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American is taking 17 MD80s out?
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General Lee
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Aparently Arpy, the new CEO of AA, is sick and tired of the LCCs and actually wants to fight. They have gotten a lot of their costs down, and they don't want to give up any more routes to the LCCs. They will use their own planes more throughout the day, and they will be pulling some aircraft out of the desert. I say, "bravo" and I hope the other legacy carriers will do the same. Sure, overcapacity isn't a great problem, but giving up and allowing the LCCs to come in and take marketshare isn't a good alternative. The economy is getting better, and as soon as gas prices go down again someday--things will really improve. I am glad that Delta announced adding back 8-10% capacity also next year.
Bye Bye--General Lee
Bye Bye--General Lee
LJDRVR
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I agree that the majors need to be concerned about loosing market share, but I wonder; How do they balance their need to compete with the very real possibility that overcapacity in those markets will delay or render impossible a return to profitability? I would imagine that the answer to this question is unique to each carrier.
Any opinions as to the best solution? Carefully control costs and strategically implement more capacity, hoping that eventual economic improvements will find your operation profitable AND competitive against the local LCC? or give up market share to the LCC, returning to black ink sooner and then fight the LCC from a position of profitability? Or is the answer much more complicated? I'm trying to educate myself here, so any opinions would be much appreciated.
Cheers,
Any opinions as to the best solution? Carefully control costs and strategically implement more capacity, hoping that eventual economic improvements will find your operation profitable AND competitive against the local LCC? or give up market share to the LCC, returning to black ink sooner and then fight the LCC from a position of profitability? Or is the answer much more complicated? I'm trying to educate myself here, so any opinions would be much appreciated.
Cheers,
FlyBoeingJets
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General Lee said:Aparently Arpy, the new CEO of AA, is sick and tired of the LCCs and actually wants to fight. They have gotten a lot of their costs down, and they don't want to give up any more routes to the LCCs. They will use their own planes more throughout the day, and they will be pulling some aircraft out of the desert. I say, "bravo" and I hope the other legacy carriers will do the same.
Bye Bye--General Lee
Bravo??? Let me get this straight, you hope Delta will furlough more pilots, park oodles of planes and cut pilot pay waaayyyy back until SWA, JBLU and ATA pilots make more?? When did you change your mind on this subject?
I'm thinking thats not what you meant. My understanding is, earlier, AA decided to park 63 airplanes this year. Is this just 18 fewer? I understand most of AAs capacity growth is from increased utilization in the upcoming year.
My theory--AA is turning itself into a hybrid LCC/Legacy carrier. Marrying elements of both. I see it as an alternative to the Ted or Song initiatives. It may be a better plan.
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General Lee
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Flyboeingjets,
Come on man, you really don't understand me, do you?
Your quote:
"Bravo??? Let me get this straight, you hope Delta will furlough more pilots, park oodles of planes and cut pilot pay waaayyyy back until SWA, JBLU and ATA pilots make more?? When did you change your mind on this subject?"
Where did you get that? Where did I say Delta will furlough more pilots, and park more planes? Where???? I said it was good that AA and other airlines (Delta too---adding back 8-10% of the capacity they parked) are going after the LCCs and trying to fight back. They are bringing more planes out of the desert, and AA is stopping their furloughs to fight you and other LCCs. If you think that AA and DL have not gotten leaner in this two year process, you are wrong. (Delta has cut 16,000 jobs, slashed wages at every stage EXCEPT pilot pay--yet) And AA has really cut back---their wages at 12 year Capt (according to someone else on this board) are lower than ATA's!!! Sounds like they are in the mood to fight now---and with the lower costs CAN.
I didn't say that we were ever going to cut our pay back below yours---and actually SW pay is actually getting darn good---and their "low cost advantage" when it comes to pilot pay on the 737 is eroding, much to their chagrin. (That is good for them) You have to remember that in our case, we are the ONLY union, or impediment at Delta---that they are very flexible when it comes to anyone's wages (except the pilots'). The flight attendants (all 14,000 of them), just were GIVEN a paycut, along with work rule cuts etc. While I feel bad for them, they trusted the company and had no union or contract. The company can do the same to the 10,000 mechanics, and 15,000 or so ramp and ground people( ticket counter people being replaced with Kiosks). Other airlines cannot do that since each group has a union etc...We, the pilots, are actually negotiating right now(and we are down 2500 pilots from pre-9-11). To say that the legacy carriers aren't trying to get their costs inline to compete with the LCCs is wrong.
Also, I remember before you were talking about how it would be very expensive to bring back the furloughs. Well, that is wrong also. Each airline has determined a "break even point" in terms of costs when it comes to the furloughs. At Delta, we were told that keeping a full paid pilot out on furlough for 6 months (losing all benefits---etc for 6 months) would be the break even number, and that they wouldn't lose any more money on re-training etc. Most of the 250 pilots were held out for atleast 6 months, and the last chunk were out 7 months.If you think about it, most of the remaining pilots make atleast $100,000 a year, and cut that in half equals around $50,000. To re-train a pilot (with a shorter school since it is likely that he/she will go back on the same equipment) would cost less than that.
I welcome your opinions, but please do not put words in my mouth. Maybe you didn't understand what was meant by bringing 18 MD-80s "out" ----but make sure you re-read the posts before you post yourself. Have a good day.
