Giants May Target Budget Airlines

[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.

 

[T-Bags]

There you go again "ty". you have no intellectual comments so you do your typical name calling. reminds me of the 'stoner's' in High School. of course all those guys ended up pumping gas or working for Valuscab... (you can 'rename' a pile of sh!t, but it's still a pile of shi!t).

"we operate nearly 70 B717, 6 DC9, 8 CRJ and 3 A-320"

exactly who is "we"? I'm sure the fine pilots at Air Willy don't appreciate you insinuating they work for Valuscab. YOU CONTRACT with other airlines.

"Ever looked over at Concourse C in ATL?"

Yeah, reminds me of biker week at Myrtle Beach...without the soap.

"As for the business traveler "coming back" and increasing the war chests of the majors . . . . well, since you seem to be the only one believing that crap, you're either an idiot or a genius, and I'm going with"idiot""

Lets see, yield up approx 10% YOY... Once again you embarass yourself.
Do you not realize that Valuscab is prob the LEAST respected outfit in America? You had to BUY a new POI (Air Tran) because the old one thought you were too dangerous to grow. Your new POI was so much in your companies back pocket, she MARRIED the chief pilot! You ARE what is destroying this profession.

 

[Ty Webb]

There you go again "ty". you have no intellectual comments so you do your typical name calling. reminds me of the 'stoner's' in High School. of course all those guys ended up pumping gas or working for Valuscab... (you can 'rename' a pile of sh!t, but it's still a pile of shi!t). [/i]

Ah, I can see that you are worthy of a highly-intellectual argument. And, you are working for who, you say?



I'm sure the fine pilots at Air Willy don't appreciate you insinuating they work for Valuscab. YOU CONTRACT with other airlines.

Actually, we have no shortage of Air Wisconsin captains applying. Some are being hired. SO are many former TWA, UAL, USAirways, etc. Careful who you insult.


"Ever looked over at Concourse C in ATL?"

Yeah, reminds me of biker week at Myrtle Beach...without the soap.

SOunds to me like you haven't flown AirTran lately. Last deadhead, I sat next to a newly-retired DAL 767 skipper and his wife. they didn't seem adverse to bathing, and I think he appreciated the new 717 and was probably surprised that the cabin crew did full-service on such a short hop . . . he would have only gotten a bottle of water or juice on Chatauqua, Skywest, or any of the other airlines that CONTRACT with DAL.



Lets see, yield up approx 10% YOY... Once again you embarass yourself.



I can;t hear what you're saying, there, Chief, you're mumbling. If you are talking about INdustry yields being up 10% YOY, that's kind of comical, considering the baseline is post- 9/11. If you're talking about OUR yields, I suggest you look at our profits, our market cap (pretty close to Delta's) and the fact that our last two offerings were snatched up by the market, while our stock is up over 350% for the year.


Do you not realize that Valuscab is prob the LEAST respected outfit in America?

You must be working at Home Depot, because you're living in the past. The rest of the crap you posted about our CP indicates that you don't even understand the relationship between an airline and the FAA. The CP is not the point of contact for the FAA, the DO is . . . and the stuff you posted shows that you have little knowlege and much venom. Sounds to me like you're right where you need to be . . . now put on your orange apron, and get back to work.

 

[General Lee]

Ok TY, what would you suggest Delta do? Delta does not have just one type of business--a domestic Low Cost one. There are many core parts to this airline. For example, we have:

1. An INTL operation. The LCCs do not. We can charge higher fares on many of those routes--like ATL-MUC---because we have very little competition. The internet doesn't matter in this case. Our flights to the Carribbean are doing very well--and in a recent USAtoday article, even USAir raised its Winter fares to well over $1000 a ticket to some islands--knowing that the elite will pay for it during Xmas. We also do well to Latin and South America, and even Tokyo. Hardly any competition.

2. A Shuttle operation. Our Delta Shuttle does very well, even with the older 737-300's, because we have part of the allotted slots, and we have a convienient terminal called the Marine air Terminal. The fares are higher, and the flights are pretty full.

3. Many Many RJs. We have great feed from lots of smaller cities. From Butte, Montana to Valdosta, GA---places you or any other LCC probably won't fly to--and we bring in those passengers at a premium.

