Up, Up, … and Gone?
by chet ~ May 6th, 2008. Filed under: Boyd's Theories, Business Strategy.Can anybody explain what’s happening in the airline industry?
Ray Neidl, a noted airline analyst
left little room for optimism in a recent report titled ‘The Perfect Storm Revisits the Industry in 2008.” He invoked the Bible’s Four Horsemen of the Apocalyse to describe the challenges of “high fuel costs, recession, labor unrest and excessive government interference.”
Did “abysmal customer service” somehow get left out? It’s so bad that WSJ airline observer Scott McCartney has suggested that customers are now trashing planes in revenge:
People do things on airplanes that they would never do in other public settings. They pluck eyebrows, polish nails and pick noses. They stick chewed gum in places only other passengers will discover. They blow noses into blankets that get folded up for the next weary traveler. They prop bare feet up on bulkheads and seats. Sometimes they even engage in sex acts.
One reason frequent fliers and flight attendants perceive an increase in offensive behavior may be the decline in air service — customers seek retaliation for late flights, snippy workers, lost baggage and unavailable upgrades.
What’s the industry’s solution? With a few exceptions, it’s cannibalism: Absorb each other in order to reduce “excess capacity” (anybody seen any of that recently?) from the system. In other words, eliminate competition.
So my question is, “What’s going on?” Do airline execs really think that their salvation lies in making their already dreadful product even worse?
Bonus question: What does lean theory have to offer?
May 6th, 2008 at 5:32 pm
It’s interesting that you should ask about Lean’s take on the issue. In his latest book, “Lean Solutions,” Jim Womack dedicates quite a bit to the problem. A presentation that spells out some of his proposed solution is here:
http://www.leanuk.org/articles/FL_2005/Day1_Plenary9_Womack.pdf
Also, when looking for the Womack reference I ran into an industry consortium aimed at the same problem, the Lean Flight Initiative, ref at: http://www.leanflightinitiative.com
May 7th, 2008 at 7:20 am
It struck me while stranded in the rain-sweep Cincinnatti airport on my way from Atlanta to Boston the fundamental flaw with the modern air travel business model:
I pay the airline LESS money to fly me to a place I DON’T want to go and it costs them MORE money to send me there than it would to take me where I do want to go.
And on occassion, I get stranded, costing them even more money for food, hotel, and the premiums to get me back where I want to be. (It was clear skies in Boston and Atlanta that day, raining in the midwest).
As Womack has pointed out before, the logic behind hub and spoke is highly suspect. I believe this is why Boeing has been so successful selling the 787 in the long-haul market. It’s the anti-hub and spoke competitor to the batch-and-queue Airbus A380. It doesn’t help us domestically, but it’s a step in the right direction.
May 7th, 2008 at 3:54 pm
Steve,
Thanks - very interesting, to say the least.
The air taxi solution that he mentions is becoming a reality — James Fallows has written extensively on it, although as he notes in today’s blog, it’s still unclear whether it will work in this business climate. [Perhaps a more implementable solution is to buy PCs with built in cameras -- all Mac laptops and iMacs, for example -- and just not travel so much].
Still, I wonder — of the majors, other than perhaps Southwest, who is actually addressing this problem? The Lean Flight Initiative shows exactly one airline, Northwest, as a premium sponsor on its home page.
Where is the Toyota of the airline business? Why are so many players still thinking in terms of economies of scale and cutting costs, which practically always means cutting back on customer service and convenience?
Ironically, perhaps, Toyota competitor Honda will have an influence on the business — as a provider of VLJs.
May 7th, 2008 at 4:00 pm
Andy,
Agree completely!
Now, here’s the question: If it’s so blindingly obvious to all of us, then it is obvious to airline execs, too. So why do they still do it?
