In other words, what’s their orientation?
I’m not too good at reading minds, much less corporate minds, but one thing stands out: For all practical purposes, domestic airlines in the US today are monopolies. They have left just enough market share at their primary hubs to avoid the threat of federal action, and this limited capacity means that open skies treaties won’t significantly increase competition.
When your orientation says “monopoly,” you act like a monopoly. In particular, without the threat of the marketplace, you have a lot of flexibility in the levels of service you provide — your quality — and in what you can charge. Play this game well and you can maximize the amount of money to be paid out to the the people who control the organization and to those who can fire them.
However, as Tom Peters once pointed out, in Thriving on Chaos as I recall, after some point, it’s impossible to order cost cuts without also damaging the customer experience.
Back in the pre-Toyota US auto industry, they had a similar orientation: Customers didn’t appreciate quality and wouldn’t pay for improvements in quality over what Detroit was already producing. As I said, that was pre-Toyota. But weren’t Toyotas cheaper than their American competitors? They were indeed less expensive, but their quality, in terms of manufacturing defects and ride experience, was much higher. Detroit claimed “Dumping!” but extensive studies showed that Toyota had evolved a manufacturing system that reduced waste thereby lowering costs organically, rather than just arbitrarily cutting costs by leaving out things.
So although the US auto industry thought they were monopolies and acted accordingly, it turned out that their orientations had left a huge opening for better, “lean,” competitors. You can read the story in The Machine That Changed the World. [It’s worth pointing out that Southwest did evolve a system incorporating a number of lean principles, and they are the second largest US airline by passenger count. However, the three legacy airlines have managed to contain this threat through tactics like controlling gates at major hubs, matching fares on critical routes, and maintaining significant international networks. Their orientation probably is that these tactics will continue to work.]
Here’s the significant point: Airlines are not manufacturers. They don’t leave you with a product that you’ll use and live with for years to come. They sell a short-term service that most people seem willing to put up with because you can stand anything for a few hours. As the editors of the website Smarter Travel concluded:
Studies show that when travelers are planning a trip, fare and schedule trump “quality” factors every time.
My guess is that as with the US car industry, this is an example of incestuous amplification. They rationalize that slightly lower prices will offset customer resistance to another ratcheting down of service levels, and they can pocket the difference in costs. It’s always worked, so you can see how orientation stays locked in the airline industry.
However, you do have alternatives because you don’t really need to fly. What you need is to move from one place to another, or sometimes, just to interact closely with people in another place (attend meetings & conferences, for example). Try this thought experiment: If you could snap your fingers and be there, wouldn’t that be much better than flying, except perhaps if you can wrangle First Class?
I listed several of these alternatives a few years ago at https://slightlyeastofnew.com/2013/03/28/transportation-update/
Looking down the road, very high speed rail — like Elon Musk’s Hyperloop — could compete with airlines on both speed and service, although one suspects that if hyperloop companies evolve into monopolies, they’ll act like monopolies, just as the airlines did.
There’s also the promise of autonomous vehicles — self-driving vans and cars — that would pick you up at your house or office and drop you at your destination in another city (or even town, village, beach resort, etc.) Design strategist David Liddell (whose company also does work for Boeing) expounded on this a couple of days ago for the New York Times:
But Mr. Liddell warned of long-term competition from other kinds of transportation. If self-driving cars make driving easier and more comfortable, midrange flights would face competition. Counting the time it takes to clear airport security and get to and from the airport, it takes just as long to drive between some places — Los Angeles to San Francisco, say — as to fly. If self-driving technology makes driving much more comfortable, too, lots of people might abandon planes for cars, Mr. Liddell said.
In other words, just as Uber sees itself an an alternative to private ownership of cars, self-driving cars could be an alternative to short – mid range air travel. If you take the objective as “get somewhere else” instead of “fly,” you can probably think of other possibilities.
For the next few years, assuming that none of the current alternatives work for you, you either pay the price for serious upgrade, or try to minimize what you pay for cattle car service. The logical result of this tactic, played out over billions of customers, is something I call “Imperial Class.” Eventually, service in non-premium classes deteriorates to the point where it isn’t worth the trouble for the legacy airlines to keep it. Use the search box at the top of the right sidebar to search on “Imperial” and you’ll find several posts I’ve done on this.
For airlines who can’t retreat into a niche like Imperial Class, my prediction is the obvious one, when orientations lock in the face of a changing enironment.