BEFORE THE O F FICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, DC

_________________________________________ ) In the Matter of ) ) ENHANCING AIRLINE PASSENGER ) PROTECTIONS ) Docket No. 2010

- 0140 ) ) )

_________________________________________ )

REPLY COMMENTS OF

BUSINESS TRAVEL COALITION AND CONSUMER TRAVEL ALLIANCE

Mr. Charles Leocha Mr. Kevin Mitchell Director, Consumer Travel Alliance, Inc. Chairman, Business Trave l Coalition PO Box 15286 214 Grouse Lane Washington DC 20003 Radnor, PA 19087 (202)713

- 9596 www.consumertravelalliance.or g www.businesstravelcoalition.com leocha@consumertravelalliance.org mitchell@businesstravelcoalition.com

Decembr 13 , 20101 BEFORE THE O F FICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, DC

_________________________________________ ) In the Matter of ) ENHANCING AIRLINE PASSENGER ) Docket No. 2010

- 0140 PROTECTIONS )

_________________ ________________________ )

JOINT REPLY COMMENTS OF BUSINESS TRAVEL COALITION AND CONSUMER TRAVEL ALLIANCE
The Business Travel Coalition (BTC) and the Consumer Travel Alliance (CTA) hereby jointly submit consum er responses to the reply comment s submitted by American Airlines, Continental Airlines, Delta Air Lines, United Air Lines, and US Airways (the a irlines) submitted on November 17, 2010 concerning the disclosure of airline fees.
BTC and CTA praise DOT's inspired leadership and significant results as the most

consumer
‐ centric DOT in a generation. The June 8, 2010 Notice of Proposed Rulemaking (NPRM) published at 75 Fed. Reg. 32318 is sweeping and contains important safeguards for air passengers.
This reply comment is made in the interest o f keeping the discussions about the proposed rulemaking focused on the airline passenger protections that w ere the original intent of the rulemaking.

DOT should not allow this important rulemaking to become a battleground between different parts of the ai r transportation community. Contract negotiations and related strategies between the airlines and their GDSs and ticket agents ar e outside of the purview of DOT and are not pertinent to this rulemaking and should not be allowed to obscure the pro

‐ consumer focus.
Both BTC and CTA strongly protest current airline practices that deceptively offer the specter of lower airfares in order to gain enhanced positioning on Internet displays while aggressively increasing and hiding ancillary fees for transportation

e lements that were once considered an integral part of the ticket price.2 This “unbundling,” as the practice is termed, coupled with the airlines’ decision to withhold the new ancillary fees from ticket agents and not fully disclose them to stifle price c omparison shopping for consumers, deceives U.S. and foreign passengers into believing the prices offered are lower tha n the eventual full cost of travel . Often ancillary fees add dramatically to published airfares.
All suggested remedies offered by the a irlines eliminate the ability to easily compare total, all

‐ in prices across airlines . Consumers’ confusion is only exacerbated when potential travel costs involve connections between different airlines that are sometimes within the same airline alliance
, a irlines that have no alliance affiliation or codeshares

. Robert Crandall, former CEO of American Airlines has recently agreed with our view of the need for airline fare and fee transparency in a speech delivered to IATA.
More recently, the industry has o bjected to consumer efforts to display a complete list of ancillary charges in every distribution channel in which a carrier participates. Again, I think the industry courts unnecessary customer discontent and risks its good name and reputation by opposing a request entirely consistent with normal retail practice. In my opinion, everyone needs to recognize that adopting operationally attractive policies that are inconsistent with customer welfare and satisfaction are, in the long run, unlikely to be rewardi ng. 1
Evidently, DOT agrees with our consumer

‐ focused point of view

. O therwise, this portion of the rulemaking would not be under consideration.

Consumers need to know the full cost of airline travel
Consumers can only compare fares and fees that are di sclosed to them and their agents by the airlines. Both BTC and CTA urge DOT to focus on the need for a simple, basic rule that will require airlines to disclose their ancillary fees at the same time and in a similar manner that they disclose their airfare s to their travel agents and the GDSs in which they participate.
The basic technology exists and is thoroughly tested by the broader airline community. Comments already filed earlier by many different parties have outlined the tested and affordable ATPC O systems 2 (ironically, owned by the airlines) that have been developed to handle the distribution of ancillary fee information as well as airfares.

1 Speech delivered by Robert Crandall to International Air Transport Association, Istanbul, Turkey, December 7, 2010. Full speech is attached as an addendum. 2 See Airline Tariff Publ ishing Company comments submitted September 23, 20103 BTC and CTA call for price transparency across all channels where airline tickets are sold. The a irlines, in their joint response to ITSA’s reply comments, claim that they support “transparency of fees” and “robust disclos ure of optional fee information. ” However, most airlines continue to refuse to file ancillary fees for use by travel agents who serve almost 60 percent of the flying public and who can best facilitate full price comparisons across airlines.

The airlines claim, “ Disclosure will be further enhanced through other aspects of the NPRM, such as requirements that e

‐ ticket receipts list ancillary fe es and that website home pages provide a link directly to complete information on such fees.” 3 The former of these solutions would only serve to help disclose the costs after the money has been paid and long after any opportunity to compare costs. The latt er offers no ability to compare across airlines and ignores the travel agency channels where almost 60 percent of travel is booked.
Furthermore, airline actions have indicated that the withholding of information about ancillary fees is a part of their mar keting strategy

. 4 The a irlines are profiting on consumer confusion, created by the withholding of fee information from their ticket agents.
Contrary to any airline claims that they, “... do not want any of their customers to be surprised by charges for optio nal services,” 5 their actions of refusing to clearly outline these fees while at the same time varying the fees based on frequent flier program levels, changing them based on distance, markets or flights, eliminating them for some based on what credit card is used for ticket purchase, and so on, only serves to create more confusion and overall price deception.
Calling an airfare a different name doesn’t make it different

The a irlines also claim that they are not hiding their fees when they refuse to share their ancillary fees (once offered as a part of overall airfares ) across all of their ticket agents as has long been required by Section 41712 . For years, DOT has required the full cost of airline travel to be available to the public , including through al l ticket agents. The airlines must be required to meet the intent of the statute and DOT’s full fare advertising regulations, rather than being allowed to dismantle an airfare and then narrow the definition of what needs to be disclosed

.
It

is clear tha t what Section 4 1 712 requires of ticket agents is that they not present consumers with information that is inconsistent with what the principal has set as the terms of sale

. That would clearly be deceptive on the agent’s part. Agents must,

3 Joint Response of American Airlines, Continental Airlines, Delta Air Lines, United Air Lines, and US Airways to reply comments of Interactive Travel Services Association, November 17, 2010 4 ibid. p. 4 5 ibid. p. 54 by law, sell on the terms set by the principal. Failure to do so not only breaches the agreement with the principal, but it violates the “no deception” mandate of Section 4 1 712. Thus, it can be inferred that without access to the ancillary fee data, the agent is put at r i sk by the withholding airline of violating the law . I n the process, the consumer is harmed by incomplete or erroneous information about the true cost of travel just at the critical time the passenger is making travel decisions

. The principle of agency ma ndatory consistency with the airline’s terms of sale is set out in official DOT policy statements in 14 CFR Part 399.80. The key examples are:
“ (c) Misrepresentations as to the quality or kind of service, type or size of aircraft, time of departure or arrival, points served, route to be flown, stops to be made, or total trip

‐ time from point of departure to destination.

