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Another Lost Dream

Primera Air

As yet another airline that sought to fly the Atlantic bites the dust, one has to ask - why? The trail of attempted trans-Atlantic (indeed, just long-haul) failures is many and varied; as is some that just got caught in that maelstrom of me-too airlines. Too many seats chasing too few passengers.

Freight was always (and still is) attractive. Indeed, transporting humans never really was a good idea and up until about 1930, was never really considered a worthwhile option.

Humans need a lot more effort. You have to run a schedule, you need to look after people who have needs, you have to have cabin attendants and caterers, you need to tell people that you run and be able to sell the service, you need to use airport terminals, fiddle about with baggage and you don't have nice, fixed rates.

No one has ever heard of a Fed-Ex or UPS or DHL getting into such deep financial trouble, have they? Cargo only types don't have to worry about most of the above or having the latest aircraft. They don't need to revamp interiors and they don't need to take out a huge chunk of extremely valuable flying-aircraft space, to put in a double bed and tons of space for just 2 humans. Cargo types can, basically, fly what they want, where they want, when they want. Even if a cargo-only firm did go bust, all you need is a lorry to shift the un-transported goods 100 yards down the building, to a still-operating cargo firm.

And, of course, cargo does not get drunk, neither does it put its dirty feet on the person-in-front's seat or cause mayhem.

Airlines fail for a number of reasons; and "regulation" is not the door at which all ills may be laid. Airlines, especially legacy airlines, tend to run out of ideas or more specifically, markets. Unless any given business has an earth-shattering way forward (in the airline situation, we have RyanAir) - an innovation that is so new, so different and so radical that it cannot fail, coupled with being in the right place at the right time, then the way forward is to tackle the local market, the small fry, "pile 'em high and sell 'em cheap" then grow from there - both in terms of quantity and ultimately, quality. This is how firms such as Southwest and Amazon grew; a firm that once sold things cheaply, now sells product at all levels from the cheapest to the more expensive; an airline which used one sort of aircraft on one sort of route and then slowly but surely, introduced new aircraft and new routes. The true slow march of classic disruptive innovation.

But, when you find that your market has no where to grow, then options are limited. You can buy the competition, you can join international co-operatives (such as OneWorld or the Star Alliance) and you have to attack costs. Attacking costs inevitably leads to a devil's spiral. As costs are cut, so inevitably, standards fall. As standards fall, so the higher end customers will graduate away. Here is another dichotomy: In order to keep the higher end clients, you have to layer on service and standards... but you need the numbers "down the back" to make up the difference. Cutting the costs to the extreme for those that make up the numbers, leads to the disruption we see today from passengers at airports and on aircraft.

The real problem? Airlines, especially legacy airlines, cannot create new value.

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