Cutting Services vs. Increasing Revenue
 

I will be the first person to admit that the airlines are in a financial bind right now with the increased costs of added security and a loss of revenue due to fewer passengers. However, I am quite confused by the decisions being made by the major airlines in how to best prepare themselves for the uncertain future.

In the two weeks since the tragic attacks on New York, we have seen:

* cutbacks in services (eliminating practically all food in coach, closing of airport lounges, closing of elite services desks)
* massive layoffs
* threats of bankruptcy
* demands of government bailouts

At the same time, though, I have seen practically nothing done to encourage passengers to get back on aircraft -- through discounted fares, waiving advance purchase restrictions or frequent flyer bonuses.

On several routes I follow, fares have at best remained unchanged:

* STL-SEA went from $198 to $408
* STL-BDL went from $200 to $282
* STL-NYC remained at $239

I may not be a marketing major, but I expected some sort of push from the airlines to get people in the air again to realize air travel is indeed safe. While unit revenue may drop, I would think it would spur a quicker return to the skies than seems to be taking place currently.

Am I missing something here?

I applaud Southwest Airlines for reinstating their Internet special fares of $39-89 each way for all flights -- while eliminating the day of week restrictions and reducing advance purchase to only 3 days.

I may not like Southwest's brand of air travel, but if my choice is a $178 roundtrip on Southwest without any food or a $408 roundtrip on American without any food, I know which I will pick.

Greg

Well stated. American is going to learn the hard way that many people share your view on this.

True.. and where else could you fly backwords.. or stare at someone the whole flight http://www.flyertalk.com/forum/smile.gif

I understand that this point of view sounds good when you're a passenger, and it seems like it should be the way the things work, but imagine this were your money.

You know that passengers aren't going to come back in any big numbers for a while. Not only did a huge group of people get scared off of planes, but the economy has tipped over into a recession, so business travel has acclerated its decline.

You have to cut costs, you have to cut them like you've never cut them before. You have to spend money only where it is absolutely necessary to generate revenue. You have to make decisions about keeping meal service to retain (not attract) a few hundred flyers who probably won't change carriers anyway versus sending a few hundred more people to the unemployment line. Are you really going to choose the meals?

This crisis isn't around because of meals, elite service desks, or lounges. We had all these things, but everyone left anyway. They're not going to come back because some airline has the best meals.

The airlines have to wait this out and survive.

(Sorry if I'm coming off like islandgirl. I understand the point of view, but think the airlines are doing the right thing)

Robb:

I agree with you to some degree. There are a percentage of people who have been scared off of flying and some percentage of business travel has been lost -- but a lot of that is because people don't know what to expect.

But, the only way this fear is going to be overcome is by getting people on the planes and showing that it IS safe to fly.

Right now you are flying aircraft around with more empty seats than full seats. Those seats are gaining you no revenue whatsoever. Are you telling me that the airlines couldn't do anything to increase total revenue by offering sale fares right now? If not, then why is Southwest doing it?

I'm not saying to reduce all fares to the point where you are cutting overall revenue. But offer selective discounts to get the leisure passenger back -- something they sure won't do with $408 fares for a 1700 mile trip.

Please don't think that I'm saying this will solve all the problems the airlines are facing.. it most likely won't. But while cutbacks are being made in services, something should also be done to spur demand.

Greg

Greg-

I'm not sure what you mean by "the airlines" not putting flights on sale. I've seen plenty of sales, and internet specials on NW, CO, and AS just for starters.

And I don't understand what cheap fares have to do with making the public feel safe to fly. If I was scared to get on a plane..why would I care how much it cost?

I am one who cancelled because of concern for safety. Didn't want to do it but protecting my family comes first. I have been feeling sorry for the airlines except for one point. Customer Service. The airlines stopped delivering good customer service many years ago and I'm not sure our Tax Dollars should be spent bailing them out until the airlines begin delivering Customer Service again.

I just flew my brother out on a transcon FC award ticket, his first FC flight ever. Nobody that he works with could understand how he could fly now, even in FC. These are all folks who seldom fly.

I think the airlines are in a tough position for a couple of reasons. There's still a level of mourning for the country's losses and coming out with big sales and promotions would need to be handled delicately. Also, right or wrong, there's a still a feeling of overall uncertainty about who did this, what else they have planned, and what the US is going to do about it.

I also understand that the airlines need to be profitable in the future. I just do not feel the thought that we will come back or stay with our airline of choice ifthey lower the bar and give no incentive. FLY SW who is the best at being an ecconomy airline.

What the airlines need to do is secure thier base of elite by enhnaceing these low cost things like bonus miles that are capacity controled and for the future. Relax upgrade rules and other things of value to the regular business man. Otherwise we may come back in this enviorment but always go for the lowest Fare only. NO LOYALTY!

[QUOTE]Originally posted by robb:

You know that passengers aren't going to come back in any big numbers for a while.

