If you were CEO what would you do?
Feb 15, 2007, 1:40 pm
#1
Suspended
Original Poster
Join Date: Sep 2006
Programs: AAdvantage PP
Posts: 13,913
If you were CEO what would you do?
We again are in the midst of another airline melt down with the B6 incident. This continues to be a very troubled business in many ways. Looking at how this call got started I think you need to go back to the middle of the 1990s when airlines started to use the Internet as what was thought to be more cost effective way to handle booking leisure travel. Little did airline executives know that consumers now would had quick and perfect information about fares.
All of sudden consumers are able to book travel in a much more cost effective manner than before and airlines build capacity, equipment, infrastructure and personnel to handle what will be marginally profitable to very unprofitable business. The airlines attempt to self correct by raising fares for last minute or walk up fares, typically used by business people.
Fast forward to 9/11, the economic slump, the explosion of LCC and then soaring fuel prices and legacy carriers are in real trouble. They respond by slashing costs, paxs ammendities and renegiotating contracts and leases (for USAir, DL, NW, UA, and a few others through the benefits of Chapter 11).
Finally airlines are starting to become profitable. However, the bulk of airpaxs still base their decision solely on price and the record load levels being reported are still tied to discrentionary leisure travel. The many, many price increases that you read about have been placed on the top tier fares. For example, if I flew AA from JFK to MIA this weekend the lowest fare is $938 plus taxes. If I waited until the end of April the same weekend fare is $138 p/t. And of course the fares that we often see on the Internet for advance purchase do not even cover the airline's operating costs.
Therefore, if so much of a flyer's decision is based solely on price airlines have little motivation to put money into improving systems, infrastructure and adding personnel. True, some money has been put into premium cabins, particularly on long haul flights, where there is a revenue opportunity.
So if you were CEO of an airline what would you do to change the situation? Or because of this marginally or unprofitable over capcity there is no way to adequately address this situation until supply and demand are more in equilibrium.
All of sudden consumers are able to book travel in a much more cost effective manner than before and airlines build capacity, equipment, infrastructure and personnel to handle what will be marginally profitable to very unprofitable business. The airlines attempt to self correct by raising fares for last minute or walk up fares, typically used by business people.
Fast forward to 9/11, the economic slump, the explosion of LCC and then soaring fuel prices and legacy carriers are in real trouble. They respond by slashing costs, paxs ammendities and renegiotating contracts and leases (for USAir, DL, NW, UA, and a few others through the benefits of Chapter 11).
Finally airlines are starting to become profitable. However, the bulk of airpaxs still base their decision solely on price and the record load levels being reported are still tied to discrentionary leisure travel. The many, many price increases that you read about have been placed on the top tier fares. For example, if I flew AA from JFK to MIA this weekend the lowest fare is $938 plus taxes. If I waited until the end of April the same weekend fare is $138 p/t. And of course the fares that we often see on the Internet for advance purchase do not even cover the airline's operating costs.
Therefore, if so much of a flyer's decision is based solely on price airlines have little motivation to put money into improving systems, infrastructure and adding personnel. True, some money has been put into premium cabins, particularly on long haul flights, where there is a revenue opportunity.
So if you were CEO of an airline what would you do to change the situation? Or because of this marginally or unprofitable over capcity there is no way to adequately address this situation until supply and demand are more in equilibrium.
Feb 15, 2007, 1:44 pm
#2
Join Date: Mar 2004
Location: MSY
Programs: NW Gold and now Delta Gold
Posts: 3,072
I suppose I would do what the other CEOs do, loot and pillage the place until I was bought off with millions of dollars in golden parachute to get rid of me. It is too bad, but the interests of CEOs and the interests of business and/or the shareholders rarely seems to coincide.
Feb 15, 2007, 3:54 pm
#4
Join Date: Sep 2004
Posts: 9,223
In order to offer the insanely low prices, they have to make almost the entire coach section uncomfortable, even for those who pay much more. The only escape is offered to people who do mileage runs.
