Airlines, managment, and government

Nadezhda of Chez Nadezhda has a good post up on the pension crisis that United Airlines and other dinosaur airlines are dealing with. Follow the links for lots of good information.

As I mentioned in the comments section over there I don’t believe that their pension plans are these airlines’ main problem or even their only problem (although they certainly don’t help). What the success of the new breed of airlines like Southwest Airlines demonstates is that the old hub-and-spoke business model that United, American, and Delta among others employ is fatally flawed. They have too many built-in costs. These airlines were fine as long as they were receiving government subsidies but when the industry was de-regulated it quickly became clear that these dinosaurs were dying and, like the real dinosaurs, they didn’t die all at once but a little at a time.

But these dinosaurs have another problem as well. When you compare the top management of United Airlines and Southwest something jumps out at you. UAL CEO Glenn F. Tilton, is an oil salesman whose main contact with the airline industry is with them as buyers of fuel.

This has been a pattern for United. Over the last twenty years they’ve had an oil man, a lumber man, an auto executive, and a hotel man as CEO’s. In fairness the only chap from the airline industry they’ve had in recent memory, James Goodwin, was a homegrown product and a disaster as well.

Compare this with Southwest. Their current CEO, Colleen C. Barrett has spent her whole career in the airline industry (at Southwest). She succeeded Herb Kelleher, the founder of the airline. This is someone who knows how to run an airline successfully and is passionately committed to the business model she helped create.

I don’t think the airline industry is alone in this. Like other American industries including the auto industry they’ve been afflicted with the notion that there is such a thing as management in the abstract—the MBA syndrome. I agree with the salesman from Meredith Wilson’s The Music Man: “But you gotta know the territory”. And care about it.

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