Mark Gerchick TIME
Why the No-Frills, Cattle-Herding, Fee-Crazy Airline Business of Today Is Here to Stay
July 4, 2013
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  • At airline-industry conferences, you can pretty confidently bet that some luncheon speaker will sagely intone something along the lines of: “In the world of aviation, the only constant is change.” Well, not anymore. Love it or hate it (polls say more folks hate it), the way we fly today, our air-travel experience, isn’t likely to change fundamentally for years to come. Whether this “new normal” will improve the lot of everyday air travelers, though, remains up in the air.

    After a decade of incredible industry turbulence — an era when most major U.S. airlines, overwhelmed by soaring fuel prices, recession or both, bit the bankruptcy bullet — the business of commercial air travel is “finally on the brink of stability,” as US Airways’ president Scott Kirby recently put it. That’s not just because fuel prices are leveling or the economy is improving. At least as important is that the airline business is becoming an actual business.

    Even in an industry long accustomed to poor-mouthing about its horrific finances, officials now dare to envision, however tentatively, some real, sustained profitability. Airlines are “heading in the right direction,” says the trade association’s chief economist; United Airlines’ CEO Jeff Smisek even admits to harboring hopes that the industry is “becoming consistently profitable,” the Chicago Tribune reported. Air travel is up, expected this summer to start closing in on the all-time record levels set before the Great Recession, and U.S. airlines overall made money for the third year in a row in 2012. Losses in this year’s first quarter — typically the industry’s worst — were less than a third of last year’s first-quarter losses. Even the killer jet-fuel costs that once pushed carriers over the bankruptcy cliff are seen now as only a threat to earnings, not to airlines’ corporate survival.

    Wall Street is cheering — the index of airline stocks nearly doubled in the past two years and tripled in the past four. Airline workers may cheer too after years of layoffs and pay cuts. So should aircraft manufacturers and thousands of other businesses large and small that benefit from a healthy airline sector. But everyday air travelers also have a right to ask what’s in it for them. After all, plenty of what it’s taken to achieve the industry’s newfound stability and profitability comes out of air travelers’ comfort, pocketbooks and elevated stress levels.

    Most obvious is crowding — part and parcel of the industry’s new focus on efficiency and the bottom line. It costs just about the same to hurl that massive aluminum tube into the air when it’s filled with paying passengers as when it’s half-empty, perhaps minus the cost of carrying the extra weight, the additional sodas and all those tiny pretzels. So the more folks you can cram aboard, the better, financially speaking. Any empty seat, however rare now, is a lost revenue opportunity.

    Then there’s the array of nickel-and-dime fees that passengers have come to loathe and airlines love as a key component of profitability. Hefty charges for all those “unbundled” services — such as having an assigned seat or enough legroom to avoid crushed knees — once quaintly known collectively as “a flight,” have meant billions in new revenue, over $6 billion just in bag fees and ticket-change fees for the U.S. airlines in 2012. Rising basic fares also undergird the industry’s successful new business model. The handful of merged airlines that survived the decade’s financial storms rediscovered the law of supply and demand, so forget about scoring cheap seats given away in hopes of grabbing market share. Airlines have tilted the balance by cutting the supply of seats and fares have risen for the past four years, though they’re still close to where they were a decade ago, adjusted for inflation.

    Maybe most fundamental, the industry’s new normal seems to rest on a whole new frame of reference when it comes to customer service. “Sit back and relax” has largely become “you get what you pay for” — no-frills basic transportation. “We’re a service business,” Smisek said of United, presently the nation’s largest carrier by revenue. “We need to get you where you want to go, on time, with your underwear.” It may be unrealistic today to expect a great deal more than that. But even putting aside antiquated expectations of flying as a pleasant sojourn through the friendly skies, can’t passengers expect their air-travel experience to regain a little of the civility and humanity lost during the dark days of the past decade’s financial panic, now that the industry is back on its feet and seems to have found a way to stay there?

    They should. U.S. airlines and their trade association have argued eloquently that a more stable, profitable industry — one that produces a decent return on investment over a sustained period — will let them reinvest in customer service and operational efficiency, build better airport facilities and improve in-flight services.

    Understandably, profit-focused carriers are likely to channel much of that investment to better airport lounges and flatter seat-beds for their higher-profit premium travelers up front, but there’s plenty to be done for the many more folks in back too. That includes expanding onboard wi-fi access and seat-back entertainment options, modernizing and enlarging aging terminals, and investing in sophisticated new aircraft that enhance the comfort of everyone aboard. (New planes like the Boeing 787 and the Airbus A350, for instance, promise more humidity in the cabin to reduce the uncomfortable Death Valley dryness, and their new fuselage materials allow higher cabin pressurization, letting fliers, in a sense, breathe easier.)

    A more investment-capable industry could also continue improving baggage-delivery systems, more rapidly implement expensive delay-reducing air-traffic technologies, and work more cooperatively with regulators on sensible consumer-protection rules. Air travelers can even reasonably hope that a more stable, optimistic industry will support a happier, more satisfied front-line workforce ready to treat ordinary passengers with a little more generosity and grace.

    All that would make aviation’s new normal something for the roughly 750 million annual U.S. fliers to cheer about too.

    http://business.time.com/2013/07/04/why-the-no-frills-cattle-herding-fee-crazy-airline-business-of-today-is-here-to-stay/