Major Airlines Will Fail
By Mathew Emmert (TMF Gambit)
August 30, 2004
It's difficult to find companies that have destroyed more investment capital over the past few decades than the major airlines. While it's true that they have suffered their share of, well, just plain awful luck recently, the history of failure surrounding the dominant carriers goes well beyond any particular event-driven malaise.
These businesses are largely failing for two reasons. One, their antiquated structure makes it exceedingly difficult to bring costs in line with revenues. Two, they provide a commodity product in a service industry, yet overall they offer an abhorrent level of service to their customers.
Case in point: My wife and I just took a trip to Boothbay Harbor, Maine, where we quietly slipped away from reality for a time. We have returned from this beautiful land -- where rugged fellows named Travis and Natty guide you on sea-kayaking adventures that boast incredible scenery and plenty of curious harbor seals -- feeling refreshed. However, our refreshed state did not have much to do with our travel experience.
Before recounting our little day of delight aboard US Airways (Nasdaq: UAIR), I feel I should be clear that this story is just an example, and one of many fairly similar experiences that I could share. You see, in our former lives as consultants, both my wife and I have accrued some fairly extensive airline travel experience. I'm simply sharing this most recent example because I think you might find it entertaining -- or at least be able to commiserate -- and because it supports the general conclusion that I'm making here.
Here, in basic timeline format, is our departure flight from Reagan National Airport:
8:15 a.m.: Arrived at the gate for our 9:30 a.m. direct flight to Portland, Maine.
9:00 a.m.: Informed via barely audible loudspeaker that boarding would be slightly delayed because the airline was having a spot of trouble "locating our flight crew."
9:30 a.m.: Informed via barely audible loudspeaker -- by an attendant who sounded very annoyed about the information she was having to convey -- that the airline was still attempting to "contact our flight crew."
10:30 a.m.: Informed "operations" was trying to find us a new flight crew because of a "scheduling problem." (Translation: There was no flight crew to "contact" because we forgot to schedule one, but we're gonna give that a shot now.)
11:30 a.m.: Informed that our flight was canceled because they were unable to "obtain a crew."
11:31 a.m.: Nearly trampled to death during the mad rush to the podium by those seeking to make alternate flight arrangements.
11:50 a.m.: Made it to the podium, where -- after he made about 8,000 keystrokes on his computer -- a polite but barely discernible attendant (i.e., it wasn't the loudspeaker after all) informed us that our only chance to make it to Maine before 7 p.m. was to hotfoot it over to a new gate, fly to La Guardia, and catch a prop plane to Portland.
11:51 a.m.: My wife and I say "Book it!" in unison.
11:52 a.m.: While booking the new flight, the barely discernible attendant assured us that our luggage would be "taken care of." (Note: Remember this -- it will be important later.)
11:53 a.m.: Hotfooted it to our new gate and barely made the flight to La Guardia.
12:30 p.m.: Landed in New York, hotfooted it to our next gate, and barely made our flight to Portland. (I was, however, pleasantly surprised that the plane wasn't filled with crates of chickens.)
1:30 p.m.: Landed in Portland, Maine.
1:45 p.m.: Arrived at the baggage carousel.
2:15 p.m.: Having stood at the baggage carousel for 30 minutes, another barely audible attendant informs us that our baggage has actually not been "taken care of."
2:16 p.m.: Nearly trampled to death during the mad rush to the lost-baggage counter.
2:30 p.m.: Informed that our luggage would be delivered to our hotel by 6 p.m.
6:30 p.m.: Called the number that I was given by the barely audible lost-baggage attendant and am told by the happiest computer-generated voice that I've ever heard: "I have good news! Your bag has been found and picked up by our courier service! It will be delivered within four to six hours."
10:45 p.m.: The hotel front desk calls to inform us that our luggage has been delivered.
10:46 p.m.: Relieved that we have survived another airline experience -- and pleased that we won't have to wear our hotel robes for the rest of the week -- my wife and I begin to dance like wild folk around a pile of burning airline ticket stubs.
Is it really a surprise that US Airways is likely heading for its second bankruptcy filing, or that Delta (NYSE: DAL) is knocking on the default door as we speak? How about American (NYSE: AMR)? Are Northwest (Nasdaq: NWAC) and Continental (NYSE: CAL) looking good to you these days?
Certainly these companies have -- with your money -- helped to build the infrastructure that makes modern air travel possible. But it would take a complete rewrite in order to make these dinosaurs competitive with the JetBlues (Nasdaq: JBLU) and Southwests (NYSE: LUV) of today (not that I'd recommend those stocks either).
Personally, I believe a fundamental change is taking place in the airline industry as we speak. Further, this change will ultimately create a completely different view of what it means to travel by air in this country, and the major carriers simply won't be able to reinvent themselves in time.
All of the majors may not be headed for the trash heap, but there are certainly better risk/reward opportunities available. In other words, skip these flights.
My email back....
What exactly were you trying covey in your story. Maybe the airline industry needs some positive stories instead of you idiots in the media harping on every bit of bad news you can get you hands on. We in the industry the hard working stiffs that try to give you the customer service that we think you deserve is constantly trampled management who believe that we are dinosaurs that need to disappear, all they want is for us to take pay cuts and put in kiosk machines no bodies behind the desk. I bet that the next time you fly no matter what airline, if it is a great experience we will not hear of it.
Maybe you should try writing stories that have some meaning, try the cost of oil that is killing any profits this industry would have had or maybe that these low cost carriers who are charging 39.00 dollars each way on the backs of welfare wages. I have even a better idea why not try to explain that a 10 year employee at one of these low cost carriers has no pension no retirement and probably still lives at home……..but I bet that isn’t news because you still get your 39.00 each way flight…..and we wouldn’t to ruin that now would we.