May 8th, 2008 at 3:03 am
about 15 yrs ago i was on a flight first thing in the morning from san jose to chicago getting a connection to boston. the flt was delayed on the ground in san jose for about an hr, because of a storm blowing past ohare. the storm took an hr to transit ohare during which time the traffic rate into/out of ohare was cut in half (take off/landings were cut in half during peak morning period, 6am in sanjose, 8am in chicago).
should have gotten into chicago about 11am local time with a connecting flt to boston about noon. actually got into chicago about noon, and connecting flt had been delayed to almost five. the problem was that the infrastructure was so highly tuned and static/rigid … that there was no adaptibility to even small gliths. what had started out being half peak capacity reduction for an hr first thing in the morning … the effects should have dissipated later in the marning when they would have been able to peak up the additional/delayed flts (during nominal much lighter traffic periods). at worst, there would have been a time-shift of possibly 30mins as the delays continued to roll forward during the rest of the day (i.e. half of an hr’s worth of delayed take off/landings not being able to be absorbed).
however, because of the highly static, rigid optimization … instead of the glitch dissipating by noon, it had actually amplified; from about 30minutes worth of affected traffic to 4hs … and getting worse.
my comment at the time was that the only way the system appears to recover from even minor glitches is the overnight quiet period when all activity drops to zero and can reset.
federal air traffic control had actually instituted an improvement that planes couldn’t take off w/o a guaranteed landing slot at the destination (previously planes would take-off and then circle at the destination because of the saturation of landing slots). the problem is that there is little provision by the carriers to be able to adapt schedules to the “fog of war” … aka unplanned for contingencies.
about a decade ago we were called into one of the large airline reservation systems. they listed the ten major things that it was impossible for them to do in *routes* and wanted us to study it (routes is the part where the agent/system looks at all possible ways of getting passenger from origin to the destination and represented about 25percent of total computer system activity). We also talked about about *fares* (pricing of different ways of getting from origin to destination) and the actual reservations of a seat. i was given a complete copy of the OAG schedule (take-off and landings of all scheduled flts in the world).
Two months later I came back and demo’ed an implementation of *routes* that handled all ten *impossible* things that they wanted to do (but couldn’t). Then the hand-wringing started. Eventually after almost a year … one of the execs said that they hadn’t actually planned that we fix all ten *impossible* things … they just wanted to tell the board that we would be studying them for the next five yrs
(somewhere along the way, I started commenting, be careful what you ask for).
A major issue was that in their existing implementation paradigm … there was almost 1000 people handling manual tasks (and extremely highly paid people). The ten *impossible* things were somewhat a side-effect of having so many things actually being handled manually. I had changed the paradigm (in a completely different way of doing things), completely eliminating all those manual activities … and then it became straight-forward to implement the ten *impossible* things.
May 8th, 2008 at 4:49 am
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May 8th, 2008 at 8:49 am
this is me pontificating …
this is somewhat related to Boyd’s comments in briefings about Guderian’s “verbal orders only” … designed to encourage local, independent action during the Blitzkrieg
i’ve commented for yrs that at moderate highway traffic loading, certain *unpolite* activity by less than 1percent of the drivers can precipitate rapid change from free flowing traffic to stop-and-go.
there are hundreds of millions of things involved in national air traffic system that at very light load loading levels (say under 10-15 precent) are only moderately coupled and slight glitches can be absorbed relatively easily. as the loading on the infrastructure increases (planes, landing/take-off slots, gates, ground crew, gate crew, pilots, cabin crew, fueling, equipment; hundreds of millions of *things*), the coupling starts to stiffen. for purely local operation, having humans in the adaptability loop, can help absorb/adapt changes/glitches.
the problem as the loading further increases, the coupling between the different parts further stiffens across the whole infrastructure. humans, in the adaptability loop, can no longer take make real-time adjustments of the millions of interconnecting things. at this point, the effect of glitches in one part of the system … rather than dissipating over short period … begins to be amplified, rippling out through the whole infrastructure. there is no longer anything (say, equivalent to shock absorbers) that can isolate what happens in one part of the infrastructure from other parts of the infrastructure (and humans in the loop aren’t able to perform real-time adaptation of the hundreds of millions of factors involved). imagine that instead of weak springs coupling the hundreds of millions of pieces, the springs becoming stiff rods and any glitch anywhere in the system becomes amplified through the whole system.