Postscript - PeoplExpress

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News reports on September 25 advised that the new PeoplExpress had lost half of its fleet on September 19 (consisting of two planes). The next day the company succumbed to subsequent operational challenges, resulting in cancellation of all service and stopped answering its phones. The company advises that it will "relaunch" October 16.

A few other commentators have observed that a company selling tickets without owning or directly operating the equipment used to fly the routes shouldn't be called an "airline." Whatever PeoplExpress might be, the media miss the point of an experiment so poorly conceived, planned, and operated.

One leased plane--down from two. A schedule with routes from Boston to New Orleans. Very few contingency plans--and inadequate one at that.

If this were a travel agency project, the criticism would be intense.

Sources:

There's something disturbing about this piece from the Virginian-Pilot (August 12, 2014). The article superficially discusses an apology circulated via Facebook by a senior PeoplExpress executive. The incident involves an air service disruption and the events surrounding it.

Read the piece carefully and then see my thoughts below. I don't believe the image the company tries to create is successful.

PeoplExpress is a strange concoction. I paid a bit of attention to it a couple years ago because Newport News is about 20 miles from where I live. The more attention I paid, the less interested I became. Rather than a brave aviation experiment, PeoplExpress seems more of a case study in failed business planning and development practices.

Here are but a few:

The essential marketing strategy for the company has never been clear, apart from reliance upon what I refer to as the "Doctrine of Cheap Things." This being that, if you sell something cheap enough, some people will buy it, regardless of whether it adds any real value. The on-line travel seller's market is also filled with such outfits.

There are frequent references to the company's customer-friendly intentions, and a "cheap with a smile" attitude, but no one has ever explained how precisely this is going to work. Delivering the same or a similar set of miserable customer services as most every other aviation company, but doing it with a better attitude, seems to be an amazingly shallow strategy. If the company is somehow expecting service enhancements, it's never been clear what these might be, how they will be affordable within a "cheaper is better" business model, and why this approach might be sustainable.

As many others more qualified that I have remarked, the company's fleet and operations strategy simply doesn't make sense. In this context, that which doesn't make sense usually doesn't work either. There are exceedingly rare exceptions, but that's a poor way to plan a business.

The business planning failures are even more striking, especially when you consider them in the context that they do contain some partial logic--but you have to have been there to appreciate it.

PeoplExpress appears to have been contrived by a very small group of people who shared some basic assumptions. None of these appear to have been validated either by the marketplace (one assumes that the service launch in a few days will be part of that exercise), or by adequate research and planning.

One is that there remains some value and goodwill in the PeoplExpress name. I've never met, or even heard of, anyone apart from the management team who believes this. Most travel industry people old enough to remember People Express Airlines have the opposite, or at least conflicted, recollections.

Another is that Newport News is a logical place to base an airline.

In a way, it is. Some commentators have remarked that there is no logic in trying to complete with a perfectly adequate and well-served airport in Norfolk. There is--but only if you live here.

I never fly from Norfolk--never. I'll drive to Richmond, which is somewhat further (and just as well-served), or occasionally to Washington, which is a lot further. The reason is that there is no good way to get to or from Norfolk International from this part of the Virginia Peninsula. It can take 30 minutes, or three hours. There's no way to predict and it's a miserable trip on a good day. That route is notorious in local thought and urban mythology. If there were such things as trolls, local people would be assuring you that they are found in abundance underneath the bridge that forms part of the route that you have to travel.

If you've ever spent an hour in a car stuck in traffic in a tunnel underneath the Chesapeake Bay, you'll understand what I mean.

However true that may be, it's an inadequate business strategy. It's usually a fatal mistake to base strategy on what you personally find appealing--unless you've been able to prove that large numbers of other people happen to agree with you.

The 200,000 or so people in the direct service area for Newport News on this side of the water will probably agree that more service from Newport News / Williamsburg International is a good idea. The million or so people on the other side probably will not. No one has convincingly tested either of these assumptions, by the way.

Early on, PeoplExpress tried to get support from Norfolk to establish its base there--the idea was rebuffed. The company's first business office was in Norfolk.

