Airlines have cut back on onboard food offerings both to promote social distancing and cut costs. However there are great ways to offer food safely – the way airlines continue to do already on longer flights.
I’ve often ordered kosher meals from American Airlines. These come frozen, prepared weeks in advance. The packaging process isn’t going to spread the virus. And the meals are presented in their full wrapping, the entree item is even heated in its packaging and presented still inside. Tray setups now come with sanitizer wipes.
We’ve heard airline executives tell Wall Street analysts that they’re going to focus on rebuilding their balance sheets before investing in product again. They’re borrowing unprecedented sums of money to keep afloat during the most challenging times they’ve faced. Don’t expect the pipeline of new club lounges to turn back on, though American Express is in a different boat and just announced an expansion of its Las Vegas lounge.
Back in March I wrote about the American Airlines turnaround plan from 2003. It involved $1.5 billion in employee concessions. When the airline began performing better financially, executives were rewarded, while employees who had sacrificed were not.
Arpey invoked the slogan “Pull together, win together” and talked about shared sacrifice. So employees felt burned, and they didn’t trust management to bargain in good faith for more concessions outside of bankruptcy.
But this was only one element of the turnaround plan that I focused on. It was actually a four-part plan,
- Lower costs to compete
- Fly smart: give customers what they value
- Pull together, win together
- Build a financial foundation for the future
Even with employee concessions, American – resisting bankruptcy – wasn’t able to get its costs down as low as other airlines that were going through bankruptcy. And there were revenue problems, too, especially with the international route network.
However there’s one element of this plan that’s most often overlooked: “give customers what they value.” American realized it had been a mistake to cut investment in the product during tough times. That meant they were no longer offering a product that would attract premium business.
A key point for turning around an airline, or any business, is delivering a product customers will pay for. And when you’re not the low cost provider in the industry, you need to earn a revenue premium, and the details of the product therefore matter most.
That begins with delivering a product customers feel confident in buying. That means air transportation is safe – including safe from spread of the novel coronavirus. It also means delivering a product that isn’t miserable to experience. And with airport concessions shut down, traveler stress high, and with airports advising passengers show up even earlier travel isn’t as much fun right now. That places an even greater burden on the airline to sell a high quality product, too.
It’s going to be important to keep investing in product. I’ve frequently heard complaints on investor calls that stockholders are getting paid last (although the volume of share buybacks over the past decade would suggest otherwise). Paying shareholders last is literally the way it’s supposed to work.