.... (f) Misrepresentations as to fares and charges for air transportation or services in connection therewith. (g) Misrepresentation that special discounts or reductions are available, when such discounts or reductions are not specific in the lawful tariffs of the air carrier which is to perform the transportation. (h) Advertising or otherwise offering for sale or selling air transp ortation or services in connection therewith at less than the rates, fares and charges specified in the currently effective tariffs of the air carrier or air carriers who are engaged to perform such air transportation or services, or offering or giving r ebates or other concessions thereon, or assisting, suffering or permitting persons to obtain such air transportation or services at less than such lawful rates, fares and charges. [Clearly out of date but indicative of the required alignment of what a irlines are selling and what agents tell the public] (i) Misrepresentations that special priorities for reservations are available when such special considerations are not in fact granted to members of the public generally.”
And the granddaddy of them a ll:

“ § 399.84 Price advertising. The Board considers any advertising or solicitation by a direct air carrier, indirect air carrier, or an agent of either, for passenger air transportation, a tour (i.e., a combination of air transportation and ground acc ommodations), or a tour component (e.g., a hotel stay) that states a price for such air transportation, tour, or tour component to be an5 unfair or deceptive practice, unless the price stated is the entire price to be paid by the customer to the air car rier , or agent, for such air transportation, tour, or tour component.”

BTC and CTA submit that these are the underpinnings of principle on which the argument rests that airlines should be required to share the data. Otherwise, the agents, and their cons umers, are at risk of relying on inaccurate or incomplete information to their detriment. In short, we are not proposing anything shockingly

new. We are merely arguing that DOT should apply its own long

‐ standing principles to a new marketplace situation.
Hidden fees for consumers are hidden costs for corporate managed travel programs
While a leisure traveler’s major issue is the ability to compare all

‐ in airfares, business travelers and corporations that fund business travel activities have to deal with a more complex series of management and accounting problems created by the refusal of airlines to file their ancillary fees. As ancillary fees grow and become a significant portion of the overall air travel cost, corporations need to have some way to mana ge, control and account for these costs.
Not only is there an unknown universe of ancillary fees but also, these charges vary at the airline’s whim depending on the corporate traveler’s frequent flier level, the flier’s credit card usage and where and wh en the ancillary fees are encountered and paid. Furthermore, the airlines provide no way to measure the impact of their ancillary fees on travel policy, expense reports and per diem limits and may leave the door open to fraud and abuse. To make comparisons , control and tracking even more difficult, the airlines do not use a standardized system to report ancillary fees.
Note: This lack of any kind of airline reporting standards and methods affects other actors in the airline

‐ ticketing world such as corporat e credit card companies who need to be able to collect data in a standard format for reporting needs and corporate travelers who are faced with back

‐ office travel expense reporting requirements.
Worse, when corporate travel managers meet with airline repr esentatives to negotiate new contracts, they will not have the complete and accurate data necessary to bargain knowledgeably. Corporate travel managers during negotiations will be in a similar position to consumers who find themselves blindsided with hidde n fees at an airline ticket counter. Hidden fees meet hidden costs!

A DOT rule that mandates disclosure of ancillary fees as broadly as airfares are disclosed would create standard identifiers for ancillary fees and allow those serving the corporate marke t to track fees through the entire spectrum of planning, controlling, accounting, reimbursing and negotiating for these new costs.6 Airline vs. GDS bargaining
The airlines claim that ITSA, contrary to its stated goal of promoting consumer welfare, is simp ly engaged in “preserving the bargaining power of its GDS members by taking away any leverage that carriers might have in negotiating lower booking fees in exchange for direct access to optional fee information.”

However, t here is nothing in the DOT NPRM that places new limits on the airlines’ bargaining power vis

‐ à

‐ vis the GDSs. What the NPRM proposes is designed to protect consumers by broadened disclosure, and not to pick winners and losers in airline

‐ GDS bargaining. Airlines and GDSs have other bargain ing tools that they can and do use

— withholding access to vital consumer pricing information is not an appropriate bargaining chip. Withholding pricing information and obscuring the final cost of a product is not considered an allowable marketing tactic i n any economic sector, and certainly not in the airline sector. Further, airlines do not have to participate in GDSs. This rulemaking has no bearing on that.
Historically (most recently with the Internet upheaval), distribution models have changed without resorting to deceptive practices of withholding the full cost of air transportation from ticket agents and consumers. Differences about displaying Web

‐ only fares were settled through bargaining. The proposed DOT rulemaking does not limit airlines from i nstituting new distribution models or bargaining with GDSs

. In fact, both new systems are being developed and another round of bargaining is under way.
A DOT rulemaking that mandates filing of ancillary fees together with airfares would go a long way to e nsuring that the old world of screen bias does not begin again. Allowing airlines to pick and choose what prices for what services they want to reveal to passengers based on some unknown criteria is fraught with danger for consumers. Consider the very fore seeable world of $1.00 airfares with hundreds of dollars in “ancillary” prices that consumers would face in their attempts to piece together actual costs for comparison shopping. A computer screen showing all airfares to every destination to be $1 plus fee s would not be of any use to consumers. Indeed, some airlines have already marketed flights this way.
DOT’s support of airfare and ancillary fee transparency can only be looked at as a competitive threat by an industry if it intends to use hidden fees and non
‐ transparent pricing in an unfair and d eceptive manner to improve its bottom line. Otherwise, as in any other business sector, consumers must be informed
, prior to purchase
, of the total price of a purchase including the base price and all the extras.

The a irlines again repeat in their joint response to the ITSA reply comments that they “fully support disclosure of optional fee information to consumers.” However, their vision of fee disclosure is limited to their websites and to an airline

‐ by

‐ airline7 approach that does not allow consumers to easily or efficiently compare prices across airlines or across all ticket sales channels

. Plus, it doesn’t address the issue that many airlines will only choose to display these fees when the traveler is well into the purchase process, altering the fees dynamically around the many variables discussed earlier.
The complex world of airline tickets

The a irlines are making the airline ticket purchasing decisions more and more complex. They are arguing for the ability to creatively market, package and merchandise their products.  But why should the a irlines be the only market participant enabled to market, package and merchandise their products? There is no reason that their ticket agents should not also be allowed to find new ways to re
‐ bundle what the airlines have unbundled.

A irlines claim that many online travel agents (OTAs) already have pages or websites de dicated to ancillary fees. However, t hese pages are non
‐ interactive (bookable) and

are incomplete with respe ct to all airline fees. The fees on such pages are either gathered manually or by “scraping” airline sites, an action that many airlines disapprove of and that almost ensures that the information will not always be complete or up

‐ to

‐ date since fees change often

. If the airlines had the true interest of consumers in mind, these fees would be disclosed b y the airlines just as the rest of their fares are and become part of the ticketing process and used for price comparisons. Further, if disclosed in the

mann er that BTC and CTA favor, agents would be able to offer the same customization of fees (based on frequent flyer or other passenger status) as the airlines propose to offer on their own websites.

