Oil prices reached $135 per barrel last week and have just claimed the latest victim: SilverJet. The all-business airline stopped operations today (Friday, May 30) since it failed to secure a $5 million loan to carry on operations. This now makes it three-in-three for all-business airlines operating between New York and London. MaxJet and EOS have shut down operations in the last year as well. Interestingly, SilverJet helped carry EOS’ passengers when the latter ceased operations. I wonder who will come to rescue SilverJet’s stranded passengers. (Update @ 30 May, 11.49pm: Virgin Atlantic is offering special fares to stranded SilverJet passengers)

(Image courtesy http://www.airflights.to)
The irony is that even as full-business class carriers go out of business, legacy airlines have been starting up all-business class routes recently. Singapore Airlines’ route between the city-state and Newark seems to be off to a good start. British Airways’ OpenSkies looks all set for launching operations too, and L’Avion still flies between Paris and New York. May be the difference is the deep pockets of the parent airlines, who sustain an unprofitable route much longer than greenhorns like SilverJet and Maxjet could.

Everyone is now aware of the much criticized move by American Airlines to charge $15 for the first checked in bag, and $25 each for subsequent bags – a perfect example of the knee-jerk reactions we are getting used to from airlines. This is a one-way street for the passenger. What if oil goes down to $100 in two months? Surely the baggage fee will not be reduced. Sounds like a perfect recipe for disaster for customer confidence (if there is any left now).

Photo courtesy of http://www.worldrider.com/
Surely, there are better ways to deal with externalities than to squeeze out every nickle-and-dime out of the already exploited passenger. Airline executives in the US can learn some things from their counterparts in Asia (who’re still doing well in this environment) and also take some lessons in Economics. Here are three tips to get started:

This is a narrative based on the traveler experiences I’ve read on internet forums and blogs, as well as personal experiences. Names of people and airlines have been changed. Hope you enjoy reading it.
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It was John’s parents 50th wedding anniversary and he had meticulously planned a surprise bash for them in their London family home. The last step was to book the flights for his two year old son, Tim, his wife, Lucy and himself, from Toronto to London. This seemed simple enough with expedia.com.
Within seconds, the search results showed over ten pages of results, with prices differing by less than $10 in some cases. He ruled out the cheapest options, Air India and SAS, based on the poor experiences of his friends who had flown these airlines before. He was debating between British Airways and United Airlines. Though he was a member of both their frequent flyer programs, it didn’t make much difference to him as they were equally difficult to redeem miles from and had similar benefits. He had flown United before and didn’t quite enjoy the experience. He finally decided to go ahead with the British Airways flight, via New York.

The airline industry is one in which there are a lot of externalities – situations beyond the control of individual airlines, which they have to deal with. These may include events such as 9/11, weather conditions, pilot union trouble or even the bankruptcy of a competitor. Though on the face of it, these may all seem to bring trouble, but if leveraged well, these externalities can lift the airline brand in a number of ways. This is because almost always, a number of airlines face a similar macro-situation simultaneously, but it is those who deal with it well who come out triumphant.
Here are three examples of how airlines around the world have been resilient in the face of externalities.

Olympics in Beijing? Let’s send the A380 there. To capitalize on the increased travel demand to Beijing during the Olympics, Singapore Airlines recently announced that they will be flying the A380 to Beijing during this period. What a perfect example of dexterity. Not only will SIA be able to showcase their …

Despite a number of US based airlines going bust in the past few months, and all the talk of consolidation and more bankruptcies in Europe, the budget airlines in Asia seem to be doing rather well.

Tiger Airways, based out of Singapore, is expanding into Australia rapidly and there are talks of starting a Korean hub. Air Asia is doing better than ever on regional routes, and now starting long haul budget travel as well. Even though the growth of Indian budget carriers has slowed, they are still doing well, given the state of the industry in the rest of the world. The fact that ever more Asian airports are coming up with budget terminals is testimony to the fact that demand will increase in the near future. So what is it that other airlines can learn from the Asian budget carriers to be more successful?

When an American Airlines passenger died in-flight earlier this year resulted in a public outrage, the airline’s attempt to rescue its reputation fell flat on its face. Two days after the death, American Airlines decided to honor a stewardess for saving the life of a passenger on board a flight – three years ago!

