Most people who travel for pleasure, but especially those who travel for business, have developed loyalties over the years to particular airlines, hotel chains, car rental companies, etc. Often these loyalties are reinforced by the companies’ programs – frequent flyer miles and similar points systems or affinity credit cards – that reward the customer and deter switching to another provider.
In one case, however, the bond has been because of service. Southwest Airlines was long known for its idiosyncrasies that set it apart from other airlines but endeared it to many in the flying public.
The airline’s “product” was unremarkable: an all-economy open seating arrangement (no assigned seats), a generally sequential boarding process (largely based on when the passenger got in queue), and no hot meals or other food service, extra-legroom seating, or a First-Class cabin. It did offer free checked bags, however.
The airline was best known for its service, with the crews being famously unconventional in their humor, and rapid turnaround times at airports to stay on schedule. Innovation may not have been its hallmark, but it knew how to do what it did very well – and had profitable quarters year after year.
Investor
All was well until a private equity firm looked at Southwest and saw it as an opportunity to make a quick buck. So the firm bought a chunk of stock – enough to get it influence – and began a pursuit of seats on the company’s board of directors and changes to Southwest’s company leadership and – more significantly – to its operations.
Eventually, arguing that Southwest could generate higher profits – which is what the investment firm wanted – the airline was pressed to comply. The private equity company got its people on the board and forced out senior company executives. Soon, the company began to make changes beyond internal management.
Under pressure to reduce costs, Southwest laid-off thousands of workers – an unprecedented and demoralizing event. Beyond that, to generate revenue from other than simply selling seats, it made fundamental changes to its familiar “product”: it would start assigning seats and rework its boarding process; cabin layouts would be revised to include (for a fee) seats with extra legroom; and – most significantly – it would begin charging for checked bags.
As many airline industry observers have concluded, the investment firm changed Southwest from an airline that was quirky and unique, but successful, into one that is like the other carriers in some ways, but without some of the key services the other airlines offer. Families that would pay Southwest’s fare for free checked bags and a no-frill flight now have no reasons to fly on just another airline that, in fact, lacks the features of the legacy carriers.
Though the investors got efficiency, cost reduction, and more revenue in the short term, they discarded the qualities and service that attracted customers and held their loyalty.
The USPS
So, readers may ask, what does the story have to do with the Postal Service? The agency is a statutory monopoly established within the executive branch of the federal government, not an airline operating in the private sector. All that is true, but both have common issues with costs and revenue, as well as “efficiency” and service, and where management places the emphasis.
Until the arrival of Louis DeJoy, most people would have concluded that the obligations imposed on the USPS are primarily for it to provide service – retail and delivery – and not to simply generate revenue.
From 1775, when it was established as the Post Office Department, through 1970 when it was rechartered as the Postal Service, there was little expectation that it would be profitable. It was a service of the federal government that, until 1970, contributed to its support. The USPO generated revenue through postage, and wasn’t indifferent to operating sensibly, but it focused on service, not making money. The 1970 Postal Reorganization Act reflected that perspective in its opening section:
“The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. …”
The 2006 Postal Accountability and Enhancement Act used a complicated matrix of nine objectives and fourteen factors to define what’s expected of the ratesetting process, made changes to the classes of mail, and redesignated the PRC, but did not alter the basic purpose of the USPS.
The 2022 Postal Service Reform Act changed how the agency’s employee health care plans operate, mandated more studies and reports, but neither diminished the importance of providing service, nor required financial self-sufficiency. Often attributed to DeJoy was language requiring the USPS to operate an “integrated network” for mail and packages and to deliver mail six days per week.
As we all learned over the past five years, cost-cutting, revenue generation, and “efficiency” have become dominant, while service has been continually degraded. Billions have been raised through price hikes to underwrite development of the more “efficient” integrated network, so now Priority Mail and First-Class Mail – despite the rates charged for that mail – move through the same network, and on the same trucks, as lower-priced bulk mail and packages.
The essential mandate of the USPS to provide service has been overshadowed by “efficiency” and the belief that the agency should – or ever could – be a break-even institution.
Like Southwest, the Postal Service has lost its focus on service in favor of cost-cutting, revenue generation, and “efficiency,” all the while trying to convince ratepayers that its actions are good and beneficial. By worshipping at the altar of “efficiency,” Southwest and the USPS lost sight of who they are and what they need to do to be successful: provide the service that customers want and are willing to pay for.