An open letter to airlines: “When is enough, enough?”

Guess what. Markets are efficient. The more apparent money there is to be made in a market, the more efficient it becomes. Maybe it is true that oil is overvalued, as dot-com stocks were. If so, the price will come back down.

I DON’T believe the airlines need to offer any apologies, but they also shouldn’t be whining.

It is perfectly reasonable for them to raise their prices. But if some airlines ran their businesses more efficiently in other areas, perhaps they’d be able to keep fares where they are, or increase them less, gaining a competitive advantage.

Someday, someone, somewhere is going to come up with a well-run airline. It may be out there already.

Bob – you said it much better than I could. What bothers me more is not the letter itself, but that they truly believe that their suggestions are a reasonable solution.

I eagerly await the day when natural selection thins the herd of mismanaged and inefficient airlines.

Whenever any of the majors complain, I feel the proper response should always be, ‘Um, what about Southwest? How are they making money?’

Such a radical change is needed in some/all of these airlines that I don’t think they’re willing to actually do what it takes to maintain a profitable enterprise. I may not have an MBA or even work in the industry, but when I see an example (Southwest) that profitability is possible, yet none of the majors can stop burning through cash, well, clearly there are solvable problems out there that are beyond the mental capacity/intestinal fortitude for the executives at the likes of AA, USAir, etc, to fix.

If I did my job with such wanton incompetence, I’m going to wager a large sum I’d be fired.

I’ve effectively tuned out the legacy carriers at this point. I don’t fly any of them, ever, any more; I call that voting with my dollars. It’s JetBlue and Southwest for me if I’m required to fly from here on out, thanks.

I’m with Lisa on the fact that it’s amazing to me that the fat cats at the top – some of whom are writing this ‘open letter’ are upset about their loss in profits while pocketing millions in bonuses. Some of us get by on a fraction of what you make, friend. Try it from our side of the coin, and then we’ll talk.

First…we won’t see oil prices change anytime soon…at least before January 2009 when a new President steps into office. Our current administration is going to guarantee the oil industry sees as many profits as it can get before it gets booted out on its behind.

Second…the airlines are going to keep begging for our indulgence and help until we say No. My little answer: we’re not flying to Hawaii this year…it was just too expensive. We’re driving to the Grand Canyon instead.

We’re voting for a change in administration. We’re sending emails to our senators and representatives both state and federal. We’re “mad as hell and not going to take it anymore!” and ready to scream it from the newsroom window!

It may seem like a small step and literally like one fish swimming upstream against all the others but if everyone took that one little step…

Not completely sure about the 50% figure, or the year of the airline bailout, but I think the rest is an adequate response (set to the tone of the open letter to consumers)…

Hello Airline Management,

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For consumers, ultra-expensive fuel means thousands of dollars lost just commuting to their jobs, and severe reductions in discretionary spending. This includes your own employees who are continuously asked to take pay cuts while management continues to collect undeserved ‘performance’ bonuses. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step or writing this letter to our nation’s airline industry.

Since high oil prices are partly a response to normal market forces, the airline industry needs to focus on increased flight efficiency and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poor management and ridiculously unearned bonuses.

Twenty years ago, airlines actually cared about their customers as people. Today, the customer is looked at as nothing more than self loading cargo, and that reflects the continued mismanagement of the majority of the US air carriers, even with taxpayer assistance. Airlines continually work to squeeze more and more money using unadvertised ‘fees’ and ‘surcharges’. These may tack on 50% or more to the actual cost of travel; the price goes up with each creative ‘unbundling’ yet with the never decreasing base fare the non-using consumer is still picking up the tab. You have even had the gall to blame rising fuel prices for many of the charges, yet when the fuel prices finally fall the charges will remain. Some airline travelers have found that rather than experience the pain of air travel, they would rather travel 18 hours or more by road or rail.

Back in the 1980’s, Congress bailed out the airline industry by removing regulations deemed excessive, opening up the industry to unchecked market speculation and manipulation. However, over the past two decades, the regulatory limits have come to be missed by the air traveling population. We believe that restoring and enforcing these limits, along with several other modest measures (such as a strong federal passenger’s bill of rights), will provide greater customer service, industry efficiency, and sound market oversight. Together, these reforms will help weed out the managers that have brought this once thriving industry to its knees, and once again allow market forces to dictate which companies survive, and which management teams receive well earned compensation.

The nation needs to pull together to reform the airline industry and solve this already overgrown problem.

We need your help. Contact Congress by visiting http://www.house.gov

The airline letter is fascinating, but it obviates three facts (also noted above):

1. Southwest Airlines is the only airline stock with a positive return this year, up 8% so far – all others have dived up to 85% year to date.

