The difficulties arise because both cost and service quality are system issues and as such have no place in the existing performance measures and management practices.
Legacy mindset is still strongly present in governing how work inside airlines is designed and managed. Fragmented information systems, departmentalised optimisations, and top-down functional hierarchies are just some of the issues. They keep managers out of touch with operational reality and damage the way customers are dealt with. The consequences are high costs and poor service quality. No wonder that in order to remain profitable airlines look for temporary rescues in mergers and acquisitions and also invest in massive fleet expansion, which is all a part of financial gaming. It increases the risk of financial failures in the longer term - oversupply of capacities can fuel an even fiercer pricing war, passing additional burden onto passengers.
To succeed in these unfavourable circumstances, airlines need to turn inside and explore their hidden potential for improvement. This includes changes from functional cost cutting to revenue enhancing mentality combined with smart cost adjustments – things that cannot be copied by competitors. The process starts with seeing people behind passenger numbers, understanding their travel experience and becoming more responsive and helpful when they need it most, especially during unexpected interruptions of their travel plans. Passenger loyalty built on trust is the main competitive differentiator that begins from the moment they buy the ticket. Measuring cost and service quality and keep testing it in reality is the key to knowingly reduce the impact of pitfalls in network design and costing, and reinventing pricing strategies (this is contrary to current practices based on assumptions made at the top of hierarchies). The workable business model transformation then starts spontaneously, without forceful changes and practice of copying the competitors.