PEG 2.0

Writer & entrepreneur. Bio.

This is my very, very personal blog.

All work that is my own is my copyright; rights reserved. Toutes mes oeuvres sont protégées par le droit d'auteur.

On The Virtues of One Plane

Matt Yglesias notes that Southwest has just one type of plane, which generates all sorts of efficiencies, and writes:

One problem, I suppose, is that you might end up too much under the thumb of Boeing once you’ve super-committed to just flying a single model of aircraft.

Actually, the opposite is the case. We studied the Easyjet case in business school, which has a similar business model to Southwest’s. Because discount airlines buy one type of plane from one manufacturer, they’re almost always their biggest customer for that plane, which means the plane companies are eager to please them and give them volume discounts. 

For example, Easyjet, which is committed to Airbus like Southwest is to Boeing, placed the biggest order in Airbus’s history right after 9/11. They got them at bargain-basement rates (they went on to resell the planes at a profit, which is unheard of in the industry) but Airbus was happy for the vote of confidence at a particularly precarious time for airplane manufacturers. It also means that when designing the next planes in its pipeline, the manufacturer will take the wishes of the discount airliners into account before those of the others. 

Sort of how Apple is Foxconn’s biggest customer. Sure, Apple has Foxconn risk, but it also means Foxconn will do everything to please Apple over its other customers.

Notes about this post from the Tumblr community:

  1. briandear reblogged this from pegobry
  2. sexartandpolitics reblogged this from pegobry
  3. pegobry posted this