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But it doesn't work that way in the airline business. You cannot inventory a backlog and slow down production for a while. We make our product every day. If you reduce capacity, your costs rise.
Let me give you an example: let's say an airline has three flights a day out of a city, which is our average. Say you have a flight at 8 a.m., another at noon and one at 5 p.m. Let's say I eliminate the flight at noon to cut costs. Now, none of that business is going to fly on my 8 a.m. flight or my 5 p.m. flight. It all goes on my competitor's flight at 12 o'clock. So the result of reducing capacity is to increase my unit costs.
Q. Why do you oppose cities spending so much to expand their airports? Isn't that good for your business?
A. Because airports cost a lot of money. Look, the public doesn't build airports, we do. When a city decides to build or expand an airport, they sell bonds, and the bonds are guaranteed by the airlines on the basis of long-term leases.
Capacity draws business, but only if you add it in the right places, where people want to go. Many cities seem to think that if you build an airport big enough to be a hub, it will become a hub. It's like they are building the Field of Dreams.
Q. "If we build it, they will come."
A. But we won't! Not if it doesn't make sense.
Q. Where is that happening?
A. Denver. A lot of money is being poured into building a great big new airport way out in the boonies, and they're going to close Stapleton Airport. There's no need for a new airport in Denver. Stapleton is already one-third empty.
Q. Where do we need airport expansion?
A. Chicago is overcrowded and clearly needs more runways.
Q. What's the problem?
A. Environmental concerns. Airports that need new capacity are blocked because people want everything to be quiet. They say that if we fly more airplanes, there will be more noise. Well, of course there will. We don't fly gliders. But if they don't have any growth, there won't be any jobs, and there won't be any new wealth. And then it will get real quiet.
Q. You've earned a reputation over the years as the financial whiz of this industry. You invented frequent-flyer plans and supersaver fares. You are also known as perhaps the most relentless cost cutter in the business.
A. We look and we look and we look. We're always trying to find a cheaper way to do it, to avoid paying for something that people do not value.
Q. Is it true that you once fired a dog to save money?
A. It's true. We had a cargo warehouse in the Caribbean, and we had a guy there guarding it all night long. I was reviewing the budget, and I wanted to reduce costs. My people said we needed him to prevent thefts. So I said, Put him on part time and rotate his nights so nobody knows when he will be there. And the next year I wanted to reduce costs, and I told them, Why don't we substitute a dog? Turn a dog loose in the warehouse. So we did, and it worked. Now the following year, I needed to get the costs down some more, and my guy said, Well, we're down to a dog! So I said, Why don't you just record the dog snarling? And we did. And it worked! Nobody was really sure whether there was a dog in there or not.