Airline performance and customer segmentation
by
LuxLawyer
08/05/2007, 8:08 AM #
A few comments on Gross's piece, coming from a somewhat but not extremely frequent flier (I average ~150K flight miles and 80-100 segments a year). In my view, what Gross ought have focused on is not general deterioration of the flying experience, but rather how it, like many other things, is becoming increasingly segmented. In this case, the "haves" are the high revenue, frequent fliers. The "have-nots" are those who fly occasionally.
First, on the data. Gross makes it sound bad, but take a step back. He says that about 19000 passengers were involuntarily bumped in Q1 2007. The Bureau of Transportation Statistics reports that US passenger traffic is about 660 million passengers a year, or about 160 million per quarter. In other words, you have about a 1 in 10000 chance of being denied boarding. Similarly on cancellations. US air traffic is about 900,000 flights a month. 17,000 cancelled flights is about 2%. Annoying when it happens, but not terribly frequent. The overall picture isn't that bad.
Second, and more fundamentally, is the airline management issue. Gross is clearly right that load management is key. But there's also something else that is related to the statistical data--better customer segmentation. Specifically, airlines seem to be getting much better at managing their high value customers (i.e., frequent business travelers). Why are there so many cancellations? Because there are so many flights. That's designed to respond to schedule-sensitive business travelers. For the destinations I go to most, looking only to 3-4 carriers, there's usually a flight leaving every 30 minutes or so. It's great, but it also means that the system is very sensitive to schedule disruptions (hence the >4%, or more than twice the average, cancellation rate at my beloved Chicago-O'Hare). One might think that a hassle for business travelers, but:
- Frequent fliers are rarely, if ever, involuntarily denied boarding. It's never happened to me
- Delays and cancellations are annoying, but generally when one occurs, there are almost always other flight options. High-revenue passengers are rebooked or fly standby. If the 8 is delayed until 11, usually the 5 is delayed until 8--so I take the 5 that leaves at 8.
- The "premium economy" Gross refers to is partially an independent revenue generator, but is mostly a way to offer high revenue passengers in an intermediate class of service on a regular basis (frequent fliers are typically seated in premium economy automatically if it is available).
When I saw the article title, I thought Gross would use the Dickens reference to play up this customer segmentation, since it is both a driver of airline profitability and the source of Dickensian differences in the experience of different flyers. My wife, who only flies a handful of times a year, recently had a very difficult experience. After describing it to me, she asked "how can you do this every week?" I could only muster an honest answer: "I don't."