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Finer food can't make failing airline fly | |||
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By DAVID MOON, Moon Capital Management In June, United Airlines announced it would begin offering two-way e-mail capability on its flights by the end of the year. German airline Lufthansa and Sweden's Scandinavian Airlines followed suit, planning to let passengers send e-mails, check stock prices and pursue their favorite art Web sites from 30,000 feet. At least United Airlines leads the airline industry in something other than begging the government for money. Too bad it doesn't concentrate on running an airline. Trying to emerge from bankruptcy, how does United try to turn around its fortunes? Increase market share? Cut costs? Concentrate on more profitable routes? Look for ways to cut fuel costs? Those are boring ideas. United is turning to the Internet to try saving the business. Apparently it missed the dot.com boom-and-bust memo. United is also trying to save itself in the kitchen, not the skies. In April, it began selling 'restaurant quality' meals on selected flights, in an attempt to increase revenues. For $10, passengers can enjoy a grilled turkey panini sandwich, fresh fruit and a chocolate cookie. Although I am an accomplished eater, I have no idea what a panini is. I'm sure not going to pay ten dollars to take the chance eating one, especially if I'm nowhere neat my own bathroom. And it's not just the airlines, either. Facing slumping sales and a sagging stock price, McDonald's has determined the root of its problems: its customers need wireless Internet service. The company erred when it abandoned the food business to concentrate on kids' trinkets and playgrounds years ago. Now McDonald's is targeting geeks and wireless gadget guys. I am a gadget guy. I own ' or want to own ' every computer toy known to man. Wireless Web access will never attract me into a McDonald's. A really good hamburger would. Several years ago, Peter Lynch used the term 'the bladder years' to describe a period in which many U.S companies bought unrelated businesses. Lynch's compound metaphor loosely compared the act of emptying one's bladder with pouring money down the toilet. During the 1960s, businesses were eager to put money I all sorts of unrelated ventures, most of which diverted their attention from their core competencies ' and turned out to be wasted energy, effort and money. The 9-11 attacks did not cause the airlines' problems. United was already facing bankruptcy; the government bailout was just another example of the federal government's 'fiscal bladder problem.' The only large airline that consistently makes money is Southwest Airlines. Southwest doesn't serve meals. It has the lowest costs in the industry. Its entire fleet consists of the same aircraft, lowering maintenance costs. There is no first-class, reserved seating, wireless Internet service or in-flight massages. They simply fly people from place to place. Be skeptical when a company appears to forget its core business. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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