I was running errands this morning; listened to an interesting edition of The Exchange – NHPR’s morning call in program. Today’s topic was “Economic Turbulence in the Friendly Skies!” – a survey of the (sorry) state of the US domestic air carriers. If you’re interested, you can listen at the link above or download an mp3 here. The talk about the new baggage fees (we get to pay for the privilege of having the carrier lose our luggage and/or have sticky fingered TSA employees help themselves) motivated me to call in – I expressed my disappointment with the current state of the skies and ranted a bit about my efforts to fly as little as possible (it was a little better than yelling, “You kids! Get off my lawn!”, but not by much).
After thinking about it a bit, I find it difficult to imagine how the airlines are going to dig out of the hole they find themselves in. Let’s take some of the points made on the show and see what they indicate.
Fuel costs. I just don’t see fuel costs dropping significantly in the medium to long term. High prices will drive down consumption and cause (I hope) some innovation – it’s clear that we need to stop being such hydrocarbon junkies – but the world will continue to bid up the price of oil as living standards rise. Falling living standards – a crash or a long period of stagflation – is another possibility, but that bring it’s own set of issues – economic disaster is a possibility, but difficult to predict. The airlines are going to have to deal with $170/barrel (their cost) fuel – praying for an improbability (cheap oil) is not a business plan.
The Faustian Ticket Bargain. American casual fliers have gotten used to crazy-cheap air fare. Folks expect to be able to fly just about anywhere in the US for a few hundred dollars. David Field called these folks ‘low yield’ passengers – I’m reminded of the old joke about selling below cost – how does one make up the difference? Volume! Can some of the incremental stuff (baggage charges, etc.) extract enough money to make low-yield passengers worthwhile?
Business Travelers. The holy grail of the airline business. Some business travel is unavoidable, but as costs go up businesspeople will travel less (duh!). Conventional wisdom seems to be that companies love sending people on the road. That may be true (not sure at all) for sales/marketing types – the marketroids may be the airlines core constituency. For non wining-and-dining applications information is relatively cheap to move when compared with kilos of mass. Already, folks are meeting in virtual environments – expect more/better.
The thing airlines offer is speed. Speed comes at a price – airplanes are inefficient. In the short to medium term, fuel efficiency is going to be more and more important (I’ll bet you can get a hell of a deal on an SUV at any dealership in the US right now). What the airline industry will look like in 5 years is anybody’s guess, but I’ll bet it’ll be smaller and tickets will cost a lot more. Whether customer service remains as awful – I’m a pessimist at heart…
