Trouble ahead for Low Cost Carriers???

[General Lee]

Medflyer,

ATL is where we make the most money, and we believe we will win that battle. We carry more people with bigger airplanes through ATL, and have made it the busiest single airport in the world, in terms of passengers. You have to remember that we only have ONE union, and that the others do not make a lot more than industry standard. The pilots (me), are negotiating to take some sort of cuts, which will lower costs even more. The reason our "CASM" is higher than most is because they add Comair/ASA's CASM (near 14.5) onto ours.

As far as Airtran is concerned, I am sure we know that they are there bringing fares down, but many of our passengers in ATL are connection passengers from cities that Airtran does not fly to. And, I am sure that they have a good frequent flyer program, but they do not offer the choices in cities that ours does with the Skyteam Alliance, nor do they offer the Crown Rooms, or better first class upgrades available.


StopNTSing,


We have a certain percentage in our contract (that we are renegotiating currently) that must be followed when it comes to INTL codeshares. We just filed a grievance concerning that, and two weeks ago they just announced all of that extra INTL flying for us. (CVG--FCO, AMS etc...) I doubt we will give up that. And, a lot of the cities we fly to INTL do not have much viable competition. Try JFK to Moscow. You can fly on us or Aeroflot. You choose. How about JFK to IST. Do you want to fly in the back of a Turk A340 for 11 hours? I didn't think so. How about ATL to Santiago, Chile? In fact, we ran KLM, Varig, Austrian, and Swissair out of ATL.


Drunkirishman,

Yes, we had some empty airplanes after 9-11. And a lot of empty airplanes in a 500 airplane fleet can really hurt your bottomline. It took awhile to get people back onboard, and the RJs helped keep market presence. As far as Mainline owning them, it would be nice for our furloughs to be flying instead of sitting right now, but I don't think they are the answer in the future. I think the LCCs are going to be charging less for seats, and the 50 seat RJ will not be able to cover the costs with just those 50 seats. I think we will need larger planes to compete, and the more seats will help spread out the costs. Look at Southwest--they can charge less but still have 100 or more seats to fill and spread out those costs. And, their pilots are getting paid more and more these days, which shows that pilot costs can still be high if you have the right plan.


SWADude,

I didn't know that your flight attendants weren't even paid the average. If that is the case, and your company continualy makes profits, then they should be compensated better. I have jumped on many of your flights, and I always had fun. I know that they often work 6-7 legs a day, and that they do work hard. But, as I have said, the regional flight attendants also clean the plane between flights, fly 6 legs a day, and are paid a lot worse than Southwest. But, Southwest is King, and they should pay your flight attendants more---period.


Bye Bye--General Lee

 

[General Lee]

Here's another article with the same point of view:



Dow Jones Business News
High Costs Prompt JetBlue, Southwest 4Q Warnings
Friday December 5, 4:40 pm ET
By Elizabeth Souder

NEW YORK -- Low-cost airlines JetBlue Airways Corp.
(NasdaqNM:JBLU - News) and Southwest Airlines Co. (NYSE:LUV -
News) issued warnings about the fourth quarter as higher fuel prices
and capacity increases drive up costs.

The announcements are particularly worrying because they come on
the back of a disappointing Thanksgiving travel weekend from two
airlines that have remained profitable through the industry downturn.

The announcements could mark a turn in fortune in the airline
industry: Growth for low-cost airlines is getting more difficult as
major carriers recover enough strength to compete for market share.

New York carrier JetBlue said late Thursday its operating margin in
the fourth quarter would be in the range of 13% to 14%, lower than
the previous range of 15% to 17%, because the airline's extra capacity
is bumping up costs and weighing on air fares.

Also on Thursday, Dallas carrier Southwest said higher fuel prices
will cause the airline's total costs to rise 4% in the fourth quarter.

"As big airlines restore supply, revenue momentum is fading at low-
fare carriers," said Goldman Sachs & Co. analyst Glenn Engel in a
research note. Goldman seeks investment-banking business with
airlines.

Both JetBlue and Southwest, like most U.S. airlines, said they flew
more passengers in November than a year earlier, thanks in part to
the Sunday after Thanksgiving falling in November this year; last year
it was in December. But analysts worry airlines aren't flying those
passengers as profitably as expected.

That's a problem for airlines both large and small. Houston carrier
Continental Airlines Inc. (NYSE:CAL - News) said its revenue per
available seat mile rose by about 4.5% to 5.5%, lower than analysts
had expected. Continental is the only airline that reports monthly
RASM, closely watched by analysts as an indicator of industry
profitability.

Analysts have said the capacity cuts by major airlines contributed to
higher load factors and higher fares. So as major airlines begin adding
capacity next year, which nearly all have said they will do, analysts
worry load factors and fares will fall, cutting into profits.

The effect will be different for low-cost carriers and major airlines.
Goldman analyst Mr. Engel, who doesn't own shares of the companies
he covers, said as hub airlines restore supply, they gain market share
and lower their average unit costs.

