Brancatelli – Joe Turns 4 And Gains A Little Perspective

Brancatelli – Joe Turns 4 And Gains A Little Perspective

This column marks the completion of four years of publication of my Web site, Joe Sent Me.

I figured my temporary site would last a few weeks, maybe a month, then disappear as the commercial sites resumed meaningful coverage of business travelers by business travelers for business travelers. Alas, four years later, I’m still here, so I will take advantage of this anniversary to do something that happens too rarely in travel journalism: try to create perspective. So come with me now as I look back at some issues and events from the last four years and consider what it all means now.

So much for SimpliFares
This year’s very first column considered SimpliFares, Delta’s start-of-the-year attempt to rationalize the Big Six fare structure. I suggested that SimpliFares wasn’t really simple or truly fair, but opined that it was better. Well, so much for better… In the wake of its bankruptcy filing, Delta began dismantling SimpliFares, slapping Saturday-night stay requirements and other onerous restrictions on prices. The justification? none at all, other than a vague claim that the restrictions will increase revenue. They won’t. All of the customers that Delta had won back with its simpler fares will return to flying JetBlue or Southwest or AirTran, three carriers that have little in common except for their corporate commitment to a rational fare structure and, of course, their profitable bottom lines.

Meanwhile, at a profitable, rational-fare airline
In contrast to Delta’s hasty retreat from SimpliFares is the tale of Aer Lingus, the Irish carrier that was virtually bankrupt in the weeks after 9/11. Despite corporate intrigue in the front office, political machinations in Ireland and a rocky relationship with its unions, Aer Lingus is now one of the world’s most profitable carriers. It managed the transformation by simplifying service and rationalizing fares. Last year, I chronicled Aer Lingus’ revolutionary transatlantic coach and business-class fare simplification. A year later, the airline is still profitable, still offering the simplest fares across the Atlantic and doing it all without resorting to fuel surcharges. U.S. passengers have responded: Aer Lingus sold 93 percent of its seats to Ireland this summer and 89 percent of its seats last winter. “This isn’t a race to a $1 fare,” explains Jack Foley, Aer Lingus’ top man in the United States. “It’s giving passengers simple fares and rational pricing patterns.” And, Foley says, Aer Lingus has discovered that simplifying fares lowers its costs. One example: “Last year, I needed 10 people working full-time for a month doing 2005 contracts and setting up audits for our corporate customers. This year, I have one person updating the files in a day.”

Maybe we need an airline named Macy’s
Back in January of 2004, I noted how the decline of the big department stores offered an eerie parallel to the decline of the Big Six carriers. I also mentioned a company once called Dayton-Hudson, an old-line department store chain that has prospered by streamlining its operations nationally and creating a wildly successful new type of chain called Target. A couple of months after that column, Dayton-Hudson, which long ago renamed itself Target Corp., sold its traditional department stores, which had all been renamed Marshall Field’s, to the May Company. Later last year, May Company sold itself to Federated, best known for its Macy’s and Bloomingdale’s chain. In September, Federated announced that it was going rationalize its operation. The Lord & Taylor and Bloomingdale’s specialty chains will survive, but all of the other 1,000 department stores in the Federated empire will be rebranded as Macy’s. That will offer Macy’s a national base for advertising and the chain will sell the same merchandise in the same way all across the nation. Contrast that concept to the Big Six carriers, which are an infuriating patchwork of fleet types, service concepts, in-flight classes, seat options and fare structures. Federated and Target get it: Offer simple, rational, consistent and easy-to-understand retail experiences and customers will come.

A bailout by any other name
The last Brancatelli File that appeared before the creation of Joe Sent Me was published on Sept. 20, 2001, at the now-defunct It decried the airline industry’s demand for a bailout in the wake of 9/11. The airlines reached new rhetorical lows during that drive. As I said in the column: “Delta chief executive Leo Mullin wailed on television that the ‘airline industry cannot be the first casualty of this war’ … while thousands of genuine first casualties are still buried in the rubble in New York and Washington and Pennsylvania.” But it didn’t seem like the Big Six got what it wanted: $12 billion in direct taxpayer subsidies and an equal amount of government loan guarantees. The 2001 bailout was “just” $4.5 billion in direct subsidies and the government eventually approved less than $2 billion in loan guarantees. But, of course, the big carriers know that there is more than one way to skin the taxpayer. The Pension Benefit Guarantee Corp. (PBGC) has assumed $3 billion in pension liability from bankrupt US Airways and $6.6 billion of pension liability from bankrupt United Airlines. And you can bet your next package of airline pretzels that the PBGC will end up stuck with a combined $11 billion in pension liability from bankrupt Northwest and Delta. And since PBGC is already underfunded to the tune of $23 billion, you know we’ll be bailing out that agency sometime soon.