Be an "Airline Analyst"

[FM2436]

Air travel may become a throwback to the era before deregulation, but that wouldn't involve planes flying primarily to big cities. The major airlines were largely point-to-point prior to deregulation and they stopped in every little town along the way picking up passengers, in full sized aircraft. If anything we'd be flying larger aircraft to smaller cities along major routes. There are many airports that, today, don't have passenger service at all and pre-deregulation had 727's passing through daily.

Those were the days!

I'd want to board 101 million airline passengers between 64 larger cities than board 42 million passengers between 231 larger/medium/small and rural cities. In 2007 Southwest flew 101,911,000 domestinc airline passengers between 64 cities. In 2007 US Airways flew 42,172,000 passengers between 179 domestic an 52 international cities. Whats wrong here???

 

[Bobbie]

I'd want to board 101 million airline passengers between 64 larger cities than board 42 million passengers between 231 larger/medium/small and rural cities. In 2007 Southwest flew 101,911,000 domestinc airline passengers between 64 cities. In 2007 US Airways flew 42,172,000 passengers between 179 domestic an 52 international cities. Whats wrong here???

I wouldn't call the majority of Southwest's cities "larger." Quite a few aren't even served by mainline anything other than Southwest. I think the common element on the majority of the Southwest cities is that they're under-served by mainline carriers. Most of the airports are airports where the majority of the flights on other carriers are regional jets. They'll maybe have one or two mainline flights on the other carriers and Southwest will be running 15-20 all day long.

The model is beautiful, really.

 

[orioleman]

I can only see that they have issues with fuel costs. Where is management complaining about labor costs?

every day ,

local management . decides to fill open lines with DNC (Do Not Cover). leaving the operation short handed. and then wonders WHY bags are missed. The High Cost of Cheap is starting to catch up to them.

for G*d sake management wouldn't even authorize bottles of water to there employees working in 100 plus

temperatures. but yet whats everything to run smooooooooth so they get there monthly bonuses.

 

[SolidCactus]

Airlines will start collecting $650 to $700 per passenger for a ticket. Planes will fly primarily to big cities, and not a lot of small communities. There will be many fewer flights. Air travel will be a throwback to the era before deregulation. Flying will be a luxury.

Sound familiar?

Yep, and then the government will come back in and mandate that an airline service the small communities,and then start paying the airlines to offer service to the smaller airport... Then other airlines will come into that airport and cry that they spent money to help the government by competing, and they need money, and ten years later, the entire industry is regulated again...

Deregulation does not work with utilities and infrastructure unless it isn't important for everyone to have access to these services. Could you imagine if our Postal System was privatized? We'd be paying $3 for a stamp, and there would be no service to 30% of our country.

America needs to decide where air travel actually fits into our country's structure. If every American is to have access to air travel within 30 miles of where they live, then it needs to be regulated again. if air travel is truly a luxury and not important to the growth of our country, then we should all be willing to drive 3 hours to get on board.

just my opinion of course.

 

[Bobbie]

US Airways isn't a government-entity? Could have fooled me... poor performance, poor working conditions, lackluster product, poor management, shady financial records, massive debt, extremely old, worn out equipment, earth tones, and vicious unions?

I say they're ripe for nationalization. Their corporate culture will fit right in with the USPS.

Perhaps the ticket agents can start selliing stamps and money orders over the counter once this takeover takes place...they can call it USps Airways

Doug can run the combined company under the title of "Postmaster General" and will ask everyone to refer to him as "General Parker."

 

[CubsFanJohn]

1. Have Doug, Scott, Robert and Sheeri read from Worse to First.
2. Reduce the # of 50 Seat RJ's.
3. Improve DM
4. Improve the 1st Class Product
5. Free Non-alochoalic Beverages minus stuff like Vitamin Water if they even have it.
6. Get the Pilots a FAIR contact
7. Put back IFE but improve it sort of like CO's idea
8. WI-FI In the Domestic Fleet sort of like what DL is doing
9. Improve Phildelphia
10. Pay Emplyoees a decent wage the days of the 1990's pay will never return.
I don't work for the Airlines but these are ideas I can think of.