Low-cost airlines, on the other hand, by definition already have very
low unit costs. So they must rely on higher fares and more passengers
to lift margins, which is particularly difficult as big airlines beef up
capacity and fuel costs rise.

In the fourth quarter, major airlines have continued cutting capacity.
But next year, American Airlines plans to add between 5% and 6%
more capacity. Delta Air Lines Inc. (NYSE: DAL - News) will add as
much as 10% more capacity -- in part via its low-cost unit Song,
which is designed to compete head-on with JetBlue.

JetBlue will add about 35% to 37% more capacity next year, slowing
its growth. The airline's capacity in November was up 53% compared
with a year earlier, as JetBlue added frequency across its system.

Last year, the airline nearly doubled capacity -- and operating
revenue, showing an operating margin of 16.5%. That's higher than
the projected fourth- quarter operating margin of 13% to 14%.

Lehman Bros. said in a research note the operating margin drop
appears to be driven by competition in the hotly-contested New York
to California routes. America West Holdings Corp. (NYSE:AWA - News)
added service on those routes, prompted fare competition from some
major airlines, Lehman said. Lehman seeks investment- banking
business with airlines.

Take the Los Angeles/New York path. According to Deutsche Bank's
weekly fare review, AMR Corp. (NYSE:AMR - News)'s American
Airlines cut leisure fares on the route by 29% last week, and nearly
halved business fares. That price drop comes amid an overall 6% rise
in leisure fares, and a 5% decrease in business fares, Deutsche Bank
said. The bank seeks business with airlines.

Capacity increases may be more expensive for low-cost airlines than
major carriers, because many low-cost airlines are currently flying all
their planes as frequently as they can. Adding capacity for many of
the low-cost players means adding more planes.

But for major carriers, after cutting capacity for the last couple of
years, adding it back means simply flying the same planes on the
same routes more often each day. Bringing back parked planes to the
fleet would be the next step before the airlines must take the more
expensive step of buying fresh jets.

American Airlines, the world's largest airline, plans to add capacity
next year while reducing its fleet by increasing frequency on existing
routes.

In addition to the looming capacity increases, airlines across the
board face higher fuel prices. Southwest Airlines' fuel-hedging
program is considering the best in the industry by some oil experts.
In an interview with Dow Jones Newswires last week, Southwest Chief
Financial Officer Gary Kelly blamed terrorism fears and turmoil in the
Middle East for the high oil prices, imposing "a significant premium."

Southwest has hedged 87% of its fuel purchases for the second half
of 2003, compared with 100% for the first half. For 2004, the
company has hedged 85% of its fuel needs, Mr. Kelly said.

Airline shares dropped nearly across the board Friday, lead by a
decline in JetBlue shares. In 4 p.m. EST trading on the Nasdaq Stock
Market (News - Websites) , JetBlue was down $5.52, or 18%, at
$25.86. Low-cost airlines with big growth plans fell more strongly
than most major carriers, with America West down $1.88, or 14%, at $
11.91 on the New York Stock Exchange (News - Websites) . AirTran
Holdings Inc. (NYSE:AAI - News) was down $ 1.32, or 9.9%, at
$12.05, also on the NYSE. Southwest, with a more modest capacity
growth plan, was down $1.01, or 6.1%, at $15.59 on the NYSE.

-By Elizabeth Souder, Dow Jones Newswires; 201-938-4148;
[email protected]




Bye Bye--General Lee

 

[SWAdude]

General,

If I were you I would also be apprehensive of the LCC's. But you come off as trying to get us to feel the same apprehension. The sad part about this is we all support your recovery and success and hope things stabilize for you and your co-workers ASAP. We all have good friends on the street and want them and their families to recover from their employment challenges soon.

Why do you want our failure so badly. Will our demise make you feel better.

I truly hope not. That would be really sick.

Respectfully,

SWAdude

 

[Skank]

Apparently there is a lot of enjoyment out there about our "failure" (13-14 % margin versus 20%-now that's failure). As SWA dude states, you've gotta be real lame to enjoy other peoples troubles. So, go on and have a good laugh now...
I, for one wish everyone success. We're all just trying to earn a living for the family, right?

 

[AA717driver]

Right now, any airline with a positive margin should be happy!TC

P.S.--For the DAL people--everyone is hoping you hold the line!

 

[General Lee]

Where have I said that I enjoy other airlines'problems etc??? What? I am pointing out that problems exist for everyone. Do you see me jumping up and down because Jetblue's profit margin is a little less? Nope. Don't attack the messenger. I thought these articles were interesting, and I didn't write them. The title I chose for this thread came right from the articles. The articles pretty much say that no one carrier is invincible, and I know I have been taught that lesson in the last 2 years with Delta. I never stated that I wished anyone to fail, or anyone to get furloughed, etc. All I want is some good competition, and that is what I have stated----Song was made to combat Jetblue. I then brought up a question, "What will happen to the profit margins for the LCC's when they all start to expand?" Then I get blasted. It was a good question. I try to explain, in my own way and my own opinion, how I think Delta/Song will do. I get blasted. This is an open forum and we are allowed to ask questions, and I even posted actual articles that also asked the same thing. I will consider any opinion and give my own, and I am not trying to upset anyone.

