itself unable to resist charging a fee ($15) for the first piece of luggage to be checked.  It was encouraging to me that they had resisted this up to now and it is disappointing to see them join the band wagon.  No doubt the argument is that they are leaving money on the table by not charging this fee.  This also changes my mind some on the idea that someone will break away from this pattern among the legacy carriers.  These fees may be around for a lot longer than I originally thought.

 

 

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The USA Today Aviation Blog, Today In The Sky, reported on who operates the worst 30 late flights of the last month.  They are:

 

July’s 30 most-chronically delayed flights
1. Delta subsidiary Comair Flight 5292 (Minneapolis/St. Paul to New York JFK; late 100% of the time by an average of 134 minutes)
2. Delta subsidiary Comair Flight 5614 (Charlotte to JFK; 100%; 121 minutes)
3. Delta subsidiary Comair Flight 5491 (Albany to JFK; 100%; 97 minutes)
4. Delta subsidiary Comair Flight 5739 (JFK to Pittsburgh; 96.8%; 83 minutes)
5. Delta subsidiary Comair Flight 5440 (Washington Dulles to JFK; 96.8%; 83 minutes)
6. Delta subsidiary Comair Flight 5610 (BWI to JFK; 96.3%; 115 minutes)
7. Delta subsidiary Comair Flight 5588 (Norfolk to JFK; 96.2%; 132 minutes)
8. Delta subsidiary Comair Flight 5496 (Philadelphia to Boston; 95.5%; 83 minutes)
9. Delta affiliate Pinnacle 2021 (Charlotte to Atlanta; 94.7%; 97 minutes)
10. Delta subsidiary Comair Flight 5287 (JFK to Minneapolis; 93.6%; 103 minutes)
11. JetBlue Flight 1076 (Richmond to JFK; 93.6%; 78 minutes)
12. JetBlue Flight 136 (Fort Myers to JFK; 93.6%; 76 minutes)
13. JetBlue Flight 1108 (Raleigh/Durham to JFK; 93.3%; 111 minutes)
14. JetBlue Flight 1056 (Pittsburgh to JFK; 93.3%; 92 minutes)
15. Continental affiliate ExpressJet Flight 2412 (Providence to Newark; 93.3%; 69 minutes)
16. JetBlue Flight 160 (Denver to JFK; 93.3%; 58 minutes)
17. AirTran Flight 311 (Milwaukee to New York LaGuardia; 93.3%; 56 minutes)
18. American affiliate American Eagle Flight 4783 (Washington National to Boston; 92.6%; 72 minutes)
19. Delta subsidiary Comair Flight 5640 (Raleigh/Durham to JFK; 92.3%; 98 minutes)
20. JetBlue Flight 160 (JFK to Dulles; 92.3%; 73 minutes)
21. Delta subsidiary Comair Flight 5438 (Tampa to LaGuardia; 92.3%; 62 minutes)
22. United affiliate Mesa Flight 7297 (Chicago O’Hare to Allentown; 92.3%; 59 minutes)
23. Delta subsidiary Comair Flight 5678 (LaGuardia to Jacksonville, Fla.; 92.3%; 53 minutes)
24. Delta subsidiary Comair Flight 5592 (Richmond to JFK; 92%; 80 minutes)
25. American Flight 1629 (Miami to San Juan; 91.3%; 92 minutes)
26. Delta subsidiary Comair Flight 5741 (O’Hare to Cincinnati; 90.9%; 103 minutes)
27. Delta subsidiary Comair Flight 5366 (Detroit to JFK; 90.9%; 86 minutes)
28. Delta affiliate Atlantic Southeast 4358 (Atlanta to JFK; 90.9%; 84 minutes)
29. Delta subsidiary Comair Flight 5496 (Boston to Bangor; 90.9%; 72 minutes)
30. Delta subsidiary Comair Flight 5515 (Detroit to Cincinnati; 90.9%; 68 minutes)

 

22 of those 30 flights involve travel to or from the New York City area and of those, 16 were to JFK airport.  A little more scrutiny reveals that 15 of the 16 involving JFK were flights operated as commuter flights using regional jets.  One would be tempted to simply associate most of the problem with Comair (Delta’s regional affiliate flying many of those chronically late flights) but if it was just Comair’s operations, they would have fantastically late flights for other city pairs as well. 

