Premium #160 – OPEN SKIES – THE TWO EDGED SWORD

Airlines For America (A4A, formerly the Air Transport Association) and Delta Air Lines have been lobbying Capitol Hill to restrict open skies and some of competition that has emerged South Asia, and new competition from the Gulf, as US carriers are losing the battle for market share. Delta would like to see open skies repealed, or at least curtailed to restrict competition with “state-owned” airlines. According to A4A, traffic to India for the big three US carriers and their code-sharing partners has fallen from 39% in 2008 to 34% in 2014, while the big three Gulf carriers increased their share from 12% to 40% of the market. It is amazing what an A380 on a route can do, with high quality cabin service and aggressive marketing. The US airlines cannot have it both ways. They would like greater flexibility and access to international routes and support open skies when it is in their favor, but go crying “unfair” to Congress when they find that they cannot compete, either in terms of service levels or aircraft preference, against the big three Gulf carriers. If you read any customer service reviews , whether Skytrax or Airways or others, it is quite clear that the US carriers are ranked mediocre when it comes to customer service, and fall well short of their Gulf and Asian competitors. Even European JV partners fall short on customer service, with rankings equal to or only slightly better than the US carriers. Several factors enter that equation. While the rest of the world is moving to four class cabins, the US carriers are scaling back first class offerings, and replacing them with business class. While this works fine in a more egalitarian culture such as the US, many developing country markets are socially bifurcated in which demand for ultra-luxurious travel exists, as shown by Etihad’s A380 apartment that is beyond first class in terms of amenities. Second, culturally, American are not as attentive to service as many Asian cultures - and this is evident in the consistently high rankings for Singapore Airlines and it’s “Singapore Girl” flight attendants. Third, the US carrier fleets are not as modern as their competitors, with no US carrier flying the A380, despite its high preference ratings from passengers and high load factors being experienced by operators. Their competitors do. Finally, even when competitors offer the same aircraft, their configurations and seats tend to be better. Would you prefer a 9-abreast configuration on Cathay Pacific to the 10-abreast configuration United on the 777-300ER? We would! There’s some catching up to do; US carriers don’t offer a competitive product in premium international service, which is where the bulk of revenues are made. The bottom line is that the US carriers simply need to step-up their game to compete with the Gulf and Asian competitors when it comes to passenger comfort and service. Perhaps their inability to effectively compete, more than any other reason, is why they would seek to limit passenger choice and restrict open skies. Congress shouldn’t relent and curtail or limit open skies. The US auto industry in the 1970s was fat, dumb and happy, building poor quality monstrosities until Asian manufacturers entered the market and cleaned their clocks. They learned their lesson, and Detroit stepped up its game and now builds world-class vehicles. Perhaps extending open skies to key domestic routes (LAX-JFK?) would shake up the US airline industry, and introduce competition to the oligopoly of poor service and high fares that have resulted from “capacity restraint” in the domestic industry. The US airline industry needs to step-up its game, and added competition is a good thing. Rather than restrict competition, perhaps Congress needs to open things up further, with freedom for international carriers to compete on key domestic routes. A radical idea perhaps, but somebody has to suggest it. The idea of flying an A380 between JFK and LAX is attractive. Especially if it exposes us to Gulf or Asian service levels.

No results