Happy flying…….
By Mathew Emmert (TMF Gambit)
August 30, 2004
It's difficult to find companies that have destroyed more investment capital over the past few decades than the major airlines. While it's true that they have suffered their share of, well, just plain awful luck recently, the history of failure surrounding the dominant carriers goes well beyond any particular event-driven malaise.
These businesses are largely failing for two reasons. One, their antiquated structure makes it exceedingly difficult to bring costs in line with revenues. Two, they provide a commodity product in a service industry, yet overall they offer an abhorrent level of service to their customers.
Case in point: My wife and I just took a trip to Boothbay Harbor, Maine, where we quietly slipped away from reality for a time. We have returned from this beautiful land -- where rugged fellows named Travis and Natty guide you on sea-kayaking adventures that boast incredible scenery and plenty of curious harbor seals -- feeling refreshed. However, our refreshed state did not have much to do with our travel experience.
Before recounting our little day of delight aboard US Airways (Nasdaq: UAIR), I feel I should be clear that this story is just an example, and one of many fairly similar experiences that I could share. You see, in our former lives as consultants, both my wife and I have accrued some fairly extensive airline travel experience. I'm simply sharing this most recent example because I think you might find it entertaining -- or at least be able to commiserate -- and because it supports the general conclusion that I'm making here.
Here, in basic timeline format, is our departure flight from Reagan National Airport:
8:15 a.m.: Arrived at the gate for our 9:30 a.m. direct flight to Portland, Maine.
9:00 a.m.: Informed via barely audible loudspeaker that boarding would be slightly delayed because the airline was having a spot of trouble "locating our flight crew."
9:30 a.m.: Informed via barely audible loudspeaker -- by an attendant who sounded very annoyed about the information she was having to convey -- that the airline was still attempting to "contact our flight crew."
10:30 a.m.: Informed "operations" was trying to find us a new flight crew because of a "scheduling problem." (Translation: There was no flight crew to "contact" because we forgot to schedule one, but we're gonna give that a shot now.)
11:30 a.m.: Informed that our flight was canceled because they were unable to "obtain a crew."
11:31 a.m.: Nearly trampled to death during the mad rush to the podium by those seeking to make alternate flight arrangements.
11:50 a.m.: Made it to the podium, where -- after he made about 8,000 keystrokes on his computer -- a polite but barely discernible attendant (i.e., it wasn't the loudspeaker after all) informed us that our only chance to make it to Maine before 7 p.m. was to hotfoot it over to a new gate, fly to La Guardia, and catch a prop plane to Portland.
11:51 a.m.: My wife and I say "Book it!" in unison.
11:52 a.m.: While booking the new flight, the barely discernible attendant assured us that our luggage would be "taken care of." (Note: Remember this -- it will be important later.)
11:53 a.m.: Hotfooted it to our new gate and barely made the flight to La Guardia.
12:30 p.m.: Landed in New York, hotfooted it to our next gate, and barely made our flight to Portland. (I was, however, pleasantly surprised that the plane wasn't filled with crates of chickens.)
1:30 p.m.: Landed in Portland, Maine.
1:45 p.m.: Arrived at the baggage carousel.
2:15 p.m.: Having stood at the baggage carousel for 30 minutes, another barely audible attendant informs us that our baggage has actually not been "taken care of."
2:16 p.m.: Nearly trampled to death during the mad rush to the lost-baggage counter.
2:30 p.m.: Informed that our luggage would be delivered to our hotel by 6 p.m.
6:30 p.m.: Called the number that I was given by the barely audible lost-baggage attendant and am told by the happiest computer-generated voice that I've ever heard: "I have good news! Your bag has been found and picked up by our courier service! It will be delivered within four to six hours."
10:45 p.m.: The hotel front desk calls to inform us that our luggage has been delivered.
10:46 p.m.: Relieved that we have survived another airline experience -- and pleased that we won't have to wear our hotel robes for the rest of the week -- my wife and I begin to dance like wild folk around a pile of burning airline ticket stubs.
Is it really a surprise that US Airways is likely heading for its second bankruptcy filing, or that Delta (NYSE: DAL) is knocking on the default door as we speak? How about American (NYSE: AMR)? Are Northwest (Nasdaq: NWAC) and Continental (NYSE: CAL) looking good to you these days?
Certainly these companies have -- with your money -- helped to build the infrastructure that makes modern air travel possible. But it would take a complete rewrite in order to make these dinosaurs competitive with the JetBlues (Nasdaq: JBLU) and Southwests (NYSE: LUV) of today (not that I'd recommend those stocks either).
Personally, I believe a fundamental change is taking place in the airline industry as we speak. Further, this change will ultimately create a completely different view of what it means to travel by air in this country, and the major carriers simply won't be able to reinvent themselves in time.
All of the majors may not be headed for the trash heap, but there are certainly better risk/reward opportunities available. In other words, skip these flights.
My email back....
What exactly were you trying covey in your story. Maybe the airline industry needs some positive stories instead of you idiots in the media harping on every bit of bad news you can get you hands on. We in the industry the hard working stiffs that try to give you the customer service that we think you deserve is constantly trampled management who believe that we are dinosaurs that need to disappear, all they want is for us to take pay cuts and put in kiosk machines no bodies behind the desk. I bet that the next time you fly no matter what airline, if it is a great experience we will not hear of it.
Maybe you should try writing stories that have some meaning, try the cost of oil that is killing any profits this industry would have had or maybe that these low cost carriers who are charging 39.00 dollars each way on the backs of welfare wages. I have even a better idea why not try to explain that a 10 year employee at one of these low cost carriers has no pension no retirement and probably still lives at home……..but I bet that isn’t news because you still get your 39.00 each way flight…..and we wouldn’t to ruin that now would we.
Happy flying…….
