Tale Of The Same Industry?

“Our homework says you would start with comfortable custom-designed leather seats, and soothing cabin lighting to set the mood. Throw in WiFi on every flight, power outlets for your electronic gear, and loads of entertainment options, including 25 movies, videogames, live television, interactive Google Maps, seat-to-seat chat to make the time fly. Finally, make sure there is great food and drink around when you want it, not just when someone wants you to have it. Offer all of that at competitive fares and with an award-winning team that is focused on friendly service.” David Cush, President and CEO, American low cost carrier, Virgin America.

“The European consumer would crawl naked over broken glass to get low fares.” Michael O'Leary, CEO, European low cost carrier, Ryanair.

Hard to imagine that the two gentlemen above are talking about the same industry – the highly competitive, regulated and commoditized global aviation industry. The diametrically opposite approaches adopted by these two carriers, however, raises important questions about how would the aviation industry of the next 5 or 10 years look like? Would it move greater towards the bare bones approach advocated by Ryanair and most legacy carriers in the US or would carriers be able to rationalize their cost structures, improve efficiency, cut corporate flab, fly more fuel efficient planes and provide passengers quality product without nickeling and diming them?

The next few years would also define air travel, once again! Would passengers continue to view air travel as a commodity without much to differentiate among carriers except price – everything else staying the same or would they be willing to pay a premium either in hard dollars or greater loyalty for additional amenities, better inflight services, or friendlier staff among other things?

Coming back to Virgin and Ryanair, one wonders what could be behind such divergent views of the same industry? Obviously both can't be right or could they? “Conventional” wisdom definitely suggests

the industry moving towards the no-frills, bare bones structure with passengers having to pay for almost everything from seating together to checking their bags. Passengers too, with their almost religious focus on prices, have given airlines leeway to un-bundle amenities, even very basic ones, and to either start charging for them like seats with priority boarding or get rid of them completely like inflight-entertainment on long-haul domestic flights.

So what is behind Virgin America's vision of the industry? One of its biggest asset is its highly creative management team headed by David Cush and Donald Carty with Sir Richard Branson's entrepreneurship and innovativeness embedded in its DNA. Other is its relative youth compared to veterans such as American, other legacy carriers or even Southwest. Being young means cleaner, better looking, more fuel efficient planes, no integration issues that come with mergers especially union related issues that other, especially legacy carrier, have to face. Also Virgin comes without any baggage in terms of bad PR or customer service incidents in the past. Finally, a strong brand name in the form of Virgin with strong positive association with music (in the past) and cell-phones and air travel more recently and its characteristic youthful red color gives Virgin great positive brand recognition.

For now, however, it's anyone's guess what way the industry will evolve. Especially since one of biggest deciding factors, viz jet fuel prices, is notoriously hard to predict and can make a lot of smart strategies look ridiculously dumb in hindsight. Until then, it is going to be an interesting interplay of execution, vision, regulation, and the broader economy that is going to shape and re-shape the industry every passing day.