Herb Kelleher On Phl Entry

[BoeingBoy]

Reading thru this thread I find things to agree with from a number of you so I won't list who said what.

From one perspective, fares are low. If you look at say 1980's fares and inflation adjust them they are significantly higher than today's fares - even that walk-up F ticket.

Having said that, most consumers will gravitate towards the lowest price that suits their needs. Not everybody shops at WalMart but a lot of people do.

Will the LCC's take over the world - probably not. To do so they would become network carriers with multiple fleet types and all the other trappings. As has been pointed out, some markets just don't have the traffic volumn to justify mainline aircraft so they would need to add RJ's. International flying means bigger airplanes. And on and on.

At some point equilibrium will be reached. The efficient network carriers will be able to compete offering what the LCC's won't or can't - service to smaller cities, international service, interline connections, first class, etc.

And notice that I said "efficient" network carriers, for there is a difference between efficient and low paying. Southwest is very efficient, but the Business Week article had two tidbits that I found interesting - the pilot that recently retired with $8 million in stock plus a 401k, and the ticket counter agent that was asking Herb to do something about the stock price because the value of her stock was down to "only" $1.2 million. How many pilots at U would like to have a multimillion $ nest egg, how many agents at U would be disappointed that their stock was only worth $1.2 million?

Will we become one of the survivors? Only time will tell and time is getting short. I think most of us are anxiously waiting for "the plan". Unfortunately, the last decade has taught us to be leery when we hear "If you'll just give me this, I promise things will be great".

Jim

 

[TomBascom]

From one perspective, fares are low. If you look at say 1980's fares and inflation adjust them they are significantly higher than today's fares - even that walk-up F ticket.

Not true:

http://www.zyworld.com/brancatelli/bf2003/...branc051503.htm

Walk-up fares have increased in price at a much faster clip than inflation. While excursion fares have in fact gone down business fares have been skyrocketing.

 

[funguy2]

The problem with US Airways is that the company has never understood how to make a profit the old fashioned way -- by having a viable business. They have essentially counted on "business travelers" to be unwillingly to admit to seeing what was going on all around them. For a while it was a cozy arrangement -- business travelers got some nice "perks" and willingly participated in the myth that SW wasn't a "business" airline. Then US and their legacy friends started pushing the envelope while putting the screws on business travelers -- more and more restrictions, higher and higher fares, fewer and fewer perks. Meanwhile the business travelers customer's (who ultimately pay the bills) are starting to question costs as they become aware of and gain insight into their supply chains -- why are you billing me $2,000 for this trip? Suddenly the deal isn't so good... It's not so easy to wink and say "SW isn't a business airline" to the bean-counter in the customer's accounting department. Especially when the conversation happens in the boardroom.

What, exactly, is US (or any legacy carrier) offering that SW doesn't? The list is very, very short and not at all convincing. And the list of things that SW does better is pretty impressive to a customer. The lack of sufficient positive differentiation (at any price point ) is what has brought the problem about and unless it is addressed it will ultimately doom the airline. The surplus negative differentiation will only hasten the downfall.

That has to change fast. A lot of "sacred cows" are going to have to go away for it to happen. There is nothing special about the backs of airline employees -- you all put your shirts on just the same as I do and you have no more of a target painted on your shirt than I do mine (which is to say that we all have a target on us when it comes to watching costs...)

And another thing... the only "excess capacity" that this industry suffers from is an excess of over-priced and overly-restricted walk-up fares. Those of you who buy into that and this balogna about the public only caring about fares are drinking management kool-aid that only serves to strengthen their case against labor costs.

Tom:

I have to agree with a lot of what you have said here...

Although, I think Southwest should be commended for what I'll call "Expectation Management". All Southwest promises is a low fare, a bag of peanuts, and a more than reasonable shot at an on-time flight. When you get even a tiny bit more, like some extra friendly service, extra assistance making a last minute change, an aisle seat towards the front, whatever, you feel like you had a positive experience because you got more than you were promised.

On most other airlines, especially the legacy carriers, there are all kinds of promises that don't get delivered on... Free upgrades, Club benefits, World-wide frequent flyer rewards, priority seating, meals, etc. When the airline fails to deliver, for whatever reason, customers can feel alienated... Especially if it happens a few times. The customer doesn't care that the free upgrades were all given to higher status elites, or that all the reward seats to Milan have been taken that day... They simply see it as a failure to deliver on promise.