4. Domestic travel. This is where we could be hurt. This is where we need to compete with the LCCs. But, we do have an advantage in part because a lot of our passengers do connect on those RJs from the smaller cities. Travel from the larger trunk cities will have increased competition from you guys, and we will have to do something. What can we do? We could slash salaries and slash fares. Well, we have slashed jobs already (down 16,000), and the salaries part is ongoing. And, we actually set up an airline to combat some of you--namely Jetblue. We were the only ones to come up with a new brand, market it, and implement it. It has been doing fairly well (77% load factors according to Fred Reid--this Summer), and with the addition of the new techno gadgets---the passengers will return and like it. If the prices are the same between cities--like Jetblue and Song fares--then passengers will go for convienence and ammenities. In the NYC area, Song will win both due to service from all 3 NYC airports, and a better entertainment system. Delta is actually doing something about this TY, and you sometimes fail to acknowledge this. How is it doing so far? Pretty good for having a new name and being around since May. Will a cold Winter help? Probably.

I am not saying Airtran is not doing a good job, which they are. I am sure Delta is watching closly. Each time you add a new city, it hurts our bottom line---but we don't have the same type of operations exactly. We will have to evolve in the domestic side, but our other operations also do well for us, and that will not change. Maybe Song will grow, which will bring down some salaries. IF Fred Reid's 7.0 CASM figures are correct, then that could spell trouble for some of the LCCs. But should we drop fares on every flight with no competition? (like Atl-Lima, Peru?)
Probably not.

Bye Bye--General Lee

 

[T-Bags]

Ty,
I have not, nor will i ever fly Valuscab. I value the safety of myself and my family WAY too much. i have been down to the C concourse (ASA) and took a wrong turn. About the only thing miossing was the burning tires and barrels of burning trash. i think I did see a few folks living in cardboard boxes.

"And, you are working for who, you say?"

the US government, you?

"I suggest you look at our profits, our market cap (pretty close to Delta's)"

What was it the last time your inattention to safety put a jet into the everglades?

Not living in the past, but once a scab, always a scab. The simple truth is that if DAL matched your payscales, you'd be out of business in less than a year, but yet your gloat about taking market share from one of the only airlines out there trying to protect the profession. Truely sickening. What you don't seem to have to intellect to realize is that when DAL cuts wages, where will you go? Cheaper wages? I'm sure you're eager to once again lower the bar. Unfortunately, you don't appear to have the credentials to ever escape the valuscab abyss.

 

[mad691]

"in a recent USAtoday article, even USAir raised its Winter fares to well over $1000 a ticket to some islands--knowing that the elite will pay for it during Xmas."

Well Usair just issued a press release saying they will have a 3rd quarter loss due to competition of the LCC's and low business demand. There gonna price themselves right out of the market.

"The fares are higher, and the flights are pretty full."

Just because the fares are higher and load factor is good doesn't mean that its profitable. Until your break even load factor goes down you will still loose money.

"Many Many RJs."

You know and I know that most people don't like RJs. They like them better than props. But if they have a choice they will almost always use the bigger airplane.

"From Butte, Montana to Valdosta, GA---places you or any other LCC probably won't fly to--and we bring in those passengers at a premium."

I agree on that one. I read an article not to long ago about how Delta charges more to go to Macon, GA from ATL than it does to go LAX.

"If the prices are the same between cities--like Jetblue and Song fares--then passengers will go for convienence and ammenities."

Right now Jetblue gets a more because Song doesn't have IFE yet. But when they do then things will get interesting.

"How is it doing so far? Pretty good for having a new name and being around since May. Will a cold Winter help? Probably."

Well it was Delta Express. I think an the first flight actually 3/4 of the passangers didn't even what Song was. They thought it was Delta Express.

"IF Fred Reid's 7.0 CASM figures are correct, then that could spell trouble for some of the LCCs."

Do you really believe that? In almost every catergory all the LCC's are cheaper. Labor, maintenence, fuel(not sure on that one). Gate space is the same, the over head. Almost all of it. And adding 20-30 seats and flying 2 hours more a day is going to off set the costs? I guess we wil see. I do give credit to Delta for trying and it seems to me the others or not except maybe Tuna fish. That will be intersting to see to.