Brand New View

Airline Mating Dance

Would you laugh if I told you that two ponderous, overweight, slow moving beasts were getting married in the hopes of producing a sleek, nimble jack rabbit? Of course you would. But that appears to be the thinking behind the proposed $3.1 billion Delta-Northwest Airlines merger. Both airlines came out of bankruptcy recently and, in their reincarnated selves decided that life would be better as a larger, even slower moving, lethargic air carrier. Proponents suggest the merger will create a more competitive airline that can survive the increasingly volatile travel industry in the US and abroad--an industry that is facing substantial costs challenges (such as soaring fuel prices). But creating a super carrier is not necessarily a prescription for the ills of the US airline industry which are structural, were exacerbated by September 11, and will take years to change. But with that said, this proposed merger merely trades one distraction--figuring out how to navigate an antiquated US travel system, for another--figuring out how to merge two below average mega-beasts. In fact, it isn't even a trade really because the new mega-airline (to be called Jabba the Hut Air--oops, I mean Delta) will be dealing with both distractions. As if being in bankruptcy weren't enough...

To be fair, there are some potential benefits including a 17% premium for Northwest Airlines shareholders and conceivably a more competitive overseas route structure that could benefit passengers, but the track record for major mergers does not give one hope. Let's see how this unfolds...but it looks like we're about to see the birth of a horribly overweight leviathan, and it won't likely have cute bunny ears.

Lead or Mislead?

With so many examples of questionable behavior these days exposed instantly via digital communications, one has to wonder what it will take to get people to do the right thing.

In Europe, the European Commission has found at least 200 air travel websites that mislead consumers because they don't comply with EU pricing transparency laws. Quoted fares often lack taxes, fees and hidden insurance costs (for example), giving online users quite a shock when they click to complete their transaction and discover that they are paying considerably more than initially shown. In effect, what you see is not what you get.

In the US, the New England Patriots Football team (in the National Football League...the professional football league of the US) have been caught and fined for spying on opposing teams during the games by video taping the signals and conversations between players and coaches. As an undefeated team that appears likely to continue trouncing the opposition right on through the Super Bowl, a key question is whether the team's spying was instrumental to their on-field performance. Without a doubt, the spying episode has cast a negative light on the franchise that only the most die-hard fan could ignore. So was it worth it? If they do win the Super Bowl, will the victory come at the expense of credibility and trust?

In Asia, product recalls have tarnished the image of manufacturers in recent months. In a back and forth game of whose to blame (whether it is western marketers or Asian manufacturers), this week it appears that the manufacturers are to blame, partly due to sub-contracting practices that emphasize low cost over quality control. In an effort to curry PR favor and avoid losing future sources of supply and labor, even the guiltless are confessing to impropriety.

Is dishonesty and misrepresentation becoming a permanent condition of the human species? Has it become standard to 'do whatever it takes' to succeed, even if that means acting unethically or against one's better judgment? Well, the big challenge today is that the news is everywhere, so there are fewer places for those inclined toward bad behavior to hide. It is also true that consumer deception, sports scandals and unreliable business partners have been around for a very, very long time. But longevity is not an adequate explanation nor justifiable excuse for abandoning common sense. In fact, given the plethora of communications avenues available today, one would think that the sensible course is to act, behave and communicate honorably. The alternative is to risk rapid, massive and potentially humiliating exposure to a world eager to see which mighty have fallen today. And with that precipitous fall goes trust, credibility and the very foundation that makes people, businesses, and societies successfully engage with each other.

