US Airways Chooses Simple Goals

Ah, Media Day. How do you sum up an entire day full of presentations into one blog post? I’ll do my best. It was very strange for me to be back in my old haunts. It was about 5 1/2 years ago that I left my job doing pricing for America West to head to business school. Somehow, when I walked back in, it didn’t feel like it had been that long.

Sure, most of my friends have been gone for awhile, but the senior management team is basically the same. I even had recently-returned Robert Isom as my VP for a short time while I was there. Making it even more surreal was that the guys there weren’t about to let me forget it. Doug Parker kept joking around with me publicly, asking if I was going to head back to my cube and do some work while I was there. The thought of lowering some LAX fares did cross my mind, but . . . nah. It’s that sort of informal banter and accessibility of executives that make this a great event for everyone.

But you guys don’t care about any of that. You want to know what I heard while I was there. To be honest, there really wasn’t any earth-shattering news that came out of it at all. There were little things here and there, but nothing that’ll make front page news (at least, nothing accurate).

To me, the most interesting thing was the big picture, so that’s where I’ll focus today. Really, I think one slide from President Scott Kirby’s presentation can sum up the day nicely. It said, “Customers choose to spend travel dollars based on:”

08_03_03 usmediaday

Research has consistently shown over the past few years that people choose their airline based on price and schedule far and above everything else. That’s why I also tell you all to act with your wallet if you want to see things change in the industry today. Historically, people just don’t do that unless an airline has a catastrophic meltdown like United and America West in the summer of 2000. And that’s exactly what this slide recognizes.

This probably won’t float well with the FlyerTalk crowd. You know, those are the guys who want the old level of US Airways service, and they’ve watched that slowly disappear as the airline has become more like America West. I think that it’s pretty clear from the message at Media Day that the FlyerTalkers are going to have to live with the new US Airways plan or find someone else to fly.

For me, the plan makes a lot of sense. It’s nice to see an airline that isn’t Southwest actually laying something out there that’s achievable. I think where airlines get in trouble is when they start promising the moon. United’s idealistic cartoons are a good example. They overpromise this uber-experience and then when you end up in a middle seat in Economy Minus paying for food, you’re just pissed off. So what US Airways is saying now is that the airline understands how it works and they’re only going to promise the basics. They will work on reliability, convenience, and appearance so that they remain in the consideration set. Then, if price and schedule are right, they will become . . .

08_03_03 usairlineofchoice

Oh yeah, the airline of choice. Gee, so original. Doug even made a point saying that he was told Stephen Wolf used something like this back in the day (but it was the GLOBAL airline of choice), and United has said similar things recently. Of course, management has meant something very different in each instance. For US Airways, becoming the airline of choice is going to involve much lower goals than United, which probably thinks they need a “definitive experience” or something like that. So for US Airways, as long as the price and schedule are right and the airline has high reliability, convenience, and a good appearance, the management team thinks they can become the airline of choice. That’s it. So what are their plans for those three areas of improvement?

Reliability

Run a poor operation and it doesn’t matter how cheap you are. Nobody will fly you. Well, ok, the really, really cheap people will do it, but that’s hardly a winning business plan. We all know what a crappy operation US Airways ran last year, and the presentations had plenty of data to back that up (as if we needed it). Most of it, they blamed on the botched reservation system migration that happened just about a year ago. There was some speculation in the media that it could have been labor unrest that caused the delays, but Doug Parker quickly killed that notion. He said there was no labor action at all. Apparently when they migrated to the new system, transactions that used to take 10 seconds in the system started to take 30 seconds. Uh oh. Multiply that by the sheer number of daily transactions and you’ve got disaster. So that’s now fixed, they say, and they’ve started to rebound in the numbers.

They seemed to be most worried about on-time performance, since that’s a big part of reliability. And yes, they’ve seen tangible improvement. I’m a little concerned, however, that they’re comparing their results to those of the industry and patting themselves on the back. Yes, December was a great month compared to the rest of the industry, but as we’ve discussed here before, the industry tanked that month. True, US Airways avoided free-falling but the airline doesn’t have much of a presence in Denver, Chicago, or the rest of the Midwest where the weather was worst. The airline says it expects to be at the top of the list in January and February as well, so then I’ll start thinking this is real achievement, if true.