Bye Bye--General Lee
Come on man, you really don't understand me, do you?
Your quote:
"Bravo??? Let me get this straight, you hope Delta will furlough more pilots, park oodles of planes and cut pilot pay waaayyyy back until SWA, JBLU and ATA pilots make more?? When did you change your mind on this subject?"
Where did you get that? Where did I say Delta will furlough more pilots, and park more planes? Where???? I said it was good that AA and other airlines (Delta too---adding back 8-10% of the capacity they parked) are going after the LCCs and trying to fight back. They are bringing more planes out of the desert, and AA is stopping their furloughs to fight you and other LCCs. If you think that AA and DL have not gotten leaner in this two year process, you are wrong. (Delta has cut 16,000 jobs, slashed wages at every stage EXCEPT pilot pay--yet) And AA has really cut back---their wages at 12 year Capt (according to someone else on this board) are lower than ATA's!!! Sounds like they are in the mood to fight now---and with the lower costs CAN.
I didn't say that we were ever going to cut our pay back below yours---and actually SW pay is actually getting darn good---and their "low cost advantage" when it comes to pilot pay on the 737 is eroding, much to their chagrin. (That is good for them) You have to remember that in our case, we are the ONLY union, or impediment at Delta---that they are very flexible when it comes to anyone's wages (except the pilots'). The flight attendants (all 14,000 of them), just were GIVEN a paycut, along with work rule cuts etc. While I feel bad for them, they trusted the company and had no union or contract. The company can do the same to the 10,000 mechanics, and 15,000 or so ramp and ground people( ticket counter people being replaced with Kiosks). Other airlines cannot do that since each group has a union etc...We, the pilots, are actually negotiating right now(and we are down 2500 pilots from pre-9-11). To say that the legacy carriers aren't trying to get their costs inline to compete with the LCCs is wrong.
Also, I remember before you were talking about how it would be very expensive to bring back the furloughs. Well, that is wrong also. Each airline has determined a "break even point" in terms of costs when it comes to the furloughs. At Delta, we were told that keeping a full paid pilot out on furlough for 6 months (losing all benefits---etc for 6 months) would be the break even number, and that they wouldn't lose any more money on re-training etc. Most of the 250 pilots were held out for atleast 6 months, and the last chunk were out 7 months.If you think about it, most of the remaining pilots make atleast $100,000 a year, and cut that in half equals around $50,000. To re-train a pilot (with a shorter school since it is likely that he/she will go back on the same equipment) would cost less than that.
I welcome your opinions, but please do not put words in my mouth. Maybe you didn't understand what was meant by bringing 18 MD-80s "out" ----but make sure you re-read the posts before you post yourself. Have a good day.
Bye Bye--General Lee
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General Lee
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- Posts
- 20,442
FlyBoeingJets
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General,
Apparently I did put a spin on your words that wasn't there. I do think it is the cost cutting at AA that is allowing them to put planes back on the line. I thought you might be agreeing with that.
With so many LCCs out there it will be hard to put the hurt on one without others creeping up on you to take their place. If an ATA, Midwest Express, or Frontier have severe problems, the void will be filled by another LCC before long.
For your sake and those I know at Delta I hope your predictions are right. I just can't see it from where I sit.
God Bless.
Apparently I did put a spin on your words that wasn't there. I do think it is the cost cutting at AA that is allowing them to put planes back on the line. I thought you might be agreeing with that.
With so many LCCs out there it will be hard to put the hurt on one without others creeping up on you to take their place. If an ATA, Midwest Express, or Frontier have severe problems, the void will be filled by another LCC before long.
For your sake and those I know at Delta I hope your predictions are right. I just can't see it from where I sit.
God Bless.
General Lee
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Flyboeingjets,
I know you are at an airline that is expanding and enjoying the hard times at the majors. That is fine. But, as the economy grows and gets better, the majors will get healthier and go after the LCCs. That is just simple. AA has really contained their costs, and unfortunately hurt the average pilot salary in the process. ( I know it wasn't their fault--they were in a corner, but man alive, did they take some huge paycuts!!!) They are very lean and they will fight you guys in the Chicago area, and Airtran's expansion in DFW. They cut costs and want to fight---which isn't great for you guys. Delta has cut a lot too, but probably needs a little more from us--but nevertheless has gotten leaner in the process. As this economy grows, more and more will fly and not care as much for the lowest fare---which was sooo important 8 months ago when the economy was tanking. Also, more people will have a little extra money to take those INTL trips next Summer that they might not have taken had they not made money recently. A better economy helps us all, but really helps fill seats at the majors, and for higher fares. Yes, there are still debt problems and also pension problems that are getting better as the stocks rise. But, atleast the economy isn't still tanking. If it were, then there would be even more cuts on our side. Take care and thanks for responding.
Bye Bye--General Lee
I know you are at an airline that is expanding and enjoying the hard times at the majors. That is fine. But, as the economy grows and gets better, the majors will get healthier and go after the LCCs. That is just simple. AA has really contained their costs, and unfortunately hurt the average pilot salary in the process. ( I know it wasn't their fault--they were in a corner, but man alive, did they take some huge paycuts!!!) They are very lean and they will fight you guys in the Chicago area, and Airtran's expansion in DFW. They cut costs and want to fight---which isn't great for you guys. Delta has cut a lot too, but probably needs a little more from us--but nevertheless has gotten leaner in the process. As this economy grows, more and more will fly and not care as much for the lowest fare---which was sooo important 8 months ago when the economy was tanking. Also, more people will have a little extra money to take those INTL trips next Summer that they might not have taken had they not made money recently. A better economy helps us all, but really helps fill seats at the majors, and for higher fares. Yes, there are still debt problems and also pension problems that are getting better as the stocks rise. But, atleast the economy isn't still tanking. If it were, then there would be even more cuts on our side. Take care and thanks for responding.
