After railing earlier this morning about how customer satisfaction doesn’t matter in the airline industry, Openskies (all-premium service between NY, DC & Paris) announced a money-back guarantee where they’ll refund the price of your flight (save for a handful of mandatory fees) if you’re not fully satisfied.  Fly between now and November 30th, and you’ve got 30 days after to complain to them.

It would, I think, take some serious, uh, guts to have them give you back the $1500 you paid for your flight, but there ya go.  I’m reminded of a friend’s father once trying to send back a $300 bottle of wine at a restaurant and getting in to a fight with the sommelier,  who wouldn’t take the bottle back.  That’s neither here nor there.  I can’t imagine many will follow through on this, but it’s a nice marketing ploy.

A NY Times article from last week notes that airlines have been successful driving domestic fares up 20 percent in the second quarter of this year over the same quarter last year (international fares are even higher).  The airlines have accomplished this (as the OTR has said over and over again, if we may pat ourselves on the back) by controlling capacity in a way we haven’t seen in ages.  As one analyst says in the article, “Airlines are continuing to show voluntary capacity discipline for the first time not just this decade, but really since the industry was deregulated in 1978…”

That’s a huge statement, because the industry has really been in turmoil since deregulation (note: I am not in any way arguing for re-regulation).  Pre-deregulation airlines and the government set fares on each route, allowing airlines to offer a bit more legroom and some crappy food in exchange for making a profit.  For years after deregulation airlines continued to offer the same service, only they couldn’t charge as much for it.  That doesn’t sound like a good business plan.

Only recently have airlines fully come around on this fact:  they are manufacturing companies in a commodity market.  They manufacture connections at hubs (or, for direct markets, manufacture point-to-point flights), trying to minimize costs as much as possible while using yield management to drive as much revenue as they can.  Note:  they are not in the business of providing meals, comfort, movies or baggage transfer.  Those things now do (and should) cost extra; they gained exactly zero revenue by being extra, extra nice to you, and they lost roughly zero revenue by taking away all of those things.  It doesn’t take a genius to realize this fact:  providing service on a flight offers no benefit to the airline.  None.

Yes yes, customers complain about poor airline service.  Boo hoo.  They can Tweet all they want about how badly they were treated, but in the end, we’ve seen a billion times:  they fly whoever is cheapest.  Please don’t write to me about how you’ll chose one airline over another — if you’re paying for it, you’re going with the cheapest.  And if your company is paying for it, there’s a growing chance that they’re telling you which airline to fly anyway.

Spirit Airlines, which everyone complains about all the time (and from whom I just bought a roundtrip ticket from New York to Detroit for $80) is profitable.  That’s all you need to know:  control your costs, and customer service will have no bearing on  your profitability.

Ok, fine, JetBlue’s customer service probably had something to do with their initial success.  But, as high-profile recent incidents have shown, keeping that level of service up as you grow the company is near impossible.

Oh, and service also doesn’t really matter on international premium class flights either.  Sure, airlines need to offer a minimum level of service in business class.  But US airlines get away with a sub-world-class business class product and, guess what:  if they control capacity they turn a profit offering that level of service.  We can talk all we want about the glories of Singapore Airlines and Etihad and Emirates, but they’re in an entirely different business than the airlines in the US.  Other than bringing people from here to there, they have roughly zero in common with what AirTran does for a living.

The services provided up front are fun to chat about and write about and share photos of, but for US airlines, it doesn’t matter at all.  As Eos learned the hard way:  so much international premium traffic is tied up in corporate agreements that for the most part, travelers aren’t choosing who they fly with anyway.  To some extent, corporations will base a part of their decision on which airline to make an agreement with based on the services provided; but these days, it matters much less than it ever did.  Flat bed seats are nice.  $2400 round trip business class tickets to Europe are nicer.

The customer-facing stuff is the fun part of the airline industry, I recognize that.  But the US industry’s profitability rests entirely on managing costs and keeping capacity at a level where they can charge fares that cover their costs.  That’s it.  It’s not sexy, but Spirit (and others) have shown that quietly turning a profit makes much more sense than pretending you offer the world’s greatest service in the air.

I’m kidding, there is no positive note.  A investigation by the Chinese equivalent of the FAA found that 200 Chinese pilots lied about their experience, including many former military pilots who have become commercial pilots.  Worse, about half of those who had lied on their resumes worked for the parent company of Henan Airlines, which experienced a crash last month that killed 42 people.

You may read some hysteria about avoiding Chinese airlines, but the fact of the matter is that China’s airlines have actually been quite safe — certainly as safe as any Western country’s standards.  And God knows you’re far safer flying around China than driving through a nation populated by those who have only had drivers licenses for a matter of months.

Airlines have been announcing their business class fare sales to Europe for the Thanksgiving and Christmas time periods.  Fares generally start in the $1600 round trip range (about 1/3rd the regular fares).   A few of the highlights:

Continental Airlines business class deals to Europe start at under $1300 round trip (plus tax), including flights from Newark to Brussels, Manchester and many more.

SAS offers cheap business class fares starting at just over $1400 round trip (plus tax) including flights to Oslo and Stockholm.

