Market Study: Major Airline Carriers

Airlines

American Airlines | United Airlines | Delta Airlines | Continental Airlines | Northwest Airlines | Southwest Airlines

**UPDATE - MAY 2010**

Much has changed since this study was published last year. Unfortunately, not all change denotes improvement and the airline industry is trying to “merge” its way out of a terrible business model.

Changes At Delta and Northwest - But not for the consumer
First, we had Delta and Northwest merge to create what was temporarily the “world’s largest airline.” From the inside out (the perspective of the airline), the merger went famously well. Northwest as a brand name went away and Delta as a brand name was painted on all the jets. Integration of schedule and fares all went smoothly.

From the perspective of the customer, nothing changed. No harm done. The problem is there was plenty wrong with the industry before the merger and the same issues are rampant today.

Maybe it is best to talk about those issues in terms of the latest merger: United and Continental.

United and Continental - Not for the consumer either
We could write pages upon pages about how each of these airlines fail to do anything well. The emphasis, on the part of the airline, is in becoming profitable. We can find no issues with this idea. It is the foundation of all great business. Without the goal of being profitable, every business is doomed to shutter its windows and close its doors.

Stealing Share, as a company, is in business because companies seek the keys to grabbing customers from the competition and depositing those customers firmly in the home camp. This is what we do. How we do it is the part that the airline industry does not understand at all. We do it by creating preference and that preference translates itself into higher margins. It is about enticing customers to prefer your brand, inconvenience themselves to own it and pay a premium to possess it. This is not what the airlines have in mind.

Aside from the location of the hub or the availability of a destination, neither Continental nor United has a brand by any stretch of the definition. They simply have a business of transportation that involves jets and regional carriers and all of the business accouterments that go along with it.

Even their affinity program — the frequent flyer programs — feel more like handcuffs than benefits as flyers try to consolidate their flights into a program with the hopeful promise that they will receive better treatment then the norm.

United is dominant in its hub cities where it doesn’t have to compete on price, because it owns the portal. Continental is exactly the same.

Is this merger mania bad for the flyer? We don’t believe so. Anyone who has flown in the past five years already understands that the pricing of tickets is a “science” beyond human understanding. It has no relevance to distance travelled or stops made.

These price fluctuations seem independent of the costs on fuel and ground crews to service the jets. (Otherwise, why would a multi flight be cheaper than a direct one?) We honestly do not see this monopolizing of the airways by a few mighty carriers as the antithesis of pricing wars. It is, instead, an attempt by failed brands to gain more passengers by buying the routes and the hubs. Nothing more.

The news out of the United/Continental merger is that the new mega carrier will:

1. Be called United
2. Be headquartered in Chicago
3. Have the Continental globe and color palate on the jets

Other than these, nothing will change - and that is the biggest shame of all. The management does not understand how brand is best when it is about the customer and not the company, reflects the highest emotional intensity in the category and truly sees all of its operations and processes from the standpoint of the customer with an eye to saying, “Because our brand promises this (that the customer is this and has chosen this), we do (everything they do).” Instead, they think the new “brand” is a business mix of the two brands.

What is the Solution?
The solution should be an answer to a question. An answer to a question they have not asked independently and are apparently not asking jointly. “What should the brand stand for? What must it mean and how can the customer who chooses the new United be different and better than the competition’s customer?”

Unfortunately, United/Continental, like Delta/Northwest before them, believe they are in the airline business. The merger meant no change to Delta/NW and it seems to mean the same to Continental/United.

Too bad because the industry needs to rethink its business model and have a new model reflect a new brand promise. Until it does, what can we expect from the new United? Lets list them: Poor service, higher fees, grumpy employees, dirty aircraft, small seats, high ticket costs, inconvenient flights, delays, maintenance issues and a failed frequent flyer program that looks, smells and feels like everyone else’s. In other words, more of the same

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The Original Airline Study Posted in 2009:

We live in the iPod world and technology has changed us. Whether it’s shopping or banking online, or scheduling our TV watching on TiVo, we’ve become accustomed to being in control.

It didn’t use to be this way, of course. We were once always dependent on our providers setting the time, place and format under which we experienced their brand. Remember the days of television when you only had three or four channels and actually had to get off the couch to change the channel? Those days are long gone.

However, there is one industry in which, from the consumer’s point of view, it hasn’t changed as much as the rest: the airline industry. True, there are elements of control for consumers. We don’t go through travel agents much any more, preferring to do it ourselves. We can check in at touch-screen kiosks and we can print boarding passes online.

But we’re still the victims of their control and often feel powerless to do anything about it. We can still feel like clones in the airline industry.

Flights are delayed more now than ever, while we sit for hours waiting on them. We’re cramped in seats like overstuffed suitcases, wait on the tarmacs for hours and are given a tiny bag of pretzels to eat, if that. It can be a miserable experience, especially as the major airlines continue to cut costs at the detriment of the consumer in order to meet rising fuel prices and a downward turn in traffic since 9/11.

What’s more, even if we were to have a brand preference of one airline over another, we often can’t make that choice. For many passengers, the choice ends up being based on who has the most convenient hub. To reduce costs, airlines have gone to a model in which the reduced number of flights are routed through hubs.

So, for example, if you live in Atlanta, the major hub for Delta, you often don’t have any choice but to choose Delta, especially if you are looking for a direct flight. Your choices are often reduced.

In addition, we are often slaves to the affinity or mileage programs offered by the airlines. It’s not that one program is better than the other (although you may have picked one over another because of the alliances with other airlines) or that you’re demonstrating your preference. Instead, you are often trapped by one affinity program because it’s where most of your mileage exists for one reason or another. It may be that you live close to a hub, such as Delta in Atlanta, or that you took an especially long trip with an airline and suddenly you have miles you can build on.

Those programs don’t demonstrate preference. They demonstrate who caught you like a fly in a spider’s web. And you can’t get out - and take control.

From a brand perspective, few of the airlines we looked at it in this study - American Airlines, United, Delta, Northwest, Continental and Southwest - have done themselves many favors in giving passengers what they truly want.

More importantly, few of them have built a meaningful brand if the models allowed passengers more freedom in making a choice. Most airlines talk about all the places they go or having the ability to print boarding passes online and other “table stakes” (what you need to have to even play in the game) that do nothing to differentiate the players.

Considering the situation, below is an examination of the market from a brand perspective and how the major players are competing in it - and why some are successful and others aren’t. And we also list why at least one airline is in the best position to do something about it, even despite the recent economic turmoil of the industry.

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