Shanghai Yummy

I received my 2003 Mileage Plus Premier Executive 1K kit from United yesterday. Because I keep up with some of the buzz on FlyerTalk, there were no surprises. The kit this year consists of a letter, the 2003 membership card, an 8 page booklet describing this year's benefits, 6 systemwide confirmed upgrades, 2 $20 off coupons for duty-free merchandise (on a purchase of at least $125), and a bunch of Air Currency coupons, which are for complimentary alcoholic beverages when you don't get the upgrade and have to sit in coach. Because I actually flew more than 100,000 paid flight miles last year, I also got a companion travel certificate, which is a buy-one-get-one-free coupon for someone traveling on the same itinerary as me.

The largest material change from last year is that the Systemwide Confirmed Upgrades can no longer be used on the more discounted fare classes Internationally. They are now only applicable to Y, B, M, and H classes, which are the same classes that you can upgrade using miles. Before this change, the Systemwides were the single greatest benefit of 1K membership, in my opinion.

This is the latest in a trend that has been ongoing since I made Premier for the first time in 1997. The welcome kit I received in 1998 for Premier (which is 25,000 paid flight miles in one year; a quarter of what I flew last year and each of the four previous years I might add) came in a beautifully decorated envelope that truly spoke of appreciation. The welcome letter was on cotton bond, and the membership booklet was printed on the same bond paper with a cut-out window on the front cover. There was a 10,000 miles-off certificate for a 2-person mileage plus award ticket, and some other stuff that I can't remember off the top of my head.

Now I realize that the airline industry, and United in particular, are facing tough times right now. Cotton bond paper is expensive, and cost-cutting is the buzz. I can understand this. The point I'm trying make right now isn't that these moves aren't justified. It's that I blame the airlines and the flying public as a whole for where this industry is heading.

Where is this industry heading? Let's take a very brief look at where it has been first. Commercial aviation spawned in the 20's and 30's as an offshoot of the air mail routes spreading throughout the vast expanses of the United States. The first intrepid air travelers sometimes sat on wicker chairs in the mail hold with a burlap bag filled with letters to grandma. Soon after, passenger airplanes hit the scene and people were flying coast to coast in just a couple of days, maybe with some train segments in between. You think that one-connection LAX-ORD-LGA 6 hour itinerary is a bitch? After the war, commercial flying really took off. Pressurized cabins, stewardess service (they weren't called flight attendants until much later), the jet engine, turbofans, on-board meal service, in-flight magazines, movies... these were the glory days of air travel. But only the very rich could partake in this indulgence for many years. All the while, the fabric of American society was changing; a middle-class emerged, the automobile gave people freedom and yearning to travel, and the Interstate system came along moving commerce along its many concrete pathways with families on vacation riding alongside. With these socio-economic forces at work, the deregulation of the industry removed the last hurdles for the common man to enjoy the benefits of air travel. Price competition saw many carriers start, and many carriers fail in the years after deregulation. The trend was to pack as many people into the airplanes as possible in order to maintain continually declining fares. This trend continued for many years into the 80's. Innovation in the industry revolved around this concept rather than the need for speed or comfort as it had in the heyday of technological innovation in the aerospace industry: the 1960's.

The convergence of First and Coach classes is indicative of where the industry is going. Years ago, a first class ticket entitled one to lounge in the upper deck piano bar of a 747. Today first means having a seat that actually reclines enough to take a nap instead of crumpling yourself against the window if you're fortunate enough to have a window seat and pretending not to notice every time the guy next to you elbows you. And that's on an international flight. Domestically, first just means you get free alcohol and there's no middle seat. Which counts for something... but not as much as paying ten times the fare.

Who populates the vast majority of first class seats today? Are they rich? Are they powerful? Perhaps. But a far more accurate term would be "frequent flyer." First class today exists not as a sanctuary for the rich like in the early days of air travel and the legacy of the steamships, but rather as a marketing product to attract frequent travelers. In large part, they are not paying the first class fare to sit in that first class seat. They got an upgrade from the airline because that's one of the ways the airline makes them feel special and thus keep their business from going somewhere else. The majority of frequent flyers used to fly on "business fares" which meant that they bought coach tickets, but their tickets didn't have restrictions like a Saturday night stay or advance purchase requirement. They were more expensive than Johnnie visiting his grandma for the weekend's ticket, and for years the airlines thrived because they could charge the premium fares in exchange for the perceived convenience to the traveler and the traveler's company. This is how the major airlines paid their bills in the late 80's and most of the 90's.

