Will Air Travel go the way of the Post Office?

It might seem like a ridiculous question, but is it really that flighty? Was it imaginable just 10 years ago that the Post Office as we knew it for decades could actually find itself on the verge of not only bankruptcy, but irrelevancy?

American Airlines is just a breath away for bankruptcy. Although in the business of air travel this seems like a common occurrence. I feel this time however it might be very different from years gone by.

Usually some airline would implode and there would be one or more of the competitors waiting on the sidelines to purchase the assets. It just doesn’t look or feel like that will happen this time. I understand that someone will find a need for some of the assets, but it won’t be because they think the business is a win-win purchase. It’ll be more of an asset purchase to offset minor anticipated market share. And that will be a major deviation from the old model of “growth for growths sake” that the industry has evolved around since its inception. And if I’m correct it may fundamentally change air travel in the future as we now know it.

Let’s look at the Post Office for some possible clues. This is a dominant player in today’s world but not near the monopoly player it once was. With the advent of email, on-line billing, FedEx®, and alike, the Post Office has been pushed far down the chain of choices in what used to be the “only” choice. Currently it keeps open distribution centers, retail locations and others that service either unprofitable routes or products. People act as if the services they are accustomed to are going to go on just like before. It can’t, and it won’t. At some point the whole model has to change. Could be that a stamp goes to $1.00. Maybe deliveries go from 6 days a week down to 3. You get the idea. It will need to become a business that delivers a product that people will pay the price that’s needed. If an item needs to be delivered in an envelope in a physical form the price will reflect what that true cost and value is. If it doesn’t, then you can send it for free in an email. But the choice will be one or the other and the price will correspond. It has to because there is no growth model that’s profitable. Downsizing is the path to profitability growth. Airlines I feel are in the same situation.

If you look at airlines through the same prism as the Post Office you’ll see the similarities are acute. Distribution facilities mirror airports. Retail centers resemble ticket counters, and so on and so forth. Video conferencing is an alternative more and more replacing the need for having to travel by air. Granted that’s just one example, but one passenger less on any given plane can mean the difference between break even or loosing money. If these routes continue to be unprofitable, they’re going to be cut or reduced regardless what people want or think.

You can’t deliver first class mail everyday, everywhere, come rain, sleet, or snow for the near price of an email. (Yes I know email is free but you still have to pay for internet service) And you can’t deliver first class passenger service and seating with on time guarantees nearer to the cost of taking the bus. Something has to give.

Mark

© 2011 Mark St.Cyr   All Rights Reserved