by James Surowiecki
September 3, 2007
In the summer of 1999, after a series of highly publicized customer-service debacles, the nation’s major airlines collectively promised Congress that they would revamp their operations, offering a “service commitment” that they dubbed “Customers First.” Eight years later, airline passengers are waiting in vain for any sign of that promise’s being kept. They’re also waiting in vain, period. This summer, nearly a third of all flights have been arriving late, more flights have been cancelled, many planes are overbooked, and, in June, reports of baggage problems were up twenty-five per cent from last year. A service commitment like this should probably be called “Customers Last.”
The airlines’ explanation for the sheer misery of flying is that the important problems – bad weather and an antiquated air-traffic-control system, resulting in overcrowded runways – are out of their hands. But those unavoidable difficulties have been exacerbated by the airlines’ strategic choices, most notably their decision to cut the number of workers they employ and the number of big planes they fly. Over the past six years, airlines have laid off more than a hundred thousand workers, around a sixth of their workforce, and six major carriers have shrunk their fleets – planes are expensive not only to acquire but to maintain – by twenty per cent. From an economic point of view, this was sensible. Making money in the airline business has always been tough – Warren Buffett has said that if captialists had been present at the Wright brothers’ first flight they would have been well advised to shoot the plane down – but the years following 9/11, in which the industry lost more than thirty billion dollars and several airlines filed for bankruptcy, were especially brutal. So airlines moved aggressively to cut the fat out of their business, trying to insure that each of their planes flew as many flights, while carrying as many passengers, as possible. The strategy was so successful that, even as business has recovered, the airlines have chosen to stay slim. As a result, planes today are more crowded than before – last year, the airlines filled seventy-nine per cent of their seats, compared with sixty-five per cent in the mid-nineties – and forecasts suggest that the industry as a whole may clear four billion dollars in profits this year.
The lean-and-mean approach may have saved the airlines, but for passengers it’s made an already bad situation worse. If something goes wrong with a plane, servicing it will likely take longer than it used to, and there’s less chance that another jet will be available to get passengers where they need to go. And since the planes the airlines do own are flying more flights, the ripple effects of delays have been magnified: a third of all flight delays are due simply to the fact that the plane was late arriving from its previous flight, and often the effects of a mid-morning flight’s late arrival can still be felt that evening. According to the Department of Transportation, more than a quarter of all delays in June were due to “air carrier” problems.
Oddly, none of this seems to have hurt the airlines – more people than ever are flying, and ticket prices remain relatively stable. In part, this is because, for many trips, there’s no meaningful alternative to flying, which limits the power that fliers have as customers. They can make certain choices – they consistently go for the cheapest flights, making it hard for an airline to raise prices – but anyone who vows never to fly with a particular airline again will likely have an equally bad experience on a rival carrier soon afterward. Like consumers of regional utilities or like drivers who tolerate bad traffic day after day, fliers have accommodated themselves to misery. It’s little wonder, then, that the air-travel market rarely punishes an individual airline for failing to get people to their destination on time: consumers assume, with good reason, that the options are interchangeably awful.
The airlines could improve the current system by investing more money in planes and staff, reducing the number of segments each plane flies in a given day, and increasing the number of direct flights. So you might expect that free-market competition would have thrown up at least one major airline promising reliable on-time arrivals in exchange for higher ticket prices – like a toll road in the air. The trouble is that although things like bad weather and air-traffic-control problems are easy excuses for the airlines’ failures, they’re also real problems, and any airline dedicated to keeping its on-time arrivals high could easily find its efforts, in the short run, stymied by storms or by high volume. And the punishment for an airline that explicitly promised excellent performance and failed would probably be much harsher than if it had promised nothing at all. (When JetBlue experienced huge delays this winter because of bad planning, it was savaged in the press, precisely because it had always insisted that it was different from other airlines.) Furthermore, in the short run more competition could actually make things worse for customers: it would mean more flights, a greater burden for the air-traffic-control system, and possibly more delays.
In other words, we’re stuck with the current system, because it isn’t really in any airline’s interest to try to change it. As long as no airline makes a dedicated effort to distinguish itself from the pack, all the airlines can stay lean, even at the expense of quality. In that sense, the most honest thing about the airlines may be their advertising, which tends to emphasize the flying experience – lulling us with talk of leg room and fully reclining seats. You may end up waiting on the runway for a couple of hours, the message seems to be, but at least you’ll do it in a comfortable chair.
http://www.newyorker.com/talk/financial/2007/09/03/070903ta_talk_surowiecki
Source: NEW YORKER
Date: 2007-09-03