After a while, I opened it up. Typically, the first thing I read is the letter from the CEO of the airline. I like this section, because it gives you a small glimpse into the airline. Typically the note is about an amazing employee, or upcoming change. At the very least, the letter is upbeat.
The letter from Smisek in November's issue is one of the worst I have ever written:
I copied this from the online version of the November Hemispheres Magazine. They did not have a direct link.
Yes, Mr. Smisek has spent his November letter complaining about the tax code. He believes that the airline industry is unable to complete against foreign competition due to this "irrational [tax] structure."
My beef isn't with the argument made in Mr.Smisek's letter. Rather, the letter is poor taste and the wrong format to address this issue. The letter is not a call to arms ie call your congressmen, but rather a CEO asking for sympathy from his customers. We aren't going to be able to compete if the tax structure isn't fixed. This month's CEO letter seemed like they lifted it from a letter Mr. Smisek wrote to members of Congress. In my opinion, its in poor taste to subject your trapped passengers to your political beliefs.
Now to the meat of his letter. While I agree with some of his arguments, I do not think they are well though-out.
For instance, Mr. Smisek is correct to point out:
"Many modes of transportation use Customs Agriculture and Immigration Resources but aviation customers and airlines pay disproportionately more for using those services. Land, sea, car, rail and bus travelers pay little or nothing."The problem with his argument is that flying is a choice. By making the decision to fly one is agreeing to pay the fees set by the government for the convenience of flying. For me, I pay the taxes on a flight to Connecticut, because its faster and cheaper for me than driving (I would have to rent a car). The tolls alone from driving DC to CT can add up to $30+. Add in the cost of gas plus the stress of driving I-95, I will take the TSA strip searches, government imposed taxes and decking leg-room in coach any day.
In addition, his argument that foreign competitor have an unfair advantage due to an easier tax code is baloney. First, few if any foreign airlines are allowed to carry passengers between two US cities. Therefore, a passenger fly DCA to BOS can not go a foreign based airline to save on US enforced taxes and fees. One can only assume that Mr. Smisek argument was talking about international travel being unfair.
When I tried to check the difference in taxes on international travel between US based carriers and foreign carriers it was difficult. Many foreign carriers lump the taxes/fees into the final price; instead of breaking them out between the base fare and taxes/fees. For instance, a trip to Sydney in December on Qantas produces this:
The $2.737 includes the base fare, taxes fees and carrier charges. Unlike Qantas, British Airways does break down the fees:
They go one step further and break down the fees in a pop-up:
Most of the fees that British Airways is charging are ones that we pay as US based carriers. Using the same trip to Sydney, we find out the taxes and fees will be $173.20. As we can see, the taxes and fees are similar to British Airways:
I know this is one example. I am positive Mr. Smisek and his team can show me many working with his argument. What Mr. Smisek wants to overlook is the power of brand loyalty? Ask 10 people on the street who they would fly from the United States to Australia, most of them would pick a US-based carrier. Why? That is all they know. Some might say Quantas, because they are Australia's carrier, but most will wind up booking tickets on United, American Airlines or Delta. Again, the competition argument does really hold up due to customer ignorance of other options.
I lost a lot of respect for Mr. Smisek with this CEO Letter. I have not criticized United or their CEO on the recent devaluation of their award chart, awkward new "friendly" marketing campaign and overall experience flying United. Why? Because its a business and I understand that changes are needs to please the pocketbooks of shareholders. However, I don't believe its fare to spend your CEO rant and raving about the tax system, because it hurts competitions. Not once did you provide an specific example of where the tax system is working against the airline industry. Instead, Mr. Smisek you used generalizations in the hope of gaining sympathy from your travelers. The same travelers that you nickle and dime. $25 for a checked bag $37 for a seat with more leg room and $3 for a snack. You can't continue to cry poverty when airlines are making billions on ancillary fees.
Mr. Smisek, if you have a problem with the US Tax Code, do what every other industry does. Hire a lobbyist, go testify at a congressional hearing, and have your Political Action Committee donate to politician's reelection campaigns. Don't spend your November CEO letter complaining. The November letter is suppose to be devoted to what you are thankful for.
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