What already sounds like a bad attempt at generating positive PR turned much worse when the stewardess blatantly rejected the award, at the ceremony, instead spilling the beans on bad management practices at the airline. All this in front of shocked executives and ever-eager media. Check out the stewardess’ interview with MSNBC, after the incident.

So what’re three key lessons from this blunder for American Airlines and others?

The airline industry is so dynamic that airlines need to keep coming up with innovative ways to make money to stay in business. This is especially true in the case of budget carriers or Low Cost Airlines (LCCs). One key characteristic of LCCs has been their point-to-point service, moving away from a hub-and-spoke model to save costs. But a new trend, in a totally opposite direction, has recently emerged, as first pointed out by the ITA Travel blog.
LCCs have started serving multiple P2P sections, effectively like a hub and spoke model. Tiger Airways customers can book two flights in one booking using their Flight Combo feature, effectively being able to travel from Chennai to Perth via Singapore, or from Darwin to Hanoi via Singapore. Air Berlin in Europe allows similar flexibility to passengers, flying via Düsseldorf in Germany.

Tiger Airways route map
The latest kid on the block is Air Arabia, the extremely popular Sharjah, UAE based airline. As mentioned on Popagandhi, they have formed a joint-venture with Nepal’s Yeti Airlines to launch a new budget carrier flyyeti.com, offering destinations in Southeast Asia and even Hong Kong based out of Kathmandu. So you can fly from Yerevan, Armenia to Hong Kong via Sharjah and Kathmandu (I’ve been to Armenia, and trust me, it’s not easy to get to that place, and you don’t want to fly Aeroflot). So why does this make sense for LCCs?

Airlines faced with a difficult economic environment and near-homogeneous products in-the-air are desperately looking for new ways to woo the customer. And what better way to do this than to show that it has a heart too. Thai AirAsia did just that recently.

AirAsia is offering assistance to facilitate the transportation of aid to cyclone-ravaged Myanmar, including sponsoring flights for aid workers and freeing up cargo space for aid materials, a Bangkok Post article mentions. Even Bangkok Airways has stepped up and offered relief flights from Thailand to Myanmar, former being the primary entry point to the military-governed nation.
AirAsia has demonstrated true personality here by showing that it cares too. This act alone gives a human face to the airline and will be remembered by customers for a long time to come. It is actions like these that makes a company, not just an airline, stand out. It reflects agility on the airline’s part as well. Especially so, if regional giants like Singapore Airlines and Thai Airways are keeping mum.
This is not the first time an airline in the region is playing a pro-active role in relief efforts. In …

How would you feel if an airline starts following you on Twitter, and not only that, starts interacting with you as well? Wouldn’t it be great to be able to vote for the name of the next big thing in the airline industry in your country? Or how about feeling truly special on International Women’s Day?

These are all things airlines are doing these days to engage the customer. Advertisements can only create a certain level of awareness. But it is the active interaction with the customer, and the ability to surprise him or her like Virgin, which leads to true brand awareness, and ultimately trust and loyalty. A great example was how Singapore Airlines engaged their customers prior to launching their first A380 flights to London.
Here are three instances of how airlines around the world are delighting (or surprising) the customer by getting up, close and personal with them.

Popular blogger Jonathan Fields was recently “followed” by JetBlue on Twitter. He was initially surprised but soon was conversing with a real person from …

With air travel in the US probably as commoditized as bus rides in Brazil, the industry was ripe for some disruptive innovation. The spark was provided when Virgin American entered the foray a few months ago. Much has been written about their famed safety video as well as a bunch of innovative in-flight amenities. But there is also a ton that other airlines not only in the US, but globally, can learn about fresh, innovative branding from the folks at Virgin.

Welcome to the Branding 101, Virgin style. Here are the Top 5 insights to be cherished.

To exceed great expectations, do the unexpected. As it is, it’s tough upholding the promise of being the airline that is “reinventing air travel”. But Virgin actually does a good job in not just meeting expectations, but exceeding them too, by consistently surprising and delighting the customers. On Earth Day, all passengers in green …