The Unseen Airline Industry Crisis
Changes. Disruption.
Pretty much describes the situation facing the U.S. airline industry. Except one other dynamic that hasn’t yet fully been grasped or even identified…
Evolution… evolution within the range of competing communication channels. The airline business is not excluded from the need to evolve or atrophy and die.
Air transportation is a communication channel. And communication channels have been completely disrupted by the response to the China pandemic. Air travel has been choked, forcing use of other channels in the day to day inter-communication of business, government and private citizens.
The surprise coming is that a substantial number of these former alternatives will not be temporary, and the world is finding that some of them are actually simpler and easier than air travel.
Think about it. We have been forced into using electronic communication. Many of those modalities are a lot simpler than the traditional air transportation process. They cannot fill the entire role that air service occupies, but it can snarf a part of it.
In short, other modes of communication have evolved. The process of air transportation has not.
The Evolution Started Long Before The Pandemic – But Now It’s In High Gear. At BGI, we’ve already covered in our air service work how alternative modes of communication have permanently replaced and supplanted air travel in many short-haul O&D and rural markets.
It’s too slow compared to other ways of getting business done, and too much hassle.
Today, air transportation faces a wider challenge from electronic means of communication. True, there never will be a replacement for most of the need for face-to-face interaction, both business and private. One cannot get a sunburn and run on the beach electronically. A billion-dollar business deal isn’t going to be done via Skype.
But at the margins of the demand spectrum, consumers are finding that the process – the physical actions needed to use scheduled air service – are increasingly onerous, and they will – will – in the future stick to a degree with what they’ve found over the last four months – electronic communication has no refund rules. No rebooking fees. No need to be concerned with fine print.
Other forms of communication have evolved to be easier and faster and more convenient. The process of air travel fundamentally has not. Sure, there’s now electronic ticketing and boarding passes and really great apps from most airlines. But nevertheless, the range of hurdles and potential hurdles that consumers need to navigate have not materially changed.
Make A Mistake & Pay For It. To be very clear, air travel demands a certain amount of process, just for safety and security. But there is no “process anxiety” with electronic communication. Make a mistake and there are unlimited Mulligans. In air travel, the process over the years has become accessorized with all manner of additional airline-developed rules, regulations, fees and processes that can represent financial hit should the customer fail to comply for any reason.
Airlines have the right to charge for their services. They have the right to require customers do business a certain way in regard to things like ticketing, baggage and itinerary changes. It is their right.
But the question needs to be asked: what is the public perception in general about the customer orientation of airlines? Regardless of the fact – and it is a fact – that virtually all U.S. airlines are focused on customer service more than ever (actually, some are flat-out excellent), the perception of the public doesn’t reflect this.
The main reason is the complexity of the process. The anxiety of being penalized for missing a rule. The difficulty – represented by penalties and fees – of making the decision on when to fly.
Then there is the ironclad enforcement of rules. Like the tacit contention that buying a ticket is somehow the customer’s contractual commitment to taking a trip, even when weather precludes the airline from delivering on the date promised.
“You are now permitted to re-book, without penalty, within 10 days, as long as it is on the same itinerary and on the same fare basis, blah blah blah…”
Really? Air travel is all about time-certain need to be somewhere. A weather or mechanical or ATC event that precludes the airline from flying is a given from time to time – it’s an intrinsic part of the business. But for the folks who made the reservation, thinking that they would get to the destination as scheduled, it’s not that simple. The wedding is now over. Grandma’s funeral was held anyway. The big meeting was missed. The cruise ship sailed.
But the money the customer paid to get to these events is not to be easily refunded. You committed to a trip to Omaha, pal. Period.
The airport and cabin staff can deliver incredible customer service, only to have it all torpedoed with one condescending form letter from the refund department, usually buttressed with an attachment of some rule or an excerpt from the contract of carriage. Or one saccharine-stupid machine-generated “tough, but it’s our rules” email from what is passed off as the customer care department.
Here’s the bottom line. The airline industry is not just facing the damage done by the China-Covid pandemic. It is now facing increased competition from other forms of communication that consumers are finding to be a lot easier to use. Yup, it may just represent a single digit percentage of traffic, but that’s also a big chunk of the profit margin.
Point: The airline industry needs to look at procedurally evolving to better compete with these pesky new forms of competition.