Industry Updates for Clients & Friends of Boyd Group International

November 25, 2023


In This T&G: 

  • Avelo: Market Messages & Consumer Trend Shifts
  • ULCCs: Begging for Congressional Attention?

Note: We held off issuing this week's Touch & Go in case there were Friday meltdowns due to the supposed Thanksgiving airport rush.

Apparently and happily not. Have a great week ahead!


Avelo Re-Trenching:


More Like Searching & Exploring The New Air Transportation System.



Summary: The recent market shifts announced by Avelo should be taken as more than just an airline making route decisions. They are potentially indications of the dynamics of the new air transportation system.


Avelo has announced that it is discontinuing several markets – four permanently and others “seasonally” but without hard projections when the “season” will end.


Several messages here:


Business Market Demand May Not Be Sensitive To Low Fares. Based on data from our friends at Cirium, a few of these cancelled destinations were not leisure destinations. ILG-CHS, ILG-RDU, ILG-BNA, ILG-SAV simply did not appear to capture traffic. Message: day-of-week schedules to these non-vacation destinations were DOA.


Is The Bottom Close For Florida Capacity? In addition, there are also leisure destinations being cut from ILG: PBI, DAB, SRQ.  The official reason is that this is seasonal. But as a “seasonal” resident of South Florida, I have first-hand knowledge that hot, humidity-inflicted summertime isn’t prime vacation time in this region. Also dropped was SRQ-RDU.


Maybe Florida destinations are starting to get less and less able to handle the capacity, at least at acceptable yields.


Is The Strip Losing Its Allure? Avelo is also dropping Dubuque-LAS, and Eureka-LAS. Financial dog markets, apparently. Looking at a map, both DBQ and Eureka have regional road access that would indicate the decision to enter these markets was sound. So, does this indicate that impulse traffic to Las Vegas isn’t as slam-dunk as in the past?


For Dubuque, this decision was particularly painful. Regardless of a couple of other Avelo flights to Florida, the market today has no local airport scheduled air service access, and the hard fact is that fleet and strategic evolution at AA/DL/UA almost completely rule out network carrier access. Cedar Rapids is their gateway.


The Name of The Game Is Resource Flexibility. The traditional conclusion from these route decisions would be that Avelo is in deep yogurt, pulling out of all these markets. Just the opposite. The “traditional” metrics and “traditional” air service thinking are today the equivalent of analog solutions in a digital world.  


Going Where Airlines Have Not Gone Before. Avelo is a Captain Kirk of the new airline industry – exploring new market worlds as consumers change and economies of rural and metro-peripheral regions evolve.Traditionally, New Haven would be considered a lost cause. But its location and access along the I-95 corridor gives it potential for impulse demand that may be more attractive than BDL or NYC airports.


The strategic point here is that Avelo is in a new air service demand environment, and its experiments at focusing on metro-peripheral Wilmington and New Haven are taking advantage of evolving consumer opportunities. To be sure, New Haven does not have the competition of a major airline connecting hub 25 minutes away, as does Wilmington. But conceptually, low-fare service at ILG can be an alternative to Philadelphia International. The thing to remember is that this is new planning territory. There is no history.


The system data so far – at least in terms of passenger numbers – are solid for Avelo, market-by-market. What has been missed is the rapid flexibility of Avelo to adjust when a market does not work out. Think CHO. Think LEX. Think DAY.


That is the real takeaway. The study, research, and implementation phases of new route development need to be accompanied by another management strategy: fail fast. If the market does not tend to work quickly, move on quickly.


That seems to be precisely what Avelo is doing.

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Taking a break before we move on:


In dealing with the future, including in our research for quarterly client Pow-Wows, we rely on Diio Cirium for important data and analysis.


The future will be different, and access to the pulse of aviation is critical to plan for it.

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It’s No Laughing Matter.


Getting Pilloried On Late Night TV Is An Airline Wake-Up Call.


Summary: The common perception of ULCC service and airline service in general tends to describe a consumer-averse experience. While in reality, major consumer meltdowns are rare, they are enough to make news that indicates differently. As it stands, congress, Buttigieg and consumerist commandos are poised to get involved. Then everybody loses.


Last week, a passenger went bonkers on a Frontier flight between Houston and Denver. Screaming, yelling, trying to claw over seat rows. The whole nine yards of crazy.


The deranged person – naturally – was cellphone videoed from more angles than a Taylor Swift sighting, and the media was off to the races with viral coverage.


One part of the coverage was on Gutfeld!, the most watched late night show on television, with average viewers of 2.5 million. But the focus of the joking repartee was not the weirdo passenger, but on the airline industry, with a goodly amount of negatively humorous commentary about Frontier itself. Again, laughed at by 2.5 million consumers.


It sure didn’t do much for the airline industry, and particularly for Frontier’s image. The board of directors should be thrilled, and employees, too. Greg Gutfeld’s show had them front-and-center. Lots of unearned media exposure. But not the kind that’s positive.


Hearsay & Trendy News. Not Hard Data. The issue here is that the happy team on Gutfeld! probably have never flown Frontier. Yet they had plenty of material to do a segment on them. A very negative segment. They got their material from ambient sources – i.e., “what everybody knows” not necessarily hard facts.


