ast week in this space, I wrote about
United Airlines and its woes. Since that time, it has asked the
government for $1.8 billion in loan guarantees to see it through
its current hard times.
While that short-term fix (and concessions from its unions) may
help it through the present cash-flow crisis, the airline still
hasn't revealed what, if anything, it's doing to address its more
United's not alone in its problems -- the major carriers are
suffering from malaise, and admit that they're prisoners of their
complex pricing structures and, perhaps, outdated business
A Wall Street Journal lead story the week before last suggested
the problem might be that airlines weren't fitting in with the
"Wal-Mart era," where low price seems to be king.
Or is it?
Gary Hoover doesn't think so. When he read that article, all he
could think was that the WSJ reporters were missing a bigger
Hoover once worked as a buyer for Federated Department Stores
(Bloomingdale's, Macy's), as head strategic planner for Mays
Department Stores (Lord and Taylor, Foley's) and as a retail
analyst for Citibank.
As an entrepreneur, he launched the world's first book
superstore (Bookstop, which was sold to Barnes and Noble for $42
million), founded a profitable internet company (Hoovers.com, the
business information service, which went public a few years ago)
and created Travelfest, a travel superstore, which managed to open
three outlets but eventually failed. He also wrote a book on
entrepreneurship, "Hoover's Vision," in which he devotes a chapter
to airlines and the travel industry.
As he read the Journal article -- in which airline chiefs
groused about union costs and reporters suggested that passengers
were heading to Southwest and JetBlue because of lower prices --
Hoover thought everyone was failing to see the obvious.
Yes, Wal-Mart is successful, and has low prices. Likewise, in
the computer industry, Dell. Yet Kmart and Gateway tried to compete
on price, and those two companies only suffered.
Hoover believes the answer involves not just price, but
differentiation and trust. "One of the big problems that United,
American and Delta have is that you could fall asleep on any of
them, wake up and have no idea which carrier you're on," he
That's not true of Southwest, JetBlue or Virgin Atlantic, which
he believes combine "good value and style."
Furthermore, he points out that despite its reputation as a
low-cost airline, Southwest frequently doesn't always have the
lowest fares, yet customers remain loyal. "The majors have created
a pricing structure that is an insult. Southwest may not always be
the lowest, but it has a pricing structure that people trust," he
Hoover's dismay with what he was reading in the Journal turned
to delight at the end of the article when he came upon the comments
of Continental president Larry Kellner, who said he hoped his
airline could end up like retailer Target, distinctive enough to
command modest premiums in a price-sensitive world. Continental
chief executive officer Gordon Bethune chimed in his support of the
concept as well.
"Yes," Hoover thought. "Target. Great stores that can go
head-to-head with Wal-Mart. Target."
Gordon Bethune, Gary Hoover wants to talk with you. He thinks he
understands your airline and where you want to go. He thinks he can
help. And he wrote to me to ask if I could get your attention on
While I can't guarantee that Hoover will better your chances for
long-term survival, it's my opinion that he's right on, well,
Target. Consumers need more than price -- they want a package of
things that represent style, convenience and value. They appreciate
companies that have their own rhythm.
It's not only about pilot pay, or the hub system. It's about
understanding the consumer, and working on how to make them love
and trust you. If Hoover's book is any indication, he understands
Gordon, take Gary's call.