
Why an Airline That Travelers Love Is Failing   - JumpCrisscross
http://business.time.com/2012/10/25/why-an-airline-that-travelers-love-is-failing/?ftcamp=crm/email/20121031/nbe/AlphavilleHongKong/product#prclt-fOXHm21v
======
omfg
Quite a few of these articles have come out over the past few months. This one
has glossed over exactly why they aren't making money. According to almost
every other article it's because of aggressive expansion. New plane orders,
updates to their on board systems next year, new routes, more planes on their
pre-existing routes and on and on.

This article has quite a bit more info:
[http://www.sfgate.com/business/article/Virgin-America-a-
hit-...](http://www.sfgate.com/business/article/Virgin-America-a-hit-but-
losing-money-3762763.php)

Sounds like they are getting ready to slow down expenses next year and prep
for an IPO.

Not really sure what's made this particular article stick and make the rounds
but it's conveniently short on info seemingly to make a more dramatic story.

~~~
pg
Now this is a case where a dismissive top comment was actually useful-- in
fact more informative than the article itself.

~~~
Jonanin
And definitely a case where an automated "middlebrow dismissal" detection
algorithm would fail. I looked into it and still don't think it is possible.
What makes this comment different from the bad ones? It seems entirely
dependent on the context of the article itself.

~~~
pg
One thing I learned from spam filtering is not to underestimate what a
statistical filter can find.

For example, the comment in question contains a url. I could easily imagine
that turning out to be a valuable predictor. The defining quality of the
middlebrow dismissal is that it's a cache dump of the writer's prejudices, and
someone doing that doesn't even take the time to think, let alone look up
urls; they're not even really writing to inform.

~~~
bravura
atpassos_ml told me an even cooler heuristic.

He was doing some research on detecting which comments are authoritative based
upon textual analysis (no username or social analysis). They made a
complicated topic model, but found that the following heuristic is almost as
good for automatically detecting authority in comments:

 _Favor the person with the broadest vocabulary compared to other people in
the thread._

This was evaluated on Yelp and Goodreads. IIRC it may have also been tested on
HN data.

(reference: Alexandre Passos, Jacques Wainer, Aria Haghighi, What do you know?
A topic-model approach to authority identification.)

The problem with disclosing these heuristics as part of your filtering
algorithm means that people will try and game the system. They'll include URLs
and expanded vocabulary to get higher-ranked comments. And then we win.
(Relevant: <http://xkcd.com/810/>)

~~~
Evbn
URLs and expansive vocabulary? That perfectly describes most spam I get, a
viagra store link and a random Hemingway excerpt.

~~~
ecuzzillo
Sure, but spam is already reasonably under control here; post-spam-filter,
those things could be predictive, along with other things nobody thinks of.

------
rdl
Their frequent flyer program is basically subpar (and was only added
relatively recently), which kept business travelers off. (I like the Virgin
America product, but if I can fly United and get upgraded to First, lounges,
etc. and earn miles toward flying in International Business or First to Asia
for fun, I'll probably suffer through a United transcontinental over a Virgin
America flight...)

They won the leisure market to/from SFO, but that's not a big enough market to
be a successful airline.

~~~
hinathan
My wife has been 1k for the last several years. Before we met I had no concept
of mileage programs but traveling with her has really opened my eyes.

The funny part is at some point it feels a bit like playing a Zynga game,
including the occasional "screw it, I'm so close I'll pay a little cash to
bump up to the next level"

~~~
rdl
Global Services >>> 1K.

~~~
hinathan
Both in terms of perks and barrier to entry, alas.

------
kyro
Allow me to vent:

The airline industry is byfar the worst run, worst staffed, most inefficient
excuse of business ventures. This is the second time I have been stranded at
an airport because agents haven't a clue how to navigate the system, dick
around and make customers wait, and are incredibly dishonest. I was told today
that supervisors were telling agents to, and I quote, "blow off" the
passengers today who are desperate to fly. They tell you one thing, make you
wait hours, all the while knowing what they told you wasn't true just to avoid
customer anger.

Someone needs to completely flip these morons on their heads. They're making
flying such an unbelievably frustrating and inconvenient task. I now dread to
head to the airport, nervous they'll screw up my reservation or find a way to
make me wait unnecessarily. Not to mention how pricey it is now to fly for
just 4 hours.

I'm seriously fuming, and this is far from the first time it's happened. The
airline industry has consistently delivered the crappiest customer experience
I have ever seen.