The a irlines claim that high GDS booking fees are harming c onsumers and airline competition. This has nothing to do with the DOT NPRM. Negotiations between the airlines and the GDSs are not controlled by DOT and should not be, other than a basic requirement that any consumer purchasing a ticket from the airlines or from one of the airlines’ ticket agents should have the same information upon which to base their purchase decision.
The proposed disclosure rule will in fact enhance airline competition. It will ensure that all airlines

— large and small

— have accura te and complete information about their total fares and fees displayed on neutral websites. All airlines will have a more equal opportunity to sell through the agency channel, not just the major airlines that filed the comments to which we are responding h ere.8 Airlines vs. GDS and other distribution models
The final pages of the a irline s’ joint response to ITSA’s comments focus es on structural “flaws,” that the a irlines claim exist within the system. Whether or not these arguments are true or false , the current airline

‐ ticketing world is made up of airlines selling tickets and travel agents selling tickets. The distribution methods have evolved into a world where the airlines work through ATPCO to disclose their airfares
, and then the GDSs distribu te these airfares to brick

‐ and

‐ mortar, online and corporate travel agents.
DOT’s current rules require that all ticket agents and the airlines sell from the same set of rules. Unfortunately, that is not happening today
, as the airlines withhold ancillar y fees from their ticket agents.
All of the airline whining about the distribution system does not change the fact that today’s market is made up of travel agents, GDSs and airlines. This is the world that consumers face every day. That is the world tha t any DOT regulation must confront.
Contrary to their statement that the GDS system s ha ve not changed with the technological times
, changes within the GDS systems have been dramatic. T he online airline ticket world has evolved in yet a different direction where ITA Software , not the GDSs, is the dominant gatekeeper for every new online travel agent that has been created since 2001 . Just like GDS shopping systems, ITA Software also relies on airlines filing fare and rule information to provide comparison sh opping.
Current GDS contracts have not prevented the airlines from aggressively developing new computer technologies that may in the future allow the airlines to bypass the GDS distribution system. When these new systems begin operating, there will proba bly be a period when both the legacy GDS programs and alternative booking systems are being tested , or , perhaps, another new still

‐ undiscovered system will be operate d side by side.
Anyone involved with the airline travel world would find any suggestion that the marketing of airline tickets has not been evolving over the past decade ridiculous. The growth in Internet programs and websites that deal with travel has been among the most dramatic on the planet. This new technology underscores the need for DO T to require that fees be broadly disclosed to all distribution channels.

Plus, t he disclosure of the airlines’ ancillary fee data as required by the rule we favor will more than likely stimulate a new group of software developers who will work aggressive ly to develop new airline/consumer interfaces that will make the airfare and ancillary fee sales even easier, more profitable and more transparent. Nothing in the rule BTC and CTA favor should be construed to limit in any way the airlines’ freedom to also provide fee and fare information to other distribution systems through which they choose to distribute their services.9 The special role of DOT in protecting airline consumers
The airline industry operates in a unique structure where its actions are not readily contestable by consumers through the normal judicial channels. Consumers have no redress through the court systems, only through the Department of Transportation.
Federal preemption denies consumers from taking the airlines to small claims court

a nd State courts, even for small issues such as refunds of taxes and mishandled luggage.  The continued lack of clear passenger rights and airline responsibilities in the airline contracts of carriage make federal court action impossible. Both BTC and CTA s trongly support the current rulemaking in its efforts to include customer service plans and expand passenger

‐ rights coverage in airline contracts of carriage.
As the consumers’ only form of redress, the Department of Transportation bears a unique and high er burden of requiring airlines to have understandable rules and regulations and clear and transparent airfares and ancillary fees that provides a strong underpinning for competition and comparison shopping across the airline market.

The bottom line

The airlines’ desire for better terms from their distribution partners or a new distribution system entirely does not change the need for full disclosure and all

‐ in airline ticket price transparency. The airlines cannot be allowed to continue to hide the tota l cost of travel from the almost 60 percent of consumers who choose to purchase tickets through travel agents

. The consumer point of view
, whether from the business side or the leisure side
, is that airlines should be required to disclose their ancillary fees at the same time and in the same manner as they disclose airfares and make them available across all ticket sales channels in which the airline chooses to sell its services. This is the only way that travelers can determine the full cost of travel so that individuals and corporations can compare the full, all

‐ in cost of travel in order to make decisions among different alternative travel options.
The airlines can run their businesses any way they choose with as many extra fees as they feel are necess ary, packaging those in a limitless variety of manners, but they must be required to tell consumers the full cost of travel wherever and through whatever channel they choose to sell airline tickets.

That is not too much to ask.10 Addendum A

THE CUSTOMER IS THE FOCUS OF EVERYTHING

REMARKS OF ROBERT L. CRANDALL IATA COMMERCIAL STRATEGY SYMPOSIUM, ISTANBUL, TURKEY, DECEMBER 7, 2010

NOT LONG AGO, I WAS ASKED TO PREPARE, ALONG WITH VARIOUS OTHER PEOPLE, A SHORT PAPER REFLECTING ON MAJOR CHANGES THAT HAVE IMPA CTED OUR INDUSTRY DURING THE LAST 25 YEARS

‐‐ A TIME THAT COINCIDES, VERY ROUGHLY, WITH THE PERIOD DURING WHICH DEREGULATION BECAME THE DOMINANT THEME OF GOVERNMENT INVOLVEMENT IN THE BUSINESS.

IT WAS AN INTERESTING ASSIGNMENT, FOR TODAY'S INDUSTRY BEARS LITTLE RESEMBLANCE TO THAT OF 25 YEARS AGO.

BACK IN THE EARLY 1980'S, CARRIERS WERE IN THE EARLY STAGES OF ADJUSTING TO THE U.S. DEREGULATION ACT OF 1978. START UP CARRIERS WERE EMERGING AND VANISHING ALMOST DAILY, LEGACY CARRIERS WERE STRUGGLING TO DEFIN E THEMSELVES AND UNDERSTAND THEIR MANY NEW COMPETITORS, HUBS WERE EXPANDING AND NEW HUBS WERE EMERGING, THE DISTRIBUTION SYSTEM WAS MORPHING FROM MANUAL TO ELECTRONIC, AND FREQUENT FLYER PLANS WERE JUST GETTING UNDERWAY. PASSENGERS COULD AND DID ARRIVE ONL Y MINUTES BEFORE FLIGHT TIME, AND CHECKED BAGS, MEALS ON BOARD AND OTHER AMENITIES WERE INCLUDED IN TICKET PRICES.

TODAY, MANY OF THAT INDUSTRY'S PARTICIPANTS ARE ONLY MEMORIES. WHILE THE HUB AND SPOKE SYSTEM STILL FUNCTIONS TO CONNECT SMALLER POINTS TO N ETWORK SYSTEMS, PASSENGERS ARE NOW MORE LIKELY TO WAIT FOR PLANES THAN VICE VERSA AND THE PERCENTAGE OF PASSENGERS WHO USE NETWORK CARRIERS HAS FALLEN DRAMATICALLY AS LCC'S HAVE INCREASED THEIR MARKET SHARE BY LEAPS AND BOUNDS. IN RESPONSE, NETWORK CARRIER S HAVE DRIVEN COSTS LOWER THAN THEY EVER IMAGINED POSSIBLE AND ARE WORKING HARD EVERY DAY TO FURTHER CLOSE THE COST GAP BETWEEN THEMSELVES AND THEIR COMPETITORS.

