"fair And Equitably" For All Affected Creditors

[BoeingBoy]

Gadget,

"But any good model would have to have fewer employees doing the work to be beneficial."

Or the same number of employees doing more work - as in increased a/c utilization producing more flights and ASM's.

The key, as you said is a "good model". Having that would lower both labor CASM and our industry-highest non-labor CASM. Unfortunately, it's far easier to say "high labor costs" than it is to change the model, as evidenced by the last 2+ years.

Jim

 

[GadgetFreak]

Gadget,

"But any good model would have to have fewer employees doing the work to be beneficial."

Or the same number of employees doing more work - as in increased a/c utilization producing more flights and ASM's.

The key, as you said is a "good model". Having that would lower both labor CASM and our industry-highest non-labor CASM. Unfortunately, it's far easier to say "high labor costs" than it is to change the model, as evidenced by the last 2+ years.

Jim

[post="180041"][/post]​

Yes, that is absolutely correct. Some combination of increasing the number of customers or increasing fares would obviously be possible in theory. This would spread the same labor (and other costs) over more customers. Doing this would require then increasing utilization and efficiency to handle the extra business. The difficulty, and part of the reason they havent made more progress in that area is that just increasing efficiency wont help. Thay have to fill the new flights as well. One of, if not the biggest problem facing the legacy carriers is defining their value proposition to customers. They have for years been floating the carriers on a percentage of flyers paying really high full fare prices and giving the rest of the seats away to recover some additional revenue. The full fare part of that is gone and some of the carriers (US isnt one of these surprisingly) havent figured out it will never come back in adequate numbers. So they are left with essentially the non-viable real cheap fares. They need to come up with a service/price match that is competititive. For another example in the travel industry look at hotel. Most of the big chains have hotel lines at several price points. Intercontinetal for instance has Intercontinental, Crowne Plaze, several Holiday in variants and a few less expensive chains. Customers can reserve any of them at the same web site and get frequent sleeper credits for any of them. Importantly though, there are two distinct differences with when compared to airlines. First, when you pay for a room at an Intercontinental you dont get a room at a Holiday Inn. Secondly, the difference in price between say the Holiday Inn and Intercontinental price points is maybe 3 or 4 fold. At least until recently, comparing walk up fares on a legacy carrier and an LCC could easily get up into the 10x price differential range. That is too high. The legacy carriers need to cut the spread on prices. They need to offer a narrower range of prices that is more than the LCCs and offer better service to make people (only some people) prefer their price/service combination. They cant just match the LCCs on price. They have to beat them on value.

 

[sfb]

Someone please tell me how much of the current LCC capacity wasn't already in the pipeline (in the form of aircraft orders) prior to 9-11.

Just with Jet Blue, Air Tran, Southwest have delivery slots totalling 260 NEW airplanes. All of JB's EMB 190 orders were post 9/11, 30 or 40 of SWA's B-737's were post 9/11. Spirit's Airbus order was post 9/11, as was Midwest's B-717 order or 25. Independence ordered some Airbus A/c as well.

JetBlue has no Embraer 190's flying at present, and they won't show up for another six to nine months. Spirit has no Airbuses flying at present, though they are coming soon (and this order largely replaces the MD-80's). Midwest is not a low-cost carrier; they're actually at the other end of the spectrum. Southwest actually delayed some of its 737-700 deliveries immediately after 9/11; their growth rate over the past three years has been slower than the three years before 9/11. Moreover, Southwest's post-9/11 orders have largely been conversions of existing options which had been on the books, though they have accelerated a few orders/options in the past two years. AirTran's order is new and its 737-700's have just begun to arive. Independence is new as a "low-cost" competitor; however, US has lower costs with its mainline aircraft than DH does with CRJ's and has the advantage of using DCA. Their first A319 just arrived but is not yet in revenue service.

I'm of the opinion that US Airways would probably have been close to bankruptcy by now even if the September 11 attacks hadn't occurred. Southwest had been adding two or three new cities each year from 1999 through 2001; it's likely they would have added six or seven by now instead of just PHL. JetBlue's greatest impact has been on UA & AA's trans-con yields since Florida flights have always been cheap. Metrojet was already toast before September 11. U was losing piles of money even during the boom in 2000. And the company knew even back in 1994 that the LCC's were posing a greater and greater threat to its business. If Southwest could walk into BWI and decimate the US Airways hub there in less than eight years, why wouldn't you (as a manager) plan for the possibility of them trying it at another hub?

 

[BoeingBoy]

Thanks, sfb. Your reply makes anything by me unnecessary.

Jim