While dinosaurs shrink, other airlines survive and thrive. Possibly the best example of this is Southwest. This week they announced the addition of two more cities to their network – Greenville/Spartanburg and Charleston, with flights to begin next year. I was interviewed on this by the local Greenville newspaper, and I’m glad I had a chance to speak with them and subsequently read the article they released.
It is sometimes easy for those of us who are fortunate enough to live in cities that are well served by Southwest, JetBlue, AirTran, and other low cost airlines (as well as the regular dinosaurs too) to forget what life is like in secondary centers where airline choices are few and airfare costs are high. Indeed, so high are many fares from Greenville that it is quite common for people to drive 80 miles north to Charlotte or 120 miles south to Atlanta and to fly from there – the saving in airfare apparently will often generously justify the cost and hassle of driving those distances. The euphoria and excitement in the Greenville community at Southwest entering their market was so apparent I could almost touch it through the phone line.
Now let’s think about this for a minute. Here is a community that is so desperate for decent airfares that people will drive up to 120 miles in their car to fly out of a cheaper airport. At the same time, we have airlines like United that currently provide such clearly inadequate and overpriced service, on tiny planes (to Chicago, Cleveland and Dulles) that Southwest is encouraged to move in.
If there is a business case for Southwest to move in to Greenville, surely there has been at all times prior to now, a business case for United to expand its presence there? Instead, United continues to shrink its domestic route system, and to complain about how tough the airline business is.
Do you really think that United’s problem is the ‘tough economic times’? Or is United’s problem its own lack of vision and leadership, and its inability to see market development opportunities in cities it already has an appreciable presence in? Most of all, do airlines such as United deserve to be given the privilege of merging with other dinosaur airlines, and to be exempted from the antitrust concerns that should surely apply, when they show such insensitivity to market development and profit opportunities that are currently right in front of them?
How will merging with Continental cause United to be more sensitive to community needs and market opportunities in places such as Greenville?
The dinosaurs are very good at persuading the Department of Transportation to believe that the only way they can survive (let alone prosper) and the ‘very competitive’ international marketplaces they struggle to operate in is by merging into the three gargantuan monsters that are the three airline alliances (Star, OneWorld, and Skyteam). They say that if they don’t merge into bigger and bigger, and fewer and fewer, alliances, they will fail.
But the international aviation marketplace also has carriers analogous to Southwest and JetBlue – a new breed of carrier, that operates efficiently, effectively, and profitably without needing to tie themselves up in alliances. Some of these carriers succeed at the bottom end of the marketplace (for example, Ryanair) and then there is one extraordinary airline that makes extraordinary profits and grows at astounding rates, while all the time providing excellent service.
This airline is Emirates, and they have just announced their last year’s results. A 21% growth in passenger traffic, and an extraordinary 248% lift in profit to make last year their very best year ever with a $1.1 billion net profit.
Yes, in the same year that airlines were merging or seeking approval to merge, in the same year that airlines the world over were bemoaning the global financial crisis, Emirates was quietly growing and the only problem they had was finding enough wheelbarrows to carry all their profits to the bank in. More details here.
Talking about billions of dollars in profit, the US dinosaurs are extremely good at one thing. I was going to say nickel and diming us on extra fees, but when you consider that last year the US carriers took $2.7 billion from us in baggage fees, another $2.4 billion from us in ticket change fees, and earned another $2.7 billion from other non-flying revenue sources (such as selling frequent flier miles at hugely inflated costs), it becomes plain that we are talking about a lot more than merely nickels and dimes.
But even with the $7.8 billion of non-core revenue, the US carriers still managed to lose between them $2.5 billion in 2009. What an amazing contrast between this and Emirates. And did I mention that with Emirates you can fly with two 50lb bags checked for free?
British Airways is doing all it can to respond to 23 nightmarish days of further cabin crew strikes, starting from next Tuesday. More details here.
Here in the US, the countdown has started for the possibility of a strike at Spirit Airlines. Their pilots are in a statutory 30 day cooling off period, at the end of which (ie on 12 June), they will be permitted to strike if they should still wish to. Apparently the airline and its pilots have been attempting to negotiate a new contract for more than three years.
Lastly, in the section for this week, airline perfidy. The good news is that I had a very pleasant chat with a nice lady from Alaska Airlines about their policy requiring electronics to be switched off prior to the airplane door closing. Discussions are ongoing, and I hope may result in a positive change for all Alaska passengers.
The bad news is my being duped and getting up at 4.30am on Thursday morning so I could excitedly send you news of what seemed to be a deal too good to be true on Air New Zealand. I could not research all details of the fare, which only arrived in my e-mail inbox at 6.20pm on Wednesday night, and noting that the details of the ‘special’ fare to New Zealand made no mention of any restrictions on the normal accrual of frequent flier miles, I extremely foolishly assumed that this meant the normal rules would apply.
As you will have seen from my two e-mails on Thursday morning, alas, the normal rules did not apply. And so when you adjust the value of the $399 airfare to reflect the lack of 13,000 frequent flier miles, the end result is that the Air New Zealand fare, offered with great hype and for two days only, was only pennies less than the Qantas fare that is also available, and which is good for travel over a wider period of time. Caveat emptor, especially with airlines.