 

[SolidCactus]

1. Have Doug, Scott, Robert and Sheeri read from Worse to First.
2. Reduce the # of 50 Seat RJ's.
3. Improve DM
4. Improve the 1st Class Product
5. Free Non-alochoalic Beverages minus stuff like Vitamin Water if they even have it.
6. Get the Pilots a FAIR contact
7. Put back IFE but improve it sort of like CO's idea
8. WI-FI In the Domestic Fleet sort of like what DL is doing
9. Improve Phildelphia
10. Pay Emplyoees a decent wage the days of the 1990's pay will never return.
I don't work for the Airlines but these are ideas I can think of.

Hmmmm, sounds like Continental...

 

[Old PSA]

The price of fuel will never (never say never) return to the levels of the 50s, 60s and 70s when measured by the percentage of it to the total cost of the airline. Before deregulation, employee cost were the largest percentage expense. Aircraft ownership (lease cost for the most part) are becoming a larger part of the overall cost. Employee cost as a percentage have shrunk and are just about at their bottom. There maybe a little bit left in terms of a percentage but the dollars cost won't. The other cost will simple go up quicker.

The legacy (hub and spoke) carriers are struggling with a dilemma, the rise in fuel prices has made it much more acute. Dropping service to enough unprofitable small cities makes the hub and spoke model not work. If the fares to small cities are raised enough to make them profitable, then people will drive to the big cities for the lower fares. This would then be the death of the small jets (there are probable dead anyway). Of course more flights into the larger cities means more traffic delays which would mean moving some of the flights into secondary but close airports if they can support (enough passengers) larger aircraft.

It all means that the future holds a continued upheaval in the air travel. Congress may step in but it will probably be the continued "selling of America" by allowing foreign carriers to buy US carriers and/or cabotoge rather then addressing the mess they created.

Sadly, the employees are going to be a disposable resource (I have always hated the term Human Resources). The employees will suffer as management tries to cope with the changing environment. Southwest will not be immune as time progresses. Their model is good but it is based upon expansion. It will not last in a no growth environment with the other airlines adapting.

All and all, just more years of turmoil and uncertainty.

 

[signals]

I just don't see it...reduction in passengers that is. At least not in my location. The lines at US counters seem packed more than before. Scheduling has changed and at time there are weather delays but the unloading, boarding and turn-around seems to be faster. B6 seems to be getting hit with more complaints from irate customers for some reason. Thus planes are still flying to small communities.

The new advertisements that went up at the gates saying that drinks start at $2, may be a PR blunder considering a Kettle mindset. The ad says drinks start at $2 and shows water, soda, and alcoholic beverages. How many will be asking for a $2 beer or mixed drink?

As far as employees, it seems privatization and outsourcing will come to play. Ramps are outsourced by many airlines and counters/gates are slowly following. Never say never for pilots and fas. Workloads will increase even by minimal. Private rampers have gone to a 4 day work week. Be advised that major airlines including LCC have stakes in many privatized airline outfits.

Never underestimate the need for smaller locations because weather may divert you to one.

One more personal note...
At one time air travel from my location was ridiculously priced to the point of being an outrage. It was cheaper to fly JFK to Europe than it was to fly from my location to JFK! All airlines did it but LCC was the major carrier with outrageous prices to anywhere. They cited landing fees, gate fees, etc. as the cause for such outrageous prices. As lower priced airlines came, the majors cut their prices and once put out-of-business, the majors raised their fares...over and over and over and over again!

Then came jetBlue and the tactic didn't work. So now my location has gone back to times of airlines past. The only thing is that even with raised fares, from my location, ALL airlines still give bargains compared to times past.

Maybe it's the scales-of-balance. The odds getting even. All paying our fair share. The ying-yang affect. Either way perhaps smaller locations may be where you find the bargains!

 

[BoeingBoy]

I just don't see it...reduction in passengers that is.

"Only" down 6.8% for the 2nd quarter year over year......

Jim

 

[jimntx]

I wouldn't call the majority of Southwest's cities "larger." Quite a few aren't even served by mainline anything other than Southwest. I think the common element on the majority of the Southwest cities is that they're under-served by mainline carriers. Most of the airports are airports where the majority of the flights on other carriers are regional jets. They'll maybe have one or two mainline flights on the other carriers and Southwest will be running 15-20 all day long.

