When entire subsections of our
business culture begin to behave irrationally, there is a tendency
to question ones own rational thought. Many of us experienced this
during the economic bubble of the late 90s: Not only were
heretofore smart people running around saying that profitability
was no longer an important factor when investing in companies, but
they were getting rich acting on that improbable insight.
The sane --
clutching their moribund old economy portfolios to their bosoms --
began questioning their own sanity. But then the bubble burst, and
the temporarily insane wondered how they could have been so foolish
as to entertain notions that were so absurd on the
For some time now,
the airlines have been promoting the quite irrational notion that
people should sell airline seats without compensation simply
because a) the airlines survival requires cutting out the cost of
distribution, and b) demand for seats means that seats will sell
whether sellers are compensated or not.
I dont know of any
other industry anywhere in the world that has successfully sold
wares without either building a direct-sales force or giving an
outside sales force some type of compensation. And, at some level,
the airlines must know this to be true because they actually do
compensate their distributors. They pay commissions to high
producers, but more importantly, they indirectly pay many, many
travel sellers via GDS incentives.
But now the airline
attack on GDS incentives, which has been building for several
years, has reached a crescendo.
Some airlines have
all but said theyre going to bury a GDS as an example to the
But the threat is
irrational. What is a GDS to do when it hears Commit suicide. Or
else ? The GDSs are not about to comply -- they, like some
airlines, might die because theyve chosen to follow poor strategic
directions or because alternatives come along that are superior,
but none is about to fall on its own sword.
The GDSs are
themselves behaving in ways that defy the accepted notions of
rational competition. Its a bit creepy watching these once
sharp-elbowed rivals strike insurance policy alliances and nod in
unison during their debates with the new-entrant GDSs.
More and more often
I hear otherwise rational people resign themselves to irrational
thought, accepting that the path to returning airlines to health
must accommodate their desire for free distribution (and reneging
on pension promises -- but thats another column).
seriously proposing a new business paradigm as follows:
Manufacturers should no longer create incentives for retailers to
sell their wares. In fact, retailers should be required to help pay
to have the unprofitable wares shipped to their stores.
should abandon their comprehensive approach to distribution and
subsidize a more fragmented model.
competitors should cease being critical of each other and instead
make supportive comments and look for ways to cooperate.
manufacturing level, sharp elbows and aggressive posturing should
be reserved only for customers and those partners upon whom one
Its a brave new
world. Ready to sign up?
Im not suggesting
that airlines shouldnt try to reduce costs wherever they can. And I
dont oppose their charging for exit row seats, meals or power ports
under the seats if people will pay for them.
service is a time-honored tradition. Refusing to pay for
essentials, such as a distribution network and sales force, does
not have quite the same track record.