Song to add capacity & destinations 2004

[Andy]

If that is the case and could be proved in a court of law, I would expect there to be a huge cash settlement for the LCC's. Starting a company with no intention of making money and only to put another company out of business I believe is illegal.

While I'm not a lawyer, you're most likely right that it's illegal. Remember Legacy and Vanguard? AMR took them down with predatory tactics. Did litigation save them from chap 7? Nope.

While I recognize predatory practices, proving them in a court of law is an entirely different matter. You can bet that Delta and UAL have fancy charts & graphs that show how these airlines will be profitable.
Do you think that UAL set up Shuttle to make a profit or to minimize SWA presence on the west coast? I say the latter. That's why Shuttle vaporized when UAL started losing money.

 

[Andy]

Does United have a size restiction clause? I think they do. The day that ACA picks up their first 319 would more than likely be the last day of the contract. Of course with United in BK, I guess that clause is no more. Evidently, with a late spring start up, sounds like this will be the end of the contract. ACA seems to think that they have a work around for the Delta PWA, but I am having difficulty figuring out how they could do this. We will see.

Um, no. ACA is restricted by size of aircraft flown under the United Express colors. It has nothing to do with additional flying. ACA currently flies for both UAL and Delta. If ACA flew 70 seaters for Delta before UAL loosened size restrictions from 50 to 70, UAL's contract with ACA would not have been terminated.

 

[46Driver]

Um, no. ACA is restricted by size of aircraft flown under the United Express colors. It has nothing to do with additional flying. ACA currently flies for both UAL and Delta. If ACA flew 70 seaters for Delta before UAL loosened size restrictions from 50 to 70, UAL's contract with ACA would not have been terminated.

I agree. This is how ACA started flying RJ's in the first place. UAL's pilots were adamant against us getting jets. ACA went out and bought RJ's and were flying them under our own banner (we have a big picture of a CRJ in ACA colors in our headquarters) otherwise we would have nothing but props - and no future.

 

[General Lee]

Andy,

I agree that each of our airlines is "going after" one or more spacific airlines. TED is obviously going after Frontier in DEN, and Song is going after Jetblue in NY or the NE. SOng does fly two flights a day into ATL from JFK, but that is it when it comes to our major hub. We also have a dangerous competitor in our own backyard, namely Airtran in ATL. But, so far we have not decided to use Song against them, and so far our hubs are still doing well. (we made operating profits this Summer, and expect to do so over the holidays, Spring, and next Summer) As the LCCs grow, competing with them will get tougher--and that is why we have been cutting expenses and will also probably take a pilot paycut soon. The key is to not shape everything like a LCC, since both of our airlines have INTL operations too.

Bye Bye--General Lee

 

[Andy]

SOng does fly two flights a day into ATL from JFK, but that is it when it comes to our major hub. We also have a dangerous competitor in our own backyard, namely Airtran in ATL. But, so far we have not decided to use Song against them, and so far our hubs are still doing well. (we made operating profits this Summer, and expect to do so over the holidays, Spring, and next Summer) As the LCCs grow, competing with them will get tougher--and that is why we have been cutting expenses and will also probably take a pilot paycut soon. The key is to not shape everything like a LCC, since both of our airlines have INTL operations too.

Bye Bye--General Lee

General, I think that Delta management views JetBlue as a bigger immediate threat than AirTran.
With AMR contemplating starting up an LCC, who will they end up doing battle against? Their hubs don't have an LCC which is cohubbed with them (unless you count SWA's significant presence in STL as a hub). I would expect AMR to go up against JetBlue or contain SWA.
With the way that JetBlue has lowered transcon fares, they seem to be the prime target of the legacy carriers. I won't be at all surprised to see a dogpile on JetBlue by next summer by Delta, AMR, UAL, and U.
As for AirTran, I imagine that Delta management will redeploy Song to contain AirTran's growth AFTER JetBlue has been dealt with.

Once the legacy carriers are happy with the size of the LCCs, you can expect them to disband their LCCs (Song, Ted) with a statement something along the lines of redeploying the aircraft to mainline in order to increase revenues.