~~~
rdl
It's a highly-regulated, highly capital intensive industry, with a complex
perishable product, extremely price sensitive customers (it's basically a
commodity), with a history of state champion regulated airlines everywhere,
and continuing operation of national flag carriers on that basis.
International flights are politically regulated as well (i.e. which of the 9
freedoms you get depends on binational agreements), and various countries
seriously subsidize their airlines.

Plus, extreme variation in demand with the economy, and cost due to fuel.

~~~
kyro
So what? That means absolutely nothing to me as a customer.

I'm here speaking with other passengers and am finding that we were all told
completely different things. People have been stranded here for 2 days and are
being told to wait while others who stroll in with the pilot hours beforehand
are given priority standby seats. Let's say there's a valid reason for that,
you're sill leaving many customers feeling as if they're being pushed to the
side. Everyone feels lied to and ignored.

I'm aware that this is one specific incident, but things like this have
happened a handful of times to me, and I'm absolutely certain to thousands and
thousands on a daily basis. It's absolutely absurd.

~~~
hinathan
The folks who strolled in earlier might have more status (miles/revenue) on
this airline, and having that means a great deal to the airline's systems and
humans. They know what you're worth to the company and whether it's worth
bumping someone else lower on the totem. It doesn't feel good but it's
generally pretty rational.

~~~
kyro
So rational, in fact, that I will do all I can to avoid flying this specific
airline.

~~~
Evbn
Losing customers in an overbook situation is not a faikure mode.

------
nodesocket
I have flown a decent amount this year. Usually [SFO -> LAX, SFO -> LAS, SFO
-> SAT]. Almost all my flights have been Southwest, because honestly it is the
cheapest. The problem is that nearly every flight leaving or heading into SFO
on Southwest is massively delayed. My last experience from LAX to SFO, the
flight was delayed four hours. There obviously was a mob of grumpy Southwest
customers.

On the other hand I have taken Virgin America a handful of times, and the
experience is the opposite. It is a complete dream and pleasure. I love the
lighting (feels so sheek).

So what is the problem? Their product is top notch, but they are losing money
hand over fist. Normally, a company would just adjust their prices, but in the
brutally competitive landscape that is air-travel, prices are everything (see
my top paragraph). So, what is Virgin America to do?

I still to this day don't know how Southwest is able to offer flights
significantly cheaper than everybody, and stay afloat, while the rest of the
air-line industry can't. What is their secret sauce? Cheaper plans? Lower
wages? Not sure, but Virgin America should figure it out and adopt it. I am
sure it ins't their interior lighting and amazing customer service though.

~~~
nirvana
Southwest is THE low cost airline. That's their secret sauce. Virgin is being
"the best way to fly" or whatever. Southwest cares about nothing else.

They don't do assigned seating because they found that without assigned seats
they were able to fill the planes faster, meaning less time at the gate
meaning more time in the air, meaning more legs in a day, which makes them
more financially efficient.

Back in the day they didn't pay travel agents the %15, and sold direct
instead, etc.

Southwest treats their employees very well, and while there is occasionaly a
union squabble of some sort or another, they have much less of a problem than
other airlines. Why? Becuase its' cheaper to treat your employees well.
Seriously.

This also means that customers are happier because employees are happier.

The attitude of a southwest steward compared to the big three (Delta, United,
Continental) is radically different. The big three employees often give me
attitude and seem to think that dealing with me is some sort of an
imposition-- and so I am loathe to fly on them (it only takes a couple
incidents.)

Awhile back southwest merged with a regional carrier (frontier? no, something
else) but that carrier was known for a gimick where the employees would sing
on landing or do the safety lecture in rhyme and the pilots would tell jokes.
Southwest didn't change this practice, and it became optional and now it's not
unusual to fly on SWA and have a landing limmerick.

Their ticker symbol is LUV.

Southwest flies into Midland instead of DFW. They fly into the older city
airports, not the big fancy new airports. Why? Gate fees are a huge operating
cost (basically a license for the local government to extort as much as they
can from the airlines for the "priviledge" of providing air travel that boosts
the cities tax revenues anyway) ... but soutwest doesn't pay to be in the
glamorous locations. You may walk further to your gate and your airport may
not be as nice, but it saves them, and -- here's the important thing-- they
pass that savings along.

Southwest doesn't serve hot meals. They give you a bag of peanuts labeled
"Frills".

They are one of those unique companies like Apple and Zappos and Crutchfield
that really put the customer first, and were willing to go against convention
to do it.

Nothing against Virgin- I think they're trying to do the same thing and taking
the high end of the market, and I'd love to fly Virgin if they had ever had an
option on a route I was going (they haven't yet, so I haven't flown Virgin
yet.)

But Southwest filters everything they do thru their mantra. They are THE low
cost airline. Does whatever help that? No? Then don't do it.

Southwest is a result of focus, and _that_ is a useful lesson for every
startup.

I hear the book written by Herb Kehler (sp?) is well worth reading (I think
it's called "Nuts" or something like that.)

