Rottweiller
Well-known member
- Joined
- Nov 26, 2001
- Posts
- 429
From the Boyd Group....
Hot Flash - December 13, 2004
Airline Failures In 2005:
Not Necessarily, But...
Here's a fact: The only reason that the airline industry as a whole is in financial chaos is because of fuel.
Here's another fact: Had oil prices not spiked in 2004, most legacy carriers would be reporting strong profits, notwithstanding depressed yields. But spike they did, and the industry is again producing a sea of red ink.
Naturally, the usual suspects in the write-before-you-research segments of the media will continue to offend journalistic standards by filing stories about the need for "consolidation" and how the legacy carrier model is "broken." These people are fully exercising their right to make fools of themselves.
Here's a reality: There are no guarantees that any airlines will go 86 in the coming year. Strategies can change, more efficiencies can be found. And oil prices may well drop into the mid-$30 range. Things change. Management can change. Market tactics can change. It's clear that traffic demand is robust. Nevertheless, as of December 2004, we have three carriers that may be on the road to oblivion if they don't fundamentally change direction.
US Airways. Regardless of the causes, this airline system is a goner if it cannot get its labor relations in order. It appears to have degenerated into the Hatfields and McCoys, except they're all armed with lawyers instead of guns. Somebody might want to advise the company's bankruptcy attorneys that employees are not some sort of cattle that can simply be replaced with another, cheaper herd. On the other hand, having unions threatening to strike does wonders to keep passengers away in droves. The anger, the hurt, and the pain employees experienced in being forced to take huge pay cuts, only to be told to give more, cannot be underestimated. But US Airways is headed for extinction if this near civil-war situation isn't reversed very soon.
United Airlines. There are clear indications that this rudderless-at-the-top carrier is still floundering to find what it wants to be. The TED burlesque says it all about the strategic direction of United. Like, it has none. United's senior management still tries to pass TED off to the gullible media as a separate stand-alone airline, when in fact it's nothing more than a small part of United's fleet painted a different color. This type of smoke-in-place-of-substance management does not do justice to United's employees, who, truth be known, have made United the standard in customer service.
Unfortunately, UA management has made the decision that less of that quality mainline service will be just the thing to turn the airline around. It's called outsourcing. In an ominous sign that United's long-term planning is starting to enter the desperation phase, United just announced a 14% cut back in domestic flying, along with a major replacement of mainline flying by RJs operated by small jet providers. Sure, the sector costs on that ORD-ATL segment will drop wonderfully when that A-320 gets replaced by a 70-seat CRJ.
But so will customer loyalty, which will cost United a bundle.
In a prime market like this, (and this is just one example) a cramped CRJ is about as competitive as riding a buckboard instead of a Lexus. Not to mention the effects of sending more mainline United passengers to the Fall-of-Saigon reenactment performed daily on the UAX Concourse F at O'Hare. It's pretty obvious that United's CEO and senior management team haven't seen this place in years. Or, at least one hopes that's the case. Otherwise, United is in much worse trouble than anyone thought.
Those formerly mainline United ORD-ATL customers are in for a real thrill when they get to Concourse F. Crowded, confused UAX gate areas, often with several flights being boarded in close sequence from the same check-in desk. Agent radios squawking out every facet of the operation so that passengers can be entertained with incidents of crews trying to be located, baggage being moved, gate changes contemplated, and other stuff that makes the whole operation feel like a rehearsal for an episode of The Simpsons. Then the healthy exercise at boarding time, with passengers forced to schlep their carry-on baggage down a stairway that might look like it hasn't had a cleaning or a coat of paint since the Nixon Administration.
Once down the stairs, they find out that they have to leave their "carry-ons" at the bottom of the plane's stairs, because, oops, the RJ cannot accommodate normal carry-on baggage. In flight, they find that using their laptop is a near-impossible feat, especially if they're sitting next to somebody who's 6'5" and weighs 200 pounds. It's up close and personal with your seat mate all the way from Chicago to Atlanta.
Yessir, tossing those United Premier Execs and 1K customers into that mess will really build brand loyalty. For American.
United has claimed that its problems stem from the refusal of the Air Transportation Stabilization Board to give it loan guarantees. If United's second application was anything like the first one, the refusal was entirely valid, as the airline's management obviously didn't produce numbers that the ATSB found credible. And that seems to be the issue for United - credibility. If it's going to survive, United needs to get a senior management team in place that has some credible strategic direction beyond slapping paint on airplanes (TED) and outsourcing flying to lowest-bidder RJ operators. In short, the airline needs a senior management team that's as customer-focused as its first-line employees. Soon.
Independence Air. It's past time that they admitted that their noble experiment is a raging failure. Breaking away from the United Express system was not a bad decision. Neither was the basic concept of being an independent carrier dominating IAD. But the high frequency RJ model has now been shown to be the fast track to Chapter 11. The necessary market stimulation and I-Air brand loyalty just hasn't materialized. Cash is is burning, load factors are disastrous, and it appears that dirt-cheap fare sales are the norm to keep the system barely half-full.
A big-time 180 is needed in the I-Air business model. Whatever advice they're following, it's getting real expensive.
Maybe lethal.
