Reality Check: Three reasons why legacy airline brands are dead (and who to look out for)

At the Aviation Outlook Summit in Sydney early this month, where I delivered a keynote on airlines + social media branding, the first day was mostly doom and gloom whereas the second day was much more up-beat. Not surprisingly, executives from legacy carriers like Qantas, Air New Zealand and the European Commission spoke on the first day, and up-beat executives from rising stars like AirAsia X, Oman Air and Gold Coast Airport spoke on the second day. That got me thinking…are legacy airlines dead? I now believe they are. Here’s why.

1. Legacy airline brands come with legacy baggage

Unions, legacy systems, government bureaucracy, old planes, old workforce, high costs, bankruptcy… these are all words that can be easily associated with Air India, Alitalia, Japan Airlines, Air Canada and many more legacy airlines. And these are all aspects that do not allow these airlines to function efficiently in the current climate.

The airline industry has evolved drastically in the past decade. With each new shock (9/11, SARS, H1N1…) we see new stars emerging, which have streamlined costs, efficient operations and specifically targeted markets they go after. And they beat the hell out of monolithic airlines that legacy carriers have become. Just read CAPA’s report on Japan Airlines vs Air Arabia to get a glimpse into what I’m talking about.

2. Legacy airline brands are not agile enough

Like an elephant trying to shake off bees attacking it, legacy airlines look clumsy trying to shake off what they call threats – low cost carriers, low premium demand, fluctuating oil prices, consumers’ reactions on social media etc. In fact, these should be looked upon as opportunties. Let’s look at airlines’ approach to social media, for example.

United Airlines is still struggling with responding to “new media” sensations like Dave Carroll’s “United Breaks Guitars”, as Southwest Airlines interacts with its fans on Facebook and JetBlue helps over a million of its customers on Twitter.

Singapore Airlines is still not on social media, just as AirAsia is making merry in its backyard. And there’s no point arguing about different market segments. I’ve flown AirAsia this summer with folks in a suit with a laptop, mostly heading to Kuala Lumpur in the morning and returning to Singapore in the evening. No wonder the 777s Singapore Airlines fly on this route are flying half-full.

A lack of agility among legacy airlines results in lost opportunities. And this is proving deadly.

3. Legacy airline brands are “stuck on stupid”

AirAsia X

At the aviation summit in Sydney, the CEO of AirAsia X caused a bit of murmur in the audience with his opening slide entitled, “Bastardising the Low Cost Model”. You want to know why? Because most airline executives are “stuck on stupid” (a term coined by Seth Godin in Tribes). They want to carry on the practices of yester-years in today’s changed environment. And that makes them look stupid. Nothing against them personally, but why can’t airlines have multiple business models? In fact, it’s the airlines which are questioning the traditional legacy model, or even the traditional LCC model, who stand to succeed. The rest will perish.

Who to look out for?

Who’s doing it right? In my opinion, airline brands to look out for are Lufthansa (and family), Qantas & JetStar, LAN Airlines (kings of Latin America), Southwest (which continues to innovate) and AirAsiaX. Airlines that have great potential, but need to wake up and smell the coffee to lead in the future too – Singapore Airlines, Cathay Pacific, Thai Airways and Delta Airlines.

So, what do you think? Is there a future for legacy airlines? What do airlines need to do to serve the customers better, and turn a profit consistently? Let’s discuss in the comments or over on Twitter (@simpliflying)

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Shashank Nigam

Shashank Nigam

Shashank Nigam is the CEO of SimpliFlying and a globally sought-after consultant, speaker and thought-leader on airline branding and customer engagement strategy. He is also the youngest winner of the Global Brand Leadership Award and has addressed senior aviation executives globally, from Chile to Canada and from Sydney to San Francisco.Shashank's perspectives have found their way into major media outlets, including CNN Travel, CNBC, MSNBC, Bloomberg UTV, Mashable and in leading publications like Airline Business, ATW, Aviation Week, and others.Shashank studied Information Systems Management and Business Management at Singapore Management University and Carnegie Mellon University. Hailing from India, he splits his time between Singapore and Vancouver, among other cities.
Shashank Nigam
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Showing 9 comments
  • oussama
    Reply

    I can not agree more with your assessment, Legacy airlines on the whole have proven that they do not have a single ounce of innovation. They have handled every crisis since 9/11 until now in the same way, not that they did any better in the pre 9/11 era. They whine and then they cut staff, ground aircraft, close routes and blame all their problems on someone else. They have constantly raised charges and surcharges and then wonder why passengers go elsewhere. All is done to preserve share holder equity and top management jobs and to hell with the customer.

  • Tom Foolery
    Reply

    The low cost airlines have found a niche populated by consumers who are seeking transport with more transparent rules and fares, and who are willing to give up some of the frills that come with traveling. Let’s face it, a meal (while nice) on a 1.5 hour domestic flight is not a major selling point to many people. Unless you are seated in the pointy end of the aircraft, generally this is a thing of the past. The legacy carriers have simply followed the lead of the low cost airlines in reducing all but the most basic services. Aside from some discounted fares with very inflexible rules attached to them, the cost structure is very much opaque and arbitrary. One must ask ‘Who needs a premium brand that lacks a premium product?’
    The legacy carriers have simply responded to the low cost competition by imitation (as is the case with most US carriers), rather than innovating systemically (as is the general case of Lufthansa), resulting in a dilute, redundant product. It is like paying for a Jaguar, and getting a Ford.