Solution: Phase out the insanely low fares. Start by restricting the low fares to a small, separate section of the cabin. Call it steerage, or economy minus, or whatever. This will be the section for families of 5 who want to squeeze themselves into 3 seats for the price of 1 seat. Keep decreasing the size of steerage until it's gone after a few years. This way people will gradually learn that they have to pay more to fly, or they can drive, take the bus, train, or stay home.
The rest of plane pays higher fares and gets approprate higher levels of service. Make first class more affordable by raising the price of comfortable coach seats and reducing first, thereby eliminating the need to do mileage runs and other crazy things.
Solution: Phase out the insanely low fares. Start by restricting the low fares to a small, separate section of the cabin. Call it steerage, or economy minus, or whatever. This will be the section for families of 5 who want to squeeze themselves into 3 seats for the price of 1 seat. Keep decreasing the size of steerage until it's gone after a few years. This way people will gradually learn that they have to pay more to fly, or they can drive, take the bus, train, or stay home.
The rest of plane pays higher fares and gets approprate higher levels of service. Make first class more affordable by raising the price of comfortable coach seats and reducing first, thereby eliminating the need to do mileage runs and other crazy things.
Feb 15, 2007, 6:54 pm
#5
Join Date: Jun 2004
Location: AMS (SEA, JNB)
Programs: Mucci Reperateur des Coeurs Brises
Posts: 4,107
What about making genuine investments in the premium market, and ensuring that the premium seats are actually paid for (i.e. not used in the majority for upgrades, rewarding elites, and "wasting" a premium product on people who paid non-premium prices down the back). Maybe introduce complimentary lounge service for ticketed-premium cabin holders. People who want to sit in the premium cabins will pay the premium prices, contributing handsomely to the profit margins of airlines. Business passengers, last-minute travelers, and well-heeled customers will accept the extra cost for genuine improvement in comfort and service that is clearly distinctive from the usual airport and travel experience.
Keep economy class more or less as it is, because even marginal improvements in comfort seem to be ignored when price is king. Focus mainly on keeping costs down, and being innovative with limited resources by focusing on what customers really value (and what will benefit premium customers as well as the bottom line, while keeping economy passengers coming back for more to fill the seats): on-time performance, quick and efficient baggage handling, easy booking and check-in processes, and most importantly consistency etc.
Maybe short-haul and/or domestic operations could introduce some sort of economy plus service like on long-haul carriers (i.e. BA, VS). A better seat (i.e. more pitch), better service (i.e. served first, wider choice of food, more attention to details like hot towels and drinks served in glasses), priority boarding before economy class (but after first and elites) and so on.
As long as the travel experience is hell, then nobody will lift a finger to pay more. As soon as premium travelers notice differences, they will pay the extra fares, while normal, budget travelers will become more loyal if they experience consistently good service (a.k.a. travel without the major hassles caused by delays, missed connections, lost baggage etc.).
Invest in the customer and they will reward you.
Keep economy class more or less as it is, because even marginal improvements in comfort seem to be ignored when price is king. Focus mainly on keeping costs down, and being innovative with limited resources by focusing on what customers really value (and what will benefit premium customers as well as the bottom line, while keeping economy passengers coming back for more to fill the seats): on-time performance, quick and efficient baggage handling, easy booking and check-in processes, and most importantly consistency etc.
Maybe short-haul and/or domestic operations could introduce some sort of economy plus service like on long-haul carriers (i.e. BA, VS). A better seat (i.e. more pitch), better service (i.e. served first, wider choice of food, more attention to details like hot towels and drinks served in glasses), priority boarding before economy class (but after first and elites) and so on.
As long as the travel experience is hell, then nobody will lift a finger to pay more. As soon as premium travelers notice differences, they will pay the extra fares, while normal, budget travelers will become more loyal if they experience consistently good service (a.k.a. travel without the major hassles caused by delays, missed connections, lost baggage etc.).
