Are Cheap Ticket Prices All That Matter?

[Draginass]

Again, the primary problem with the industry right now is 25% too much capacity. It's a simple supply and demand problem . . . which has driven a paradigm shift among the biz and leisure traveller. The excess of seats has driven the price down to unsustainable levels, and now that is low price is considered the "real" price, and the prices of a few years ago, gouges.

It doesn't have much to do with labor costs or service, but it does have to do with "who are our customers and why are they gone?"
And the answer to that is the collapse of the economy with a 9/11 knock-out punch.

Even if ALL the carriers were LCCs years ago, we'd still have the same problems now, because the demand a few years ago forced a huge expansion in capacity. After 9/11 that demand imploded and now the airlines were stuck with huge amounts of overcapacity.

Like I said, even if we were all SW and JBs, we ALL be losing money right now, because there's simply too many seats and not enough customer . . . and that means low low ticket prices.

 

[Publishers]

After the 11th

It was said a good deal after the Sept 11th disaster that people would not want to fly. The fact is that as much as being afraid for anything that might happen in the air, people did not want to be far from home if something happened.

That holds true for the recent war and other times that people feel apprehension. They do not want to be away if there is a disaster.

As to the seeking the bottom, what exactly is the bottom. I can go get on a brand new A319/20 with all kinds of good features and fly to Miami from New york at a very good fare. If this is the bottom, great.

 

[metrodriver]

Tarp is on the right track. Why does a ticket DFW-LAX in coach on AA coat $1700 dollars (no weekend stay-over)? I knew a guy who would buy a DFW-TUL (Tulsa,OK) roundtrip and a TUL-DFW-LAX round trip for $700.-, spend $60.- for a hotel and get of the plane back in DFW on the return, saving almost $1000,-.
The airlines need to raise the prices on the cheap tickets. $100.- more on a $200,- coast to coast ticket is nothing, That's $5000.- on 50 seats. DAL had 2500 departures a day (without the commuters). That's $12.500.000. Twelf and a half million! To be realistic ,devide it by 3 since not all flights go across the country and your left with more than $4 million a day, That's about what their daily losses are. If the industry would get together and do it across the board, there would be no more chapter 11 carriers. Why can airlines sell their products below marketvalue and get away with it?

 

[Publishers]

What

What is Market Value?

The fact is that unless all are willing, none are willing and that is set by the low cost producer.

Southwest wants to be the most efficient airline and then develops a price structure. They want the bigger airlines to have to meet them because that is what puts the pressure on.

That is what capitalism is all about. Producing a product at a price. Now you can have a premium product that people will pay more for but it will still be relative to the lowest producer./

If the New York to St Louis fare is $225 on a lower cost producer, I may be willing to pay $400 for something better. Will I pay $2000, no.

What you want is actually illegal as it is price fixing.

 

[Eagleflip]

Race to the Bottom...Not.

I'm sure I'll catch flak about this, but I challenge the basic premise of the argument.

Does the move toward LCC's necessitate a "drive toward the bottom?" I'd say no.

But there are caveats. I see the argument split betwen external (e.g. as seen by passengers) and internal (pilot pay, quality) facets.

For the external point, let's just examine JetBlue as an example. An obvious LCC, it provides ammenities beyond the bare bones. Folks flying on B6 have preassigned seating, very acceptable seat pitch, snacks on par with any other airline, inflight entertainment, and inflight crews/pilots that are (for the most part) pleasant. Does B6 differ from the majors in their view? Sure. Do they feel shortchanged by flying a LCC vice a major? Don't think so. Many of them wanted a frequent flyer program, so now one's in place.

AirTran is another great example. Thier jets are clean, well maintained from my perspective, and quite reliable. Their inflight crews and pilots are personable, their point-to-point service is quite popular with their passengers as their black ink last quarter indicates. What's not to like?

Sure, neither of these examples fly to Europe, Asia or Peoria. Consumers want these niches to be filled, so majors (with commuter partners) will continue to be needed.

Where is the "bottom feeder" quality of these two airlines? Both serve P-T-P markets for the most part and are statistically safe. Passengers obviously find their product and price desirable. Sorry guys, but this product is not racing to the bottom--it is virtually indistinguishable from the majors.