Newport News is a delightful airport to use because almost nobody uses it. As soon as it becomes busy, it is a far less attractive facility.

All this is why there is a market for good consultants. By that I mean equally aviation and business experts who will look at situations objectively and tell you the truth. There are far too few of these.

PeoplExpress is an idea that is so flawed in concept and execution that it's impossible to rationalize how it even might succeed.

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On February 19, 2014 the U.S. General Services Administration (GSA) announced what The Beat calls a "first of its kind" competition to develop travel data analysis technology. The formal announcement posted by the GSA says,

"In this GSA Travel Data Challenge, the public is asked to develop a technology-driven solution using GSA travel data that allows an agency to identify opportunities to reduce costs.  As such, GSA challenges the public to create a tool using GSA travel data that could be replicated across government to every agency, using their own travel data."

This exercise is described as "crowdsourcing" in other publications that usually pay little attention to how the GSA administers its travel programs or analyzes travel data--one supposes because the novelty of the approach somehow makes it important.

The Travel Data Challenge raises a number of questions that are equally worthy of some attention. Here are some of the most obvious:

1)  The competition offers $35,000 for a winning submission; lesser amounts to other categories totally $90,000 in all. This is but a fraction of what such a solution would likely earn in the open market, which makes one wonder why any established developer would want to participate.

2)  Participants grant the government a perpetual, royalty-free license to any and all intellectual property comprising the winning entry. A good deal for government, but a bad deal for a truly innovative developer. While the terms of the contest go on to say that "All other rights of the winning entrant will be retained by the winner of the competition," since the rules also say that "The final tool should be in Open Source Code," we are left to ponder how little those remaining rights might be worth.

3)  The GSA has existing contracts-holders for a variety of travel management and analysis products. Why isn't the innovation and creativity the agency desires forthcoming from these presumably well-funded and well-compensated sources? Perhaps the agency should be questioning whether its procurement and program management practices are truly adequate to deliver the sustained innovation it seeks, or if that is not the problem, then whether the incumbent vendors are up to the job?

4)  The Organization and operation of the event give the impression that many aspiring participants are unprepared for the task. Travel data analysis and interpretation is a complex and highly specialized field. The agency has provided only the sketch of what it wants to accomplish, and many of the online questions posted on the event site indicate that an understanding of the sources, tools, and objectives of successful travel management are equally barren within the community of interest developers. A much more thorough developer briefing is needed if all sides of the contest are to avoid wasting their time.

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Why Not The Computer Business?

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This analysis appeared February 24, 2014 in Cornerstone Information System's "Insight & Opinion" section:


Travel and technology are very different businesses. While technology supports and enhances much of the travel and transportation industry, difficulties begin when the two are confused.

You need competent people to help you address technological challenges, but you don't need to be in the computer business. There are enough products and services on offer now, too many developers who don't know what they're doing, and too much imprecision hiding behind innovation.

Because technology is an important part of travel distribution, it's easy to be overtaken by the sights, sounds, and outright glamor of technology. In recent years it's become much easier (though by no means simple) to find investors for technology companies.

We're used to hearing about technology start-ups with modest resources and still more modest ideas, to the point that people start to believe they should be part of the fun.

The Essential Differences

Succeeding as a technology developer is difficult, time-consuming, risky, and costly. While the marketplace makes room for genuinely good ideas, finding them is almost always harder than building them.

I read a recent contribution from a travel technology developer who suggested a few strategies for starting a travel technology venture. Among these were "doing the opposite of what already works," and "recycling old ideas." i

There's a certain logical flaw in basing development projects on practices that, by definition, don't work. The notion of having a genuinely good and innovative idea is something that entrepreneurs frequently neglect along the way.

Nor is it more than a remote possibility that most technology start-ups will succeed. It's true that some start-ups pay big rewards to a few early investors and employees, but most simply spend their early capital without delivering more than the most trivial results and products.

There is a significant difference between having what seems to be a good idea and transforming that idea into a commercially practical product or service. Most travel technology products, web sites, and related gadgets accomplish very little and quickly fail the consumer's "why should I care" test.

