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Airbus can borrow a leaf from matatus on survival : The Standard




The Airbus A380 plane failed to become a bus, so to speak. It will cease production in two years and like the Concorde or Space Shuttle – become part of history.
Let me show off: I once flew the A380 from Dubai to Shanghai’s Pudong Airport. 
Why did the Airbus A380 become a cropper despite all the fanfare? Why didn’t the economies of scale work? The answers might be closer home.

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The original plan was to take passengers from different parts of the world, bulk them together at a major airport, called the hub and take them to other parts of the world (spokes).
Direct flights
Have you noted that Emirates must fly you through Dubai? Qatar through Doha, KQ through Nairobi, Ethiopian through Addis and KLM through Amsterdam? 
That model has been overtaken by events. Passengers prefer to take direct flights which are quicker. Southwest Airlines used direct flights to become a very successful firm.
They used one of the smallest planes, Boeing 737. Southwest has no seat reservations, just like matatus. Our budget airlines are copying that. 

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The end of A380 mimics the end of big buses in Nairobi. They were bigger but did not have the flexibility of the matatus. Remember Kenya Bus or Stagecoach? 
Think of why matatus shuttles have gained popularity while the Government is pushing for high capacity buses. 
Economists love talking about economies of scale, the more you produce the cheaper it becomes. But if you keep producing, you eventually experience diseconomies of scale.
Could A380 have become too big to experience diseconomies? What is the optimal size of a plane? Surprisingly, the matatus shifted in the opposite direction, reducing their capacity with shuttles. They carry fewer passengers who pay a premium because they value their time and comfort.
The advancement of the economy means we are more concerned about time than in the past. Who wants to waste time waiting for a bus to fill up?

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The time premium has made Uber and motorbikes so popular.
In most developed countries, waiting time is reduced by having buses or trains leave on scheduled time. They often operate under capacity.
That is why most such mass transit firms are subsidised by the Government. This makes sense because citizens are more productive working than waiting for buses or trains. 
The same argument applies to big planes. They must fill up to make money. And they waste time going through the hubs.
Ethiopian Airways can drop you in Addis from South Africa after overflying Nairobi then bring you back.  

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If big planes must leave on time to keep the current passengers happy, they lose money.
Matatus often use “dummies” to make passengers think it’s almost full. As more passengers come, the dummies leave.
Besides security, that can’t happen in planes. 
The end of A380 shows that we often make unrealistic decisions. There is a big difference between public relations and bottom line.
No one from Airbus had heard of Southwest Airlines?
Smaller planes
The ownership structure of Airbus, four countries might have contributed to the decision to make A380.
They saw lots of jobs. The reality seems to have come home; they are now making smaller planes.  
We shall debate on why the Airbus A380 never flew long enough. But the basic truth is that the business environment is often unpredictable and rarely do we get all the information needed to make decisions.
Such information scarcity allows us to make money and lose it too.  The longtime horizon increases uncertainty and risk.
A380 was probably about the future. 
Matatus are short term, they know enough about today, that’s why they can charge you Sh100 one way and Sh20 after one hour. The big firms such as airlines might not have that luxury. You can even bargain with touts before boarding. You can’t go bargaining for an air ticket.
However, some websites allow you to bid for tickets depending on your flexibility with late night flights and several stops flights being cheaper.
Are we factoring in the lessons from Airbus as we bring in high capacity buses to reduce congestion in our city?
Will they operate on scheduled time? If they don’t make money, will the Government offer subsidies? Will they replace matatus or to complement them? Transport systems have improved over the years from dhows to supertankers, from small propeller planes to jet engines. But transport has never been about machines, it has always been about people and their needs.
It seems despite flying by wire, being a consortium of several countries, Airbus could still learn something from our matatu industry and its fame for “chaos.” Success in business demands an intimate understanding of the customer.
Matatus are ahead of Airbus. It’s no wonder behavioural economics is winning Nobel prizes. 
-The writer teaches at the University of Nairobi

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