Boyd: Jetblue/Southwest headed for financial difficulties

[klhoard]

Yep D-H-who... I suppose Southwest was always a household name. Toyota was a cheap import and so was honda. Steel is the backbone of America.

In Captialism someone makes a ton of money. Eventually people see said someone making a ton of money and say "I think I can do it better". Over time the ton of money is reduced to a half ton... Then a quarter ton... Next thing you know you are TWA, Pan Am, Braniff, DAL, NWA, UAL, etc...

Remember it took a while for steel, cars, and majors... LCC and cargo your time is coming... Hopefully some of you pilots, however, get to be similar to the recently departed DAL pilots... Hopefully you get to be some of the few blue collar workers in America with a golden... ok make that silver parachute.

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Oh my, misery does love company doesn't it??
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[FN FAL]

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Oh my, misery does love company doesn't it??
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I could use a vacation, when do the flowbacks start?

 

[skykid]

I don't think it is as easy as "fuel hedges expiring." SWA has a ton of money to take advantage of any angle at getting cheaper fuel, and the b$lls to do it. None of the big boys can do that.

 

[Clyde]

Yep D-H-who... I suppose Southwest was always a household name. Toyota was a cheap import and so was honda. Steel is the backbone of America.

In Captialism someone makes a ton of money. Eventually people see said someone making a ton of money and say "I think I can do it better". Over time the ton of money is reduced to a half ton... Then a quarter ton... Next thing you know you are TWA, Pan Am, Braniff, DAL, NWA, UAL, etc...

Remember it took a while for steel, cars, and majors... LCC and cargo your time is coming... Hopefully some of you pilots, however, get to be similar to the recently departed DAL pilots... Hopefully you get to be some of the few blue collar workers in America with a golden... ok make that silver parachute.

The concept and ideas behind the LCC model of a passenger airline cannot be applied in the same manner to the package delivery industry. The 3 giants are UPS, FedEx, and DHL.

Barriers to entry:
The market is practically closed to anyone who would like to start a company and compete against these three. The start-up costs alone are enough to keep someone out.

Start-up costs:
What if someone wanted to start a LCC equivalent to compete with Brown, Purple, and Yellow? The start-up costs alone would cost in the billions, and not too many investors are willing to risk that much, especially when fuel (diesel and jet) is going to be among your largest and most varied expenses.

Capital:
An LCC had better be prepared to offer it's customers guaranteed door-to-door service to millions of addresses around the world. Warehouses? Going to need at least several dozen of those. Sorting facilities? Can't deliver packages without a large worldwide network of those either. Airplanes? Going to need a large fleet, so purchasing a handful of used 737-200's or DC-9's isn't going to work. The smallest airplane you can get away with is the 727-200. Planning to go overseas? Going to need some widebodies and mx support over there too. How about vehicles? Probably going to need around 80,000 long-haul and delivery trucks, worldwide. Contract out? Sure, but you have very little control over reliability when several contractors are carrying your stuff.

Services:
Are you going to just deliver packages only as an LCC? If so, you are not going to grow at all and don't count on any profits. Are you prepared to provide warehouse and logistical services for your customers? How about customs service for the freight? Are you prepared, as an "LCC Cargo Airline" to offer to handle every single logistical need for your customers? Where can your potential customers go to ship packages? Will this new LCC purchase the next Kinko's or Mail Boxes Etc. to come along?

Can a start-up LCC package giant just start ops overnight and threaten the big 3 that are currently out there? How can a new company possibly start out competing against someone such as UPS, offer the same services as they do, but with a massive amount of debt from start-up costs and still expect to turn a profit as an LCC? Especially, since a company such as UPS practically has no debt to begin with. What if UPS, FedEx, and DHL drop their rates a little bit to where they still make a profit but the new "LCC Carrier" cannot? Our little LCC cargo-giant would be out of business in a week. What if one of the big 3 offer to dip into their petty cash fund (yes, I said petty cash) and just buy out the competition?

Don't forget about the labor groups. I'm sure there are enough pilots out there who would offer to fly airplanes for this new "LCC" for practically free. But what about your other labor groups? What if all or some unionize?