Although this may seem to be a heretical view, most travel technology is neither good nor useful--never has been. Apart from the handful of start-ups who are struck by the lightening of unanticipated success, most travel distribution success stories are told by people who had the rare talent of discerning between what works and what doesn't.

Travel is a service business and successful participants in the industry must never lose sight of their customers and what they really want to buy. Understanding and correctly answering that question usually means the difference between success and failure--and is the essence of delivering customer service.

Travel customers, as an example, want to take vacations, do business in distant cities, visit their families, and a variety of other things. They don't want someone to give them data, collect their data to give to someone else, or offer them pointless Amazon-like product suggestions because of past purchases that are no longer relevant.

I've frequently observed that almost nobody in travel distribution delivers customer service, or is able to do so. ii We're so obsessed with recycling old ideas and focused on what our customers have bought that we can't discern what they will buy, and therefore act accordingly.

Suggestions

Here are my own ideas for you to consider as you look for ways to employ technology as a business tool in travel distribution, and profit from it. They may sound simple, but effectively putting them into practice is sufficiently challenging to assure their competitive merit.

1)  Become The Best User Of Other People's Tools

Skilled travel industry managers decide what their business goals are, how technology can help them reach those goals, and what partners have the requisite expertise to make that happen. They then move forward with those partners and don't let themselves be distracted by short-term events and new but irrelevant ideas.

I've been CIO of multinational travel and transportation companies more than once. It was always a challenge to convince other parts of management that being the best user of tools that other people build can be as much, and often more, of a competitive advantage than was our own technology.

We want to believe that access to proprietary technology in itself creates an advantage, while we overlook the expense and risk creating that technology imposes and assume that we can succeed at maintaining and enhancing it.

In most instances using technology and what it provides well is more important than proprietary tools. Your competitors are usually not good technology managers, and you can exploit opportunities when they assume technology risks that you don't have to.

2)  The Best Tool Is No Tool

Technology is attractive and we are conditioned to believe that the solutions it delivers work better, last longer, and are more efficient than answers we find elsewhere.

The secret here that takes experience and insight to understand is that many problems "solved" through technology were really unresolved management problems that could have been cured more efficiently in other ways--or the problems never existed in the first place.

Look for business opportunities and solutions that don't depend upon new technology developments and you're ahead of your more development-inclined competitors.

3)  Seek Scarcity, Then Exploit It

Forget recycling old ideas. If you're looking for technology-driven opportunities, you'll find them where people have demonstrable business needs that are not addressed in other ways.

These are difficult to find and still harder to develop, but unless you're counting on that bolt of lightning, they are the only reliable path to successful products.

There's plenty of scarcity, in ideas, management, products, and customer service throughout travel distribution to provide more than enough profitable opportunities that don't depend upon starting a technology venture for entrepreneurs with the foresight and skill to pursue them.

Not Quite That Special


Here are a few final questions for you to consider:

  • When was the last time you heard a law firm say that the "LexisNexis" user interface isn't what it should be, so it's time to build our own legal database search engine?
  • Do you know of an accounting firm that is developing software because Oracle, Microsoft, Best, or SAP have nothing to offer and don't understand the company's unique business objectives?
Travel distribution has always been and remains a unique business but it's essential to separate qualities that make business better from the costly specialization that it's tempting to ask technology to make for us.



[i]     Alex Bainbridge, EUREKA! Where Could Your Travel Startup Ideas Come From?, (Tnooz, February 3, 2014).

[ii]    As many times as I've made that observation over the last 20 years, I've frequently been told what a shocking thing it is to say. I've almost never had anyone question whether or not it was true.

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The Myth of the Bell Curve

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According to Josh Bersin (Principal and Founder, Bersin by Deloitte), business has a lot to learn about understanding and evaluating human performance and achievement. Some of the standard tools that have been employed for decades cause managers to draw imprecise and unacceptable conclusions.

"There is a long standing belief in business that people performance follows the Bell Curve (also called the Normal Distribution). This belief has been embedded in many business practices: performance appraisals, compensation models, and even how we get graded in school. (Remember "grading by the curve?")

