Ty Webb
Hostage to Fortune
- Joined
- Dec 10, 2001
- Posts
- 6,524
General Lee:
Thanks for your articulate, well-reasoned response- and I mean that in all sincerity. I will try to respond:
My question was what will happen when there is such a large amount of LCC's all fighting with each other, and what will that due to future profits?
I don't pretend to be a guru, but from what I have seen in the trenches, we generally avoid going head-to-head with other LCC's. There is too much low-hanging fruit, and most of the LCC's have a different niche to fill.
For example, SWA has generally avoided congested airports, and does not serve ATL. Therefore, most of our routes don't compete with theirs directly. For example, they avoid BOS, EWR, LGA, LAX, SFO, DCA and (and, until now, PHL) and in places where we both have a presence, like TPA, MCO, BWI etc. we generally are going to ATL or are doing direct flights to non SWA-direct cities, so, in that regard, we co-exist just fine.
The JB incursion into ATL was an aberration, and we were largely responsible for discouraging their ATL ambitions, I think. It is one thing to have competition from a major, but another to get it from another LCC, and on their home turf!
You have noted many times that our costs will have to come down, and we are doing just that. We have 2500 less pilots than pre-9-11, and 16,000 less total employees, more Kiosks, etc.....
True. But I doubt you will see anywhere near the 8 cent level you need (especially with RJ's doing 49% ASM) but we will never know, since DAL chooses not to reveal the unit CSM's.
Your costs at Airtran will eventually go up, like you pilot pay costs---you said it yourself--you will be making more coming up here. I, as it looks like today, will be making less.
This is true, but as was noted in a Motley Fool article today, our labor costs only make up 29% of our overall costs. Here is a link to the article (which you have to join, but it is free and painless) http://www.fool.com/news/mft/2003/mft03120501.htm?ref=foolwatch
The LCCs are not keeping their costs the same, but they are increasing theirs too. Southwest pilots pay is getting really good, and the other employees (like the flight attendants) want more too. Do you see my point? More LCCs and more cheap seats will not help your future profit margins.
LCC workers want more money, it's true, but they also work their butts off to control costs. How many strings on the DALPA website are devoted to APU usage, or brake wear, or ways to safely decrease turn time? I don;t know, but from watching some of these DAL skippers taxi, it would seem that the majority must be about "How to taxi more slowly to increase pay"!
Just kidding, but LCC work requires a moitivated work force, and it is very hard to get people to go backwards (ie give up bennies and pay and still be productive).
TW
Thanks for your articulate, well-reasoned response- and I mean that in all sincerity. I will try to respond:
My question was what will happen when there is such a large amount of LCC's all fighting with each other, and what will that due to future profits?
I don't pretend to be a guru, but from what I have seen in the trenches, we generally avoid going head-to-head with other LCC's. There is too much low-hanging fruit, and most of the LCC's have a different niche to fill.
For example, SWA has generally avoided congested airports, and does not serve ATL. Therefore, most of our routes don't compete with theirs directly. For example, they avoid BOS, EWR, LGA, LAX, SFO, DCA and (and, until now, PHL) and in places where we both have a presence, like TPA, MCO, BWI etc. we generally are going to ATL or are doing direct flights to non SWA-direct cities, so, in that regard, we co-exist just fine.
The JB incursion into ATL was an aberration, and we were largely responsible for discouraging their ATL ambitions, I think. It is one thing to have competition from a major, but another to get it from another LCC, and on their home turf!
You have noted many times that our costs will have to come down, and we are doing just that. We have 2500 less pilots than pre-9-11, and 16,000 less total employees, more Kiosks, etc.....
True. But I doubt you will see anywhere near the 8 cent level you need (especially with RJ's doing 49% ASM) but we will never know, since DAL chooses not to reveal the unit CSM's.
Your costs at Airtran will eventually go up, like you pilot pay costs---you said it yourself--you will be making more coming up here. I, as it looks like today, will be making less.
This is true, but as was noted in a Motley Fool article today, our labor costs only make up 29% of our overall costs. Here is a link to the article (which you have to join, but it is free and painless) http://www.fool.com/news/mft/2003/mft03120501.htm?ref=foolwatch
The LCCs are not keeping their costs the same, but they are increasing theirs too. Southwest pilots pay is getting really good, and the other employees (like the flight attendants) want more too. Do you see my point? More LCCs and more cheap seats will not help your future profit margins.
LCC workers want more money, it's true, but they also work their butts off to control costs. How many strings on the DALPA website are devoted to APU usage, or brake wear, or ways to safely decrease turn time? I don;t know, but from watching some of these DAL skippers taxi, it would seem that the majority must be about "How to taxi more slowly to increase pay"!
Just kidding, but LCC work requires a moitivated work force, and it is very hard to get people to go backwards (ie give up bennies and pay and still be productive).
TW
