xUT,
if the comparison between airlines is solely on the basis of service items such as food, seats, frequent flyer programs etc, then you might be somewhat right but there is still plenty of data to show that even within the same peer groups – such as network/legacy carriers – passengers perceive significant differences between service levels.
And it is precisely because it is the high value passengers, not Ma and Pa Kettle, that make or break an airline. Simplistically, labor has tried to argue for too long that passenger service and winning in the marketplace doesn’t matter – yet there are clearly carriers that have built their business models around winning in the marketplace and winning customers – and their employees are achieving those goals to the benefit of the company and the employees.
And countering 757etc’s point, fares in the US bottomed out a long time ago and are moving as revenue shifts between carriers and as costs are being passed along to customers. Yes, fares are lower than they were decades ago, but the bottom was reached years ago and the revenue movements that are taking place now will define the future of the industry.
And, as much as some people may not want to accept it, there are significant differences in how the network carriers have succeeded in the marketplace. It was very obvious before the last round of mergers that CO, DL, and NW had fared far better than AA, UA, and US among the network carriers in protecting their revenue and in growing in the marketplace, often at the expense of other network carriers. But CO, DL, and NW also did far better at protecting their networks from low fare carrier growth. The trends continue even though DL is the only one of those 3 legacy carriers standing (incorporating NW’s competitive characteristics that were quite similar to DL’s). UA is acting far more like the former UA than CO with the company being guided down by the belief that there is no money to be made in the domestic market, even though UA obtained 59% of its revenues from the domestic market in the most recent quarter. In comparison, DL was 61% domestic.
DOT 2[sup]nd[/sup] quarter 2012 data has just been released and it provides a number of insights that further confirm that AA, UA, US continue to lose share and revenue, particularly driven by the domestic market while DL continues to hold its ground against low fare carriers as well as take revenue from AA, UA, and US.
- Even factoring in the mergers of the past decade and the capacity that has been pulled by all network carriers, DL has increased its share of the total US market relative to AA, UA, and US.
- In the JFK transcon markets which are some of the largest markets in the country and markets which AA and UA have long dominated, AA has lost 10% market share while UA has lost 15% while pulling back in the market with its PS 757 strategy. DL has ADDED 10% market share and by next summer when AA’s 321 strategy that is similar to UA’s 757 strategy, DL will become the largest carrier in the JFK transcon markets.
- The reason why the JFK transcon markets are so important is because they are large markets but they are also heavily divided between carriers and are highly competitive with a strong presence of low fare carriers, who make up 25% or more of the capacity. In all of the major transcon markets, AA and UA have lost share AND revenue to low share carriers and to DL over the past decade – and the same picture applies throughout their domestic systems.
- DL’s share of the NYC market – all airports is over 23% compared to less than 26% for UA post merger – and these numbers don’t reflect the final phase of the DL-US slot swap.
- In BOS, B6 remains the top carrier both in terms of revenue and passengers but DL is the largest network carrier in both measurements. The big coastal markets are large and highly competitive and determine how well carriers will do in the US as a whole. DL is gaining more passengers and revenue in those markets as a group than AA, UA, and US.
- Less than 3 months after DL entered the LGA-MIA market, one of AA’s core markets, DL obtained 25% share – and DL is getting fares comparable to AA while moving that share. DL already has over 40% share of JFK-MIA, another key AA market.
- AA’s market share relative to DL took another hit during their operational problems and it hasn’t recovered yet.
- DL has increased its presence in all of US’ hubs – and most of DL’s new LGA flights to US hubs did not start until the 3[sup]rd[/sup] quarter and is not reflected in this data.
- DL has largely not focused its competitive efforts until the 2[sup]nd[/sup] quarter – many DL flights to UA hubs started in the 3[sup]rd[/sup] quarter as well.
- UA’s share of the DEN market is at the lowest level it has been since data has been made available. WN boards more passengers at DEN and continues to grow. UA’s share of the DEN hub is the lowest among any of the network carriers at a hub city.
And lest some want to argue that UA can just turn its focus to international markets, the evidence shows that UA’s international markets are not any more able to handle more capacity than is their domestic system. UA’s worst performance in the most recent quarter was in Latin America and Europe where AA and DL, respectively, are larger and are managing their capacity more effectively.
Given that everyone is trying to also grow their presence in the international market, the ability to win in the domestic market will make the difference for those carriers who compete in both market groups, as AA, DL, UA and US all do – and now increasingly WN will as well.
Labor, including people on this board, have argued that because labor continues to lose at airlines, the business models of those airlines is broken – and that because labor can’t win, neither can the companies or their employees.
The evidence clearly shows otherwise and the trends of AA, UA, and US losing market share to DL and low fare carriers is not changing.
All carriers DO NOT compete – or win – in the same way.
Applesauce with nutmeg or not.
BTW, UA now includes former CO who chose GE engines for its widebodies and RR for its 757s.
