Cushman & Wakefield are global commercial real estate brokers specializing in commercial real estate space. Their interests in both commercial office space and warehouses are substantial. As a result, C&W have produced an interesting white paper that documents trends in commercial warehouse space in both the Americas and globally.
Interesting findings include:
Global industrial rents
declined by an average of 5.5% in 2009
While the Asia Pacific region
saw the largest decline in rents (-6.4%), it is also the first to show
signs of stabilizing due to an up tick in exports and rise in production
Ottawa now
replaces San Francisco as the
most expensive city for industrial space in the Americas
In the US, an increase in
consolidation has caused a trickle down effect including an increase in
supply of space and a downward pressure on rental rates
Upturn in domestic consumption
and regional trade will be the determining factors in the strength of
recovery in occupational demand
The global info in the C&W white paper didn't surprise me. However, some of the trends in the Americas were of interest. In particular the expense of commercial property in Canada and Mexico. Both are growing markets, but the cost of commercial buildings surprised me given the downturn in the global economy.
I guess some folks must've found the SWA baggage strategy article interesting... that article got over 27,000 hits in the last 48 hours!
A number of people asked me if I had a twitter account. Up to now, the answer was no. Mainly because I am still unsure as to what value twitter brings. However, the best way to learn is to do! So, herewith you can follow me on Twitter as freightdawgcom.
Dear blog visitor, watch this video of a Southwest Airlnes television commercial...then lets talk.
What you see above is pure marketing genius.
Heres why:Southwest Airlines flies a network within the United States that uses basically one airplane. The Boeing 737. For this reason, baggage capacity is fairly consistent with passenger load. Also anyone making a connection is likely to make a connection to another SWA 737, so baggage load factor remains fairly consistent across the network. This has major advantages.
By inspiring customers to check bags, aircraft can be loaded and unloaded much faster than if passengers carry bags onto the main deck and put them in the overhead bin. Anyone who has been on a fully loaded jet recently knows it can take 15-20 minutes just to get the passengers off the plane. The bigger the jet, the longer this takes. Time spent on the ground means time not in the air. Airlines only make money when the jet is flying. By encouraging passengers to check bags and by operating a homogeneous network, SWA can turn flights faster and thus create more profit for the airline.
What you are actually witnessing is an extension of Southwests fuel strategy. SWA has always done a brilliant job of fuel cost hedging. That is buying futures in jet fuel against probable market cost at time of consumption. Turning aircraft faster means more revenue for the fuel already purchased. Consider this a post hedge leverage on the gas in the tank.
Other airlines either dont get it, or can't. Look at Continental and Delta as examples. If I fly Delta from Phoenix, Az to Savannah, Ga, I am going to fly on a Boeing 757 to Atlanta, then change planes to a regional jet operated by a 3rd party commuter airline like Chautauqua. If I pack golf clubs, a suit case, and maybe my wife does the same, there will be more baggage than the feeder aircraft can accommodate. This is a big problem especially to vacation destinations where scuba gear, skis, golf clubs etc, are part of the bag mix. For this reason, the majors discourage checked baggage.
They don't want you to bring luggage in the first place because you screw up their network planning. Most majors don't want you to have ANY bags. They don't want to carry them and especially they don't want the liability for tracking and reuniting you with a bag left behind because of network mismatch.
Consumers think the airlines lost the luggage. In fact many times the airline couldn't accommodate it so they chose to pay a premium to deliver it to you later, often at the cost of your loyalty and future business.
This is exactly why I had to pay $25.00 for one checked bag today on a Continental regional jet flight from Houston to Atlanta. I rarely fly Continental any more because my travels most often take me where Delta flies. DAL has its largest hub in Atlanta, so I have travel status with them. As a frequent flyer, I dont pay the extra baggage fees for checked bags I would on other less frequently flown carriers. This incites loyalty as a function of consumer cost and convenience, but it also is a major cover up for airline network inefficiency.
Southwest is leveraging the HELL out of this opportunity. Folks like me who fly weekly and spend business dollars to do so, need to get there efficiently and as conveniently as possible. If I can check a bag and know its going to get there, and not pay any extra, I will skip the frequent flyer loyalty in order to make the flight that best suits my business interests. Im not a vacation traveler. Im the guy whose money pays for the flight.
SWA's network allows all this to work. Consistently sized aircraft, carefully selected destinations and a desire to compete with the big guys only where they can win, has made Southwest profitable where the big guys have failed.
The advertising campaign is a very clever leverage of the weakness of big air carriers. However, it has complex reasons as described above. Nevertheless, the big guys (or any air carrier) could fight this another way.
What if an air carrier said...rather than charge you a fee to check a bag, They would PAY you to do so? Maybe not in cash, but in additional frequent flyer mileage or another perk? What if that same airline also said that they would enable you to track your bags enroute so that you KNEW that your bag was on the same airplane you were on, that the bag also made your connection and that the bag finally was enroute to the bag carousel at the destination. And what if all that was sent to your cell phone, PDA, Blackberry or whatever.
I think what would happen is that customers would immediately start to check luggage and flight turn times would improve measurably. Enough to avoid government imposed fines for late departures as well as save millions in fuel costs. The cost to enable this kind of program is to treat baggage the same way the express carriers (UPS, DHL, FedEx, etc.) treat packages. You track it and milestone enable scanning technology. Scan the bags at specific milestones like checked in, onboard, deplaned, at destination, etc. Sending to a PDA is common technology nowadays.
If I were a competitor to Southwest, this is what I would do. However, if SWA does it first, the goodwill created as a first mover on the advertising campaign, coupled with the tracking technology described, would be very powerful.
On December 7th, 1941 a Pan American Airways Boeing 314 flying boat was enroute to Auckland, New Zealand when news of the Japanese attack on Pearl harbor reached them by wireless. Directed to get the high tech airplane back to the US, the crew flew around the world westbound.
The video below is about that flight. I wouldn't mind the air miles for this one, but the trip was dangerous and lengthy.
Those who want to know the rest of the story, check this link.
Recent Comments