Sunday, May 9, 2004

Look Who's Talking: Subodh Karnik, Air traffic ombudsman



[photo]
Subodh Karnik sets prices and assigns planes to new routes for Delta Air Lines.
The Cincinnati Enquirer/ERNEST COLEMAN
If you have a beef about high airfares in Cincinnati, Subodh Karnik is the guy to talk to. Karnik, Delta Air Lines' senior vice president for network and revenue management, sets prices and assigns planes to new routes for the Delta system. Cincinnati/Northern Kentucky International Airport is the Atlanta-based carrier's second-largest hub. Karnik, 44, talked about the state of fare pricing, industrywide and in Cincinnati - the second-most expensive airport in the country for air fares - last week as Delta inaugurated its nonstop service from Cincinnati to Amsterdam.

HOW DOES SOMEONE get to your position?

(Laughing) You need masochistic tendencies. No, really, to somebody who is an airline person, having the job of deciding where the airplanes go and pricing seats is sort of the be-all, end-all. If one were to be an airline person, this is the job to have.

ONE OF DELTA'S BIGGEST problems is generating enough revenue to cover costs. What's the problem?

Normally, you have to assume that costs are sequential, that you go from prop planes to regional jets, from narrow-body jets to widebody jets and find the sweet spot in each of those. But over the last few years, given the airframes, markets and the costs of employment at connection carriers and on the main line, the equation is broken. Most airlines are able to fly three 50-seat regional jet flights cheaper than they can fly one 150-seater.

IS THE FARE MODEL different for Cincinnati?

Let me preface this by saying that we still lose hundreds of millions here, given the costs it takes to run this place. So there's something wrong, especially when you have 580 flights and 130 cities. Therefore, you can either generate lower costs or more revenue, and if you are talking about drastically cutting costs at the hub you are talking about a whole new ballgame. We know that some people drive (from Cincinnati) to other airports, and we have to be competitive in many places. A lot of those people fly us in the other cities, but I am still constantly looking for that sweet spot for fares that will keep as many of them here.

ARE YOU SAYING that Delta is making up its losses by charging Cincinnati travelers more?

No, not at all. If the answer to Cincinnati profitability lies in Cincinnati pricing, that's beyond the thinking we've been doing in the last few years. If we were to lower fares here, we might generate more traffic, but we might lose more money than we were before because of the drop in revenue. I lose sleep over this every day, but there are certain constraints I have to keep in place, even while I find that balancing point between demand elasticity and costs and revenue.

James Pilcher




SPECIAL REPORT: SWEET INVESTMENT
Home sellers find prices up in short time
Both neighbors, houses diverse
It's affordable, on scenic river
Big new homes and top schools
Home values soar while Newport remakes itself

BUSINESS HEADLINES
Look Who's Talking: Subodh Karnik, Air traffic ombudsman
Businesses just like Mom used to make
KFC not chicken about facing critics
Tristate Business Notes
Cindy B! agents specialize; the results speak volumes
Eckberg: Build winning team through delegating
Business Agenda
Diebold finds voting machine venture stormy
T-shirt makers hope to boost sales among socially conscious
Google stock auction - revolution or disaster?