USA320Pilot
Veteran
- May 18, 2003
- 8,175
- 1,539
Last week Kevin Mitchell of the Business Travel Coalition wrote, "As a recent Business Travel Coalition survey suggests, while the falloff in business travel may have bottomed out, the foward looking revenue environment appears anemic. Indeed, much of the 4% growth in business travel traffic that BTC projects for 2004 will likely be atributable to low-fare carriers' stimulation of demand as they enter an ever expanding number of markets and discipline major airlines' pricing, he said."
"Major network airlines have still not fully grasped that the market place for commercial air transportation services is not only experiencing a cyclical squeeze, but is in the throes of structural change, which carries vastly different implications. For example, when any industry enters a cyclical downturn, layoffs are made with the assumption that workers will be rehired afrter the cycle turns up again. On the other hand, when an industry experiences structural change, it is expected that the laid off workers will never be replaced," Mitchell noted.
"The airline industry has changed structurally, but not everyone agrees yet. Just last week at an indusry conference, a leading airline economist stated with absolute conviction one of the largely debunked "immutable laws" -- the business traveler is price insensitive. He said that if a business traveler has a need to go to Atlanta, he is going irrespective of price. In his example, if a major airline lowered its business airfares, the airline would simply receive less revenues, and gain nothing, said Mitchell.
"This analysis is flat out wrong, ignores the structural shift the industry is experiencing and perpetuates flawed strategies and lost market shares at the major network airlines.....the business traveler is now permanently price sensitive...."
"The conclusion is inescapable, whether assessing the imminent assault on Philadelphia by Southwest, or the phenomenal expansion plans of JetBlue. No major network airline can survive without radical changes to the way they currently operate their businesses. No major network airline has restructured to the extent neccessary for success. Costs must be significantly lowered, asset productivity levels must be vastly improved and airlines must discover true customer-centered strategies," Mitchell said.
Regards,
USA320Pilot
"Major network airlines have still not fully grasped that the market place for commercial air transportation services is not only experiencing a cyclical squeeze, but is in the throes of structural change, which carries vastly different implications. For example, when any industry enters a cyclical downturn, layoffs are made with the assumption that workers will be rehired afrter the cycle turns up again. On the other hand, when an industry experiences structural change, it is expected that the laid off workers will never be replaced," Mitchell noted.
"The airline industry has changed structurally, but not everyone agrees yet. Just last week at an indusry conference, a leading airline economist stated with absolute conviction one of the largely debunked "immutable laws" -- the business traveler is price insensitive. He said that if a business traveler has a need to go to Atlanta, he is going irrespective of price. In his example, if a major airline lowered its business airfares, the airline would simply receive less revenues, and gain nothing, said Mitchell.
"This analysis is flat out wrong, ignores the structural shift the industry is experiencing and perpetuates flawed strategies and lost market shares at the major network airlines.....the business traveler is now permanently price sensitive...."
"The conclusion is inescapable, whether assessing the imminent assault on Philadelphia by Southwest, or the phenomenal expansion plans of JetBlue. No major network airline can survive without radical changes to the way they currently operate their businesses. No major network airline has restructured to the extent neccessary for success. Costs must be significantly lowered, asset productivity levels must be vastly improved and airlines must discover true customer-centered strategies," Mitchell said.
Regards,
USA320Pilot
