Airline law ends long Tarmac delays, fine threat improves performance

by Tom Johansmeyer on

The world didn’t end. No logistical disasters emerged. In fact, everything got a hell of a lot better.

Several months ago, the prospect of a maximum three-hour tarmac delay had the airline industry proclaiming the arrival of the four horsemen. They claimed that it would severely disrupt the industry to have to give passengers the option of getting off the plane would lead to chaos. People would be furious by a lone passenger wanting to bring the plane back to the gate, and crews would be forced to operate within the constraints of customer demands (you know … like other businesses).

Well, the airline industry doesn’t appear to be any worse off than it was. In fact, it looks like the new three-hour rule is having a positive effect. Three-hour tarmac delays have effectively disappeared, and on-time arrivals have improved overall. Everything seems to be running better than it was before the airlines faced fines of up to $27,500 per passenger.

How big a different did it make?Well, only four planes sat on the tarmac for more than three hours in April. In March, 25 hit that mark, and April 2009 had an astounding 81 planes on the tarmac for that long.

So, you’re probably wondering if the airlines stacked the deck, canceling flights to protect their stats and mitigate the risk of having to yank planes back to the gate or shell out big bucks fines. Year over year, the DOT reports that cancelations fell approximately 50 percent, with only 3,637 of 529,330 flights getting chopped.

Overall, on-time performance for the 18 airlines that report to the U.S. Department of Transportation climbed to 85.3 percent in April – up from 79.1 percent in April 2009 (and better than March’s 80 percent. Most of the late arrivals were caused by aviation system delays (e.g., bad weather or heavy traffic).

Efficient use of New York airspace and generally calm weather contributed to the improvement. LaGuardia‘s on-time rate surged to 87.4 percent from 67.4 percent. JFK showed a similar improvement – from 67.3 percent to 83.5 percent.

U.S. Airways led the pack in on-time performance among major airlines and followed Hawaiian and Alaska Airlines in the total market. American Airlines was the bottom of the barrel for the large carriers, with its sister carrier, American Eagle, sucking most among all airlines.

Let’s do the math on this. Holding airlines accountable and offering up the threat of hefty fines for mistreating passengers didn’t jeopardize their ability to operate. If anything, it led to improved results. For once, it seems, the government got it right. If that sounds weird, think of an airline that takes off and lands on time. Weird, right?

Two billion reasons why you pay to check bags

by Tom Johansmeyer on

Or, you could call it “2 billion reasons why flight attendants shouldn’t get raises.” It works both ways.

The labor debacle at British Airways reminds us of the perpetual stupidity turmoil that has come to characterize the airline industry. Not to pick on BA, but the strike shows how disconnected the flight attendants are from the nuts and bolts of the business, and it translates across the pond. Yet, passengers are in a similar state of denial, feeling wronged by the airlines as they are nickled and dimed for “amenities” such as checking luggage. With the latest data from the Bureau of Transportation Statistics, it’s pretty obvious that airlines need to bring in some more money, and it has to come from somewhere.

In the United States last year, 769.9 million travelers set foot on planes (departing from, arriving to or completely domestic), a decline of 5.3 percent from recession-stained 2008 and off 8.2 percent from 2007, when 832.2 million passengers flew the friendly skies. This was the first time the number of fliers fell below the 800 million mark since 2004, in which 763.7 million passengers boarded planes. Think about it: 2009 is basically 2004. The airline industry has lost five years of growth.Meanwhile, fewer people were paying less for tickets, with the average fare falling $30 from 2007 to 2009 – settling at around $315. The increase in demand led to the shedding of around 700,000 flights from 2008 to 2009.

In all, this dynamic cost the U.S. airline industry approximately $2 billion … and that doesn’t include financial losses elsewhere. Fewer customers spending less led to a profound decline in revenue, and the airlines need to find a way to get it back. They’ve been able to close the gap, in part, through the ancillary fees we’ve all grown to hate. Every time you pay to check a bag, eat an unsatisfying sandwich or grab a little more leg room, you’re helping to keep these guys in business.

Of course, this would be a lot easier if the airlines would do their part. Price increases are frustrating when you see striking employees looking for more in a market where their salaries are effectively unsustainable. And with some flight attendants willing to subject themselves to interviews with 18 airlines in order to land a job, it’s pretty clear that demand is sufficiently high to make pay raises not only unnecessary but irresponsible.

So, it’s time for both sides of this equation to accept reality.