STRUCTURALLY, THE INDUSTRY HAS MORPHED INTO A COMPLETELY NEW SHAPE. MERGERS THEN THOUGHT UN THINKABLE HAVE BEEN CONSUMMATED, ALLIANCES BETWEEN PREVIOUSLY VIGOROUS COMPETITORS NOW DOM I NATE MOST INTERNATIONA L ROUTES AND THE INDUSTRY'S ONCE INTEGRATED PRODUCT HAS BEEN FRAGMENTED INTO MANY SEPARATELY PRICED BITS AND PIECES. SECURITY NOW SLOWS PASSAGE THROUGH THE SYSTEM

‐ ALWAYS TO A WALK AND SOMETIMES TO A CRAWL

‐ AND TECHNOLOGY HAS ENABLED AIRLINES TO SHIFT MILLIONS OF MAN HOURS OF PROCESS OR I ENTED WORK FROM EMPLOYEES TO CUSTOMERS.11 THE LIST GOES ON AND ON

‐ BUT BECAUSE ALMOST EVERYONE HERE IS INTIMATE LY FAMILIAR WITH THESE EVENTS, I WILL NOT BORE YOU FURTHER WITH A RECITATION OF WHAT WE ALL KNOW.  I MENTION THEM ONLY BECAUSE THE WAYS IN WHICH THE INDUSTRY HAS CHANGED HAVE HAD A VERY PROFOUND IMPACT ON THE TRAVEL EXPERIENCES OF PASSENGERS EVERYWHERE

‐ WHICH IS THE FOCUS OF THIS SESSION OF YOUR CONFERENCE.

BECAUSE TODAY’S CUSTOMER EXPERIENCE IS SO DIFFERENT FROM YESTERDAY’S,  I WOULD LIKE TO BEGIN OUR CONVERSATION TODAY WITH A QUESTION ROOTED IN THE MAGNITUDE OF THE CHANGES THAT HAVE ALREADY OCCURRED AN D THE CONTINUING EVOLUTION OF BOTH STRUCTURE AND PROCESS THAT UNDOUBTEDLY LIES AHEAD

‐‐ SOME OF WHICH YOU WILL BE DISCUSSING IN THE COURSE OF THIS CONFERENCE. THAT QUESTION IS WHETHER IT IS CONTRADICTORY TO TALK ABOUT THE CUSTOMER AS THE FOCUS OF EVERYTHIN G AT A COMMERCIAL CONFERENCE BEING HELD AT A TIME WHEN THE INDUSTRY'S ATTENTION IS CLOSELY FOCUSED ON RESTORING PROFITABILITY FOLLOWING A PERIOD OF APPALLING LOSSES. GLANCING THROUGH THE AGENDA, I DO SEE SOME INTERESTING TITLES INCLUDING A DISCUSSION ABOUT WHAT THE CUSTOMER REALLY WANTS AND ANOTHER ABOUT WHETHER YOU WOULD DO BUSINESS WITH YOU

‐ WHICH SHOULD BE REALLY INTERESTING. BUT FOR THE MOST PART, THE AGENDA IS WEIGHTED WITH PRESENTATIONS AND DISCUSSIONS THAT FOCUS ON HOW BEST TO RUN THE BUSINESS

‐ NOT HOW TO BEST PLEASE THE CUSTOMER.

NOW BEFORE YOU ALL THINK I HAVE TURNED DAFFY IN MY OLD AGE, LET ME ASSURE YOU THAT I AM ALL IN FAVOR OF MAKING MONEY RATHER THAN LOSING IT. I THINK CONTINUOUS LEARNING IS AN ESSENTIAL ASPECT OF GOOD MANAGEMENT AND I APPLA UD ANY COMPANY THAT IS FOCUSED ON PROMPTLY IDENTIFYING AND ADOPTING BEST PRACTICES AND THAT SEEKS INNOVATIVE APPROACHES TO TOUGH PROBLEMS. AND THERE IS NO DOUBT THE INDUSTRY'S CUSTOMERS

‐ ALTHOUGH THEY MAY BE LOATH TO ADMIT IT

‐ ARE FAR BETTER OFF WHEN THE INDUSTRY IS PROFITABLE THAN WHEN IT'S NOT, FOR THERE IS NO OTHER WAY TO FINANCE THE HEAVY I NVESTMENTS IN AIRCRAFT, AIRPORTS AND SUPPORTING INFRASTRUCTURE NEEDED TO PROVIDE THE SERVICE OUR CUSTOMERS WANT AND NEED. THUS, THE INDUSTRY'S APPARENT FINANCIAL RE SURGENCE IS WELCOME NEWS FOR BOTH AIRLINES AND THEIR CUSTOMERS, AND WE SHOULD All HOPE THAT PROFITABILITY WILL BE LESS ELUSIVE IN THE FUTURE THAN IT HAS BEEN IN THE RECENT PAST.

AT THE SAME TIME, I THINK THE INDUSTRY HAS DONE LESS THAN IT SHOULD AND CAN D O TO MAKE TRAVELING MORE ENJOYABLE.  TO MAXIMIZE LONG TERM PROFITABILITY, ENHANCE THE INDUSTRY'S CONTRIBUTION TO REINVIGORATING THE WORLD'S ECONOMIES AND BETTER SERVE INVESTORS, EVERY CARRIER SHOULD BE SPENDING MORE TIME THINKING ABOUT WHAT CAN BE DONE TO IMPROVE THE CUSTOMER EXPERIENCE. UNLESS THE INDUSTRY DEVOTES TIME, ENERGY AND RESOURCES TO DO12 SO,  ITS PRACTITIONERS ARE  LIKELY

‐ LIKE PINOCCHIO

‐ TO GROW LONG NOSES AS THEY SING THE PRAISES OF CUSTOMER SERVICE BUT DO LITTLE TO MAKE IT HAPPEN.

MAKING THI NGS BETTER FOR CUSTOMERS WILL INVOLVE LOTS OF HARD THINKING ABOUT THE MOST APPROPRIATE TRADE OFFS BETWEEN LOWER COSTS AND BETTER SERVICE AND WILL REQUIRE EVERYONE TO THINK WAY OUTSIDE THE BOX OF HISTORICAL SERVICE IDEOLOGIES. MOREOVER, IT WILL BE IMPORTANT TO BE SURE THAT THE GOAL IS NOT COMPROMISED BY THE GROWING LEVEL OF INDUSTRY CONCENTRATION.

NO ONE CAN PREDICT WHAT THE LONG TERM IMPACT OF MERGERS AND ALLIANCES IS LIKELY TO BE

‐ BUT WE ALL KNOW THAT THE GOAL OF CONSOLIDATION IS TO REDUCE COMPETITION AN D THEREBY FACILITATE REDUCING CAPACITY, RAISING PRICES AND CUTTING COSTS. GIVEN THAT REALITY, IT’S GOING TO TAKE SUBSTANTIAL EFFORT TO BE SURE THAT IMPROVED SERVICE IS ALSO ON THE RADAR SCREEN AND AVOID BEING SEDUCED BY THE NOTION THAT IMPROVED RESULTS ARE SIMPLY THE RESULT OF SUDDENLY IMPROVED PERFORMANCE. IN A FORTHCOMING BOOK

‐ ENTITLED THE NEW CAPITALIST MANIFESTO

‐ UMAIR HAQUE IS EXTRAORDINARILY CRITICAL OF INCREASING CONCENTRATION IN A NUMBER OF INDUSTRIES. HE CHARACTERIZES THE RESULT AS A "POISONED M ARKET STRUCTURE" WHICH HE SAYS IS GOOD FOR BEAN COUNTERS BUT TERRIBLE FOR INNOVATION, QUALITY STANDARDS AND CUSTOMER SERVICE

‐‐ AND WHICH HE DECRIES AS THE REAL WORLD MANIFESTATIONS OF A LACK OF COMPETITIVENESS.

