While flying back from Madrid, Spain, to New York-JFK, and then waiting through the normal end-of-the-day, end-of the-month hassles of hopping from JFK to Washington-Reagan, I began thinking about what really makes up an airline. There are a lot of pieces to the airline puzzle, but almost none of them are now owned by airlines. The modern “airline” is more of a management company that owns as few assets (such as planes) as possible.
I have just read through a series of news stories that lead me to this conclusion. Reports from the Farnborough International Airshow in Britain noted that the leasing business is going gangbusters. American Airlines has their American Eagle subsidiary up for sale. Air Canada has sold its frequent flier program. Shortages of airport gates are limiting low-cost carrier expansion since most are leased to legacy carriers not keen for competition.
Even international flying is now becoming something other than an airline business — current developments have individual airlines giving up control of their own schedules to joint ventures formed by airline alliances that have been granted special antitrust immunity arrangments by the U.S. and European Union.
So what have we ended up with here? Here is a surprising list of just what is an airline is not.
• An airline owns no planes — it leases planes from giant aircraft leasing companies or manufacturers.
• An airline owns none of its regional partners — all but American Eagle, now up for sale, are already independent airlines with only contracts with the majors.
• Some airline don’t even own their frequent flier programs
• An airline owns no airport gates — these are all leased from the airport
• Airlines have no inflight kitchens — all of these operations are contracted out
• Airlines have few maintenance facilities — almost all maintenance, inspections and repair operations are jobbed out to other companies, often in foreign locations
• Airlines depend on others for more than 50 percent of their sales — most air transportation business is contracted by travel agents. These include the traditional brick-and-mortar agencies; online travel agencies like Expedia, Priceline, Orbitz, Travelocity and others; and corporate travel agencies.
• Few airlines have baggage handlers — almost all baggage operations are jobbed out to airport contractors.
It seems that the most clever airlines own nothing.
They are a organization of executives who hire pilots, flight attendants, limited emergency mechanics, gate agents (possibly) and advertising and public relations agencies. They run the computer systems that keep all of the pieces of this organization that are leased, lurching forward to hopeful profitability using as little of their own capital as possible.
Once upon a time, all of these systems belonged to the airlines. Not today. Just as our airfares have been slowly but surely unbundled, the airlines have been unbundling the traditional concept of an airline into an amalgamation of contracted businesses.
Is this good? Or bad? Does it matter?
(Photo: ABCTeach.com)
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