 

I’m sure a pattern is revealing itself here.

 

First, airports in the New York City area and JFK Airport in particular cannot accomodate the flights unless it is a perfect day.  Since those airports are subject to severe weather both in the summer and winter, a fair number of those flights simply never take off or arrive on time.  Ever.  If there is one minor disruption at a peak flying hour, schedules for most airlines at those airports are shattered.

 

Second, because those flights are regional jets flown mostly by legacy airline “connector” airlines, they take low priority when it comes to dispatching.  If Delta has 25 mainline aircraft scheduled into the airport and another 20 regional jets, then it will give priority to dispatching those mainline aircraft first for the simple reason that there are more passengers on those airplanes.  Regional jets are carrying generally less than 60 passengers on those aircraft and by letting those aircraft arrive late in favor of mainline airplanes, they disrupt the fewest passengers.

 

However, doesn’t it seem a bit deceptive to have flights scheduled for a route that is 100% late?  Wouldn’t it seem deceptive to schedule flights that cannot arrive at least 60% on time with late being no more than 45 minutes at the worst?  Of course it does.  Airlines ask for and get performance guarantees when they buy aircraft.  A new airplane generally has to be within 2 or 3% of the guarantee or airlines receive performance penalty payments and sometimes negotiate their way out of the purchase contracts.  If Boeing delivered an airplane that was 100% over its fuel burn, they would be out of business.  If they delivered an airplane that was 10% over its fuel burn they would be out of business. 

 

The public puts up with this because it is pretty hard to find out just how reliable a flight is when booking a seat.  It can be done but I just did it on a hypothetical flight from DFW to ORD (Chicago) and it took me more than 12 minutes to check out the statistics on just 3 flights.  If those first 3 revealed themselves to be too late on average, I would have spent more time identifying one that wasn’t too late and that did have a seat at the price I wanted to pay.  Selling services that perform that badly would constitute fraud in many other service sectors. 

 

What if airlines had to publish their dispatch reliability and schedule reliabiilty along with a fare?  It would sure make the consumer approach his purchases differently, wouldn’t it?  After all, how willing are you to pay for a full fare economy seat if you know that the flight you are purchasing it on runs 100% late and by as much as 130 minutes?  You probably wouldn’t buy the ticket at almost any price if you are business traveler because those travelers need some predictability and reliability in their schedules.  Likewise, wouldn’t you be willing to pay an extra $20 or $30 to take a different flight at a similar time that *does* have a good track record?

 

One way to evaluate your prospects for a particular trip is to look at which airlines serve that city pair and what their actual performance is for that route.  FlightStats.Com is a good website for this information but don’t be afraid to insist your business travel agent ensure you are on a flight with good dispatch reliability and on time statistics.  It is cheaper to pay $50 more for a good flight than to risk your entire schedule on a flight that has a 100% chance of making you miss a connection and blow an entire business day. 

 

The greater the transparency in the airline industry, the better the service will be.   If we required a variety of statistics be published by airlines in their flight listings, I would be willing to bet there would be a wholesale change in consumer behavior towards those airlines.  Good for good airlines and bad for bad airlines.  Shouldn’t it always be that way?

 

Update:  I’m told by a frequent flyer who flies Continental most often that Continental *does* publish their performance stats on their website when booking a ticket.  To a degree, that is unsurprising since Continental Airlines is one of the very few airlines that has consistently followed a policy of measuring their performance with very real metrics.  A policy that started with Gordon Bethune and has been continued by Larry Kellner.  Well done.

