This past weekend I flew to Dallas to see the Redskins play the Cowboys on Sunday. The Redskins stunk up Jerry Jone's stadium so badly, Jerry had to open the roof. Dan Snyder wants a new stadium just like Jerry's AT&T Stadium. This is a case of Dan wanting to keep up with the Joneses. Maybe Dan can start by signing some defensive players who can tackle.
Since the game was played Sunday evening, I booked a return flight to Dulles Airport for Monday morning. I would arrive early Monday afternoon and get to the office about 3 PM. I flew United, since it was the only airline that would let me use frequent flyer miles on a nonstop flight. The trip to Dallas was a breeze, but my return trip turned into a nightmare when my flight was cancelled for mechanical trouble.
Because so many fans traveled to Dallas from DC for the game, there were no seats available on any flights until the next day. Gate agents handed out hotel vouchers to a hundred angry passengers. When I approached the gate agent to rebook, I expected the same. However, since I am a United Club member and was traveling alone,she booked me first class into Chicago and then into Dulles for a midnight arrival, supposedly. My Chicago flight was delayed for two hours and I arrived home for bed at 3 AM.
The only good part of the trip was flying first class. Sitting in the plane on the tarmac in Dallas, I wondered how many of my fellow passengers in first class had actually paid for first class seats. I was there to make up for my crappy experience. I thought many of the remainder were either there for similar reasons or had used frequent flyer miles to upgrade. So I asked the people around me. No one had paid full price for a first class seat. Where have all the paying first class customers gone and what does that mean for the airlines?
The where part is easy. Wealthy travelers charter flights on time share planes and jets. They can either share flights with other like minded travelers or book a plane for a solo flight on a per hour basis. You rent the plane and the crew for an hourly fee. These flights typically leave from regional airports near major cities and land at other regional airports.
No one waits for hours to check in and endure pointless abuse at security checkpoints. You walk out of a private terminal onto a plane. At the end of the flight, you step off the plane and board a rental car or limo waiting on the runway. A three hour flight requires about four hours of travel time. A major airline three hour flight requires a whole day.
I know all of this, because I have flown with a client, who travels exclusively this way. He crosses the country, making three customer visits in three different cities, in a normal work day. He stays overnight in a hotel and then repeats the procedure on the way home. In two days, he can be in six cities and get home for a late dinner. Try that on Continental.
So we have answered where paying first class customers have gone and why. What does this mean for the airlines? It means their first class cabins produce little revenue. Today's first class customer either gets bumped there, or uses frequent flyer miles to get there. The funny thing about frequent flyer miles is that you don't have to even fly to get them. Miles come most often from credit card affinity deals. Spend enough money and you get first class airline tickets.
How did first class become unprofitable? I have blogged before about the insurance concept called adverse selection. With adverse selection, you unwittingly drive off your best customers and are thus left with only your undesirable customers.
Airlines routinely torture their customers. So their wealthy customers left for private aviation, leaving the airlines with cheap ass, frequent flyer mile usin' blokes like me in their first class cabins. Bankruptcy was inevitable. Note that the one consistently profitable airline, Southwest, has no first class cabins.
The business lesson from this seems obvious, at least to anyone not running an airline. You may think you control your market and customers. Maybe you think your customers don't have a choice but to use you. Maybe you just like being an asshole to customers. But you're wrong. Customers always have alternatives; at least the desirable ones with money do.
Chase away your best customers, and you'll be left with ones, who will make your life hell on earth.
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Until next time, let's do it to them before they do it to us.
