Attention All Passengers (12 page)

The problem for airlines and passengers alike, of course, is the same problem discussed in other chapters: record-high load factors. With planes more crowded than ever, the number of unredeemed miles keeps soaring. So in order to mitigate a clear-cut case of demand far outpacing supply, the major airlines have developed other coping mechanisms, like higher redemption thresholds, expiration dates, and fees, fees, and more fees.

The bottom line is that the goalposts have been moved. Until a few years ago, it required 25,000 miles to earn one round-trip domestic flight; now all the majors require 50,000 miles in most cases. Of course, redemption is still available at 25,000 miles, but it includes a host of restrictions and blackout dates that affect availability.

Then there are the ever-changing rules on expiration. As far back as the mid-1980s, United was stamping expiration dates on mileage; today it's common practice. For example, Delta announced that all mileage earned after January 1, 2011, will not expire, but all mileage set to expire prior to that date would not be reactivated on a complimentary basis. I received a letter from an angry reader who was told by a Delta rep he could reactivate his expired miles—for a fee (there's that word again). He rightfully asked why he needed to pay for something he had already paid for once.

And of course there's no reason to believe frequent flyer programs will be spared the ancillary revenue trend. SmarterTravel.com's “Ultimate Guide to Frequent Flyer Fees” is continually updated, and no wonder, since both the number and amounts of fees are continually increasing. An “Award Ticket Change Fee” is $150 on American, Delta, and US Airways, while “Upgrade Cash Surcharges” can be as much as $500 on Continental and United, and Alaska charges $25 for something called a “Partner Airline Award Fee.”

Many members may not have contemplated it, but in essence frequent flyer programs are a study in comparing apples to oranges. On the flying side, you earn by generating miles, so a flight from Boston to Seattle is worth about three times a flight from Boston to Detroit. Yet once it comes time to cash in those miles, all domestic round-trips are treated equally, so Boston–Detroit requires the same 50,000 miles as Boston–Seattle. What's more, airline pricing has never been based on mileage; you can easily pay four times as much to fly from Boston to Washington as from Boston to Miami. So there really are three types of currency—miles, trips, and fares.
6

Therefore, when it comes to redeeming, consumers should consider the
value
of a single frequent flyer mile. Like all currency exchange rates, it's a moving target, but it usually hovers in the 1.5¢ to 2¢ range. That means even a trip that costs only 25,000 miles should be redeemed only if it cannot be booked for less than $400. The airlines will never tell you this, because they're happy when you redeem mileage at less than its face value—whether it's for trips, upgrades, or any number of products in that catalog in the seatback pocket.

Tim Winship is another guru, as well as the publisher of FrequentFlier.com, and he speaks of two “marquee” pieces of news in recent years: One is the evolution from frequent flyer programs to frequent buyer programs. American Airlines' AAdvantage program has grown to more than one thousand partners, for everything from financing a mortgage to buying a pair of khakis at the Gap. So how can an airline executive resist when Citibank comes calling with a satchel full of cash to cobrand a credit card? Winship says it would be bad business to say no. The other piece of news is that awards are increasingly difficult to come by.
7
Sorensen of IdeaWorks adds, “I think the airlines have learned the economic cost of ignoring frequent flyer members because of how it has come back to bite them.”

Winship points to the industry's recent “historic” escalation in filling cabins while both load factors and the amount of miles being issued continue to increase: “It's a zero sum gain.” So at what point do we declare airline frequent flyer programs to be well-marketed pyramid schemes or shell games? “That's the worst-case scenario,” admits Winship. “Would the airlines allow this to happen? You never want to underestimate the stupidity of the airlines. My own best guess is they would avert that type of shipwreck.”

Any discussion of frequent flyer programs eventually leads back to Rolfe Shellenberger. Back in 1951, he was one of about one hundred people on the second floor of Hangar 3 at New York's LaGuardia Airport, answering calls and jotting down passenger names and phone numbers on index cards, cutting-edge Korean War–era technology. Eventually Shellenberger would become a key architect of AAdvantage, widely recognized as the first major mileage program when launched in 1981. Airline myth holds that launching frequent flyer programs in the 1980s was never about rewarding loyalty—it was about
buying
loyalty in an industry notorious for a lack of it.