 

Filed under: Airline News, Airline Service, Airports by ajax
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American Airlines, in a rare move smacking of smart, began flying from Dallas Love Field to Chicago O’Hare (Midway would have been better) using their American Eagle subsidiary and the Embraer ERJ-145 aircraft.  The Wright Amendment allows this flight because it uses an aircraft with less than 56 seats. 

 

There are 6 daily flights each way and at very convenient times too.  This is smart because they can price the seats for these flights so they make money and, at the same time, build some customer loyalty for the flights while Southwest Airlines waits until 2014 to fly the same route.  The Dallas business traveler potentially saves an hour or more in total travel time for the same economy price he or she would pay flying from DFW. 

 

By using their 2 gates at Love Field (Dallas’s secondary airport) for these flights instead of competing directly with Southwest on flights to places like Austin and St. Louis, American Eagle Airlines will begin to get traction with the Love Field business commuter for once.  It would not surprise me at all if they introduced their CRJ-700 aircraft on this route with a few first class seats to reduce seating to the Wright Amendment limits.  The CRJ-700 or even the CRJ-900 could be uniquely well suited to this city pair in that could provide first class and/or economy plus seating for a price many would pay.

 

 

Filed under: Airline Service, Airports by ajax
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How do you regulate airlines?  You don’t.

 

You regulate the airports instead.  Rather than constrain airlines by route awards and fare regulation, the better model is regulate airports and we already have an agency that is well suited to the job.

 

Major airports, including those secondary airports in major cities, should be regulated by the regular auction of slots.   By auctioning these slots twice a year, airlines would be forced to consider the value of flying into an airport against the costs imposed on them by infrastructure and resources.  Currently, most large airports in the United States that suffer from congestion do so because of unlimited slot availability or overly high slot allocations per hour.  By setting hourly caps and making those slots available at a price, airlines will have to align their operations according to the value of operating a flight into the airport and the value of monopolizing those same resources would be greatly reduced.

 

What this means is that airlines who have to pay a high price for a slot at an airport such as JFK will be more likely to use that slot for an airplane carrying a larger number of passengers rather than wasting the slot on a regional jet carrying very few.  This would have the effect of shifting those regional jet flights to times of the day when airport use is relatively light.  Critics of such a plan (including airlines) would decry it as a loss of service for people in smaller communities and as interfering government regulation against free enterprise.

 

Nonsense.  Airlines should remain free to operate routes of their choice but they should only be permitted to use public facilities (and that is, in fact, what an airport is) in a way that benefits the whole rather than just their network.  Passengers from Binghamton, NY may have to realize that because they offer so few passengers, it may be necessary to fly at different times of the day and experience some longer connection times because there is no economic argument for them to experience the same service levels (or frequencies) as someone who lives in a major metropolitan airport.

 

By auctioning slots a couple of times a year, you force an airline to weigh the opportunity costs of operating flights into an area on a regular basis.  If Airline A cannot make a revenue argument for flying from Syracuse, NY to JFK at 5:00pm in the evening, then they won’t buy the slot for that route.  If, on the other hand, they can make the revenue argument for 3:00pm, they will.  

 

In addition, it will force more competition upon the airlines for serving such airports because Airline B may be willing to pay more for a slot as a function of having lower operating costs and the airline who manages their costs will be rewarded with greater revenue rather than Airline A who has held on to slots under the current “use them or lose them” regime in place at capacity constrained airports. 

 

Put another way, if Airline A, a legacy carrier, cannot justify bringing 10 regional jets into an airport such as JFK at 5pm in the evening, and Airline B and C can justify bringing in 5 mainline aircraft each into the airport at the same time, the greater whole is better served.  Rather than enjoying those slots as a monopoly, the airlines are forced to regularly evaluate the economics and cannot engage in predatory pricing to deny other airlines opportunities. 

 

The follow on effect of such regulation is that the patterns of demand on airport infrastructure would smooth out some which means airlines and airline facility labor demands would also smooth out resulting in greater productivity on a unit basis.  Airlines would have less incentive to “sit” on gates they’ve leased for peak demands and the barriers to entering a crowded market would be lessened.  If American Airlines has the same number of flights into JFK but they come in more spread out over 24 hours, they need fewer gates and airlines have no incentive to hold those gates for their exclusive use if they cost them money without producing revenue.

