The airline business is pointless.
If there was any kind of alternative to traveling further than 250 miles, we’d all take it. And celebrate.
Instead, we game the system to get the lowest fare possible, hope our upgrade clears, and try to make sure there’s internet access on board to help us forget that as an indicator of man’s achievements, air travel is our only major innovation that’s going backwards. Having experienced Concorde, that’s a realization that hits me every time I fly.
Fifty years after the Boeing 707 was heralded as the first jet airliner, we still fly at exactly the same speed that modern miracle achieved on its maiden voyage. 591 MPH. Imagine where things would be if technological achievement had remained frozen in 1959. Today, New York to London is still 6 hours, give or take, depending on the jet stream.
Maybe that’s the real strategy behind global warming. Heat the planet, create violent weather conditions, jump on board the jet stream. It would make more sense than anything else those that run the airline industry have offered as business rationale.
Let’s look at just this decade. Since 9/11 the industry has:
- Gone through five Chapter 11 reorganizations
- Supported two mergers
- Eliminated about 250,000 jobs
- Been responsible for a mountain of debt and pension defaults.
If over that same period you ignore the tens of billions of dollars written off to goodwill write-downs, and the hundreds of millions of dollars of reorganization costs, then the airline industry only lost around $40 billion.
$40 billion. In an industry trying to make money.
With no competition.
That every one of us will have to use multiple times this year.
And yet. The most recently published quarterly reports have been met by airline executives with rejoicing over the increases they have generated in ancillary revenues. Things like baggage fees and on-board meals. United earns about $14 a passenger in those fees. They also lost $137 million in the 3rd quarter.
What they don’t know is the cause and effect of either number on the other.
In other words, they don’t know if charging for bags increases revenue or drives people to other airlines.
Seems like a fairly rudimentary piece of analysis. If we do this, will be better or worse off?
United don’t know. (No news there for the airline that came up with the profound brand positioning, Rising. As opposed to the alternative, one presumes.)
Neither do any of its competitors. One of the many reasons why the airline industry has lost more money than it has ever made.
But the airline industry does have value. As a business model. Of what not to do.
- Don’t sell your services for less than it costs you to provide them. Unless you know you can raise them tomorrow. Not think. Know.
- Don’t build a business that is entirely dependent on any single resource, especially when controlled by a limited number of suppliers who are ambivalent whether you succeed or fail.
- Don’t build a business around a small group of people with highly specific, and hard to replace skills. And if you must, align their interests with yours. So that the success of the business is their business - as well as yours.
- Don't restrict innovation. If your business can't offer a significantly more valuable experience every three years, your customers will find someone who can. Unless you can corner the entire industry. In which case, you don't need anyone's help.
- Don’t focus on narrow metrics that support what a great job you’re doing while the business is falling down around you.
The truth is out there.
Just don’t expect to find it by looking up.