Bye Bye--General Lee
General Lee
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- Aug 24, 2002
- Posts
- 20,442
Here is a recent article about the economy next year:
2004 Will Be the U.S.'S Best Year Economically in
Last 20 Years, The Conference Board Reports in a
Revised Forecast
Thursday December 11, 11:01 am ET
NEW YORK, Dec. 11 /PRNewswire/ -- Revising its
year-end economic forecast sharply upward, The
Conference Board today projected that real GDP
growth will hit 5.7% next year, making 2004 the best
year economically in the last 20 years.
The forecast, by Conference Board Chief Economist
Gail Fosler, expects worker productivity, which set a
20-year record in the third quarter, to rise at a healthy
3.6% next year. That would follow a gain of 4.3% this
year.
The economic forecast is prepared for more than
2,500 corporate members of The Conference Board's
global business network, based in 66 nations.
KEY BAROMETERS FLASHING GROWTH
"Growing business spending and continued strength
in consumer spending are generating growth
throughout the U.S. economy," says Fosler. "This
burgeoning strength is reflected in The Conference
Board's widely-watched Leading Economic
Indicators, the Consumer Confidence Index and the
Help-Wanted Advertising Index. While the labor
market, a critical factor in sustaining growth, is
growing slowly, a pick-up in hiring may already have
begun."
Real consumer spending, which continues to fuel
growth, will increase at a 4.7% pace next year, up
from about 3.2% this year. Another gain of 4.3% is
projected for 2005.
While the U.S. economy is expected to generate more
than one million new jobs next year, the
unemployment rate will edge down only slightly,
averaging 5.6% in 2004.
The Conference Board forecast notes that as the U.S.
economy bounces back, so is Europe, although
growth will be subdued compared to most other
major parts of the world. "For all the concern about a
weak dollar," says Fosler, "the dollar will be worth
more than the euro by the end of the year."
Real capital spending, which will rise by only 2.7%
this year, will climb 11.7% next year and another 8.6%
in 2005. Pre-tax corporate operating profits will top $1
trillion next year, up from a projected $928 billion this
year. Another trillion-dollar-plus gain in profits is
expected in 2005.
The continued recovery in business profits, which
was a key ingredient in funding new investment
(crucial in making 2004 a strong growth year),
depends on price relief. Business profits will benefit
from both improved volume and recovering profit
margins in 2004, as inflation creeps back toward 3%
by the end of the year.
Source: Revised Conference Board Economic
Forecast
December 2003
Bye Bye--General Lee
2004 Will Be the U.S.'S Best Year Economically in
Last 20 Years, The Conference Board Reports in a
Revised Forecast
Thursday December 11, 11:01 am ET
NEW YORK, Dec. 11 /PRNewswire/ -- Revising its
year-end economic forecast sharply upward, The
Conference Board today projected that real GDP
growth will hit 5.7% next year, making 2004 the best
year economically in the last 20 years.
The forecast, by Conference Board Chief Economist
Gail Fosler, expects worker productivity, which set a
20-year record in the third quarter, to rise at a healthy
3.6% next year. That would follow a gain of 4.3% this
year.
The economic forecast is prepared for more than
2,500 corporate members of The Conference Board's
global business network, based in 66 nations.
KEY BAROMETERS FLASHING GROWTH
"Growing business spending and continued strength
in consumer spending are generating growth
throughout the U.S. economy," says Fosler. "This
burgeoning strength is reflected in The Conference
Board's widely-watched Leading Economic
Indicators, the Consumer Confidence Index and the
Help-Wanted Advertising Index. While the labor
market, a critical factor in sustaining growth, is
growing slowly, a pick-up in hiring may already have
begun."
Real consumer spending, which continues to fuel
growth, will increase at a 4.7% pace next year, up
from about 3.2% this year. Another gain of 4.3% is
projected for 2005.
While the U.S. economy is expected to generate more
than one million new jobs next year, the
unemployment rate will edge down only slightly,
averaging 5.6% in 2004.
The Conference Board forecast notes that as the U.S.
economy bounces back, so is Europe, although
growth will be subdued compared to most other
major parts of the world. "For all the concern about a
weak dollar," says Fosler, "the dollar will be worth
more than the euro by the end of the year."
Real capital spending, which will rise by only 2.7%
this year, will climb 11.7% next year and another 8.6%
in 2005. Pre-tax corporate operating profits will top $1
trillion next year, up from a projected $928 billion this
year. Another trillion-dollar-plus gain in profits is
expected in 2005.
The continued recovery in business profits, which
was a key ingredient in funding new investment
(crucial in making 2004 a strong growth year),
depends on price relief. Business profits will benefit
from both improved volume and recovering profit
margins in 2004, as inflation creeps back toward 3%
by the end of the year.