Bottom line is that the LCC model will not work.

"Next thing you know you are TWA, Pan Am, Braniff, DAL, NWA, UAL, etc..."
TWA, Pan Am, Braniff, DAL, NWA, and UAL all are or were passenger airlines. The passenger airline business has realistically only been operating for about 50 years. I know, there was some service prior to that, but they really did not get going until after WWII.

Taking a look at the passenger airline industry over the past 50 years, the industry as a whole has lost much more money than it has ever made. Passenger airlines have started up and gone out of business more times than it is worth keeping count.

Southwest Airlines is not the reason that the legacy carriers are having financial difficulties. The amount of debt that they owe is the reason why. Throw in a recession every 10 years, volatile fuel prices, several low-budget airlines popping up, and overcapacity in the market, and you have a recipe for more trouble. If you want to fix the industry, a lot of pilot groups out there must get together, demand raises, and quit flying for practically free. The LCC airlines are not low-cost, they are low-paid.

If the passenger industry ever wants to be more like a profession and less like a vocation, here is what must happen:

First, downsize. There has to be a reduction in carriers.

Second, the remaining airlines must strengthen, and this means turn a profit by INCREASING REVENUE and not by DECREASING SALARIES.

Third, a lot of pilots must drop this "I'll be an airline pilot and fly a jet at any salary attitude" and start demanding that they be paid as professionals. Management at some carriers has been successful in brainwashing their pilots into thinking that they must "fly for free or else".

Instead of being pessemistic and demanding that everyone else share the misery, a lot of you (no one person in particular) need to start aiming the other way.

 

[FreightNazi]

SWA and JetBlue in trouble in a year or so???

If the CASM's continue to come down and debt owed is allowed to be wiped away, you betcha.

America wants their low airfares and competition. If they have that nothing else matters.

Look out cargo industry. I predict your time will come too. I see way too many DHL ads and trucks rolling thru the neighborhood.

What you pax pinheads continually fail to realize is that DHL's two US contractors make as much, if not more, that UPS/FedEx pilots! LCC my A$$!

 

[FN FAL]

What you pax pinheads continually fail to realize is that DHL's two US contractors make as much, if not more, that UPS/FedEx pilots! LCC my A$$!

I've noticed a lot more contract 727 operations over at the DHL ramp lately.

 

[lowecur]

What you pax pinheads continually fail to realize is that DHL's two US contractors make as much, if not more, that UPS/FedEx pilots! LCC my A$$!

You Nazi!!!

What you fail to realize is that the expense side of the P&L is not just pilot payroll for DHL. If they lower the cost to send packages, where do you think FX/UPS are going to cut expenses?

 

[Clyde]

You Nazi!!!

What you fail to realize is that the expense side of the P&L is not just pilot payroll for DHL. If they lower the cost to send packages, where do you think FX/UPS are going to cut expenses?

Depends. If you are like Brown and pretty much have no debt, the cost of doing business is probably still much lower than at DHL.

Second, if you were a Coca-Cola drinker for many years and Pepsi lowered it's price by $0.05, would you switch sodas because of the price, regardless of which one has the better taste? How about reliability? Because you get what you pay for.

The difference in price for shipping packages among UPS/FedEx/DHL is not like shopping for ticket prices to take the family on vacation. For the average consumer to ship a package, any differences in price are not going to break the bank. They just want it to get there without any undue delays.

Until DHL establishes an effective ground-based package system (and I'm not referring to the little yellow vans), they don't have much to offer the consumer.

 

[SDF2BUF2MCO]

You Nazi!!!

What you fail to realize is that the expense side of the P&L is not just pilot payroll for DHL. If they lower the cost to send packages, where do you think FX/UPS are going to cut expenses?

Straying far away from the original thread....

Anywhoo, DP/DHL is getting ready to incur a huge debt by buying a British based logistics company who doesn't offer any real transportation services but is big into freight forwarding and warehousing. UPS attempted to make a go of it but my cynical side thinks it was just to jack up the price for DHL thus making them incur more debt. Time will tell.

 

[robert_fla]

Freight Nazi,

Who are DHL's principal US contractors?

TX