Airline Industry: Failure by Growth

The airline industry is a great example of how the pursuit of profit growth can destroy something amazing.  If we step back, it is undisputable that the airplane is one of the most amazing and powerful human inventions. Truly exceptional humans – figured out how to propel 20 tons of metal and supplies into the air.  And while crashes occur on rare occasion, these giant metal birds are incredibly reliable and safe.

More importantly, the ability to fly creates amazing new opportunities.  Even if you don’t fly, you can now access goods that were previously unavailable.  And if you do fly, you can reach incredible places, friends and family in hours. 

So why are Airlines one of the most hated industries in America?  The answer is profit growth. 

The business of air travel must provide attractive returns to investors. It also operates in a highly regulated and competitive business that is constrained by how often people want to fly.

To drive profit growth, highly educated and experienced business executives have ruined the experience of flying. Highly opaque pricing, smaller seats, baggage fees, and overselling of seats are just a few examples of ways airlines have degraded travel for profit. (It is important to note that some issues like security and weather are challenges the airlines do not control).

But most importantly, these efforts are still not enough. Today, most airlines are driving growth through co-branded credit cards and frequent flier miles.  In fact, recent estimates say that this non-flight related activity may account for most of American Airline’s profit.

To be clear, the pursuit of profit means that airlines are spending most of their time focused on credit card and promotion – not how to drive the best experience for travelers.

If we want to changes this, we need a new way to reward airline shareholders and airline executives.  As long as driving profit growth up remains the primary driver, the experience for consumers will continue to go down.