"Research shows that this statistical model, while easy to understand, does not accurately reflect the way people perform. As a result, HR departments and business leaders inadvertently create agonizing problems with employee performance and happiness."

Read Josh's complete, and very interesting, comments here.

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The world of Open Booking is a confusing one. No one seems to understand how it's supposed to work in sufficient detail. Beyond some broad statements about how much travelers want it and how you can apply the concept to suit your situation, those devilish details are left to look after themselves.

Its business case has never been fully or adequately developed. No one has ever successfully demonstrated, using adequately supported data and research, that Open Booking (to the degree it is described and understood) even works, financially or operationally.

Some of our colleagues also claim too much for Open Booking. There is a tendency to believe that Open Booking is inevitable because there are serious flaws and failings with how travel management is conducted. Open Booking is not the sole alternative--there are equally, if not more valid management techniques that can be employed.

It's one choice among many, and based upon the answers that are available it isn't a very good choice. It would be great if more solid information were forthcoming, but even asking questions carries its own challenges.

Here's an experiment for you to consider.

While the setting is intended to be light-hearted, the issues discussed are quite real and the responses are all based upon incidents in my own experience with the Open Booking Question.

Pick any of the national, regional, or larger local travel management companies that specializes in business travel, or an on line travel agency with the same specialty. Call someone from the sales department, introduce yourself and your company, and tell them that you'd like a few questions answered.

Begin by asking for a detailed explanation of how the would propose to handle your business. Respond to their questions directly and intelligently, and listen to their explanation. You may not like what you hear, but you'll be told in sometimes painful detail how their operation works and where you fit in.

Ask all the difficult questions you want that reflect your real concerns, possible issues and contingencies you may have heard about, and criticisms of their process that you may have heard from competitors or read in the trade press. Typically, answers will be immediately forthcoming or a quick follow-up call will offer clarification.

Then, pointedly ask how they will "prove" to you that their service is any good, how it is cost-effective compared to their competitors, what evidence they will provide as to their ongoing purchasing efficiency, and how they can project and measure your savings. Remember to ask where their data come from and why these are accurate.

Without much hesitation, you'll probably be told about benchmarking, reporting tools, econometric models, and various gadgets and systems that the person on the phone is convinced are just what you want.

Some of the answers you will receive will be interesting, others quite inventive, and still others less so--but the point is that you will get answers. These are legitimate inquiries and the business development area within travel distribution is happy (even anxious) to address them.

Try the same process on someone who is anxious to talk about the inevitability of Open Booking (or Managed Travel 2.0) and the benefits that idea provides.

You'll be challenged to get a comprehensive description of how Open Booking works, largely because no one has adequately defined the operational details and how they apply in the real world. People have their own ideas but there is no shared view--and the experts create explanations as they need them.

Even though Open Booking has been a popular topic for some time, difficulties continue to pop-up that no one has thought through (see here for example). The list of questions that should have been considered and have not is long and tedious.

You're likely to learn that Open Booking is a concept that you must apply in ways that suit your own situation. Patiently remind the person that, if this is true, Open Booking has descended to the level of how you've been handling your travel for the last 40 years, and suggest that the proverb "there is nothing new under the sun" may also be true.

Remind them that the apostles of the Open Booking doctrine want the industry to adopt it as a premise for doing business, as an overriding concept that reshapes how managed travel is understood in the current century, and as an inevitability brought about as a result of how traveler attitudes and expectations have been reshaped in the Internet age.

In such a toplofty setting, some comprehensive definition, description, and attention to detail is not too much to ask.

Next, take a deep breath and ask your contact to prove to you that the operational system they have described to you (to the degree this has happened) can and will work, that they have considered all relevant details, and that sustainable savings (offset by any costs and business risks that you might incur) have resulted in other settings and will result for you.

Remember to insist on clarity as to where the data come from, how reports were developed, and why they are accurate. Don't be content with unsourced figures pulled at random or comments from published materials with an equal lack of transparency.

Your spokesperson will likely be affronted at your having the temerity to ask such questions. You may be informed that "proof" is unreasonable and impolite, and that countless satisfied travelers are enjoying excessive (but unspecified) savings and satisfaction through Open Booking, so it is up to you to join their happy throng.

