Deltas LCC vs Delta

[enigma]

I attempted to wade through all of the posts dealing with the ramifications of the newly announced LCC. I did not see comment directed towards the obvious damage that this could do to mainline Delta. This could blow up in DAL's face in a dramatic manner. If successful, it will devalue mainline even more than their current position. I say this because the buying public will now expect every Delta flight to be either, overpriced (the mainline customer) or under featured (the LCC customer).

In order to prevent this, Delta must diffrentiate the two services in the minds of the customers. I am curious how ya'll feel that Delta can accomplish this feat. Do you think that the LCC will fly under different paint jobs with some name on the side other than Delta? Will the Captain say, "thanks for flying Delta", or say "thanks for flying LowCost airlines operated by Delta", or will he just say, "thanks for flying LowCost airlines"? Will the pilots get to wear a more casual uniform coat?

I personally think that this is the beginning of the end for the full service mainline. I expect that it won't be long before Delta is 100% low cost. They will fly narrow and wide bodies between population centers and RJ's will do most all of the hub and spoke work. It's quite ironic that the RJ;s could soon be the aircraft of choice for the upscale business traveler, and the 757's will be relegated to cattle car duty between MCO and JFK.

Just thinking, What do you think?

regards,
8N

PS. My condolences to all of the non-union employees of the current mainline Delta(and everywhere else for that matter). It looks as if the LCC will establish a new level of pay and it won't be anywhere close to "A" scale for anyone except pilots and mechanics.

 

[Ty Webb]

Very insightful post, as usual, 8N.

My guess is that it will have some overblown marketing name with a punctuation mark (GO! or EZ-Fly! or something else that a bunch of stoned-out marketing gurus are bouncing off of each other down on Madison Avenue right now) and it will either not reference DAL or will put it in the fine print.

Your picture of the DAL of the future- a stripped down cattle carrier- assumes that the LCC is succesfull . . . . but I have my doubts.

I would think that it would be easier to start from scratch than it is to go backwards. A LCC depends as much as anything on having happy, motivated employees.

Any LCC dude knows that simple things like having ground power hooked up right away at the gate, a few pax bumping up to biz class and getting a "direct" or two can be the difference between making money on the flight or not. All it takes is one shiftless, unmotivated line guy, an overworked gate agent or a p.o.'d pilot to turn that flight from the black to the red.

If anyone has a hard time believeing that, think about this:

AirTran has 400 flights a day (round numbers).
90 days in the calendar quarter=
36,000 flights per quarter.

3rd quarter profit = 1.5 million

I don;t have a calculator handy, but it looks like a profit margin of less than $50. per flight to me. That's the equivalent of 1 biz upgrade and running the APU for half an hour.

Now, granted, that was the worst quarter of the year. The one before that, we made $5 mil., so that was about $150. per flight. Of course, some flights make $$$ and some flights lose $$$ but the nickles and dimes ad up to being profitable or not- in this environment.

Now, how do you change the corporate culture at Delta to do that? You start outside the company, not by naming a 58 year-old DAL VP as the President of the new operation!

As I wrote in an earlier post, Leo Mullin's background before DAL was in Utilities and (I believe) banking . . . hardly the innovator needed for a start-up operation, IMHO.

 

[surplus1]

Congratulations, enigma. So far you seem to be the only one willing to look at the heads up display and thus see through some of the fog.

With respect to your PS, it won't be too long before those that think they are left with the "A" scale find themselves in the same boat with the others.

The 199 seat bigger plane idea just might work, assuming of course that those seats can be filled (still a big assumption). If this works, the airline will be reduced to the new LCC, the DCI LCC, and the international and domestic codeshare feed. Times are a-changing.

 

[SDF2BUF2MCO]

Good topic. Want to add my $0.02 as a business traveler. I have a difficult time understanding why the airlines are focused on lowest cost rather than value. It is strange that companies/business travelers don't mind paying $129 a night at the Hilton but don't want to pay $350 for an airline ticket. With that said, would think there is still a market catering to the business traveler or else Hilton would be in a similar boat (maybe they are, I don't know). Speculate people are willing to pay more if they think they're getting something in return. Think the airlines are hurting but I also think they're using this as a smoke screen for deeper concessions.
To date, my company has not placed any restrictions on travel nor have they tried to dictate who we use to fly (can't book 1st class though!). Realize this is not the norm.

 

[~~~^~~~]

From what I am reading, the LCC will be put in markets where Delta has to put it there. Jet Blue's strategy has always been to simply survive until the dust settles and they are the only airline remaining in the NE.

Delta has wanted the NY market for a while now and was spending huge money on a new terminal at Kennedy (anyone know if that plan is still going forward?)

I do not think that the LCC is the end of mainline, but rather a diversion to beat down the competition and hopefully secure a good market while everyone else is down and out. Delta has to reduce capacity and the LCC probably looks like a better use of resources than parking the airplanes in the desert.

I also forecast that Delta is not finished negotiating with their pilots. This SLOA is a step, not the end game. Evidence of this can be seen in the DCI scope. In case no one noticed, more RJ's are on order than Delta is allowed to operate at DCI. I really do not think these aircraft are destined for mainline and even if they are, that would open up the DAL contract to negotiate pay rates. Either way, I forecast more negotiations.