Southwest under-promises and over-delivers. I think this has been a cornerstone to their success, and it will be hard for other airlines to emulate, because they have already made their promises.

 

[orangeman]

Jack Mama,

"in fact they already hub over 50% of their flights. Siegel had the figures on one of those weekly meesages."

Southwest does not hub in the sense that the network carriers do. Try finding a connecting flight thru their web-site - you can't. Yes, you can build your own connection but you can't buy a ticket for say ALB to PHX. You buy two tickets - one from ALB to a "focus" city and another from the "focus" city to PHX.

Southwest's focus cities are rolling hubs taken to the extreme of not even offering connections. More misinformation from the top.

PineyBob,

"in my mind victory is NOT a slam dunk for SWA."

If "victory" for SWA is driving U out of PHL, you're right - though U has to implement many structural changes to survive at all (not just in PHL). However, if "victory" for SWA is a growing presence at PHL, then they may score even if it's not with a slam dunk.

Jim

This is completely wrong. You can buy a ticket from ALB to PHX connecting in BWI. You don't have to buy 2 tickets. I have worked for SWA for over 13 years.

 

[deelmakur]

America does not think it has a right to "lower fares". Provision of goods and services at the lowest cost is a basic underpinning of why the country has been an economic success model for the rest of the world. While you can be sympathetic to the local hardware guy, nobody with half a brain will pay him twice what Home Depot charges for the same item. It's just how it is. Managements of full fare carriers had the opportunity to curb their costs, but in the mistaken belief that there were barriers to entry, they ignored warning signs, and did not. Now, they find themselves saddled with high fixed costs, yet continually eliminate those service touches which made them different from the LCC types. Having blurred the distinction between themselves and, for example, an AirTran, they wonder why the consumer, who sees almost no difference, doesn't remain loyal. If you're Kelleher, and you see a Battleship stopped in the water, why wouldn't you launch a torpedo? You can't set yourself up as a sitting duck, and not expect hunters. As a loyal customer, I want US to win this one. Sitting on a LUV cattle car is not my idea of a good time. But I fear that in a tribal industry, where, like pro sports, the same management just keeps recirculating from team to team, the outcome of this one was determined a long time ago.

 

[twoturnin]

Southwest flying into the worlds largest "uncontrolled airport"-- tongue in cheek of course----my four airline diversions in 18.5 yrs --three were in KPHL--we will see --but their employees have the right attitude about the company and their work---it shows in the bottom line ! my .02 $ Twoooo

 

[repeet]

deelmakur,

You are dead right on everything you said. But as an employee, let me share the way we employees see it.

The company has ground services remove china plates and metal utensils from the aircraft, and tell the Attendants "we" can't afford luxuries like that any more. We the employees feel embarrassed and the customers feel (rightfully) cheated.

Then the company has the catering company provide cold food, box lunches because "we" can't afford prepared meals anymore. We the employees feel embarrassed, the customer fees rightfully cheated, so the employees agree to pay cuts and more work hours.

Management then give themselves retention bonuses.

Then the company cancels the contract with the catering company because "we" can't afford to give away food on the majority of our flights any more. So the employees (embarrassed for our customers) agree to more pay cuts and benefit reductions.

Management then give themselves skill level pay bonuses.

Now here's the rub:

The company now wants us (the employees) to agree to laying most of ourselves off, and having subcontractors service, repair, and book your flights.

We won't be around to be embarrassed and you will get a patch work product.

A look at the publics records show more bonuses are scheduled for our top-level management later this summer.

Philadelphia is a small blip for most of the employees at this company. If the company asks us, what we hear they are going to ask us, we will not self terminate our jobs for the profit of a small greedy group. (Senior Captians included).

The only question will be how large the picket lines are in PHL.

For the majority of the airline, the big spring challenge to US Airways survival is this:

 

[crazyincanton]

While walking through the pit airport the other day, I saw two people run into each other who were evidently aquaintances. The one guy asked the other where he'd been. The second guy said phx. The first guy said that he hoped the second didn't take u. The second said no way. He took america west. I think we p****d off a lot of pax with the airport fiasco in pit.

crazyincanton