Gen
Medflyer echos some of my thoughts. LCCs (other than SWA) have attacked legacy carriers more than each other. The result has been a selective cleaning of lush routes & a drop in yields for the legacies. The LCC can make this stand & still make money at it. Doesn't mean the legacy carriers don't have other places to make money.
As for the day & time when LCCs compete against each other. Well, that day is somewhat here but not quite yet. But let me state some of the results. When SWA use to fly into ISP, Spirit flew routinely out of there. They're now gone if I'm not mistaken. Airtran has done well in BWI & I suspect they will continue to do so when they connect to cities that other LCCS don't fly too. At some point will we fly to those other cities, probably but they maybe too small for us to consider going into. As for JB, we overlap very little & they do little shorthaul vs longhaul which allows them to keep their costs down (if SWA could remove the short haul & just do longhaul from its CASM like you'd like to drop Comair, our CASM would be much smaller too but we/you are who/we are).
The question is when the time comes down to LCC fighting among themselves, where will the the legacy carriers be? I suspect they're domestic route structure will look radically different than it does now. Lots of regionals flights into the central hubs connecting to either international flights or transcontential flights on the legacy carriers. LCCs will be flying out of the hubs flying to all the stops the legacy folks use to fly to (under 300 miles up to transcontential). Legacy carriers will survive on their international & long haul & the connections to the regionals that will feed cities most of the LCCs will avoid. JBlue may go to some, other carriers may go to a regional aircraft but who knows.
The time is no where near that LCCs will be in the position where we will be dogfighting each other...there are too many other financial opportunities which permit LCCs to compete & steal legacy business. Maybe in 5 years but that is an eternity in the airline business. One other thing SWA has going for it is the fact we provide something that the business & casual traveler wants....frequency & price. When the other LCCs go somewhere they usually don't provide the frequency & the number of flights out of terminal like we do--usually a minimum of 10-12 flights with rapid increases to even more popular places. This adds efficiency. As another benefit is the normal opening expenses of getting a new station up & running is $1M I've been told. With the excessive number of folks we have, we should not need to hire a single person off the street to fill PHL or any new base for awhile.
You can play the scenario out as you have described but the assumptions are that the other LCCs have no bumps along the way. However, the other LCCs may have significant problems facing them that we don't....rising fuel costs (we've hedged about 75% for next year at around $24-$25) increasing costs on the personnel side as it relates to pay (JB in particularly as each year they are getting closer to their top pay scales, we are at least retiring folks at that level), debt payments. While every airline is facing increases (SWA is not excluded) other carriers have additional ones that we don't have.
So far where we have competed with the LCC, we've remained & have thrived. Often times we don't siphon customers from each other, we've merely allowed more folks the luxury to fly, something that charging through the nose to international destinations doesn't appear to be in the future. I will say without any malice, gouging one segment of your customers to offset losses where they compete against LCCs is a losing proposition. All carriers make marketing decisions on pricing & while one person's gouging is another "fair pricing model", I would argue that even when SWA has an exclusive market somewhere, while the ticket prices might be slightly higher, they'll never be higher than the highest advertised price (quite frankly they are usually much lower). It is an aspect of flying for SWA that I enjoy...we don't try to rob one set of customers to generate profit for the entire airline....a reasonable price on all routes. One has to do what one has to do. (the last portion is only an opinion & not meant to flame but is a philosophical point I would have dealing with if I flew for another carrier
)
Medflyer echos some of my thoughts. LCCs (other than SWA) have attacked legacy carriers more than each other. The result has been a selective cleaning of lush routes & a drop in yields for the legacies. The LCC can make this stand & still make money at it. Doesn't mean the legacy carriers don't have other places to make money.
As for the day & time when LCCs compete against each other. Well, that day is somewhat here but not quite yet. But let me state some of the results. When SWA use to fly into ISP, Spirit flew routinely out of there. They're now gone if I'm not mistaken. Airtran has done well in BWI & I suspect they will continue to do so when they connect to cities that other LCCS don't fly too. At some point will we fly to those other cities, probably but they maybe too small for us to consider going into. As for JB, we overlap very little & they do little shorthaul vs longhaul which allows them to keep their costs down (if SWA could remove the short haul & just do longhaul from its CASM like you'd like to drop Comair, our CASM would be much smaller too but we/you are who/we are).
The question is when the time comes down to LCC fighting among themselves, where will the the legacy carriers be? I suspect they're domestic route structure will look radically different than it does now. Lots of regionals flights into the central hubs connecting to either international flights or transcontential flights on the legacy carriers. LCCs will be flying out of the hubs flying to all the stops the legacy folks use to fly to (under 300 miles up to transcontential). Legacy carriers will survive on their international & long haul & the connections to the regionals that will feed cities most of the LCCs will avoid. JBlue may go to some, other carriers may go to a regional aircraft but who knows.
The time is no where near that LCCs will be in the position where we will be dogfighting each other...there are too many other financial opportunities which permit LCCs to compete & steal legacy business. Maybe in 5 years but that is an eternity in the airline business. One other thing SWA has going for it is the fact we provide something that the business & casual traveler wants....frequency & price. When the other LCCs go somewhere they usually don't provide the frequency & the number of flights out of terminal like we do--usually a minimum of 10-12 flights with rapid increases to even more popular places. This adds efficiency. As another benefit is the normal opening expenses of getting a new station up & running is $1M I've been told. With the excessive number of folks we have, we should not need to hire a single person off the street to fill PHL or any new base for awhile.
You can play the scenario out as you have described but the assumptions are that the other LCCs have no bumps along the way. However, the other LCCs may have significant problems facing them that we don't....rising fuel costs (we've hedged about 75% for next year at around $24-$25) increasing costs on the personnel side as it relates to pay (JB in particularly as each year they are getting closer to their top pay scales, we are at least retiring folks at that level), debt payments. While every airline is facing increases (SWA is not excluded) other carriers have additional ones that we don't have.
So far where we have competed with the LCC, we've remained & have thrived. Often times we don't siphon customers from each other, we've merely allowed more folks the luxury to fly, something that charging through the nose to international destinations doesn't appear to be in the future. I will say without any malice, gouging one segment of your customers to offset losses where they compete against LCCs is a losing proposition. All carriers make marketing decisions on pricing & while one person's gouging is another "fair pricing model", I would argue that even when SWA has an exclusive market somewhere, while the ticket prices might be slightly higher, they'll never be higher than the highest advertised price (quite frankly they are usually much lower). It is an aspect of flying for SWA that I enjoy...we don't try to rob one set of customers to generate profit for the entire airline....a reasonable price on all routes. One has to do what one has to do. (the last portion is only an opinion & not meant to flame but is a philosophical point I would have dealing with if I flew for another carrier
)
