The ART Of Business

The Day the Jet Set Died

20 years ago this month, the jet set died.

The Summer of 92 was looking to be the worst ever for the airline industry.

A global recession was firmly in place and prospects for a turnaround were bleak.

As I detailed in my recent book SOFT LANDING, flights were regularly cancelled because of a lack of passengers. The airlines were hemorrhaging billions of dollars.

Something needed to be done.

On May 28, the mother of all fare wars broke out.

Northwest Airlines introduced its "Grown Ups Fly Free" promotion where one adult would travel free with any child aged 2 to 17.

American Airlines answered immediately with fare reductions of up to 50% under the guise of its new "Value Pricing".

Delta did the same thing.

It all became "the sale of the century" as then American-CEO Robert Crandall put it.

Fares dropped all over the country, and a bloodbath ensued as the airlines undercut each other in a race to the bottom. Almost overnight, flights for the rest of the summer were filled beyond capacity.

While nobody recognized it at the time, this dramatic slashing of fares was a game-changing moment for the airline industry and its passengers.

The era of Flying Cheap was inaugurated and the last 20 years have seen the evolution or devolution, depending on your point of view- of a new business model: one that is based on increasingly low prices and outsourcing.

As we prepare for the 2012 summer travel season, one thing is clear: the jet set have been replaced by Wal-Mart shoppers. And there is no going back.

TAGS: Supply Chain
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