One of the last two airlines that focused first on customers gave up the ghost yesterday. JetBlue announced that it will start charging for checked bags in 2015 and will be cutting passenger leg room by roughly 5% beginning in 2016. In explaining these moves, airline execs pointed to the need to satisfy the interests of the financial community:
JetBlue said its new steps and improvements in other projects would increase annual operating income by about $450 million by 2017, including $200 million from the new fare classes and $100 million annually from the new seats. … While the discount carrier has earned plaudits from customers, its financial performance has lagged behind rivals. Analysts have pressed the carrier for bag fees and tighter seating, saying it gave fliers too much for too little. … [JetBlue CEO Robin] Hayes said in an interview that the changes will improve investors’ returns without scaring away customers. “We’re very proud of our customer-first model, but we need it to deliver a similar level of return as other models,” he said. “JetBlue to add bag fees, reduce legroom,” WSJ, 11/20/14 (paywall)
The promise of Boyd-type strategies, including lean and maneuver, is that by focusing on your culture and on continuously reducing waste, you can produce both a higher quality product and superior financial results. But it’s hard to do; much easier just to cut costs and add fees.
Airlines, other than Southwest, are rapidly approaching the point where the only reason they carry coach passengers is for the fees. The next logical step will be to offer to carry your suitcase to LA for $50 if you agree to drop it at the terminal and then get yourself to LA some other way.
Airlines are taking another step on the march to Imperial Class — instituting a super-premium class, filling the rest of the airplane with business class, and dropping coach entirely — by reconfiguring their frequent-flyer programs to reward how much you pay rather than how often or how far you fly. In a sense, it becomes a rebate program geared to big spenders instead of a loyalty program.
As Scott McCartny describes it in his column in today’s WSJ (paywall):
People who fly on expensive business-class and first-class tickets and have top-tier status in frequent-flier programs will see their accounts flooded with miles. At Delta and United, a frequent flier at the highest status level will earn 11 miles for every dollar spent, excluding taxes and government fees, up to 75,000 miles per trip. Most travelers riding in economy will earn a fraction of the frequent-flier miles they used to get. A traveler with no high-level status gets 5 miles for every dollar spent, so a $1,000 base fare for a 10,000-mile round trip gets half as many miles as it would earn today. (Emphasis added.)
The message, again, is: If you aren’t at least business class, we really don’t want you.
Except for the perqs of higher “status,” like upgrades and access to clubs, many travelers will be better off to search for the cheapest fare (don’t forget to include the bag fees!) on any available airline, and use the money saved just to buy another ticket. If you want to use the club, add in another $50/day (e.g., the daily rate at Delta’s Sky Club) for that, too. If you’re going less than about 300 miles, check out Greyhound: plenty of legroom, leather seats, free wi-fi, no charge for suitcases, and you get your bags within 5 minutes of arrival.
What all this means is that airlines are doing exactly what you’d expect. All cheng, no chi. I’m beginning to think that this is another example of entropy at work.