Frequent Traveller Nightmare Part 2: Traveller heal thyself

As I wrote, some people are not in a position to slow their travel. Sales people need to see customers, and indeed there is a different social dynamic that occurs in person versus remote. However.

If one visits a site like flyertalk.com, where one sees the sheer mountain of complaints against the airlines, there must clearly be a better way for many people. There was a person at my company, for instance, who would commute to his customer in New York from the middle of England – on a weekly basis. Apart from what that costs in terms of dollars to our company and greenhouse gas emissions, it costs the individual too. Why didn’t the management hire someone in the New York area to do the job? Why didn’t they insist that he use TelePresence?

Well, watch this space: video is really coming into its own. Cisco has led the way with TelePresence, and is doing its level best to bring people closer together through introduction of new products and services like ūmi. If video can be made cheap enough, it hopefully means an end to at least some routine business travel. Better placement of resources would mean an end to much more.

But beyond that, all of these people who complain about business travel on that web site look at it as if there is nothing they can do about it. Really- to read someone who travels over 100,000 miles a year and took the time to complain leads me to ask the question I asked myself when I found myself miserably traveling: why travel if it is so miserable? How about not traveling? Or at least not flying? Or at least reducing the amount you fly? You’ll make yourself happier, spend less money, and reduce carbon emissions.

Here’s one reason not to stop flying: sending a message to the airlines. They don’t care. Not only don’t they care, but they’ve learned how to make money no matter what passenger demand they have, through the ability to easily adjust their fleet size, furlough employees, and cancel flights. Load factor is the only thing they care about. You can’t affect it.

By the way, people might think I find the airline industry uninteresting. I don’t. I think it’s fascinating, how planes are designed, how they’ve learned to make money in the worst of times, and how they’ve consolidated themselves into an oligopoly. But I’ll watch from a distance as best I can, thank you very much.

More Airline nonsense!

Yes the airlines are at it again. This time, according to the Wall Street Journal, they are complaining about the idea that you might actually want to get off of a plane after some number of hours of sitting on a tarmac. The pendulum has swung so far to the side of the airlines that they think that they can simply bully the FAA into backing off on the meager regulations they’ve proposed. I have another idea.

With the airlines threatening to cancel flights at the first hint of trouble, I propose that the FAA institute one additional rule: when a flight is canceled, the airline responsible must rebook a passenger for a flight to his or her destination on that same day, or allow the passenger to book the next available flight to his or her destination on any airline. Just for spice, we might add something about allowing that booking to be in a higher class of service if it is the only available manner to get a passenger moving.

Still think we don’t need a real Passenger’s Bill of Rights?

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Airlines’ motto: Squeeze now, apologize later

Who’s getting squeezed? Of course we all are. with additional costs for everything, including seat assignments, baggage, and (Heaven help you) change fees, airlines are making money again, on our backs. One might think there would be an easier way to do this, like simply increasing fees, but for whatever reasons, it’s not the case. Southwest has always been on the forefront of charging for this or for that. It’s latest adventure into charging people who seem too large seems to have gone awry, thanks to the light shown on this policy by Hollywood director Kevin Smith. A spokesman told CNN, “We want to assure everyone that has expressed concern over the situation that we will use this experience in our customer service program when training our employees on the correct way to apply the policy.”

This discussion isn’t about the size of individuals, or even Southwest’s policy on large people. It’s about the fact that they were able to impose a policy, which until this point hasn’t really given them much grief. And why not? Many people agree with the policy in principle: you take up more than one seat and you should pay for it. The problem is, of course, in how the policy was implemented, and this is often the case. Often the result of poor training, contracting of services, or just underpaid staff, passengers are subjected to policy fabrications. A classic case that we have suffered is whether our FAA-certified car seat can go on board a passenger plane. What often happens is that it is allowed in one direction, and then we have to argue for it to be allowed in the return direction. Worse was when we were in Newark Airport and were told by a staff member that we would not be allowed to rebook our flight when a security incident occurred, even though Continental Airlines had stated on its web site that we could.

And so what do the airlines do after such events? They apologize. They ask for our forgiveness. I would gladly give them that forgiveness, were it not for the fact that forgiving often doesn’t go both ways. If I need to make a change to my flight will they forgive me? If my daughter is ill and we need to reschedule our trip, will they forgive me? Of course not.

The underlying problem is that individual consumers have very little buying power. Even large corporations get very little say in how airlines treat them. With market entry costs in the tens of billions of dollars for an airline, consumer protection laws are needed to keep airlines honest. Kevin Smith should be compensated for the poor service he received. So should people who are less visible, who are not Hollywood directors. America really needs the same sort of protections that the European Commission implemented in 2005.

Airlines may argue that such regulation hampers their ability to offer tailored services, or that it is simply too costly. It’s difficult to quantify the impact of such legislation as well, because airlines airline statistics in Europe are not easily available. Still there is a moral need to address the problem. Agree? Disagree?

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Final Thoughts on Airline Upgrades

As we discussed, customer loyalty is worth something to airlines. They spend billions of dollars worth of free services each year in order to maintain that loyalty, and their strategic alliances are intertwined with that customer loyalty.

And so let’s look at the customer. Be the customer a frequent business traveler or a casual tourist, one problem that could exist is that he or she may not be able to afford an upgrade if it is somehow connected to actual dollars. And while in my previous post I suggested that the cost would be in miles, there would be a conversion from dollars to miles. And so some segment of the customer based could end up unable to participate in the auction because of wealth disparaties. Such a customer might then be inclined to pick another airline that has a different upgrade allocation mechanism such as what we mostly have today.

That’s the risk. Is it worth it?

More On Airline Upgrade Auctions

When last we left our hero (me) we were talking about airline upgrade auctions, noting that Priceline already does this for seats.

Some of the problems that airlines would face with auctions would be these:

Upgrades are a huge perq for elite frequent flyers, where they either make or strongly influence their airline selection. Business travelers in particular make up the vast amount of revenue.
Inviting frequent flyers to use their miles as value to get these seats could imply that their miles in fact have value, and the IRS and SEC might like to know that. For years airlines have fended off attempts to view miles as any form of liability that would need to be written down. While I am sure that in recent times with the current set of passenger-hostile rules, this notion has at least been temporarily dispelled, one could easily envision governments taking a second look if they believed there was a logical monetization.

There are several approaches that may yet be available to airlines:

Run several auctions for the same seat, so that those in the same class are allowed to buy the seat first. This would be very close to how things are run today.
Provide elite members a discount on the final price. For instance, if you are a silver member, maybe you would get a 20% discount, but if you are a gold, perhaps that discount rises as high as 50%.
Reserve some seats for the Old Fashion methods of buying them in advance and using miles.

We may already be past the point where we could ever expect the auctions to be run in real money, simply because so many people have so many miles banked.

Potential Revenue of Business Class Upgrades

What this graph shows is normal business class revenue in red, and the potential for additional revenue in green. Note that the horizontal green line just indicates a random equilibrium. In reality that price would jump up and down based on the popularity of the flight, its length, and just how important it was to someone to get upgraded.

Again, this would need to be done in such a way as to preserve customer loyalty.