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.

Need stock photos?  I sell some at iStock!

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?

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 departedflights.com.  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?

United's New Look

Just after the merger of sCO and sUA's Passenger Reservation System, Jeff Smisek said, "Functionality first, design second."  He was referring to Continental's outdated website.  I believe that the change is just around the corner.  A few weeks ago while I was checking in in Portland, I saw something exciting.  United was testing out a new look for their check in Kiosks.  Have a look:

The start screen has a much more direct approach, asking customers to get started from the first page.

This is the flight view, show flights, equipment, seats, and times. 

The final screen, showing boarding time and gate information.  The system also alerts you if you are precheck.

 I was super excited, and then I realized that this design matched one of the designs in a #flyerfriendly ad:

This #flyerfriendly ad shows a new website, that seems to work beautiful on the iPad.  

So a few days later I asked United if they were going to update their iOS app for iOS7, and they said, "Stay Tuned."  As a guess, I believe they are about to release all new apps, launch the new website, and roll out the new kiosks very quickly.  

All I can hope at this point is that they let me have a sneak peak at the new site!

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

The Friendly Skies Are Back!

It's not that often that a truly great ad campaign is created, but in 1965 Leo Burnett created one of the greatest:

Burnett said, "I have learned that any fool can write a bad ad, but that it takes a real genius to keep his hands off a good one."  When United let go of the ad in 1996, the new agency was smart to keep their hands off of the friendly skies.

BUT, today marks the historic return of this amazing campaign.   Flyer Friendly.  Info Friendly.  New and Improved Friendly. 

Read more about United's new campaign on the United Hub.

This new twist on an exceptional classic brings the greatness of the United Subsidiary and the Continental Subsidiary under one statement; friendly.  If you read my blog, you know that I have been a long supporter of United, and when the merger happened, I welcomed the New United into my life.

I believe that had the merger never happened, there would be no New and Improved Friendly.  Each of the United Subsidiaries have something special to bring to the plate.  Continental brought its great mobile app.  United brought its fantastic hubs.  And together, under Jeff's lead, they have created a service focused airline.

For a long time I've dreamed of going back to the golden years of flight, and though things will never be the way they were in Catch Me If You Can, United has done an amazing job of creating a truly great experience.

United has actually become Flyer Friendly.

I will have more to say as I continue to fly with United and see what else they have out.  But I believe that this is the start of something great.  Oh, and Leo, I think that a greater genius figured out how to take your great ad and make it even better.

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

Earn More Rewards With United

As you all know, I'm Premier Platinum member (Not far from 1K, after a lot of work) in United's Mileage Plus loyalty program.  But did you also know I'm earning even more rewards using United's PerksPlus?  I work with several people and all of us travel.  Since all but one of my team flies United (the other person flies Don't Ever Leave The Airport), it became advantageous to see if there was any way my company could be earning valuable miles.  The answer: United PerksPlus.

United's PerksPlus is a revenue based system where points are accrued based on the revenue to either a hub (1 point per dollar) or a non-hub (2 points per dollar).  What can those points get me?  Free flights, free status (up to Premier Gold), United Club passes, and more!

Now I'm not only earning miles for my flights, but I'm also earning points from my entire team's travel. But is that it?  Of course not!  I am also a member of the United.com Club.

The United.com Club has a $25 per year membership fee.  For each flight I fly that I booked on United.com, United gives me $5 in my Travel Bank.  If I book 100 flights on United.com and fly all of those trips, I'm going to earn $500 in my Travel Bank!

So, with some simple steps, I'm earning miles, points, and dollars!  Not to mention I use MileagePlus shopping, MileagePlus Dining, and more!  Make sure you look into these options so that you continue to earn the most miles and points that can be used for reward travel on United and Star Alliance Partners.

But, hey, I'm just some guy who likes to look at airplanes, so what do I know?  (I know I'm flying to Hawaii for free thanks to the above steps!)

Renting A Car Should Be Easier

The Budget counter at OKC.

We've all seen the commercials that make renting a car look like a glorious event.  And for those of us who are road warriors, we know that the car rental is the weak link in the chain.

I've rented at least once from all of the majors rental companies.  I've settled with Budget.  "Why?", you ask.  Why not?  I don't believe that it really matters.

My big issues stem from the lack of a customer focus.  Budget rewards me with 50 to 100 United Mileage Plus miles (at select locations), and the Budget Business Program, which earns me a few dollars with each rental.  However, I have no real reason to stay with Budget, they just got lucky to get me.

There's not an amazing system out there for any Car Rental company either.  Budget and Avis both have an app.  Do you know what "Hello World" is?  Is commonly the first app that any programmer builds.  All it does is say "Hello World" on the screen.  That's about how much the Budget and Avis apps do.  And within their websites you have to know your confirmation numbers, the system doesn't present those for you.

Airport arrival is also annoying with many car rental companies because it's so very different at each airport.  I'm not talking about the location of the car rental facilities, but the process.  At some airports I need to go to the counter, at some I go to the Fast Break counter outside, and at others I just go get a car.

Where does this problem stem from?  The business model of a car rental company stems from its profit centers.  All car rental companies make money when they purchase their cars, not when they rent them.

The Life Cycle of your Rental Car
Rental cars are often bought in bulk by a local/regional manager, not on a national basis.  The goal is to buy enough of one car to get a strong discount.  As you know, cars depreciate (very quickly I might add), so the goal is to purchase a car with a strong enough discount that you can sell it 40,000 to 60,000 miles later for about the same price, or even make a profit.  Once the car is purchased, they need to get it on the street, making money, as soon as possible.

So, you rent the car... You ABUSE that car.  There's a lot of rough travel that happens during that time. Come on, you know you rent the Impala and drive it off road.

When the car hits a certain threshold (which really varies by location), the car is retired and sent for Recon (industry term: recon is a term used to describe reconditioning of the car which includes and cleaning or repairs needed before sale).

Once the cars are ready they are sold.  It used to be that most of the cars were sold wholesale at the auction, but more and more the car rentals companies are selling retail to buyers -- this practice results in  a higher sale price, which means more profit in their pockets.

So, here's the truth about car rental companies, they don't care about the people who rent their cars.  They care about the buying, selling, and depreciation of the cars.

Renting a Car Should Be Easier
Whats my point?  If rental car companies focused more on making the rental experience better, there's a chance they could increase their ancillary revenue.  Yes, I am calling the rental portion of their business ancillary because it is.  That's not where the money is made.

Take it from me, it's never going to happen.  Until some rich hotshot gets in the business, no one is ever going to make a great car rental company.

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

Why should you sit in on the #unitedplanechat about Bags?

United invites you to participate
in their #unitedplanechat
on Twitter.

I've been a big fan of #unitedplanechat since its inception.  One of my early posts was all about the chat.  But why would I take the time to highlight a chat all about bags?

People complain about their lost or missing bags all the time.  United handles huge numbers of bags every day.  With that many bags any company might lose one or two.  How does United recover your bags?  What types of special services are there with bags?  How do the bag tags tell United employees where your bag is going?

During the #unitedplanechat on June 3rd at 1:30 pm Central Time, you can ask all of these questions and more!

Oh, and you might want to be on the lookout for the #unitedgiveaway hashtag on Twitter.  You might just get a chance to win 8 passes for BagsVIP, a great new service from United.  Learn about BagsVIP Here!



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