AND IT IS NOT AS IF THERE ARE NO TEMPLATES AGAINST WHICH TO JUDGE POSSIBLE OUTCOMES. THE BANKS AROUND THE WORLD WHICH HAVE SUCCESSFULLY SHIFTED THEIR LIABILITIES TO TAXPAYERS GOT AS LARGE AS THEY ARE THROUGH A LONG PROCESS OF ACQUISITION AND CONSOLIDATION. THE GIANT CABLE COMPANIES T HAT ENJOY BOTH LOCAL MONOPOLIES AND STEADILY  RISING LEVELS OF PROTEST ABOUT BOTH COST AND CONTENT GOT THAT WAY THROUGH A PROCESS OF ACQUISITION AND CONSOLIDATION, AS DID THE U. S. AUTOMOBILE  COMPANIES THAT IGNORED REALITY FOR SO MANY YEARS.

UNHAPPILY, WE HAVE LEARNED THAT PERFECT COMPETITION

‐ WHICH TEXTBOOKS DESCRIBE AS A WORLD OF MANY SELLERS AND MANY BUYERS

‐ SIMPLY DOESN'T WORK VERY WELL IN COMMERCIAL AVIATION. THERE ARE TWO BROAD SOLUTIONS

‐ ONE IS REGULATION AND THE OTHER IS CONSOLIDATION. SO FAR, GOVERNMENTS HAV E CLEARLY COME DOWN ON THE SIDE OF CONSOLIDATION

‐ BUT THERE IS NO GUARANTEE, IN MY VIEW, THAT THEIR VIEW IS PERMANENT. THUS, UNLESS THE INDUSTRY DOES ALL IT CAN TO IMPROVE CUSTOMER SATISFACTION LEVELS, I WOULD NOT BE SURPRISED TO SEE REGULATION REASSERT I TSELF IN THE YEARS AHEAD.13 TO AVOID THAT OUTCOME, I TH I NK AIRLINES SHOULD BE BENDING THEIR BEST EFFORTS TO THINKING ABOUT WHAT CAN BE DONE TO BENEFIT CUSTOMERS

‐‐ AND IN THE PROCESS, HELP THEMSELVES. TO DO SO, EVERY CARRIER MUST ANSWER THE QUESTIONS THOSE TWO PANELS WILL BE ASKING

‐ WHAT DO CUSTOMERS WANT, AND WOULD YOU WILLING TO DO BUSINESS WITH YOURSELVES.

WITHOUT THE BENEFIT OF KNOWING WHAT LATER PRESENTERS WILL POSIT, LET ME LAY OUT MY OWN THOUGHTS ON WHAT MOST AIRLINE CUSTOMERS WANT MOST. NOTE THAT I SAID , MOST CUSTOMERS

‐ NOT ALL

‐ AND FURTHER SAID WHAT THEY WANT MOST

‐ NOT WHAT THEY JUST WANT. IF I STARTED A LIST OF EVERYTHING PASSENGERS WANT I WOULD TAKE UP THE REST OF THE DAY

‐ AND LIST LOTS OF THINGS THAT ONLY SOME WANT AND MANY THAT HAVE BEEN PR OVED UNAFFORDABLE. SO I WILL STICK TO WHAT I THINK ARE THE TOP THREE.

FIRST AND FOREMOST, THEY WANT LOW PRICES. OVER THE YEARS THAT HAVE ELAPSED SINCE DEREGULATION BECAME THE NAME OF THE GAME, THERE HAVE BEEN THOUSANDS OF MARKET TESTS WHICH HAVE CLEARLY E STABLISHED THAT LOW PRICES ARE TOPS ON THE CUSTOMER WISH LIST. THEY LOVE TO TRAVEL

‐ THEY WANT TO TRAVEL

‐‐ THEY WILL TRAVEL

. BUT MORE OF THEM WILL DO SO, MORE OFTEN, IF THE PRICE I S RIGHT. THUS, IT’S IMPORTANT FOR EVERY PROVIDER TO CONTINUOUSLY SEEK WAYS TO BE MORE EFFICIENT.

TO YOUR COLLECTIVE CREDIT, THE INDUSTRY HAS DONE JUST THAT IN AN INFINITE VARIETY OF WAYS. IN RECENT YEARS, A HOST OF ANCILLARY CHARGES HAVE ADDED HUNDREDS OF MILLIONS OF DOLLARS TO INDUSTRY REVENUES AND SHARP SERVICE REDUCTIONS HAVE CONTRIBUTED TO THE INDUSTRY'S ABILITY TO OFFER LOWER FARES.

OF COURSE, THERE WILL NEVER BE UNIVERSAL AGREEMENT ABOUT WHICH CHANGES APPROPRIATELY REFLECT EITHER FAIR COST ALLOCATIONS OR SENSIBLE SERVICE ALTERNATIVES THAT ENHANCE THE SYSTEM'S EFFICIENCY AN D WHICH MERELY TAKE ADVANTAGE OF CIRCUMSTANCE TO UNFAIRLY PENALIZE CUSTOMERS.

IN MANY CASES, THE CHANGES THAT HAVE OCCURRED

‐ WHILE NOT UNIVERSALLY APPLAUDED

‐‐ CLEARLY REFLECT PASSENGER PREFERENCES. I THINK MOST CUSTOMERS AGREE THAT THERE IS NO REASON FO R ALL PASSENGERS TO CONTRIBUTE TO THE COST OF MOVING BAGS IF ONLY A SUBSET OF PASSENGERS NEED AND USE THAT SERVICE. AND DESPITE AN AWKWARD PERIOD OF ADJUSTMENT WHEN ON BOARD SERVICE CHANGES WERE INTRODUCED, MOST CUSTOMERS SEEM TO HAVE ACCEPTED THE FACT THA T THE COST OF SERVING MEALS ON RELATIVELY SHORT FLIGHTS IS DISPROPORTIONATE TO THE BENEFIT AND PREFER THAT THE FUNDS PREVIOUSLY DEVOTED TO MEAL SERVICE BE USED INSTEAD TO ENHANCE THE14 INDUSTRY'S ABILITY TO OFFER LOWER FARES. FOR THE MOST PART, THE PUBLIC HA S ACCEPTED THE NOTION OF A LA CARTE PRICING WITH CONSIDERABLE EQUANIMITY, BELIEVING

‐ AS I DO

‐‐ THAT MOST OF THE CHANGES THAT HAVE TAKEN PLACE ARE APPROPRIATELY COST RELATED, AND THUS ENHANCE THE ECONOMIC EFFICIENCY OF THE SYSTEM.

WHILE THERE IS NO BRIGH T LINE REPRESENTING THE DIFFERENCE BETWEEN APPROPRIATE CHANGE AND CHANGE INTRODUCED BECAUSE THE INDUSTRY HAS THE POWER TO DO SO AND CUSTOMERS LACK THE ABILITY TO EFFECTIVELY PROTEST, I THINK EVERY CARRIER SHOULD EVALUATE FURTHER CHANGES TO THE SCHEDULE OF ANCILLARY FEES AND CUSTOMER SERVICES VERY CAREFULLY TO AVOID STRAYING FROM ONE TO THE OTHER.

