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?