Majors OWNING 50 Seat RJs in LCC Environ

[On Your Six]

Does it make sense for a major airline like Delta Airlines to own 50 seat RJs in a LCC environment with declining airfares?

Sure, you want to offer passengers connections to many, many destinations out of large hubs. Clearly the onward hub traffic tends to be pretty profitable (i.e., Madison to Frankfurt and vice versa). There are many thin markets in which an aircraft with more than 50 seats does not make much sense - just not enough demand.

However, airlines like AirTran (which recently decided to end its CRJ partnership with Air Wisconsin in a few months) and Southwest are demonstrating their unwillingness to spread costs across 50 seaters. It is true that SWA has a different model than DAL which uses hubs vs. point-to-point flying. I understand that. However AirTran has a sizable hub out of ATL and it has decided to withdraw CRJs in favor of increased 717 utilization (more seats to spread the costs). Frontier has started to use Horizon CRJ-700s out of Denver - but 70 seaters at least have 20 or so more seats over which to spread costs. With regard to 70 seaters, 100 seaters may be preferred even more. (Please no SCOPE arguments - I am sure ASA and Comair pilots would argue for more scope flexibility to operate more 70+ seaters but that is not the point of this thread).

Does it make sense for Delta, for example, to operate so many 50-seat RJs in a low-cost environment? Can you make money with 50 seaters in short-haul markets (less than 1 hour flights) in a LCC environment? I realize that in a standard fee-for-departure agreement, cost wouldn't matter as much to the major airline - the fee per departure is fixed and the RJ capacity is what really matters (the cost then drops to the regional carrier). Should Delta dump some of their 50-seat RJs in favor of 100 seaters (717 size like AirTran) to spread out costs (assumes DAL pilots accept wage reductions)? Delta's Grinstein has publically stated that he is not a big fan of the RJ. JetBlue likes the EMB-190 and says it can make significant cash using them on small-to-midsize markets.

I don't want to only target Delta (applies to NWA, USAirways and UAL as well), but given that AirTran and Southwest have shown their lack of interest in using 50-seat RJs, should other airlines take notice? Should airlines like Delta OWN a lot of 50-seat RJs in a LCC environment - does it make much sense with airfares on the decline and gas bills climbing?

Any thoughts?

 

[General Lee]

Good post.

Bye Bye--General Lee

 

[Freebrd]

OnYourSix, why the hard-on for ASA/CMR?

Geez, this is the THIRD thread you've started on the same subject!

 

[FLB717]

Becasue DAL through DCI et al. is the largest operator (I think) in the world of RJ type aircraft.

 

[General Lee]

I think the loss of 3000 mainline jobs versus 1000 additional DCI jobs since 9-11 might be his problem. I don't blame the DCI pilots, I blame the failed plan of Fred Reid, which is now starting to bite Delta---with lower fares coming and more RJs clogging the system with less seats available to add needed revenue. This is a management problem that we must now fix with lower pay rates.

Bye Bye---General Lee

 

[ATR-DRIVR]

Then let him blame them and not us!!! We have zero say in the going's on across the street and all he wants is to see DL sell ASA/CMR. It is VERY tiring to hear the same rant. I talked to a good friend of mine who was in the last group to get furloughed, she says rumblings SHE has heard - NOT from this forum or other internet BS barns - is that DL was looking at a cap of 5000 pilots.
HER words - not mine. So why don't you rant about that and not me. GET OFF OF IT.

 

[General Lee]

I have heard other numbers, but they would have to get rid of a lot of planes and not replace any with new ones--ever. That is a scare tactic and one that would not be endorsed by Dalpa. If Chap 11 ever happened, those same leaders who might want that would lose control to a judge and would then be out on the street themselves for their failed business plans. How about we have 5 777s and 1500 RJs? That would be my plan-----not. I see Song growing and a 100 seater also eventually being bought. Who knows??? Grinstein will share his "Grand Master Plan" in July.....

Bye Bye---General Lee

 

[wms]

Majors OWNING 50 Seat RJs in LCC Environ

With this philosophy you could ask why should a major remain a major in the LCC environment.

The fact is that the majors have an opportunity to use their flexibility to their advantage. They can examine the various city pairs and determine whether it's best to serve those pairs as traditional hub-and-spoke, direct service or LCC style service. Not only can they choose the type of service but what type of aircraft best serves that pair.