MOREOVER, I THINK THE INDUSTRY'S LEADERS SHOULD BE CAREFUL NOT TO BECOME IDEOLOGICAL WHEN PRESENTED WITH CUSTOMER INITIATIVES. FOR EXAMPLE, THE INDUSTRY OBJECTED VIGOROUSLY AND VOCIFEROUSLY TO RECENT CHANGES REQUIRING THAT PASSENGERS NOT BE INVOLUNTARILY CONFINED FOR MORE THAN THREE HOURS ON AIRCRAFT EXPERIENCING LONG TAXIWAY DELAYS. IN MY VIEW, IT WOULD HAVE SERVED ITS OWN INTERESTS FAR BETTER BY ACKNOWLEDGING THE NEED TO DEVELOP IMPROVED PROCEDURES FOR ALLOWING WHATEVER MINORITY OF PASSENGERS WISH TO DEPLANE TO DO SO. I THINK EXPERIENCE WILL SHOW T HAT THE NEW RULES WILL NOT DRIVE THE FEARED SPATE OF CANCELLATIONS AND THAT THERE IS NO REASON

‐ OTHER THAN INTRANSIGE NCE

‐ TO KEEP PEOPLE ON AIRPLANES FOR EXTENDED PERIODS WHEN THEY WOULD PREFER TO DEPLANE.

MORE RECENTLY, THE INDUSTRY HAS OBJECTED TO CONSUMER EFFORTS TO DISPLAY A COMPLETE LIST OF ANCILLARY CHARGES IN EVERY DISTRIBUTION CHANNEL IN WHICH A CARRIER PARTICI PATES. AGAIN, I THINK THE INDUSTRY COURTS UNNECESSARY CUSTOMER DISCONTENT AND RISKS ITS GOOD NAME AND REPUTATION BY OPPOSING A REQUEST ENTIRELY CONSISTENT WITH NORMAL RETAIL PRACTICE. IN MY OPINION, EVERYONE NEEDS TO RECOGNIZE THAT ADOPTING  OPERATIONALLY ATTRACTIVE POLICIES  THAT ARE INCONSISTENT WITH CUSTOMER WELFARE AND SATISFACTION ARE, IN THE LONG RUN, UNLIKELY TO BE REWARDING.

I ALSO THINK THE INDUSTRY'S LEADERS NEED TO GIVE CAREFUL THOUGHT TO THE INTERESTING QUESTION OF WHY SOME OF THE NEWER CARRIER S

‐ ALL OF WHOM QUALIFY AS LCC'S

‐ CONSISTENTLY EARN BETTER CUSTOMER REVIEWS THAN THEIR LONGER ESTABLISHED BRETHREN. IN THE U. S

. SOUTHWEST

‐ A START UP ONLY A GENERATION AGO

‐ FOLLOWS DIFFERENT PRACTICES WITH RESPECT TO CHECKED BAGS, TICKET CHANGE FEES AN D TICKET PRICE REFUNDABILITY THAN MOST OTHER AIRLINES

‐ AND DOUBTLESS BENEFITS FROM DOING SO. JET BLUE

‐ ANOTHER LOW COST CARRIER WITH AN EVEN SHORTER HISTORY

‐ LIKEWISE EARNS HIGH MARKS FROM CUSTOMERS AND PROVIDES ON BOARD SERVICES THAT HAVE NOT BEEN WIDE LY COPIED. SINCE I NO LONGER HAVE DAY TO DAY ACCESS TO THE DETAILED COST STUDIES CONDUCTED MORE15 OR LESS CONTINUOUSLY BY MOST OF YOU, I ASSUME THAT THE REASONS OTHERS HAVE NOT FOLLOWED THEIR LEAD IS THAT THE NUMBERS SAY THOSE STRATEGIES ARE LOSERS.

I HAVE NO PROBLEM WITH THAT CONCLUSION, SO LONG AS THE STUDIES THAT HAVE LED YOU THERE ARE FREE OF IDEOLOGICAL BIAS. BUT I THINK ANY AIRLINE THAT CEDES SERVICE SUPERIORITY TO ANOTHER DOES SO AT ITS PERIL, AND WOULD URGE EVERYONE TO TAKE A LONG RATHER THAN A SHORT TERM VIEW OF THE IMPACT YOUR SERVICE REPUTATION WILL HAVE ON BOTH LONG TERM CUSTOMER LOYALTY AND PROFITABIL I TY.

IN ADDITION TO LOW FARES, AIRLINE CUSTOMERS WANT THE SYSTEM TO MINIMIZE TRAVEL TIME AND DISRUPTION

‐ THEY EXPECT BOTH CONVENIENT ACCESSIBILITY AND ON TIME PERFORMANCE. IN BOTH AREAS, GOVERNMENTS HAVE MUCH TO DO WITH THE QUALITY OF THE AIRLINE PRODUCT, AND AIRLINES HAVE DONE TOO LITTLE

‐ IN MY JUDGMENT

‐ TO INFLUENCE GOVERNMENT PERFORMANCE.

LET'S START WITH SECURITY. IT GOES WITHOUT SAYING THAT W E ALL WANT TO FLY SAFELY, AND SAFETY HAS LONG BEEN THE AVIATION INDUSTRY'S STRONG SUIT. THE STEADILY DECREASING NUMBER OF FATALITIES IS SO GOOD THAT VERY FEW PEOPLE GIVE MUCH SERIOUS THOUGHT THESE DAYS TO THE POSSIBILITY THAT THEIR FLIGHT WILL NOT ARRIVE S AFELY AT ITS DESTINATION.

UNHAPPILY, TERRORISM HAS REPLACED THE ERRORS AND MISTAKES OF EARLIER DECADES AS THE PRIMARY THREAT TO AVIAT I ON SAFETY, AND WE HAVEN'T YET GOTTEN AS GOOD AT DEALING WITH IT AS WE NEED TO. IN RECENT WEEKS, THERE HAS BEEN A GREAT FL AP

‐ PARTICULARLY IN THE U.S.

‐ ABOUT THE USE OF THE SO CALLED FULL BODY SCANNERS NOW APPEARING AT AIRPORTS. AS THE DEBATE HAS RAGED, I HAVE BEEN STRUCK BY THE FACT THAT AS PASSENGERS AND GOVERNMENT DEBATED, THE INDUSTRY HAS REMAINED LARGELY SILENT.

WHILE ITS EASY TO UNDERSTAND WHY THE INDUSTRY WOULD PREFER NOT TO BEAR THE BURDEN OF DECIDING WHO FLIES AND WHO DOESN'T, IT'S HARDER TO UNDERSTAND WHY IT HAS NOT WEIGHED IN WITH MORE ACTIVE SUPPORT FOR ALTERNATIVES TO THE EXTRAORDINARILY INVASIVE APPROACH NOW B EING USED. I THINK MOST PEOPLE WHO HAVE THOUGHT THE MATTER THROUGH WOULD AGREE THAT IT MAKES LITTLE SENSE TO USE SLOW AND EXPENSIVE FULL BODY SCANNERS FOR PRIMARY SECURITY CLEARANCE IN THE MAJOR AIRPORTS WHILE LEAVING SMALLER AIRPORTS WITHOUT ANY OF THIS E QUIPMENT. AND I THINK MOST WHO COULD BE CALLED EXPERTS WOULD AGREE THAT FULL BODY SCANNING IS FAR BETTER SUITED TO SECONDARY RATHER THAN PRIMARY SCREENING AND THAT ALTERNATIVE APPROACHES

‐ TRUSTED TRAVELER PROGRAMS AND MORE CAREFULLY TRAINED SECURITY OBSER VERS AMONG THEM

‐ WOULD LIKELY YIELD AS GOOD OR SUPERIOR16 RESULTS WHILE RESPECTING THE SENSIBILITIES OF MANY OBVIOUSLY NON THREATENING TRAVELERS.

