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- Thread starter Imamec.itsmyfault
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Flufdriver said:
They're all charging the same (more or less) and increasing prices regularly because they all have the same costs and, for the most part, the same financial capabilities. None of them can gain a decisive edge over the others. They aren't in jail because they aren't colluding to artificially prop up prices -- which is what you were advocating the airlines ought to do.
It doesn't work that way for airlines -- costs vary dramatically and some airlines (like SWA) are able to insulate themselves via hedges. That forces everyone to follow their price leadership unless they can establish product differentiation to justify a price premium -- which is why capacity and service cuts to meet their costs just hasten the downward spiral.
I didn't actually say that but you're probably right. I don't see it as particularly funny but if you're getting a giggle out of it I guess that's ok.
I buy tickets. So I guess you could say that I run the place.
BostonTerrier
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TomBascom said:
Great reply!
fatherabraham
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TomBascom said:
TomB,
So I guess you are to blame?
BoeingBoy
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Hi Bob,
It's a slow night and I haven't picked on you in a while.....
Your first statement has merit - while most of us know that you, TomB, Art, Isp, etc are customers, there is always the odd one or two that don't get the word right away.
As for the second statement, let's just say you might be skating on some thin semantic ice. Take it from someone who's spent some time watching some of the LCC's operate (when we sit on the ground an hour or longer while they come and go in 25-30 minutes, you have time).
Getting hung up on "job classifications" misses a pertinent point. All the jobs done at US are done at the LCC's. Dumping lavs, cleaning up trash in the cabin, catering, cleaning & restocking lavs, etc. are done at all airlines (though Ryanair has talked about not having lavs). And the people doing those jobs at those LCC's have pay scales similiar to, and in some cases above, those at good ole US.
What you see at the outstations is very much what you see at those LCC's (except the turn times). F/A's picking up in the cabin, agents or ramp folks (contract folks at some stations) cleaning the lavs, dumping the lavs, dumping the galley trash. The difference is at the hubs, where many planes are on the ground at the same time (the business model the LCC's don't have).
Of course, there are places that US spends extra money. Take EWR, where there are more overnight aircraft than gates. We pay a contractor $350 to move an overnighter off the gate at night and another $350 to bring it back in the morning. $700 for two people to do 10-15 minutes work using our equipment. The ramp folks there could do it, but aren't allowed. Go figure.
Jim
It's a slow night and I haven't picked on you in a while.....
PineyBob said:
Your first statement has merit - while most of us know that you, TomB, Art, Isp, etc are customers, there is always the odd one or two that don't get the word right away.
As for the second statement, let's just say you might be skating on some thin semantic ice. Take it from someone who's spent some time watching some of the LCC's operate (when we sit on the ground an hour or longer while they come and go in 25-30 minutes, you have time).
Getting hung up on "job classifications" misses a pertinent point. All the jobs done at US are done at the LCC's. Dumping lavs, cleaning up trash in the cabin, catering, cleaning & restocking lavs, etc. are done at all airlines (though Ryanair has talked about not having lavs). And the people doing those jobs at those LCC's have pay scales similiar to, and in some cases above, those at good ole US.
What you see at the outstations is very much what you see at those LCC's (except the turn times). F/A's picking up in the cabin, agents or ramp folks (contract folks at some stations) cleaning the lavs, dumping the lavs, dumping the galley trash. The difference is at the hubs, where many planes are on the ground at the same time (the business model the LCC's don't have).
Of course, there are places that US spends extra money. Take EWR, where there are more overnight aircraft than gates. We pay a contractor $350 to move an overnighter off the gate at night and another $350 to bring it back in the morning. $700 for two people to do 10-15 minutes work using our equipment. The ramp folks there could do it, but aren't allowed. Go figure.
Jim
UseYourHead
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- Apr 1, 2003
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Your right 700,
But the problem is that most of the other airlines will not let us raise prices, they keep undercutting pressuring our cash position.
I wish we could....
But the problem is that most of the other airlines will not let us raise prices, they keep undercutting pressuring our cash position.
I wish we could....
700UW said:
UseYourHead
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Jim,
We cut capacity in a big way a fw year back under Seigel....
We cut capacity in a big way a fw year back under Seigel....
