Trouble ahead for Low Cost Carriers???

[Boeingman]

I thik Andy is spot on with his analysis. I remember all the hoo rah with another darling upstart years back.....PEX. Had there of been an internet back then we would of been reading the same hype.

Look at them now.

 

[SpeedBird]

Oh another brilliant analysis using the never-mentioned and long forgotten PeoplExpress. Sheesh, why didn't the rest of us figure that one out before now!

Hey nothing personal against your posting boeingman, but I've lost track of the number of times that worn-out comparison has been used to determine the future demise of jetBlue and other LCCs. Talk about your urban legends. That one ranks right up there with jetBlue's free airplanes, and maintenance accusations.

Anyone who really does some objective detective work about the history of PE and its eventual failure will find a vast number of significant differences between it, jetBlue, and every other LCC in business right now. Not only that but what I'll call the "operational context" in which it operated and competed in is nothing like the circumstances we find today, both with the LCCs and the established major carriers. While Andy made his point about what he thinks will happen, I provided my rebuttals to his premise.

However, I will say this much about PE and that is it serves as a well-known (in some circles at least) example of an airline which failed primarily because of the poor decisions of its own management, and less so from any outside competitor beating it on the field of competition. The same still holds true today. jetBlue's worst enemy is itself, if management fails to remember the kinds of lessons learned from the mistakes made by people like Donald Burr, Frank Borman, Frank Lorenzo, and Dick Ferris, then it will be doomed to repeat them and ultimately lapse into oblivion. Therefore David Neeleman needs to keep his eye on the ball by remaining focused on his young airline's strengths, treating his people well, and continue giving his customers exceptional value and service. So far he has my confidence that he is a good student of airline history.

In the same instance, jetBlue employees must remember the abuses (yes I said abuses) that over-zealous unions have wreaked upon this industry. The labor excesses which were born in the regulated days of the CAB are a terrible legacy and now act as a heavy financial anchor around the necks of all carriers who's operating histories harken back to those days (Southwest excluded from present company).

The archaic tradition of pattern-style bargaining and the overbearing sense of entitlement fostered from that epoch in aviation history should serve as a more relevant reminder to all current airline employees today than anything assigned to PE.

As long as Neeleman and his entire team of jetBlue crewmembers can remember the abundant lessons that have been exorcised like demons from an often dyfunctional airline culture; built upon a long tradition of collective greed, mistrust, and hatred, then they will control their destiny going forward, not AMR, UAL, Delta, or any other legacy carrier as some suggest.

 

[Boeingman]

Oh another brilliant analysis using the never-mentioned and long forgotten PeoplExpress. Sheesh, why didn't the rest of us figure that one out before now!

Hey nothing personal against your posting boeingman, but I've lost track of the number of times that worn-out comparison has been used to determine the future demise of jetBlue and other LCCs. Talk about your urban legends. That one ranks right up there with jetBlue's free airplanes, and maintenance accusations.

Anyone who really does some objective detective work about the history of PE and its eventual failure will find a vast number of significant differences between it, jetBlue, and every other LCC in business right now. Not only that but what I'll call the "operational context" in which it operated and competed in is nothing like the circumstances we find today, both with the LCCs and the established major carriers. While Andy made his point about what he thinks will happen, I provided my rebuttals to his premise.

However, I will say this much about PE and that is it serves as a well-known (in some circles at least) example of an airline which failed primarily because of the poor decisions of its own management, and less so from any outside competitor beating it on the field of competition. The same still holds true today. jetBlue's worst enemy is itself, if management fails to remember the kinds of lessons learned from the mistakes made by people like Donald Burr, Frank Borman, Frank Lorenzo, and Dick Ferris. David Neeleman needs to keep his eye on the ball by remaining focused on his young airline's strengths, treating his people well, and continue giving his customers exceptional value and service. In the same instance, jetBlue employees must remember the abuses (yes I said abuses) that over-zealous unions have wreaked upon this industry.

The labor excesses which were born in the regulated days of the CAB are a terrible legacy and now act as a heavy financial anchor around the necks of all carriers who's operating histories harken back to those days (Southwest excluded from present company).

The archaic tradition of pattern-style bargaining and the overbearing sense of entitlement fostered from that epoch in aviation history should serve as a more relevant reminder to all current airline employees today than anything assigned to PE.

As long as Neeleman and his entire team of jetBlue crewmembers can remember the abundant lessons that have been exorcised like demons from an often dyfunctional airline culture; built upon a long tradition of collective greed, mistrust, and hatred, then they will control their destiny going forward, not AMR, UAL, Delta, or any other legacy carrier as some suggest.

