Airlines Record Profits
Slate has an article about how the airlines are seeing record profits while service is at an all-time low. I’d just like to add a few notes to the article.
The article points out that customers can blame others for their misery- the FAA, the TSA, and the weather. Except as far as I can tell the FAA air-traffic system is overall working really well. The airlines try to hype how much of a problem it is, but that is mostly because its their favorite excuse and they hope to make a grab to get other users of the airspace (small airplanes, other carriers) out of their way. As for the weather, it can sometimes be an issue when there are actual big storms, but its not the sort of thing that a well-run airline couldn’t accomodate for. Plus, I’ve caught airlines lying numerous times about either FAA traffic issues or weather as an excuse for late flights. If you are a pilot its not that hard to hear the gate agent blame one of those two for a delay, go sit down in your seat with a laptop and a wireless connection, and check for actual flow-control notices and/or weather issues. So far my experience is that about 50% of the time its a straight-out lie. I’m not saying that the gate agent knows that its a lie, but someone at the airline is spreading false information to pass the blame.
But the article’s main point is true- most people believe this stuff, so the airlines manage to dodge the blame for their mismanagement.
Of course to call it mismanagement in the technical sense would imply that its poor business for the company involved. The amazing thing with the screwed up situation with this industry is that the companies have managed to position themselves so that not only do they make big profits while treating the public like crap, but we also subsidize them to the tune of billions of dollars to do it. I guess when you put it that way, maybe it should be written up as a nice Harvard Business School Case Study “how to treat your customers like crap and make billions”.
My favorite example is what I realized American Airlines is doing with overbooking in my little incident with them. The article points up that the load factor (filled seats) has risen from 66% to 78% over the past decade. Handled correctly this is a good thing for everyone because it results in a more efficient economic system. The catch is that there are supposed to be protections in the system against the airlines pushing it too hard in their favor.
If they overbook an airplane and have to bump you, they owe you some money. So if they do it too much, they start to lose money. Except that American has realized that by causing passengers to miss their connections, even when its 100% the airlines fault, they get out of the bump fees. Everyone misses the flight they were booked on and winds up on the next flight, but with no rights to any compensation. The airline gets all the money from filling every seat in every flight, working their bizarre pricing schemes to maximize the pennies they wring out of every passenger.
And THAT is I guess what you would call good management. Hand out those big bonuses!