Invest in the customer and they will reward you.
Feb 15, 2007, 7:06 pm
#6
Join Date: Mar 2004
Location: Minneapolis, Minnesota,USA
Programs: UA, NW
Posts: 3,752
Right, at the moment it's a race to the bottom. The next step will be removing the seats from Y and replacing them with straps hanging from the ceiling. Then the airlines will brag about their "new, low fares."
I pay extra to fly UA because of their E+ section. Perhaps if more airlines installed E+ (or even REAL premium economy) for their elite passengers or the ones who paid the higher economy fares, as the poster above said, and, in addition, stopped having 12 potential fares for the same cramped seat...
No, actually, what would really improve things on U.S. airlines would be to require all airline executives to fly a long-haul in Y (and only in Y) at least once a week.
I pay extra to fly UA because of their E+ section. Perhaps if more airlines installed E+ (or even REAL premium economy) for their elite passengers or the ones who paid the higher economy fares, as the poster above said, and, in addition, stopped having 12 potential fares for the same cramped seat...
No, actually, what would really improve things on U.S. airlines would be to require all airline executives to fly a long-haul in Y (and only in Y) at least once a week.
Feb 15, 2007, 7:33 pm
#7
Join Date: May 2006
Posts: 7,541
Actually, I have some inside info on a Premium Economy/Business Lite Airline in development in Florida, while the market plan does not look like a traditional airline trying to cover the vast expanses of the USA or the World but...by god, it will improve the lives of us elite frequent flyers and business passengers traveling on this airline...I am not supposed to release any factual information here on FlyerTalk however, if anyone is interested in the information and being on the consulting team, we are always taking FTers and we take FlyerTalk as a source of wonderful information and feedback to actually make air travel pleasurable as it was in the 70s...before deregulation 
PM me and I will give you the info on a limited release and discuss some stuff regarding our future FF/Corporate program.
PM me and I will give you the info on a limited release and discuss some stuff regarding our future FF/Corporate program.
Feb 15, 2007, 7:46 pm
#8
Join Date: Dec 2006
Location: Washington, DC
Programs: US-CP, UA, Marriott Rewards, HHonors, Avis,
Posts: 4,549
I'd create the anti-Ted. Seriously! You'd have to start with an airline that already has an extensive network of destinations, like UA or AA or etc. But instead of pared down services at a pared down price, I would bump prices up gently--- in between coach and business/first--- and take out some seats. If you can get a business traveller everywhere they want to go in comfort, you'll have a very loyal clientel. That's why we all stick to one or two airlines: because we fly them enough to get upgraded frequently. Accounting is never going to approve a full-fare first ticket (or even a discounted first) where I work, even though overall we have a very generous travel policy. Make it a reasonable enough fare increase that corporate travellers can justify it, and they'll be flying full. I think this is where JetBlue was originally going with their service idea (and truth be told, lots of us care more about comfort than about a good inflight meal or a hot towel) but they just don't go enough places yet.
On the opposite side of the coin, I think doing away with free upgrades and only issuing premium seats to those who pay premium prices would kill any loyalty business travellers still have. My co-workers and I all rack up the airmiles and we're all ferociously loyal to our chosen carriers, specifically because we get upgraded. I've had a co-worker kill 3 hours in the airport bar waiting for me to arrive (we like to share a car because we go everywhere together anyway once we get there) because that's the best we could coordinate our nonstops between DL and US. We'd much rather kill time in the bar than switch carriers and lose out on upgrades. Take those upgrades away and we'd have a much easier time getting our schedules together.
On the opposite side of the coin, I think doing away with free upgrades and only issuing premium seats to those who pay premium prices would kill any loyalty business travellers still have. My co-workers and I all rack up the airmiles and we're all ferociously loyal to our chosen carriers, specifically because we get upgraded. I've had a co-worker kill 3 hours in the airport bar waiting for me to arrive (we like to share a car because we go everywhere together anyway once we get there) because that's the best we could coordinate our nonstops between DL and US. We'd much rather kill time in the bar than switch carriers and lose out on upgrades. Take those upgrades away and we'd have a much easier time getting our schedules together.
