Saturday, February 22, 2014

Airlines and Profit

Disclaimer: Anyone who has ever spent more than 5 seconds on this blog knows I am obsessed with United.  You know that I admire Jeff, his team, and everything about the airline. That being said, the things I'm going to say below are not directed at United, but at the airline industry as a whole.

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The Golden Days Are Gone.
I often sit at my kitchen table at home and look at my Genealogy of US Airlines poster.  I think back to when air travel was something special.  Now don't get too excited, because I've never dressed up just to get on a plane.  The days when the customer was king are long since gone.

I love Free Enterprise.  I love that in America companies can work hard to earn their money the way they want.  Now that all of the mergers are started or behind us, the fear is that US based airlines are going to become focused on one thing - the almighty dollar.

I heard a rumor last night that one of the major airlines is considering replacing their ramp employees with outsourced labor.   This was an effort to cut costs, but at what cost?

Save a Buck now, or make a million later?
CEOs world over look for ways to make their company more profitable today.  But often they are near sighted.  Our fast food world has bled into the way we think about making money.  How much money can I make TODAY?  A move like the one I described as to do with making money today and not creating a lasting legacy.

The economics are pretty simple: Customer Satisfaction brings more long-term money than cutting expenses ever can.

Let's just say the airline mentioned above is United.  Here's the scenario:

Post-merger, both sCO and sUA employees and customers have been highly dissatisfied with the changes.  Each feel like a part of their culture was ripped away from them (and it was).  Jeff had one very important job: create a new culture that everyone could get behind.  Since the single reservation system on March 3rd, 2012, the culture and customer satisfaction have improved.  However, with the CLE announcement, sCO folks are up in arms again.  The question is really, "what's next?"

So let's say Jeff decides to outsource ramp work.  In an already unstable environment, employees see half of their co-workers get fired.  The remaining employees become constantly afraid of losing their jobs.  That fear manifests itself into frustration that is often taken out on the customers.  With lack of customer service already being the biggest complaint among United travelers, United can't afford any more customer service problems.  This sends satisfaction ratings on a downward spiral.  Customers begin to look elsewhere.  They see fun and exciting cultures on Virgin America and Southwest.  They leave.  United falls.

Anyone remember TWA or PanAm?
"Too big to fail" is the ultimate downfall.  A CEO who believes that he can fire half of his staff and still keep his employees and customers happy must be living in Colorado (you know, because he's stoned out of his mind).  Look at the three remaining legacy carriers.  Each of them has huge market share, but none of them are the best.  Any one of them could make a few changes and not only become profitable, but also become sustainable -- or any one of them could fall to the perils I talked about.  Who knows, we might see a surge with the LCCs, and the legacies may fall to Aviation History.

But, hey, I'm just some guy who likes to look at airplanes, so what do I know?

Monday, February 17, 2014

Good Bye, CLE.

If you're like me, you are sad to see United close CLE has a hub, but you kinda saw it comin'.  I've only passed through Cleveland two or three times, and I have yet to fly on the direct flight from OKC (but I intend to do that before the de-hubbing is complete).  More than anything, I want to say thank you to the United and #ExCon employees who have dedicated their waking hours to the #flyerfriendly skies.

From a cultural standpoint, I know that Jeff and his team probably struggled with closing a Continental hub since there has been so much sCO frustration with the new United.   But it's a loud statement that United is focused on creating a profitable airline.

I spent a good deal of tonight reading wikipedia articles on United Shuttle and Ted, which led me to  I spent about an hour looking at route maps and I got to thinking about what the CLE close means to the United route structure.  Nothing.  The new United is over saturated in the northeast.  Between O'Hare, Liberty, and Dulles, there's no where you can't get on United.

I would like to make it clear that I'm not saying the people of Cleveland's United Team mean nothing, but specifically the route system.  I greatly appreciate the work that each and every CLE United Team Member has provided.  

But it got me thinking about what United's Route Structure is missing.  My first thought was a northwest hub... say SEA.  SeaTac would provide a great strategic location for International and Domestic routes.  But the Seattle market is a bit crowded.  Between Alaska (Horizon) and Southwest, there are so many routes that cannot be penetrated.  There's also so much International service from SEA that it would be tough to overcome.

Although I think that putting more direct flights to SEA would be great, I really think the best place to expand United's route structure is on the opposite side of map.

Orlando.  Nobody hates that town more than me (expect maybe the person who's been playing an oversized, stuffed version of Mickey for the last 15 years), but I believe that MCO could play a pivotal role in United's hub-and-spoke system as well as generate new revenue streams by creating more point-to-point options for holiday flyers.

The first reason I would pick the City Beautiful comes down to the amount of mainline flights in and out.  United has a large footprint at the airport already.  With US Airways (whoops, sorry, #worseAmerican) merging with oldAmerican there will most likely be a shift from gates 30-59 to gates 1-29, freeing up more space for more flights.

Secondly, I think that utilizing MCO would be a relief of burden for IAH.  Houston has a huge reach to Central and South America, but the airport gets clogged more often than not.  In the spring time when the April Showers bring delays for hours, MCO could serve as alternate routing for the Americas and the Tropics.

International Travel could also be eased with a southeast arrival.  Using Florida at a port of entry would allow business travelers a new approach to the US.  It would also allow Star Alliance members a new way to get travels to United.

Lastly, everyone is already flying to Orlando, why not give more direct flights.

I know that this blog is probably wasted breath, but I think United would do well to consider it.  I also know that I still wish my friends in CLE were not going to lose their jobs.  But I wish them the best, and I hope that this doesn't hurt the culture that was being built.

But, hey, I'm just some guy who likes to look at airplanes, so what do I know?