Value, pricing, and the TSA

I try to avoid political commentary, but sometimes I just can’t avoid it. The airline industry has always been a tough place to make money, but since 9/11, terrorism fears, long delays in security, and surging oil prices have really made the market a place with little pricing power and lots of cost exposure. Pricing power comes from perceived differential value, and this phrase is probably not heard in a lot of airline executive offices. (Southwest is a notable, and profitable, exception.) Part of the problem is that it’s hard to differentiate one major carrier from another. So much of the travel experience is out of the airline’s immediate control.

However, every time the TSA ups the ante of ridiculous reactions to the last terrorist threat (or lobbying dollars from the well-connected), the perceived differential value of *all* airline travel decreases. Do I want a nice dose of radiation and a somewhat nude picture of myself sent to a server somewhere (TSA was caught lying about the ability of machines to store images. Of course they can store images!)? Or perhaps I’d like to be sexually assaulted (there’s really no other word for it) by a frustrated TSA official? Or perhaps I’d rather just do a video conference. Or drive, if the distance is short enough. Or just change my plans.

As someone who flies a fair bit (and whose loved ones fly, too), I have a pretty big interest in air travel being as safe as reasonably possible. However, I accept that 100% security is impossible. (Especially once I pull out of the airport and onto the freeways.) We’re not even making a “trade off” of time, dignity, and constitutional rights against safety. There’s no value on the other end. For all the billions spent, how many terrorists has the TSA caught? 0. Passengers have caught a few. Law enforcement has caught some. Again, TSA: 0.

Back to the airlines’ executive offices. The CEOs of these companies should be doing the talk show circuit, talking about how this is an intrusion of big government into business, etc, etc. Considering how much airtime these types of issues sometimes get, you’d think it would be fertile ground. And perhaps they would have more sway than the folks who actually travel. But they don’t, because they are afraid, too. Not of actual terrorism, but of taking any responsibility. One of the primary jobs of a CEO is to maximize the profitability of the business, which is tied to perceived differential value. In this case, the differentiation is not from immediate competitors, but from other substitutes– other modes of travel, or communication, or just staying home. If your market starts destroying your value prop from the “outside”, you need to do something about it.