Feb 15, 2007, 9:09 pm
#10
A FlyerTalk Posting Legend
Join Date: Sep 2006
Location: where the chile is hot
Programs: AA,RR,NW,Delta ,UA,CO
Posts: 41,681
Feb 15, 2007, 11:21 pm
#11
Moderator: Hilton Honors forums
Join Date: Dec 2002
Location: Marietta, Georgia, United States
Posts: 24,997
You are the CEO of _____ Airlines.
The above thread was the very first time I have ever posted on FlyerTalk.
Ahhh — memories...
The above thread was the very first time I have ever posted on FlyerTalk.
Ahhh — memories...
Feb 16, 2007, 9:30 am
#12
Join Date: Jul 2006
Programs: UsAir CP, Marriott Gold,
Posts: 5
Americans and the Airline Industry
This is from the O'Reilly factor on the Fox News Website.
Normally I hate this guy. Pompus A@@. But in this case I agree with him.
O'REILLY: Now there's no excuse for this kind of incompetence by the airline companies. Bad weather is always with us. Other countries around the world have worse weather. But there is a pattern of behavior that abuses airline customers in America. We all know it. And it must stop.
If the government will not step in, then class action litigation must begin. Like oil and gas, Americans often have to use the airlines. They must fly, just like we must have fuel. Over the years the performance of the airlines has dropped dramatically. They've cut employees and salaries, cut services and even cut civility.
When they go bankrupt, as they often do, we taxpayers pick up the tabs, as the airlines skip out on debts and reorganize to come back, even worse than before. It's not the fault of the individual airline worker who is often under siege. There aren't nearly enough people working to handle the crowds.
The flight crews are the best in the world, accidents are rare. It is the management that is abusing people. And the government must step in and force standards of decent behavior on these airline companies.
I agree something must be done here. Litigation... well that may be a little extreme as only the lawyers will make out from that.
Airlines will continue to cut cut cut, employees, Services, (hopefully not safety) until they cant anymore. And becasue people like me HAVE TO fly, we are left to pick the lesser of two evils. In my case PHL, where its really slim pickins.
How much more must we take, before enough is enough? I am just glad that I did not travel this past snow storm. I would probably be in jail if I was part of the horror stories that I heard from the East Coast.
Just my .02
Normally I hate this guy. Pompus A@@. But in this case I agree with him.
O'REILLY: Now there's no excuse for this kind of incompetence by the airline companies. Bad weather is always with us. Other countries around the world have worse weather. But there is a pattern of behavior that abuses airline customers in America. We all know it. And it must stop.
If the government will not step in, then class action litigation must begin. Like oil and gas, Americans often have to use the airlines. They must fly, just like we must have fuel. Over the years the performance of the airlines has dropped dramatically. They've cut employees and salaries, cut services and even cut civility.
When they go bankrupt, as they often do, we taxpayers pick up the tabs, as the airlines skip out on debts and reorganize to come back, even worse than before. It's not the fault of the individual airline worker who is often under siege. There aren't nearly enough people working to handle the crowds.
The flight crews are the best in the world, accidents are rare. It is the management that is abusing people. And the government must step in and force standards of decent behavior on these airline companies.
Airlines will continue to cut cut cut, employees, Services, (hopefully not safety) until they cant anymore. And becasue people like me HAVE TO fly, we are left to pick the lesser of two evils. In my case PHL, where its really slim pickins.
How much more must we take, before enough is enough? I am just glad that I did not travel this past snow storm. I would probably be in jail if I was part of the horror stories that I heard from the East Coast.
Just my .02
Feb 16, 2007, 10:04 am
#14
FlyerTalk Evangelist
Join Date: Dec 2000
Location: PHL, NYC
Programs: AA PLT, DL SLV, UA SLV, MR LTT, HH DIA
Posts: 10,067
This must be in response to the JetBlue passengers stranded on the tarmac at JFK for 10 hours with no food and overflowing bathrooms. It's the same old story. Bill O'Reilly is just beating the drum again.