Such requests for "proof" will likely be dismissed by comments such as "that's what the marketplace is doing."

As you politely close the conversation, a gentle reminder that it is the "marketplace" that just asked the question may be in order. When the call is over, you might also reflect upon how long a TMC that gave a similar answer would remain in business.

What Have We Learned?

I'm not sure why many observers are prepared to give Open Booking "a pass" in settings where other parts of the travel distribution system are held to a much higher standard.

This may be because Open Booking sounds technological or scientific, that they are beguiled by its promises that amount to the benefits of managed travel without much of the work, or that it's simply (at least for many) an attractive and new idea.

Open Booking is none of these things. It is essentially the same complaints and objections to managed travel that have been wandering about for decades, now in a new suit of technological clothes, with the promises that gadgets, web sites, and reporting methods have succeeded in changing human nature.

Travel buyers should rightly expect better answers to how Open Booking works, how real-world problems can be affordably addressed, and the financial benefits it delivers (in all instances using better data and analysis than has been forthcoming thus far).

Advocates of Open Booking should consider it their obligation to provide nothing less.

Open Booking, lacking better evidence, simply doesn't make sense. Because many people believe Open Booking to be a good idea, I'd have thought that an adequate, specific, detailed business case would not only be easy to produce but would have been forthcoming long ago.

I'm anxious to see it.


More Bad News For Open Booking

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Consistent with my prior comments on the management hazards of Open Booking, travel attorney Mark Pestronk remarks that:

"Open booking presents a serious legal problem that no one has yet touched on: By allowing employees to use the public websites and mobile apps offered by suppliers and online travel agencies, travelers and their employers waive all of the contractual and other legal rights that they normally have under U.S. law."

Read his article at:

Corporate travelers surrender rights with 'open booking' - Travel Weekly

According to The Economist, something may finally be done about "patent trolls," although I personally don't agree with the view that no computer software should be patentable.

"AT LAST, it seems, something is to be done about the dysfunctional way America's patent system works. Two encouraging events over the past week suggest the patent reformers are finally being heard."
Complete article here.

An interesting piece that credits much of the current patent mess to miscalculations by President Carter in the 1970s.

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This analysis appeared December 17, 2013 in Cornerstone Information System's "Insight & Opinion" section:


IATA is listening--or so I've read in a number of published reportsi. To whom and about what is open to question.

The industry has been repeatedly assured that the NDC isn't what you may think, and, that the NDC or something like it is inevitable in any case.

In his piece, "Fear and Loathing in Airline Distribution (aka NDC Phobia),"ii which a surprising number of observers have liked well enough to redistribute, IATA's Aleks Popovich remarks, "today's airline distribution network is changing with or without NDC."

Mr. Popovich also says "Let's get the posturing behind us and work together to address the heart of the matter."

Surely that's a sentiment everyone can support, but "NDC Phobia?"

NDC Phobia Described

I don't myself believe that the majority of NDC's critics are subject to whatever that malady might involve. I do believe that organizations advancing business and technology proposals have an obligation to adequately explain and defend them--and not keep shifting the scenery on stage so that the audience forgets how bad the play truly is.

IATA asks its critics to accept that criticisms of the NDC can be dismissed by statements like,

"These are all legitimate questions that IATA recognizes must be answered if NDC is going to become a reality. But it is the market, not IATA, which must provide those answers."iii

If that were true, perhaps IATA should consider whether it is wise to propose changes to the essential ways in which travel distribution operates in the guise of a proposal for technology standards and cooperation.

You don't have to accept my analysis to come to that conclusion. According to IATA description of What is NDC about:iv

  • The initial scope is the shopping process.

  • In tomorrow's new distribution, airlines will have greater ability to interact with who is requesting and provide tailor-made product offers.v

In order for that to happen, multiple changes to the structure of travel distribution must occur. That's assuming we agree with IATA that this business structure is superior to the many others that are available and the inevitable financial and relationship costs its implementation requires are offset by whatever benefits will accrue.

