A Letter to Mr. Horton

[FWAAA]

So the employees of every airline take massive pay cuts to offset the cost of fuel. How about passing it on to the consumer.
The 9-11 factor is getting old. You cant beat that horse anymore. Not to mention the govts 9 billion dollar bail out what happened to all that money.
Seems next to impossible to fly lately. So I am not buying the overcapacity.

Don't buy the overcapacity argument? Yes, most airlines have record-high load factors. And they tend to also have record-high losses. Doesn't seem too difficult to figure out that they are filling many of those seats at fares that are too low, and that's because at distressed and bankrupt airlines, they view some revenue as better than no revenue for those seats.

Like it or not, demand for air travel is very elastic. Bob Owens likes to say that everyone flying into or out of JFK that he sees every day absolutely has to fly (no choice at all), but he is sadly mistaken. Flights are filled in part because of the low fares. The price for seats is determined by where the demand and supply curves intersect. Remove some of that capacity, and the remaining seats will go for more money.

If you want to be hypertechnical, there's currently a glut of high-cost legacy capacity and a shortage of low-cost, low-fare capacity. So B6 and WN are adding dozens of airplanes to try to satisfy that shortage while the legacies are dragging their feet in downsizing. Someone should have gone out of business, but UAL and USAir survived because the airplane lenders and lessors would rather get paid by money-losing airlines than eat all those extra airplanes. Maybe NWA or DAL will do the rest of the industry a favor and go belly-up, but I doubt it (for the same reason as UAL and USAir).

You're right - September 11, 2001, isn't a huge factor anymore. But it was huge in late 2001 and 2002. It temporatily killed demand for high-yield travel and low-yield travel. Then SARS hit in 2003 and oil began going up big in 2004-05. Meanwhile, WN and B6 kept on adding dozens of new airplanes anyway.

What happened to the billions of federal bailouts? AMR, UAL, DAL, NWA, CAL and USAir spent theirs on employee wages (before they slashed them) and on very expensive jet fuel. IMO, those federal bailouts were a very stupid move - they permitted some airlines to stay in business instead of allowing them to fail.

Impossible to fly lately? Maybe as a nonrev space available employee, like yourself. But as a domestic revenue passenger? It's never been cheaper. Airlines falling over each other to try to bring in some revenue to pay all those fixed costs. And that means lower and lower yields and lower RASM.

Should employees have to subsidize high fuel prices? NFW.

But until 50k or 100k (or more) legacy airline employees get out of the business (involuntarily), it's gonna keep happening. A big airline (or two) needs to go under. Until that happens, the unfortunate beatings will continue. My sympathies go out to the beaten.

 

[Bob Owens]

Don't buy the overcapacity argument? Yes, most airlines have record-high load factors. And they tend to also have record-high losses. Doesn't seem too difficult to figure out that they are filling many of those seats at fares that are too low, and that's because at distressed and bankrupt airlines, they view some revenue as better than no revenue for those seats.

I agree they are selling them at prices that are too low, however the difference between record high losses and breaking even is very small, according to the NYT they only had to raise fares by $12 per ticket.If the planes are full you can raise you fares by $12 and it aint going to send anyone away.

Like it or not, demand for air travel is very elastic. Bob Owens likes to say that everyone flying into or out of JFK that he sees every day absolutely has to fly (no choice at all), but he is sadly mistaken. Flights are filled in part because of the low fares. The price for seats is determined by where the demand and supply curves intersect. Remove some of that capacity, and the remaining seats will go for more money.

Perhaps when you went to school it was very elastic but things do change and like I said before $12 isnt going to change demand very much if all the planes are full.Let the other guy fill his plane first at $12 less and then you fill yours for $12 more.

If you want to be hypertechnical, there's currently a glut of high-cost legacy capacity and a shortage of low-cost, low-fare capacity.

Fine, rip out First and Business class then.

So B6 and WN are adding dozens of airplanes to try to satisfy that shortage while the legacies are dragging their feet in downsizing.

I hear B-6 is not doing so well anymore.Word is that they have informed their employees that they are considering asking them for concessions and they owe out a lot of money, plus their costs are rising fast.

Someone should have gone out of business, but UAL and USAir survived because the airplane lenders and lessors would rather get paid by money-losing airlines than eat all those extra airplanes.

Hmm, havent I been saying that for the last three years? You are contradicting those who say that we were right to give massive concessions to avoid BK because if we would have gone BK then the airlines could no longer get money.

Maybe NWA or DAL will do the rest of the industry a favor and go belly-up, but I doubt it (for the same reason as UAL and USAir).

Exactly, why consolidate when you can just squeeze the employees. My guess is that are fewer major airplane lessors than their are airlines and the airlines, even those that are losing money are still pumping a lot of cash into them. If the airlines hadnt had a financial crisis, even a fabricated one, the airlines never would have been able to get the concessions from their workers. If the industry consolidated into fewer carriers it would put workers in a more powerful position.

You're right - September 11, 2001, isn't a huge factor anymore. But it was huge in late 2001 and 2002. It temporatily killed demand for high-yield travel and low-yield travel.

Yea for about an hour. I remember going over to help out in the bagroom because the company had sent most of the FSC's home. People were aware opf what happened but couldnt understand why they couldnt go home. They were still more than willing to get on those planes.

Then SARS hit in 2003 and oil began going up big in 2004-05. Meanwhile, WN and B6 kept on adding dozens of new airplanes anyway.

What happened to the billions of federal bailouts? AMR, UAL, DAL, NWA, CAL and USAir spent theirs on employee wages (before they slashed them) and on very expensive jet fuel.

But you leave out the fact that even after a short layoff after 9-11 AA continued hiring off the street. As I already brought up we could not figure out why they just kept on hiring people. In the past the airlines used to layoff and hold OT but there was almost no OT worked at my station in 2001 or 2002.Instead the overhired.

IMO, those federal bailouts were a very stupid move - they permitted some airlines to stay in business instead of allowing them to fail.

No it allowed them to overhire and continue buying airplanes and building new terminals.

Impossible to fly lately? Maybe as a nonrev space available employee, like yourself. But as a domestic revenue passenger? It's never been cheaper. Airlines falling over each other to try to bring in some revenue to pay all those fixed costs. And that means lower and lower yields and lower RASM.

Impossible to fly because all the seats are gone.

Should employees have to subsidize high fuel prices? NFW.

High fuel prices, high lease rates etc. We are subsidizing everyone else. AA lowered operating costs by a mere $200million, which is probably an exaggeration and we gave up close to double the $1.8 billion that they calimed we gave. Our money is going to the oil companies, the aircraft lessors, airport operators etc. Its not just Oil.

But until 50k or 100k (or more) legacy airline employees get out of the business (involuntarily), it's gonna keep happening. A big airline (or two) needs to go under. Until that happens, the unfortunate beatings will continue. My sympathies go out to the beaten.

Maybe we need for all of them to go on strike?