Scott Mayerowitz has a piece for Associated Press that asks why Virgin America hasn’t done well as US airlines earn record profits, and why talk of a public offering of shares has so far been met with lukewarm reception.
The bottom-line seems to be that you can’t succeed as a high cost, low fare airline.
That’s not a new idea. When Independence Air launched at Washington Dulles, the former Atlantic Coast Airlines which had operated as a United Express carrier decided to go it alone rather than continue as a feeder when United sought contract concessions. They began as the largest carrier at the airport by number of flights, with a huge fleet of 50 seat regional jets — high per seat cost aircraft.
They offered tons of flights a day, without United’s marketing muscle, to cities like Flint, Michigan. What’s more, they didn’t want to pay to be included in global distribution systems, you had to book direct.
With tons of flights, and no customers, their fares were rock bottom. They even pulled a stunt, planting a mistake fare in their own reservation system on purpose around midnight and then calling the Washington Post themselves to alert the paper to the great deals customers found at iFly.com. It didn’t help. And neither did the Airbus aircraft they acquired to fly long haul routes. Too little, too late, they went under.
Virgin America was far better capitalized. They managed to absorb $400 million in losses. But as Henry Harteveldt observes in the piece, they have neither the frequencies nor the reach to appeal to high fare business travelers. They’ve developed a following more in the leisure markets, which don’t generate the fares which go along with a full service product.
What struck me as most interesting, though, was the title of the article (which I presume was given by editors, rather than by Scott): “Service without a smile: why airlines aren’t nice”
There’s nothing in the piece about customer service, really. It’s about the features and benefits of Virgin America, and to a lesser extent JetBlue — how the things airlines provide without additional fees were coming under pressure.
Put another way, the article is about ‘nice’ the way that United brought back ‘the Friendly Skies’ without friendly people, describing their features and benefits as ‘flyer friendly’.
Because the actual friendly part doesn’t really cost more. In fact, net net it tends to be airlines with lower labor costs that are actually friendlier. I explored this notion four years ago in Genuineness vs. Plasticism in Flight Attendant Interactions with Customers.
Flight attendants can be there primarily for your safety or can provide an experience of true hospitality. In the U.S., those outstanding crews are generally great by virtue of their own choice and drive rather than company culture. Fixing that is the part that not only doesn’t cost money, it can be less expensive, but it’s hard to get there once you’ve lost it.
So smaller, start-up airlines have the competitive advantage. It doesn’t always translate into profits (it’s not a sufficient condition) but it sure helped Southwest Airlines along the way.
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