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Monday, June 2, 2008

Analysis: Hassle Factor a Marketing Blueprint for Air Taxis

If the air taxi industry could capture the disgruntled airline passenger, which may already be happening to some extent, it could also capture some of the $9 billion it cost airlines as the hassle factor drove passengers to avoid 41 million trips in the past 12 months, according a Travel Industry Association survey released last week. The exodus not only cost the airlines but cost the economy $26.5 billion which includes the $6 billion lost to hotels and $3 billion lost to restaurants along with the fact that federal, state and local governments lost more than $4 billion in tax revenue.
The landmark survey was the first time traveler frustration was actually quantified. Couple that $26 billion with the $12 billion + delays are expected to cost the economy this year and it is little wonder that business aviation continues to boom.
Travelers are most irritated about the air travel process, not the airlines, which is counter-intuitive given all the coverage about lousy airlines service and the crescendo of announcements about additional fees being charged. Indeed, the top issue is delays, which at this point, is an issue for policy makers who have stalled reauthorization and modernization with political infighting. Given their ability to fly in underutilized airspace to underutilized airports, delays are not the problem for air taxis they are for scheduled carriers.
The next two issues include cancellations, which touches both airlines and the government; and inefficient security screening, another government issue. Using air taxis eases both problems. Passengers clearly feel that no one is taking responsibility for the government problems, nor do they think anyone is doing anything about it. But somebody is – the air taxi industry, which uses the hassle factor in plugging the legion of new services cropping up nationwide.
More than 60 percent believe the air travel system is deteriorating with one-third of all air travelers expressing dissatisfaction with the air travel system. In addition, 48 percent of all frequent air travelers (5+ trips per year) are dissatisfied. Air travelers expressed little optimism for positive change, with nearly 50 percent saying that the air travel system is not likely to improve in the near future. The survey of 1,003 air travelers (adults who had taken at least one roundtrip by air in the last 12 months) was conducted between May 6 and May 13, 2008.
What was most shocking about the survey is the fact that passengers are blaming government more than the airlines for the top three factors they cited as driving them away, indicating that they are pretty sophisticated about who it is that is actually causing problems. On the other hand, perhaps all the ink devoted to airspace system limitations is having some impact. But what is surprising is the fact that survey participants trusted airlines more than twice as much as they trusted government to solve their problems. But when it comes to fixing problems 33 percent said government needs to get involved while 61 percent would rely on the marketplace to solve problems, meaning passengers may know capacity limitations are part of the problem but not the fact that no amount of marketplace manipulation will solve it.
A majority also indicated they are not willing to pay more for fixing the system. Nor should they be expected to pay more, given the billions they already contribute to the constipated Aviation Trust Fund.
“The air travel crisis has hit a tipping point – more than 100,000 travelers each day are voting with their wallets by choosing to avoid trips,” said TIA President and CEO Roger Dow. “This landmark research should be a wake up call to America’s policy leaders that the time for meaningful air system reform is now. With rising fuel prices already weighing heavily on American pocketbooks, we need to find ways to encourage Americans to continue their business and leisure travel. Unfortunately, just the opposite appears to be happening.”
To some, it may be surprising that this dissatisfaction has not been turned into political action by Congress to pass Federal Aviation Administration reauthorization and fund the modernization that proponents say will resolve some of the hassle factor. The pressure seems to be increasing to no avail with new organizations joining in support of passing modernization and rolling out near-term initiatives that would help increase efficiency and reduce delays. The Business Travel Coalition and Former AMR CEO Robert Crandall think there is more to the picture and are pushing for a National Aviation Policy and given the state of the industry, they may be right. Related Story
Even so, turning passenger dissatisfaction into political action has never worked, despite the fact that 88 percent of those surveyed said they were voters, as evidenced by a failed attempt to garner public action during a similar delay-and-congestion crisis in the late 1980s. It is clearly easier to stop traveling than to tilt at that particular windmill. In addition, the poor, hapless traveler is no one’s constituent and it is for that reason taxes keep being piled on whether they are local hotel and restaurant taxes or aviation fuel and ticket taxes.
The Travel Industry Association called on each of the major presidential candidates to commit to addressing this issue “for the millions of American air travelers – and voters – who face the trials of the antiquated air traffic system on a daily basis and to issue a comprehensive plan to fix major elements of the air travel system during their first term in office.” It has already met with Republican Candidate John McCain and has invitations out to meet with other presidential candidates.
Good luck with that. We have seen these same sentiments expressed before with each air travel crisis when too much demand leads to delays and cancellations. This time we have the added hassle factor of irrational, and often ineffective, security procedures that are little more than window dressing that serve to frustrate travelers more than terrorists. But now the economy, as it has always done in the past, will likely relieve the pressure and the political will to really do something meaningful.
We have seen such calls for presidential candidates in every election year. The failure of Congress to pass the critically needed reauthorization legislation is a perfect illustration of just how little this issue resonates with them. Even so, you’d think an estimated $40 billion hit to the economy would get some attention. But such issues pale in comparison with the sound bites candidates can receive on such critical pocket-book issues as health care, prices at the pump, and rising food costs. Even the war in Iraq is playing second fiddle to the impact of fuel prices on the family budget.
“Many travelers believe their time is not respected and it is leading them to avoid a significant number of trips," said Allan Rivlin, a partner at Peter D. Hart Research Associates, which, with the Winston Group, conducted the study. When asked who is least respectful of their time they blame airline and security personnel.
For the business aviation industry, the question then becomes how to capitalize on the disgruntled passengers by capturing their business. Certainly, folks like DayJet have provided part of the formula for a new air transportation model which seems to be resonating like tiny tremors amongst the 1500 members it has.
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