  • Walter Adamson
    Reply

    Hey we're all experts on airlines, here's my bit. I think that the legacy airlines AND many of their start-ups are dinosaurs. I could use Qantas and Jetstar as examples, trouble is they are financially very profitable and “well performing” in any sense within the world of airlines. The issue that I see is exactly the “stuck on stupid” but within the whole airline industry. So if we measure QF and JS against the other “stuck in stupids” they come out quite well.

    In the real world the “success” of JS is all about low price. The “success” of QF is all about still controlling is it 70 or 80% of the Australian market, and neverending protection on key other routes. It appears to my untrained eye that they have used that route protection to close down their full service flights, not face any competition because they had the slots locked up, and then introduce their low price carrier e.g. Japan.

    But that's not my big issue, that's just taking commercial advantage of government stupidity, at both ends.

    The big issue is that their brands stink and their brand promises are trash and the brand behaviour is so far from stupid it is idiotic. Anyone travelling QF on any day of the week will have the same stories, some parts good, some parts bad, some parts appalling, all completely unpredictable except that noone will be at the jetway to open the door when you land on the last flights into Melbourne or Sydney – you'll wait 10 minutes for that.

    Both JS and QF are all about what's good for them, keep hammering the passengers, keep letting them know how lucky they are to be allowed to be a customer, keep telling them what you won't do for them, keep restricting and taking things away and cutting out everything and then putting it back with a fee.

    So in this “competitive” commercial world, why hasn't Virgin cleaned up, if QF and JS are such a mess? Actually it is the same reason – the brand promise is great and on the surface it's happy and bright. But the brand depth and brand behaviour is the same trash. Try with any of them to change or amend bookings, or to do something a little different, or to even ask questions about what options might be available, or to find out when and if your luggage might arrive. It's all the same for all of them – appalling.

    Let's face it – air travel these days is mostly a pain in the butt.

    Consumers are hostages to bad service whereever they turn. So price is the driver – but also apathy prevails and people stick with QF and its offspring as it has a kind of patriotic ring. I'd predict that QF has measured and reported on a high level of “satisfaction” among its travelers and FF members, and this is taken to mean loyalty which it absolutely is not.

    Their TV ads, take the latest QF campaign, promises that travel on business with Qantas is “a breeze”. That is the whole message. I mean really, that's as bankrupt as advertising can get and I thought that the world had moved on. There is no hope of delivering on that promise, and the behaviours during any customer engagement cycle simply destroy the message completely. The others live in the same yesterworld of fake advertising that proves your point yet again – “stuck on stupid” legacy or not in Australia.

    Walter

  • pierreduval
    Reply

    Well, when you use these “new carriers” a bit, you rapidly become a lot desillusioned about their customers oriented performances compared to “elephants”. I tried to use Ryanair & EasyJet several times for business or family trip in 2007/2009 and I'm back to Air France, Lufthansa, United and the like: not really more expansive on the long run, a lot friendlier and a lot more reliable as far as schedule goes…
    The “old” model is not dead, it just impoves bit by bit…and new airlines become “old” quite rapidly when their personnel is fed up with short term business pressure (which does not go well with safety and service on the long run…)

  • vladimirc
    Reply

    While I agree with everything in this post, I believe that the biggest problem with legacy carrieres is their financing. After so many years of heavy capitalization for airplanes, routes, and infrastructure, legacy carriers do not have the nerve, nor the flexibility to develop new business models. Unfortunately, they fall into a cycle of “re-trenching” using past financial strategies, and just dig a deeper hole.
    That mold needs to be broken. Some have gone the route of bankruptcy, with mixed results. The solution needs to be developed between the carriers and finacial institutions. Airlines need to develop a new business model, and as stated in the post, possibly more than one that can operate concurrently. Then the financiers need to give the carrier an opportunity to put the plan(s) into motion and (hopefully) generate the promised returns.

  • vladimirc
    Reply

    While I agree with everything in this post, I believe that the biggest problem with legacy carrieres is their financing. After so many years of heavy capitalization for airplanes, routes, and infrastructure, legacy carriers do not have the nerve, nor the flexibility to develop new business models. Unfortunately, they fall into a cycle of “re-trenching” using past financial strategies, and just dig a deeper hole.
    That mold needs to be broken. Some have gone the route of bankruptcy, with mixed results. The solution needs to be developed between the carriers and finacial institutions. Airlines need to develop a new business model, and as stated in the post, possibly more than one that can operate concurrently. Then the financiers need to give the carrier an opportunity to put the plan(s) into motion and (hopefully) generate the promised returns.

  • vimalrai
    Reply

    I couldn't agree more with this assessmet of legac airlines in general. There are some exceptions however. Many of the airlines that are “stuck” because of large capex expenditure, expensive commitments and perhaps a unionised workforce. Then again, many are also stuck because of tunnel-vision backward thinking management that is secretly hoping for the glory days to return.

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