The Southwest Airlines Business Model. Does it Apply to Private Jet Travel?
Southwest Airlines (SWA) is one of my favorite companies. In some ways I guess we in the private jet charter business compete with these guys at a certain level of customer. Maybe we compete with them more than we know. A few years ago I read an article featuring a CEO of a successful national company and he said that SWA was their corporate jet. His stockholders had to love that frugal mentality. SWA definitely Luv’d it.
What can the private aircraft industry learn from these guys?
Price: Price matters. SWA with their ability to price their product lower than other carriers and still make a profit revolutionized air travel. When I was a kid, airline travel was something really unique and special -mostly because a big portion of us could not afford it. SWA made it affordable for the masses. SWA got people off the highways and the Greyhound bus and into the air. I still hear comments like: you can’t drive there for that price.
Simplicity: Somehow over the years, airlines, in their infinite wisdom, created a pricing structure that no one has yet to understand. You may be sitting in a seat next to a guy who paid 5 times more than you paid for the same space. SWA has made it easy on us. The fares are simple, logical and it is easy to book the flight. Even their rewards program is simple. And what about those new baggage fees that the other guys charge? None of that confusion and frustration with Southwest.
Consistent Reliable Friendly Service: Depart on time, smile, don’t lose my stuff, give me a coke and some peanuts and let me ride on a clean airplane.Do all that time and time again for a great price and you’ve got my business!
How can we emulate SWA’s success story in the private aircraft business?
First, we have to figure out the price problem. I don’t know a single person who has ever flown on a private aircraft who wants to go back to the airlines; but, they reluctantly do so because of price. Good news is coming on that front. New technology, efficient aircraft are here and more are on the way. These aircraft will drive the price of private aircraft transportation down. And just like our friends at SWA have proven, if you offer something people want and you can deliver at a better price, more people will buy it.
Simplicity is another issue. With so many types of aircraft and so many operators out there to choose from how do we simplify our service and pricing? Jet Cards where you buy a block of 25 or 50 hours of time on a private jet has been an innovation in marketing that has simplified it for many. There is still a lot of room for innovation in simplifying what we do.
Consistent Reliable Friendly Service: We do a pretty good job on this one. But we can always do better!
Where do we start in improving our model? How about listening to the people who use our service. And better yet, how about listening to those who don’t use us today? What do they have to say?
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Allen-
I think the reason that SWA is so successful is that their aircraft utilization is out of sight. They overstaff on customer service and baggage handling, while empowering their people on the ground to make fast decisions, to keep those airplanes flying. I don’t know the exact numbers, but, the SWA utilization rate for their aircraft is much higher than any other US airline. They certainly fly more revenue miles per aircraft than any other US airline. That is a fact, and that is where SWA’s greatness comes from. I think the lesson the that charter industry can learn from this is to figure out ways to be more efficient in using the aircraft that are currently in the fleet. The charter industry doesn’t need more aircraft added to it, in fact, it probably needs less! That in turn will drive up utilization, which will then in turn drive up profitability, and drive down prices, bringing more users in the charter world, and repeating the cycle. But as long as their is a surplus of charter capacity, the charter business will never be able to emulate the greatness of SWA.
Allen,
Good question. We’re actually working on that solution. (Email me @ adam@rsvpair.com for the PDF teaser if you’d like.)
The reality is that most people with the means to underwrite / finance are ones who use the existing broken fractional and charter models and are therefore confused about how to make “Southwest” work. (In other words, you need need “non-spoiled” financiers who understand that this is not a concierge service… it is more like a bus… just a little bus… and yes, you share and sit next to people you may not know that well.)
In short, when you have last minute availability, you, by default, create idle aircraft (waiting for the boss) which tanks the whole thing. We wrote two “mini books” on the subject at http://www.jetowner.com. One is titled “Golden Chariot” the other “Magus, Patron and Passenger.” (More here: http://jetowner.com/index.php?page=private-jet-books)
The ability to pull of a Southwest like revolution will require two things:
a) A dramatic increase in utilization. (Plan on at least 1800 plus hours per airframe per year that’s 50% of Southwest’s btw)
b) A complete altering of client expectations around how aircraft access works. (This is for the unwashed masses, not the guy used to getting away with huge last minute changes.)
Fixing those two things will make it happen. We believe we have the experience and web based optimization tools to make it happen too. We just need $6MM for the first two aircraft and a sales effort to get our project rolling.
–Adam
Here are some more helpful links about us and what we do at the Marcil Tech Group:
http://www.rsvpair.com (our world wide air charter directory)
http://www.jetowner.com (our service for current jet owners)
http://www.fractionalforum.com (to help people in the dying / collapsing fractional business)
http://www.adamwebster.com (my pontifications and shameless self promotion)