Lufthansa has cheap business class fares for under $1200 for flights to London and many other European cities.

I just saw that India’s lowfare carrier SpiceJet is launching its first international service from Chennai, India, to Colombo, Sri Lanka in October.  The route, which is less than 90 minutes in the air, makes sense as a first international destination (close; quick turnaround; solid amount of demand).  But I was thinking about how different the Indian air traveler is from the American air traveler.  Specifically, the flight from Colombo to Chennai departs at 3:15am and arrives at 4:35am, with no time change.  Has there ever been a route in the US with a similar middle-of-the-night departure time with such a short distance?

From the time of deregulation through 2007 or so, the US airline industry saw new entrants launch with considerable frequency.  Lots tried a variation on the east-coast-to-Florida-low-cost model (Kiwi, Eastwinds, a bunch of others), while others went upscale (MGM Grand Air, Eos, MAXjet, etc).  Restaurants (Hooters), clothing companies (Roots in Canada), and others will no seeming connection to the industry tried their hand.  Save for a handful (AirTran, Frontier, JetBlue, Spirit, Allegiant) they’re all gone.  That these airlines went out of business somewhat constantly hadn’t stopped others from trying.

But the spiraling economy has managed to stop new folks from trying.  We haven’t seen a new airline since Virgin America in 2007.  That they have yet to turn a profit, and have struggled to build a route network that was in their original plan (something tells me their recently announced flights to Cancun and Cabo were not in the original business plan) shows just how difficult it is even a well-funded new entrant to succeed.

So, I was thinking about whether this means there’s simply no opportunity or whether there are ways to succeed once the economy comes back.  So I turn to my readers — what model could a new airline succeed with in the US?  I’ll throw one out there:  Everyone rags on Spirit, but they’re profitable and they’ve managed to carve out a nice niche, even with some competition on Latin American routes from American out of Ft. Lauderdale.  One idea: could the same set up work out of Los Angeles?  With some feed coming from other West Coast cities, but primarily serving VFR-focused cities in Mexico (ie, not the major tourist destinations, which have plenty of service) and Central America?  With an extreme low cost model, with fares starting at $9, wouldn’t there be an enormous amount of demand for flights to San Salvador, Guatemala City and others out of Southern California?  Just a thought…I’m curious what others think…

Ever wonder how many calories were in that bag of peanuts you no longer get when you fly?  Neither have I.  But that’s moot, as the government will require airlines to post calorie counts for onboard food beginning next year.  Airlines (and other companies forced to comply with this law) are complaining about it in part because they don’t have menus on which to post calorie counts on many of their flights.  New York City has required chain restaurants to post calorie counts for a year or two now and a study has found that there has been no change in consumer behavior since learning, for example, that some Jamba Juice drinks have 1,000 calories.   On the other hand, a donut at Dunkin Donuts has fewer calories than a bagel.  Go figure.

That’s neither here nor there.  Airlines are actually required to post calorie counts now, but no fine kicks in until next year, which is when they’ll actually enact these changes.

Six ground crew for Malaysia Airlines have been suspended after a passenger was found dead in the bathroom of a 737 that had arrived in Kuala Lumpur from Ho Chi Minh City.  An empty syringe was found in the bathroom, leading investigators to believe the passenger had overdosed on heroin on the plane.  The crew were suspended because they had failed to check the bathrooms after the plane arrived.

The WSJ has an article today about the various factors that go into setting airfares in a given market.  The short version is that if there is a lowfare airline in the market, you’ll pay less (shocker).  The article does go into some detail about the area of airfares that consumers find most annoying:  why price doesn’t seem to correlate with distance.  I’ve paid $1100 to fly from New York to Cleveland and $300 to fly from New York to London.  Most people who have flown even a modest amount have a similar tale.

Consumers, obviously, look at airfares in a completely different way than airlines do.  Consumers think airfares should be correlated with distance (until they start to think about the implications for this and then realize they don’t really want to go back to paying $2,500 for a flight to Tokyo because they like to pay $89 to fly from New York to Boston).  Airlines, though, care primarily (or only) about maximizing revenue.  I really brought this up because there’s an American Airlines exec quoted in the article who, I think, puts this in the best perspective:

He says, consider airfares to be like Coke — it costs a certain amount in the supermarket (say $1.29 for a 2 liter), but much more at the movies (say $3.29 for 24 ounces).  While that’s annoying, no one freaks out about the price discrepancy because people realize it’s simply different — you’re not just paying for syrup and carbonated water.  Consumers don’t really buy this argument with airfares, but airlines see the seat as a commodity and most of their actions are based on maximizing revenue, not making sure consumers are happy with airfare pricing strategies.  The Coke analogy was as good as any I’ve heard…

a) Thanks to someone at Airliners.net for this
b) I’m on vacation this week so stories will be short, sweet and sporadic.  For example:

Funny thing on Saudi Arabian Airlines’ website:  On their route map, they have Frankfort, Kentucky, listed as a destination.  I’m certain they mean Frankfurt, Germany.  But the idea that they fly from Jeddah to a small midwestern city without an airport is amusing.  Also amusing is that they’ve placed it on the map somewhere in the center of Oklahoma.