Airlines may need new business model
I was really hoping that business model transformation at Delta Airlines would work. But as I had feared all along, Delta did not make it, and neither did Northwest Airlines. The example of Delta in particular shows how difficult business model transformations are when legacy issues make certain changes difficult. The traditional US airline companies are burdened with the same challenges that auto companies are. And that is why I would not be surprised to see Ford and GM continuing to be in serious financial trouble.
Wouldn’t it be much better to just start all over? That is exactly what is going to happen with emergence of airlines that would mimic the business models of JetBlue and Southwest. If I had the power to do it, I would dissolve all these legacy airlines, bring together all their assets, and then launch several small airlines with a new business model.
So what does it mean for you?
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A bankruptcy is not always the result of incompetent management or poor strategy. If the business environment changes remarkably, there is no alternative than to start all over again.
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Sometimes, just starting all over again may be the best option. Don’t delay it. According to Air Transport Association, airlines have lost over $32 billion during last four years. With that kind of money, my suggestion above could have been easily implemented.
- Always monitor not only your cost, but also that of your competitors. Competitor bechmarking on an ongoing basis is the key to survival. If your numbers are not aligned with that of the industry, immediate changes are needed. We have seen that when Southwest was thriving, the legacy airlines did not bother making the changes that were needed way back then.
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