Going to get off this kick soon, I promise.
However, the fact that BOTH Delta and Northwest filed for bankruptcy today seems a wee bit odd…too good to pass up..probably qualifies as a conspiracy. They even did it in the same court. I can imagine the scene. A bunch of suits with briefcases, cell fones, blackberries, and grande latte’s come strolling in from stage left. At the same time a nearly identical group enters from stage right. They spy each other and start walking more quickly. They each wonder about the other group. Someone starts running and mass chaos ensues. The judge was probably very willing to grant their request and send them on their way. They were probably all serious in their demeanor too. Is it still collusion, though, if you jointly agree to declare your inability to compete?
Well, yes, it probably is…and, hence my rumination about the apparent conspiracy. Here’s why…bankruptcy will now be used to default on loans, bonds, pensions, contracts, etc. The unions are getting their death sentence. The airports and city/state governments that have given enticements in the past, won’t get to see positive ROI. Consumers will have fewer options. Bankruptcy is one big get out of jail free card. (Thanks here for the image.)
So, now, Delta and Northwest (and United) can stop the bleeding and compete with Southwest. (Of course, Southwest is in a fight of their own against regulation, citing “anti-competitive” as the main reason. Given the sorry state of the rest of the airline industry, I advocate giving “LUV” a shot. But, that is a topic for another day.) Well, what exactly is the “bleeding” for these airlines? It isn’t caused by regulation, unless you count a residual/legacy factor. It isn’t caused by changing technology. It isn’t caused by massive infrastructure improvements or capital expenditures. No, while the airline industry is one of the most regulated and capital intensive…along with the automobile industry…the reason for the bleeding is blind management, IMHO. So what if fuel is expensive and 9/11 scared business travelers away. The fact that the airlines were so close to bankruptcy before these incidents is where the probe should start. Don’t treat the symptoms, cure the illness.
What self respecting MBA of a high caliber would want a job with an airline? Sure, there are lots of smart people that work for airlines. But, the cream of the crop from the last 20 years has not gone into that line of work, I’m convinced. They’ve gone to Silicon Valley or Redmond or Austin and started/joined tech companies. Up and comers don’t go into mature industries. They learn all about growth potential in their MBA classes and never take a second look at the bottom half of the Fortune 500. That’s why I blame management. Where’s the talent? So, while the pilot/mechanic/flight attendant unions will now (as a result of the bankrupcy) have to make lots of concessions, the companies will be allowed to stumble on with their same weak management and leadership. This is not good.
I agree with the deregulation enacted by Reagan back in the 80s. I think fostering competition is always the better plan. But, I think that we now are faced with another high profile time in history for the airlines. It is time to turn a bad situation into a better one.
The requirement for that “get out of jail” card should be that the present management should have to go. And, the creditors should be allowed to bring in a white knight. I propose that the Southwest Airlines style of operation and management should be put into place. Point to point is better than hub and spoke. Ignore monopoly (for awhile), set the new airlines up as regional carriers with separate territories while allowing the situation to settle and grow stable again. And, for those that need to travel outside the “territories”, I’m confident the vacuum will quickly be filled by competitive start-ups. Put a proven and trusted, high profile, Warren Buffet type in place at the top to ensure the turn-around. And, give up on the “that’s the way we’ve always done it” mentality. After stability (and profitability) returns, then open the floodgates and let the competition begin again. Think AT&T/Baby Bells in 1984 and then in 1998. Bust up the airline industry, put it back together, then allow it to grow again. Anything is better than what we have now.
And, still considering the fone company analogy, the cream of the crop MBA or Engineer needs to start thinking about how to turn the monolithic airline industry into the next great thing, like telecomm spawned the internet. If point to point is good, imagine how great HTML-style packet travel could be instead. The flying car is that next reality. And, having passed the GTA-SA flight school, I feel confident I can pilot a “daedalus” to my next business meeting in El Paso.
And, before I leave this topic…GM and Ford aren’t far behind Northwest and Delta. Substitute the industry and company names above, and the same conclusions can be reached. (I will clarify that I have known some very smart and bright MBAs from each auto company.) With the same conclusions comes the same proposed plan.
Bottom line – air/ground transportation in this country has become a commodity. It is a stagnant industry. That means it’s time to break the logjam and get the waters flowing again.
Copyright (c) 2005 Jamoker. All rights reserved.