BoeingBoy said:
BoeingBoy
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UYH,
Rereading my post, it was not as clear as it should have been.
US & UA cut capacity more than any other big carriers. And who're the one's that ended up in BK?
My point was that AA was probably smart not to follow the example of US and UA. AA trimmed capacity instead of slashing it, and that is at least a part of the reason they're in better shape than either US or UA.
Despite the claims of some, the "can't shrink to profitability" theory is alive and well - we're living proof.
Jim
Rereading my post, it was not as clear as it should have been.
US & UA cut capacity more than any other big carriers. And who're the one's that ended up in BK?
My point was that AA was probably smart not to follow the example of US and UA. AA trimmed capacity instead of slashing it, and that is at least a part of the reason they're in better shape than either US or UA.
Despite the claims of some, the "can't shrink to profitability" theory is alive and well - we're living proof.
Jim
FlyUs said:
AA, like most other legacy carriers, slashed capacity by 20% the week following September 11.
AA has grounded over 100 mainline jets since September 11. It is flying its remaining jets more these days, but then so are the other airlines.
Of course, since then, most airlines have added back some of that reduction in bits and pieces, but I doubt a look at the numbers would show such disparity. I'm too lazy to look at all the numbers right now, but I doubt your numbers are accurate.
UseYourHead said:
Once again, it is not the other airlines that will not let you raise prices... It is the economics.
1. Demand has decreased as evidenced by the falling yield nearly every airline has recorded. Economics 101: If demand falls and supply stays the same, prices will fall. Ticket prices=airline revenue in this case. (Yes some airlines have announced modest decreases in capacity or growth, but overall I do not believe that it is enough to move the supply/demand curve meaningfully yet... If a large carrier ceases service. that would probably do the trick, although no company is going to close up voluntarily... Heavens forbid we should try to save some cash for the creditors, it is far more important to continuing running at a loss until every last dime is spent.)
2. Higher consumer prices for energy and basic goods = less discretionary income for personal travel. Higher energy prices and lowered profitability for business means corporate travel is down. Both items reduce demand for airline tickets...
3. If you raise fares $10rt, a trip which was previously "on the bubble" will not be purchased... (For example, if somebody was barely willing to buy a ticket PHL to MCO for $199rt and the fare increases to $209, they may no longer be willing to buy. Thus raising prices will reduce demand. The airlines will take in even less revenue, but capacity and costs stay the same...
Thus raising fares could have the effect of increasing losses for the airlines, simply because of falling demand and macro-economic issues. This, in my opinion, is why some airlines continually choose not to go along with fare increases. When the economy turns around (at least more firmly), then airlines will be able to raise fares, as the increased fares will not dilute demand as much when discretionary income is increasing. However, that is not the case today.
Lastly, I do not believe fare increases will occur with a press release and a "fare" increase. I think the fares will stay the same, but the increases will occur by limiting availability of the cheap seats. In other words, I don't expect to see one of these fare increases stick... I expect the airlines will eventually do this via their Yield Management departments.
BoeingBoy
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funguy,
I'll only quibble a little.
Demand, as measured by the number of people flying, is rising.
Now if you're talking about demand at a price point that would allow US (or whatever legacy carrier) to make a profit, I won't quibble with that.
Likewise, if you're talking about demand vs capacity, I won't quibble either.
Jim
I'll only quibble a little.
Demand, as measured by the number of people flying, is rising.
Now if you're talking about demand at a price point that would allow US (or whatever legacy carrier) to make a profit, I won't quibble with that.
Likewise, if you're talking about demand vs capacity, I won't quibble either.
Jim
BoeingBoy: That is exactly what I am referring to. Overall, people are willing to travel at very low fares... But not at the fares needed to achieve profitability. Increasing fares, will not affect this equation in a positive (for the airlines) direction.
Airline execs know there are two ways to try to increase RASM... increase fares or increase load factors... On a number of airline 3Q conference calls I listened to, I heard the execs say that basically in this environment, they cannot control RASM with fares, so they are ensuring high load factors (by selling additional low fare tickets).
Airline execs know there are two ways to try to increase RASM... increase fares or increase load factors... On a number of airline 3Q conference calls I listened to, I heard the execs say that basically in this environment, they cannot control RASM with fares, so they are ensuring high load factors (by selling additional low fare tickets).