(c) 2004, The Boyd Group/ASRC, Inc. All Rights Reserved
Hot Flash - December 13, 2004
Airline Failures In 2005:
Not Necessarily, But...
Here's a fact: The only reason that the airline industry as a whole is in financial chaos is because of fuel.
Here's another fact: Had oil prices not spiked in 2004, most legacy carriers would be reporting strong profits, notwithstanding depressed yields. But spike they did, and the industry is again producing a sea of red ink.
Naturally, the usual suspects in the write-before-you-research segments of the media will continue to offend journalistic standards by filing stories about the need for "consolidation" and how the legacy carrier model is "broken." These people are fully exercising their right to make fools of themselves.
Here's a reality: There are no guarantees that any airlines will go 86 in the coming year. Strategies can change, more efficiencies can be found. And oil prices may well drop into the mid-$30 range. Things change. Management can change. Market tactics can change. It's clear that traffic demand is robust. Nevertheless, as of December 2004, we have three carriers that may be on the road to oblivion if they don't fundamentally change direction.
US Airways. Regardless of the causes, this airline system is a goner if it cannot get its labor relations in order. It appears to have degenerated into the Hatfields and McCoys, except they're all armed with lawyers instead of guns. Somebody might want to advise the company's bankruptcy attorneys that employees are not some sort of cattle that can simply be replaced with another, cheaper herd. On the other hand, having unions threatening to strike does wonders to keep passengers away in droves. The anger, the hurt, and the pain employees experienced in being forced to take huge pay cuts, only to be told to give more, cannot be underestimated. But US Airways is headed for extinction if this near civil-war situation isn't reversed very soon.
United Airlines. There are clear indications that this rudderless-at-the-top carrier is still floundering to find what it wants to be. The TED burlesque says it all about the strategic direction of United. Like, it has none. United's senior management still tries to pass TED off to the gullible media as a separate stand-alone airline, when in fact it's nothing more than a small part of United's fleet painted a different color. This type of smoke-in-place-of-substance management does not do justice to United's employees, who, truth be known, have made United the standard in customer service.
Unfortunately, UA management has made the decision that less of that quality mainline service will be just the thing to turn the airline around. It's called outsourcing. In an ominous sign that United's long-term planning is starting to enter the desperation phase, United just announced a 14% cut back in domestic flying, along with a major replacement of mainline flying by RJs operated by small jet providers. Sure, the sector costs on that ORD-ATL segment will drop wonderfully when that A-320 gets replaced by a 70-seat CRJ.
But so will customer loyalty, which will cost United a bundle.
In a prime market like this, (and this is just one example) a cramped CRJ is about as competitive as riding a buckboard instead of a Lexus. Not to mention the effects of sending more mainline United passengers to the Fall-of-Saigon reenactment performed daily on the UAX Concourse F at O'Hare. It's pretty obvious that United's CEO and senior management team haven't seen this place in years. Or, at least one hopes that's the case. Otherwise, United is in much worse trouble than anyone thought.
Those formerly mainline United ORD-ATL customers are in for a real thrill when they get to Concourse F. Crowded, confused UAX gate areas, often with several flights being boarded in close sequence from the same check-in desk. Agent radios squawking out every facet of the operation so that passengers can be entertained with incidents of crews trying to be located, baggage being moved, gate changes contemplated, and other stuff that makes the whole operation feel like a rehearsal for an episode of The Simpsons. Then the healthy exercise at boarding time, with passengers forced to schlep their carry-on baggage down a stairway that might look like it hasn't had a cleaning or a coat of paint since the Nixon Administration.
Once down the stairs, they find out that they have to leave their "carry-ons" at the bottom of the plane's stairs, because, oops, the RJ cannot accommodate normal carry-on baggage. In flight, they find that using their laptop is a near-impossible feat, especially if they're sitting next to somebody who's 6'5" and weighs 200 pounds. It's up close and personal with your seat mate all the way from Chicago to Atlanta.
Yessir, tossing those United Premier Execs and 1K customers into that mess will really build brand loyalty. For American.
United has claimed that its problems stem from the refusal of the Air Transportation Stabilization Board to give it loan guarantees. If United's second application was anything like the first one, the refusal was entirely valid, as the airline's management obviously didn't produce numbers that the ATSB found credible. And that seems to be the issue for United - credibility. If it's going to survive, United needs to get a senior management team in place that has some credible strategic direction beyond slapping paint on airplanes (TED) and outsourcing flying to lowest-bidder RJ operators. In short, the airline needs a senior management team that's as customer-focused as its first-line employees. Soon.
Independence Air. It's past time that they admitted that their noble experiment is a raging failure. Breaking away from the United Express system was not a bad decision. Neither was the basic concept of being an independent carrier dominating IAD. But the high frequency RJ model has now been shown to be the fast track to Chapter 11. The necessary market stimulation and I-Air brand loyalty just hasn't materialized. Cash is is burning, load factors are disastrous, and it appears that dirt-cheap fare sales are the norm to keep the system barely half-full.
A big-time 180 is needed in the I-Air business model. Whatever advice they're following, it's getting real expensive.
Maybe lethal.
(c) 2004, The Boyd Group/ASRC, Inc. All Rights Reserved