Whether they want to be innovative to solve their problems or continue to shaft labor is up to them. Judging by his actions so far, it doesn't appear the Grinch has an innovative bone in his body. I jump seated off-line the other day and the captain made the good point that mgmt would rather rip their employees off for a buck rather than save 10 through good business. That way there is less risk and someone else to blame if things don't work.

At any rate, you have some kind of issue with the WOs. We can't change things or solve your problems. If you're sincere in your questions about the sensibility of RJs, then why don't you e-mail your own bean counters. They're the one's who sold LM on the RJs to begin with. RJs are also the reason DAL is still the best positioned major, in spite of what mgmt's cooked books say, and the reason that DFW was DAL's bright spot in Q403, according to the analysts.

 

[MedFlyer]

The huge RJ build-up is a failing strategy. RJ's don't have low-unit costs and do not compare favorably against 737's or 717's.

But until mainline can get its act together, the RJ strategy will remain. Simply buying a bunch of big planes and dumping them into the system will not solve DL's problems....just look at Song. DL has to practically give the seats away to fill the planes ($49 to fly BDL-TPA!!!!).

Mainline DL needs three things to be a viable competitor: reasonable costs, reasonable fares and a quality product. If DL does these three things, then the entire mainline vs. RJ debate will be mute.

 

[FLB717]

I was on DAL flight over two years ago from CVG to ATL and a DCI/DAL manager sitting beside me in First stated very firmly that the plan was RJ's, 738's and 76/77's. And that DAL Mainline would be around 5-6000 pilots total after cuts and retirements. So far the plan looks unchanged.

 

[Heavy Set]

I think the future growth should probably be 70-100 seaters for the small to mid-sized markets. For Delta, I suppose high frequency DoJet flights (crewed by low-cost Skyway pilots) could be used on short trips out of CVG and maybe ATL.

JetBlue has ordered 100+ EMB 190s. AirTran continues to add 717s. ATA is now talking about 717s. How much longer before Delta realizes that a 100-seater is the right way to go for small to midsize markets? Let's face it, 50 seaters are uncomfortable on 2+hour flights and hated by the flying public - add that to the unfavorable economics in a low-cost environment. For Delta, it's time to think outside of the box and look seriously at the 100 seaters....

 

[Otto]

Does it make sense for a major airline like Delta Airlines to own 50 seat RJs in a LCC environment with declining airfares?

However, airlines like AirTran (which recently decided to end its CRJ partnership with Air Wisconsin in a few months) and Southwest are demonstrating their unwillingness to spread costs across 50 seaters.

Who cares what AirTran and Southwest are doing...if Delta had stuck to and improved their core product (high service) instead of trying to copy Southwest's cost structure (thanks for the advice Mckinsey) than they wouldn't be in the mess they're in today. Costs will have to come down but fixing the product is the real solution. Grinstein may not like the RJ but he said it himself...they are profitable.

 

[General Lee]

Otto,

They are not profitable in a low fare market. Sure, they may be now after Delta pays for most of DCI's services--like insurance, reservations, kiosks, gate services at Delta stations, etc. RJs are actually clogging up the system (like ORD---now limiting number of departures and arrivals)--and not bringing in enough revenue due to the lack of seats per aircraft. With lower fares and more LCCs growing every day, we at mainline will need larger airplanes with more seats to cover the costs---spread them out over more seats. We have to hold more in ATL due to traffic delays---costing $$$$ in fuel, and waiting for T.O. in those long congo lines. It is true, and we could be funneling in more revenue to our hubs with larger aircraft. Airlines like Airtran and Jetblue have noticed this---and they are right.

Bye Bye--General Lee

 

[BLUE BAYOU]

Delta flies into a number of markets with the 50-seat RJ that no LCC will ever fly to, ie Columbus, MS. The price of a ticket round trip from ATL is the same as it would be to fly JFK-LAX! In markets like this, the 50 seater makes sense. Where you find trouble is when you've got elite travel members trying to upgrade their flight from DFW-OAK, only to find out that it's an RJ that he'll have to fly for three hours in...

 

[spanky2]

More CRJ piling on. Crowded skies are here, again. Delays are up, again. Heard that ORD will limit arrivals to 100 per hour...told AA and UAL that they have to cut back. Given a fixed number of arrivals at a mjaor airport, what would you rather have...50 seater or 200+ seater in your limited time slot? Hmmm, that is a tough one.