2. Southwest Airilnes (surprise!) hedges their fuel cost – any airline that does not hedge its full fuel costs (and a NYTimes article pointed out last Thanksgiving, http://www.nytimes.com/2007/11/29/business/29hedge.html ) should fire its Board, CEO, CFO and head of procurement.

3. The coming carbon cap-and-trade system and resulting price-per-ton of greenhouse gases (GHG) is only going to exacerbate the pricing of oil and its users. If you think $150/bbl is high for oil, wait til you calculate $150/ton of GHG.

My father used to say that the airline business was the worst you could invest in because of the long list of risk factors: safety/crashes, maintenance/frequency, fuel/oil prices, consumers hooked on $300 airfares, capital/leases at risk of under-utilization, partial regulation (and more in overseas markets), underpaid staff, and more.

Here’s to the resurgence of customer satisfaction, eco-jet fuel (thanks Richard Branson of Virgin, and soon Continental Air), and employee-respecting airlines (oh how I miss you People Express and Don Burr!)

R. Paul Herman, HIP Investor Inc.

Shri – you asked how much fuel would be saved by not showing a movie…You seem to have misread the statement…By removing several hundred pounds of video equipment from each plane, the plane is lighter and uses less fuel for takeoff and cruising (or can haul a couple more paying passengers.) Charging more for luggage does the same thing – fewer people bring a bag, then the plane is lighter (less fuel) or they can haul frieght (US Mail for example) which they can charge for. All of these changes are methods of reducing the amount of fuel used, or bringing in more income to pay for the fuel.

And I second the motion to eliminate bonuses for any industry leader who is whining about loosing money and blaming the other guy. I live on 1/10 of your salary and I get by, so can you.

As angry as I was about the letter, I was impressed that the airlines coordinated enough to somehow stop me from getting the letter 7 times. It proves that they are capable of better customer service, even if they only use it to suit their needs.

Maybe instead of asking consumers to stop oil speculation, they should ask when we’ll be ready to acknowledge that fares need to actually go up rather than nickel-and-diming us on the small stuff.

I don’t pretend to understand the futures market, but I do know long before the open letter from the airlines, I was hearing about speculators being responsible for as much as 20cents a gallon. At least when I went to the site suggested (and I did email my congresscritters) there were concrete ideas for change — something I had yet to see.

I loathe the arilines like everyone else — flying is just a pain in the rear end these days, and with increasing prices, I am sure I will hate it even more — but with that said, anything that helps them, helps me, so I did not take the suggestion to write Congress as them whining.

Wachovia sent out an interesting graph the other day showing demand has been all but steady for over 20 years, but not the price. I have heard all types of oil execs saying it is not the fundamantals, ie supply and demand, driving this price increase.

A summary of the airlines’ open letter to customers:

Bill the Cat: Aaack!
Mrs. Fletcher from the “life alert” commercial: Help! I”ve fallen and I can’t get up.
My bathroom: (the sound of flushing)
My 6 year old: How do planes fly? My answer: Customers, dude. Customers.

Cheers, -Big Daddy Alan

My complaint is not that travel costs more. I don’t especially like seeing airfares rise, but I understand the necessity. What I fail to understand is the seeming inability to provide friendly and involved service, irrespective of the cost. What I most dislike about the current situation is paying more for continued rude and indifferent treatment. As Tony Tyler said at a recent industry gathering, “What is the cost of a smile?”

The boarding announcements often begin with the reminder that “we are primarily here for your safety”–an oblique way of saying that unless we’re in flames, I’d really like to be undisturbed as I chat with my colleagues or read my magazine. This is certainly a blanket statement–and often untrue–but that it should be true so often is a clear indication of just how far service standards have fallen.

Some staff also seem to have decided that they are also arbiters of behavior as well. We all know that children can be unpredictable, even in cases where the parents are doing their best. We also know that some parents don’t try very hard to limit their kids. Nonetheless, how many restaurants or hotels throw people out based on a young child’s demeanor? Very often, the norm in other venues is to ask how one might be of service to help, but that apparently is no longer the case for many airline staff since threats take so much less personal involvement.

On some American carriers, the use of the toilet by the cockpit crew is preceded by the erection of a barricade of food trolleys and a flight attendant on guard. Given the fact that one of the things we learned on September 11 was that once passengers perceive a threat, they will be a first line of defense, this seems to be a poor course of action. Nonetheless, carriers often treat their passengers as threats rather than allies, building additional roadblocks in the client relationships.

In short, I will not be driven from flying by higher prices but rather by rudeness, intolerance and poor attitudes. And those things, Mr. CEOs, you can fix.