Source: Revised Conference Board Economic
Forecast
December 2003
Bye Bye--General Lee
It is good to see some of the majors considering bringing back mainline planes from the desert. If the majors want to compete with the LCC's, they're going to have to do it with mainline planes. The RJ strategy simply won't work against LCC 717's, 737's or A320's.
Unfortunately, overcapacity could be a real problem. If the majors dump too much capacity back in while the LCC's add even more, it will drive yields down to barebones levels. The economy is improving, but there is only so much capacity that can be soaked up. If this scenario plays out, some of the majors will be hit hard...we've already seen warnings that USAirways could get knocked back into bankruptcy next year if revenues don't show some real recovery.
There's also no guarantee that adding capacity will slow down the LCC's. Take a look at the recent developments in BOS. DL got their first and brought in Song which added a hefty amount of capacity at BOS. Ideally, this should have dissuaded or at least slowed down JBLU....but it didn't. JBLU has come charging into BOS. Just yesterday, JBLU announced they were adding extra BOS-Florida flights because demand for JBLU was so strong. This is pretty amazing when you consider that JBLU hasn't even started service to BOS and they are already increasing flights. Song may have lowered JBLU's yields a little, but considering the cost advantage that JBLU has over Song, DL can't really afford to have Song get into a long-term fare war with JBLU.
AA has done a pretty hefty overhaul of its costs which explains the desire to bring in more planes. AA has probably gotten its costs down to a point where they can compete with the LCC's without losing too much.
DL is a slightly different story. DL's management took a gamble two years ago that they could make a lot of small cuts and hopefully get by without major restructuring. Unfortunately, that gamble has failed. DL's BOD finally realized how the strategy was failing and hence gave Leo Mullin the boot. DL now has to scramble to truly restructure or all the extra capacity they are adding will only bleed more money from their cash reserves.
Unfortunately, overcapacity could be a real problem. If the majors dump too much capacity back in while the LCC's add even more, it will drive yields down to barebones levels. The economy is improving, but there is only so much capacity that can be soaked up. If this scenario plays out, some of the majors will be hit hard...we've already seen warnings that USAirways could get knocked back into bankruptcy next year if revenues don't show some real recovery.
There's also no guarantee that adding capacity will slow down the LCC's. Take a look at the recent developments in BOS. DL got their first and brought in Song which added a hefty amount of capacity at BOS. Ideally, this should have dissuaded or at least slowed down JBLU....but it didn't. JBLU has come charging into BOS. Just yesterday, JBLU announced they were adding extra BOS-Florida flights because demand for JBLU was so strong. This is pretty amazing when you consider that JBLU hasn't even started service to BOS and they are already increasing flights. Song may have lowered JBLU's yields a little, but considering the cost advantage that JBLU has over Song, DL can't really afford to have Song get into a long-term fare war with JBLU.
AA has done a pretty hefty overhaul of its costs which explains the desire to bring in more planes. AA has probably gotten its costs down to a point where they can compete with the LCC's without losing too much.
DL is a slightly different story. DL's management took a gamble two years ago that they could make a lot of small cuts and hopefully get by without major restructuring. Unfortunately, that gamble has failed. DL's BOD finally realized how the strategy was failing and hence gave Leo Mullin the boot. DL now has to scramble to truly restructure or all the extra capacity they are adding will only bleed more money from their cash reserves.
General Lee
Well-known member
- Joined
- Aug 24, 2002
- Posts
- 20,442
Ok, wait, wait one second. Here's a great quote from Medflyer:
"DL is a slightly different story. DL's management took a gamble two years ago that they could make a lot of small cuts and hopefully get by without major restructuring. Unfortunately, that gamble has failed. DL's BOD finally realized how the strategy was failing and hence gave Leo Mullin the boot. DL now has to scramble to truly restructure or all the extra capacity they are adding will only bleed more money from their cash reserves."
Ok, now out of all of the Majors, which one has actually tried to fight the LCCs by creating a whole new brand, and paying A LOT of money in the process? I am waiting.....That would be Delta. Most of the recent losses are due to setting up this new brand. Each 757 (36 total since April 15th) has been taken out of service (which costs money in lost revenue and daily lease rates), repainted, new seats and some with new IFE installed that is expensive, and lots of advertising. The new brand took awhile to catch on, which cost money too. To say that this cold Winter will not help fill Song's planes from the NE and retain new passengers in the process is wrong.
On the subject of Leo, Leo was kicked out because he lost all credibility with everyone because of the hidden offshore pensions. He was a good banker, just not a leader. He helped bring the idea of Song, and that has created a buffer when it comes to Jetblue. The old Delta Express was not cutting it, and Jetblue would have continued to win marketshare. Song has stopped that and created a viable new entity that will create revenue beneficial to Delta. By putting better airplanes out there that are more efficient and carry more people (an extra 80 passengers compared to the 119 at Express), only good things can result along with the better economy. People who want those lower fares and nonstop service will fly Song,a nd the more expensive tickets can flow through the hubs. That is how it works.
As far as DL management taking "small cuts"---I guess laying off 16,000 employees is small to you? What? We also parked quite a few planes, and now the economy is growing again and some capacity (not all) is going to be restored. Paycuts for the 14,000 flight attendants have already occured, and some from the pilots and mechanics are probably on the way. Managment also sold 11 738 orders to a leasing company and saved $500 million in Capital expenditure costs for 2005 alone. Where are these small cuts Medflyer? Back yourself up with facts please.
