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AirTran Airways - Airline Market Leadership Award 2010
In this most competitive and capricious of industries, and during this most trying of times, staying on top is difficult even for those airlines with entrenched advantages. Simply leveraging a timeless brand, a supportive government, a key hub or sheer size no longer guarantees success, especially when the effort required to innovate increasingly is focused on ensuring survival.
All of which makes AirTran Airways' ascendancy so impressive. These days, it's one thing simply to maintain your position. It's another to lead the pack after having brought up the rear. A decade ago when most of the Atlanta-based low-cost carrier's executive team joined it, AirTran was an airline that passengers chose grudgingly because of its low fares. Now it is among the world's most successful hybrid carriers, attracting an increasing number of passengers with a unique suite of amenities and sticking to a formula that carried it into the black in each of the first three quarters of 2009.
"It was exceptionally difficult. There's no question. It wasn't just one thing, and we were really starting at a point where nothing really worked," Senior VP-Marketing and Planning Kevin Healy remembers. "In many ways there was less pressure when this management team joined the company because nobody thought you were going to be successful."
Those reduced expectations gave Healy, Chairman, President and CEO Robert Fornaro, Senior VP-Finance, Treasurer and CFO Arne Haak, former chief Joe Leonard and their colleagues the time and leeway to make profound changes while ignoring traditional business models. They gradually upgraded AirTran's product as they retired its DC-9s and introduced the 737-700 alongside the workhorse 717, all while restoring the industry-leading low cost base that had enabled it to gain a foothold in the market.
Once the airline had traction, it could work on differentiation. "We had to build a model that was going to work, and we needed to have a cost structure that allowed us to offer low fares and stimulate demand, both business and leisure," Healy tells ATW. "But to be successful we were going to have to adapt to what people want. We couldn't say, 'If you want to fly AirTran, you're going to have to do it our way'."
So it has managed to grow into a carrier that can be nearly all things to nearly all people. Its network focuses on tourist destinations in Florida and is growing in the Caribbean, yet it also features all the major US business centers (ATW, 3/09, p. 40). It sells most of its tickets online, but it has renewed its relationship with the major global distribution systems over the past couple of years--crucial to winning corporate travelers. In addition, unlike other LCCs it offers a competitively priced business class product featuring priority boarding, larger seats, a more spacious cabin and free checked baggage and cocktails. AirTran reinforced its market leadership last year by becoming the first major airline to equip its entire fleet with inflight Internet. Already featuring XM Satellite Radio at every seat, now each of the carrier's 138 717s and 737s offers Aircell's Gogo Wi-Fi product.
The results are clear. AirTran's measured growth along with its prescient May 2008 decision to defer 18 737 deliveries have resulted in improvements to both its bottom line and its stature among its competitors. Through the first nine months of 2009 it had posted a net profit of $117.6 million, and its third-quarter surplus of $10.4 million came against the backdrop of a $578 million aggregate loss by the nine largest US carriers. Meanwhile, it finished second to Hawaiian Airlines in the most recent Airline Quality Rating, an annual independent rating of the operational integrity of 17 US airlines that measures ontime performance, flight completions, baggage delivery and complaints.
AirTran's rock-bottom cost structure makes it possible to attract value-conscious travelers, but its competitively priced business class product, Wi-Fi, free XM Satellite Radio and highly reliable service make it a successful crossover brand. It is a deserving winner of this year's Market Leadership Award.