The effect of all this was that the majority of people became used to the concept that air travel was a hassle and that getting on a plane to go somewhere was a pain in the ass, literally. You had cram yourself into a seat just barely wide enough for Kate Moss, sit there for 3-5 hours, be treated curtly at best along the way, and be shown old movies and food that reminded you of college. But hey, it was fairly cheap to do so, and besides, you had no other choice because all the airlines had very similar products at very similar prices. The product of air travel became a commodity item, where the only differentiating point was price. The frequent flyer programs slowed this trend a bit by attempting to build brand loyalty and by building value into that brand.

At the same time, management and labor had public wars where the only losers were the flying public. Eager to get a piece of the action in the booming economy of the mid- to late- 1990's, airlines drove up fares, labor revolted to get their share of the profits, and management sat on their laurels because the times were good and more and more people were flying to make deals, meet their clients, sell the latest dot.com, visit their folks because they were making lots of money and had good disposable income...

But all the while the public hated that journey because the airlines herded them like cattle. They kept looking for ways to get there cheaper. So discount airlines popped up. Now the biggest secret about discount airlines is that for someone that does their homework, they aren't one penny cheaper than flying a premium airline. You just have to know your way around a very archaic, complex, arbitrary maze of rules, regulations, and systems. There are probably five people on earth who know it inside and out. I happen to know it pretty darn well for one particular airline. But guess what? When your average Joe wants to go somewhere, they don't want to spend four hours looking for a good airfare. They want to look at two, maybe three competing airlines, and then put that credit card in and get it over with. I insist on flying my airline, so I play their stupid game and spend a lot of time looking for a good airfare on that airline.

The great thing about discount airlines is that everyone EXPECTS to get treated like cattle when they go on that airline because, hey... this is so cheap I can't believe they actually have flight attendants on board! But the thing is, sitting in coach on a premium airline is pretty much the same as sitting in coach on a discount airline. Your ass hurts at the end of the trip, you feel like crap, your eyes are dry, your bladder is about to explode because you couldn't climb over the two sleeping hulks next to you, and your stomach hurts from the meat-like substance you just had to endure on board.

The point is that the products are exactly the same from airline to airline, for most people. The only difference was in the frequent flyer programs. For some very picky, nerdy people like myself, there were other factors like airplanes and technology, but for most of the people out there, flying meant the same thing, and if someone could do it cheaper, then they were there.

This is where the industry is heading. There's no first class on a Greyhound bus, is there? In ten years, there will probably not be first class left on the airlines either. No more frequent flyer programs. They might still have program that they claim to reward your loyalty, but they will be but shadows of their legacy. You'll get to board first maybe, and check in at a special line. But gone will be the first class upgrades (because there won't be a first class section, it will all be cattle class), lounge memberships, etc. There might still be this whole concept of earning miles and "free" trips, because I think people see some value in that and I think most people in fact see the miles as the whole reason the frequent flyer programs exist.

The glory days of aviation are long, long past. People no longer see the romance and jetsetting image they once did. Just as cars and busses have become a boring, commonplace necessity, so too has the concept of flying seven miles above the surface of the earth at more than 3/4 the speed of sound.

The airlines capitulated to the "just get me there for cheap" attitude in varying degrees. It's interesting to note that the airlines that spent the most in innovation and attempting to differentiate their product from others are the ones in most peril today. I fly United because they invested a lot of money into new planes and new technology. They're the only US airline that flies both the 747 and the 777. Compare this with some of the other US airlines, who are milking their 35 year old DC-9's for every last flight they're worth, still flying 30 year old DC-10s across the ocean... But all this innovation costs money. United gambled that their flying public would recognize the value of these innovations.

But they didn't. Because most people don't care. When you're sitting in the back row, it doesn't matter if you're on a 40 year old DC-9 or a brand new 777... it's still cramped as hell and the food is still going to make your stomach rumble. That's what people care about. That and how much they're paying. They just want to get the hell off of that plane and get on with their day.

The failure of United to generate loyalty, and in turn, revenue in the present market is a combination of a lot of factors. But in the long term, I believe that the underlying reason is because the days of innovation and product differentiation in the airline industry are over. The days of commodity price wars are here to stay.

It doesn't matter who survives this latest drought and who doesn't. Coming out of it, everyone is going to be the same. Do you care if you're on Greyhound or the Mayfair Bus Lines? Do you pay attention to who manufactured the bus? What new innovative fuel injection technology the engine employs? How long the driver has been driving? Did he drive a humvee in Desert Storm? Same thing with airlines. United? American? Continental? Do you want a window or aisle? Do you pay attention to the airplane? Do you care that the engine on the 777 you're sitting in generates more than 100,000 pounds of thrust? That the veteran captain at the controls of your plane has 30,000 hours of flying time, flew F-111's in 'Nam, has spent his whole life loving every day because he loves to fly.

No, of course not. What matters is, how much was that ticket? And man, can I get another ginger ale? My ass hurts in this seat!

PGP Signed Entry