VA-keeping competitors honest

[jonjuan]

It's a seat. 300 bucks for 5 hours. United frequent flyers (read: high yielding business travelers) will stay due to the massive number of greater opportunities to upgrade, drink, and eat for free, sit in the departure lounges, and fly anywhere in the world using their free miles.

By the way, how's Virgin Atlantic doing, financially?

 

[Ralph Cramden]

The west coast folks love us and understand the service. The east coast folks don't know us from Adam. I actually had a guy in PHL get on and point to the big cushy seats in first class and asked "It's sit anywhere, right, like Southwest?" Um, no, your seat is 25E, next to the lav door and the screaming brat.

The only unfair part of the UniCal response in EWR is where their extra slots came from. Word is they were "unused dormant slots". We've been trying to get into the EWR market for 5 years, and they have slots in their back pocket. Use it or loose it should be the rule in a slot restricted airport. Otherwise, bring it on, we compete in every market we serve.

 

[Andy]

The only unfair part of the UniCal response in EWR is where their extra slots came from. Word is they were "unused dormant slots". We've been trying to get into the EWR market for 5 years, and they have slots in their back pocket. Use it or loose it should be the rule in a slot restricted airport. Otherwise, bring it on, we compete in every market we serve.

Seriously?
AMR is leasing 15 takeoff and landing slots to VX.
AMR cancelled 4 takeoff and landing slot leases from Porter Airlines. The least number of flights Porter operates daily out of Newark is 8 so they were using all of their leased slots.
AMR cancelled 10 takeoff and landing slot leases from United Airlines. Those slots were used by regional partners.

As part of merger consolidation, United increased the number of hub to hub flights from EWR to LAX and SFO. Those slots were previously used to fly to other airports. United has moved connecting service to those cities from EWR to IAD.

Unused dormant slots at EWR? Sure. Just like there are unused dormant slots at DCA. And LGA. And JFK. And LHR. Seriously?

 

[Ralph Cramden]

Andy, if your info is more correct that what I was told then I have no beef with UA shifting slots from orher markets to compete. I am sure UAL management knows exactly the cost of the shift.

OTOH, if the slots came from thin air or a back pocket, my opinion doesn't change.

 

[Flyer1015]

Why is it fair for a start-up airline to enter a market and price their service below cost (as VA has done since day one) and lose money in an attempt to win customers but when the competition responds with the same tactic it's unfair? If VA is going to price their product below cost they have no right to complain about unfair competition.

Sir Richard chose to enter one of the most competitive air travel markets in the world at the worst possible time when there was already excess capacity and somehow it's a surprise that they can't turn a profit? Sir Richard made a very bad investment, it's nobody's fault but his own. Business is business, you have to expect established players to defend their turf against upstart competitors.

If VA really offers a superior product they should be able to compete on that basis and the customers should be willing to pay extra for it and they should make money. So far it hasn't worked, I'm sure the customers love the product but that doesn't mean enough of them will choose VA and pay high enough fares for VA to make money. Everybody would like a Mercedes for the price of a Chevy but how long would Mercedes stay in business if they offered that? No premium service carrier in the US domestic market has ever survived with that model. Midwest did well for quite awhile in the 1990's but the economy and industry landscape was much different then. They had a tiny niche that they were unable to expand and their business model eventually proved to be invalid. VA is trying the same thing on a larger scale with less success.

Because VX doesn't enter a market by dumping huge capacity in it. They enter with 1, 2, or at most 3 daily flights. Worst case, United could have matched the fares and kept their 7 daily flights from SFO-EWR and 6 LAX-EWR. Instead, not only did they match the fare, they doubled the daily flights to 14/15 each way!

 

[Flyer1015]

It's a seat. 300 bucks for 5 hours. United frequent flyers (read: high yielding business travelers) will stay due to the massive number of greater opportunities to upgrade, drink, and eat for free, sit in the departure lounges, and fly anywhere in the world using their free miles.

By the way, how's Virgin Atlantic doing, financially?

I wouldn't know, because Virgin Atlantic is a separate entity from Virgin America. I did hear however that Delta purchased a 49% share in Virgin Atlantic (share from Singapore airlines).

 

[fam62c]

Because VX doesn't enter a market by dumping huge capacity in it. They enter with 1, 2, or at most 3 daily flights. Worst case, United could have matched the fares and kept their 7 daily flights from SFO-EWR and 6 LAX-EWR. Instead, not only did they match the fare, they doubled the daily flights to 14/15 each way!