 

Does it favor trunk route flying at peak times?  Yes and it should.  An airport like JFK (or ATL or DFW or ORD) should see predominatly high capacity aircraft arriving and departing at those times.  It is more efficient for both the passenger as well as the airline.  It should not be possible for an airline to fly a regional jet between two major cities during the day because of the opportunity cost of doing so.  Right now, airlines are using low capacity regional jets to boost frequency on hub routes and the incremental cost of those passengers makes it more expensive for passengers flying that same route on mailine aircraft. 

 

If the FAA auctioned such slots at airports, they would have a revenue source for additioning staffing at peak times and an incentive for redesigning airways and air traffic control to boost slots at airports. 

 

It would also have the effect of providing a dis-incentive to people who want to fly a corporate jet into a busy hub airport at a peak time.  Such jets offer maximum inefficient use of airport infrastructure at the worst times.  Currently, landing fees offer no disincentive for such aircraft who want to use the airways (modern corporate jets fly at the same altitudes as commercial traffic) and airports (these jets are light and pay small landing fees presently).   The greater good is not served when 4 business people  travel from Cleveland to NYC in a Falcon business jet at 8am on a Monday.  Those people should be traveling on a Continental 737 or 757 to NYC.

 

Likewise, major airlines will have an incentive to right-size their fleets to their routes.   A major carrier will no longer be able to justify “holding” a lot by operating a larger aircraft on a route than necessary because the cost of that slot (presently almost non-existent) will rise to a point that requires a business justification for operating the right aircraft for the right route.  Put another way, a legacy carrier might operate a larger MD-80 on a peak time route, at times, that enjoys only a 50% load capacity just to “hold” that slot for better times.  Under an auction model, that airline can only justify the right aircraft for the right route at the right time and no more.  That legacy carrier might find it of far greater benefit to operate the same route with a Embraer 190 that enjoys a 90% load factor and 30% lower operating costs. 

 

If anything, this pattern of regulation serves to boost competition and efficient use of facilities which, in the end, does benefit the consumer *and* the taxpayer. 

Filed under: Airline Fleets, Airline Service, Airports by ajax
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In the late 1990’s, I worked in a general contractor partnership with two other men.  We reached a particularly bad period where despite all our efforts, our clients weren’t giving us business.  After almost 2 months of giving ourselves $200 paychecks every other week, it was clear that it was time to do something else. 

 

Our particular situation seemed to be based on our costs.  Things like sheetrock and doors had been rising in costs to the point where it became necessary to raise our prices to support the work we did.  There were other competitors, one man shops with a pickup for an office, who were undercutting our bids just enough to win the business.  We faced a choice of lowering our prices to win the business and not have any money or to stand firm and not win the business.  Or so we thought.

 

One of my partners and I were motorcyclists and decided to take a ride during this period that lasted 18 hours.  At one point, we were taking a breather alongside a very quiet road and began talking about our business troubles.  We realized a couple of things that changed our game.  First, the people that were undercutting our business were formerly from larger construction companies setting out on their own.  They were winning on price, not quality and dependability.  Second, we had an operation that had grown some and no longer fit well with some of our clients. 

 

The next business day, we renewed our effort to check in with clients on a regular basis and continued to bid every job available.  By doing this, we began to underline our ability to a project better and for a reasonable price.  We also began to go out and seek new clients who better fit into our business.  This meant asking for the business and delivering exactly what we promised on each job.  The result was that old customers that continued to fit our model came back and we gained new customers who were looking for a company that performed.

 

This should sound remarkably familiar to those who follow the airline industry.  There has been a cycle of attempts to enter the industry by people thought they had a game changing business plan and some were successful while others haven’t been.  Jet Blue brought a new LCC model based on the Southwest turnaround and fleet efficiency but that was also focused on a higher level of comfort and service.  They introduced two types of fleets to right size their routes but stuck with only two in order to benefit from economies of scale. 

