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"Delta will eventually become a LCC"

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Medeco

SQUIB
Joined
Sep 12, 2002
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Interesting quote, and article. Also funny that Flightinfo censored the IFE product name.

Medeco


Delta's Song To Launch New Routes To West In Summer

By Steven Lott 12/07/2004 08:27:13 AM http://www.aviationnow.com/media/images/x.gifhttp://www.aviationnow.com/media/images/news/AIRCRAFT/Boeing/757ENG.jpg Delta's Song division is finalizing a 2005 expansion plan that will see 12 more 199-seat 757s joining its fleet, likely helping to launch new transcontinental routes from New York Kennedy starting next summer.

In one of her first interviews since taking over for former Song chief John Selvaggio in October, Acting Song President Joanne Smith told The DAILY that the carrier expects to unveil the new routes in February and start service in June. The carrier will add about one plane every two to three weeks starting this summer, with all of the additional aircraft flying on all the new routes by November.

"The game plan is to use the Song product to compete vigorously in some of those tough competitive markets where there is a lot of demand and low-cost competition is fierce," Smith said. The 12 new planes will let Song add service to another four to six "high-density" markets. Two of the top transcontinental routes that may get Song service are Los Angeles and San Francisco, both of which are served from JFK by Delta's mainline product.

Song already serves LAX from three Florida cities and the only other western city to see Song so far is Las Vegas. Song about a year ago was planning to roll out an aggressive expansion plan to the West, but the launch was put on hold after there was a change in leadership at the airline last winter (DAILY, Jan. 29). Delta CEO Jerry Grinstein for months noted his skepticism for Song inside the airline and out, but he wanted to see a full year's results before deciding Song's fate.

Smith believes that Grinstein's September approval of Song's 2005 growth plan is an endorsement of the strategy and adds some credibility to their claims that the operation is achieving its goals (DAILY, Sept. 9). "What really convinced him is that the costs are coming in where they should be, the margins were improving and, more than anything else, was the strong customer response," Smith said.

She believes that Grinstein was encouraged by the high marks passengers were giving the Song service, which many observers believe is better than the mainline product. Grinstein also could not turn his back on the tremendous financial investment that was made in Song.

One of Grinstein's goals for the airline is to boost customer service and the inflight product. Just last week, Song unveiled its upgraded inflight entertainment system, which will be installed on all 36 planes by yearend. The upgraded Matsu**CENSORED****CENSORED****CENSORED****CENSORED**a system offers 10 on-demand movies for a fee and digital music that allows passengers to create individualized play lists. The system also has 10 video games along with the live television.

The 2005 growth plan is essentially the same one put on hold last year, Smith said, except with a "few tweaks," and Smith believes Grinstein's green light means Song will be around for years to come. Even though Delta eventually will close the cost gap between itself and low-cost carriers, Smith believes Song is still crucial to Delta's long-term strategy. "We believe that two brands are better than one," she said.

Delta has been able to prove internally that it has gained incremental passengers thanks to a new brand. "Delta will eventually become a low-cost carrier but Song will continue to be a small part of Delta," she said. "There is no plan that says we are going grow to half the size of Delta." Smith predicts that Song will continue its role as a "test bed" for Delta for new products and processes as it slowly grows its own presence in key leisure markets.

Smith acknowledged that yields at Song are weak, as they are for the whole industry, blaming fare wars and overcapacity this summer leading to weaker yields on many routes. "We're feeling pretty optimistic about 2005," she said. "Better awareness leads to stronger demand, which leads to higher yields." Meanwhile, Smith said "traffic is building in the face of added capacity."

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What exactly is the definition of a LCC? The term just seems to be thrown around alot. SWA seems to have one model, AWA another, Indy yet another, JBLU seems to be running it's own brand of LCC as is Airtran.
 
Good Question FDJ2. The only thing I can come with is the Saturday night stay restrictions in place at just about every "major" or "legacy" along with a more elaborate fare structure and route map. Other than that, any carrier that decides to lower fares seems to become the next LCC in the media's eyes. Who really knows what a true LCC is.


IAHERJ
 
I think part of the definition is no traditional pensions. For the not so long ago "good old days," you might aspire to have a traditional pension on top of what the LCCs have for retirement. In other words an A and B fund. Traditional defined pensions are gone, in my opinion, regardless of what happens in the short term at the legacy carriers, and unless you work for the government they will be gone anywhere you go. You simply cannot compete in this environment with companies that don't have traditional pensions. It will be interesting to see if any of the other legacies will be able to shed their pensions without Ch11. I don't think they can.
 
About 7.7 to 8.3 CSM or less. Anything more is just not a LCC, it's a NCC (normal cost carrier). Those numbers are with Oil at $35 to $38 a barrel, add .5 or .8 CSM when you get closer to $50 a barrel.
 
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My definition . . .

would be that there are no different seat classes on the airplane.

No first, no business, no coach plus, etc.

Just a good ole 132 seats of coach.

My 2 cents.

Jetsi
 
FDJ2,

If thier CSM is above those numbers yeah, it thay are well above, you betcha! Anyone know what Indy's numbers are?
 
Jetsi said:
would be that there are no different seat classes on the airplane.

No first, no business, no coach plus, etc.

Just a good ole 132 seats of coach.

My 2 cents.

Jetsi
Doesn't Airtran have two seat classes?

I'm not busting on you, buy no means, but it just seems hard to pin down exactly what a LCC carrier is, other then a marketing pitch to Wallstreet and the leisure traveler.

10 years ago you could say it was an airline that flew single class, point to point in a single type air frame (SWA). You just can't say that anymore. I suspect you're a LCC if you choose to label yourself as one. The variety of airlines business models that are now claiming to be LCC is stretching the definition. You even have airlines with CASMs in the 20cent range that claim to be LCCs.
 
I would agree with FLB717, that a low cost carrier is a carrier whose CASM is around 8 cents or less.

Indy is not a low cost carrier. They are a low fare carrier. They offer lots of low fares...despite having high unit costs. Ideally, if you are a low fare carrier, you want to have low costs if you intend to survive for the long-haul. I don't think Indy has quite figured out what they want to be.

Like Indy, Song would be a low-fare carrier, but not necessarily a low-cost carrier. Since DL does not break out Song's CASM, there's no way to know if they are really low cost or not.

I'm not quite sure how DL intends to become a full fledged low cost carrier. Given DL's multiple fleet types, large cost-intensive hubs, regional market service and international network, it'll be difficult for DL to get a CASM down near the LCC level.
 

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