July 20, 2020, © Leeham News: The timing is coincidental. If you think the airline industry is in a wind shear now, don’t be fooled.
The industry has been in perpetual turbulence for 50 years.
At least that’s the theme of an airline executive’s new book, Turbulence.
David Banmiller began his career as a ticket agent, when hand-writing the coupons at the airport as common practice.
He retired three years ago after a career that saw him in executive positions at AirCal, American Airlines and other carriers.
He became a bankruptcy reorganization specialist as well.
Banmiller weaved through American, TWA, AirCal, the second Pan Am, Aloha and Air Jamaica. He was CEO of AirCal when it was sold to American, where he became an executive under legendary CEO Bob Crandall. Banmiller went on to become CEO of Aloha, Pan Am and Air Jamaica. He took the first two through bankruptcy reorganization and restructured Air Jamaica outside of the courts. He also served as CEO of Sun Country Airlines.
Throughout his careers, Banmiller experienced many of the downturns of the airline industry: oil price wars, 9/11, the SARS pandemic and now, from his retirement, COVID-19.
His book, Turbulence, is less about his experiences in reorganizing airlines (which are interesting though too lightly covered) than it is about the dynamics of airlines.
Banmiller offers a defense of why airlines do what they do and argues that, no, it’s not because they hate passengers.
Banmiller methodically goes through how the airlines and the airplanes work, from the cockpit, to the cabin, inside the airports and corporate offices and how the employees do what they do.
Moving “iron,” pricing and scheduling, rules and regulations, security and technology all are covered.
When it comes to the business, Banmiller covers “managing 747-sized egos,” weathering bankruptcies—which became his specialty—and charting the best course for the future.
For someone who is unfamiliar with why airlines do what they do and why they do them, Turbulence is kind of a textbook. For those of us who intimately know the industry, more stories of the personalities would be welcome, as well as a better look at why legendary airlines (Eastern, the original Pan Am, TWA, et al) went bankrupt, some several times.
The paperback edition is available on Amazon for $14.68.
I have always been concerned about the fact that many airlines appear to be always on the brink of bankruptcy. I do remember happier times for legacy airlines like TWA and PanAm (both of which I have flown) in the 1960’s, when airlines competed on the service they offered and not ticket prices. Then came deregulation, unfettered I might add. Opportunistic airlines sucked away profits from legacy airlines by competing with them in ticket price on lucrative routes, leaving the legacy ones to serve less lucrative routes. No wonder well-known names like TWA and PanAm went bankrupt and current ones like American, Delta and United in US and Lufthansa in Germany are always at a disadvantage with respect to opportunistic lucrative route airlines.
I blame it all on mindless deregulation, without any constraints to make sure competition was on a level field. Mismanagement could have played a role but was not likely the main culprit. While deregulation brought down the cost of travel (principally on busy routes) and made it more affordable, my feeling is that there should have been some constraints to “level” the field. I have not read “Turbulence” but look forward to reading it to see if I am way off the mark.
I wonder if Scott or Bjorn can be persuaded to address this issue.
I feel the same.
Also, would we not be better served with solid airlines and well covered routes.
When I was younger, we only traveled every 4 years or so, but we could afford it and they went where we wanted to go.
Seems travel went from a need to go t0o I want to go and to the detriment of stability as well as environment and guaranteed ever and on going Turbulence.
“…Seems travel went from a “need to go” t0 “I want to go” and to the detriment of stability as well as the environment and guaranteed ever and ongoing Turbulence.”
A great illustration of the IBGYBG philosophy running businesses since the ’80s. i.e. “let’s exchange a big revenue bump today with a reduction in financial stability and good margins in the future. Who cares; by the time consequences come home, I’ll be gone, and you’ll be gone.”
wow… this is the most original observation on the airline industry I’ve seen in a long while. Thank you, TW.
commoditize everything to increase turnaround and profits.
a death spiral.
Warren Buffet hates aviation stocks, because of the HUGE capital expenditure involved just to keep the whole industry (barely) ticking. Any activity that requires vast amounts of stagnant money just to get started is always going to be vulnerable to the slightest market tremors.
Railways would be in a similar situation if they had to pay up-front for their own rail infrastructure, rather than renting it from largely government-owned “companies”. The same applies to electricity companies and the transmission grid that they use.
Why blame deregulation? If you attempt to make an intrinsically expensive product widely available to large numbers of “common” people, then it’s self-evident that margins are going to be severely diluted.