How Many Chances Does Usair Get?

[dbcwaar]

I don't think that any carrier has a business plan that consists of "waiting for US to fail".

[post="239155"][/post]​

Not True! This was DL's plan for years and years!

 

[Walmartgreeter]

There’s a post on flyertalk saying that a mid-level manager at USAirways told the person who was posting on flyertalk that there is a general recognition at CCY that US is not capable of making it in the medium or long-term. Take it for what it’s worth.

Was he the same guy that saw Ferris pass out at 31 flavors? Greeter.

 

[CaptianBoomer]

Wal-Mart:

Excellente!!

Boomer

 

[USA320Pilot]

Eye:

I agree with your comments.

By the way, Boeing787 has been PM'ing me a lot lately and he is a UAL pilot.

Regards,

USA320Pilot

 

[Rico]

but US is the only legacy airline that had to ask for government backing to obtain financing

You are wrong. Multiple carriers utilized the ATSB program, or in United's case, tried to do so.

America west is good example of another carrier that used the ATSB loan to help restructure itself, and it has now found decent success with it's business model, than the old Legacy version (both structure and pricing) that every non LCC was using

Further, other airlines are cutting costs and generating new revenues as well so US is not gaining an advantage that other carriers cannot also gain if not surpass. Airlines such as AA, CO, and DL have built their turnaround plans around significant increases in capacity which serves to lower unit costs. UA and US are both shrinking their operations or replacing mainline capacity with regional jets which have higher unit costs. Regional jets work well in tapping new revenues but they do not work very well at increasing profits in a diminishing revenue environment such as we are in now.

Oh, I know that the other legacies are looking to cut costs, but unlike U, they are still stuck with overhead that U has been able to shed through back breaking negotiation or judicial relief. Things the other legacies will have a hard time following. At this point, U is poised to become a new company, while the other legacies are far far from that point.

From outsourcing to buyouts to retirements (average U pilot is 55yr/old) the labor costs go down from here on. Growth and better aircraft utilization will only help that further. As U might be shrinking our fleet, but the amount of flying those remaining aircraft will do is growing, that translates to increased productivity, and lower costs.

As for Regional Jets, most other legacies have actually gone overboard, and are stuck with too many routes covered by the more expensive and uncomfortable 50 seaters (they have no choice, they have to use them somewhere) U on the other hand is coming in late in the game, and is able to rationalize the number of smaller RJ's. We are learning from the mistakes of others, and we are not "stuck with fleets of 50 (and smaller) seat jets with limted range and payload (as well as limited revenue production)

Instead, U is leading the way in the more profitable and useful 70 and 90 seat segments with the new E-Jets. Do many of the legacies even have scope provisions that allow such, nope. U has a successful "carrier within a carrier" with our Midatlantic Division, providing the cost cuts the company needs while keeping that flying on the mainline property, not outsourced (again, something no other legacy has).

It is time for U to stop worrying about what the old school airlines are doing, and concentrate upon leading the way into becoming a new type of carrier that will be successful in today's market. The legacy style of flying alone is no longer profitable, but a hybrid using the cost advantages of a LCC model with the revenue production of a hub/spoke has a far better chance of success.

Can the other legacies follow suit or adapt sufficently, that remains to be seen.

All I know is that we havea promising future to look forward to for once, despite all of the naysayers predictions.

 

[FlyUs]

Rico, You should be our next CEO!

 

[lowfareair]

Weiss:

Gasoline:

Prove it. Some airline tickets are taxed at over 50%.

[post="239229"][/post]​

Uh-huh. And some tickets, such as EWR-SFO nonstop unrestricted on the 17th have ~8% in taxes. Just because the $49 2 stop airline ticket has all the flat fees does not make it applicable for everybody. I would venture to say that the average ticket, a one-stop for $500 roundtrip(including taxes) will be taxed approx. 15% based on trying BOS-PDX on CO 2/5-2/12 for a total fare of $505, with $66 in taxes.

As for the gas taxes... http://www.msnbc.com/news/423165.asp?cp1=1

Most states seem to tax an average of 40% in federal and state taxes on gas looking at that per state chart.

 

[mweiss]

Gasoline: Prove it. Some airline tickets are taxed at over 50%.

"Some" isn't a very useful term. Let's talk about the average ticket tax, shall we?

A recently-released study by Daniel Webster College and the Massachusetts Institute of Technology Global Airline Industry Program reveals that the average ticket tax paid by airline passengers is 15%.

The average gasoline tax is $0.42/gal, and the average retail price of gasoline is $1.94. This is an average tax rate of 27.6%, a full eighty-four percent higher than the average airline ticket tax.

As far as general fares go, look at history. If you go back 25 years, fares have never been lower. And that isn't counting the effects of inflation.