IATA appears as unwilling to make a defensible business case now as it did when last I wrote about this topic.vi

Later, in the same IATA document:vii

Key Principles New Distribution Model

  • It is critical airlines construct/own their product. Need to connect to customers through indirect channels with interactive relationship.

  • Standards must facilitate authentication of customer identity, enable personalized offers through the whole distribution supply chain.viii

Whether you agree with these objectives and believe that the marketplace is asking for them (which I do not), they clearly focus on changes to business processes and not simply to the adoption of new communication methods.

The messaging standard itself isn't particularly relevant, not is its potential efficiency, how related or unrelated it is to other protocols the industry might like to use, or how potentially rich a data environment might be created. The business processes that are both required to sustain the NDC and the processes it will potentially enable are more central to justifying the NDC.

The frequent suggestion that people still have to build business processes that use NDC capabilities, and that this is a marketplace function, is correct as far as it goes, but it doesn't really address the quite rational business concern:

People don't create "standards" without the expectation that they will be used as fully as they can.

My prior NDC comments inspired several objections to what I called "privacy compromises." Privacy, is unrelated to communication standards--or so I've been told.

If the NDC's business goals (described above) are to be realized, a far greater amount of specific, identifiable traveler data is required than is necessary for booking an air ticket. This is assumed to be collected by the NDC and is also assumed to be available as part of the traveler selling process.

The intent of collecting these data is to deliver "recognition by airlines and personalized products offers."ix How does this suggest anything other than a fundamental change to the type and amount of data surrendered by travelers?

Specifics as to how this would work and why it has sufficient value are weak. Amazon is typically cited as the visual model, although nobody I've listened to bothers to explain why Amazon has any relevance to selling transportation.

The traveler is, therefore, asked to surrender data based upon promises that something valuable might, someday result. The best that can be said of that arrangement is to call it a "compromise."

It isn't the same thing, for example, as self-identification with a passenger-type that might be entitled to a discount or other services--the process is not self-initiated and the deliverables are unknown.

Who's Talking and Who's Listening?

According to published reports, IATA seems to have abandoned travel agents as "key" participants in the NDC pilot."xIATA should have engaged travel agencies of all descriptions more skillfully from the start, and the lack of meaningful agency involvement needs to be quickly and wholly resolved.

In recent weeks a collection of trade groups announced an effort to develop alternative standards.xiThat initiative isn't going anywhere.

The serious questions are about business, not standards. These are the questions IATA says it doesn't want to answer.

It's difficult to conceive of a standard that would be embraced by the airline industry being developed in competition with IATA's standard, especially this late in the day. None of the interested trade groups has the technological or business capability to make that happen.

Putting the NDC Argument Behind Us

The industry's energy is best spent not tinkering with alternative standards but insisting that IATA confront the real business questions the NDC raises.

This exercise represents one of several business process and strategic flaws that compromise the NDC. These have real strategic, implementation, and operation costs for all parts of the distribution system that are not addresses by the NDC's proponents. There are direct and indirect costs for travelers as well.

I can't agree with observers who suggest that it's time to put NDC objections in the past and face up to business realities. It's IATA that wants to walk away from business discussions--they're so inconvenient and it doesn't have good answers.


Notes:


i    Michèle McDonald, GDS Exec Says IATA Is Listening, (Travel Market Report, November 7, 2013).

ii   Aleks Popovich, IATA Senior Vice President, Finance and Distribution, Fear and Loathing in Airline Distribution (aka NDC Phobia), (Tnooz, August 26, 2013).

iii Popovich, op. cit.

iv   New Distribution Capability - Update, (International Air Transport Association (IATA), November, 2012), page 8.

v    Emphasis added.

vi   David Wardell, IATA's New Distribution Capability (NDC), (Insight and Opinion, July 15, 2013).

vii  IATA, op. cit, page 9.

viii Emphasis added.

ix   IATA, op. cit, page 11.

x    Jay Boehmer, Agencies Absent As IATA Names NDC Pilot Participants, (The Beat, October 30, 2013).

xi   Kate Rice, Travel Groups Propose To Work With IATA On Distribution Initiative, (Travel Weekly, October 28, 2013).


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