Airline Baggage Handling

The gold standard for quality assurance is known as 6 Sigma. Without going into detail, 6 Sigma translates into approximately 3.4 defects per million items.

When it comes to baggage, there isn't an airline in the world that comes close to performing at that quality level.

Since the 6 Sigma defect rate is measured in relation to the number of opportunities to foul up, a reasonable estimate of the "mishandled" (a squishy word for lost, damaged or destroyed) bag rate, under a 6 Sigma system, would be around 6.5 per million travellers. The reason that it is higher than 3.4 is that many bags have to make connections, and some travellers check more than one bag, so the average number of opportunities for loss, damage or destruction is significantly greater than one per trip.

The actual ten year average of "mishandled" baggage reports, for the eight largest airlines in the USA, ranges from 4.25 (Continental) to 5.49 (United) per THOUSAND passengers. It is not too hard to do the math which shows a defect rate that is at least six hundred and fifty times worse than the 6 Sigma standard.

That airline executives can, with a straight face, charge extra for checked bags, while delivering wholly inadequate service, must be considered a marvel of modern business. Adding insult to injury, we hear only excuses and see not very creative efforts to assign blame to someone else.

That is just not good enough. It also brings to mind a thought that crossed my mind some thirty years ago, when I was relatively new in the consulting business: the only reason that any given company is not bankrupt is because the competition is as incompetent or worse.

In the past eight years, all of the major airlines, except American and Southwest, have taken a trip through Chapter 11 of the bankruptcy code. Although Southwest hasn't gone bankrupt, it doesn't count because it is really a single focus hedge fund, speculating in jet fuel futures, that happens to own and fly airplanes. How much profit would Southwest have made for its shareholders if it hadn't bothered to be in the airline business?

It is time for management and unions, whose incompetence (and shortsighted greed) has created this situation, to suffer the consequences. So, too, should the shareholders who have invested (speculated?) without performing a proper analysis of the industry's dysfunctional economics and incompetent management.

The next airline to file under Chapter 11 of the Bankruptcy Code should be refused protection from its creditors and be liquidated under Chapter 7. That is the nature of capitalism: the risk of failure is the other side of the potential for reward. Penalty free "do overs" are for kids in kindergarten, not business people whose salaries are in the millions of dollars.