U.S. Air Travel Industry Harms U.S. Image

With so many pressing issues in the world, from environmental concerns to war to, well--you name it, it seems a bit misplaced to complain about the US air travel industry. Nevertheless, Americans need to realize how badly managed their air travel industry really is. Years ago, the US air travel industry was a model for the rest of the world. Modern airports, reliable airlines, excellent route structures. But that was a long, long time ago. Unfortunately, most Americans have little idea how bad things are. Most major US airports are old, poorly maintained and utterly inadequate to satisfy the demands of the world's travelers. Over the past 3 years, I have been shocked by the shoddy maintenance in Newark, Atlanta, Boston, San Francisco, LAX, JKF, Portland and Washington DC. In fact, at times it seemed as if I were in the airports of a 3rd world country instead of the world's most dominant economy. The security procedures are poorly run, logistical and even ergonomic, nightmares. The personnel are not trained properly and their indifferent, even surly attiude reflects poorly on the US as a whole. TSA personnel regularly treat travelers as if they were either complete idiots or criminals, instead of the busy customers they really are. A common lament I hear from foreigners is 'What's wrong with your country? It used to be so friendly and well run..." Even US citizens who live abroad notice these problems and, among those with whom I have spoken, concur that the industry is a mess. Most major US airlines are years behind their international competitors in terms of up-to-date fleets and, worse, they are woefully inept at customer service. Fly on BA, Qantas, Cathay, JAL, Singapore Airlines, Virgin, Thai and ANA if you want a pleasant flight experience. Fly on most US air carriers (Southwest and JetBlue excepted) if you want to be frustrated. The sad part is that the US air travel industry's problems are fixable, but no one in any position of influence or authority, whether airline CEOs or government officials, are taking responsibility for it. Which means they either don't care or aren't aware of it. Apathy and ignorance are unacceptable responses.

Virgin Blue Soars

Virgin Blue's (www.virginblue.com) net profit increased 92% last year, according to their just-released financial statements as report in today's Wall Street Journal ('Virgin Blue's Net Profit Climbs 92%' http://online.wsj.com/article/SB118772016280804277.html?mod=rss_whats_news_asia). The airline's overall earnings grew 16% to A$2.17 billion and their revenues per available seat kilometer rose substantially, as did their load factor (the percentage of seats sold per flight) which increased 3.3% to 81.2%. These are strong results.  The Australian-based air carrier's success reflects the continued changing shape of the air travel industry.  Virgin Blue continues the recent success witnessed by other discount airlines (AIr Asia, JetBlue, Jetstar, Ryanair, Tiger Airways...), based on a business model pioneered by Southwest Airlines (www.southwest.com) in the early 1970s (Southwest continues to perform well more than 35 years later, as it has since its inception...). Virgin Blue focuses on the business traveler, demonstrating that a discount carrier with a clear, focused offering that is tailored to the needs of a specific customer-type, can reap significant rewards. Virgin Blue's success is not just about the in-flight experience.  From booking to arrival, the airline has mastered the art of easy travel.  Its web-site provides a wealth of simple tools for travelers who may need post-arrival transportation, hotels, medium-term apartment stays, sightseeing, and other related services, all available at the click of a button.  Additionally, Virgin Blue has created terrific airport lounges that cater to the demands of business travelers (you can see these lounges by visiting their web-site). Virgin Blue is definitely a brand that is on the rise, and other companies and emerging brands can learn a great deal from their efforts. 

