The ART Of Business

A Soft Landing for the Airlines?

Concern about the potential bankruptcy of American Airlines seems only the latest indicator that the airline industry is once again ready to fall off the cliff.

Rising fuel prices over the past year finally turned eight consecutive quarters of profits to losses.

Fears of a global economic slowdown have many wondering if passengers will start staying home in large numbers.

In addition, the specter of new taxes on security and departure fees proposed by the Obama Administration, along with the EU’s controversial emissions trading scheme scheduled to start next year, all combine to make it very hard to be bullish on the industry’s future.

And yet I am.

I believe the airline industry is set up for a period of long-term stability, where the wild fluctuations of the past are smoothed over- so long as no one goes nuts...

This is not to say that long-term profitability for the airlines is right around the corner. The industry has historically never been profitable and likely never will be.

Instead, what I am suggesting is that the airline industry is on the precipice of a new era in which stability is much more the norm than the exception; the inevitable downturns are not as bad; and, everyone associated with the industry has much clearer and realistic expectations for what the industry can and cannot do for them.

As I detail in my new book Soft Landing: Airline Industry Strategy, Service, and Safety, after years of taking root, the industry’s “flying cheap” strategy, coupled with organizational efficiencies based partly on outsourcing, and more realistic expectations of stakeholders, have set the stage for far less turbulence.

This should not be easily dismissed or shrugged off.

Greater stability for the airline industry will immensely profit passengers and taxpayers- the same folks who ultimately underwrite so much of the costs of keeping the industry alive. Smoothing over the rough patches will enable governments to better plan and allocate where their support of the industry can be best targeted. It will empower aircraft manufacturers and their suppliers to better anticipate what will be needed going forward. And, when it comes to clearer, more realistic expectations, everyone will end up saner and less flummoxed when things don’t go as planned.

It has taken decades to arrive at this critical moment. To squander it now with bad public policy or flawed management action would be a travesty.

For starters, this ludicrous tax scheme on tickets and security being proposed by the Obama Administration should be stopped in its tracks.

History will remember the people who facilitated the Soft Landing and those who fought against it.

TAGS: Supply Chain
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