Go into the wayback machine to January 3, 1999 when Northwest had the EXACT same thing happen (affectionately referred to as "runway Sunday"). Yet, just 2 months ago AA stranded passengers in 3 planes at Austin for 8 hours. And now, JB did it. I'm sure there have been more that, for whatever reason, hadn't made national news. Then if we go back to the summer of 2000, there was a lot of consumer backlash at United for it's poor handling of thunderstorm related weather that wreaked havock on their over-scheduled banks of flights.
The government devised the passenger bill of rights, the airlines put up an appearance of following it, but haven't really done so and aren't really held accountable.
Now people are pushing for it again. Go sign up.
http://www.strandedpassengers.blogspot.com/
Go into the wayback machine to January 3, 1999 when Northwest had the EXACT same thing happen (affectionately referred to as "runway Sunday"). Yet, just 2 months ago AA stranded passengers in 3 planes at Austin for 8 hours. And now, JB did it. I'm sure there have been more that, for whatever reason, hadn't made national news. Then if we go back to the summer of 2000, there was a lot of consumer backlash at United for it's poor handling of thunderstorm related weather that wreaked havock on their over-scheduled banks of flights.
The government devised the passenger bill of rights, the airlines put up an appearance of following it, but haven't really done so and aren't really held accountable.
Now people are pushing for it again. Go sign up.
http://www.strandedpassengers.blogspot.com/
Feb 16, 2007, 10:17 am
#15
Join Date: Jan 2000
Location: Canada
Programs: AS, DL, UA, Hyatt, SPG
Posts: 2,574
I've worked in aviation, both in Canada, the UK and the US, for several years, holding different jobs ranging from Flight Attendant through to Senior Management.
I got laid off in December of last year, and am in the purpose of setting up my own business... and giving up the excitement of employee pass travel for the excitement of mileage runs and the chance of free EUA's on my travels.
But it's been one hell of a roller coaster ride, and this industry has changed beyond recognition in the last 10 years. The push for lower costs, higher load factors, and the chance to nickel and dime to make a few bucks extra for pre-paid seating etc. etc. is now a fact of life in N. America.
Whilst I can deal with having no food, no free pretzel mix even (!), what has really been disturbing of late is the trend for US carriers in particular to increasingly duck out of their responsibilities during delays and IROPS.
Missed connections due to "air traffic control" result in unsympathetic agents, and you footing the own cost of your hotel accommodation if you miss your onward flight home. Whilst air traffic control is not within the direct control of the airlines, it's hardly an 'act of god' either. Goodness knows the air taxes are rising steadily - but where does that money go? If the government is responsbile for air traffic control services, and we're paying for it with taxes, why should the consumer lose out and be penalised financially when the overcrowding/short staffing/shortcomings cause us to miss our flight home?
This brings up the next point - overcrowding. O Hare is infamous for it, as are several other airports across the country. Air Traffic delays are a fact of life - but who is really the culprit here? Certainly the airlines and airport authorities who clamour for more slots, all at the same time, are not blameless in this state of affairs - but they certainly are quick to distance themselves from the inevitable service disruption when the system is crammed to the max and busting at the seams.
On a flight last year with American Airlines, my MD80 went mechanical at the gate. This is within the control of the airline - but the gate agent (singular) was woefully overworked for rebooking a full plane load. I dashed to another gate and rebooked onto another AA flight leaving 2 hours later. This flight was subsequently delayed due to 'air traffic control', and as such AA refused to sort out en route accommodations for my missed connection (the last of the evening). Yet, the original delay had been caused by a mechanical on the aircraft.... fair? Seems like it's a fact of life.
The slashing of staff numbers means that when weather delays or IROPS occur, the harrassed staff are beseiged, and cannot cope with the large numbers of customers needing assistance.
