Giants May Target Budget Airlines

[dispatchguy]

Let me get this right. The major airlines, whom are all ready bleeding red ink, are going to slash fares and induce a fare war to drive the low cost carriers out of business.

Didnt UAL do that to Western Pacific - slash the fares out of DEN to the point where WP couldnt make a dime, and WP went tangu-uniform?

Where's WP now?

 

[General Lee]

WP is gone. We fly some of their planes now I believe. I think the larger LCC's--Southwest, Airtran, and Jetblue already have name recognition etc, and it would be harder to "hurt" them. The newer LCC's without name recognition will be the targets I believe, and I think that's what the article said.

Bye Bye--General Lee

 

[Pickle]

Predatory pricing part deux, LCCs

General Lee said: "AA kept flying those routes for about 6 months to appease the FEDs, and then stopped."

YEs, AA did knock Legend out of Love Field, but I was also referring to Northwest the "Kings of Predatory Pricing" and their pp endeavor into RNO to take on Reno Airlines (remember them?) and also what they are doing in MKE to Midwest right now.

General Lee also said: "I think the larger LCC's--Southwest, Airtran, and Jetblue already have name recognition"

There is one LCC who is glaringly ommited form your list, a carrier that is bigger than all of those mentioned save SWA. It is ATA, the "Biggest Airline You've NEVER Heard Of." (tm)

I coined that phrase. Y'all can feel free to use it though, just make sure my royalty checks show up on time.

 

[greyhound]

General

I think you are right about the skycaps not belonging to Delta.
But I am sure you will agree that they represent "Delta" no-matter who they get their check from.
At SWA, you get a SWA employee.
Probably because SWA knows it's own employees take better care of their customers.
My wife flew Delta to GDL on your 737-800's(I believe).
Everything else was fine.

 

[General Lee]

Greyhound,

You're right, they do represent Delta, and they should be talked to. Customer service is very important and some of these guys don't get it. I'm glad the rest of her trip was fine.


Pickle,

I wasn't leaving ATA out on purpose. I am sure people are starting to recognize them more and more each day--especially in Chicago. The whole point of this article to me is that the newer ones with less name recognition might have initial problems if the Majors launch a price war at their hub city. It is all speculation though.

Bye bye--General Lee

 

[Pickle]

AT what?? AT who?

General Lee:

No, please don't think I was getting on you about leaving ATA out of your list, it was actually aimed at how you never hear of ATA in the media or in articles about LCCs. ATA has replaced the old VP of Marketing with a new guy. I do notice lots of ads here in Chicago on the radio, also on baseball games on ESPN and other shows on other networks.

But, no, that was not aimed at you.

 

[FLB717]

General,

You said Delta run JBLU out of ATL. We sort of they are still here. But I really believe they retreated slightly (they will be back) not only because Delta dumped a crap load of capacity on the the routes but they had to try and take AAI pax also. I believe if AAI was not on ATL LAX then they would still be here but bigger.

As far as Preditory Pricing, yeah Delta does it all the time. It just has a smaller impact than on a carrier like the future ACA or if someone tried to kill Spirit. Spirit would live but they would take a much harder hit than AAI or JBLU. And lets face it you want power? If LUV paid off all debt they would still have nearly 1 BILLION in cash.

 

[General Lee]

FLB717,

Hey, I didn't mean to leave you guys out (Ryan actually), and I know that Airtran has good feed onto those flights. So, maybe both of us ran them out---and we really did. Sure, they might be back, but probably not on the LGB route, and they just started OAK---with a 6am departure out of ATL (who wants to wake up super early for that? The TVs wouldn't help because you would sleep through the whole flight) and it returns as an allnighter. I think they will eventually return with some FLL flights to ATL, maybe JFK, IAD, or BOS. Who knows? I am sure it probably hurts our bottom line, but we are going to have to figure out a way to compete--and right now that is Song on a lot of their routes. Let's see how it goes when we get all 36 of our planes up and running, and the TVs installed. We shall see---and I am not forgetting about you guys at Airtran....

Bye Bye--General Lee

 

[FLB717]

Hey it ok we have Ryan, you have DCI. Of course ryan leaves in 1.5 years.. Whens the DCI contract up? Thats a joke

 

[General Lee]

FLB717,

Never. But, they do provide good feed and make profits for us in this rough time. Hey, you guys are getting into the RJ game too---Look at PNS, TLH, MEM, GSO, and RDU. I have a feeling that you might be seeing more RJs too. It's all about economics.....right????

Bye Bye--General Lee

 

[FLB717]

True but with what we charge and the CSM for the RJ it only makes sense to use them on low Pax routes or when the time (mid day MEM) is always lite on pax. The best part is that we dont own AW so the desire to exspand them is not as prevelent as in other circles.