As for Shellenberger, he is not happy to see how his brainchild has devolved. “It's cupidity,” he says of the current state of frequent flyer programs. “It's greed. They're screwing it up and they're ruining a good thing. The bean counters got involved because it's profitable, and few things are profitable for the airlines these days.”

5

A Mad Race to the Bottom:

How Airlines Mistreat Employees, Outsource, and Ignore Passengers

Once you consent to some concession, you can never cancel it and put things back the way they were.

—Howard Hughes, chairman of Hughes Aircraft and TWA

N
o Puerto Ricans, no Jews, no job.

In 1991, I learned that my employer, the Pan Am Shuttle, had been sold to Delta and would commence operations as the Delta Shuttle. During the course of a hectic twelve days, I was interviewed by the conquering carrier and offered a job 750 miles away. A senior exec from Delta personally sat me down in the Marine Air Terminal at LaGuardia Airport and urged me to jump at employment as a flight dispatcher in Atlanta. But I wasn't eager to jump; in my heart I knew my “summer” sojourn working for the airlines—which had now lasted seven summers—was finally ending. I had no interest in working in a large ugly building without windows at Hartsfield-Jackson International Airport.

I patiently explained I had personal reasons for not transferring to ATL: I had been married for only two years, and my then-wife was immersed in a Ph.D. program and could not leave the area. It would mean living in a one-room efficiency in Peachtree City and using my dispatch license to bum cockpit rides back and forth to New York. The Delta exec tried to convince me my wife should switch schools: “We've got lots of good universities in Atlanta.” Then he looked right at me and added: “In fact, about the only things New York has more of than Atlanta are Puerto Ricans and Jews.”

When each of us looks back on the highlight reels of our life, we tend to focus on the moments when we stepped up and rose to the challenge. To be blunt, I've always considered myself fairly quick with a quip or a comeback, someone who can think on his feet without getting tongue-tied. But that day in the Marine Air Terminal I was flabbergasted. I simply couldn't conceive that a senior executive at a Fortune 500 company would utter such a statement, and my vocal cords failed me. For several long seconds, I had nothing. By the time I was close to retorting, he was blabbing about Delta's health benefits. I felt my face and neck growing warmer, and thought of some way to let this bigot know that the woman he wanted to switch graduate schools was Jewish. Finally I blurted out, “Another reason I can't relocate right now is my wife has a part-time job teaching Hebrew school.”

You'd think he would have had the grace to look shocked, but he didn't even blink. Later that day, I learned from a good friend of mine that her interview had taken a bizarre turn as well. Her family was Cuban, and the man from Delta wanted to know where she was from. “New York,” she replied. “No,” he kept repeating. “Where are you
from
?”

It turns out our experiences were not at all isolated. Several weeks later,
Newsday
ran a front-page headline about Delta's treatment of former Pan Am employees that satirized the company's old slogan: “They Love to Pry and It Shows.” There were multiple stories of applicants for the position of Delta flight attendant being asked about their private lives. Homophobia and sexism abounded. Males were questioned on their sexual orientation, while females were interrogated about birth control. By the early 1990s it eventually became apparent that Delta's definition of corporate diversity entailed promoting straight white Christian guys who hailed not just from Atlanta but from throughout the entire state of Georgia.

Then again, bigotry was not a new concept at Delta. Back in the day, Carleton Putnam had orchestrated the mergers of a series of smaller airlines that eventually became Delta, and then served as chairman. But in the 1950s he stepped down to devote himself to academic discourse, and promptly wrote
Race and Reason
, a landmark 1961 work on segregation. That is, it's a landmark work if you see the world through the eye slits of a hood made out of bedsheets. It's a book that
defended
segregation, and it's still quoted today by white-supremacy organizations. No less a literary scholar than David Duke—American Nazi and former Grand Wizard of the KKK—gushed that when he bought it, “I was about to read a book that would change my life.”

