Note: This article was originally published on Wednesday, May 2, 2018 at 4:02 in the afternoon and has been updated.
As the travel industry as a whole has started to contract worldwide — to the point where American Airlines reported a loss of $473 million and other companies in the travel industry have pared back on their forecasts for future earnings — now many be a good time to remind companies in the travel industry that simply cutting back does not grow a business.
Simply Cutting Back Does Not Grow a Business.
Lowered earnings forecasts and higher costs of goods could tempt a company — whether or not it is in the travel industry — to cut back on numerous products and services.
As an example, I dined for lunch at a local restaurant some years ago; and one of the items which I typically enjoy is ravioli, as I do not eat it very often. My last experience was quite disappointing primarily because of significant cutbacks on the food. When I started dining at this particular restaurant, the dish contained six ravioli with a significant amount of filling; six shrimp that accompanied the ravioli; and a Caesar salad. A small loaf of hot fresh bread came with the meal…
…but the meal I received no longer came with salad; had only five ravioli; and less filling was stuffed in each ravioli — to the point where parts of each ravioli were flat with no filling at all. Even the olive oil for the bread no longer had pepper freshly ground on it for that slight extra kick of flavor.
The person who served the meal apologetically explained that salads no longer accompanied the entrée at lunch. The meal was still good — although not as good overall as when I first started dining there — but I was not full when I left; and that was the first time that happened.
In case you were wondering, the cost of the meal was still the same despite less food.
With those new policies in place, the value for me to dine at that particular establishment no longer existed. I stopped dining there — and the restaurant permanently closed not long after that.
The same can be true for companies within the travel industry: charge the same price for a lesser product or service; and I will likely go elsewhere for what I need to travel in the future. Cutbacks do little to foster customer loyalty to a brand.
Cutbacks in the Travel Industry
Over the years, travel companies have been implementing similar cuts in products and services — one of many examples was the uproar over the devaluation of the American Airlines AAdvantage frequent flier loyalty program back in March of 2016 — and on some of the particularly egregious cutbacks over the years, consumer response was strong enough that the company was forced to restore value — partially, at the very least.
Then again, I believe in many cases that is a ploy: have the customer lose what he or she enjoys in a product or service in order to appreciate it more when only some of the value returns to the product or service. That could possibly happen during the remainder of 2025.
This sort of slicing costs is nothing new to airlines. Remember the famous story of when Robert Crandall — once the chief executive officer of American Airlines — reportedly had the idea in 1987 to remove an olive from each salad served to passengers, resulting in a savings amounted to at least $40,000 a year?
For the record, Crandall did not conjure the idea to remove the olive from each salad. Rather, a member of the flight crew — who noticed that passengers rarely ever ate it — was the brainchild of the cost-cutting measure. At the time, American Airlines had an incentive program where employees could report ideas which save money — and get a portion of the savings as an incentive…
…and the airline may still have this program — except one does not get any return on successful ideas, which likely resulted in significantly fewer ideas submitted to the airline by its employees. That — in and of itself — is cutting back which likely does not benefit the airline in return for the nominal savings in cost.
Speaking of which, remember the uproar by employees of United Airlines when the introduction of a new incentive program was announced through which instead of receiving a guaranteed small bonus, employees have the opportunity instead each quarter to win a significantly larger prize — such as one of ten employees to receive a choice of a Mercedes-Benz C-Class sedan or $40,000.00; or perhaps the sole winner of a grand prize of $100,000.00?
The removal of one olive per salad may not matter much to passengers. Remember the Great GrapeGate Grate of 2014 when groups of FlyerTalk members grappled with the gripping story of griping about groping fewer grapes — or lack thereof — during meal service aboard aircraft operated by United Airlines? How about when the airline purportedly bade farewell to garlic bread, ketchup, and Sprite Zero?
Many other cutbacks had occurred over the years with not only airlines, but also lodging companies, rental car companies, and other businesses of which the travel industry is comprised.
Final Boarding Call
Cutting back on the value offered on a product or service is certainly understandable when the cost of providing those products or services increases — but when overall value is decreased significantly enough, the customer will likely be dissuaded from further patronizing the company. This is especially true when the experience itself has degraded significantly enough and no advance notice of the devaluation was announced.
Devaluations are certainly not the end of the world — especially when put into the proper perspective — as life is all about maintaining perspective and adjusting your expectations…
…but unless a company offers such exceptional value to its customers that the cost of maintaining it is unrealistic — and that most customers will still patronize the company regardless of the reduction in value — history has repeatedly proven that simply cutting back solely to save money does not help to grow a company.
In fact, quite the opposite effect could happen: cutting back could actually cost the company significantly more money than it saves — especially if enough customers are dissatisfied enough to conduct their business elsewhere. More often than not, cutbacks typically eventually sound the death knell of a company — or, at least, substantially shrink a company which once thrived. The present financial situation of Sears is a good example, as the retail behemoth once had a wildly successful catalogue and almost 3,500 stores around the world — but only eight stores remain open to this day.
The potential good news is that when travel companies endure more difficult times of doing business, some of them reintroduce products and services that were cut out during the good times to maximize profits — or perhaps introduce new products and services to entice more customers…
…and if that will happens during the second half of 2025, those of use who travel often will benefit…
All photographs ©2024 and ©2025 by Brian Cohen.
