In the July 1 podcast episode of Airlines Confidential former Spirit Airlines CEO Ben Baldanza attributed the different decisions around whether airlines are limiting capacity on planes, to allow middle seats to go empty, to the culture of those airlines. I do think there’s something to this, and where Baldanza didn’t go into detail I’ll sketch out why this makes some sense.
What’s the mental model of each airline?
- CEO Doug Parker argued for densification (cramming more seats onto planes) because it meant carrying more passengers, which is what he believes an airline is supposed to do
- President Robert Isom sees the airline’s primary competitors to model as Spirit and Frontier, here’s how he explained it before the pandemic:
[T]oday there is a real drive within the industry and with the traveling public to want to have really at the end of the day low cost seats. And we’ve got to be cognizant of what’s out there in the marketplace and what people want to pay.
The fastest growing airlines in the United States Spirit and Frontier. Most profitable airlines in the United States Spirit. We have to be cognizant of the marketplace and that real estate that’s how we make our money.
We don’t want to make decisions that ultimately put us at a disadvantage, we’d never do that.
- Chief Revenue Officer Vasu Raja comes out of Network Planning and sees the airline’s strength as its route network, not its product
- CEO Scott Kirby manages off the spreadsheet, if you cannot prove an investment improves the bottom line he’s historically very resistant to making it.
- And right now United has been willing to do anything for cash now, including illegally refusing refunds for cancelled flights
In some ways United might have had even more challenges than debt-laden American because of their reliance on international.
- Belief that they will earn a revenue premium providing more to customers
- Hard-nosed approach that includes the realization that planes are paid for either way, employees are paid for, so what’s the point in squeezing more people onto planes versus adding an incremental flight which just means paying for gas?
- Plus they reduced their connecting network more than American and Southwest, so it meant they weren’t filling planes anyway to some extent.
- Has a customer focus brand, taking care of people (both customers and employees)
- Wants to grow its route network, with announced plans to be back to as much flying at the end of 2020 as they ended 2019
- If they’re flying more, they’ll naturally have lower load factors, so limiting loads in order for customers not to have to sit in middles isn’t as costly to them as United or Delta
- They start with a stronger balance sheet than American or United and can play a (slightly) longer game through the pandemic
It makes sense why American and United would sell every last seat on a plane customers are willing to buy, why Southwest doesn’t lose as much capping load factors and why doing so – they believe – will help them capture market share, and why Delta would take a more ‘premium’ approach that includes blocked middle seats.
And indeed right now I’d certainly prefer flying Southwest or Delta, or if I must fly American or United buying myself an extra seat.