Thanks for the interesting post, Icahn! The cruise industry is absolutely fascinating from an operations perspective. You raised a lot of interesting points about where they must excel in order to succeed. Maximizing asset utilization of those expensive ships is critical to profitability – I like how you pointed out the ability to move geographies and use dynamic pricing in order to fill the ships at anytime of year. Given the time that it takes to design and build a new ship, it must be an enormously challenging industry from a capacity planning perspective. That is, determining how many additional beds should be added to the global cruise market several years from now, given what we believe about the future economy and customer preferences in travel. From my experience cruising, the other component of the operating model that stood out to me was the repeatability of tasks and specialization of staff. For example, in the dining experience, there is a division of labor such that one employee does drinks, another food running, another clearing, etc. so that the tasks are done with utmost efficiency and little variability.
It would be fascinating to dig into the details of the tasks, scheduling and supply chain coordination that goes into turning around a ship in one day.
Marcin – thanks for this comprehensive piece. I wrote about Southwest so wanted to read about the parallels in the two airlines, of which I have found there are many. Some of the similarities are (i) use of a single aircraft type, (ii) use of secondary airports, and (iii) maximizing asset utilization.
However, I did notice some differences. The most striking is in the attitude of Southwest towards its employees. Southwest says that their employees come first, emphasizing a culture where-by happy employees leads to better customer service which leads to happier consumers. Southwest has a relentless focus on hiring personnel who fit their culture of mutual respect, positive attitude and willingness to go beyond expectations in customer service. I found this to be a sharp contrast to Ryanair calling their employees “not an asset”.
The other difference I see is in the approach to maximizing asset utilization. While Ryanair uses flights at odd hours, Southwest focuses on reducing turnaround time between flights. That is, by working as a collaborative and cohesive team on the ground, Southwest employees are able to de-board, clean and re-board flights for departure faster than any other airline.
I wonder to what extent Ryanair looked at Southwest when they were launching…
As a former Boston commuter, and one that despises the T, I really enjoyed learning about this option! It’s an interesting model and reminds me of Uber pool. The recurring theme is that when we maximize utilization either through the pairing of riders (Uber) or selling more tickets (Bridj) by focusing on higher concentration routes, we’re able to create value that drives down the cost to consumers while simultaneously increasing profitability for operators. It’s interesting because when we think about utilization rates for fixed assets, we’re usually looking at a manufacturing operation and attempting to spread the cost of machinery across more “widgets”. In this parallel case, we’re spreading the fixed cost of the vehicle across increasing volumes of people.
I also love the idea that in this case the operating model continuously refines itself to optimally align with the business model. That is, the on-going use of data from user demand and other streams leads to improvement in route optimization and therefore lends itself to creating additional value that can be captured through increased ticket sales.