As far as BOS is concerned, the main reason Jetblue has the planes to expand there is because they figured out that ATL wasn't a fun place to fly to. They saw that they wouldn't make a lot of money there, and redeployed to BOS. You have to remember that Delta fought Metrojet while they were in BOS, and they left too. Delta's Song will do just fine, and Delta is also building a large new terminal there for future expansion. I think Jetblue's service to FLA will do well, but I question LGB and DEN. We shall see about that one.
As far as slowing down LCCs---I am sure they have plenty of orders onhand and will expand, but they will find it harder to compete with healthier majors due to the better economy. Jetblue was kicked out of ATL, but it cost DL a lot. But, the better economy will fill the DL seats again and they will be allowed to charge a little more. A BETTER ECONOMY HELPS AIRLINES.
And, as the majors cut back wages, other LCCs are adding to their payrolls. Look at SW. They undoubtably are doing great. Good for them. And, the pilot's are gaining higher pay each year with their new contract. Again, I say great. But, now the flight attendants and their union want a larger piece of the pie. Didn't the rampers just go through that too? As the Majors are "forced" to cut back on pay etc, the LCC's (I think ATA just got a better and more expensive contract too) will have to pay more, and those margins will get thinner as capacity is restored. We shall see how this all pans out, but the majors have gotten leaner and a better economy will help them out in the long run.
Bye Bye--General Lee
PS---here is the latest statement from CBS Market Watch about the industry:
"So far this fall, business is picking up for the industry.
"Our global airline passenger traffic report for November shows average traffic growth this month of 6.4 percent year on the year, and a capacity increase of 1.6 percent," wrote Banc of America Securities analyst Robert Stallard."
Not bad.
"DL is a slightly different story. DL's management took a gamble two years ago that they could make a lot of small cuts and hopefully get by without major restructuring. Unfortunately, that gamble has failed. DL's BOD finally realized how the strategy was failing and hence gave Leo Mullin the boot. DL now has to scramble to truly restructure or all the extra capacity they are adding will only bleed more money from their cash reserves."
Ok, now out of all of the Majors, which one has actually tried to fight the LCCs by creating a whole new brand, and paying A LOT of money in the process? I am waiting.....That would be Delta. Most of the recent losses are due to setting up this new brand. Each 757 (36 total since April 15th) has been taken out of service (which costs money in lost revenue and daily lease rates), repainted, new seats and some with new IFE installed that is expensive, and lots of advertising. The new brand took awhile to catch on, which cost money too. To say that this cold Winter will not help fill Song's planes from the NE and retain new passengers in the process is wrong.
On the subject of Leo, Leo was kicked out because he lost all credibility with everyone because of the hidden offshore pensions. He was a good banker, just not a leader. He helped bring the idea of Song, and that has created a buffer when it comes to Jetblue. The old Delta Express was not cutting it, and Jetblue would have continued to win marketshare. Song has stopped that and created a viable new entity that will create revenue beneficial to Delta. By putting better airplanes out there that are more efficient and carry more people (an extra 80 passengers compared to the 119 at Express), only good things can result along with the better economy. People who want those lower fares and nonstop service will fly Song,a nd the more expensive tickets can flow through the hubs. That is how it works.
As far as DL management taking "small cuts"---I guess laying off 16,000 employees is small to you? What? We also parked quite a few planes, and now the economy is growing again and some capacity (not all) is going to be restored. Paycuts for the 14,000 flight attendants have already occured, and some from the pilots and mechanics are probably on the way. Managment also sold 11 738 orders to a leasing company and saved $500 million in Capital expenditure costs for 2005 alone. Where are these small cuts Medflyer? Back yourself up with facts please.
As far as BOS is concerned, the main reason Jetblue has the planes to expand there is because they figured out that ATL wasn't a fun place to fly to. They saw that they wouldn't make a lot of money there, and redeployed to BOS. You have to remember that Delta fought Metrojet while they were in BOS, and they left too. Delta's Song will do just fine, and Delta is also building a large new terminal there for future expansion. I think Jetblue's service to FLA will do well, but I question LGB and DEN. We shall see about that one.
As far as slowing down LCCs---I am sure they have plenty of orders onhand and will expand, but they will find it harder to compete with healthier majors due to the better economy. Jetblue was kicked out of ATL, but it cost DL a lot. But, the better economy will fill the DL seats again and they will be allowed to charge a little more. A BETTER ECONOMY HELPS AIRLINES.
And, as the majors cut back wages, other LCCs are adding to their payrolls. Look at SW. They undoubtably are doing great. Good for them. And, the pilot's are gaining higher pay each year with their new contract. Again, I say great. But, now the flight attendants and their union want a larger piece of the pie. Didn't the rampers just go through that too? As the Majors are "forced" to cut back on pay etc, the LCC's (I think ATA just got a better and more expensive contract too) will have to pay more, and those margins will get thinner as capacity is restored. We shall see how this all pans out, but the majors have gotten leaner and a better economy will help them out in the long run.
Bye Bye--General Lee
PS---here is the latest statement from CBS Market Watch about the industry:
"So far this fall, business is picking up for the industry.
"Our global airline passenger traffic report for November shows average traffic growth this month of 6.4 percent year on the year, and a capacity increase of 1.6 percent," wrote Banc of America Securities analyst Robert Stallard."
