Monday, April 30, 2012

Dealing With The Virtual Airline

It happened in the petroleum industry. It's happening in the airline business.

Or, more accurately, it's already happened in the airline business. Brand virtualization.

Today, you go to the gas station and pump a brand of gas in to the tank of your SUV. But where that unleaded came from, how it was produced, who produced it, who moved it and who put it into the filling station storage tank, are all different companies, and they can change month to month, and even gas station to gas station across town. The only thing that's the same is that the sign at the station says "Conoco" or "Shell."

Twenty years ago, oil companies were involved from the wellhead to the gas pump. Today, it's different vendors and suppliers for every part of the logistics stream. It's all been farmed out to independent surrogates.

Tumble to this: that's exactly what's happened in the US airline industry over the last 15 years. Today, it's not only possible, but probable, that you can book a trip on a major airline from a mid-size community on the East Coast to one on the West Coast, and never in the process deal with anybody directly working for the airline brand. It's all been outsourced.

Think about it. You book the seat on-line. No contact whatsoever with an airline employee. And in the event that you do need human intervention, there's a better than even chance the guy on the other end of the phone is in a call center in some Third World country. He's successfully completed Level Three of English As A Second Language, and thinks that "FRA" is the code for "France."

You go to the airport. Get a boarding pass at a kiosk. Or, have it sent to your iPhone. You flash it at the gate, which, like the rest of the airline brand's operation at the airport, is staffed by outsourced vendors, or a "regional" airline. You board the RJ, operated by an outsourced vendor. You fly to the connecting hub - to a concourse again where staff are outsourced to a "regional" airline. Board another outsourced flight, and fly to your final destination.

Not one interaction with any staff or employees of the airline brand from which you bought your ticket. Just like at the gas station - the whole process is now virtual. You have no contact with anybody that is directly working for the airline. Vendors, all.

And, you'd best believe that this is sooooo much more cost-effective than having the airline itself do it with their own employees. Airline employees tend to want to make a career at the carrier. They stay around for years, moving up the pay scale. And - yikes! - they may even be in a union, one of those pesky groups that want to bargain for things like pay and working conditions. Truly, it's much more enlightened to just farm the work out.

Just Like The Fast Food Business. Youbetcha, it's better from a cost-approach to outsource this work to vendors. They just hire kids, or maybe not-so-kids, and pay 'em wages that will encourage them to work a while, and then move on, to be replaced by other bottom-of-the-scale new hires, creating a cycle that keeps labor costs low. It's the same approach that's been used in the fast food industry for years. Turnover is the key to low labor costs and a real barrier to union entry.

Sounds great. But what's been created is a system that is not focused on service. Not focused on excellence. It's just focused on labor costs. And it's one that offers employees almost zero potential for career growth - just like at the local Burger World.

This extends across the board: The ramper at East Upchuck has a career path that will last until the ground contract is re-bid in two years. The pilots and flight attendants on the "regional" airline to which flights have been outsourced are really caught in a special bind: there are limited flow-through opportunities to majors, and worse, those mainstay 50-seat jets are going to get retired faster than new jobs will open at majors. (See recent comments by Republic Airlines CEO on the matter, by the way.)

The point is this: there's not a lot of long-term career-play for employees involved in this oh-so-cost-efficient virtual airline system. But, so what? It works, right?

Here's a clue: airlines are not the same as Burger World. Slapping secret sauce on a hamburger and keeping the yogurt machine churning out sugary glop is not the same as the skills and training needed to professionally handle an airport passenger service and ramp operation.

So, let's touch that third rail that we're not supposed to mention: a lot of this outsourced work is shamefully done. To be sure, there are stellar companies in the business, like SkyWest, where there is a career path, and the training infrastructure in place to make it work.

But that's not the norm. It's not uncommon for consumers to get abused (unintentionally, usually) by vendors where the "customer service" staff has less training than a day-old puppy. Situations where they are clueless as to why the flight's late, or visually looking like they just came from a street fight. Or, hamstrung with really incompetent rules - like, the incidents where people actually standing in line to check-in for a 34-seat airplane are cut off 30 minutes before departure - and responding aggressively when consumers get understandably ticked off.

Why should they care? It's just a temporary job. If the customer doesn't come back, no big deal.