Regards,
~~~^~~~

 

[pilotyip]

Work more

JB guys are pushing a 1000 hrs hard block per year @ around $125/hr, will the LLC guys fly a live 1000 hrs at $125/hr?

 

[Tim47SIP]

Ty Web makes a good point

The current info concerning the LCC states that the pilots will be paid based off of the current PWA. There is no way that this LCC can compete without lowering the mainline pay structure. I think fins is correct in that the negotiations are not complete as Delta management will shoot themselves in the foot if they treat the non union versus union people differently. Additionally, the money just does not add up concerning Air Trans revinue/costs basis and Delta mainlines (pilot) cost structure.
I was sort of hopeing that the new pilots would be furloughed guys but it looks as if they are shirinking mainline by this number of 75's and moving them to the new LCC. If the mainline guys keep their current pay and bennies, then the new LCC really wont change anything concerning DALPA's wants and needs and thus not really change the status quo. Maybe the pilots wages were negotiated so that Delta management could manuever in other areas that DALPA did not want their younger siblings to know about. Things that make you go HHHHHMMMMMM!

 

[higherflyer]

In case no one noticed, more RJ's are on order than Delta is allowed to operate at DCI.

Have you checked those RJ limits? There is a clause that allows the scope clause limits (on <50 seaters) to be lifted after two consecutive quarters of losses. We are well past that now. DCI is planning to soon commit to even more deliveries for 2004 beyond the 75+ deliveries already slated for 2003. Rumour (you can always trust those, right?) is that if ASA settles their contract reasonably, they will be pushed out to fly more point to point routes beyond the hubs. These are routes not served at this point by DL or affiliates.

 

[csmith]

I attempted to wade through all of the posts dealing with the ramifications of the newly announced LCC. I did not see comment directed towards the obvious damage that this could do to mainline Delta. This could blow up in DAL's face in a dramatic manner. If successful, it will devalue mainline even more than their current position. I say this because the buying public will now expect every Delta flight to be either, overpriced (the mainline customer) or under featured (the LCC customer).

In order to prevent this, Delta must diffrentiate the two services in the minds of the customers. I am curious how ya'll feel that Delta can accomplish this feat. Do you think that the LCC will fly under different paint jobs with some name on the side other than Delta? Will the Captain say, "thanks for flying Delta", or say "thanks for flying LowCost airlines operated by Delta", or will he just say, "thanks for flying LowCost airlines"? Will the pilots get to wear a more casual uniform coat?

I personally think that this is the beginning of the end for the full service mainline. I expect that it won't be long before Delta is 100% low cost. They will fly narrow and wide bodies between population centers and RJ's will do most all of the hub and spoke work. It's quite ironic that the RJ;s could soon be the aircraft of choice for the upscale business traveler, and the 757's will be relegated to cattle car duty between MCO and JFK.

Just thinking, What do you think?

regards,
8N

PS. My condolences to all of the non-union employees of the current mainline Delta(and everywhere else for that matter). It looks as if the LCC will establish a new level of pay and it won't be anywhere close to "A" scale for anyone except pilots and mechanics.

I find it interesting that we need to set up this different entity, and spend the associated money, in order to secure competition against our LCCs. I rhink you are spot on with this analysis. The aircraft will probably be painted a different color. The employees will be paid less and make up for this loss with increased utilization. I've even heard from fairly reliable sources that advertising will play a large part of covering costs--eg Old Navy uniforms, Power Puff type advertisements on planes, etc.

The company has been waiting for years to play their card against the non-unionized employees, and this may very well be the time--it's really hard to tell.

As far as being the end of mainline as we know it, there is a problem with that theory. In the DAL-NWA-CAL code share, there was a seemingly small, but very significant change: the way the percentages for DCI/DAL are calculated. Its all about the margin now. The consecutive quarters of losses thing is gone. The FM remains. This is the first time, IMO, that it seems the company is holding true to its word that they actually want to run an airline.
In fact, if indeed the 200 million figure holds true, the margin will grow and it will trigger the recall of pilots based on minimum block hours. Could it actually be that this may be the "common ground" for resolving the furlough issue?!? Time will tell.

Regardless, I don't see the end of mainline Delta as we know it just yet. The LCC will be run at first in the old Express routes. Down the road, it may go after SWA out in Vegas with some transcon low yield routes. It may even--gasp--create new routes which Delta has not done or no longer does. It really doesn't matter to me until they attempt to change the scale back to one of Express type. It is then that you will see resistance from the Delta pilots.

More negotiations may very well lie ahead, ~~^~~, but the economy is growing at 3ish%, the recession is over. The pilots were burned by this one before, and are unlikely to let it happen again. Interesting things are happening around the industry. Talks just broke off at USAir over more concessions with the company giving a "take it or leave it" final offer over productivity and RJs. Untied seems to have fallen a bit short on its goals of concessions. DAL and CAL are headed for an alliance--again--this time with NWA. My personal take is that United and USAir are headed for the old take two on the consolidation route. There are just too many fingers pointing that way, IMO. Look for Delta to join the same if the trend begins.

Oh the times, they are a changin'.

 

[V-1]

It looks as if the LCC will establish a new level of pay and it won't be anywhere close to "A" scale for anyone except pilots and mechanics.

Can anyone explain to me how uneducated, unskilled employees are worth "A" scale wages?