What's more, I'd say that a few of these customer satisfaction issues will eventually filter to SWA, especially the preassigned seating (often voiced as an issue); is there any doubt that SWA will figure out a low-cost way to improve their customer's experience as the other LCC's expand?

Is safety an issue? No. Let's face it--LCCs provide a very safe product within the US. The FAA, investors and the overall regulatory environment provide incentive to make their fleet a safe one. Training is not an issue from my perspective, but I'd welcome a discussion on that topic.

How about "internal" race to the bottom arguments? I'd assume that most of these issues revolve around pay, work environment, and general quality of life issues.

There's no doubt that LCC pay is not the same level as the major's. How much pay is enough? As I have said on the board before, a pilot should make as much as he/she possibly can negotiate. That said, where do you draw the line? A pilot, mechanic and CEO must realize at some point that excessive pay is not sustainable for the long term. Those who proclaim "Full pay to the last day" get what they deserve. Lots of money for a while and then no job, period.

Yeah, I know that most labor groups don't trust management. We at B6 are fortunate in that respect. I think AirTran and SWA have similar views, though. I can't resolve that conundrum, gang. I simply realize that pay cannot go up indefinately without an adverse impact on the company.

Concentrating on pilots, is LCC pay sub-standard? Well, defined from the majors, yes. Defined from a resonable man's perspective, no. You work for what you think you are worth. SWA, AirTran and B6 pay is not peanuts. Many of their compensation packages involve stock or other profit-sharing devices; what a great concept! Produce more and get paid more.

Funny, though. When the majors were doing well in the 90's, no one complained about SWA pilots driving the overall pay structure down. Now that the economy has turned and public demands have changed, the mantra is that LCC's are slaying chances at equitable compensation.

Will this so-called race to the bottom evolve into an even skimpier product? I don't think so. Passengers demand a certain quality of product, from blankets, snacks, safety, on-time performance, and so on. SWA has excelled in this area, maintaining low CASM despite offering certain ammenities that are important to the passenger.

Have passengers changed? Yep. Should we prefer as a passenger a well-paid businessman over not so well off mom and pop from Ranlo, NC? Nope. Passengers--any passengers--willing to pay the cost translate to potential black ink on the ledger sheet.

We're providing a service, not a screening process for "social castes" we don't like.

Your thoughts?

 

[Draginass]

If all the airlines followed the JB example, there'd only be service in major cities out of secondary airports, for the most part. And sure, it would be cheap to fly.

As far as compensation goes, it's not that much of a player anymore. If you look at AA compensation, I'll be JB is acutally better now, with possible exception of the pension . . . and that going to be attacked in a few months when AA is still losing money by the boatload even with draconian concessions.

There's simply too much capacity and now the expectation of airline fares is too low to sustain a robust national industry where smaller cities and international destinations are served. Unfortunately current "major" managements are concerned at the moment with mostly getting their cut before they tank the entire company. Leadership, and marketing aren't a priority given the current paralysis of vision.

My hat's off to JB. They're timing and business model is perfect. I'd gladly surrender my current seniority to start over at an airline like JB that seems to have coherent leadership.

 

[stillaboo]

I don't think pilots are the best people to ask about ticket cost. We don't pay for our tickets, generally, so our perspective is a bit different.

I personally don't like flying WN that much (the cattle call aspect), but when I was forced to purchase tickets to travel (I bought the tickets 10 minutes ago!), I shopped for 1 item, and one only. PRICE!

If another carrier served the route at the same price, I would have choosen them. If JB or AA served the route, I would have even paid a small premium (extra room in coach or TV's in the seats is worth the extra cost to me -otherwise, a seat's a seat). But nobody could match WN on the days I needed, not even close.

$289 for sitting next to a fat cow in Nascar mesh jersey halter-top and jean shorts, or $648 for sitting next to a T'd-offed businessman b/c he didn't get his frirst class upgrade. Seriously, you would pay over 100% more?

I don't think so! Homey don't play that!

-Boo!

 

[stillaboo]

Don't look on WN for the cheap people

On a seperate note, what's up with these prissy business travelers?