So clearly there was a lot more playing out here than the melding of two very different corporate cultures. Pan Am was the world's greatest airline and America's premier flag carrier during much of the American Century, making its reputation at a time when Delta was better known for crop dusting. Human Resources liked to tell us our “blue ball” was the second most recognizable logo in the world behind Coca-Cola's circular thingie. And that blue ball was bolted into the top of a skyscraper that fronted Park Avenue. For my interviewer and several other Delta execs, the takeover of Pan Am's shuttle and European routes apparently was a response to General Sherman's march through Georgia. A few days after my Puerto Rican–Jewish interview, I was alerted to a modest severance package. That option was a hell of a lot more attractive than debating the merits of
Race and Reason
on a midnight shift in Georgia, so I said farewell to a business that was rapidly changing—for the worse.

Goodbye to All That

My most controversial action on the DOT's Future of Aviation Advisory Committee was vocally and repeatedly arguing that the FAA needs more resources to address airline maintenance outsourcing, both domestically and overseas. There were three labor representatives on the FAAC and I was the only consumer advocate, but we at Consumers Union made a conscious decision not to address outsourcing as a labor issue, for fear it would dilute and distract from the very real concerns over safety. But the time has come to address what I could not address on the FAAC: there is no question that employee “downsizing” and outsourcing have had adverse effects not only on safety but also on service and quality.

In recent years most of us have become our own grocery clerks, bank tellers, gas station attendants—and reservations agents. Like other global industries, airlines have shifted tasks that once were performed by their own employees onto their customers. When we book online we become res agents, and when we check in at an airport kiosk we become ticket agents. And yet from an airline cost point of view, enough is never enough. Besides fuel, labor remains the highest debit on every carrier's ledger, and airlines keep looking for ways to reduce employee expenses.

Consider that in the 1990s and 2000s four domestic network carriers launched six different “airline-within-an-airline” products, separate brands designed to compete with Southwest and other low-cost operators:

• Continental Lite (aka CALite), from Continental

• Delta Express and Song, both from Delta

• Shuttle by United and TED, both from United

• MetroJet, from US Airways

All six efforts ultimately failed, and analysts noted that just wishing for a lower cost structure doesn't automatically produce one. These operations were run exactly as the high-paid consultants advised: no frills, skimp on amenities and meals, quick-turn the airplanes, obtain greater utilization of aircraft and equipment, etc. But there was no getting around the most significant variable cost of all: labor. Even when network airlines try to segregate their employees through separate contracts and hiring practices, legacy carriers manage to generate higher labor expenses.

And so the major airlines—and even low-cost carriers—have turned to other methods to reduce their labor bills. These include outsourcing, laying off workers by the tens of thousands, hiring “b-scale” employees at lower wages, shifting full-time work to part-time work, and cutting benefits.

What is not readily recognized by the airlines is that all these actions have equal and opposite reactions felt by passengers.

India Calling: Overseas Reservations

Airline customer service—increasingly viewed as an oxymoronic term by legions of paying passengers—has morphed into something quite strange in recent years. And so I decided to tap into the very nerve center of the U.S. airline industry. That, of course, meant traveling 7,834 miles across the world to India.

In the years after 9/11, news outlets across the country were continually reporting on U.S. airlines shutting down telephone call centers. In most cases these stories were accompanied by corollaries detailing where all that work went. In 2003: Delta outsources to India. In 2004: American outsources to Mexico. That same year: United outsources to Canada. Manila. Santiago. Cape Town. Montego Bay. Pune, India. Delhi, India. India. India. India.

Was anyone truly surprised when CBS News reported that eighteen states were outsourcing welfare benefit calls to India? One IT firm in India boasts on its site of all the Fortune 500 companies that have offshored work to that country, including Microsoft, Oracle, Citibank, Morgan Stanley, Wal-Mart, AT&T, General Electric, Reebok, General Motors, Sony, Boeing, Coca-Cola, Pepsi, Swissair, United Airlines, Philips, IBM, Lucas, and British Aerospace.

