Rethinking Airline Success: Insights from My Conversation with Alex Dichter

While working on the second edition of Beyond Airline Disruptions back in 2017, I set out to find people with deep industry knowledge -those unafraid to challenge the status quo and speak openly about the systemic issues making airlines the biggest losers in an industry where suppliers and partners continue to profit. One of them was Alex Dichter, then a Senior Partner in McKinsey’s London office and leader of the firm’s global Airline, Travel, and Aviation practice. I reached out to Alex, drawn by his unorthodox insights and bold articles that questioned institutional thinking, especially around the factors undermining airline financial performance and their fragile relationship with passengers.

The timing of our conversation was not accidental. At that point, airlines were showing historically high profits, but many of us working closely with the industry knew that this financial performance was masking growing structural weaknesses.

Eight years on, much of what Alex shared still resonates and in many ways feels even more urgent.

Following is a lightly edited version of that interview, revisited for today’s context.

Financial Metrics: Are They Telling the Truth?

JR: Airline performance reports are built around disjointed KPIs, often distanced from the operational reality. ROIC (Return on Invested Capital) has become a key benchmark. Is it the right one?

AD: Most frontline employees don’t think in terms of ROIC. They focus on local drivers: cost per departure, check-in automation, etc. and that’s as it should be. But at senior levels, ROIC can be misleading.

For example, maintenance costs are often deferred in accounting. Buy a new aircraft, and for five years you show almost no maintenance costs - so ROIC looks great. But each hour flown still brings you closer to a major check.

Labor costs work similarly. A junior pilot earning $60K might be making $160K in year twelve. So you can show high ROIC for a while without making decisions that are healthy in the long run.

Then there’s the bigger question: does the airline industry as a whole create value? Shareholder returns are poor. But for owners and founders, the story’s different. Many succeed by using leverage, generate quick value, then exit leaving long-term challenges behind.

The Expansion Trap: Growth Without System Thinking

JR: Why would low-cost airlines shift to congested hubs like Gatwick, where disruption risks are high? Meanwhile, legacy carriers are quietly pulling back.

AD: It’s often about demand stimulation and dominance. Most airlines earn the bulk of their profits in cities where they control capacity. That creates an arms race to be “number one.”

But most airlines don’t fully grasp the operational risks of these moves. They make decisions based on long-term averages and rules of thumb. The irony? The data is there. We can predict disruption patterns and redesign schedules accordingly. But it hasn’t yet become part of everyday decision-making.

Outsourcing and the Quality Gap

JR: With more than 60% of cost structures outsourced, how do airlines control service quality?

AD: Technically, there’s no reason an outsourced provider can’t perform as well as an internal team. The issue is how you outsource. There are two models: input-based (you pay for hours, transactions) and outcome-based (you pay for results). The latter is more sophisticated and much more effective.

The real challenge is cultural. Too many providers in ground handling aren’t well equipped. But this isn’t just about outsourcing, it’s about airlines taking ownership. Quality is not a tech problem. It’s an organisational and cultural problem. But again, the data exists.

Passenger Experience: Falling Between the Gaps

JR: As airport congestion rises, passenger experience deteriorates across all classes. Do airlines stop caring once a ticket is sold?

AD: Some things need to change. Passengers need clearer information about risks, missed connections, delay probabilities - not just legroom.

Operationally, every airline would prefer 90-minute connection windows. But they lose market share if they offer them. Passengers pick the shortest option, even if it’s less reliable. So tight connections stay.

Airlines are, in a way, responding to customer preferences, but it’s a fragile equation.

So Who Will Change First?

JR: With lower fares, higher anxiety, and longer delays, who should change: passengers or airlines?

AD: Ultimately, it’s about informed choice. If passengers are given clearer visibility into risks, some will make different decisions. And that, in turn, will shift airline behavior.

I’m eager to see what comes next, especially given the ongoing confusion between Artificial and, in this case, Integrative Intelligence.

Here is the link to the orignal version of our conversation published in 2017: Are Airlines Using the Right Metrics to Run Their Business—or Is Something Missing?