LCC for Freight Carriers

[Ty Webb]

Ty,

So you think you can start a LCC freight carrier and just fly to Taiwan and say "Here I am"? Slots into and out of China, Taiwan, Tokyo, Hong Kong, etc are extremely competitive.

Give me a little credit, Sparky. I was merely stating that it is not that remote of a possibility that you could see not only domestic LCC freight, but also internationally. I used Taiwan and San Jose as an example because they have a common industry.

It seems to me that the guys who are arguing that this can't happen are the guys who have the most to lose if it does happen . . . . kind of like the same stuff we used to have guys saying on this board four or five years ago about LCC's.

"The LCC's will never have a significant share of the market, because . . . ________ [insert your particular reason here]" .

 

[klhoard]

LCC's in the cargo industry. . .

I think it would be an awesome idea. . . Imagine how much revenue you can generate by by palletizing your passengers!!!
.
Another great marketing idea would be that you could pick up and deliver your passengers door to door!!

I think it is only the natural progression of the market. . .
.
.

 

[Clyde]

Give me a little credit, Sparky. I was merely stating that it is not that remote of a possibility that you could see not only domestic LCC freight, but also internationally. I used Taiwan and San Jose as an example because they have a common industry.

It seems to me that the guys who are arguing that this can't happen are the guys who have the most to lose if it does happen . . . . kind of like the same stuff we used to have guys saying on this board four or five years ago about LCC's.

"The LCC's will never have a significant share of the market, because . . . ________ [insert your particular reason here]" .

I have to partially disagree with you on this one. True, I can see a LCC freight operation starting up, but not on the scale of a UPS/FedEx/DHL sized company.

It's apples-to-oranges when you compare an LCC pax to a potential LCC freight market. In all actuality, the airplanes are just one small part of the operation that would have to be purchased and put into play. It's the infrastructure and the customer base that would have to come to light.

How long do you think it would take to accumulate a customer base that is comparable in size to that of the big parcel carriers? And keep in mind, that these same companies already branch out internationally.

A LCC pax airline pax uses those airlines to travel within the lower 48, and possibly to Canada and Latin America. That same person would have to travel on a different carrier to go overseas.

A customer who wants to ship multiple parcels (a business for example) to many different parts of the world is more than likely going to ship it through one shipper. i.e., UPS, FedEx, or DHL. Why? Because of the ease of having one company handle all of their needs. It would take years, if not decades, for a start-up LCC freighter to even think about rivaling what's already there.

And again, the delivery is only one aspect. UPS for example, can handle all of it's customer's needs from warehousing, logistics, forwarding, and delivery.

A LCC-freight carrier starting up has a lot more to think about than just airplanes.

One more thing. Just a few years ago, we had American, Delta, United, US Airways, Northwest, and Continental as the big, profitable legacy carriers. Then, you had Southwest, AirTran, Frontier, and a few others on scene as the discount carriers, as the general public would refer to them as.

Fast-forward to now. It's a huge hodge-podge of legacy and LCC all fighting for business and seeing who can offer the lowest fares on similar routes. Add to that the fact that the typical airline passenger wants the lowest fare and doesen't care who they are flying on.

My point is this: there is overcapacity in the passenger side of things. The barriers to entry (as one pointed out in an earlier post) are not as great on the passenger side. The differnce in prices of tickets can be as much as 40% and higher between legacy and LCC carriers.

You don't see that on the parcel/freight side. You can't offer a product or service 30% less than that of UPS/FedEx/DHL and expect to stay in business.

You have to look beyond the airport and at the roads for this one. Look at all of those trucks driving around out there in brown, purple, and yellow and ask yourself this: "could I compete against all of those trucks on a daily basis?" Then ask yourself this question: "could I meet all of my customer's needs beyond just delivering a package?"

This is a lot more complicated than just throwing a few DC-9's (or A320's, or 737's) up at the airport and offering low fares to a few city pairs.

Again, it's apples to oranges.

 

[Ty Webb]

I think you're missing the point, Clyde. The point isn't that there is some LCC on the horizon that will start doing small package delivery.

It is that it would be very possible to cherry-pick large accounts and/or industry city/pairs. Fly trailerloads, not be all things to all people. That's the LCC way.

 

[wndshr]

Who's "Fred Reid"?

oops!!!! brain fart! fred smith!

 

[profile]

2 points being missed in all this:

1. Everyone is forgetting the ultimate in LCC in the express biz, USPS. Already here and cheaper for those that want that, and;

2. There ARE already little carriers that serve one market, but for them to make a significant dent in the biz of the big 3 (4 including USPS), is very unlikely.

3. The cost savings of running a big hub and spoke allow for a lot more competitive pricing because the "convenience" factor of a non-stop is just not a player. All that matters is that the product gets to the destination reliably, consistently. That new little LCC's airplane breaks and they can't recover just once, and it's all over. Not an issue with the pax side. The larger carriers have the ability to recover the freight through alternative means, and THAT ability is what differentiates them more than anything else.

 

[Ty Webb]

I don't think anyone here is talking about a "new little LCC that is in trouble if their plane breaks", anymore than American was talking about that "little, bitty 737 outfit over at Love field".

I think what is being speculated about here doesn't have anything to do with the USPS, either. My bet is that when it happens, it'll be high-volume, cherry- picked routes, serving a few thousand major customers in a few dozen easily-accessible destinations . . . . in other words, they'll just skim off some of the cream.

 

[profile]

Already been tried, I think....

 

[wndshr]

what about a LCC outsourcing?

i know the majors have scope clauses and i am sure the cargo guys do too....but if they didn't have scope, what would be the impact of FedEx and UPS outsourcing more and more freight to lower "mesa type" bidders?

to what extent do the polar/atlas kalitta and etc contract freight for FedEx or UPS? or do they?

 

[profile]

If it was better to operate thru the sub's, then both UPS and FedEx would be doing it. Neither set themselves up that way, and UPS intentially went away from that in the early 80s. Operational control is the key, I think.