Training in customer service skills? Sure, we do a half-day program, you might hear. But to do more would be un-economic, don't ya know: There's too much turnover to spend the money,

Future? Two dynamics are emerging: Ground outsourcing will continue and expand. But in the cockpit, the trend will be toward flying shifted by to the major, simply becasuse of changes in airplane economics. As 50-seaters get retired, we can expect that 80+ seaters be the capacity floor - and they will be flown in-house.

Plan on it.

 

this guy has always been half right, and continues to be so, I do think however this long term is accurate. The industry is going to be a product of its own environment, they are going to be short on pilots long term, because they have made people not want to do it, and the govt is making them need more, while less are around.

 

 

The half wrong part includes calling SkyWest a career airline - Boyd's not looking five years into the future with that call.

 

Boyd has been about 50/50 on projections since I stared reading his stuff in 2007. He is an entertainer, and I think half his following consists of airline pilots. You could almost read this website, and fly a few times a month, and write what he writes.

 

No prayers needed. It's already started. UCH is shrinking it's ffd budget by 420M from 2011-2015. That's 23% over 5 years. The DAL mec is reportedly in fruitful sec 6 discussions with management over improving mainline to express ratios. Take a look at Comair, Mesa, and PNCL. What's the time to upgrade at Trans States or Republic?? On a good note, those UAL furloughees are leaving GOJet in droves. THey will be hiring. 'cause the times..they are a changin.

Sled

 

Boyd has failed again, scope at all mainlines and AA will be included allow up to 90 seats at the regional non mainline airline. so his statement of 80+seats back to in house aint gonna happen.

Boyd was all for the regional airlines and regional jets until he was hired by APA at AA and from then on he has gloom and doomed the regional airlines. Only reason he is even partly correct is because of the banking fiasco with mortgages and the oil speculations. If they had not happened, nothing he spouts would have even come close to happening.

He is correct in one way somewhat, that in house it will be, the mainlines will again start to own there feed airline so as to control the quality of customer service so they can stop loosing corporate accounts.

AA has to double is domestic regional feed just to be equal with DAL, UCAL and UCC. AA is not going to expand domestic coverage with the mainline just to compete with a E175 or CRJ900 aircraft. An AA cramped 757 and 737 is worse than AE's CRJ700's, that is a given fact.

Boyd is a paid consultant. As consultants do, what you want is what you pay for.

 

That's the part Boyd unknowingly left out. This won't be the windfall for pilots that everyone is hoping. Times a changin'? Sure...just keep in mind: The House Always Wins.

 

[QUOTE=buddies8;1179318]Boyd has failed again, scope at all mainlines and AA will be included allow up to 90 seats at the regional non mainline airline. so his statement of 80+seats back to in house aint gonna happen.

Negative. Scope at DAL is 76. Scope at UAL is 70. EMB 190s are flown by mainline at LCC. So who's scope is 90 seats???? Wrong

Boyd was all for the regional airlines and regional jets until he was hired by APA at AA and from then on he has gloom and doomed the regional airlines. Only reason he is even partly correct is because of the banking fiasco with mortgages and the oil speculations. If they had not happened, nothing he spouts would have even come close to happening.

Yeap. Comair parking half their fleet was all about AA and the banking fiasco. wrong again

He is correct in one way somewhat, that in house it will be, the mainlines will again start to own there feed airline so as to control the quality of customer service so they can stop loosing corporate accounts.

That is exactly what the mainline carriers that did own their feed are NOT doing. DAL sold ASA at a huge loss. DAL couldn't sell Comair so they are slowly just letting them die. DAL/NWA sold Mesaba and Compass. AMR has been trying to get rid of Eagle. Where do you come up with this stuff?? Wrong once again

AA has to double is domestic regional feed just to be equal with DAL, UCAL and UCC. AA is not going to expand domestic coverage with the mainline just to compete with a E175 or CRJ900 aircraft. An AA cramped 757 and 737 is worse than AE's CRJ700's, that is a given fact.

Oh yea. a Given Fact. Well you got me there. And who says they have to double their feed? you? If they merge with US Airways they ought to be just fine. What they need to do is pare that Eagle emb fleet, and hire Gojets or Republic to feed them. I am sure ALPA could work out a pref hire deal for the displaced bankrupt Eagle guys. maybe start you out at 2nd year pay or something.

Sled

 

ASA-sold. Compass-sold. Mesaba-sold. Pinnacle-spun off. AmEagle- they tried. Yeap, I see mainline buying up their feed right away, that's why they sold them all off.

Sled