The comparison was not meant on a company vis a vis comparison with PEX. I am just reminded of the same hype which surrounded PEX, which is not unlike what is going on at JB now.
Nothing more.

Sure things are rosy now for you guys, but I still agree with Andy's analysis.

And you're dead wrong about the primary death of PEX. It was caused by the eventual awakening of the trunk carriers to maximize their yield management and thereby destrying the cost advantage PE had on competing routes. I believe AMR was the first to crack the code and put the pricing screws to PEX with Sabre.

I think what happened in ATL is a wake up call which will go unheeded with you guys.

 

[SpeedBird]

If I'm dead wrong about PEX then please provide details that support your argument. I'm always interested in learning from other who know more than I.

You mentioned Sabre and the implementation of yield management strategies by AMR as the death knell of PEX; well it seems that some so-called experts are now accusing these same yield management programs as one reason why the there has been a revolt in the industry by frequent flyers who felt betrayed by the big six majors who "maximize" yields all at the expense of their best customers.

The LCCs like jetBlue, SWA, AAI, and others have purposely avoided such revenue schemes in an effort to provide a simplier way for people to purchase tickets without the confusing array of fares that lead to a sense that these same people are being taken advantage of.

The next chapter in yield management is the internet which gives the control back to the customer, removes the middleman, and other related overhead costs, thus allowing for equally profitable pricing and improved goodwill with passengers. If you don't believe it then just look at the mad rush that all airlines are undertaking to close down res centers, ditch TAs and place "airlinex.com" on the sides of their airplanes. LCCs are the early adopters of this technology and have a sizeable lead over many of the legacy carriers which have been slow to recognize this sea change in customer preferences.

As far as jetBlue pulling out of ATL as a latent "unheeded" mistake I'd love once again to see more substantiation to back up your claim. While I also see it as an operational mistake by jetBlue management; their quick decision to move their limited capital assets to more productive routes is sign that there is no pride in sticking with a fight that produces diminishing returns to the bottom line. Imagine how many other airlines would have benefitted themselves with the use of a similar strategy over the years. Making "mistakes" can be viewed as an acceptable cost of doing business, as long as the key decision makers who direct strategic planning of a company learn from the experience (in most circumstances), and improve the overall operations as a result of such mistakes. I believe the culture at jetBlue will allow such an outcome to manifest itself, and produce a collective corporate memory that uses this experience as part of the calculus used in opening new markets in the future.

 

[General Lee]

Speedbird,

That is "double speak" you are doing. (saying something that is true, but leaving out major facts) You should go work for Howard Dean's campaign. If Jetblue had the proper amount of revenue with the ATL-LGB and ATL-OAK flights, they would have kept them. Since they did NOT, they went looking elsewhere, and BOS was a logical choice--since SONG is the main player to FLA (with AA also in there). Yes, Delta spent a lot of money fighting Jetblue there in ATL, but with the reviving economy-----revenue will return and more future seats will be sold at higher prices. It is good that jetblue can move in and out of markets quickly, but will only do so when they are not filling the required seats to make profits.

Bye Bye--General Lee

 

[jetblue320]

I think what happened in ATL is a wake up call which will go unheeded with you guys.

Yes, it was absolutely a wake up call. But unheeded is absolutely not correct. We most definately learned a lot from the ATL deal. Please don't misunderstand our lesson as us running away crying, we just ran away smarter. Trust me, we'll be back when we are better prepared.

As far as the PEX comparison, Speedbird made an interesting comment in a prior post that was relevant. We (JB) have something that PEX didn't have, and it's not better plans or more money. We have PEX to learn from. Our VP of Opns. was ex-PEX and believe you me, we won't have a repeat performance!

It is sad to see the legacy carriers spending time, effort and money targeting jetBlue. If they took all of those resources and aimed them at better performance, targeting customers, and taking better care of their people internally maybe they would turn things around. Song is at leat attempting to improve the overall product, but even though it is early to tell, they haven't effected jetBlue's ability to thrive (measured by our ever increasing loads) very much at all.

As far as the economy recovery bailing out the legacy carriers, that is probably true. I for one, however would not like to bank my future on what everyone else does but rather what I/we can accomplish. It's like my boss (DN) says all the time: "let's just stay focused on us". I think that is the key. But like the General always says "we'll see, it'll be interesting"

Merry Christmas All

 

[Boeingman]

Speedbird:

I don't have the time or inclination to argue with you. My point is there is a lot of hype with JB and it seems from your reactions you buy into said hype hook line and sinker. Nothing more nothing less. Personally, I think JB is asking for trouble with the rate of expansion taking place.