WE NEED MORE THOUGHTFUL POLICIES

‐ AND SINCE THE INDUSTRY HAS BOTH THE EXPERTISE AND THE FINANCIAL RESOURCES N EEDED TO PARTICIPATE IN WHAT IS CLEARLY A POLITICAL DEBATE, I THINK IT SHOULD DO FAR MORE THAN IT HAS TO VOICE THE CONCERNS AND PREFERENCES OF ITS CUSTOMERS.

THE INDUSTRY HAS ALSO BEEN REMISS, IN MY VIEW, IN FAILING TO GIVE ITS FULL SUPPORT TO THE EXPENSI VE, DIFFICULT AND POLITICAL TASK OF DEVELOPING AND IMPLEMENTING IMPROVED AIR TRAFFIC CONTROL SYSTEMS.

THE IMPACT OF AIRCRAFT DELAYS IS IMMENSE. QUITE RECENTLY, RESEARCHERS FROM THE NATIONAL CENTER FOR AVIA T ION OPERATIONS RESEARCH, WHICH IS A CONSORTIUM O F FIVE LEADING     U. S. UNIVERSITIES, RELEASED A VERY DETAILED ANALYSIS OF THE IMPACT OF U. S

. FLIGHT DELAYS.  ACCORDING TO THE STUDY, COSTS IN THE U. S. ALONE T OTALED $33 BILLION DOLLARS IN 2008. (THE WORLDWIDE NUMBERS ARE DOUBTLESS FAR HIGHER, BUT I HAV EN'T BEEN ABLE TO FIND A SOURCE FOR WORLDWIDE DATA AS YET).
IT IS IMPORTANT, I THINK TO FOCUS ON THE FACT THAT OF THE $33 BILLION, ABOUT $17 BILLION REPRESENTS COSTS TO PASSENGERS THEMSELVES. THE OTHER $16 BILLION REPRESENTS DIRECT COSTS TO AIRLINES AND T HE LOST REVENUES ASSOCIATED WITH PEOPLE WHO DO NOT FLY (BOTH OF WHICH MUST BE RECOUPED THROUGH HIGHER FARES) AS WE L L AS ABOUT $4 BILLION BORNE BY OTHER BUSINESSES AND INDIVIDUALS WHICH REDUCE THE NATIONS GDP.

ONE OF THE PRIMARY PROBLEMS INHIBITING THE DEP L OYMENT OF THE SO CALLED NEXT GEN SYSTEM IN THE UNITED STATES IS THE RELUCTANCE OF THE AVIATION COMMUNITY

‐‐‐ AIRLINES, AIR TAXIS, FRACTIONAL PROVIDERS, BUSINESS AIRCRAFT AND OTHERS

‐ TO COMMIT TO EQUIPPING AIRPLANES UNTIL THE FAA HAS ENOUGH OF THE NEW SYST EM IN PLACE TO ALLOW THEM TO CALCULATE A RELIABLE RETURN ON INVESTMENT. WHILE IT'S HARD TO FAULT ANYONE FOR CAREFUL FINANCIAL MANAGEMENT, I THINK THIS IS AN EXAMPLE OF A PHENOMENON WHICH OFTEN HOLDS UP MAJOR PUBLIC WORKS PROJECTS

‐ THE INABILITY OF THE PUB LIC AND PRIVATE PARTIES INVOLVED TO AGREE ON A COMMON SET OF GROUND RULES FOR CALCULATING THE WHOLE SOCIETY'S RETURN ON A PARTICULAR INVESTMENT. WHILE ANY GIVEN AIRLINE MIGHT WELL ARGUE

‐ WITH SOME JUSTIFICATION

‐ THAT IT IS UNWILLING TO EQUIP ITS FLEET BE CAUSE IT CANNOT RELY ON THE TIMETABLE OF INSTALLATION AND EFFECTIVENESS PROVIDED BY THE FAA (OR IN OTHER VENUES, OF OTHER AIR NAVIGATION SERVICE PROVIDERS (ANSP)

‐ THE SUM OF THE CALCULATIONS OF INDIVIDUAL AIRLINES AND AVIATION PARTICIPANTS DOES NOT ADEQUA TELY WEIGHT THE COSTS TO CUSTOMERS AND THE PUBLIC IN GENERAL

. THUS, THE AIRLINES

‐ BY FOCUSING ONLY ON THE EXPLIC I T OPERATIONAL ADVANTAGES THEY ARE WILLING17 TO ASSUME

‐ DISCOUNT THE INCONVENIENCE THEY IMPOSE ON THEIR CUSTOMERS AND ON THE ECONOMIES TO WHICH THEY CONTRIBUTE.

I THINK IT WOULD BE VERY MUCH IN THE INDUSTRY'S INTEREST TO HAVE BOTH INDIVIDUAL CARRIERS AND AIRLINE TRADE ASSOCIATIONS TAKE A MORE AGGRESSIVE ROLE IN ENCOURAGING BOTH GOVERNMENT AND PRIVATE SECTOR INVESTMENTS IN NEW TECHNOLOGIES THAT WI LL REDUCE EN ROUTE DELAYS AND INCREASE THE CAPACITY OF EXISTING RUNWAYS. CONTINUING TO DELAY THESE INVESTMENTS ENCOURAGES SYSTEM PROVIDERS TO CONTINUALLY UPDATE AND REASSESS SYSTEM GOALS, THEREBY FURTHER DELAYING

‐ AND RAISING THE PRICE OF

‐ NEW CAPABILITI ES THAT ARE CLEARLY NEEDED SOONER RATHER THAN LATER.

IN MY VIEW, THIS KIND OF SHORT TERM THINKING IS MYOPIC. THE INDUSTRY WILL DO FAR BETTER INVESTING IN THE EQUIPMENT NEEDED TO GET CUSTOMERS WHERE THEY ARE GOING ON TIME THAN BY SHORTCHANGING THE INVESTME NTS REQUIRED AND IMPOSING CONTINUING DELAYS AND DISCOMFORT ON ITS CUSTOMERS. ITS TIME TO PUT NEXT GEN IN HIGH GEAR

‐ AND BY DOING SO, LAY THE GROUNDWORK FOR REDUCING DELAYS, INCREASING CAPACITY AND SATISFYING CUSTOMERS.

THE LAST OF THE BIG THREE ON MY LIST OF WHAT CUSTOMERS WANT IS WARM FRIENDLY SERVICE FROM COURTEOUS, WELL TRAINED PEOPLE. RESEARCH TELLS US THAT PEOPLE DEALING WITH SERVICE INDUSTRIES HAVE PSYCHOLOGICAL NEEDS FOCUSED ON SECURITY, SELF

‐ ESTEEM, JUSTICE AND TRUST.

