34 replies to this topic

[Itestwell]

ClueByFour, on Nov 30 2006, 12:37 PM, said:

No, it's not.

Doogie admits they are doing the merger to dominate the east coast (or "consolidation" if you want) and to permit them to reduce capacity and raise fares. It's really black and white.

Please show me the quote where DP says he wants to "dominate" the east coast. Also, please show me where he says he wants to "raise fares."

Further, can you explain this quote?

"Typically capacity reductions mean less supply and higher fares. But US Airways noted that since its 2005 merger with America West, it has cut fares between 10% and 83% on 400 business routes and 350 leisure routes."

Is it all a lie?

[BoeingBoy]

"Lie" is such a harsh word - how about spin?

So tell us, exactly how many of those routes seeing fare cuts didn't have low cost competition? And how many of the routes that didn't have low cost competition had DL as competition - remember the SimpliFares that DL rolled out nationwide?

Doug and company are doing everything they can to spin this proposed merger as a win for everyone concerned - no cities will lose service, no hubs will be cut, no employees furloughed and pay going to the highest of the three carriers, competition will keep fares in line, etc.

Yet there's supposed to be nearly $1 Billion in extra revenue generated. Is that a "lie"? If not, just where do you think that $1 Billion is going to come from?

Jim

[Charlie_Tuna]

BoeingBoy, on Nov 30 2006, 12:29 PM, said:

just where do you think that $1 Billion is going to come from?

Jim

Well thats simple, Doug told us.....synergies

[Itestwell]

BoeingBoy, on Nov 30 2006, 01:29 PM, said:

"Lie" is such a harsh word - how about spin?

So tell us, exactly how many of those routes seeing fare cuts didn't have low cost competition? And how many of the routes that didn't have low cost competition had DL as competition - remember the SimpliFares that DL rolled out nationwide?

Doug and company are doing everything they can to spin this proposed merger as a win for everyone concerned - no cities will lose service, no hubs will be cut, no employees furloughed and pay going to the highest of the three carriers, competition will keep fares in line, etc.

Yet there's supposed to be nearly $1 Billion in extra revenue generated. Is that a "lie"? If not, just where do you think that $1 Billion is going to come from?

Jim

Jim,

I agree that DP is putting a lot of spin on to push this merger thru, that is obvious. I am still confused about the fare issue, especially that quote where they claim they lowered all these fares here on the East since the HP/US merger. Obviously, not all of those routes had LCC competition. You are saying that they lowered many fares to compete with DL and their Simplifares? Was US always much higher in many of these markets than DL? I just don't understand how they can make such a bold statement and have it simply be "spin."

Also, DP keeps talkin about synergies. Didn't he state that the HP/US synergies realized thus far are well above the number that DP and his crew were shootin' for? If so, pretty impressive. Is this just spin? Financially, I think this guy knows what he's talking about. No?

[BoeingBoy]

I think it's just a matter of generalizing vs talking about specific markets....

Yes, there's been fare reductions in the east - mostly where lower cost competition exists - and US is still the high cost provider of the industry so everyone else is lower cost competition. But saying that's there's been reductions in some markets doesn't mean that there'll no passenger will pay more post-merger than pre-merger.

On the revenue side, the US/HP merger "filled the gaps" in each others route map. Doug's favorite example was DFW, where neither airline could conveniently transport a passenger to both the east and west coast pre-merger but could post-merger. The merger made US a viable alternative for that type of passenger. Likewise, there were large portions of the west that pre-merger US didn't serve and large portions of the east that pre-merger HP didn't serve. We became a viable choice for passengers in those markets thanks to the merger. Thus the revenue synergy - we could sell tickets to folks that wouldn't have given either of us a second thought before.

Contrast that to a US/DL merger. Where can the post-merger airline take a passenger that one of the pre-merger carriers couldn't, especially DL? Very few places. Thus the revenue synergy can only come from one place - reduced competition, which allows raising averagefares in markets that would become relatively non-competitive. So some of the people that would have paid $129 for their flight might have to pay $159 or whatever because there weren't as many of the $129 seats available. US could legimitely argue that they didn't raise fares - the various fare levels might still be the same. But some people would pay higher fares post-merger than they would have without the merger with US and DL competing for their business.

Jim

[ringmaruf]

Itestwell, on Nov 30 2006, 05:10 PM, said:

Further, can you explain this quote?

"Typically capacity reductions mean less supply and higher fares. But US Airways noted that since its 2005 merger with America West, it has cut fares between 10% and 83% on 400 business routes and 350 leisure routes."

Is it all a lie?

The whole purpose of the fare cuts is to increase revenue. And with load factors this high, that can only be done by increasing average fare.

So, yes, the nominal fares have decreased, and they make a big deal of that. (And yet again, I'll note that HTS and AGS fares were dropped *specifically* to earn support for the DL merger.) But although the nominal fares have been lowered, they're not putting as many seats for sale in the cheapest buckets, so average fares have in fact likely increased even in the markets where US claims to have lowered fares.

BoeingBoy, on Nov 30 2006, 05:29 PM, said:

"Lie" is such a harsh word - how about spin?

So tell us, exactly how many of those routes seeing fare cuts didn't have low cost competition? And how many of the routes that didn't have low cost competition had DL as competition - remember the SimpliFares that DL rolled out nationwide?

So, Jim, how long before the Tempe folk start calling you a "disgruntled former employee"?

[BoeingBoy]

ringmaruf, on Nov 30 2006, 05:37 PM, said:

So, Jim, how long before the Tempe folk start calling you a "disgruntled former employee"?

LOL - hardly disgruntled - I've been too fortunate in my career for that though I was basically accused of being just that today in a PM from "a LGA based pilot"......

I just figure US is exemplified by the "Everything Counts" promo - pay close attention because what's not said is what's really important.

Jim

[Itestwell]

BoeingBoy, on Nov 30 2006, 06:15 PM, said:

I think it's just a matter of generalizing vs talking about specific markets....

Yes, there's been fare reductions in the east - mostly where lower cost competition exists - and US is still the high cost provider of the industry so everyone else is lower cost competition. But saying that's there's been reductions in some markets doesn't mean that there'll no passenger will pay more post-merger than pre-merger.

On the revenue side, the US/HP merger "filled the gaps" in each others route map. Doug's favorite example was DFW, where neither airline could conveniently transport a passenger to both the east and west coast pre-merger but could post-merger. The merger made US a viable alternative for that type of passenger. Likewise, there were large portions of the west that pre-merger US didn't serve and large portions of the east that pre-merger HP didn't serve. We became a viable choice for passengers in those markets thanks to the merger. Thus the revenue synergy - we could sell tickets to folks that wouldn't have given either of us a second thought before.

Contrast that to a US/DL merger. Where can the post-merger airline take a passenger that one of the pre-merger carriers couldn't, especially DL? Very few places. Thus the revenue synergy can only come from one place - reduced competition, which allows raising averagefares in markets that would become relatively non-competitive. So some of the people that would have paid $129 for their flight might have to pay $159 or whatever because there weren't as many of the $129 seats available. US could legimitely argue that they didn't raise fares - the various fare levels might still be the same. But some people would pay higher fares post-merger than they would have without the merger with US and DL competing for their business.

Jim

So in these markets where fares would be "raised", we are talking about a sum of $30 - $50, let's say? Hardly "skyrocketing", as so many naysayers have been shouting....

Why can revenue synergies ONLY come from reduced competition? What about less congested hub structures (ie shifting some capacity from hub to hub)? Less overhead (mgmt combination) etc? Less RJ's, larger a/c flying? Just thinking.....