4.06.2009

How Can Travel Companies Cope With Overcapacity?

A recent trip to Florida got me thinking about how to cope with overcapacity – in this case, in the travel industry. I didn’t come up with any easy answers, so perhaps this posting will prompt some comments with worthwhile suggestions.

I flew on Continental from Newark to Fort Lauderdale on a 7:30 a.m. weekday flight. Much to my surprise, the plane was no more than two-thirds full. A flight attendant told me that the 6:30 a.m. flight, considered more of a business flight, was always full. Perhaps. But the simple fact that any flight nowadays could have so many empty seats is indicative of the decline in travel that has already been widely reported.

(For the record, my return flight two days later was full. However, that 6:30 pm flight took off two hours late because of weather problems. I believe it may have had additional passengers from earlier delayed flights, and I know it was filled up partly with stand-by travelers.)

When I arrived in Fort Lauderdale, I went to Dollar Rent a Car to pick up my reserved vehicle. Dollar has a counter with about 20 computer stations, but only three of them were staffed. The agent I spoke with told me most employees were in a meeting. Perhaps. But I don’t know how many employees were actually there. And the line of people waiting to pick up cars wasn’t that long.

Those two specific examples aside, we know that airlines and car rental companies are suffering. How do you cope with that? A partially full plane doesn’t cost any less to fly than a full one. And the maintenance of a 20-station rental counter doesn’t go down when business is slow, though staffing costs will be less.

Airlines are mothballing some planes, but that approach has its limitations.

What lean principles or methods are most relevant here? How do you cope with high fixed costs during a business downturn? Post your thoughts below.

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