A few days ago, while presenting the ROKC methodology to a group of international business people, one asked me, “What is an airline’s key component?” An animated discussion ensued in which different points of view were expressed and a great deal of debate around each proposal. Some of the key components suggested were:
- Customer service
- Information technology
- For low cost carriers, one type of aircraft
- Routes/Networks, and
- Landing slots
Sure, airlines compete on customer service and information technology but those services are increasingly bought-in. The big exception is customer service in the air which is still performed by the airline’s staff. Airlines don’t build airliners so even if there is an advantage to have a homogeneous fleet this cannot be a key component. Using one type of aircraft helps with maintenance costs and standardized image of service. Routes are important from a consumer point of view but it is hardly imaginable that an airline’s competitive advantage stems from from flying from point A to point B instead of point J. A very close cousin of routes and networks is landing slots, which in my view is an airline’s key component. Without a landing slot the air carrier cannot provide their service in terms of the first three: customer service, IT, aircraft type or routes.
From the ROKC point of view by placing landing slots at the center of the airline business it becomes clear that this is the asset that gives an operator a competitive advantage while the other suggested assets are part of transforming that asset into a product that customers want to consume or related to managing the inherent business risks.
Interestingly, not too long after this talk, an article appeared in the paper “Baffling About-Face in American-US Airways Merger” (NY Times, James B. Stewart, November 15, 2013) explaining how the Federal Government was dropping its lawsuit against the American Airline – US Airways merger as a result of the parties having agreed to sell landing slots in certain airports.
“The Justice Department did get some important concessions from American and US Airways, primarily an agreement to give up slots at some of the nation’s busiest airports, including La Guardia in New York, Reagan National in Washington and Logan Airport in Boston, to low-cost carriers. The department said it was the biggest divestiture program agreed to by any airline as a condition of federal approval of a merger.”
So I guess it is safe to say that landing slots are an airline’s key component.