 

[side stick-n]

Andy,

This is not a flame but are you on some type of medication? You seem to think that the "legacy" carriers are some type of major military force. In reality they are more like the Russian military, lots of equipment but no money to operate it with. The companies that you seem to think control the industry are the same ones that have their tails between there legs and are trying to save the ship. You are entitled to your opinion but I would suggest that you look at history to see that your scenerio doesn't always work the way you think it will. The legacy carriers have NEVER been able to "deal" with Southwest and don't count on them being able to "deal" with them or any other LCC this time around either. Remember, the "legacy" carriers you have mentioned (except AA) have already tried the LCC once before. Each time they were disbanded because they lost money and were gaining NO ground against the established LCC's. Heck, Southwest ran MetroJet right out of BWI when Metrojet was already established there. And now AA is out of STL. Please, give me an example of a LCC within a "legacy" carrier that has been successful. That doesn't mean they won't succeed this time only that it has never worked before. I hope for the sake of the employees and pilots that it does work out this time around. Though not at the expense of our jobs.

Where in the world did you get the idea that we have lowered transcon fares? Helloooo, they have always been low. However, we can make money with fares that low.

Right now, all of the "legacy" carriers are in damage control mode. General Lee, wouldn't you agree that Song was created to try and control the mass exodus to terminal 6 across the field and to lure those that have gone, back into the fold? Flying at other airports has been put in place as a defensive move to try and keep the LCC's from even going in. Of course, you probably know that it didn't work at BOS and I doubt it will work anywhere else. Don't get me wrong. I don't think or believe for one second that jB is some wonder child that only has to bring a plane to town and it is automatically full. We will however start service between cities where we feel we can make the most money for our shareholders. Song, TED, or LittleAA are not going to affect our decision to do so.

I respect your opinion but strongly disagree with it.

 

[General Lee]

More Spin from Song:

Press Release Source: SONG


Strong Bookings for Thanksgiving Week Demonstrate High Consumer Demand for Song
Thursday November 20, 3:18 pm ET
Song's Unique Pre-Ordering Option for In-Flight Meals and Simplified Online Booking/Check-in Process to Ease Customer Experience at Peak Times


NEW YORK--(BUSINESS WIRE)--Nov. 20, 2003-- Song(TM), Delta Air Lines' new service developed to change customer expectations for high-quality, low-fare air travel, reports that it will service significant traffic volume around Thanksgiving, especially November 21-26, November 28-30 and December 1. Specifically, Song reports that bookings on peak dates are ahead of those posted last year by Delta Express - as much as 12 points -- in certain key markets.
"The high advance bookings around Thanksgiving are clearly demonstrative of consumer demand for the Song product," said Joanne Smith, Song's Vice President of Marketing & Customers. "The fact that Song's loads are so high this Thanksgiving is particularly noteworthy given the airline is only seven months old and our capacity is as much as 40 percent greater than that of our predecessor, Delta Express."

Song recommends passengers traveling around Thanksgiving take the following steps to ease their travel experience:

Go online to www.flysong.com to print out boarding passes in advance. Passengers who are unable to access the Internet are advised to utilize one of Song's many convenient self-service airport check-in kiosks.
Go online to www.flysong.com to pre-order meals from Song's menu, which features a wide range of organic food selections and premium beverages.
Please allow extra time - as much as 30 to 60 minutes - to get through airport security.
Just in time for the Holiday Season, Song has begun introducing the MAS eFX In-Flight Entertainment system to its fleet of 36 Boeing 757 aircraft. Over the next several months, Song will phase its new entertainment technology - the most sophisticated available on a single aisle aircraft -- into its fleet of thirty-six Boeing 757 aircraft at the rate of approximately one plane every four days. By March 2004, all Song aircraft will be outfitted with personal video monitors at every seat, offering a complement of entertainment features, including:

All-digital, live, satellite broadcast programming with 24 free channels;
All-digital broadcast audio programming with 24 free channels; and
Multi-player interactive trivia games that allow play between passengers.
Beginning in the second quarter of 2004, Song will add server technology to its aircraft, providing a more sophisticated, broader array of amenities, including:

Digitally-streamed MP3 programming that allows customers to create individual play lists during their flights;
Downloadable, pay-per-view movie programming available on demand, featuring a wide-range of current offerings for all ages;
Interactive iXplor moving map program with zoom capabilities and points of interest information; and
Connecting gate information broadcast directly to personal in-seat video monitors.
Consumers can experience Song's in-flight entertainment technology "on the ground" at Song's first-of-its-kind concept store in New York City, open now through December 21. The "Song in the City" store, located at 98 Prince Street in the heart of Manhattan's Soho district, features actual Song all-leather aircraft seats that are equipped with the In-Flight Entertainment system.

