Delta and all pay RAH to compete

[JoeMerchant]

Seems to be OK? A bit of an inferiority complex there?

If you haven't noticed, everyone gave/gives Skybus and VA nothing but sh!t.

What I meant was "big jet pilots" have no problem going to work for places like Skybus and VA when they get furloughed from the majors....They wouldn't start over again in an RJ...but an A320 at 35 bucks an hour is acceptable...After all, it is a "real' airplane...That is how we got in this mess in the first place.....

 

[Monster Buck]

The same one Delta had?

http://www.airtimes.com/cgat/usb/delta/detail/insidecover-dl420323.jpg

Hard to believe such a little airline is now the world's largest....

Weak jab to try to capitalize on. One did and is the largest in the World and one is the little engine that thought it could and failed miserably. You can try to spin it anyway you would like but those are the facts.

 

[Scope out RJ's]

What I meant was "big jet pilots" have no problem going to work for places like Skybus and VA when they get furloughed from the majors....They wouldn't start over again in an RJ...but an A320 at 35 bucks an hour is acceptable...After all, it is a "real' airplane...That is how we got in this mess in the first place.....

Of course the fact that you paid for training, and that your company was PFT has "nothing to do with what you meant either," eh junior?

 

[JoeMerchant]

Weak jab to try to capitalize on. One did and is the largest in the World and one is the little engine that thought it could and failed miserably. You can try to spin it anyway you would like but those are the facts.

The point is, little airlines can become big airlines....Then big airlines can fail...Every big airline started as a little airline, and no "biggest" airline has stayed at the top.

 

[Monster Buck]

The point is, little airlines can become big airlines....Then big airlines can fail...Every big airline started as a little airline, and no "biggest" airline has stayed at the top.

You are trying to draw parallels between a growing "little" airline 80 years ago and one today. That's not even apples and oranges its two completely different dimensions.

 

[SpauldingSmails]

I really do feel there are some parallels here with the regard to RAH and Indy Air. No, the situations are not identical; nor would I argue that. Clearly, RAH is financially better positioned and at the moment their contracted lift isn't immediately threatened.

However, RAH's contracts now carry a lot baggage, specifically with regard to Delta and United that was not present when they were signed. What RAH has now isn't just two new subsidiary carriers, but they now wield pricing power in a number of destinations. Indy had a very destructive effect on pricing as Monster Buck had stated, and that in turn had a negative effect on bottom line for major network carriers. In the case of RAH, it has the potential of being a triple whammy for the major network carriers.

In an economic downturn, the effect is dual-fold because there are in essence no "new" passengers; its every airline fighting over the same people. When another carrier lowers their fares to try and gain market share, other carriers have to lower their's to remain competitive lest they wish to lose their share. This is especially applicable with regard to United, where UA and F9 will be competing head to head in Denver for the same bodies. With a smaller number of traveling public, the bodies will either go to Frontier or United. IF fares go down it will be doubly destructive to United's bottom line by way of revenue destruction through lower fares, and then again though a loss of ridership. To top it all off, they have to cut a rent check to their regional feed provider every month who happens to gutting their bottom line in their backyard.

Sure the contracts will stand for now, but moving forward I don't see this turning into a "gentlemen's agreement" between the major network carriers and RAH.

 

[Indy319FA]

Indy Air did not lose the Dojets over competition. Delta's scope clause prohibited any aircraft with more than 70 seats on the certificate. The contract was canceled the day the 319s went on the ACA/Indy Certificate. That is why Delta was stuck with the leases on the Dojets.

Why would Delta care if we are competitors with them when we already have contracts providing feed with 4 of their major competitors already?

 

[SpauldingSmails]

Why would Delta care if we are competitors with them when we already have contracts providing feed with 4 of their major competitors already?

If it sounds as if I implied that DAL canceled the ACA contract due to "competition" I am sorry. I realize that was not the scenario, believe me, I work with enough former ACA guys to have heard that story many times over. The parallel I'm drawing is in regard to a previous contract-only lift provider transitioning into the field as an independent carrier.

Like I said, RAH now has pricing power through Midwest and Frontier. RAH does not set the fare for a flight they operate under the banners of their mainline partners. RAH is not a competitor when they fly under the banner of another carrier, they are merely the agent of the competitor.