The model is beautiful, really.

I would disagree with you. The majority of the cities served by WN are large cities served by other carriers. I went to their website tonight and I counted less than 10 cities that WN serves that would be considered "second-tier." Midland-Odessa has only about 250,000 people, but it is an important center in the oil business. ISP may be out in the Long Island "boonies," but there is a little hamlet just 50 miles down the road called Nu Yawk Ciddy.

I would agree with you that a number of the cities that WN serves are not served by other airlines or only their regional component. However, most of those cities were served by other airlines mainline until WN started service there. My airline, AA, was building a hub at SJC. After WN moved in, AA all but abandoned San Jose. LCC used to "own" Baltimore. And, I'm sure you know that back in the Dark Ages, WN served only two cities--Dallas, TX and Houston, TX. Neither of those has been called a small town for quite awhile, nor are they lacking in service from other airlines.

WN has succeeded because they do what they do extremely well--namely, they provide transportation from Point A to Point B at a reasonable fare. It may not be non-stop, and they don't even SELL snacks (other than peanuts and pretzels) during flight. But, they will get you there. They do it pleasantly, and they do not charge you almost $1000 for a last minute fare from PHL-CLT. Or in the case of my airline, from DFW-ORD.

WN has a lot of room for growth in their system. And, as long as Boeing continues to build 737s, WN can continue to move into new markets. The difference is that they do not move into a market until they are fairly sure they can make a profit there, and if they are proven wrong, they don't take years to make a decision to pull out of that market.

 

[roabilly]

I can see the WN business model staying viable to a point…

At some point in the not to distant future, they will reach “critical massâ€￾ as fuel hedging expires…employee costs increase, and the legacies began to compete with them on a more level playing field.

WN will have to decide whether to stagnate as a domestic carrier, or attempt to grow into the larger, and international markets.

 

[ussnark]

At some point in the not to distant future, they will reach “critical massâ€￾ as fuel hedging expires…employee costs increase, and the legacies began to compete with them on a more level playing field.

I'd like to point out a couple of things, just to clarify your points.

SWA fuel hedging is through 2011 or 2013, depending on who you read and/or believe. It would seem somewhat premature to think they would be joining the legacies within three years.

I am not certain which part of employee costs you are referring to. With the highest employee compensation in the industry (highest rate of unionism also) offset by the best employee utilization, it would be rather difficult to measure where SWA is located on the "employee cost" playing field. I would suspect that they are "outside the box" compared with the legacies.

When you make the point of "not to (sic) distant future", you (as well as others) seem to imply that rising costs will get them, eventually, like a rising tide covering all the rocks on a beach, anchored by "fixed" fares. I would suggest that a better analogy might be a "herd of airlines" running from a "pack of costs". All SWA has to be is slightly faster than the "slowest airline in the herd".

 

[Bobbie]

I don't know about labor costs but, by and large, Southwest's employees seem a heck of a lot more productive than any other airline's employees. That's not a strike against any airline...and I'm no fan of Southwest...but it seems like there are fewer people standing around doing nothing and more people actually chipping in to make it work.

Looks to me like Southwest is getting what they pay for...

 

[does this plane go to paris]

I don't know about labor costs but, by and large, Southwest's employees seem a heck of a lot more productive than any other airline's employees. That's not a strike against any airline...and I'm no fan of Southwest...but it seems like there are fewer people standing around doing nothing and more people actually chipping in to make it work.

Looks to me like Southwest is getting what they pay for...

I know that there are more up to date stat's and I'm sure that someone will provide them but right after 9/11 there was an article in some business magazine breaking down the airline industry. I was stunned to see that United employeed 180 (give or take) employee's for each aircraft they had in their fleet. Southwest had 87 employee's per bird and I've seen other stat's since that the number is being reduced.

Southwest's fuel hedge's have been a hot topic and I recall a few year's ago that people were sure that they contract's would expire in 2005/06 and the detactor's said we would see the downfall then. Doug has called the hedge's the single biggest obstacle for other carrier's competing and Gordon Bethune seethed in a recent article. Gordon is upset that Southwest passed their saving's from the hedge's on to the Customer rather than raising fare's and increasing fare's and therefore profit's.