Additionally, Song and American Express have announced a special promotion to engage consumers. American Express classic, Gold and Platinum Delta SkyMiles® Credit Cardmembers and Delta SkyMiles® Business Credit Cardmembers from American Express can earn triple SkyMiles® when they use their Card to purchase Song tickets at www.flysong.com and for all in-flight purchases now through December 31, 2003.(1) Plus, Cardmembers also receive a special 1,000 mile bonus for their first in-flight purchase with the Delta SkyMiles Credit Card.(2) The 1,000 SkyMiles bonus is awarded for the first onboard purchase made on Song with a Delta SkyMiles Credit Card during the promotion period of 10/15/03 - 12/31/03. Only one 1,000 SkyMiles bonus will be awarded per account. The bonus will be posted to the primary Cardmember's account 8 to 12 weeks after the promotion has ended. All standard Delta SkyMiles program rules and conditions apply. For complete terms, conditions and restrictions, please visit www.americanexpress.com/deltaoffers.

Song provides non-stop service between major cities in the Northeast United States and key Florida leisure destinations, plus Atlanta, Los Angeles, Las Vegas and direct service to San Juan. Utilizing a fleet of thirty-six 199-seat, one-class Boeing 757s, Song provides more than 140 daily flights. Song offers an onboard food program created by Chef Michel Nischan featuring healthful, organic selections. Customers can pre-order their menu selections online at flysong.com or use their credit card or cash to make purchases onboard. Song presently serves all three New York metro area airports - JFK, Newark and LaGuardia - the only low-fare service to do so. All Song flights are operated by Delta Air Lines. Song tickets can be purchased by visiting flysong.com.

Song's in-flight entertainment system will be installed between October 2003 and the end of the first quarter of 2004. Song cannot guarantee the system's availability on any flight during this transition period, nor the availability of all entertainment system features prior to the third quarter of 2004.





Side-stick-n,

I do agree that our LCCs were created to combat yours. You can't just lie down and take it, you need to fight it. I happen to think that Song was well thought out and has a chance of doing well. Delta was not affected as much after 9-11 as some of the other majors, and SARS also didn't really affect us. We have been lucky in some ways, but we do have a debt problem. But, we put the correct airplane, the 757, on our LCC, and the routes are well thought out. We know there are people out there that won't pay a lot for tickets, and we won't just give them to you or Airtran etc. There are other people that live in cities that don't have LCCs, or want to go somewhere---like Aruba, that doesn't have LCC service, yet. It will take years for the LCCs to grow and to serve all of the same cities, and in that time we will try to patch ourselves up, and a better economy will help. If the economy was still going down the tubes, that might be different.

Bye Bye--General Lee



PS--Also, read the IFE section above and tell me what you think? Do you think that might retain passengers and allow them to enjoy their experience for once? That is why we have had larger losses lately---mostly due to the Song set up. It must be expensive to paint those planes!!

 

[side stick-n]

It will take years for the LCCs to grow and to serve all of the same cities, and in that time we will try to patch ourselves up, and a better economy will help. If the economy was still going down the tubes, that might be different.

That is an advantage Song has. You already have the planes and all you need to do is slap some new paint on them. It's somewhat unfortunate that we can't get airplanes faster. However, history has proven that slow steady growth is safer and more managable. A better economy will indeed help all of us and as you said, it might be different for all of us.

Hopefully, we will all be successful.

 

[General Lee]

Side-stick-N,

I agree. We do have the advantage of having planes, and a lot of our current planes are under utilized---so they could be used more and step in for 757 flights that would be going to Song. But, that would force the company to recall more furloughs, and they haven't been very responsive to that---unfortuately.

I also hope the economy gets better and that causes more people to want to fly. There are those who want super cheap fares, and they will fly Song alsong with the other LCCs. Then there are people who don't care, and will fly for the frequent flyer miles. Hopefully the terrorist stuff will die down and more people will fly to Europe or Asia. (we just announced more service to London and Munich from ATL starting next May, and announced new service from CVG to Amsterdam and Rome---also Athens and the Olympics will help this upcoming Summer) Yeah, I want us all to do well and get out of think current funk. Your growth at Jetblue with the eventual EMB-190s will probably spur us to get some more 100 seaters etc.....and then hopefully we can fill all of those seats. I also want us ALL to be successful.

Bye Bye--General Lee

 

[T-Bags]

"This is not a flame but are you on some type of medication? You seem to think that the "legacy" carriers are some type of major military force. In reality they are more like the Russian military, lots of equipment but no money to operate it with. The companies that you seem to think control the industry are the same ones that have their tails between there legs and are trying to save the ship. You are entitled to your opinion but I would suggest that you look at history to see that your scenerio doesn't always work the way you think it will."

