Airline Hatred and Online Aggregators

Ok, so I hate airlines.

Actually, there’s a little more to it. In general, I’m OK with the flying experience. I know it could be better, but for the most part, it’s good hearted people doing the best they can in a very tough, complicated, interlocking service industry. (Full disclosure: my bother is a pilot.)

The hatred I have for airline comes from their management decisions. I hate them for their inhuman inflexibility. I hate them for their nickel and dime tactics. They remind me of banks, both lay out very narrow rules of engagement and give themselves the right to tax you if you deviate from the plan. They let the policies play bad cop and stand unaccounted for some pretty unfair treatment.

This week, American Airlines hit me with a $200 change fee on a $300 airline ticket. Even worse, I booked a ticket for two passengers, that change fee applied for each passenger – $400 to change a ticket. At this point I’m hamstrung. I can walk away from $600 or pay $400 to make use of my money. What am I going to do scream at the ticketing agent? I literally have no recourse, I’m being heisted.

Then I see this article via Kotte.org. The article is an account of an airline exec lamenting the industry’s further march towards ancillary charges.
It ends with a nice thesis:

But the overall numbers don’t lie: The faster airlines add fees for basic services like checked bags, the faster their total revenue declines.

While this is comforting in the face of my American Airlines heist, I also think revenues are also down because people just flew less this summer.

More interesting to me are the interactions going on between the airlines and the analysts.

The legacy airlines–Delta/Northwest, American, United, Continental and US Airways–lost a lot of money. Collectively about $1.9 billion, in fact. Their revenue plummeted, too.

And do you know what most of them wanted to talk about? You guessed it. The baskets of ancillary revenue they’re harvesting by charging us fees for checking bags, choosing coach seats or whatever. Forget that their houses are burning down. They found a tap in the bathtub with some water leaking out, so they’re thrilled.

The airlines aren’t boasting to customers that they’re bringing down prices and creating fair use-based pricing, they’re bragging about the a-la-carte charges to the analysts. If the analysts believe the fees are a good decision, they’ll give a favorable recommendation that helps keep the stock price up. As airline management obsesses over their fate through the market they seem to miss the big point…the experience matters. If they’d take care of customers, customers wouldn’t obsess singularly over price.

Oddly, I think the major airlines maybe leaving some of the traveler experience on the table that could position online travel aggregators to deliver value in a way they weren’t able to before. As the airlines chop up the total travel price, the aggregators can stitch it back together again and start to evaluate airline more on total experience.

You might imagine Priceline/Kayak/SeatGuru/Orbitz launching a “True Price” feature and making a lot of noise about how you can make more informed comparisons through their site. While they’re at it, they could start to add consumer ratings for the different flights. Each flight is different, but I bet consumer preference for certain airlines shows up pretty quickly. That would sort of leave the airline with their plants down. All that brilliant airline cost accounting would go right out the window and consumers would know who the dirty birds were.

I feel like if airlines spent more time trying to create an unbeatable experience rather than hiring a herd of smart shiest-y shell-gaming consultants to screw me out of my money, I guarantee they’d be in a much better position than they are today. It seems to be working for Virgin, JetBlue, and Southwest.

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