You have to cut costs, you have to cut them like you've never cut them before. You have to spend money only where it is absolutely necessary to generate revenue. You have to make decisions about keeping meal service to retain (not attract) a few hundred flyers who probably won't change carriers anyway versus sending a few hundred more people to the unemployment line. Are you really going to choose the meals?

This crisis isn't around because of meals, elite service desks, or lounges. We had all these things, but everyone left anyway. They're not going to come back because some airline has the best meals.

With airlines cutting food, service, elite desks, lounges, etc. There is nothing that distinguishes them anymore at this rate.

Basically all airlines will become one shade of gray and the only differentiating factor between them will be their uniforms and passengers basing decisions solely on price.
This does not sound like building customer loyalty nor retaining it for that matter. I am disgusted with what has happened and looking forward to flying European carriers which provide a hot meal even on a 2 hour flight! (gasp)

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"Fly me to the moon and let me earn alot of miles."

I don't mean to be insensitive, but I for one think the airlines are a bunch of cry-babies. Yes, what happened was tragic. Yes, it's going to have a horrible affect on the bottom line. But, like all other Americans, it's time for the airlines to start returning to their normal lives.

I have not seen a single airline do ANYTHING to lure passengers back onto those planes, with the possible exception of Southwest. Of course there are some people who won't come back for a long time, but there is a significant population out there that will fly under the right circumstances.

There are some deals out there, but I haven't seen these "sales" promoted anywhere. Where are the full-page ads in US Today and the New York Times? Instead, you basically have to stumble upon a bargain... something inexperienced travelers aren't saavy about.

Now, today I get an e-mail from UA saying they will no longer remind me of webfares via e-mail. That's ridiculous! I now have to go to their website and "search" for these deals.

The airlines are simply going to have to be more aggressive. The government bailout seems like a lot of money, but it won't last long. I doubt Congress will be real agreeable to a second round.

I was against the bailout from the beginning. It wasn't too long ago that the airlines were making record profits. During those times, did the airlines share any of those profits with the US Government and taxpayers? Sure, there were increased landing fees, PFCs, etc... but I didn't see any outright gifts a la the airline bailout. In fact, as far as the individual taxpayer is concerned, fares increased nearly a dozen times during that period of profitability.

If the airlines continue to wallow in their misery and do nothing to improve their circumstances, some of them will not make it. And I, for one, won't feel very sorry for them.

The terrorist attacks have undoubtedly caused a great deal of damage to the finances of the airlines and I believe that a bailout was necessary. However, I believe that the government should have attached "strings" to the money that required the carriers to increase service as the load factors and revenue per available seat mile (RASM) approached historic levels. There has been general agreement within the airline industry that there has been too much capacity in the system, which has in turn decreased prices. The effect of the majors cutting their collective service by 20% is the same as American or United shutting down completely.

I can understand the short-term reduction in amenities provided and believe that things will gravitate closer to pre-WTC standards. If not, Southwest will undoubtedly be the victor when service levels are the same because cost and reliability are important for many travelers. In addition, Southwest is building immense goodwill with its employees by working with its employees to reduce the need for furloughs. Who knows if they will be able to escape unscathed, but what matters is that their company is working to keep furloughs from happening and the employees will reward Southwest with their loyalty.

The airlines can't be seen as offering systemwide fare sales yet without seeming desperate or unsympathetic. They have to walk a fine line here, and I imagine that there will be significant sales as they are able to adjust their pricing models to the new reality and the initial shock wears off.

As life begins to normalize, the tightening of demand and the resulting increase in airfares is what has me worried over the long term. The airlines have also been given the opportunity to remove entire aircraft types from their fleets with the benefit of a U.S. subsidy. For more than just the obvious reason of fewer people traveling, the airlines would be foolish not to stop some of their flying. I believe that almost all of the planes that have/will be parked will never fly for their airlines again and that the return to pre-WTC traffic will be done as new a/c slowly enter the fleets.

I hope that the airlines will be able to recall their employees quickly as traffic improves. Many of my friends at different airlines are waiting on pins and needles to see if the American public will fly again. At BWI yesterday morning I was stunned to see how full the airport was at 6:00 A.M. I hope that this is just the beginning of the upward trend.

CWPFLY

Considering that the airlines paid on average $2-$4 a meal, cutting the meal service is ridiculous!

Even more ridiculous, instead of rewarding passengers brave enough to fly again, no drinks on some flights. If at a cost of $1 per passenger (airlines get drinks cheaper but only as an example) for 100 passengers is only a cost savings of $100. However, the airline could generate more revenue by putting one more passenger on board after selling a $100 ticket (base fare before taxes). I would gladly pay a $100 discount fare and heck, end up buying everyone drinks on board! http://www.flyertalk.com/forum/smile.gif

However seriously, I am more scared now about skimming on fuel. Airlines fly very close to empty when landing as fuel weighs too and does not provide revenue as passengers or cargo do.

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"Fly me to the moon and let me earn alot of miles."

AdamATL,

You must have missed National Airlines' spectacular "Get America Flying" campaign.

http://www.nationalairlines.com/itn/...ebspecials.asp