As we enter a new year, it is always a good time to reflect on what has happened and what we can do better. New Years’ resolutions are an annual tradition for many, so why shouldn’t businesses do the same thing? The last year had some positive news for U.S. airlines, with two start-ups and a nice return of the price-sensitive leisure traveler. It was also another very safe year for the U.S. airlines.
Not all went well this past year however. Most airlines cancelled more flights than usual due to to worker shortages, and there were many unfortunately violent and disruptive acts onboard some flights. The industry as a whole will lose a lot of money again in the year, so as we look into 2022 what are the aspirational ideas that airlines can do to make things better for all? Here are five important ones:
Better Align Scheduling With Operations
In a typical airline, the schedule planning team determines how many flights to fly, to what places, and which airplanes to use on each route. This process usually includes a few iterations with the operating teams to ensure that crew assignments, maintenance needs, and practical airport issues can all be properly handled. On a day to day basis, this process moves to a 24/7 operations center that deals with the issues that come up each day with weather, customer, crew, and airplane issues. This process works most of the time, but as the industry saw this summer it can fail when some parameters end up changing more quickly than expected. Specifically this year, lack of staff has been a common reason for airline cancellations.
Without wholesale changes to organizational structures, airlines should be able to better align the practical reality with the theoretically optimal aircraft schedule. This means being more proactive about the next few week’s plan given the staffing issues and expected weather. Thankfully some airlines have been doing this, and that suggests good learning from a tough summer.
Create A Practical Plan To Keep Sick People Off Airplanes
If you discover that you have a known communicable disease and tell your airline about it, they will calmly quote you the price change plus the change fee required to move your flight to another date. Airlines aren’t good at keeping sick people off of planes, because they create economic incentives to take the flight scheduled. This is understandable in some ways — allowing passengers to move flights based on their statement of illness opens big cans of worms for the industry’s revenue.
But still, it would be great if a creative airline could find a way to keep infectious people off of their airplane but not open the flood gates to willy-nilly changes. A doctor’s notes won’t work, because we all know how easy those are to get or fabricate. The right answer may be some form of insurance that both protects the customer and the airline, and no one is better than insurers at reducing adverse selection.
Stop Justifying “Strategic Flying” Routes
In my first role at American Airlines way back in 1985, I first heard the term “strategic flying”. My job was in the finance department group that created and analyzed the company’s route-level profitability. Some routes were highly profitable, others lost a lot, but most were in the -5% to +3% margin category. When I asked the naive question as to why we flew routes that lost money, my manager reminded me that we were looking at only one month of the year, that some routes were new and still had to build up, but that some routes were flown “for strategic reasons”.
Over the next 35 years in multiple roles and at several airlines, I continued to hear this justification. I came to realize that airlines use this term to rationalize losing money, because they don’t know what else to do to make the route profitable. Yet, they feel they must keep flying it because something would go terribly wrong if they stopped it. John Dasburg, when he was the CEO of Northwest Airlines, once famously said “the fastest way to stop losing money is to stop doing things that lose money.” He was right, and for 2022 every airline should make a resolution to scrap flying that does not produce a positive return for its investors. Not every airline will do this, because they would likely have to shutter their company. But every airline should be less tolerant of this condition and more quick to pull the plug.
Update Views As To How Customers Demonstrate Loyalty
Ever since American Airlines created the first airline frequent flyer program in the early 1980s, these programs have been very important to many airlines. They have become large revenue generators and good contributors to company profits. When the pandemic hit and airlines needed to raise significant new capital, Delta Airlines raised $6.5 Billion using their SkyMiles program as collateral. As strong as these programs have become, they still engage far fewer than half of the people who fly and the attraction rate is even smaller for the highest level of participation.
If you only fly three times a year, but you pick a specific airline for all three flights even when you have options, you are demonstrating loyalty to that airline. But no airline gives you anything for that. If you fly a lot but live in a place where you must fly multiple airlines because no single airline serves everywhere you go, each airline wants more of your business. Typical programs base their awards on total money spent or activity, like number of flights taken. These make sense as absolute measures. But customers can show loyalty, and benefit an airline by doing so, for absolute levels that don’t register in today’s programs. Of course, with less revenue paid or less activity, the programs could not offer the same level of awards. With more airline revenue coming from leisure traffic for the next few years at least, it will be smart for airline loyalty teams to think of ways to better engage a larger number of passengers. The key will be looking at share of flying, and not just the absolute level of flying. This won’t be easy, but it will be worth it.
Find A Creative Way To Fill Empty Seats With Stranded Passengers
Every time a flight is cancelled, passengers scramble to figure out how they are going to make their trip. Often, while this is happening, flights are leaving with empty seats going to places that may not be the same, but are closer at least. That is because some airlines have deals with other airlines to make this happen, but many times these arrangements don’t exist or are not used. The result is people stuck at airports while flights leave with empty seats. This doesn’t make sense , and when this is the case the answer likely is because the economic incentives are wrong.
Most airlines were burned this summer, and some this holiday, for having an excessive amount of cancellations. One way to mitigate at least some of that problem is to establish an industry-level cooperation agreement to use all seats available to help stranded passengers. If American cancels a flight from Philadelphia to Chicago O’Hare, but Southwest has seats on their flight to Midway, there could be an Uber-like app process to make this available to the stranded American customers. Even if there are seats on a flight to Detroit or Minneapolis, that might be a preferable place for some to be stuck if trying getting back to Chicago. With today’s ride-sharing technology and some creativity, let’s find a way to fill every seat on departing flights when other flights at that airport cancel.
What resolutions does your industry need?