My point is one of caution and that I feel what happened to JB in ATL may be a precursor of things to come when the trunks start getting off their collective rear ends by defending their turf more aggressively.

As far as the yield management, you're responding with apple and oranges. Interjecting pricing and purchasing functions although a valid example has no merit in what I am saying on a cost basis and maximizing revenue. AMR could price just how many seats it needed to sell at rock bottom prices to drive a given amount traffic away from PEX to the point where their cost structure lost its advantage and they ended up losing money.

I'll let the General take over from here, I think he knows what I am trying to say.

I'm off flying. I'm careful not to casually say where I'm going because I don't want another lecture from that whiner Mugs.

 

[Boeingman]

Yes, it was absolutely a wake up call. But unheeded is absolutely not correct. We most definately learned a lot from the ATL deal. Please don't misunderstand our lesson as us running away crying, we just ran away smarter. Trust me, we'll be back when we are better prepared.

As far as the PEX comparison, Speedbird made an interesting comment in a prior post that was relevant. We (JB) have something that PEX didn't have, and it's not better plans or more money. We have PEX to learn from. Our VP of Opns. was ex-PEX and believe you me, we won't have a repeat performance!

It is sad to see the legacy carriers spending time, effort and money targeting jetBlue. If they took all of those resources and aimed them at better performance, targeting customers, and taking better care of their people internally maybe they would turn things around. Song is at leat attempting to improve the overall product, but even though it is early to tell, they haven't effected jetBlue's ability to thrive (measured by our ever increasing loads) very much at all.

As far as the economy recovery bailing out the legacy carriers, that is probably true. I for one, however would not like to bank my future on what everyone else does but rather what I/we can accomplish. It's like my boss (DN) says all the time: "let's just stay focused on us". I think that is the key. But like the General always says "we'll see, it'll be interesting"

Merry Christmas All

I think the leagcy carriers are going to target JB because they all learned a lesson from letting SW grow to the point where they are eating at their markets on an ever increasing basis. They ar now a force to be reckoned with and it will not be a mistake they want to repeat.

I don't think for an instant you guys left ATL in tears, my only point is that it validates my above thinking that there will be a line drawn in the sand in certain markets and proof positicve was DAL's reaction.

Perhaps unheeded was an unfair characterization. But the impression that is left by many JB pilots I have run across is that you guys are immune to any type of downturn.

 

[SpeedBird]

General Lee:

If I'm giving you the perception of "double speak" then that is certainly not my intention. I think I made my comments regarding ATL with the purpose of agreeing with boeingman, but providing my views that his accusation that it was "unheeded mistake" was an empty one without any substantive support. I hope he rebuts my position with something more objective to make this debate more compelling.

I could spend a considerable amount of time regurgitating all the facts about what has happened in ATL with jetBlue, Delta, and AirTran but it doesn't serve any useful purpose for the point I was trying to emphasize here. My point was that it was a mistake for jetBlue to go into ATL and there is no double speak about that.

Don't happily assume that jetBlue was losing money on its ATL routes from LGB and OAK. They were in fact profitable, but not as expected when jetBlue management decided to innaugurate this service. Boston is seen as a much bigger prize than ATL, and I would venture to guess that as the on-going negotiations with Logan officials since last summer generated a better than expected result, it made jetBlue's decision to pull out of ATL that much easier. Unlike some other airlines which have had to shed excess capacity in the last three years, jetBlue has been capacity constrained even as it has grown at an average rate of 50% YOY. If they could have acquired their gate agreements in Boston just six months earlier we wouldn't be having this discussion about Atlanta; because jetBlue would most likely have never started service there in favor of opening Boston service sooner.

Funny thing about Boston, and something you've been quiet about since the news broke is that jetBlue is expanding its previously announced service out of Boston due to "strong" demand for tickets to FLL & MCO, etc. Just imagine what would of happened if Song had not positioned itself in Boston before jetBlue, in an effort to stifle jetBlue's new service.

I will agree with you that an improving economy will result in improving yields for all airlines, but if and only if capacity growth is measured and lagging with regard to growth in demand. But even in the best scenario don't expect to see the types of go-go yields and stratospheric walk-up fares that were ubiquitous during the last half of the nineties and early 2000.

 

[Cyclone]

expensive post

Speedy...whoa...lots of fifty cent words there big fella. Are you jetblue management? You must not be a pilot.

Are jetBlue and SWA in direct competition in many markets?

Who should be more afraid of the other?

(JBLU or SWA)