On the business travel speaker circuit, I’m often the bearer of bad news for air travelers. U.S. airlines have cut capacity, raised airfares and imposed fees for everything from snacks to checked luggage to seat selection. Despite these forceful moves to raise revenue and reduce costs, the nation’s top ten airlines still lost over $4 billion in the last quarter and nearly $20 billion in 2008.
No one wants to pay more for less, but corporate travel managers also worry about service disruptions and loss of competition when airlines shrink, go bankrupt or liquidate. So it was not surprising following my somber forecast when someone asked, “What would you do if you were chief executive of a major U.S. airline?”
Travelers are quick to criticize airlines, and such criticisms are often well deserved. But few offer realistic solutions to stop the losses and make flying pleasurable again. Fixing an airline losing millions of dollars each day is no easy task. Airlines, once protected and subsidized in a regulated industry, were suddenly forced to compete with scores of nimble, low-cost upstarts that cherry-picked the most lucrative routes and weren’t saddled with aging aircraft, outdated computer systems, bloated payrolls and union rules and wages. Twenty major airlines during regulation morphed into five surviving “legacy” airlines today that are still losing money even after shedding billions of dollars in costs.
Now in the past decade, heinous terrorist acts, pandemic panics, skyrocketing oil prices and a global recession have brought the industry to its knees. Even with this adversity, there is no excuse for outrageous executive bonus pay, employee abuse and poor management decisions that alienate an airline’s best customers. So here are ten things I would do if I were CEO of a major airline:
1) Treat employees well. Every business school graduate is taught: “If you treat your employees well they will treat your customers well.” Somewhere along the way the big airlines have forgotten this guiding principle. Salary cuts, layoffs and pension fund dissolutions have generated much ill will and resentment. When times get tough, that’s precisely the time you want your employees treating customers well. At my airline, wages and benefits would be honored and employees would be recognized and compensated for exemplary customer handling.
2) Walk around and listen to customers and employees. This sounds so simple, but most CEOs never walk around and interact with employees and customers. JetBlue received kudos when their CEO worked side-by-side with flight crews serving food and cleaning airplanes. What better way to motivate employees than pitch in yourself? When I worked for US Airways, it was a real eye-opener to assist at LaGuardia Airport during the busy holiday season. On my airline, all management would spend one day every week on airplanes and in airports, handling luggage, picking up trash and serving customers.
3) Always fly coach. If you’re going to stack your customers six-across in a 17″-wide seat with just 31 inches of legroom, you’d better be willing to sit there yourself. On my airline, all employees would ride in the back of the airplane. It’s also another great opportunity to interact with customers.
4) Reduce flights at congested airports. Nothing irks travelers more than arriving late or missing a meeting due to a flight delay. One way to mitigate this problem is scheduling fewer flights at congested airports during peak times. Any lost revenue will be offset by happy, loyal customers who will fly with you again and again to avoid flight delays.
5) Always tell customers the truth and give them options. Sometimes flight delays and cancellations are unavoidable. Airplanes break down; Mother Nature intervenes. Passengers often complain that airlines don’t tell the truth or tell passengers nothing at all when flights are delayed or canceled. On my airline, employees would be instructed to keep passengers informed and relay all known information. When flights are delayed or canceled, passengers would be offered a seat on a competitor’s flight, a free hotel room and meals if no flights are available, a voucher for a free future flight, and the option to get off the airplane, go home and reschedule their trip. The passengers would choose. Lost revenue or increased costs would be offset by satisfied customers for life.
6) Simplify the fleet. Operating many aircraft types increases training, maintenance, spare part inventories and many other costs. While the big, money-losing airlines operate five, six, or more different aircraft types, the most successful airline since deregulation, Southwest, operates just one aircraft type (the Boeing 737). On my airline, we’d slim down to cover the world with just two or three different aircraft types and the money we’d save could eliminate the need to charge for checked luggage or other passenger fees (or, as mentioned above, could be used to reward employees for exemplary customer service).
7) Update the fleet. Newer airplanes are more fuel-efficient, less costly to operate and less likely to incur mechanical delays. New airplanes can be cost-efficiently outfitted with the latest electronics, like satellite TV/radio and in-flight Internet access. Yes, it costs more to lease or purchase new airplanes, but on my airline, we could use those funds received from downsizing and simplifying the fleet to invest in new airplanes.
8) Offer carrots instead of sticks. No one likes paying fees, but rather than penalize customers, why not incentivize passengers who carry less or skip the meal? Continental Airlines still serves free meals and Southwest has few ancillary fees and neither is worse off than their competitors. On my airline, the price of a ticket would include checked luggage and the appropriate meal service. Those who don’t check luggage or eat the meal might receive a discount coupon for future travel or bonus miles. Distributing carrots instead of sticks makes for happier customers.
9) Give them an extra inch or two. Last year jetBlue removed some seats to give many passengers additional legroom. To offset lost revenue, they charge a few dollars more for those premium seats, and removing those seats allows them to fly the airplane with one fewer flight attendant. On my airline, we’d implement similar win-win programs for airline and customers.
10) Don’t take money if you can’t make money. Nothing incites the wrath of customers and employees more than a CEO taking million-dollar bonuses when their company is losing billions of dollars. On my airline, compensation would be tied to performance. Management salaries would be capped with greatly diminished disparity between the lowest and the highest paid employees. Bonuses would be apportioned similarly and no bonuses would be paid if the airline is losing money.
These ten actions would set the proper example, earning the respect of all employees and creating loyal customers Making money should follow.