But whether accurate or not, whether exaggerated or not, this is the perception the airline is getting saddled with and was clear that the participants commenting on Gutfeld! were fully aware of it when they added this schtick to their Tuesday night line-up.


The Low Base Fare’s Just The Start of An Accounting Exercise. As I pointed out in last week’s Touch & Go, and again on Linkedin, the convoluted menu of fees and services at some ULCCs are clear sources of confusion.


Although these charges are (mostly) apparent to any sober consumer before hitting the “enter” button, the truth is that there is a big problem in how fees are being postured and enforced. And why they are there in the first place.


The argument is to charge the passenger only for what he or she really wants. Start base fare and add on the options. Sounds really consumer positive, right. But not on this consumer planet.


Yup, if they don’t check a bag, back it out of the base fare. If they don’t care about advanced seat selection, back it out, too. If they need to speak to a human employee at the ticket counter, well, that should be an add-on to the base fare. If they use the airline website instead of the app to check-in, charge a boarding pass fee. How about the customers who insist on traveling with a change of underwear and basic hygiene items in a carry-on bag. Charge’em.


The argument is that this is the right thing to do when there are passengers without such extraneous needs. It’s equitable and fair, is the argument. It’s also fertile ground for customer confusion. A confused airline passenger is not a happy consumer.


Nevertheless, all those reasons sound great back in the sterile airline planning department conference room. But, let’s tell it like it is - these fees confuse consumers and make the travel process more difficult.


Not exaggerating this. We can use what’s reportedly in place at Frontier Let’s see: $25 bucks to talk to an airport agent? Somehow, that’s an extra perk? A $99 fee for a ”personal item” that’s an inch over the gate sizer? Not real swift when it is unevenly enforced and worse when it comes out that the staff are paid a bounty on these fees. Charge for normal carry-on luggage – you know, the ones containing that weekend underwear switch and personal hygiene items most people insist on traveling with? You betcha!


Don’t bother with human-level contact to resolve passenger concerns because it’s expensive and would cause the airline to raise fares, see. Better idea - do it in an on-line chat room. Finger-typing on an Android flip phone about covering the complexity of getting re-booked is good mental exercise, anyway. Particularly if you’re in a crowded airport.


That is not a supposition. The unquestionable Exhibit A is that an airline – Frontier – was the butt of jokes in front of millions of consumers on a talk show hosted by individuals who themselves probably never been in sight of a Frontier airplane, let alone ever flown on one.


Fact: It’s One-Off Incidents. But Enough To Get Media Traction. Furthermore, the reality is that these issues come up probably in less than 2% of the consumers flying these airlines. It isn’t universal. But with today’s communication networks, it’s enough for the usual gadfly suspects to take off running.


Enter The Clowns. Airlines Are Holding The Door Open For Them. Ticked consumers are great fodder for politicians. And the solons inside the Marble Playpen, a.k.a., Congress, are not missing the opportunity. Yessir, Senator Blumenthal of Connecticut and his buddies are demanding that airline CEOs cough up the data to support these fees. They want a complete P&L verification for every fee. Too bad they aren’t required to do this with the taxes and fees they inflict on citizens.


‘Course, they ignore the basic fact that it is entirely legal and entirely the right of an airline to charge for whatever they want. Bundle, unbundle, combine, dissect, give it away free – whatever.


And it is specifically disgusting to have senators, many of which have had no business experience beyond going to the supermarket or extorting campaign donations, on the media warpath to prove that airlines are the enemy of the people.


Airlines: Deal With This, Or Congress & Buttigieg Will. And, as for the often one-sided videos of customer abuse going viral on YouTube, anybody who has worked in frontline contact positions knows that the customer is not always right. Sometimes, there’s a percentage that are downright jerks.


Lots of time they are confused and naturally on the defensive. Put this in with gate staff who have near-zero customer skills training, and every Oscar Preminger wannabe with a cell phone has a field day recording the fun.

 

The Achillies Heel of ULCCs: No Alternative Passenger Options. Then toss in the inherent downsides of day-of-week schedules (“this flight’s cancelled… the next one is on Friday, but it’s full,” etc.) and there’s a real challenge that that some ULCCs need to address.


The days of Rule 240 (Rule 75 in ancient times) are over. Interline acceptance of disrupted ULCC passengers by mainline airlines is not in the cards. But for those of us who have experience in the pre-deregulation swamps of revenue accounting seem to remember that the billing for these diverted passenger tickets was just short of breaking usury laws for the receiving airline. Maybe that could be leveraged again.


Here’s the bottom line. There's an occupant at 1600 Pennsylvania, and a DOT secretary on the prowl to make noise, and several powerful congressional types who are just drooling to take this fee stuff and the alleged airline customer torture to the soapbox and maybe to the legislative floor.


The Gutfeld! example should be a wake-up call for major shifts in customer service strategy. For ULCCs, the negative image often portrayed is not completely accurate, but it is a perception that is encouraging several dynamics in Washington that are not going to be positive for airlines - or the consumer.


The game is on.

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