Boyd says LCC's have their problems approaching

[Palomino]

Posted on Sat, Feb. 04, 2006

Passenger traffic up for American

By DAVID WETHE
STAR-TELEGRAM STAFF WRITER

American and Southwest airlines both carried more passengers in January compared with last year, according to reports released this week.
Fort Worth-based American Airlines said its planes last month were an average of 75 percent full, up 1.8 percentage points from the same period in 2005.
Its overall passenger traffic grew 4.4 percent, thanks to a 1.9 percent increase in capacity.
American Eagle, the company's regional affiliate, reported a 28 percent increase in traffic from January 2005.
Dallas-based Southwest Airlines reported an 18 percent increase in traffic, with its airplanes flying 63 percent full, compared with seeing 59 percent of its seats filled in 2005.
Michael Boyd, president of the Boyd Group, a Colorado-based aviation consultant, said American's traffic numbers are sound.
"A lot of work's been done at American, and a lot more is going to get done," he said. "It clearly shows that as long as oil prices don't head further into the stratosphere, it's carriers like American that hold the future."
He expects 2006 to finally be a better year for legacy carriers such as American relative to low-cost carriers such as Southwest.
Although American never filed for bankruptcy protection, several other legacy carriers are reorganizing their burdening debts and higher costs through bankruptcy court, allowing for more effective competition with low-cost carriers.
"In nine to 12 months, we'll be talking about the problems of these low-cost carriers," Boyd said.
Shares of AMR Corp., American's parent, (ticker: AMR) fell 55 cents to $22.74 on Friday. Shares of Southwest (ticker: LUV) fell 9 cents to $16.43.
www.aa.com
www.southwest.com
David Wethe, (817) 685-3803 [email protected]

 

[OPECJet]

I just flushed something that had the mentality of this Boyd guy.....

Come to think of it, it was smarter. It didn't point out obvious crap before I flushed, and it was just as offensive.

 

[FlyBoeingJets]

"A lot of work's been done at American, and a lot more is going to get done," he said. "It clearly shows that as long as oil prices don't head further into the stratosphere, it's carriers like American that hold the future."

He expects 2006 to finally be a better year for legacy carriers such as American relative to low-cost carriers such as Southwest.

"In nine to 12 months, we'll be talking about the problems of these low-cost carriers," Boyd said.

I have read some good stuff from Boyd. This is not it.

He just looked at American's last quarterly report. He also looked at UAL's emergence and is judging it less than spectacular, like everyone else. American will be putting over $1B down on their $20B in debt. Smart move and a good sign.

American is doing doing better than DAL and NWA this year while they continue to shrink in 2006.

2006 will be a GREAT year for LCCs and, by the end of 2006, articles will be posted about LCC growth "in trouble". His prediction comes right after JetBlue and Frontier posted such losses. He is already right about some LCCs!! But this comes off of several "great years for LCCs" and the resurgence of the Legacy is long overdue and necessary for their survival. I would predict it to with their non-fuel CASMs as good as they are now. International routes are expanding and paying the bills while domestic is less of the operation and sucking much less cash. When was the last time you heard of a legacy paying a $1B for anything good let alone toward debt?? He is already right about American!!

Boyd is pretty much master of the obvious on this one....Again.

 

[YourPilotFriend]

People in the past have selected the LCC because of the $90 price tag verses the $500 from the legacy. If the legacy charges $90 people will select the legacy everytime. Why would I buy a ticket on SWA when I can buy a ticket on AA at the same price? There's a huge difference between "you are now free to move about the country" vs "you are now free to move about the world".

 

[radarlove]

Has he ever been right about anything? Or does he just spout and move on to the next thing?

Boyd just reads the paper and tells us what he thinks of the news.

 

[Dangerkitty]

Has he ever been right about anything? Or does he just spout and move on to the next thing?

Boyd just reads the paper and tells us what he thinks of the news.

From what I have seen Boyd is right many more times than he is wrong.

Of course he is very full of himself and very arrogant, but that is another story.

 

[canyonblue]

Why would I buy a ticket on SWA when I can buy a ticket on AA at the same price? There's a huge difference between "you are now free to move about the country" vs "you are now free to move about the world".

Because the majority of travelers don't fly enough to even earn a FF ticket. Trying to woo a passenger with the prospect of a free trip to Paris will only work if the person actually flies enough to even earn one. The bottom level for AA to Paris is 40,000 miles, 100,000 for unrestricted travel. So for the average person that travels 2 or 3 times a year it isn't even a reality. On the other hand if that same person were to fly just 8 roundtrips in 24 months on Southwest they will get a free roundtrip ticket, and mileage does not matter.

 

[radarlove]

Yeah, but those travelers that do fly enough to participate are also price-insensitive business travelers that provide the highest margin of profit to the airlines.

That's the trick to revenue management, get those to pay the top amoun they are willing to pay for the ticket. Lot's o' grandmothers paying $175 pay for the gas, then a couple of business whales paying $700 pays for the profits. I wouldn't dismiss FF programs, there are folks (fewer in the last couple of years, but they're coming back) who are willing to not shop for bargains.

 

[Tejas-Jet]

Why would I buy a ticket on SWA when I can buy a ticket on AA at the same price? There's a huge difference between "you are now free to move about the country" vs "you are now free to move about the world".

Funny you should ask, because that very option was given to many AUS-DAL travelers just a few years ago. Guess what? AA no longer competes on that route....what was it...27% ...or was it 37% load factors they had.

Now, yes...<yawn>...by now, we all know that you can get to London on AA, but you can't on SWA....OK. (Of course, when i fly to Europe, I'd rather go on CAL than on AA....I can discuss those reasons later).

SWA still shows profits and thats really all I care about. Lets rember, when AA and all the other legacies were showing profits ( you remember when that was), SWA was really raking it in....thats why I'm looking forward to the legacies showing profits again.

Tejas

 

[32LT10]

Because the majority of travelers don't fly enough to even earn a FF ticket. Trying to woo a passenger with the prospect of a free trip to Paris will only work if the person actually flies enough to even earn one. The bottom level for AA to Paris is 40,000 miles, 100,000 for unrestricted travel. So for the average person that travels 2 or 3 times a year it isn't even a reality. On the other hand if that same person were to fly just 8 roundtrips in 24 months on Southwest they will get a free roundtrip ticket, and mileage does not matter.

It is not just the tickets that the airlines want the people for. They want them for the credit card mileage promotions. I do believe even the likes of JBLU has a CC program. It is the smart traveler that decides to use the CC for travel and they choose to sign up with carriers that CAN take them to Europe, Asia, South America or just about any where on the globe. The LCC cards are for the most part worthless.

Of course if you eat 6 wendy burgers you get a ticket on Airtran. Do they get the biggie seat for the 8th burger? The depths of this industry in the LCC arena knows no limit.