(above: photo by Getty Images/Patrick Foto)
A mathematics major, Don Carty (MBA 1971) has always seen the airline business as a huge puzzle, with the equation involving inventory and pricing, cruising allocations, weather, and holiday effects, to name just a few factors. “Solving these problems has always been intriguing to me,” says Carty, which explains his five decades in the field—starting at Air Canada, moving on to American Airlines (where he served as chairman and CEO), and including board stints with Porter Airlines, Virgin America, and Hawaiian Airlines. The industry is always changing, he says, but he believes it is “structurally more stable today than it has been in many years.” Here, Carty answers some of your questions and offers some insight into what the future holds.
Why charge passengers for checked bags but not carry-ons? Why not do the reverse and let people check bags for free? The result would be more checked bags, more overhead bin space, faster boarding and deplaning, and probably more money.
—Katherine Liu (MBA 2004)
CARTY: The airlines are wrestling with this. Unbundling pricing and charging separately for checked bags has resulted in more people trying to carry on bags, and frequently those bags are larger than allowed. Enforcement of carry-on rules has increased at most carriers, and at least one has moved to charging for carry-ons—even charging a premium at the gate if the passenger hasn’t purchased the carry-on privilege in advance. The next couple of years will see more experimentation with baggage pricing.
The success of Emirates is due in part to the fact that airline, airport, and air traffic control work together under one “boss” shareholder—ultimately owned by the government of Dubai—which is not the case in the majority of the industry. Would the industry be best served by a model in which these three entities operate under one umbrella?
—Marguerite Soeteman-Reijnen (AMP 190, 2016)
CARTY: The growth and development of the airline industry over the last 30 years has been based on deregulating the business and encouraging open, free-market competition. While market liberalization internationally is still evolving, the consumer benefits of the competitive marketplace are pretty compelling. Putting any one carrier in charge of the infrastructure that forms the framework for competition is really an argument for doing away with a free market, and replacing it with a government-owned or government-controlled airline industry. Although Emirates has done an extremely good job when it comes to customer service, I would argue that the primary reason for its success is the government support it has received.
How do you see the new generation of aircraft like Boeing’s 787 and 777X and Airbus’s A350 series impacting the structure of global networks?
—Ryan Both (GMP 18, 2015)
CARTY: The new generation of long-range aircraft is not likely to have a major impact on the structure of global networks. Many of them will simply be replacement aircraft for a lot of existing international routes. But their longer range will allow airlines to offer service on some routes that are not served on a nonstop basis today. The markets from the United States to Asia, Europe to Asia, and many long-haul intra-Asian routes will be the beneficiaries of this new capability. As Asia continues to be the fastest-growing region for air travel, these aircraft will play an increasingly important role.
Class of MBA 1971, Section B