Not bad.
Last edited:
General Lee said:
DL estimated that the startup costs for Song would run somewhere in the ballpark of $85 million dollars. Considering how much DL has lost in the past few quarters, blaming Song for most of your losses is a joke.
Song is a nice product, but what about the rest of the DL system? For business passengers who loyally fly DL and give DL big bucks, Song is an insult. Why is DL spending millions of dollars on fancy seats and IFE, for people who spend $79 to fly JFK-FLL? Meanwhile, the business traveler who buys a last minute ATL-CMH ticket gets gouged for $800 and gets a dirty, worn out plane with no IFE. DL's mainline customer service is pretty dismal these days.
Do you think this is a smart business plan General? Piss off your best customers and cater to the $79 special? Do you think DL's path to profitability lies in the $79 special?
General, you don't seem to know the difference between total costs and unit costs. Sure DL cut total costs by laying off employees, but DL also cut a large amount of capacity during that same time period. The end result is that DL's actual unit costs haven't gone down much. DL's CASM has barely budged despite all the cuts you mention (I'm talking mainline here not counting the regionals).
Selling the 738's also doesn't lower unit costs, it just lowers future capital expenditures. Reducing future capital expenditures, might help DL's liquidity, but it do any good when DL has to duke it out with LCC's whose unit costs are well below DL's.
Paycuts and work rule changes can lower unit costs, but DL has been very slow to make these changes.
Shutting down ATL, only freed up about two planes. JB's launch into BOS will take about four or five planes, so shutting down ATL wasn't the only reason.
Who cares if DL beat Metrojet? Metrojet was a high-cost, low-quality product. JetBlue is a high-quality, low-cost product. There's absolutely no comparison.
You're right, a better economy will help the airlines. I have no doubt about that.
I also know that a good economy can mask a failing airline. Look at UAL and USAirways. UAL made big bucks during the late 90's, but they also got careless. Costs weren't controlled, customer service was allowed to slip and they spent lots of money on all kinds of strange products (from the Shuttle to Avolar). Look where UAL is now. A similar story played out at USAirways. Remember during the late 90's, LCC's like WN still managed to kick USAirways's high cost butt out of BWI without any difficulty. The good economy couldn't save USAirways from losing to the LCC's.
PS---here is the latest statement from CBS Market Watch about the industry:
"So far this fall, business is picking up for the industry.
"Our global airline passenger traffic report for November shows average traffic growth this month of 6.4 percent year on the year, and a capacity increase of 1.6 percent," wrote Banc of America Securities analyst Robert Stallard."
Not bad.
It's good to see that the industry is recovering, but those are global numbers. How much of that 6.4 percent growth is for foreign carriers or LCC's? Look at DL's numbers for November, they are nowhere near as good.
General Lee
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Medflyer,
Atleast you tried to back your post up with facts this time, even though some are off.
Sure, Song's start up costs were costly--and the $85 million was an estimation that didn't take into account that the brand wasn't known at first. That is why our initial load factor wasn't very good, and that meant lost revenue compared to using those planes on mainline. As the brand grows in popularity, the revenues will return. (and as the cold weather hits the NE)
When you say Song is an insult to regular passengers....compared to what? Southwest? How is mainline service compared to most LCC service??? A lot better. How about RJ service? Many smaller towns will never get Song and the IFE--and that is just economic reality. Yeah, some fares are higher than Song's normal $99-299 fares---and that is what happens when LCC's don't serve every town. Will there be a backlash? Probably not---the thriving economy will cover it. And, I don't think Song's $79 special as you call it is our path to recovery---the $500 walkup is---and with a better economy there is a better chance of that. The $79 "wonder" is why we created Song-----to funnel them nonstop to their destination and avoid them in the hub so we can get that higher fare customer. Got it yet?
Delta's CASM has Comair/ASA mixed in, so it really isn't accurate. Look at USAir and their cost cutting. They have cut labor costs to the bone, and their CASM is still higher than ours. That proves that cutting costs alone will not do what you say. You need to fly airplanes on longer flights with more seats to lower the CASM. We are doing that with SONG---which has an average stage length of 3 hours or more, and we fly them more hours throughout the day---which helps overall. But, you can't really do that with hubs---unless you only fly very long distances. What about Huntsville, AL? Should we not fly there because it is a short distance from ATL? But, many businessmen fly there, and a lot connect in our profitable ATL hub. You can't always get a lower CASM---because there are some cities and shorter stage lengths that are worth doing. As far as Delta cutting pay to lower CASM---they have cut 16,000 jobs (or 100% paycuts for you), and have GIVEN the 14,000 flight attendants paycuts and work rule changes so far, and have replaced ticket counter people with Kiosks. The 10,000 mechanics have had changes (I am not really familiar with those), and we are talking to them. Not fast enough, eh? We have 2500 less pilots compared to pre-9-11. That has really cut down on the planned expenses for Delta---and we only have one union--giving them a lot of flexibility to do what ever they want and any time with everyone else.
As the economy gets better, fighting the LCCs will not be as important because lower fares will not be the primary importance anymore. Sure, some people will be looking for bargains, and that is why we have LCCs and Song. The others will be looking for convienence---and business travel will be up---which has "time" as the most important factor. INTL travel will also be up, and LCC competition in that arena is small.