Under Midwest and Frontier, the pricing power now lies with RAH to whom other airlines pay to provide feeder services.

 

[waveflyer]

Ahh- once again Joey completely missed the point - the point is that as bad as VA rates are- they are better than regional rates- it's a legitimate step up from the low pay and constant whipsawing at "regionals"- and it will be as long as mainline carriers keep farming out their growth- your pay is lower today because of outsourcing.

 

[erikgigem]

The conditions that led to the failure of Indy Air do not exist at RAH. RAH is not guaranteed success, but they are not following the same path that ACA did. Your comparison is too general, and incorrect.

Indy Air had its contract with UAL terminated during UAL's bankruptcy period over the inability of the two companies to agree on reimbursement rates. UAL wanted to cut those reimbursement rates by an unreasonable amount, and ACA said they could not work for such low rates. UAL said goodbye, and ACA was left with 85 CRJ's and some J41's that had no home in a very short time. The only option seemed to be to operate those planes independantly. By doing that, ACA voided its contract with Delta, and lost the revenue it was generating from the 30 or so Do-328 Jets. Those were sold/parked, as were the J41's. ACA branded itself Independance, and tried to start an airline with ZERO customer recognition or loyalty. It also began by operating as many as five round trips a day between cities and IAD. IAD does not have a lot of originating traffic, high landing fees, and no easy connection to Washington, DC by land. ACA also thought it could save money by not advertising initially on major internet websites like Expedia, et al. With no brand recognition, and no major distribution outlets, ACA could not fill seats on its overly ambitious fleet of 85 CRJs. Eventually the brand caught a loyal following, paid to dstribute on the national websites, and bought more economical Airbus types to operate on popular markets, but it just wasn't enough. There still was not alot of originating traffic out of IAD, and they just did not connect a diverse range of cities. They kept too many planes flying from day one, and did not cut back to meet demand. The rest is history.

RAH is currently in a position where it has not acted in a way that would endanger it's feeder contracts in the immediate future. There is a large amount of income from those operations, and those operations have not declined in a rapid, unmanagable way (15-20 planes per year vs. 100+ airplanes in six months). RAH has made concessions to its mainline partners in their times of need (reduced compensation from AA, removal of 15 smaller ERJs for Detla, Cash to US Airways), and still found a way to be profitable in the process. RAH "standalone" operations via Midwest and Frontier come ready with brand recognition, customer base, reservations staff, gate space, and established ticket distribution networks. Also, RAH has had some recent practice with expanding customer outreach in it's successful attempts to grow Mokulele. RAH has also successfully negotiated codeshare agreements for its stand alone carriers, helping to fill seats and spread the brand names to new customers. Alaska, United, Delta, Frontier, and Midwest have all signed some form of codeshare agreement in the past few months, and more are being pursued.

ACA/Indepedance was an attempt to go it alone following the rapid an relatively unexpected cancellation of their main revenue stream. They did not have the time to calculate an apporpriate entry into the marketplace, and did not have a way to estalish their name fast enough.

RAH has not lost any of it's current revenue stream. It has purchased one complete, turn key airline (F9), and another airline that brings customers and has staff, but has no airframes left at this time next year (YX). It also bought Mokulele, which was really nothing more than a name known to locals in very concentrated market. Mokulele brings potential (via codeshare with mainline carriers that don't want to invest in mulitple Hawaiian destinations), Frontier brings proven steady profit (an established airline with a functioning business model), and Midwest brings a platform from which to make a new airline from existing components and customers). RAH still has revenue diversity, and that diversity will not go away in the next few years. Six major airlines contract with RAH, and RAH will have three independant sources of revenue, one of which is currently profitable, another of which is expected to be profitable within a year. There really are no significant similarites between Indepedance and RAH, except for everyone else's desire to see them fail. But then again, none of us enjoy watching the success of others.

Nice explanation. But flightinfo readers don't want to read informative articles from people that have critical thinking skills (can look beyond the surface and examine the complexities, in view of airline business history, and market forces that shape our industry). There are winners and losers in a free-market (for better or worse) to the benefit of some, and difficulties to others.

The only correct answer about this deal on flightinfo is that RAH single-handedly completely and utterly destroyed the airline industry as we know it. Everyone at Frontier is about to commit suicide since the buyout. And Bryan Bedford makes Bernie Madoff look like a saint Peter.