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



--------------------------------------------------------------------------------

 

[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.

 

[General Lee]

Mad691,

Well, I think you do bring up some good points. But, of course, I disagree with you on some.

First, USAir overall isn't doing well. But, to the Carribbean, they are doing well, and so is Delta. I don't think other LCC's fly much to the Carribbean--except Airtran to Freeport, and Jetblue to SJU. I was just pointing out that Delta and USAir do not have much competition to St. Thomas, for example, or St. Martean. Those types of flights generate big bucks because the elite go there, regardless of the cost. Delta flies to Liberia, Costa Rica for God's sake--where the heck is that? But, it is full. And prices on the internet for those types of places don't change much.

Second, The Delta Shuttle is probably one of our most profitable programs. We charge $199 one way regardless of the time of day, and the loads are better than 75%. We use our older 737-300Gs--that have a low daily lease rate and fly back and forth all day. It does very well, even with competition from AA Eagle and USAir.

Third, yes, some people don't like the comfort levels in RJs. But, at most places they fly---like Dothan, AL or Baton Rouge etc...They might not have a choice. Butte. MT--for example---you have two choices: Skywest RJs and Horizon Dash-8-400s. (I think BigSky pulled their Metros out of there) How about Valdosta? How about Fayetville, NC? Ashville, NC? In other words, a lot of these people don't have a choice, and a smaller jet is better than a prop. These fares are higher for the convienence factor, and we win there. Now RJs on longer flight segments are more uncomfortable--that is right. And, Delta has done that one some city pairings--like DFW to OAK, and DCA to DFW. But, hopefully things will get better and we can put a mainline 100 seater on those routes someday, etc....

Fourth, the IFE has always been scheduled to be installed in OCT--as planned. The planes that come from mainline in OCT will get them installed, and the others out there right now will get them installed in regular maintenence periods. That was always the plan. Just like Airtran getting Ryan to do some West Coast flights for them, we also saw a need to implement our Song strategy before we had time to get the IFE installed with the best gadgets. Had we waited until the IFE was ready, Jetblue would have had very little competition with our older Delta Express product. I flew Delta Express for 1 year out of MCO, and we were always packed. But, our 737-200s were not the right plane for the service, but then again we really started it to combat Southwest--and they really don't have a huge presence of North --South East Coast flying. Now Song will combat Jetblue, and when we have every plane up and running with the IFE, we shall see how they do.

Last, as far as Fred Reids numbers, he said them. The only workers that are paid at a higher rate are the pilots at Song. Everyone else has taken pay cuts compared to Mainline, and benefit cuts. The new flight attendants, except for the first 700, called "founders", will have 5 year contracts with a small lump sum and no retirement at the end. Huge cost savings. The planes have more seats (199), and fly more hours per day than mainline. They get the fuel savings from Delta's large fuel hedging program, and benefit from "Delta Technologies"--our large company that helps streamline everything.

You're right, this will be interesting to watch. I am biased of course because I work for Delta, and I want them to succeed.
One more thing that will help everyone coming up is the lowering of fuel costs, which apparently is right around the corner. IF that happens, costs (fuel is our second largest) will fall, and everyone will do better. We can only hope.

Bye Bye--General Lee

 

[Ty Webb]

Hey, that's great! I don't plan to shop at your Home Depot.


I value the safety of myself and my family WAY too much.


Oh, come on, what are you, about fourteen? If you really believe that we are less safe than any of the majors, you're just talking out of your ass. Your beloved UAL put one in the dirt not too long ago, as has every major except SWA, and perhaps ATA. We had one fatal accident 7 years ago due to a felonious act by a subcontractor, and you want to talk about safety? Puh-lease.


You say in this string that you work "for the US Government", yet in another string you claim to work for UAL. What is it? Let me guess- Furloughed by UAL, found out that you didn;t meet our hiring requirements (500 hours 121 PIC), now sucking at the Gummint titty and taking out your frustrations on other airlines and the pilots who work there.

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

Never. When was the last time your company squandered your retirement? Broke an MD80 apart in LIT? Flew into a mountain? Ran off a runway? Landed at the wrong airport? FLew into a Microburst? Blah, blah, blah. Shall I continue?

Not living in the past, but once a scab, always a scab.

Who are you talking to, fool? We have 850 pilots, and a handful of them are on the scab list. There are WAY more pilots on the "Scab list" at UAL and CAL than there are here . . . . maybe you're on the list? I'm sure not.


The simple truth is that if DAL matched your payscales, you'd be out of business in less than a year.

Now who doesn't understand economics? You really think the difference between our operation and DAL's is that their front-end crew is making an extra $100./ hour, about a three-tenths of a cent per seat mile?

Clearly, you are just a flamer, with no facts at your disposal, you're either a kid with nothing better to do than flame, or you are a disgruntled wanna-be.

Either way, this is where I get off.

 

[mad691]

"Second, The Delta Shuttle is probably one of our most profitable programs. We charge $199 one way regardless of the time of day, and the loads are better than 75%. We use our older 737-300Gs--that have a low daily lease rate and fly back and forth all day. It does very well, even with competition from AA Eagle and USAir."

Look how many times Delta has changed the shuttle. You had the 800s for a while now you use 300s. I think at one time you had rjs. Correct if I am wrong. I don't think it was that good. Ridership is still down from pre 911/recession. But at least they are adjusting. I think USair is actually putting a 2 class configuration on theirs.

"I was just pointing out that Delta and USAir do not have much competition to St. Thomas, for example, or St. Martean. Those types of flights generate big bucks because the elite go there, regardless of the cost."

You are absolutely right. No competition there and Delta and Usair know it. They get to charge pretty much what they want. But still as whole Delta is still loosing money as a company. So I don't think its doing that well.

"Delta has done that one some city pairings--like DFW to OAK, and DCA to DFW. But, hopefully things will get better and we can put a mainline 100 seater on those routes someday, etc...."

I think in this case Delta is doing the wrong thing. Out of ATL for example Delta puts RJs against 717s on ROC,BUF,CAK,PHF, and FNT. No mainline. To me thats not smart. Most people would will fly the competition. Samething out DFW. People rather AMR or other competiters because of this. I wonder why Airtran is setting up shop over there now?

"Last, as far as Fred Reids numbers, he said them. The only workers that are paid at a higher rate are the pilots at Song. Everyone else has taken pay cuts compared to Mainline, and benefit cuts. The new flight attendants, except for the first 700, called "founders", will have 5 year contracts with a small lump sum and no retirement at the end. Huge cost savings."

The point I was trying to make that labor is cheaper than MAINLINE. I doubt that Song flight attendents, rampers, and gate agents make less than JBLU,SWA, and Airtran. Whats the point. You can go work for them and make more money. So I do think that labor actually costs more at Song than at the 3 LCC's.

In the end I believe Song is about cutting costs and NOT being profitable. The same goes for Starfish. Just remember AMR, UAL, Usair took HUGE pay cuts and the are still not profitable. Thats why I don't think you guys should take a pay cut. Even if you guys take a 20% pay cut Delta would still loose money. Management needs to generate revenue not keep cutting costs.