Bye Bye--General Lee

PS--SWADude and Skank, Just because you don't like what both articles state, doesn't mean you should take it out on me. I didn't write them. I just posted them and asked for opinions. I don't think it says both of your airlines will be Chap 7 soon. I also am not laughing. Lighten up please.

 

[SWAdude]

General,

" Just because you don't like what both articles state, doesn't mean you should take it out on me."

My comment is on your slant on these issues. Not the articles. The article didn't make me feel one way or another. My airline is expanding at historical levels next year. Were making a bunch of money.

" I didn't write them. I just posted them and asked for opinions."

Who exactly are you trying to fool. Yourself??? Where are the articles about your imminent pay cuts to compete??? Are you not interested about THOSE opinions that are much closer to your interests???

" I don't think it says both of your airlines will be Chap 7 soon."

I suspect only because none of those type of articles exist."

" I also am not laughing."

I didn't say you were. Just wondering if you were getting some pleasure out of this."

" Lighten up please."

You need to look in the mirror.

SWAdude

 

[f9driver]

LCC Profits

General Lee,

A 9% pay give up isn't going to do it...wages do sometimes matter. A good argument could be made that Delta may eventually be worse off than American or UAL as the bleeding will probably continue until you do give up those scheduled contract raises and the full 22% the company is asking for.
A lot of the best economic forecasters are calling for a real bad 2005-2006 economy and financial market. Economic forecasting is not a pure science but, nevertheless we all know a lot of seeds have been cast that could precipitate this scenario. What will this do to Delta if that happens with their high pension and wage costs? Enjoy it while it lasts.

 

[General Lee]

F9driver,

Welcome to this thread. Ok, now WHAT? What are you talking about? Do you really think we were only going to give up 9%?(there was also a 4.5% raise we were going to get next year that was erased too=13.5%) That was just our starting position, and I think it will go to 15%. But, that 15% is really A lot of money per year that Delta will get back. 15% of your pilot group salary might not equate to much, but a 15% cut on ours will give the company a lot more. Also, we would be giving up many other things, like some productivity, and some other beanies--like per-diem cuts, night pay, and INTL pay, etc. It won't be only the straight salary cut. Also, you probably don't know much about the other employee groups at Delta, that actually make industry standard wages, and they have no union or contracts. And the Song employees (except the pilots) actually make less than mainline.

Ok, now where is the proof about your best economic forcasters are calling for a bad 2005 and 2006 economy? Who said that? Lou Dobbs on CNN? Who? I haven't seen anything about that. How long did our last upswing last? We started doing really well in 1996 and continued until the tech bubble burst in early 2001. That would be 5 years. The economy is now getting good, so I would guess that (without another 9-11) 2008 will be the next downturn, and hopefully we will be ready. And you say that a good "argument" could be made that Delta may eventually be worse off than AA or UA if we continue to not give up pay until the next contract talks. The only difference is---the economy is actually getting BETTER. AA and UA had a double whamy---a bad economy and 9-11. Now things are turning around, and loads and fares are getting better. But, I still feel we will help out and help that debt problem now before it gets out of hand. And, as I have said many times before, that pesky pension problem evaporates as the stockmarket and interest rates rise, and we just had our union and advisors complete a new study on that porblem and should know how it is going soon. Our wage costs at Delta, as you can see now, are only higher on the pilot side, and even that is coming down a bit. Thanks for joining this thread, and watch out for TED--they are aimed right at you.



SWADude,

Maybe you are new on this board, but I respond all of the time to our pay issues. The airline blaming all of the problems on the pilots is wrong, and I express my views constantly. How do you know that I get "pleasure" out of these articles? Should I not post them because you might think that? What? It is great that you fly for a stable airline that never has a problem----but when something arises that shows a possible flaw in the whole LCC side, should I not post it? I guess no one on this interview board should ever see anything like that? There sure is enough about the Majors doing poorly, that's all I see. Pointing out something that isn't necessarily flattering might sting, but overall it is good to get out there. Then I asked a good question about what will happen when there are LCCs overlapping, and I get "gang banged" by a SW and Jetblue guy. Nice. I welcome your opinion, but not your message. Enjoy that growth.

Bye Bye---General Lee

 

[SWAdude]

General,

I my be rather new on this board and I don't want to take the time to find a like article in your part of the industry but I doubt I could find one.

I asked you a question that I am sure with little doubt many here understood.

You may not be aware of how you may come off and if I misunderstood your intentions it would have been nice to say that those were not your intentions. Instead you just defend yourself with an obvious underlying aggression.

You have answered my question loud and clear.

Good luck!!

SWAdude