While they’re working on the whole on-time thing, they’ll also be thinking about lost bags as well. Anyone who has flown through Philly knows this is still a big problem. US Airways is spending a good chunk of change of upgrading Philly once again. Actually, Suzanne Boda, the new head honcho of the East Coast, says she’ll spend $28m on getting the hub in better shape. Even simple things like the planned installation of a Ramp Information Display System (RIDS) at all the gates will go a long way toward helping the ramp workers get bags to the right place. For what it’s worth, I remember when America West installed the RIDS in Phoenix probably 7 or 8 years ago, so it’s amazing to me that Philly doesn’t have them yet. You’ll also (finally) see bag scanning at all points of bag handling. This will help them to actually be able to tell people where their bags are. How is this not already happening? Oh, whatever. At least, they’re going to be doing it now.

Specifically to Philly, it looks like after a couple years of failed attempts at fixing it, they’re finally just going all out. They’ll be opening a satellite headquarters operation in Philly, and they’ll be hiring more than 200 more employees in the area. The satellite office will have Real Estate, Finance, Government Affairs, HR, Safety, Corporate Communications, and Information Technology groups. Not a bad plan of attack. Get people on the ground with decision-making abilities.

Convenience

This is a pretty broad category, of course. But it seems to me that most attempts at improving convenience center around increased automation. I know, that throws up red flags all over the place, but there are times where this is a good thing.

Some of the effort will be on increasing the number of things passengers can do at kiosks or online. If they can make it easy for people to change flights, etc., COO Robert Isom thinks this can “really distinguish an airline, especially when things don’t go right.” This also includes installing passport and credit card readers at all kiosks. The more places people have to get things fixed, the better. I always find that complicated transactions need the help of an agent though, so I’m highly skeptical of automated solutions until I see that they can actually get the job done. If they can, then I’m with Isom. This can differentiate an airline, but US Airways is already behind the rest of the crowd.

For some things, automation is great without question. And that’s why they’re planning to expand off-site check-in. If you’re at home and have a computer, you don’t need this. But if you’re on the road, it can be a big time-saver. I’m assuming this will see things like in-hotel check-in opportunities become more prevalent.

So, these aren’t bad ideas, but I still care most about having people around when I need them. If this automation can help reduce lines a the assistance counters for people who really need personal help, then this will be good. If it just makes it worse because people try and fail to fix their problems themselves, then it’s not good. Obviously the airline’s goal is the achieve the latter former.

Appearance

Anyone who has been on a 737 in the US Airways fleet, or even worse, one of the old America West 757s, probably knows why “appearance” has become such an issue for the airline. I would be kind to say that some of those planes look like they haven’t been refurbished since they were bought. So they’re now going to spend $50m this year refurbishing interiors. They’ll have a common, leather interior on the entire fleet; even on the 737s which will be disappearing by 2011. Employees will get new uniforms, and cleaning schedules will be stepped up. Overall, things should appear much more clean and new. That’s pretty important to me and to a lot of people. A plane could be maintained perfectly from a safety perspective, but if it’s dirty and nasty on the inside, people perceive it to be unsafe.

Isom noted that the key to this is actual compliance with the standards, so they’ll be stepping up their audit procedures to make sure things are getting done. While he did note that in tough times, this type of cleaning and upkeep can be considered more discretionary in order to cut costs, he believes that fixing them down the road just becomes more expensive so the airline won’t be using that strategy.

And that was the gist of the presentation. Not bad if you’re flying coach, huh? But what if you’re flying First Class? That’s not going to cut it. Are they just giving up?

Fortunately, no. Kirby said that the airline still sees domestic First Class as the number one most important benefit for elite members of Dividend Miles, so it’s not going anywhere. And international Envoy (business class)? That also has a different strategy.

According to Kirby, the number one important factor in someone choosing to fly an airline up front on long haul international flights is having a lie-flat bed. That’s why the airline will have angled lie-flat seats (bleh) on all the 767s by the summer. Of course, the much newer A330s will still have the cradle seat, so you’ll actually want to fly the older 767 if you’re riding up front. Strange since you’re much better off flying the A330 if you’re in coach. That creates a dilemma for the wishful-upgraders.

On the westbound transatlantic flights, the airline will start serving a brunch onboard. We had a chance to taste some of the appetizers to be served, and they were fine. I’m always hesitant to say anything about food on the ground, because it tastes a lot different when it’s prepared in the air anyway. But the idea isn’t a bad one. You get to choose from a variety of options that they’ll bring around during the flight. Take some, take all, whatever. I kind of like the idea.