~~~
Stratoscope
> Awhile back southwest merged with a regional carrier (frontier? no,
> something else) but that carrier was known for a gimick where the employees
> would sing on landing or do the safety lecture in rhyme and the pilots would
> tell jokes. Southwest didn't change this practice, and it became optional
> and now it's not unusual to fly on SWA and have a landing limmerick.

My guess is that you're thinking of PSA (Pacific Southwest Airlines). They
were the classic and original "funny" airline.

PSA didn't merge into Southwest, but Herb Kelleher did study them and use some
of their ideas.

[http://en.wikipedia.org/wiki/Pacific_Southwest_Airlines#Corp...](http://en.wikipedia.org/wiki/Pacific_Southwest_Airlines#Corporate_culture)

------
jasonkester
I wonder what the solution is for an airline trying to follow this model of
"better experience for a tiny amount more money".

It seems like you should be able to simply advertise the fact that yes, we
cost exactly $20 more than the cheap guy. And here's all stuff you get for
that (dignity, comfort, sodapop and your bags in the hold). And here's how
small a fraction of your whole trip that $20 actually represents. And oh,
here's how small a fraction of your whole trip the entire $179 you're paying
for the flight is.

But there's just so much innumeracy and irrational behavior to overcome before
you can get that message across. Try selling the above to the average flyer
who will happily take the $159 seat on the airline that charges him $50 to
check a bag over the $179 seat that doesn't have any added fees.

I hope somebody cracks it. It seems like you could do it with a whole bunch of
published (and advertised) transparency in your pricing and value offered,
combined with a campaign encouraging buyers to "sort by happiness" or whatever
when browsing at kayak.com.

~~~
lancewiggs
While not that explicit, that's exactly what Virgin America is doing.

For me it is an easy trade off. When faced recently with a 3 day jaunt out
East, my pact with myself was to fly Virgin, or not to fly at all. It's the
difference between an acceptable experience and a high chance of a very
unacceptable one. Seriously - I have no idea why there hasn't been a mass
rejection of the flying experiences in the USA.

Some folks like chasing Air points or status, but ask first - do you really
want to spend even more time getting lousy service on a lousy airline?

I'm lucky enough to be based in New Zealand, and these days our flag carrier
is simply great. Their Hobbit safety video just came out:
<http://www.youtube.com/watch?v=cBlRbrB_Gnc>

~~~
aquaphile
Reason #2: no viable alternatives. We don't have a decent passenger rail
system in the U.S. and our population centers are hours|days apart by
automobile.

------
diego
_"So who is to blame if an airline that’s comfortable and treats passengers
well fails, while a carrier that annoys and nickel-and-dimes customers at
every turn is a run-away success? We all are."_

All? Evidently many people (myself included) prefer Virgin America, otherwise
its flights would always be empty. Blaming "all people" is not understanding
how a market economy works.

~~~
jvm
Airlines generally fill their flights by charging the fares that fill them up.
But in the case of VA that doesn't add up to enough to cover their costs:
people don't prefer them enough to make the costs of their better service
worthwhile. That in turn means that consumers' revealed preference is to
prefer the value proposition offered by United/American/Delta/USAirways.
People might prefer VA to the competition, but they don't prefer it enough to
pay the difference in costs, which is why VA is hemorrhaging money.

