I posted multiple times on LinkedIn in 2019 and 2020 that I believed either Microsoft, Google or Facebook should acquire TikTok from their parent company, ByteDance. Most members of LinkedIn disagreed with the recommendation. Fast forward to the present and it appears Microsoft will indeed acquire TikTok.
It’s time for me to expand on another recommendation I’ve posted several times on LinkedIn since 2018.
The airline industry continues to suffer losses in revenue as a result of COVID-19. Some airlines are reporting decreases in business over 70%.
To help cover costs and retain employees, every major airline in the U.S. is seeking billions of dollars in government assistance. In other words, a bailout. I strongly advise Congress not to provide funds to any of the major airlines. Here’s why.
No one knows how long COVID-19 will remain in the U.S. Airline CEOs are requesting funds to cover their operating costs and employee salaries for six months. What if six months from now, COVID-19 remains and consumers still avoid flying? Does Congress approve another six months of funds? I think not.
Instead of a bailout, the market should be able to dictate the winners and losers. As the airlines lose cash and value, buyers will appear wanting to buy the airlines or specific assets. It’s called capitalism.
My advice to the CEOs of American, United and Delta airlines is to approach Jeff Bezos and make the argument that Amazon should acquire their company. Amazon would be wise to make a big move by acquiring one of the big three airlines and doing the following:
- Convert the business model from flying passengers to flying cargo. Air cargo rates continue to increase meaning Amazon can make a profit off every cargo delivery.
- Convert a percentage of the fleet to Amazon Prime Air.
- Create an end to end logistics network of cargo and last mile delivery.
FedEx operates a fleet of 650 planes and UPS operates 267 aircraft. Amazon can easily become the largest provider of air cargo if they acquire one of the big 3 airlines. I recommend Amazon acquire Delta or American Airlines.
As passenger travel begins to return, Amazon can add more planes to their fleet or Amazon can continue to haul cargo and passengers within the weight limits of each aircraft.
Some may argue that Amazon can’t run an airline. That’s true. However, Amazon can expand Amazon Prime Air and run the passenger business as a separate company. There are many qualified individuals that Amazon can hire to manage the commercial airline requirements. As I stated earlier, Amazon acquiring an airline would be a big, strategic move and big moves aren’t easy.
There will also be those who will argue that Amazon needs planes, not an airline, and with so many planes sitting empty, Amazon should just start buying planes at pennies on the dollar. False. Planes require pilots, crews and maintenance crews to service the planes. Acquiring a major airline provides Amazon with everything it needs to significantly expand Amazon Prime Air and use capacity in the passenger planes to haul cargo.
As I’ve stated many times in the articles I write, I never recommend any company make an acquisition if it means maintaining the status quo. Instead, I always recommend that companies make an acquisition and then reimagine the business. There are many things that can be improved regarding how airlines operate. Amazon has an opportunity to usher in a new era of commercial aviation.
Let’s not forget Jeff Bezos owns Blue Origin. A combined Amazon, Blue Origin and American Airlines offers exceptional possibilities for innovation.
I also want to point out that if Amazon acquires one of the big 3 airlines, they can create a new retail model specific to the needs of passengers. For example, offer door to door service whereby an Amazon driver picks up the passenger and takes them to the airport. To add increased value, when the passenger returns, the Amazon driver will retrieve the passenger’s luggage and take it directly to the car and then pickup the passenger at their terminal.
In addition, Amazon can create a retail service specific to the needs of passengers. Instead of a boring SkyMall catalog placed into a pouch on a seat, Amazon can provide any number of ways for passengers to shop on Amazon.Com and receive awards only for passengers. Amazon can also redesign retail in the terminals their aircraft service.
Success is not assured for any company, especially airlines. Congress should say no to bailouts and yes to approving an acquisition by Amazon of one of the major airlines operating today. Congress should also support Amazon if they choose to take steps to eliminate the unions currently active in the airline industry. If given the choice of wasting billions of dollars on bailouts for the airline industry or allowing Amazon to convert a major airline to a non-union company, supporting Amazon should be the answer.