More than any other thread I've seen on this forum, this one strikes at the heart of the issue facing the industry. Namely, what is the formula for long term success, and directly associated with that, what is it customers really want (besides cheap fares) and what amenities are most of them willing to pay for.
I suppose the answer to long term success is finding the key to what customers really want and those amenities they're willing to pay for, or perhaps pay a premium for. So they really are two questions joined at the hip.
We know what works for Southwest and jetBlue. But what works for American and United? They are different animals offering very different services. The majors offer alliances, partnerships and code shares that the LCC's cannot come close to matching, particularly in terms of global route structures and universal FF programs. They also offer first class, which has essentially become an upgrade product domestically. But in order to cut costs, particularly on domestic routes where they compete with WN or B6, they have cut coach amenities to the bone and have reached the point where the level of service is virtually indistinguishable or the LCC actually has better customer service.
So what's the answer? Does TV make a difference? Are fares too low? I don't think we know the answer yet. The LCC's can make money at these fare levels, so they can't be too low, yet the majors are bleeding. Nobody is picking flights because of TV, yet it is an attractive amenity. To me, MRTC is more of a competitive edge than meal service or TV, but others may not agree.
Personally, I want something more than bare-bones service and I'm willing within reason, to pay more for a plusher seat and a quasi-elegant meal, particularly on longer flights. How much? I'm not willing to pay ten times the price as is the current practice, but I am willing to pay something like a 50% premium, which is much closer to the added value I am gaining. On a short flight that means nothing more than a more comfortable seat. On a long flight you can add in the nice meals and other service perks. I think AA's new "kill jetBlue" pricing between Southern California and JFK, $299 coach walk-up and $599 first class, strikes the balance much closer and I also think they can make money at those rates. If they can't, they don't belong in business, especially after the concessions they have squeezed out of their workers, suppiers, aircraft lessors and the government.
Perhaps we should look more closely at the hotel business, where there are plenty of Motel 6's, yet the Hiltons and Marriotts are also ubiquitous and they have expanded their products to multiple brands at a variety of price levels, yet all are plugged into their benefits program. Airlines within airlines have failed to date, yet hotels within hotels seem to thrive. What are the hotels doing that the airlines are missing?
Maybe where we're headed are alliances of necessity, where the LCC's provide domestic feed and the majors become boutique international carriers with a few choice domestic routes here and there. In the shorter term, I think we will start to see code-share and interline agreements among some of the LCC's as they try to bolster their girth and connect the route map dots. Ultimately, regardless of anything else, what constitutes a fair price is not going to be based upon costs. It's going to be based upon what the market will bear, and somebody is always going to find a way to provide that -- at a profit.
In the meantime, the majors are becoming dinosaurs while the new "mutants" begin to thrive. I suppose we can call it aero-darwinism.
Marky