 

Skybus came about based on the single fleet, pay for everything model that Ryanair of Ireland built.  They promised rock bottom fares and engineered a plan to accomodate that by flying to secondary cities and airports that offered lower operational costs.  Skybus failed partly because of rising fuel costs but also from a failure to recognize that distances in the US make it much more inconvenient to fly into those secondary cities. 

 

Airlines who identify their niche and develop a plan for it are more likely to survive.  You cannot be all things to all people in this business because that means you have to compete against every other airline at the lowest common denominator.    Why would American Airlines wish to compete against Allegiant Airlines when doing so puts them at a competitive disadvantage?  Allegiant is based on a business model that addresses low frequency, leisure travel combined with ancillary revenue derived from charging for every convenience.  Their labor costs are low and their fleet capital costs are low.   American Airlines isn’t built to compete for that business.

 

Continental Airlines is an excellent example of a company serving the people that fit their niche.  It doesn’t operate a low cost airline, it operates a high frequency, high service system that serves business travelers.  They understand that maintaining a modern fleet with modern conveniences is important to that customer.  They fly where their customers want to go and worry a lot less about being all things to all people when it comes to destinations. 

 

Southwest Airlines has found itself evolving over these past several years.  Often identified with the first time flier in the past, business travelers have realized that Southwest Airlines offers something that many don’t:  dependability.  When they fly Southwest, they know that there is a very high degree of probability that they’ll be able to get to their destination on time and, often, closer to their needs in a particular city.   While Southwest still offers a very low fare compared to its customers and still attracts those first time fliers, they’ve also begun to serve the needs of the business traveler by remodeling their gate areas to offers business conveniences such as laptop power ports.  They are in the process of testing in flight internet connections for the business traveler as well. 

 

In contrast, you have United Airlines who has pursued the “be all to everyone” philosophy and it shows.  With a huge network to leisure destinations, they get soundly beat by other airlines who compete on price.  Their national and international business traveler destinations are served by older, unrefurbished equipment and their service model denies the conveniences a business traveler expects such as meals, beverages and even charging for checking the first bag.  Notice that Continental hasn’t ignored the incremental revenue from such fees in general (they charge $25 for the 2nd bag checked) but they haven’t offended the business traveler with 1st bag checked fees either. 

 

American Airlines and United Airlines have pursued a strategy that offends or, at the least, disappoints their core customers.  Continental, on the other hand, recognizes that the opportunity cost of forgoing that 1st bag fee is paid back in customer loyalty when it comes to choosing Continental. 

 

The last thing the business or frequent flyer wants to hear is that the airline resents them and wants more.  Indeed, many have said publicly that if an airline wants more money, charge a higher fare but don’t insult them by charging for a bottle of Ozarka water on a flight.  It strikes such people as petty and money grubbing.   At the same time, these travelers don’t need to be singled out as the ones to carry the burden of paying for a flight.   Don’t charge exorbitant business fares simply because the company is paying for it rather than traveler.  These business travelers are smart people and generally the ones traveling are some of the smartest.  They will begin to recognize that the fare to travel somewhere on business becomes inefficient at a certain point.

 

I suspect that it is time for airlines to begin eliminating some perks in the business class cabin as well.  Often the business cabin is occupied by many travelers who purchased full fare economy class tickets and used their frequent flier status to upgrade into that seat.  Airlines will have to begin to find ways to differentiate their service and charge accordingly.  Perhaps a full fare economy ticket should be upgradeable to an Economy Plus seat rather than a business class seat. 

 

Service is important to the frequent flier but what is that “service” that is most important?  Is it a hot meal?  A business class seat?  A friendly flight attendant?  No doubt each of those things has some importantance but I’d argue that the primary measure of service is whether or not you can dependanbly transport your customer from point A to point B on time.   That is, after all, what the airline is contracting to do.  Deliver that and the customers bags as well, and you’ll likely win their hearts and minds.

 

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