 

[Otto]

Otto,

With lower fares and more LCCs growing every day, we at mainline will need larger airplanes with more seats to cover the costs---spread them out over more seats. We have to hold more in ATL due to traffic delays---costing $$$$ in fuel, and waiting for T.O. in those long congo lines. It is true, and we could be funneling in more revenue to our hubs with larger aircraft. Airlines like Airtran and Jetblue have noticed this---and they are right.

Bye Bye--General Lee

General,
I'm sure management at Delta has done the analysis and there is a reason for having RJ's on all those routes...a sound business reason, not just to piss mainline pilots off. I know that you, despite having no data to analyze whatsoever, think it should be otherwise but don't you think you're operating more on wishful thinking with this arguement versus reality? Do you REALLY believe having bigger aircraft makes business sense or do you support the idea just to bring back some furloughed buddies? What you are saying about clogging up the skies and delays may be true but Joe Passenger doesn't think big picture...all he knows is that he want's to fly in the morning and if Delta takes away his three morning RJ departures for one evening 737 departure, he's going to fly with someone else versus waiting around six hours, sacrificing his time, all in the name of expediting the American ATC system. Believe it or not, customers operate on their time schedule...not yours.
I will agree that there is a proper balance between size and frequency but to simply say Delta would be competitive if they only had bigger aircraft is far too simple.
Otto

 

[aspire]

Just to reiterate what Blue Bayou said in a previous post. I think most of us are forgetting that most CRJ routes are to places like Appleton, Bangor, Lexington, KY etc. These are not LCC markets. And although CRJs do have higher operating costs the money that one charges to fly out of these cities more than makes up for the higher costs. After all, when was the last time you saw a $79. fare to the West Coast from Wilmington, N.C.

Just my opinion, don’t hate me for it..

 

[canyonblue]

This is a management problem that we must now fix with lower pay rates.Bye Bye---General Lee

I agree 100% with ya GL. Why must the employees always save the company money, when that is an obvious job description for management. I feel they always believe there is a buffer zone for costs and it lays at the feet of labor. Managments job at any airline is to utilize their business skills to ensure the company makes money. But if you always count on the employees to save your a$$ then there was no plan at all, or at least a poor one at best. To quote Chris Rock and applie it to some Airlines..................
" The Airline is like an uncle that paid your way through college, but molested you"

 

[General Lee]

Otto,

Fred Reid used to share your view, that frequency was "key" to getting business from high fared businessmen. That concept has been WRONG----they actually are looking for lowest price, and then comfort. The RJs provide none of those---and if they do provide the lowest price when competing on routes with LCCs---then they are money losers. I know that LCCs probably won't be going to Columbus, MS anytime soon---and higher priced fares will stay on that route. But, when you put RJs on DFW-MSY (which competes with Southwest's DAL (Love Field) --MSY service)--we would lose. How about DFW to DEN and PHX? Passengers would much rather use America West or Frontier---for the comfort. How about RJs from ATL to YYZ? Two large cities and competing against AC....

They key here is that we parked a lot of planes after 9-11, and now the passengers are back, the fares are lower--but we now have more uncomfortable RJs flying longer legs to larger cities that could produce more needed revenue. Now we, the mainline pilots, need to take one in the shorts because we expanded too much with RJs and can't get the revenue stream we need due to lack of available seats.

Bye Bye---General Lee

 

[MedFlyer]

They key here is that we parked a lot of planes after 9-11, and now the passengers are back, the fares are lower--but we now have more uncomfortable RJs flying longer legs to larger cities that could produce more needed revenue. Now we, the mainline pilots, need to take one in the shorts because we expanded too much with RJs and can't get the revenue stream we need due to lack of available seats.

Bye Bye---General Lee

If that was true, then why did AMR, UAL and U pilots have to take cuts? None of them had RJ fleets like DL. Using your logic General, AMR with all their big planes (almost 50 777's) and relatively small number of RJ's should have been a smashing success. So why did AMR end up teetering on BK...with employees giving up huge concessions?

If your theory is correct, Song should be a great success. DL replaced smaller (732's) with larger 757's. Song should be rolling in money with all that extra revenue. But in reality, Song is having to give seats away and abandon many markets (IAD-MCO is gone and EWR-FLL is next to go).

The reason the pilots have to take it in the shorts is because your contract was designed under the assumption that the good times of the late 90's would roll on forever. Unfortunately, the good times didn't last. Reality bites.