Look for part one of the seven-part special report on the economics of the industry called Travel + Money: How the Industry Really Works in the Sept. 4 issue of Travel Weekly. Other reports will follow throughout September, October and November.
To death and taxes, I would like
to add a third certainty: When Travel Weekly writes about airlines,
we get letters to the editor.
Thats because the
relationship between airlines and some travel agents among our
readership overflows with deep emotion and is forever colored by
the airlines decision, more than 10 years ago, to cut, cap and
subsequently eliminate base commissions for agents.
resentment and anger is the one type of baggage that the airlines
seem unable to lose. In fact, on those occasions when outrage
appears to subside, airlines make an announcement that seems
designed to rile agents. The $3.50-per-ticket underride charged to
agencies that use nonpreferred reservations systems would be a good
Airlines seem to
puzzle some of us in the industry as much as women puzzled Freud.
Had Freud been a Wall Street analyst rather than a psychoanalyst,
he would have undoubtedly asked: What do airlines want?
In a business
newspaper like Travel Weekly, we report breaking airline news and
activity as objectively as we can in the news pages. We
additionally offer some subjective observations in our opinion
But to wholly
understand the motives, actions and goals of any business, one must
first grasp its economic underpinnings. Its the equivalent of
examining the subconscious to better understand the behavior
patterns on the surface.
To that end, weve
undertaken an ambitious venture in explanatory journalism, a
seven-part special report on the economics of the industry called
Travel + Money: How the Industry Really Works.
The first part is
about the airline sector, and like the other reports to follow, it
focuses on money (which is, of course, the answer to What do
In this issue, we
look at what has to happen for carriers to see black ink, what they
are compelled to spend and the various economic realities that
drive their business and marketing plans.
issues, appearing every other week, well also examine the business
dynamics that drive travel agencies, hotels, tour operators, car
rental companies, cruise lines and travel technology
reality for commercial carriers is not only unique in the travel
industry, but perhaps unique to any mature private industry where
demand has constantly risen for almost a century: As our report,
beginning on Page 15, points out, from the time of the first
commercial airline to the present, the aggregate profit of the
industry is zero.
Reading that, it
might be easy to conclude that any executive who chooses a career
in an industry that, as a whole, consistently loses money, is
irrational. And irrational people can be expected to make
irrational business decisions, such as appearing to intentionally
alienate its largest distribution channel.
But as you read
this report by our aviation editor, Andrew Compart, youll begin to
understand that while commercial aviation as a whole cant turn an
aggregate profit, individual airlines can, and do.
And when youve
finished reading it, youll understand what perhaps not even every
airline CEO understands: what must happen for an airline to make
money, and why carriers that go out of business fail. Its a
fascinating dissection of a complicated industry, told in laymans
language but with expert insight.
understanding why a company takes certain actions may be cold
comfort if those activities affect your business in a negative way.
But we cant help believing that when one segment of our very
diverse industry understands the other sectors more fully, the odds
improve that creative leaders in every sector will conceive
business arrangements that result in improved benefits for
Arnie Weissmann, send comments to[email protected].