Death Of A Salesman
Since British Airways became yet another member of the “defer the A380” club, the prospect of more full-service airlines considering a strategic shift away from premium products will start to gather pace.
Just like Arthur Millers fictional character, Willy Loman, life insurance didn’t cover his suicide - neither will flying passengers on a discounted basis while yields continue to fall off the nearest cliff. That “strategy” is probably just as bad, if not worse than suicide…(can it get any worse?)
Air New Zealand may have been flying without First Class for a while now, but at British Airways’ annual general meeting last week, the talk on the sidelines was that of when a rebound would occur - or, indeed, whether it would ever occur at all. For British Airways, the reality is that the ideology of First Class has all but evaporated, and with it, the intended revenue that it has relied upon for so many years of its existence in the post-Thatcher years. Part of that had begun when it introduced World Traveller Plus (premium economy) and has been exacerbated by the need for more liquidity to offset losses that are inevitably going to be revealed going forward.
British Airways Boeing 747-400 being pushed back from the stand
Image copyright/owned by FleetBuzz Editorial.com
The decision to push back its A380 deliveries plays a big part in the reason why some quarters within the airline have openly questioned why they weren’t deferred for longer and indeed, why part of it hasn’t been cancelled outright. For Airbus, half of the sixteen customers for the A380 have deferred deliveries and Thai Airways has practically begged to all and sundry to be relieved of its misery to the association of the mismatched niche airplane.
(Shoot The Dog & Shoot The Dog Part Two)
John Leahy has repeatedly touted the A380 as the answer to high fuel prices, yet despite the hype behind the marketing, current A380 operators along with carriers in the Asia-Pacific Rim region have been dealt a huge blow with cargo demand dwindling and also with high yield traffic doing better disappearing acts than Houdini.
Air New Zealand has certainly stolen a march on its bigger rivals, and being much nimbler, has avoided the pitfalls of the highly inflexible A380 and instead concentrated on making money on routes that it knows it can do so without the fear of not filling up the front of the airplane. Expect more airlines to execute this strategy - just this year British Airways and newcomer V Australia have taken delivery of 777’s equipped with everything but First Class. Even route-centric deployment of high yield seating is under threat - business travellers have started down-gauging their budgets and even gone down the low-cost carrier route where applicable.
Part of this new culture has forced deferral, cancellation and re-evaluation of product strategy. Equally, throw in the 747-8 Intercontinental into the fray, and its not hard to see why it hasn’t sold as well as envisaged. For the first time in as many as three decades, the likelihood of the parked fleet coming back to revenue service is undermined by excessive capacity and fluctuating oil prices.
Economic growth has been stagnant for only a short period of time - talk of “green shoots” of revival is a short-lived proposition when you consider that even the IATA Director General, Giovanni Bisignani said recently that “even if we look beyond the crisis, it is difficult to see a return to business as usual.”
The bottom of the cycle may still be around the corner. Critically, recovery isn’t.
While the salesmen find cheaper way of getting from A-to-Z, the distinct prospect that First Class will be supplanted by two class airplanes, or tri-class (Biz/Prem Econ/Econ) configurations will almost certainly mean that last summers surreptitious levies on baggage and fuel surcharges will probably something we’d all better get used to.
At the opposing end of the spectrum, Ryanair, with its innovative pricing policies is, like Air New Zealand, streets ahead of the competition.
Closing full circle, product development for Airbus and Boeing will eventually mean a tectonic shift in the way marketing one airplane against a rival offering is carried out. Airbus has had to adjust the A380 from the decade-touted 555-seater to 525 seats and remains eerily silent on the A350XWB operating empty weight, while Boeing has revised ranged targets on the 787 pending first flight.
All of these factors and more will determine which airlines deploys what airplane on what sector with what configuration and what fares will be charged.
What we do know, the salesman job may not have changed (unless he he’s been laid off) - however, the implications for his cost structure has profound and wide reaching implications farther back up the supply chain.
Business class may survive in a milder form, premium economy is the new First Class.
36 comments July 20th, 2009
