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Bigger Isn't Better
Cheap Charlie · July 27, 2000

Two weeks ago the airline world was jolted with the announcement that United Airlines would purchase US Airways. Last week American Airlines was reported to be in talks with Northwest Airlines about a possible buyout.

Naturally, the stocks of the targeted airlines are soaring. Northwest and US Airways stock prices jumped. I hope the antitrust folk in our Capital are jumping as well.

Hopefully, they are not so focused on breaking up Microsoft in an industry where prices have been steadily dropping and the quality of software and computers have been steadily increasing at consistently lower costs, that they miss what is happening in the airline industry.

Granted, there is truth in the preface to every article about the airline industry that prices have dropped dramatically since deregulation. What seems to have missed the radar screen are indications the airlines are re-regulating the industry to their benefit.

Let's look at pricing over the last year rather than "since deregulation." Where the software/computer industry has seen better products and lower prices, the airline industry has seen deteriorating service and higher prices.

These reintegrations of the airline route structure don't bode well for passengers. I think everyone who has flown over the past two decades can attest to the adage that "Smaller is better" when it comes to airline service. We can't prove it. We just know it.

Delta Air Lines used to be known for its phenomenal service and almost "family atmosphere" before it became a mega-carrier with the purchase of Pan American. US Airways service has only recently rebounded after plunging during the period when it was absorbing Allegheny and PSA. Northwest just digested Republic and American feasted on Reno. Few, if any, columns have been written about the great passenger benefits of these combinations.

Big is efficient, but it doesn't translate to better customer service.

American Airlines and United Airlines exude all the customer friendliness of a Big Blue mainframe. It is a sorry state where customer service reps feel that their hands are tied by a corporate attitude forbidding, even punishing, anyone who bends the rules. Even if the dedicated frontline individuals want to be helpful, many of the mega-airline policies actually work against customer flexibility.

The United/US Airways combination promises to "spin off" their Reagan Airport operations to a new airline and pull out of the market except for flights feeding their fortress hubs. Somehow, I don't see how the customer benefits. The current vibrant competition between United and US Airways through Dulles International will evaporate. I can't see any great customer benefits there.

United Airlines and US Airways vow to hold prices steady on their routes for two years. But, the airlines make most of their money shifting prices around between seats in a complex computerized yield management dance. Promising to hold the line on prices is worthless without a promise to maintain a certain level of low-priced seats.

The American/Northwest bond would blend two corporate cultures that have been vicious competitors, especially in the pricing arena. I can't see the consumer upside there either.

I know the debate about whether or not these mergers/buyouts will allowed to proceed will focus on route competition and pricing policies, the real losses will come in terms of intangibles such as customer service and flexibility.

Though corporate value is created at the bottom line by squeezing as much out of the customers and giving as little as possible in return, customer value is cultivated on the front lines of the industry at airports, check-in counters and on planes.

Let's not continue on the route of sacrificing customer service on the altar of efficiency and profit. At some point, pundits will begin to recall the story of The Goose that Laid the Golden Egg.

Let's hope it's not too late.

Charlie Leocha is the Boston-based author of Travel Rights: Know the Rules of the Road and the Air Before You Go. Cheap Charlie appears every Monday on this site. E-mail him at charlie@ticked.com or access his Web site.