Airline recap: entirely focused on operations, always on the brink of collapse. Operations consist largely of optimizations problems, so lots of attention is paid to these problems (peanuts vs. pretzels). For whatever reason customers are not insulated from the volatility (pretzels, bag fees, route duration, availability, etc., in addition to price fluctuation).
Typically you see finely-tuned optimization in old and evolved markets, e.g., cola, where it makes sense, and where customers are insulated from changes in the product or service. Here though it reeks of over-optimization and misapplied attention. Nobody makes a fuss about boarding the bus. When the price of corn goes up I don't have to use a can-opener on my soda.
What's wrong with airplanes? Why don't they work like buses? Let's try to figure this out. Investors have long recognized airlines as a valuable service but a terrible business.
1.) We really like to fly but our technology is behind the curve?
2.) Irrationality of consumers has created government controls which muck too much with an already fragile system? (security lines, shoe removal, bomb sniffing, personal searches, over-training of pilots, too-expensive pilots, burdensome safety regulations, burdensome inspections, all of these perpetuated by expectation)
3.) The average passenger does not fly enough, and so he is inefficient?
4.) Dependent on fixed-location airports? And their regulation?
5.) There's no clear cause and effect, it's simply a manifestation of the system?
6.) ?
7.) Demand for flight is very volatile but the capital which supports it is very expensive and illiquid?
(one red-herring: fuel efficiency, planes appear to be more fuel efficient than driving alone)
(another red-herring: this google hit http://www.brookings.edu/testimony/2005/0928business_morriso... states the obvious but does little to explain what makes the airline industry any different from anybody else dependent on large capital investments. sure they have to buy planes. and cola bottlers have to build plants.)
Typically you see finely-tuned optimization in old and evolved markets, e.g., cola, where it makes sense, and where customers are insulated from changes in the product or service. Here though it reeks of over-optimization and misapplied attention. Nobody makes a fuss about boarding the bus. When the price of corn goes up I don't have to use a can-opener on my soda.
What's wrong with airplanes? Why don't they work like buses? Let's try to figure this out. Investors have long recognized airlines as a valuable service but a terrible business.
1.) We really like to fly but our technology is behind the curve?
2.) Irrationality of consumers has created government controls which muck too much with an already fragile system? (security lines, shoe removal, bomb sniffing, personal searches, over-training of pilots, too-expensive pilots, burdensome safety regulations, burdensome inspections, all of these perpetuated by expectation)
3.) The average passenger does not fly enough, and so he is inefficient?
4.) Dependent on fixed-location airports? And their regulation?
5.) There's no clear cause and effect, it's simply a manifestation of the system?
6.) ?
7.) Demand for flight is very volatile but the capital which supports it is very expensive and illiquid?
(one red-herring: fuel efficiency, planes appear to be more fuel efficient than driving alone)
(another red-herring: this google hit http://www.brookings.edu/testimony/2005/0928business_morriso... states the obvious but does little to explain what makes the airline industry any different from anybody else dependent on large capital investments. sure they have to buy planes. and cola bottlers have to build plants.)