~~~
paupino_masano
Perhaps I'm one of the minority? If a VA flight is available, I'll definitely
pay the difference (usually negligible). Every other time that I've HAD to fly
some of the others (i.e. a VA flight is not available) I end up swearing I'll
never fly that airline never again. I've never had that feeling with VA which
is why I'll always choose it over any other...

But then again, I may be one of the minority...

~~~
jvm
Of course if there were enough people like you VA wouldn't be failing. But it
is so that must mean there aren't.

------
psychotik
A counter-example - Singapore Airlines is consistently ranked the best in the
world and is also cost effective. Here's a link to an HBR case study:
[http://hbr.org/2010/07/the-globe-singapore-airlines-
balancin...](http://hbr.org/2010/07/the-globe-singapore-airlines-balancing-
act/ar/1)

~~~
nikcub
Singapore airlines get access to a lot of the best long haul routes in the
world because its government negotiates it for them as part of larger trade
deals.

Singapore is also well situated politically (it has no real enemies anymore,
so while China may deny a US airline they wouldn't deny Singapore),
geographically and commercially in terms of global trade.

The lesson here is that if you want to run a super cheap airline, make sure
you are backed by the government of one of the wealthiest countries and major
trading hubs in the world.

~~~
joonix
Yes, it's kind of like comparing a state owned oil company to Exxon. Another
example is Emirates. Can't blame the govt for backing the airline, though, as
it leverages a huge strength: Dubai is within 1 stop of virtually all airports
in the world.

------
MichaelApproved
Off topic but is anyone else bothered by the typos in this article? I would
expect more from something published by Time. Don't their editors proof read
the online articles?

Edit: Here are the two sentences I found. They're small but they have the
staff to check for this, don't they.

" _It’s fairly remarkable than (THAT) any airline can generate positive
feelings among customers in today’s travel scene. But while Virgin America may
be well-liked, it may not be well-suited to compete._ "

" _Because Virgin America is young, it doesn’t have a (AS) large a network of
routes_ "

------
brc
Virgin America is largely modelled off Virgin Australia, right down to the
lighting in the planes, the uniforms and the in-flight entertainment. I'm not
sure how much of this is borrowed from Virgin Atlantic.

Virgin Australia is a very successful company - started in 2001 by Richard
Branson and a few others with about $4 million in capital, 2 aircraft and a
single route, and they managed to be around when one half of the cosy duopoly
of Australian airline industry went bankrupt in October 2001, as a direct
result of the September 11 attacks and subsequent collapse in air travel.

As a result they expanded from 2 planes to 90 in 10 years, expanded from a
domestic carrier to an international carrier and have progressed from being a
budget airline to much more like the model that Virgin America now has -
cheaper pricing but better service, two class cabins and business lounges.

I would expect that if Virgin America proves to be remotely as successful,
then it is here to stay.

------
ianb
Is it a good idea to be headquartered in San Francisco? That's halfway between
EVERYWHERE, and the vast uninhabited expanse of the Pacific. Most airlines
have hubs inland.

(Maybe I'm just bitter because I'll probably never take a Virgin flight due to
their route layout. Also I hate SFO.)

~~~
rdl
I like the ground experience at SFO (it, along with PDX, has my favorite
food), but I hate the runways, specifically the two parallel runways which get
converted by daily fog into one runway for most of the morning. Which causes
predictable many-hour delays.

OAK and SJC are far more reliable, although far less pleasant as airports.

~~~
ianb
I find SJC quite nice when it's convenient to my destination. I suppose it's
not nearly as luxurious-feeling, but it's so much more relaxed. I went through
OAK just once, and was surprised how much of a dump it was. Reminded me of
Midway before it was renovated/rebuilt. But I'd still choose it over SFO.

