It’s year-end wrap-up time, so I thought we’d take a look at the 5 things we learned about airlines this year:
1) Mergers do not have to be a failure. Seemingly forever, an airline merger was often a signal that two weak airlines were jamming themselves together with hopes of being able to take on more established airlines that way. The complexities of the merger often doomed that strategy. So when Delta and Northwest announced their merger, all signs pointed toward a mess. We were all wrong. The combined airline has a global route network with reach we haven’t seen since Pan Am, and a domestic network that, unlike Pan Am, will allow it to thrive. Add to that solid labor relations and it looks like we have a winner (despite the fact that every frequent flyer complains about SkyMiles). Continental and United look like they’ll also have a winning mix when they’re combined as well (Continental was very strong heading into that merger, and United was most definitely on the upswing). It still feels to me like we have one more larger merger coming (US/AA or AA/AS) and that’ll be it for a while.
2) Airlines do not need to drive prices down to be successful. For years, the knee-jerk response to any competitive action in the industry was for a competitor to drive down prices. This worked as long as fuel was cheap and they were able to drive up prices for business travelers. That was successful in that it made passengers think that a roundtrip transcon ticket should cost $200, and it made business travelers hate the airline industry for charging $2000 to fly from Newark to Dallas. For the past 2 years, airlines have tried a different approach, keeping higher end fares a bit more reasonable (in most markets), and generating more revenue off the low-end travelers by charging fees for various items (discussed ad nauseum). This is a successful strategy, keeping frequent travelers a bit happier (as they are not being screwed on fares quite as much), while generating more from the person flying on a $200 transcon ticket. Passengers can complain all they want about fees, they still pay them (ask Spirit, which was profitable even during the darkest days of 2008).
3) Southwest is no longer a “low fare airline”. One of my pet peeves of lazy business writers is when they refer to Southwest as a “low fare airline” or “no frills airline.” All airlines are low fare airlines, as they generally offer the same fares when in direct competition (usually, not always). And Southwest offers roughly the exact same frills as every airline, except that they don’t charge for bags, which actually suggests to me that they are a high-frills airline. Southwest is not the same airline they were 15 years ago. They no longer focus on secondary markets, and they have introduced several strategies that suggest they are going after business travelers at least as much as they are targeting typical fare-conscious leisure travelers. In fact, because they have tried hard not to wring every last dime out of their passengers over the years, they have actually been able to charge a premium over competitiors in some cases, since people assume Southwest is charging them a fair price. Southwest has last minute roundtrip fares well in excess of $1,000 on many routes – that’s hardly low fares. It works for them, and their customers are happy; but stop calling them a low fare carrier.
4) The jury is still out on in-flight Wi-fi, and if I had to guess, we won’t see much more uptake than we have now. Continental has canceled their wi-fi plans. JetBlue has kept it to their one plane. The industry seems ambivalent about in-flight wi-fi. While customers who use it (especially on tech-friendly Virgin America) are happy with it, uptake rates are low and airlines are now focusing on rolling out in-flight TV at the expense of in-flight wi-fi. As I heard some airline exec say — only some people have laptops with them, but everyone can watch TV.
5) US Airlines are focused on making their international premium classes just good enough, not world class. And that’s fine, so please stop complaining about it. Continental, United, Delta, US Airways and American have all begun the process of installing flat-bed seats on some of their premium cabins on international routes. No matter what they do, they will not be putting in first class like you see on Singapore or Emirates. Their service will not be as polished, and their food will not be as extravagant. Get over it. Their premium cabins are headed in the right direction and, compared with those other airlines, they are priced where US travelers are willing to pay for them. You want to pay (hahahhahahahha) or use your miles on an alliance partner, enjoy! But it’s time to stop complaining about the premium product. The airlines have made it exactly as good as it needs to be to stay competitive. If you were running their airline, you’d do the same thing.
As a final wrap up, Gary Leff at View from the Wing wrote something to me earlier this year that’s stuck with me. He said something to the effect of: It requires so little work to make your traveling experience so much better. Meaning, there are plenty of ways to get Elite status for free or almost no flying (Aegean Airlines, thanks), allowing you to board first and check your bags for free. Marriott is offering free Gold status right now. The 100,000 mile BA credit card. I just spent a night (and a flight) for free at the Mandarin Oriental Las Vegas with the Expedia Canada deal. And on and on. These deals come up all the time. Paying even a small amount of attention can make your flying life so much better.
Have a great new year, and we’ll see you in 2011.