And you said something about our Novemeber numbers. I saw on CNN that the last day of the Thanksgiving break (the SUN) was our best day EVER! We filled 96% of all of our seats, including SONG, DCI, Mainline, etc.... And, I bet the fares weren't too low for that day. We knew that the Fall was going to be tough for us, but we also knew that the Holidays, Spring, and next Summer will be really good for us.
So, we are adding back capacity to take on the LCC threat while the economy is getting better. Sounds like a good combination to me---and not a better time to do it. We have more cash on hand than almost every airline ($2.7 billion), and we are renegotiating our contract to help them get better financing on their debt payments. The pension problem is slowly getting better with the higher stockmarket(How do you think it got bad so fast? The stockmarket went from 11,000 on the Dow to 7,000. Now it is getting better because a lot of the pension funds were invested in stocks). And, people are returning and fares are creeping upwards. Now, if we could just get those oil prices down, which will eventually happen, then the picture will even look brighter. And, to top it off, we have a huge code share with NW/CO that is bringing in a lot of extra revenue and making it even easier for the businessman to choose us---with all of the perks. I think we have a good chance to do a lot better in the future---and we have the better economy helping us at the same time. Take care.
Bye Bye--General Lee
Atleast you tried to back your post up with facts this time, even though some are off.
Sure, Song's start up costs were costly--and the $85 million was an estimation that didn't take into account that the brand wasn't known at first. That is why our initial load factor wasn't very good, and that meant lost revenue compared to using those planes on mainline. As the brand grows in popularity, the revenues will return. (and as the cold weather hits the NE)
When you say Song is an insult to regular passengers....compared to what? Southwest? How is mainline service compared to most LCC service??? A lot better. How about RJ service? Many smaller towns will never get Song and the IFE--and that is just economic reality. Yeah, some fares are higher than Song's normal $99-299 fares---and that is what happens when LCC's don't serve every town. Will there be a backlash? Probably not---the thriving economy will cover it. And, I don't think Song's $79 special as you call it is our path to recovery---the $500 walkup is---and with a better economy there is a better chance of that. The $79 "wonder" is why we created Song-----to funnel them nonstop to their destination and avoid them in the hub so we can get that higher fare customer. Got it yet?
Delta's CASM has Comair/ASA mixed in, so it really isn't accurate. Look at USAir and their cost cutting. They have cut labor costs to the bone, and their CASM is still higher than ours. That proves that cutting costs alone will not do what you say. You need to fly airplanes on longer flights with more seats to lower the CASM. We are doing that with SONG---which has an average stage length of 3 hours or more, and we fly them more hours throughout the day---which helps overall. But, you can't really do that with hubs---unless you only fly very long distances. What about Huntsville, AL? Should we not fly there because it is a short distance from ATL? But, many businessmen fly there, and a lot connect in our profitable ATL hub. You can't always get a lower CASM---because there are some cities and shorter stage lengths that are worth doing. As far as Delta cutting pay to lower CASM---they have cut 16,000 jobs (or 100% paycuts for you), and have GIVEN the 14,000 flight attendants paycuts and work rule changes so far, and have replaced ticket counter people with Kiosks. The 10,000 mechanics have had changes (I am not really familiar with those), and we are talking to them. Not fast enough, eh? We have 2500 less pilots compared to pre-9-11. That has really cut down on the planned expenses for Delta---and we only have one union--giving them a lot of flexibility to do what ever they want and any time with everyone else.
As the economy gets better, fighting the LCCs will not be as important because lower fares will not be the primary importance anymore. Sure, some people will be looking for bargains, and that is why we have LCCs and Song. The others will be looking for convienence---and business travel will be up---which has "time" as the most important factor. INTL travel will also be up, and LCC competition in that arena is small.
And you said something about our Novemeber numbers. I saw on CNN that the last day of the Thanksgiving break (the SUN) was our best day EVER! We filled 96% of all of our seats, including SONG, DCI, Mainline, etc.... And, I bet the fares weren't too low for that day. We knew that the Fall was going to be tough for us, but we also knew that the Holidays, Spring, and next Summer will be really good for us.
So, we are adding back capacity to take on the LCC threat while the economy is getting better. Sounds like a good combination to me---and not a better time to do it. We have more cash on hand than almost every airline ($2.7 billion), and we are renegotiating our contract to help them get better financing on their debt payments. The pension problem is slowly getting better with the higher stockmarket(How do you think it got bad so fast? The stockmarket went from 11,000 on the Dow to 7,000. Now it is getting better because a lot of the pension funds were invested in stocks). And, people are returning and fares are creeping upwards. Now, if we could just get those oil prices down, which will eventually happen, then the picture will even look brighter. And, to top it off, we have a huge code share with NW/CO that is bringing in a lot of extra revenue and making it even easier for the businessman to choose us---with all of the perks. I think we have a good chance to do a lot better in the future---and we have the better economy helping us at the same time. Take care.
Bye Bye--General Lee
Last edited:
General Lee
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Adding back capacity and flooding the market with seats killed Legend out of LUV, and Vangaurd. I am sure that will be AA's strategy in BOS against Jetblue, and Airtran in DFW. The thing is, AA actually brought their costs down a lot to compete--and that is one part of their winning strategy. We shall see....
