Are airlines destined to go the way of the railroads?
Despite continued capacity cuts and lower fuel prices, most major airlines posted another round of steep losses in the first quarter as companies everywhere trim travel in a dismal economic environmen
Despite continued capacity cuts and lower fuel prices, most major airlines posted another round of steep losses in the first quarter as companies everywhere trim travel in a dismal economic environment. With fewer flight options, a slew of new ancillary fees, the continuing hassles of post-9/11 air travel and now a looming global health crisis, more companies and business travelers are choosing teleconferences, Webinars and other virtual meeting venues in lieu of the old-fashioned business trip.
With the airline business eroding, it might be a good time for airlines to ask themselves, “What business are we in?” I suspect every airline CEO would probably say they are in the business of flying passengers from one place to another, but they may be off the mark. The purpose of just about every business trip is to facilitate some kind of meeting. Whether it is a sales person calling on a prospect, a job applicant interviewing with a potential employer or conventioneers wandering the exhibit hall, the objective is always the same: Get people together.
In each case, it’s the meeting, not the air travel, that’s the true purpose of the trip. When air travel becomes too costly, inconvenient or dangerous, business travelers find ways to make meetings happen without flying. Yet airlines fail to comprehend their supporting role, and the fact that they could cease to exist if business travelers stopped holding meetings. Therefore, airlines are not in the flying business; they are in the meetings business, at least with respect to their most important clientele.
The current airline struggle for survival is reminiscent of the death of the passenger railroads in post-WWII America. Once upon a time, hundreds of railroads crisscrossed the country and carried everyone wherever they needed to go. When air travel became safe, reliable and affordable, and the nation constructed a network of interstate super highways, the passenger railroad industry missed a vital and obvious business signal that major change had arrived.
What the railroads failed to recognize was that they were really in the transportation business, rather than the narrow niche of moving people from city to city in metal coaches riding along thousands of miles of tracks. In the short space of a few decades, every major U.S. passenger railroad disappeared as Americans opted for faster and more convenient air and automobile travel instead of the train. Had even one railroad CEO understood this simple concept and altered their business model to include air and road options, that railroad might still be in business today.
A savvy railroad CEO, who saw the handwriting on the wall, might have extended their tracks right up to the airport passenger terminals (as they have done in Europe), or constructed new airports alongside their existing tracks. Had one CEO recognized they were in the transportation business, no matter what mode, that railroad might have purchased or partnered with an airline, a rental car company, a taxi or limousine service, parking facilities, bus lines and any other businesses that help passengers complete their journey from end to end regardless of transport mode.
While the airlines helped put the passenger railroads out of business, in an ironic twist of fate, those same airlines are facing a similar threat to their core business and may eventually be obliterated by virtual meetings, automobile travel and even a high-speed, all-electric reincarnation of those railroads they replaced decades ago. Sadly, the airlines have failed to learn the lessons of the defunct passenger railroads and have yet to see the big picture: Airlines are in the meetings business.
If I were an airline CEO today, instead of annoying my best customers with service cuts and ancillary fees, I’d be building conference rooms with lots of meeting space at airports and installing the latest Web and teleconferencing equipment. I might partner with or even purchase a company that already provides these services across the globe and integrate these services into my product line. I’d partner with Amtrak and municipal commuter railroads and mass transit systems in every major city, and position my airline to capture federal government stimulus funds to construct my own high-speed, intercity rail lines. I might also partner with or purchase a hotel chain and fill those properties with the latest virtual-meeting and communications equipment. I’d even encourage my customers to try a virtual meeting this time instead of flying. In short, I would try to capture as much of the money spent on business meetings as possible, regardless of the venue and meeting method.
In this way, during hard times like these when fewer people are traveling, I’d be expanding my revenue stream to include virtual in addition to face-to-face meetings. Additionally, on my website I would sell all of my company’s meetings products including air, rail, highway and virtual meetings – all on the same page. I’d display prices for every meeting option as well as the features and benefits of each option to make it easy for my customers to evaluate the merits and costs of each business meeting type to help them make an informed decision in selecting a meeting method best suited for their needs.
If just one airline implemented some of these suggestions, that airline would be miles ahead of its competitors and could become the instant favorite of business travelers, meeting planners, and other professionals who control the travel and meetings spending for their companies. Perhaps that airline would still need to shrink the flying part of its business to match reduced travel demand, but it would also spend less money on flying, and surface travel options or virtual meetings might provide the revenues and profits necessary to sustain the company until the demand for air travel rebounds again. Finally, that one airline which has redefined itself as a meetings company might consistently make money while its myopic competitors still in the “airline” business continue to drown in red ink.