Sidestick, this is not a flame either. UAL's october DIP numbers just came accross the wires. UAL generated more CASH from it's operation in the month of October (traditionally very week) than AirTran has in the entire years 2000, 2001, 2002 COMBINED. When the majors lose money, they lose BIG, but when the start making it, they have a lot of money to bleed.

 

[General Lee]

T-bags,

I hope United does get better and finances improve, but do we really see the "whole story" when United still doesn't have to pay for certian things under Chap 11 protection? I honestly don't know.

Bye Bye--General Lee

 

[T-Bags]

GL, not to hijack the thread, but the "they don't pay the bills" line is a bunch of bunk. Take a look at the breakdown of all the expenses in Q3 for UAL, then compare it to the previous year. you'll see they are fairly similar, with modest declines as each jet lease is sorted out. WRT the obligations, it's like if Ty quit paying his QVC bill. The fee's would keep adding up anyway, until that particular bill was thrown out in BK court. IOW, UAL's operating cost will actually be significantly lower than they are now, when they emerge from BK. Lobbying the ATSB for UAL loan rejection was a VERY high stakes gamble on the part of AMR, NWA, and CAL. They were betting on a liquidation. Unfortunately for them (and arguably industry wide wages....), they didn't

 

[General Lee]

T-bags,

Yeah, thanks for clearing that up---I honestly didn't know. And, with the litigation costs so high right now, you are probably right that the costs will be lower after they get this over with. And unfortunately you are right again when you said that airline wages took a big hit also. We are trying to hang on here at Delta, but our debt burden might make us give in a bit.

Bye Bye--General Lee

 

[Andy]

Andy,

This is not a flame but are you on some type of medication?

Ted and I were out back of the maintenance hanger in DEN doing bong hits. But I didn't inhale.

You seem to think that the "legacy" carriers are some type of major military force. In reality they are more like the Russian military, lots of equipment but no money to operate it with. The companies that you seem to think control the industry are the same ones that have their tails between there legs and are trying to save the ship.

This is an extremely capital intensive business. Large carriers aren't able to respond quickly to economic downturns due to their high fixed costs. They immediately cut variable costs, but they do not achieve the same amount of cost savings as new small carriers with a smaller percentage of fixed costs. However, once the economy recovers, the legacy carriers make money faster than they can waste it.

You are entitled to your opinion but I would suggest that you look at history to see that your scenerio doesn't always work the way you think it will. The legacy carriers have NEVER been able to "deal" with Southwest and don't count on them being able to "deal" with them or any other LCC this time around either.

Well, the Wright Amendment was supposed to torpedo Southwest, but Herb Kellaher found a way to make the company prosper due to the Wright Amendment (chalk that one up to the law of unintended consequences).
The only other LCC in existance for more than 10 years that hasn't been run out of business by the legacy carriers is America West.

Remember, the "legacy" carriers you have mentioned (except AA) have already tried the LCC once before. Each time they were disbanded because they lost money and were gaining NO ground against the established LCC's. Heck, Southwest ran MetroJet right out of BWI when Metrojet was already established there. And now AA is out of STL. Please, give me an example of a LCC within a "legacy" carrier that has been successful.

You have chosen to define a legacy carrier's success as being profitable. I strongly disagree with your assertion. It is turf protection.
Do you play chess? The legacy carriers create LCCs in which they 'sacrifice the queen.'
Examples of successes? Shuttle by United contained SWA's west coast growth and also contained FRNT's DEN growth.
AMR's 56 seat F-100s flying out of Dallas Love ran Legend Airlines, with its 56 seat DC-9s, out of business. After Legend went chapter 7, AMR disbanded the operation.

Where in the world did you get the idea that we have lowered transcon fares? Helloooo, they have always been low. However, we can make money with fares that low.

Only restricted fares have been cheap, and even those have been limited. JetBlue's pricing structure has put a big dent in walkup fares.

Originally posted by side stick-n Right now, all of the "legacy" carriers are in damage control mode.

That is rapidly changing. UAL was cash flow positive by $7 mil/day in October (yes, October!). You can do a LOT of damage to LCCs with that kind of positive cash flow. We'll have to wait and see how 'nicely' Ted plays with FRNT. With positive cash flow, Ted can be a real a-hole to FRNT.

Originally posted by side stick-n I respect your opinion but strongly disagree with it.

Side stick-n, I'm open to opposing ideas. Personally, I expect to see FRNT and AirTran around for a long time. The reason for that is because they give the appearance of competition with UAL in DEN and DAL in ATL.
However, JetBlue is a different animal. Not only are they in highly competitive turf where many legacy carriers can use predatory pricing, but they are also undercutting some of the legacy carriers' extremely profitable routes.