Big Slick
Well-known member
- Joined
- Oct 18, 2004
- Posts
- 284
[FONT=tahoma, verdana, lucida]Market Factor: LCCs. The Easy Meat Is Gone.
A Shake-Out Is Coming[/FONT]
[FONT=tahoma, verdana, lucida]Most of the financial-house analysts haven't noticed it yet, but the competitive lay of the land is now very different from what it was three years ago.[/FONT]
[FONT=tahoma, verdana, lucida]In the last year, we've seen LCCs doing some increasingly fast dancing, trying to find places for a whole lot of new airplanes coming on line. Meanwhile, restructured legacies are adjusting their fleets, their strategies, and their route systems to take advantage of emerging global and domestic market opportunities. [/FONT]
[FONT=tahoma, verdana, lucida]LCCs - using a model based on "large" aircraft (100 to 160 seats) with low-ASM costs dependent on grabbing or price-generating traffic where large passenger flows are, or where they can be created - are facing a marketplace where they're increasingly going to be fighting with each other.[/FONT]
[FONT=tahoma, verdana, lucida]As the prime example, it's been clear that even Southwest, arguably one of the best-managed companies in America, is now scrambling to adjust. Three years ago, the competitive battlefield was theirs to exploit. Today, they're more in a mode that is focused on dealing with market shifts, instead of being the airline that's driving them. [/FONT]
[FONT=tahoma, verdana, lucida]Examples are clear regarding the new environment faced by Southwest. When ATA collapsed, Southwest was vulnerable to entry of a hubbing carrier that could have been a real threat - either AirTran or America West. The result was that WN had to react, crafting a deal to capture gates at MDW. (Along with it, like an old shaggy dog, came a relationship with ATA which is something that maybe Southwest is at best ambivalent about.) [/FONT]
[FONT=tahoma, verdana, lucida]Then there's Philadelphia and Pittsburgh, markets that Southwest entered more out of competitive necessity than as part of a prior long-term plan. Finally, they had to enter Denver, a market Southwest had consistently decried as too expensive. Forget the jive about costs going down at Denver, the fact is that it's market imperatives that caused WN to go into the Mile High City.[/FONT]
[FONT=tahoma, verdana, lucida]Those imperatives are being driven by one major factor: the cost advantages of LCCs are eroding, but more importantly, their revenue streams are increasingly vulnerable to poaching by other LCCs trying to fill new airplanes coming on line.[/FONT]
A Shake-Out Is Coming[/FONT]
[FONT=tahoma, verdana, lucida]Most of the financial-house analysts haven't noticed it yet, but the competitive lay of the land is now very different from what it was three years ago.[/FONT]
[FONT=tahoma, verdana, lucida]In the last year, we've seen LCCs doing some increasingly fast dancing, trying to find places for a whole lot of new airplanes coming on line. Meanwhile, restructured legacies are adjusting their fleets, their strategies, and their route systems to take advantage of emerging global and domestic market opportunities. [/FONT]
[FONT=tahoma, verdana, lucida]LCCs - using a model based on "large" aircraft (100 to 160 seats) with low-ASM costs dependent on grabbing or price-generating traffic where large passenger flows are, or where they can be created - are facing a marketplace where they're increasingly going to be fighting with each other.[/FONT]
[FONT=tahoma, verdana, lucida]As the prime example, it's been clear that even Southwest, arguably one of the best-managed companies in America, is now scrambling to adjust. Three years ago, the competitive battlefield was theirs to exploit. Today, they're more in a mode that is focused on dealing with market shifts, instead of being the airline that's driving them. [/FONT]
[FONT=tahoma, verdana, lucida]Examples are clear regarding the new environment faced by Southwest. When ATA collapsed, Southwest was vulnerable to entry of a hubbing carrier that could have been a real threat - either AirTran or America West. The result was that WN had to react, crafting a deal to capture gates at MDW. (Along with it, like an old shaggy dog, came a relationship with ATA which is something that maybe Southwest is at best ambivalent about.) [/FONT]
[FONT=tahoma, verdana, lucida]Then there's Philadelphia and Pittsburgh, markets that Southwest entered more out of competitive necessity than as part of a prior long-term plan. Finally, they had to enter Denver, a market Southwest had consistently decried as too expensive. Forget the jive about costs going down at Denver, the fact is that it's market imperatives that caused WN to go into the Mile High City.[/FONT]
[FONT=tahoma, verdana, lucida]Those imperatives are being driven by one major factor: the cost advantages of LCCs are eroding, but more importantly, their revenue streams are increasingly vulnerable to poaching by other LCCs trying to fill new airplanes coming on line.[/FONT]