US Airlines are a Mess

I just returned to Singapore after a busy few weeks in Washington DC, Boston, New York, Atlanta, as well as Santiago, Chile.  Needless to say, I was on a lot of airplanes. I flew to the US on Singapore Airlines' non-stop flight to Newark, an 18 hour journey (in each direction).  Both going to and returning from the US was a pleasure on SingAir. Those who travel extensively know about the airline's legendary service.  On each SingAir flight, they knew my name as I walked on even before being seated (no, they did not look at my boarding pass). That, by itself, was amazing. Beyond the terrific service are the well-designed interiors.  Of course, flying 18 hours compels an airline to maximize passenger comfort and SingAir does this better than anybody else.  The business class and executive economy seats are very comfortable (although the business class seats on the Newark flight have since been trumped by other carriers, including BA and even Singapore Airlines' newest seats on select routes), and the selection of entertainment choices is unrivaled.  All in all, Singapore Airlines once again wins my annual 'award' for outstanding air travel.  Contrast this with my experiences this same trip on Delta, United and Continental Airlines. Each flight was a lesson in how not to treat passengers. The most glaring example was on my flight from Atlanta to Santiago on Delta.  The plane's interior is about 10 years out of date (uncomfortable seats, no in-seat entertainment, lousy food) and the service was extraordinarily bad.  As a case in point, I went to use the restroom and found the restroom door blocked by the food service cart.  I proceeded to move the cart and the flight attendant emerged from the galley and raised his voice loud enough to be heard throughout the cabin, telling me not to move the cart.  I told him I had to use the restroom and he said (I'm not kidding) "Sir, I am sick of this. You are going to have to wait until I finish my job. I'm not here to cater to your every whim." And he then turned his back dismissively and continued cleaning out his cart.  So I tried to move the cart anyway and he firmly put his hands back on it, telling me to return to my seat. Now, it would be one thing had I been drinking (I don't drink), or had I been trying to use the first class bathroom (I wasn't), or had I been acting unreasonably in general (I wasn't).  Instead, I was polite, diplomatic and, at the end, quite frustrated by this.  My later flights on Continental and United were equally bad, for different reasons.  The point?  US Airlines have struggled mightily the past few years, and most business travelers recognize it.  But that does not forgive the kind of idiotic, insulting service I experienced.  US Airlines should take lessons from Singapore Airines (and Emirates, BA, Qantas, and Cathay Pacific) if they want to have any chance at all of increasing their share of the international travel market (which has been declining for many US airlines for some time).  If US carriers do not improve, then they deserve their sad fate.

Slow Time of Year

Actually, it is a frenetic time of year. But with the end of school, summer travel, book writing and related projects, this time of year is so busy that the blog slows a bit. The pace will change soon, however. The real reason for this post is personal. After nearly 4 years overseas, we have seen families come and go each year. This year, in particular, is a hard one as there are many, many families who have become quite close and, sadly, they are moving. Sometimes it is to another overseas position and sometimes it is home to the US. But in each case, it is hard to see them leave as their friendship has been great for us as parents and for our kids. We have been to so many going away events that I have lost count. An overseas posting is a bit like going to college...you develop a very special connection to people because of the unique shared circumstances, and it is hard when those circumstances change or come to an end. It is a reminder how important friendships and human connections really are. We still have friends from the many places we have lived in the US and now overseas. With either us moving or them, it is never easy, but we know that friendships endure and the circle grows ever larger. To those moving on, we wish you the very best and will undoubtedly see you somewhere in the world in the coming years!

The Heineken Hong Kong Experience

Today's Asian Wall Street Journal discusses the efforts by Heineken, the Dutch brewer, to open its first Heineken-themed bar at Hong Kong airport.  It is particularly interesting that this bar is in Asia, a region still seen as better at copying than innovating.  The Heineken bar is part of a long-term plan to develop similar bars in key airports around the world to create a more engaging consumer experience connected directly to the Heineken brand.  Borrowing slightly from Starbucks' playbook, Heineken hopes to make these themed bars destinations that increase total beer sales, including Heineken's signature green coloring, plus signage and memorabilia affiliated with the beer. The bars will feature Heineken and Amstel (another beer they make) on tap, but also a wider variety of competitor beers by the bottle.  Speaking of Amstel, Heineken opened 20 'La Amsteleria' bars in Spain in 2004 and claims that these bars sell 10 times more beer than regular bars, of which most are Heineken/Amstel-labeled beers.  Will the new Heineken-themed bars work?  It is too early to tell, but I think the idea of making more compelling destinations for consumers is a smart business move.  Few companies do this well, which is why most retail stores are dull and uninspiring, with horrible service to match.  I was working at Nike when the first Niketown stores opened, and there was palpable excitement in the company partly because we saw the stores as a way to create retail environments that involved consumers directly with the brand by conveying Nike's personality more effectively than the average retailer could or did.  WIth globalization comes the risk of accelerated commoditization, so companies that succeed will do so by focusing on creating great experiences, in addition to great products, that truly differentiate their offerings from those of their boring competitors.  It is my bet that the majority of profits will flow to the innovators, not the copiers.