January 05, 2006

Independence Air's sad day

On Tuesday Independence Air’s frequent flyers were greeted with an email message. Subject: A Sad Day for Independence Air.

It announced the airline was ceasing operations as of tonight. While the Independence Air finale was handled with more class than Swissair’s demise (this one-time star performer one day abruptly canceled all flights leaving thousands of unsuspecting passengers stranded across the world), the root causes were similar. Both airlines tried – in the face of threatening business environments - to expand too fast and turn themselves into something they were not.

Swissair’s crash was accelerated by an ambition to be the leader of a cluster of (mostly troubled) smallish European airlines, and to diversify into a host of aviation services businesses. This is one of my examples in Bigger Isn’t Always Better of how a quest for bigness bites back. Other European airlines such as Austrian and Finnair chose to stay with their focused niche markets. They are still in business today.

Independence Air was originally an outsource-provider. Then called Atlantic Coast Airlines, it made money operating as a regional carrier for United and Delta. It owned and flew the planes; they sold the tickets and provided the passengers. But Atlantic Coast wanted independence and a chance to establish it own identity. It got both for all of eighteen months and a few days. Rather than follow the slow and steady approach to profitable growth championed by fellow discounters Southwest and JetBlue, Independence Air got big quick: serving 47 cities with 600 flights and rock-bottom fares. Flight crews were friendly and spirited, but saturating so many markets - already served by competing airlines - with so many flights led to half-empty planes. Skyrocketing fuel prices over this period didn’t help, but they affected Independence Air’s competitors as well. As times got harder, Independence Air clung to its low fares (“lose a little on each ticket, but make it up in volume …”).

Which gets to customer expectations. Do we only want perpetual rock bottom fares? Or do we want an airline viable enough to be around well into the New Year? Or as Washington Post
columnist Marc Fisher, reflecting on the 2500 people unemployed as of tonight, put it so well in today’s paper:

Does our collective sense of entitlement to low prices consign our neighbors to lives of economic uncertainty and insecurity?

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