It was a delicate mission I embarked on, and as I precariously scheduled meetings at leading call centers in New Delhi and Mumbai, I lived in dread that a representative would insert the search phrase
McGee airline outsourcing
into Google and read all my previous work on the topic. Full disclosure: even before I began this book project, I wasn't a public cheerleader for offshoring U.S. aviation jobs.

Malarone for malaria and Vivotif for typhoid? Check. Deet insect repellent for warding off disease-carrying mosquitoes? Check. Compression socks for avoiding deep-vein thrombosis during the thirty-six hours of round-trip flying? Check. Visa? Check. But not before noting with irony that the Indian consulate in New York City has—wait for it—
outsourced
its visa services. LMAO, as the kids say.

The very week I was visiting call centers on the subcontinent, Donald Trump was making news, barking about America being overtaken by the new economic powerhouses, China and India. In one sense he's right, of course, since U.S. debt to Asia continues to accrue at an alarming rate; Southern California Public Radio reported last summer that China held at least $1.115 trillion of our debt. However, I've visited both countries and what Americans often don't grasp is that these emerging superpowers—complete with high-tech infrastructure, plenty of new construction, nuclear weaponry, even space programs—remain dirt-poor places for many of their own citizens to live and work. We have far too much poverty in America, of course, but there's no comparison between the standards of living.

Yes, Fortune 500 companies have rushed to outsource in India, but it's impolite for returning American business travelers to mention the piles of dung and the ubiquitous trash lining nearly every street in New Delhi and Mumbai. The cars and buses and Thai-style tuk-tuks clearly have no emissions controls, and the air stinks of pollutants, both gasoline-generated and animal-generated. When you set out for the airport at 5 a.m., packs of wild dogs roam downtown thoroughfares, cows graze on garbage in the traffic circles, and bare-butt children sleep in dirt. Sure, you'll see yuppies in golf shirts toting laptops. But once United Airlines and American Airlines and Travelocity come calling, it's no wonder there is no shortage of newly minted IT and customer service professionals eager to jump into the breach.

Of course, frontline employees on both ends of this equation are simultaneously getting screwed over on two continents. U.S. workers are watching decent jobs emigrate for good. James P. Hoffa of the Teamsters recalls meeting with devastated TWA employees who were in tears after their call center in Charleston, West Virginia, was outsourced to India. “Do you know what that does to a community?” he asks.

Meanwhile, in India they're barely making a fraction of the living wage they would receive in the Western world. Yet even where wages are lowest, there is little job security. Documentary filmmaker Dawn Mikkelson noted this when she visited outsourced maintenance shops in Asia: “The guy in Hong Kong is going to lose his job to someone in China, and now the guy in China is going to lose his job to somewhere else.”

All this contributes to an economic divide in India that makes America look like a commune by comparison. It's crass to use the word
caste
in democratic India today, but how else to describe the creepiness of staying at the palatial Hilton in Delhi? It's a fenced, gated, and guarded fortress in which the undercarriage of every taxi is screened for explosives while the gorgeous fourth-floor swimming pool overlooks a slum. But it served as my base as I set out to finally view airline outsourcing up close and personal.

There are many entrances to the WNS Global Services facility in Mumbai, but my appointment was at Plant 10, Gate 4 (just past the Citibank kiosk at Gate 2). A poster warned
NO SHOOTING!
and they mean it—all cameras are checked at the door, and surreptitious photography results in confiscation. Once I turned over my digital Polaroid, I entered a huge campus that is quasi-collegiate and quasi-military. Then it hit me: the place resembled those old clips of 1940s Hollywood studios, with bicycle messengers scooting past Quonset huts.

The executive who scheduled my meeting had been called away, so instead I met Shainon Vyas, a hip young assistant manager in Corporate Communications (in apologizing for his delay he said, “My bad”). But he is Indian through and through, and repeatedly referred to Mumbai as Bombay. Unfortunately, nearly all my questions were deemed proprietary, so there was much he could not share with me. I received a quick tour, and gazed through thick glass at a vast room of endless cubicles designated exclusively for the travel sector. This was it: the epicenter. When you haggle for an airfare refund or need to reschedule your flight, chances are good your call has been routed across several oceans right to that desk over there.