"Whah! I won't fly Southwest b/c they treat me like cattle and the passengers have no class b/c they're too cheap. "

"Whah! I didn't get my first class upgrade. I always fly first class!"

How much did this guy pay for his ticket?

Nada! He's traveling one someone else's dime.

How much did the ticket cost?

$400 or so.

This guy is just as cheap as everyone else. If HE was buying, he wouldn't have flown for less than $300! All travelers are price sensitive now. The only ones who complain are the ones who are the cheapest, who didn't pay a DIME for their ticket.

Business fares make all the $, right? Yeah, who's paying them? What % of a first class cabin is actually made up of people who paid for that ticket? Take out all the airline employees, all the frequent flier upgrades (most of whom accumulated those miles on someone else's nickel), all the bumped passengers given 1st class seats for compensation, how many you got? Why even HAVE a 1st class section? It's not making $ if nobody's paying the fares for it! Find me one airline in the USA that has a 1st class section that turned a profit in the last year.

Frequent fliers want the free tickets. Of course they'll take the 1st class if offered, but they want the free tickets. Why? B/c they're the cheapest f**kin' people of all!

How many customer's does JB lose b/c they don't have a 1st class section? I'd bet 3% at most. Many of my friends work on Wall Street (yeah, I picked the wrong profession, huh?), and they rave about JB (and they're cheap pricks with tons of $). They request if from their company's travel department whenever possible.

Price is the ONLY thing that drives the market. And anyone who pays for a ticket knows that.

-Boo!

 

[SDF2BUF2MCO]

Eagleflip, my original intent of the race to the bottom was in regards to compensation. LLC's have provide a great niche service and have helped make flying affordable for the masses. They have certainly turned up the heat in regards to airfare competition.

Dragin brings up some good points. There are overhead costs associated with offering international service and flying into smaller cities that LLC's don't have to deal with. Then there is over capacity. It will be interesting to see if upper management does indeed divide and plunder their companies or will they "fight" and try to make them into viable airlines?

It is sadly comical that a company would ask a regional pilot with a four year degree and hundreds, more likely thousands, of flying hours, earning $35K a year to take a pay cut just so an airline can offer a $199 ticket from Podunk to Boston.

People should be compensated fairly (realize this can be a loose term) for the skills and qualifications needed for the job. This includes all occupations not just pilots. I don't want China to be a business model on how people should be compensated. Yes this is a slight over statement.

 

[list2002]

Being a cfi it's all about price. I took AirTran from D.C. to West Palm Beach because it was the cheapest. I don't know if it was the location I departed from but everything went very smoothly, like said earlier the planes were clean, and I arrived at ATL 10 m inutes early, and in PBI 30 minutes early. I was impressed.
Lower Prices did not negotiate the professionalism and quality of product of AirTran.

 

[Draginass]

Now that we've established what ticket pricing is. What's the "value" of a pilot.

We'll, I'd submit that the "market value" of a pilot is exactly what one is willing to work for. If a pilot is willing to fly a 767 internationally for $35k a year, then that's it. If a qualified pilot is willing to fly the right seat in a CJ for $18k a year, then that's also it.

Better get used to it for quite a while. With the gross oversupply of pilots, where you are is likely where you're going to stay for a long, long time. Oh, and BTW, you're compensation is going down.

 

[wickedpilot]

I think the average (and lets say by AVERAGE airline passenger, I mean fly's 3-5 times a year) has one goal in mind when it comes to planning a trip and purchasing tickets. That goal being, get from point A to point B in the most cost efficient way. And Depending on the individuals' personality and patience level, a possible point C, D etc. The things that are important to us in the industry don't carry a grain of salt to the "Wal-Mart-type passengers."

More avid travelers who are flying for business purposes and such, have a more heighten view on what they're actually paying (the one's who DO shell out their own $$$ for a seat) for due the fact that their flying more frequently than the "AVERAGE" person.

Different classes put different emphasis on what they want - but if we get no impression of service, then only the time and the money matter.