 

[Caveman]

John Q. that flies maybe once a year has only one thing in mind when he buys an airline ticket: Price. When he shows up and finds a TV in front of his seat he's pleased. When he's treated courteously,he's pleased, but he won't remember or care about any of that the next time he flies. He'll be looking for the cheapest ticket, period. I would venture a SWAG that the John Q. I'm describing makes up about 70% of pax. IMO it isn't the seats or service that keeps SWA, JB and AirTran successful. It's ticket prices plain and simple. Until the legacy carriers can restructure their operating costs they'll never be able to compete with the LCCs and unless mainline employees are willing to work more for less compensation it ain't never gonna happen. The LCCs are a better mousetrap folks. Darwin was right, change or die.

 

[General Lee]

Caveman,

That is exactly what Ron Allen said to the Delta employees in '92---"The airline industry has changed forever..." What happened in the late '90s??? Huge growth, great economy. Can it happen again? Probably.

Bye Bye--General Lee

 

[mad691]

Back in 92 LCC's made 7% of the domestic market. Now they have almost 30% of the domestic market. Back in 92 the internet was in its infancy. Now everybody buys tickets on the internet.

 

[mad691]

Heres an interesting article.........

Low-cost carriers to 'inherit the earth' in US
Dateline: Monday October 06, 2003

By the end of 2006, the current crop of seven US low-cost carriers will operate 1,030 aircraft, up from 776 today, and will account for 40% of domestic mainline aircraft movements, according to JP Morgan analyst Jamie Baker.

By comparison, the domestic narrowbody fleet at the US network carriers (American, Continental, Delta, Northwest, United and US Airways) will remain static at 2,494 aircraft at the end of the period.
In a report released Friday, Baker observed that "these are alarming statistics for network shareholders." He went on to predict that "given the rate at which LCCs are expanding, the devastating pricing impact they possess and the network carriers' myopic refusal to question their own business model, we believe LCCs will eventually inherit the earth."

Shrugging off comparisons to earlier periods, Baker noted that today's LCCs are much larger than in the mid-1990s at the onset of the last industry profit cycle. He identified 17 such airlines in 1994 and noted they operated a total of 2,705 departures per day, representing 17% of domestic departures and 12% of domestic ASMs. However, the group was highly fragmented: Only two operated more than 25 aircraft. Today AirTran, America West, ATA, Frontier, JetBlue, Southwest and Spirit operate 776 aircraft--all have at least 25--and they account for 32% of domestic departures and 26 of domestic ASMs.

The pricing impact of LCCs "threatens to significantly mute the business travel recovery in 2004," Baker wrote. Already, network airlines are finding their pricing power constrained in more than 600 domestic city-pairs where last-minute one-way fares are capped at $299 thanks to the presence of a low-fare competitor.

"With each successive LCC route, so goes the network carriers' last grasp on pricing power," he stated. For example, when AirTran enters the Atlanta-San Francisco market next month--Delta's ninth-largest US market in terms of revenue--the one-way walkup fare will plunge from $1,167 to $254. Newark-SFO is Continental's sixth-largest domestic market in terms of revenue (it was the largest prior to the dot.com meltdown) with a last-minute walkup fare of $1,233 each way, according to Baker. When ATA Airlines enters the market Oct. 26 with two daily roundtrips, Continental's highest walkup fare will fall to $454.

Although it is true that LCCs are unlikely to compete in connecting markets, this is "irrelevant" because only 30% of revenue comes from connecting markets while 70% is generated in nonstop markets, and "these are the markets LCCs continue to cannibalize," the analyst noted.--Perry Flint



Return To Main News Page
ATW



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[General Lee]

Yeah, that is interesting. But, it doesn't take into account that some Majors are trying to combat the LCCs and play the same way. Delta, for example, is trying with Song, and will be affective. The reason? They have cut the CASM down to near 7.0 (Fred Reid's numbers)--by slashing wages on everyone except the pilots--and the planes have 199 seats, and fly more. As Song grows and competes, it will make a dent in some of the LCCs plans---not all. But, I think the Song model will grow at Delta---maybe to all 120 757s--not just 36. Delta has tried to adapt to one segment of the flying public with Song, has kept the profitable hub and spoke with two large hubs that bring in passenegers on RJs from small cites and connects them to bigger ones, and still has profitable INTL hubs at JFK and ATL---with little or no competition to Europe, Latin America, and South America. They also have a great codeshare with CO/NW. I hope it works.
The other Majors will also have to figure out how to combat these successful LCCs. We shall see how it works out.

Bye Bye--General Lee

 

[badog]

Back to the qestion topic! How many aircraft for the LLCs'? I think USA 3000 have 6? JB a few more Value tran? Spirit??? IF the large carriers want to hurt the LLCs' believe me they can. All thats needed is some EXTRA cash and that's coming with the return of the business travelers. As soon as the reigns loosen up on corporate travel, (SOON) the extra cash will flow and competition WILL return. As for the LLC market share........ all good things come to an end.