Oh, and they’re now going to prepare a lot of the food on the cart in the aisle instead of in the galley. So, they’ll roll the salad out, for example, and make it to your order right by your seat. Nice changes to the product, and you can see that they’re taking a different view of international Envoy than they are everywhere else at the airline.

As far as I’m concerned, I like the messaging, but I won’t believe it until I see it. They say this isn’t a message that needs to be pushed out to customers. Customers will notice it when it happens. But it is something that they will be actively communicating to employees. The commitment of $300m for all these projects this year shows that they are really serious about doing something to improve the product, but that doesn’t mean the end result will be there. It’s always all about implementation.

Of course, for the airline to make this work, they need to get employees onboard. As we all know, they don’t have an agreement with four of their largest labor groups, and that’s a big problem for everyone. They didn’t touch on labor negotiations too much at Media Day. All they said was that pilot negotiations are stalled waiting for the two pilot groups to agree on how to merge seniority. Flight attendants are talking about detailed issues and the progress is slow. Fleet service and mechanics are once again back in negotiations, so they’re hopeful about that.

Many of these changes won’t work if the employees aren’t into it, and I think it’s going to be tough to motivate everyone while they’re preoccupied thinking about a new contract. I hope they can get that done soon, for everyone’s sake. But in the end, we’re looking at a basic, but very functional product at US Airways. It’s a nice, reasonable goal. Let’s just see if they can do it.

*Edited 3/3@ 830a to change “latter” to “former”


11 Responses to US Airways Chooses Simple Goals

  1. Harr Chen says:

    Wow great writeup. Just a small nitpick:

    Obviously the airline’s goal is the achieve the latter.

    should be

    Obviously the airline’s goal is to achieve the former.

  2. CF says:

    Arrggh. Too much editing, I suppose. Thanks, Harr. It’s been fixed.

  3. Cranky thank you for doing an entry on an airline that has a special place for me. They used to be the only airline we’d fly when we lived in BGM.

    I see strains of Bethune at Continental going through US Airways. If only they could get all cylinders firing at the same time.

  4. Yo says:

    Great article, the key is getting the militant types out east to either lead, follow or get out of the way. No, its not the old USAirways, that is dead. Having glassware did not make for a profitable airline.

    USAirways need to hit that niche that is above Southwest, but is still a high frequency, low cost carrier.

    I’d hate to see all this promise killed by a lack of morale.

  5. VANative in NYC says:

    Guess you could call me one of those FlyerTalkers. Been posting there since 2000.

    You obviously were not around; but I was – and I can recall nothing ‘good’ about the ‘old’ USAir, better known as Useless Air since 1990 when Wolfe and Rakesh absorbed and destroyed the Piedmont operations and culture.

    Even the original Allegheny (aka Agony) was better than what they did with what they put together.

    Then they raped it and moved on, ala Icahn at TWA

  6. CF says:

    VANative – I actually was around US Airways in the late 1990s (going to college in DC and interning with the airline), and I have to agree that it was hardly a stellar airline. But the (empty) promise of being one was there, and that’s why I think you still see a lot of threads in FlyerTalk bemoaning the changes we’ve seen since the America West merger.

    But I think most people who grew up with Piedmont (and PSA for that matter) would whole-heartedly agree with you that US Air destroyed the cultures that used to exist at those airlines.

  7. Margaret Nahmias says:

    Hey, they have it right. That’s why I have never flown JetBlue and Southwest. . They both have great reputations,but did not have flights when I needed them However, it about what one gets for the price. Ironically, flyers don’t mind paying fees as long as customer service is good according the latest JD Power customer satisfaction survey.
    I am glad US management is setting realistic goals instead of making grandiose promises they can’t keep. Parker and company admitted they screwed up and trying make a amends. The only problem they should done this at the beginning of last year instead of chasing after Delta.

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  10. Mike Smith says:

    No airline, whether USAirways or another, will EVER be profitable and give reasonably good service until the airline executives will stop a marketing strategy of “cheap fares” are all that matters to the point the general public feels they are entitled to a ticket for FAR less than the reasonable cost of PRODUCING that seat. Until airlines quit “marketing and selling below cost” the airline industry will continue to be a THREE RING CIRCUS ZOO. The only thing to be seen is whether the airlines will clean up their acts on their own (doubtful) or will Congress have to do it for them in the form of at least limited re-regulation–at least to the extent of prohibiting below cost ticket sales and requiring some minumum standards on lost bags and controllable delays. Buying and selling on “cost and schedule” ALONE will NEVER provide even a RELIABLE airline industry, much less a QUALITY one.

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