Bye Bye--General Lee
Bye Bye--General Lee
jetblue320
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General Lee said:
On the subject of "Song has stopped that" were you refering to Song stopping jetBlue capturing market share? If that was your point, I'd like to know, how do ya figure that? Yes, without a doubt Song was a dynamic process, and it appears to be doing well in regards to branding and all of the other stuff needed to compete with jetBlue except for one minor detail (and this is just my observed opinion mind you), have they made a dime yet? They have certainly put together a good package and as you have said many times before, at least they (DL) is doing something, is a very true fact. But more importantly, if their whole goal and scope is to "stop" jetBlue and run us out of town (so to speak) I don't think they have even scratched the surface. Remember, our leaving ATL was not, repeat not directly related to Song. It happened because of our over zealous ambitions in a market that we over-stepped our bounds in and admittedly, never should have tried.
If Song is measuring it's claimed success by "stopping" jetBlue as opposed to just simply becoming profitable, they have a long, long way to go. It is a shame that they won't just focus more of that energy and drive towards self improvement instead of simply knocking out the competition. Our loads and progress have only increased. I will add that the upcoming holiday season should be great for all the airlines including Song, and I certainly wish the best prosperity for everyone. Our sales are indicating 100% LF's and it simply can't be any better than that. But then again, we only fly out of one NYC airport. (I had to barb ya with that one Buddy!)
All the hype in the press recently about our over stated margins focused on just that, media hype. If we still succeed in 4Q with 12-14% margins as opposed to the 16-17% we had projected earlier I would safely say that it puts us way out in front of Song, or DL altogether for that matter.
Of course, I could be wrong (standard disclaimer applies)
See ya in BOS General!!
(Really, Merry Christmas Pal
)P.S. Sorry for temporarily robbing the AA thread, but I couldn't resist!! Feel free to cut and paste this post to the LCC in Trouble thread if you wish.
Last edited:
General Lee
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jetblue320,
No, I understand your point. Do I know how much Song has made? Nope. I fly the planes, and I see the loads are getting better and better..... I don't know exactly what each passenger is being charged, and I don't really know what the break even point is, but with 199 seats and the more efficient 757, I think they are doing pretty well. They haven't put a stop to the project, and are in fact adding more planes---so I think that is a good sign. As far as "stopping" jetblue---that may have been the wrong term. You guys will continue to get new airplanes, so there really is no way to "stop" you from growing. But, we can prevent you from taking too much of our former marketshare away, and we can do that by offering a better product (better IFE---which is true, a better IFE system), a better frequent flyer program with better cities, and a better choice of airports---in the NYC area which is your home base. We already have a good following in BOS, and even though you have now increased your start up flights there, our Song service will continue to win over customers--primarily because we go to more FLA cities from BOS, and we have good connections with Comair/ACA also. Also, AA is now getting mad and will beef up service in BOS too---which may affect us also, but they are aiming for you too. It will probably be the "squeeze play" up there, and we'll see how everyone does.
As far as Song running you out of ATL, I don't think that is the case, since Song only flies 2 daily flights out of ATL to JFK. I think we added a lot of flights (at great expense to us probably), and Airtran also had low fares that affected you guys. But, that is another case of LCC vs LCC---and what will happen when Airtran, Southwest, Spirit, ATA, etc. want to expand out of their bases and compete with you directly? We have Song that competes well point to point, but the rest of our energy goes towards defending our hubs---which we do fairly well. The LCCs will start to do more and more point to point, and try to feed off of other airlines' hubs. That is when things will really heat up. But, in the mean time, watch out in BOS for Song/DL and AA now. Let's see if you can make BOS your next LGB or JFK.
Merry Christmas to you too Bud.
Bye Bye--General Lee
No, I understand your point. Do I know how much Song has made? Nope. I fly the planes, and I see the loads are getting better and better..... I don't know exactly what each passenger is being charged, and I don't really know what the break even point is, but with 199 seats and the more efficient 757, I think they are doing pretty well. They haven't put a stop to the project, and are in fact adding more planes---so I think that is a good sign. As far as "stopping" jetblue---that may have been the wrong term. You guys will continue to get new airplanes, so there really is no way to "stop" you from growing. But, we can prevent you from taking too much of our former marketshare away, and we can do that by offering a better product (better IFE---which is true, a better IFE system), a better frequent flyer program with better cities, and a better choice of airports---in the NYC area which is your home base. We already have a good following in BOS, and even though you have now increased your start up flights there, our Song service will continue to win over customers--primarily because we go to more FLA cities from BOS, and we have good connections with Comair/ACA also. Also, AA is now getting mad and will beef up service in BOS too---which may affect us also, but they are aiming for you too. It will probably be the "squeeze play" up there, and we'll see how everyone does.
As far as Song running you out of ATL, I don't think that is the case, since Song only flies 2 daily flights out of ATL to JFK. I think we added a lot of flights (at great expense to us probably), and Airtran also had low fares that affected you guys. But, that is another case of LCC vs LCC---and what will happen when Airtran, Southwest, Spirit, ATA, etc. want to expand out of their bases and compete with you directly? We have Song that competes well point to point, but the rest of our energy goes towards defending our hubs---which we do fairly well. The LCCs will start to do more and more point to point, and try to feed off of other airlines' hubs. That is when things will really heat up. But, in the mean time, watch out in BOS for Song/DL and AA now. Let's see if you can make BOS your next LGB or JFK.
Merry Christmas to you too Bud.
Bye Bye--General Lee
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