707Flyer
Oct 16, 07, 6:04 pm
http://freakonomics.blogs.nytimes.com/2007/10/16/what-will-us-air-travel-look-like-in-ten-years-a-freakonomics-quorum/
This summer, as Virgin America launched, I was asked to comment on the state of air travel. Where most people see mess, I see opportunity. Thirty years ago, when I was stranded at an airport, I chartered a plane, sold seats to other stranded passengers, and in effect started Virgin Atlantic Airways. Our airline began with stranded passengers in mind, and that focus — customers first — continues to drive all our businesses.
The American traveling public has proven, with their dollars, where the future lies for commercial air travel: next generation, low fare, point-to-point carriers. This segment now owns one-third of the market, up from about 5 percent in the early 1990s. Consumers have been abandoning legacy carriers for years, and that decision is proving that there’s money to be made if you listen to what customers have to say.
I’ll use Virgin America as an example, since it launched just two months ago — on a morning when JFK was hit by a tornado (only the second tornado ever to hit New York!), during what people said was the absolute worst time to start an airline.
Virgin America chose to design a travel experience around the question, “How do people travel now?” If they are subject to long lines, delays, weather, and shabby planes, then why not try out innovations that we and our passengers can control? Virgin America passengers are entertained with 25 movie options, TV, games, in-flight chatting, and music. They can order food whenever they want it. They have power to charge up computers and, by next year, will have WiFi access at their seats. And why not have a bit of fun with mood lighting and a soundtrack in the bathrooms? Not an earth-shattering idea; but still, a new approach in the airline business. As the best financed new U.S. airline of all time, Virgin America has the luxury of making these investments, driving down ticket prices, and sparking an in-flight entertainment war. As with most other things, more competition is good for everyone.
In addition to our financing, Virgin America has other key cost-savings, including a streamlined, tech-savvy business model and a brand new fleet that is fuel-efficient and saves on fuel costs (and mitigates the impact on the environment). With an increasing focus on climate change, airlines have an opportunity and a responsibility to innovate with cleaner fuels and efficient planes. We’ve made business decisions with that in mind, such as pledging 100 percent of our profits from all our transportation companies to direct investments in clean energy. I believe we’ll see a lot more improvements there — and perhaps more pledges towards bringing clean energy to an otherwise dirty industry.
You’d mentioned private aviation in an earlier post, so I’ll make a brief point about that. Travelers who’ve had enough of commercial air travel actually have greater options in private aviation. That market is growing at over 25 percent per year, in part due to the growth of business travel and a willingness to spend more to get places faster. It helps that travelers can fly in and out of over 5,000 private airports in the U.S., compared to 500 commercial airports. New pricing models and very light jets are lowering the barrier to entry. We’re doing our bit with Virgin Charter, an online marketplace for sellers to put up their flights and for buyers to find and book flights as easily, as if on Expedia. So, the way I see it, it’s a brilliant time to be in the air travel business. Especially if you put yourself in other people’s shoes and ask, “How can I make this better for them?”
This summer, as Virgin America launched, I was asked to comment on the state of air travel. Where most people see mess, I see opportunity. Thirty years ago, when I was stranded at an airport, I chartered a plane, sold seats to other stranded passengers, and in effect started Virgin Atlantic Airways. Our airline began with stranded passengers in mind, and that focus — customers first — continues to drive all our businesses.
The American traveling public has proven, with their dollars, where the future lies for commercial air travel: next generation, low fare, point-to-point carriers. This segment now owns one-third of the market, up from about 5 percent in the early 1990s. Consumers have been abandoning legacy carriers for years, and that decision is proving that there’s money to be made if you listen to what customers have to say.
I’ll use Virgin America as an example, since it launched just two months ago — on a morning when JFK was hit by a tornado (only the second tornado ever to hit New York!), during what people said was the absolute worst time to start an airline.
Virgin America chose to design a travel experience around the question, “How do people travel now?” If they are subject to long lines, delays, weather, and shabby planes, then why not try out innovations that we and our passengers can control? Virgin America passengers are entertained with 25 movie options, TV, games, in-flight chatting, and music. They can order food whenever they want it. They have power to charge up computers and, by next year, will have WiFi access at their seats. And why not have a bit of fun with mood lighting and a soundtrack in the bathrooms? Not an earth-shattering idea; but still, a new approach in the airline business. As the best financed new U.S. airline of all time, Virgin America has the luxury of making these investments, driving down ticket prices, and sparking an in-flight entertainment war. As with most other things, more competition is good for everyone.
In addition to our financing, Virgin America has other key cost-savings, including a streamlined, tech-savvy business model and a brand new fleet that is fuel-efficient and saves on fuel costs (and mitigates the impact on the environment). With an increasing focus on climate change, airlines have an opportunity and a responsibility to innovate with cleaner fuels and efficient planes. We’ve made business decisions with that in mind, such as pledging 100 percent of our profits from all our transportation companies to direct investments in clean energy. I believe we’ll see a lot more improvements there — and perhaps more pledges towards bringing clean energy to an otherwise dirty industry.
You’d mentioned private aviation in an earlier post, so I’ll make a brief point about that. Travelers who’ve had enough of commercial air travel actually have greater options in private aviation. That market is growing at over 25 percent per year, in part due to the growth of business travel and a willingness to spend more to get places faster. It helps that travelers can fly in and out of over 5,000 private airports in the U.S., compared to 500 commercial airports. New pricing models and very light jets are lowering the barrier to entry. We’re doing our bit with Virgin Charter, an online marketplace for sellers to put up their flights and for buyers to find and book flights as easily, as if on Expedia. So, the way I see it, it’s a brilliant time to be in the air travel business. Especially if you put yourself in other people’s shoes and ask, “How can I make this better for them?”