Why the heck can’t airlines make any freaking money?
As my senior project, I did a huge case study on Southwest Airlines. The reason I chose that company, is that it is the only airline that has turned a profit for 30 consecutive years. Hell, a lot of those years, it was the ONLY airline that made any money. Even after September 11th, with all of those implications, they still made money… every year. So what gives?
Delta has lost 2 billion this year, so far. That means they are loosing something on the order of 300 million dollars a month. So take a step back. That means that if Delta ceased to exist, the economy of the United States would be better off to the tune of 300 million per month. That is staggering!
Of course, my travel last week on Delta clued me in to at least one of their problems… they are mean to their customers. Yes, they yell at them, give them bad service, throw their baggage into a chipper-shreader, etc. And they’re late, constantly.
Fortunately, I did enough research for my senior project that I can give you some specific reasons for the difference. First, Southwest has an entire fleet of identical airplanes. They are the only company that did it this way. That means all of their crews, service people, parts, pilots, etc are completely interchangeable. Also, because of that, they are very efficient, allowing them to have shorter times on the ground. Since time is money, that means every time they get a plane turned around fast, they’re making money. The major airlines make the turnaround in about an hour. Southwest was doing it in 20 minutes, until 9/11, and now the extra security pushed that to about 28 minutes, but it’s still way under the industry average.
Interestingly, the other airlines tried to copycat a lot of Southwest’s ideas. But somehow, even the players with deep pockets could never get results with those ideas. What was the difference?
Well, as cliche’ as it sounds, it’s the people. Southwest was built around the employees. Every employee feels like an important part of the team. They help each other out, and they really believe in the quality of their company. This came down from the top, by Herb Kelleher, the founder. Every year, employees get a personally signed birthday card from Herb, even though Southwest has thousands of employees. They are serious about it. While the Delta pilots are threatening to strike if they don’t get huge raises, the Southwest pilots are back in the plane helping the crew clean up so they can turn the plane around quicker. They don’t have to do it, but they know that if they pitch in, the company will perform financially, and they will get their raises.
Southwest has never laid anyone off. Not even after 9/11. Well, to be honest, one time 20 years ago, they laid off 3 people, but immediately hired them back. They know that if people are secure, they will be happier and work harder. They make cuts in other areas, because they understand that the people make the difference. After 9/11 when other airlines were doing massive layoffs, Southwest delayed their remodel at the corporate headquarters, and cut other overhead. Not one employee was affected by 9/11.
Sprint is a Kansas City based company, so I’m pretty up on their business. They have had TONS of layoffs in the past few years. They hire 10,000 people, and a week later, they lay off 20,000. The spent a billion dollars building a new campus. A BILLION DOLLARS! It’s not like they were operating out of someone’s home. They owned about half of the commercial real estate in Kansas. But they decided to spend a BILLION dollars relocating to this new massive campus. It’s so big, the employees have a map printed on the back of their ID card. I know dozens of people that have worked for and been layed off by Sprint. I have absolutely no respect for them, because they put stupid corporate projects like the campus ahead of taking care of their people. I will never use a Sprint service, and I hope none of you do either. They deserve to die.
My point is this: Companies that use people like “assets” will never truly reach their full potential. People aren’t “assets,” they are people. If they feel important and needed, they will be better employees, and your company will reap the rewards. The big airlines don’t deserve federal bailouts. This is the free market. They need to figure out how to make money and survive. If Southwest can do it, then you can’t tell me that they can’t. If they can’t survive, then they need to die, because that’s how the free market works. Survival of the fittest. And by the same token, Southwest has to make sure they don’t get too comfortable, or some little startup will come up with a better idea, and they will be the next to die.
God bless the free market!