B.D.

 

[mad691]

Ya..things are sure comin to an end!! Hope the majors don't wait too long......

Reuters
UPDATE - Airline business travel bottoms out- survey
Monday October 6, 3:56 pm ET
By John Crawley


(Updates with more survey details, company comment)
WASHINGTON, Oct 6 (Reuters) - The sharp decline in business travel fueling the downturn at major U.S. airlines has reached its low point, but the outlook for carriers remains bleak as more companies shop for bargains and cut back on trips, an industry survey found on Monday.

ADVERTISEMENT


"While the falloff in business travel has bottomed out, according to the survey results, the revenue environment from this segment is as good as it is going to get for the foreseeable future," said Kevin Mitchell, chairman of the Business Travel Coalition.

That group, which represents corporate travel managers, surveyed 110 companies in the United States and Canada with more than $1 billion in travel spending for its annual report on industry trends.

"The major airlines' choices are to either improve cost and productivity or continue to cede market share to the low-fare airline segment," Mitchell said.

The survey found that 76 percent of the companies that were surveyed increased their travel on low-fare airlines in 2003 and 75 percent boosted their use of technology to purchase tickets on the Internet and enhance strategies to avoid or minimize travel.

Virtually all of the companies that have made those changes say they are permanent, the survey found.

"Travelers are being more cost effective and we're encouraging that," said Pete Buchheit, travel manager at power tool and hardware manufacturer Black & Decker Corp. (NYSE:BDK - News).

Buchheit said the company now books nearly 40 percent of its domestic travel online and is relying more on low-fare carriers Southwest Airlines (NYSE:LUV - News) and AirTran, a unit of AirTran Holdings (NYSE:AAI - News). Both fly from Baltimore-Washington International airport near Black & Decker's Maryland headquarters.

Mitchell said 73 percent of these executives are dissatisfied with their airline contracts and nearly the same percentage believe better deals can be found online.

He predicted the shift to Internet booking will only strengthen online travel sites like airline-owned Orbitz and Expedia, and said big online booking outfits would soon be "invited" to bid on big travel contracts.

"They may not be selected (right away) but they will be brought in and they will become a real force in corporate market," Mitchell said.

The survey also found that more business travelers are seeking alternatives to airlines like Amtrak or driving. Some, especially tech savvy younger executives and budget-conscious sales personnel, are more widely using teleconferencing and videoconferencing to avoid travel or they are planning trips more strategically.




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[F9 Driver]

Size may matter

Hey folks,

Just something to ponder when bantering about the "does size matter?" question... What happens when the LCCs start code shares? Could add lots of frequency. And, Bad Dog, even more market share

Just a thought.

PS: Just found this while surfing. Looks like another is entering the fray.

http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2003/10/06/story1.html

This too.

http://www.forbes.com/2003/10/06/cx_ld_1006mesa.html?partner=yahoo&referrer=

 

[Ty Webb]

Spoken like a true idiot.

Why don;t you try to research the facts before you just start ejaculating your nonsense on this board? Let's take a look at your post:

First, the Company name on my paycheck is AirTran Airways. Does a Delta guy's say DeltaWestern? Does a NWA pilot's say "NorthwestRepublic"? What does your paycheck say? That's what I thought.

SEcond, the fleet numbers, for one, are readily available. AirTran operates more aircraft than JB, not less, in fact, right now, we operate nearly 70 B717, 6 DC9, 8 CRJ and 3 A-320 with an order pending for 100 B737, with deliveries starting in early Summer.


more of your veral diarrhea:

IF the large carriers want to hurt the LLCs' believe me they can. All thats needed is some EXTRA cash and that's coming with the return of the business travelers.

First of all, a LCC is a Limited Liability COrporation. I think what you are trying to get your mind around is LCC, low-cost carrier.

Second,

You seem to be the only one in the world that thinks that the Business Traveler is coming back to pay those dinosaur fares. With the LCC's selling 30%-40& of the ASM's (depending on what year we are talking about) they won't NEED to pay those astronomical fares again. Even the management at nearly every major has seen that fact . . that is why Delta has started Song, basically to begin the restructuring of mainline domestic service.

And the idiocy continues:

As soon as the reigns loosen up on corporate travel, (SOON) the extra cash will flow and competition WILL return. As for the LLC market share........ all good things come to an end.

Now, this part is just plain wishful thinking. The Majors will hurt the LCC's? Hmmm. Ever looked over at Concourse C in ATL? Delta has been trying their best to hurt us for years, and we keep growing at 25% ASM per year and making record profits. SWA has been doing battle against AMR for 30 years. ATA has grown into a major while battling UAL . . . . . and we are within a few hairs of becoming a major, while battling DAL.