Five years ago, American Airlines factored in on-time arrivals, lost baggage and consumer complaints to help calculate annual incentive payments for top management. Today, these bonuses are based exclusively on the company’s pretax income and cost savings.
“The response isn’t to Wall Street. It’s to customer behavior,” said Alex Dichter, a senior partner at McKinsey who works with major airlines. “About 35 percent of customers are choosing on price, and price alone, and another 35 percent choose mostly on price.”
So the argument by analysts is basically that executive bonuses are based on profit because focusing on profit focuses on what customers care about most: price. But I call bullshit. When all things are equal, then price matters. Show people something better, and price is no longer the deciding factor.
In otherwords, make the flying experience not suck balls, and you can charge a little more.