First, a quick quiz for experienced travelers: looking back over the last 20-25 years, would you say that the overall air travel experience has gotten better or worse through mergers?
Good start: you all answered, worse.
All airline mergers offer the same arguments, and this week's United-Continental combination is no different
- Bigger is better, because we can reduce the total number of flights offered (better for whom?).
- Fares will rise due to that reduced capacity. This will lead to profitability.
- We will need to make sacrifices and reduce operating costs through job-cutting initially, and this will make us financially more solid in the long run.
- We will improve our fleet, create maintenance/supply cost efficiencies, etc.
- Most of he same management teams at each airline will still be in charge; Mr. Tilton will be the new leader, followed later by Mr. Smisek.
That last one is the kicker, right? We certainly don't want to lose any of the senior men ( management always seems to be guys) any more than we wanted to lose most of those auto CEO's a while back.
One lonely airline always wants to marry another airline with the same problem set. It's as if they suddenly think, cheered on by bankers and lawyers, that if they combine flawed business models, idealistic business plans, average strategies, and slow bureaucracies it will get better. They dream that they'll become like, well, Southwest, which all of these merging partners despise.
But, you know most of that.
So, here's a wild idea. We base this idea on the fact that airlines are really good at some things: flying, maintaining and moving airplanes, for example. These are enormously difficult operating tasks involving super-complicated systems and dedicated, talented human beings. This effort also eats up huge amounts of cash. Every day, airlines like United perform herculean flight operation tasks that the Pentagon would envy.
Airlines are not nearly as good at non-flying things, basically anything directly connected to customers. The travelers' experience at the airport and on board gets low ratings, and the pay for baggage plans are getting complicated. You might argue that much of this is due to a concern for security; however, we do not know a single person who thinks that airlines themselves even offer consistently fair customer service today.
So, here's our thought: instead of looking in the mirror for a merger partner, why not look out the window for a partner who will compliment the things you do not do well by doing them superbly well. Anyone who has a relatively healthy marriage will tell you that they didn't have a "marriage of equals;" they had a marriage of complimentary part-ners.
Released from the financial burdens of aircraft leases (requiring extensive and expensive financial expertise) and managing the customer experience (as some hotel companies do so well), airlines shrink to their competent, even excellent core: operating aircraft. Four Seasons Hotels got this kind of thinking right, when they got out of the real estate investment business and stayed in their potentially profitable core of excellence, managing hotel services and operations.
This is an unrealistic plan you say? We think it's a far more realistic concept than a merged United/Continental. We think, ultimately, that this proposed merger will only lead to another merger down the line with the same arguments, the same management teams, the same bankers and lawyers. And there will be even less customer service, not more.
The airline industry today desperately needs the kind of radical thinking that created the ipod, the iphone, google, and other superlative every day products that the music, cellular and internet establishments could not produce by in-breeding. The iphone wasn't conceived after a Verizon-AT&T marriage.
We need an entirely new model. Who will be the Mr. or Ms. Jobs of the airline industry, or even the next Mr. or Ms.Branson, or, excuse us for saying this, the next Mr. or Ms. Kelleher?
Please, it is time to stand up and do something truly crazy and outrageously good.
Please, it is time to stand up and do something truly crazy and outrageously good.