Again, if VA is going to price their product below cost in an attempt to get established in a market and then continue to price their product below cost (they haven't made a profit yet) why shouldn't competitors be able to respond? Every new entrant faces this kind of competition, SW did, AirTran did, JB did and VA will. If VA can't stand the heat they can get out of the kitchen.

What would you suggest? Should VA be protected so they can dump new capacity into markets below cost and take business from established competitors? The US domestic airline industry is brutally competitive, Sir Richard knew that from day one........there's no crying in aviation

 

[tomgoodman]

Because VX doesn't enter a market by dumping huge capacity in it. They enter with 1, 2, or at most 3 daily flights. Worst case, United could have matched the fares and kept their 7 daily flights from SFO-EWR and 6 LAX-EWR. Instead, not only did they match the fare, they doubled the daily flights to 14/15 each way!

UAL may have suspected that the nose was attached to a camel.

 

[Flyer1015]

Again, if VA is going to price their product below cost in an attempt to get established in a market and then continue to price their product below cost (they haven't made a profit yet) why shouldn't competitors be able to respond? Every new entrant faces this kind of competition, SW did, AirTran did, JB did and VA will. If VA can't stand the heat they can get out of the kitchen.

What would you suggest? Should VA be protected so they can dump new capacity into markets below cost and take business from established competitors? The US domestic airline industry is brutally competitive, Sir Richard knew that from day one........there's no crying in aviation

Price below who's cost? I looked at a roundtrip for EWR on United earlier this year with more than a 2 week notice and it was over 1,100 dollars roundtrip from SFO. Sorry but that is a ripoff. I could do a roundtrip to London for that.

 

[fam62c]

Price below who's cost? I looked at a roundtrip for EWR on United earlier this year with more than a 2 week notice and it was over 1,100 dollars roundtrip from SFO. Sorry but that is a ripoff. I could do a roundtrip to London for that.

That's probably what VA needs to be charging to get to break-even so they won't be burning through new capital to stay alive. Answer my question, what is fair? Should VA be protected from competition while they are selling tickets below THEIR cost to try to gain market share?

 

[jonjuan]

Price below who's cost? I looked at a roundtrip for EWR on United earlier this year with more than a 2 week notice and it was over 1,100 dollars roundtrip from SFO. Sorry but that is a ripoff. I could do a roundtrip to London for that.

Sounds like London is a discount.

 

[bri5150]

That's probably what VA needs to be charging to get to break-even so they won't be burning through new capital to stay alive. Answer my question, what is fair? Should VA be protected from competition while they are selling tickets below THEIR cost to try to gain market share?

I don't know the answer to this question. To be honest, it sounds like you may be speculating as well. I will ask you since you are making the accusation. How much did we start charging for EWR before United had their response? How much does it cost for us to fly a leg from SFO to EWR? How about LAX to EWR?

 

[fam62c]

I don't know the answer to this question. To be honest, it sounds like you may be speculating as well. I will ask you since you are making the accusation. How much did we start charging for EWR before United had their response? How much does it cost for us to fly a leg from SFO to EWR? How about LAX to EWR?

I don't know but if VA is not profitable they are, by definition, pricing below cost. Any company that is losing money and enters an established market at prices below the existing carriers has no right to complain about unfair competition. Sir Richard is attempting to place the blame on others for his own bad investment. We will see what happens, VA will either turn the corner and make it or it will not but complaining about competition in a highly competitive industry isn't going to solve their problems.

 

[bri5150]

I don't know but if VA is not profitable they are, by definition, pricing below cost. Any company that is losing money and enters an established market at prices below the existing carriers has no right to complain about unfair competition. Sir Richard is attempting to place the blame on others for his own bad investment. We will see what happens, VA will either turn the corner and make it or it will not but complaining about competition in a highly competitive industry isn't going to solve their problems.

Okay, so you don't know. How about what ALL of the airlines were doing during the bankruptcy age? Is it possible that we are/were losing money because we are/were pricing it at the cost of the flight and couldn't fill the airplane? How about route development? Does that come into play with our profitability? Since we are new to the route, it isn't developed. Maybe it makes sense to price it right to get people on the aircraft so they can understand our product and come back to us again? I will say it again. Adding 6 completely new routes to a new destination and pricing them to fill airplanes is completely different than flooding a route with 14 turns from an airline that is already established there.

Also, I understand that this is the way of the airline industry. That doesn't mean it is right. The consumer will decide what they want. Maybe we will pull out of EWR in a year because of what United is doing.

 

[Flyer1015]

VX has recently started making money on its operation, but it loses net due to interest payments from previous debt which in part largely from initial startup costs and delays in launch.