~~~
rdl
OAK will be a lot better once the airport connector (to BART) opens in 2014, I
think. That will lure a lot more ex-SF traffic, which will probably cause the
traffic to increase, which will improve retail, which might cause the terminal
itself to be improved.

There are already some great direct flights out of OAK -- Alaska and Hawaiian
direct flights to Honolulu and the Neighbor Islands, etc.

------
brianm
I'd fly VA all the time if I could, sadly they don't do my most common route,
DEN <-> SFO :-(

~~~
techsupporter
Same here. Alaska Airlines goes SEA/DFW non-stop twice or three times a day.
VX makes me connect through SFO or LAX and adds at least a two hour layover.
Lack of non-stop is why I don't fly Southwest anymore, even though they're my
all-time favorite airline for both price and service[1]. I'd fly VX if they
had a non-stop or a one-stop that didn't connect via California. DEN or LAS or
even ABQ would be preferable.

1 - 2014 is going to be a glorious year with the Wright Amendment going fully
away. I hope to be on WN's inaugural non-stop SEA/DAL flight.

------
muratmutlu
I'm from the UK and flew Virgin America for the first time last month from
Orlando to SF for $120 (a 5 hour flight) and thought it was amazing value.

Flying from London 5 hours in any direction costs around 4/5 times more for
airlines that have a significantly worse experience than Virgin America.

But saying that I booked a flight to LA a few days ago and picked Southwest
because it was $50 cheaper than VA and if the Florida flight would have been
$50 cheaper on Southwest I would have gone with them too.

The way I see it is that I can deal with slightly less comfort on a flight if
it means I save enough money to buy myself something like a new pair of
Converse when I land.

~~~
nirvana
I thought if you flew in or out of London the UK government subsidized the
flight costs significantly, as a form of economic stimulus.

Hence Ryan Air has $14 pound flights to Berlin, and stuff like that. (been
awhile since we lived in europe, so I could be out of date.)

At my age, and 20 years of flying on Southwest, if I ever got a chance to fly
Virgin and it was $50 more, I'd pick Virgin. Historically Southwest has been
my favorite airline and most flown airline, but I'm getting too old for the
cattle car.

~~~
rdl
Taxes on flights in/out of LHR, at least, are among the highest I've seen.

<http://en.wikipedia.org/wiki/Air_Passenger_Duty>

~~~
lmm
In fairness LHR is pretty much at capacity. Government needs to get on with
building a third runway and/or Boris Island.

------
EricDeb
Reminds me of Walmart - everyone hates on it but they absolutely rake in
profits. On certain purchases, Americans love cheap prices above all else.
Plane flights likely fall in this category for most.

------
michaelpinto
Are their any airlines that don't fail over the long haul? With the flux in
fuel costs and the need to keep an aircraft in top shape combined with super
low fares is seems to be a hard industry to stay alive over the long run. Over
my lifetime I've seen a few entrepreneurs seem to crack the business (from
Freddie Laker to David Neeleman) and they always seem to hit the wall after a
point.

------
nikcub
It isn't failing in the same way Facebook wasn't failing when it wasn't making
money in its first almost-decade. Virgin is pouring all of its resources into
expansion before making a profit, a business model straight out of silicon
valley.

It is only a risk and failing if their ability to raise new money is hindered,
and Virgin are a long, long way from that.

------
lightyoruichi
Airline business is never profitable imho, except if you're running it like
Spirit, or AirAsia does. Charge a fee for every nitty gritty stuff that your
consumer wants. Extra 10kg? That's $50 for you Sir.

~~~
joonix
I don't mind that as long as the potential fees are made clear before
purchase. That way I can decide what my needs will be and determine if I can
navigate that fare structure to minimize my costs. If it were up to me, all
passengers and their bags would stand on a scale at check-in and a fee
assessed based on total mass. That said, United almost always has the cheapest
fare in my city (a hub -- although I think they've become much more expensive
since the merger), and I get free checked bags with the Chase card and a solid
rewards program.

------
wickedchicken
I fly SFO <-> JFK very often. VX34 there and VX27 or VX29 back are my rides of
choice, since I hate layovers and prefer redeyes. The wifi is passable too
(don't try to SSH over it, though).

