Where American Airlines Went Wrong
by Veronica Stone on May 22nd, 2008
I’m sure you’ve heard all the ruckus surrounding American Airline’s announcment that it will initiate a checked bag fee as well as increase fees for other services on top of jacking up actual ticket prices. All in the name of the weak economy and soaring fuel prices.
There’s the saying that you can’t please everyone. And it’s true, especially if you are in an industry that serves millions of people a year. But what happens when you don’t please the majority of your customers? Sit back and watch in the next few weeks.
The following are some of the major issues that have come to light following the announcement:
Customer Service: First and foremost, whether AA had decent customer service or not, the fact is that it doesn’t have the kind of customer service that separates them from the pack. Therefore, fliers group them in with the rest of their bad experiences thusly creating their first big problem-customer trust and loyalty is compromised. When times get tough, these customers aren’t going to be understanding.
Price Jacking: Everyone knows prices are going up across the board. And they knew airlines would be no different. The problem here is where and how AA raised their prices. Ticket prices are constantly going up and down…had they lumped all their price hiking into the cost of tickets it would not have caused as much of a stir because it is an area people expect the prices to fluctuate. Instead, they tacked on charges for things that were previously "free" (checked baggage) or low cost. This gives people the impression they are being extorted and this, is problem number two.
Timing and the Blame Game: AA hasn’t given anyone enough time to adjust to the new price changes. As of June, it’s go time. What would have happened if they had increased prices slowly over time as gas prices went up? People still wouldn’t like it but they wouldn’t feel taken by surprise. Also, AA (and I’m sure other airlines to follow) is making it out like they are the only ones being affected by the economy and price of oil…well guys, we’re all suffering aren’t we? It surely is a reason, but it’s not one that is going to give customers warm and fuzzies about the situation. Instead of laying blame, find some positives and highlight them. If nothing else it’ll take the sting out of the price hike.
Take heed of this bad example and as you wade through the economic crises, learn from others mistakes. For some guidance on a different approach to price hike strategy, I suggest you read Markup on Cost Versus Gross Profit Margin .
What is so sad about this story is that AA is writing off the expense for all it’s fuel, equipment payments, etc. and making it seem like they are not doing well. Big corporate America is over paid and the recession is our economies way of saying “Wait a minute…you’ve taken advantage enought!” The companies that will stand to prosper will be the companies that step up to the plate and give back to Americans. Better service, better service, better service. Great products and better service….did I say better service? Differentiate yourself from the competition by thinking outside the box in creating value for your product. So much about creating value is stepping up…we have gone long enough will low expectations and no value. Now is the time to shine, now is the time to forge ahead and live the American Dream.
Michael Bonanno
May 27th, 2008
at 1:01 am
What’s worse is that whoever came up with this idea (to charge for checked baggage) didn’t really think of the long tail of consequences. Now you’re going to have longer waits at check-in as passengers argue with counter staff over what they should and should not check, longer waits at security as more baggage is having to be checked there, and longer waits on the tarmac as flight attendants struggle with getting all the excess carry-on bags stowed. WTG, AA.
Kari
May 27th, 2008
at 9:26 am
Great comments Michael. Thanks for the feedback!
Veronica Stone
May 27th, 2008
at 10:27 am