Passengers: you’ll be paying for extras. The airlines need it right now, and the beauty of momentum is that they’ll keep charging us for everything imaginable even when the economy recovers, because they aren’t going to slash a revenue stream that’s paying off.

Flight attendants: raises? Look at the economics of the situation. If passengers are paying more for the same service and demand is high for a shrinking number of positions, there’s no reason to pay them. With revenue in the tank and an aggregate net loss of $4.6 billion for 11 U.S. airlines last year, there’s no money for raises … unless there’s a new way to extract blood from a stone, of course.

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Corporate travel comeback expected

by Tom Johansmeyer on

When you look at the woes experienced by the airlines through this recession, it’s hard to escape the fact that there’s only one solution: the business traveler. Recreational travelers may be important, but that’s not where the real money comes from. Airlines salivate over the M&A banker who books a last-minute flight every week. As businesses were laying off and cutting costs, corporate travel suffered, dragging the airlines down with it. With a turn for the better expected this year, airlines are now looking for ways to attract these valuable passengers and the budgets the command. Bed-like seats are starting to pop up, and first class service is finding its way onto regional carriers.

According to airline consultant Bob Harrell, “The business traveler is the most profitable part of the traveler segment.” As much as these folks can be a pain in the ass (and I sure was back in my day), they are probably the most important passengers the airline has. Harrell adds, in USA Today, that even in coach, the smallest domestic refundable fare paid by the business traveler tends to be five times higher than the rock-bottom price paid for a comparable ticket by a leisure traveler.

So, to bring the valuable customers in the door, airlines are rolling out the perks. Luxury lounges, in-flight gourmet meals and other amenities, the airlines hope, will put the corporate traveler back in their seats. The airlines are even paying handsomely for the business traveler: Delta, for example, is pumping $1 billion into enhanced up-market services through 2013.Business travelers represent a unique opportunity for airlines, in that they command travel budgets that are quite large relative to their incomes. They travel frequently and often have some degree of choice in the airlines they use. Further, business need may render price effectively moot. This is the sort of passenger that any business would love, and the airlines are no different.

Cash, it seems, is the universal language.

Click here to gain more business traveler insights in my weekly “White Collar Travel.”

Fees passengers hate actually make sense

by Tom Johansmeyer on

I honestly don’t have much of a problem with all the extra fees being tacked on by airlines. They have an obligation to their shareholders to deliver results: it’s a fact of life. And, realistically, they don’t do us any good if they can’t afford to put planes in the air. But, I suspect I’m in the minority on this one. A recent online poll by Airfarewatchdog.com sought to learn which fee passengers hate most and found that 52 percent abhor having to pay to pick a seat. Only 14 percent had a problem paying for snacks. A mere 3 percent (my kindred spirits, I guess) said they were happy to pay for extra services.

George Hobica, Airfarewatchdog.com‘s president, observes that passengers are more tolerant of fees that come with an added expense to the airline. If you want a meal, someone has to pay for it. Sure, you’re going to pay more than the airline does – as you should – but there’s an understanding that the airline is picking up part of the burden. With seat assignments, he believes, the fact that there is no incremental cost is what irks passengers.

I see Hobica’s point, but there’s an opportunity cost for the airlines that isn’t readily seen by the average passenger. If there is a place for a fee that the airline doesn’t use, it’s potential income that can never be recaptured. Sure, there’s no additional cost to be covered, but there is the reality that the airlines aren’t monetizing something that could ease the pressure on their financial statements.

There’s a good reason for every additional fee you’re seeing: airlines don’t have a choice. Rather than push up the prices, this a la carte approach allows passengers to decide what’s important to them. Why pay for a meal you won’t eat … or for a “better” seat that won’t make a difference to you?

Airline demand suffered worst decline in 2009

by Tom Johansmeyer on

Demand for airline seats fell 3.5% last year, making it the greatest decline the industry has seen, according to the International Air Transport Association. Airlines had a tough time filling 75% of available seats on average flights, IATA reports, and an early recovery, given the difficult conditions of 2009, is unlikely. For the freight sector, the situation was even worse: a 10.1% year-over-year decline, with less than half of all available capacity consumed.

Giovanni Bisignani, IATA’s chief executive, says, “In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen.” He continues, to USA Today, “We have permanently lost two years of growth in passenger markets and three years of growth in the freight business.”

IATA forecasts a $5.6 billion loss for the air transportation industry in 2010. Bisignani observes, “Revenue improvements will be at a much slower pace than the demand growth that we are starting to see.”