A few days ago I read an article on MSNBC that had me scratching my head.  Basically, American Airlines came out and tried to justify their $15 per checked bag fee, and claimed that the new fee would affect fewer than one in four customers this Summer.   They also claim that the fees won’t result in longer lines at the ticket counter.

Right.  I don’t believe them, but that’s really not the point that really got me steaming.

The airline then went on to try and passify its customers by trying to spin the fee as a “bargain”.

The airline defended the fee, saying it was a bargain compared with the cost of shipping a 45-pound bag overnight on a package-delivery company. It said the cost of sending a bag from Dallas to New York would range from $150 to $230 or more. -Source

What an absolute joke!

If they want to use that rationale to try and get me to accept the new checked bag fee, let’s turn that same rationale around and see how much it would cost to ship me, a 180 pound guy, and my checked bag (using their own 45 pound figure) from Dallas to New York via UPS overnight air:

The result: $1,162.58 one way.

Now, lets look up the lowest fare on American Airlines that I can buy today such that I get to New York by tomorrow.

The result:  $433 fare, including the $15 per checked bag fee, because let’s face it, if you take a tube of toothpaste, you’re going to check a bag.

So American Airlines is trying to tell me I’m getting a heck of a deal by paying $15 to check a bag as compared to shipping it via UPS, yet I have to listen to them complain about rising fuel costs when their fares are 35% of what it would cost a shipping company to ship human beings in the belly of an airliner.

Does that make any sense to anyone?

The first rule of business.

It has become increasingly apparent to me that the airline industry is the most poorly run industry in the United States (with a few exceptions).

The first rule of any business is that it must make money on every single product it sells.  In an airlines case, that product is its seats (there’s the cargo side of things as well).  Fundamentally speaking, the airline must lump together all of the costs of doing business plus a fudge factor for not being able to account for all business expenses and unsold tickets, and divide that by the number of seats it offers.  That’s the absolute minimum ticket price to be offered, and not a penny less.

But we’ll lose market share!

The airline executives are instilling upon employees that market share is everything.  In fact, this way of thinking has filtered down to those a bit lower in the food chain.

About six months ago I was engaged in a discussion with an airline manager friend of mine regarding increasing costs of jet fuel.  He proceeded to blame the oil companies for price gouging, blamed the government for not stepping in, and blamed the speculators for driving up oil prices.

I then asked him why, when his companies cost of doing business increases, they don’t simply increase the price of a ticket?

His answer?  We can’t increase ticket prices, we’d lose market share!

The airlines have forgotten about the first rule of business.

Piss-poor management in the airline industry will be the root cause of an airlines demise.  Not fuel costs.

For the sake of a free market, and capitalism, I believe all airlines that have displaced the first rule of business for market share should be allowed to fail.  They’ll run out of money long before they run out of market share.

Business airlines, Business, management

I’m starting to realize that there must be a tipping point to advertisement.  There must be a point where ads are so visible and omnipresent that they actually take away from the medium in which they’re delivered.

American Idol for instance.  I don’t watch a lot of television, and I’ve never really been a huge fan of American Idol, but since David Cook is a local guy, I started to take interest in the last couple weeks of the show.  During the few episodes I did watch, I started to notice the gratuitous placement of advertisements.

From the shows host rambling on about how great the iPhone is, to the three super-tall Coca-Cola glasses sitting on the judges table, to the fact that Ford gave both finalists a Ford Escape of their very own, to the Risky-Business-esque rock and roll ads featuring the two contestants to the fact that every word spoken on the show was brought to you by AT&T… It almost seemed like an hour of advertisements filled in with a little music every once in a while.

Top it all off with the five minute build up to announce the winner… after these messages from our sponsor.

There has to be a point where the viewer is so bombarded with advertisements that he just turns off the television to go do something else.  I think I’m at that point.

I watch television (on seldom occasions) to be entertained.  Not to be peppered with advertisements for crap I don’t need.

Does anyone else feel this way?

Business, Marketing advertisement, American Idol, Business, Marketing

It seems that AT&T is no longer seeing the value of the pay phone.  The company announced today that its pay phones will be phased out over the next year. They declined to say how much revenue its pay-phone business generated, but the number is small and declining, after all, how can they compete with cell phones at $0.50 per call?

It’s interesting that a service long thought to be impossible to live without could be phased out of service, but it’s happening.

It certainly leaves one to think about what other iconic items once thought to be revolutionary will be a thing of the past in the not too distant future…

From a business standpoint, I think it’s important to have enough where-with-all to understand when your product is no longer viable, and when advancements in technology have made your service obsolete.  The phone company has enough diversification to be able to cut ties with the product and still be a viable company, which speaks volumes not only for how far we’ve come in the technology field, but how companies are willing to adopt new standards, and cut bait on old ones.

Business, Technology AT&T, Business, pay phones