WE ALL KNOW THAT WHILE TRAVEL ING, MANY PEOPLE ARE UNEASY. THEY ARE AWAY FROM HOME, IN AN UNFAMILIAR SETTING, IN CROWDED AND NOISY CONDITIONS, OFTEN USING A SERVICE WITH WHICH THEY ARE UNFAMILIAR AND IN CIRCUMSTANCES WHERE A MISTAKE OR A MISHAP CAN INVOLVE SERIOUS CONSEQUENCES SUCH AS A MISSED FLIGHT, A LOST TICKET, A LOST BAG OR A LONG DELAY. IN THESE CONDITIONS

‐ TO A MUCH GREATER EXTENT THAN IN OTHER SERVICE INDUSTRIES

‐ THEY NEED THE FRIENDLY SMILE, THE HELPFUL ADVICE AND THE CALMING REASSURANCE THAT PROPERLY TRAINED, EMPATHETIC EMP LOYEES CAN PROVIDE. UNFORTUNATELY , AS WE ALL KNOW, WHAT THEY GET IS SOMETIMES FAR DIFFERENT.

OUR INDUSTRY SUFFERS FROM THE DISADVANTAGE OF CONTINUOUS IRREGULARITY. I HAVE OFTEN REFLECTED ON THE FACT THAT FOR A TYPICAL AGENT OR FLIGHT ATTENDANT

‐ AND MANY OTHER EMPLOYEES AS WELL

‐‐ THERE'S NEVER A DAY WHEN SOMETHING DOESN'T GO WRONG. WHETHER IT'S AN OUT OF SERVICE AIRCRAFT, A WEATHER SYSTEM, A COMPUTER SYSTEM FAILURE, AN OUT OF CONTROL PASSENGER OR SOME OTHER PROBLEM, SOMETHING GOES WRONG EVERY DAY. AS A CO NSEQUENCE, THINGS THAT SEEM LIKE A CRISIS TO THE CUSTOMER OFTEN STRIKE AIRLINE EMPLOYEES AS ROUTINE.  THE IRREGULARITY OF AIRLINE LIFE IS INHERENT IN THE WORK

‐ AND IT'S ONE REASON SO MANY PEOPLE FIND THE INDUSTRY AN INTERESTING AND REWARDING PLACE TO WORK . AT THE SAME TIME, IT CAN BE BOTH18 FRUSTRATING AND TAXING, AND EVERY AIRLINE INEVITABLY ENDS UP WITH SOME FOLKS THAT JUST CAN'T MANAGE THE STRESS.

ON THE OTHER HAND, THE INDUSTRY ENJOYS THE GREAT BENEFIT OF ATTRACTING PEOPLE WHO LIKE TO SERVE OTHERS AND W HO THEREFORE HAVE HIGH EXPECTATIONS OF THEMSELVES AND THEIR COMPANIES. THUS, WHEN AN AIRLINE FAILS TO DO WHAT ITS EMPLOYEES THINK IS RIGHT AND FAIR, IT OFTEN ENCOUNTERS RESISTANCE OR RESENTMENT ON THE PART OF ITS PEOPLE

‐ WHICH LIES AT THE ROOT OF MANY OF THE LABOR CONFLICTS THAT HAVE LONG BEDEVILED OUR BUSINESS. MOST AIRLINE EMPLOYEES ARE NOT VERY GOOD ACCOUNTANTS

‐ AND MANY HAVE DIFFICULTY UNDERSTANDING WHY THEIR WORLD CANNOT BE THE SAME AS THE ONE THEY INHABITED 25 YEARS AGO.

RESOLVING THAT DILEMMA

‐ FI NDING A WAY TO RAISE THE SATISFACTION LEVEL OF EMPLOYEES WITHOUT VIOLATING THE ECONOMIC IMPERATIVES WITHIN WHICH THE INDUSTRY OPERATES

‐ IS KEY TO MOTIVATING AIRLINE PEOPLE TO PROVIDE THE KIND OF INTERFACE  CUSTOMERS WANT AND EXPECT.

FOR THAT PROBLEM, THE RE IS NO EASY ANSWER. GENERATIONS OF AIRLINE MANAGEMENT HAVE STRUGGLED WITH THE PROBLEM, AND I AM QUITE SURE MORE STRUGGLES LIE AHEAD. EDUCATION, EXPLANATION, LOGIC, INSPIRATION, PATIENCE, AND EMPATHY WILL ALL PLAY A ROLE IN SUCCESSFUL STRATEGIES

‐ AS WIL L A LARGE HELPING OF GOOD LUCK AND SOME HELP FROM THE UNIONS THAT REPRESENT MOST AIRLINE EMPLOYEES.  LIKE IT OR NOT, HOWEVER, FINDING AND MOTIVATING FIRST RATE PEOPLE IS AND WILL REMAIN AN IMPORTANT ELEMENT OF PROVIDING THE PERSONAL SERVICE WHICH I THINK I S ONE OF THE THINGS AIRLINE CUSTOMERS REGARD AS AN ESSENTIAL COMPONENT OF AN ENJOYABLE TRIP.

AS WE ALL KNOW, COMMERCIAL AVIATION HAS BEEN THROUGH A VERY ROUGH PATCH RECENTLY, AND I KNOW WE ARE ALL ENCOURAGED BY THE FINANCIAL RENAISSANCE NOW SEEMINGLY UND ERWAY. I HOPE IT CONTINUES, AND I BELIEVE THAT BEING SURE IT DOES WILL DEPEND VERY HEAVILY ON THE INDUSTRY'S ABILITY TO RETAIN THE SUPPORT AND GOOD WILL OF ITS CUSTOMERS. TO DO SO, I THINK THE INDUSTRY WILL NEED TO TREAD CAREFULLY AS I T BALANCES THE INTERE STS OF EMPLOYEES, INVESTORS AND CUSTOMERS.

I N THE YEARS AHEAD THE INDUSTRY WILL DEAL WITH A PLETHORA OF PRACTICAL PROBLEMS: HOW TO MANAGE THE EVOLVING RELATIONSHIP BETWEEN LOCAL AND LONG HAUL PROVIDERS, HOW TO BEST USE THE EVER EXPANDING CAPABILITIES OF TECHNOLOGY, HOW TO BETTER HARNESS ANALYTIC METHODS TO REFINE AND IMPROVE IT'S BUSIN E SS DECISIONS, HOW TO ACCOMMODATE EVER STERNER DEMANDS FOR ENERGY CONSERVATION AND LOWER EMISSIONS, HOW TO ATTRACT AND TRAIN GOOD PEOPLE AND HOW TO MANAGE THE EVER GROWING DEMAND FOR ITS SERVICES.19 AS THEY GRAPPLE WITH THESE PROBLEMS, I HOPE THE INDUSTRY’S LEADERS WILL REMEMBER THAT THE CUSTOMER REALLY IS THE FOCUS OF EVERYTHING THEY DO, AND WILL ADD LIKELY CUSTOMER SATISFACTION TO THE VARIOUS METRICS AGAINST WHICH THEY TEST NEW INITIATIVES.   THERE IS A SIGN THAT HANGS IN MANY BUSINESS OFFICES AROUND THE WORLD, WHICH READS “NOTHING HAPPENS UNTIL SOMEBODY SELLS.” IN THIS BUSINESS, THE SIGN MIGHT WELL READ “NOTHING HAPPENS UNTIL SOMEONE BUYS A TICKET”

– WHICH IS LIKELY TO HAPP EN FAR MORE OFTEN IF PASSENGERS CAN LOOK FORWARD TO ENJOYING THE TRIP.