Some of us remember flying an airplane before deregulation. It was a pleasure. Deregulation changed the business model of the legacy airlines to hugely unprofitable in bad times and somewhat profitable in good times. But overall, the legacy airlines could not develop a business model that was viable over time. Many of the new airlines fared no better. Many "no frills" airlines targeted at leisure travelers have disappeared also.
Warren Buffet expressed his opinion of the airline industry in annual letter to Berkshire Hathaway shareholders, February 2008:
"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."
Throwing away the concept of customer satisfaction and turning the concept of value pricing on its head, the airlines have lurched towards a business model of quoting low fares and making money on add-ons: checked bags, food, booking a ticket through a human agent, etc. The airlines claim that other industries unbundled their offerings long ago and why should passengers pay for services that they don't want.
OK, unbundled offerings is a valid business model and transitioning to a new model is difficult for flyers, but American Airlines, according to recent news article on a family traveling to Disney World, reached a new low in customer satisfaction. ("Airlines 'playing chicken' with passengers, charging 'you-get-to-sit-with-your-kid" fee," by Bob Sullivan, www.nbcnews.com) When American Airlines changed the type of aircraft flying to Florida, it seated John and Amanda Parish separately from their five-year old daughter and would not change the seating without a $60 fee. Ask the boarding agent at the gate said the airline.
American Airlines learned this pricing trick from European airlines. When I flew to India on British Airlines in July 2011, I arrived at the airport to find my 10 year old twins seated separately from me. But the staff at the gate quickly placed us together--in middle seats. Window seats would cost 60 pounds each. The good news was that foreign airlines consider kids under adult height to be children and we got priority boarding and seats together for every flight.
While I believe all industries should develop a viable business model, the airlines are so desperate for the fee income that they have forgotten that they exist to serve customers. This event will make me less likely to book on American as I have children. And if I am traveling without my kids, I do not want to sit next to your untended child.
I used to drive if the time it took equals the time to fly. Now I drive unless the travel distance is over 750 miles and time is tight. I hate flying. I wish the airlines could develop a viable business model that includes value pricing AND customer centric thinking. But I'm not holding my breath.