And you can't blame the staff. A good friend of mine is still a flight attendant with United. UA's recent removal of complimentary pretzels/snack mix in Economy on flights of 2 hours or less has been an unpopular move. When one customer became beligerent at the lack of pretzel mix, he ranted and raved about how crappy and airline UA had become. He demanded to know why there was no Pretzel mix - and my freind, frustrated, replied (perhaps inappropriately) - "they've gone the same way of my pension - they're outta here". The staff are unhappy about the service cuts, but they themselves are seeing their work rules, pay, or pensions slashed - so no wonder morale is not what it should be.
I'm not sure if legal action, or the threat thereof, by O'Reilly and his co-horts will really get anywhere. But if it helps raise the profile of the things that airlines and the Government CAN do such as sensible numbers of slots, staggering of flights, investment in air traffic control, and sufficient staffing levels... then when a T-Storm roles in, it will be a bit of a mess, but not a complete crisis.
I got laid off in December of last year, and am in the purpose of setting up my own business... and giving up the excitement of employee pass travel for the excitement of mileage runs and the chance of free EUA's on my travels.
But it's been one hell of a roller coaster ride, and this industry has changed beyond recognition in the last 10 years. The push for lower costs, higher load factors, and the chance to nickel and dime to make a few bucks extra for pre-paid seating etc. etc. is now a fact of life in N. America.
Whilst I can deal with having no food, no free pretzel mix even (!), what has really been disturbing of late is the trend for US carriers in particular to increasingly duck out of their responsibilities during delays and IROPS.
Missed connections due to "air traffic control" result in unsympathetic agents, and you footing the own cost of your hotel accommodation if you miss your onward flight home. Whilst air traffic control is not within the direct control of the airlines, it's hardly an 'act of god' either. Goodness knows the air taxes are rising steadily - but where does that money go? If the government is responsbile for air traffic control services, and we're paying for it with taxes, why should the consumer lose out and be penalised financially when the overcrowding/short staffing/shortcomings cause us to miss our flight home?
This brings up the next point - overcrowding. O Hare is infamous for it, as are several other airports across the country. Air Traffic delays are a fact of life - but who is really the culprit here? Certainly the airlines and airport authorities who clamour for more slots, all at the same time, are not blameless in this state of affairs - but they certainly are quick to distance themselves from the inevitable service disruption when the system is crammed to the max and busting at the seams.
On a flight last year with American Airlines, my MD80 went mechanical at the gate. This is within the control of the airline - but the gate agent (singular) was woefully overworked for rebooking a full plane load. I dashed to another gate and rebooked onto another AA flight leaving 2 hours later. This flight was subsequently delayed due to 'air traffic control', and as such AA refused to sort out en route accommodations for my missed connection (the last of the evening). Yet, the original delay had been caused by a mechanical on the aircraft.... fair? Seems like it's a fact of life.
The slashing of staff numbers means that when weather delays or IROPS occur, the harrassed staff are beseiged, and cannot cope with the large numbers of customers needing assistance.
And you can't blame the staff. A good friend of mine is still a flight attendant with United. UA's recent removal of complimentary pretzels/snack mix in Economy on flights of 2 hours or less has been an unpopular move. When one customer became beligerent at the lack of pretzel mix, he ranted and raved about how crappy and airline UA had become. He demanded to know why there was no Pretzel mix - and my freind, frustrated, replied (perhaps inappropriately) - "they've gone the same way of my pension - they're outta here". The staff are unhappy about the service cuts, but they themselves are seeing their work rules, pay, or pensions slashed - so no wonder morale is not what it should be.
I'm not sure if legal action, or the threat thereof, by O'Reilly and his co-horts will really get anywhere. But if it helps raise the profile of the things that airlines and the Government CAN do such as sensible numbers of slots, staggering of flights, investment in air traffic control, and sufficient staffing levels... then when a T-Storm roles in, it will be a bit of a mess, but not a complete crisis.