I concur. This is an issue that deals with a spectrum of different social classes. On a case-to-case basis, who's to say which is the right way to go about the whole process? I'm glad GoldenEagle mentioned SONG, because I believe they'll get ball rolling for selling their image as an airline. The new high-tech seats will be installed Mid-May and that should give them an edge as a LCC.

Rather than delving into every classification of the traveling man/women, I have this comment to offer:
-50-60 years ago when the airlines had first begun carrying passengers for revenue, I can bet you there weren't price shoppers. People back then respected what the airlines had to offer. It was a royal event to participate in the service the airlines provided. Passengers dressed up in their Sunday best and traveled with class and manors.
-50 years before that, if you wanted to travel somewhere, you'd jump in the fastest wagon you could get a hold of.
-And 50 years before that if you wanted to travel...well you were just SOL.

Don't forget how far we've come. I think most passengers take for granite that they are actually AIRBORNE...DEFYING GRAVITY... FLYING!!!!

To the passengers out there, Thank your Captains/FO's and Crew.

 

[enigma]

Here's something to ponder

Actually,some questions.

Here's a question for ya'll to ponder. Why is Spirit, the LCC with the lowest (by a significant margin) labor costs, the weakest carrier of the LCC group? If paying diddly squat gave an airline a significant advantage, Spirit should be a world beater airline. Spirits financial performance is secret, but management continually represents its fortunes as fading. (According to USATodays front page article of a few weeks ago, NK has by far the oldest fleet, and charges the highest price for tickets. A planned expansion has been put off, and put off, and put off, ad nauseam. The company is effectively shrinking.)

Another question, Someone inferred that SWA was taking customers away from other carriers. If so, then why are the load factors at SWA not 100%? I personally doubt that SWA has had any real affect on the other majors. The difference is this, SWA's customer base still exists while the profit base of the legacy carriers is gone. SWA didn't take them, the legacy carriers drove them away.

Last question, Does anyone really know where the money goes at any of the legacy carriers? Seriously, are they in the same situation GM found itself in twenty five years ago when GM realized that it had no real idea of how much it cost to produce any specific car?

regards,
8N

 

[Mr. Irrelevant]

I flew SWA for the first time last week and this past weekend. Three separate flights. All were 100% full. Good sign since I'm a shareholder!!

The last flight however had the human element some have described already. Before the plane even backed away from the gate the Captain had to come about halfway back thru the cabin to very sternly (yell might be a bit much but there was no doubting his message) admonish and warn some idiots toward the back that their behavior (they were giving the flight attendants a hard time) would not be tolerated. I had purposely avoided the back of the plane when I saw these people moving towards the back. Halfway thru the flight the two guys behind me discussed their sleep patterns with one saying he had six hours sleep on the bus and the other replying "yeah, but you got to smoke some before hand". Lastly, a lifetime barfly, there was no doubting by his looks that this guy had spent a ton of time imbibing, jumped up to take a leak as we were on the taxi to the gate. The FA had to tell him to sit down via the PA and this guy was yelling back thru the cabin that he "had to go real bad".

I'd never been on one flight with so many 'scenes'. I'll still fly SWA but given the choice between they and another airline with direct flights and similar pricing (it's always very similar if you book in advance) I'll choose the other airline. Great service by everyone on the flight despite the difficult conditions.

It would be nice to see some better service by the non-LCC majors. For me it's really about fares and convenience. I had to drive an hour to get to the airport SWA serves. 10 minutes to my prefered airport. Was worth it though for the less than $300 price at a week and half's prior booking.


Mr. I.

 

[cointyro]

When I fly, price is virtually everything.

All this talk about what airlines SHOULD do, etc. etc. I think is a lot of very hypothetical conjecture.

In the free market, they will do whatever they think is best to make cash. That's it. SWA has figured it out. United et. al. has not. They'll adjust, or they'll go bankrupt. That's how capitalism works.

I think many people will say they want better service, bigger seats, higher quality meals. But what people say is virtually worthless. It is what they DO that matters. The true test of a person's convictions is in their wallet, not in their verbal claims.

As a pro-pilot individual, I wish pilots were paid more (or at least could hold their collective ground against management). But as a capitalist, I understand why they are not... especially at this junction in history.