They've gone up in some markets, and down in others. On average, they have fallen somewhat...if you count the effects of inflation. If you don't, they've remained about constant, on average.

I am advocating they price their product at the cost at an absolute minimum.

If you go to the thread on the AA board, you'll be able to read a lengthy explanation of why that approach does not work.

No entity, whether it be Wal-mart, Target, or Starbucks can consistently price their product BELOW cost and stay in business.

Which is why the successful players in those spaces target very specific market segments through differentiation.

Further you can bet you buns that if the price per pound of coffee goes up 50% in a year, Starbucks will pass that cost on to their customers. It isn't price gouging, it is economics.

They will be able to pass on a portion of it, yes, but not all of it. That's economics.

The airlines collectively hope someone goes out while at the same time hoping they can hang on long enough to benefit.

Except that such a plan will not work.

They can raise fares, they just won't.

Of course they can. Now explain how doing so will increase profits.

 

[mweiss]

Never mind...I had it right the first time.

Lowerfareair, those numbers are cents per gallon. I had to read the fine print to make sure.

 

[lowfareair]

Never mind...I had it right the first time.

Lowerfareair, those numbers are cents per gallon. I had to read the fine print to make sure.

[post="239286"][/post]​

Oops... my bad.

 

[CaptianBoomer]

Weiss:

You are correct about the airlines not raising fares. That is why there will be no profit for the forseeable future.

I read your gasoline dissertation. Truth told the numbers seem to favor your opinion. However, gasoline tax is just that. It is a tax that is passed on to the consumer in the form of increased cost per gallon. If and when the state and federal gov't up the gas tax, the cost is passed on to the consumer. There is a further difference. The gas tax was not added to the cost of a gallon of gas during a downturn in the demand for gas. The airlines had to add this cost of "security" when they were dealing with record losses post 9/11. IMHO, the airlines were forced to chop the cost of flying to deal with an increasing amount of skittishness on the part of the public. They cut the cost of flying to create demand and now with the growth of low cost competition almost 5 years down the road we are still dealing with it.

As far as them raising fares, I think the airline business is heading more and more into a "commodity" pricing environment. If all the airlines raised fares $20 bucks with 500 million travelers per year equals $ 10 bil in revenue. That makes the industry profitable. Now I am not advocating the poor bastard who pays $2000 to go from PHL-LAX pay an extra 20. I am advocating that the lowest leisure fares come up to a level that will support the industry. Will you lose a few passengers? Possibly, and even probable. Since the airlines will have to increasingly depend on the leisure traveller to make a go of it, they will have to start to provide some service as well.

Unfortunately, they will have to all act together to get healthy.

Boomer

 

[Bob Owens]

mweiss,Jan 14 2005, 06:15 PM]

Pure crap. Gasoline is more heavily taxed than airline tickets.

In some states more so than others. What has happened to gasoline prices over the last four years?

 

[Bob Owens]

=mweiss,Jan 14 2005, 10:10 PM]

They've gone up in some markets, and down in others. On average, they have fallen somewhat...if you count the effects of inflation. If you don't, they've remained about constant, on average.

Now are you talking about the average of posted rates or the rates at which tickets are actually sold?

 

[mweiss]

...gasoline tax is ... a tax that is passed on to the consumer in the form of increased cost per gallon. If and when the state and federal gov't up the gas tax, the cost is passed on to the consumer.

And the exact same thing happens with airline tickets. In fact, the comparison is particularly well matched, since in both industries the final quoted retail price includes all taxes. This is rather different from most other retail forms of taxation in the US.

The gas tax was not added to the cost of a gallon of gas during a downturn in the demand for gas.

But that's irrelevant to your claim that airlines are the most heavily taxed.

But let's treat it as a separate issue. You are correct that gasoline taxes have not generally increased at the same time as a significant dropoff in demand. Did the security tax have an effect on airline pricing? Probably. OTOH, it may have also increased demand (due to less fear of flying) sufficiently to overcome the pricing impact. I sure don't have any way of testing either hypothesis. Do you?

They cut the cost of flying to create demand and now with the growth of low cost competition almost 5 years down the road we are still dealing with it.

We're dealing with three separate, coincidental, impacts to the airline market:

• The decline in the economy beginning in 2000
• September 11
• Rapid expansion of LCCs

The problem here is that it is exceptionally difficult to separate the effects of the three. Yes, prices are still down. Which of those three causes are responsible?

I think the airline business is heading more and more into a "commodity" pricing environment.

The airlines sure are acting like it is. If so, then we'll have a single level of service at the lowest possible cost. It's not the only possible future, but it is one possibility.

If all the airlines raised fares $20 bucks with 500 million travelers per year equals $ 10 bil in revenue.

The only way that pricing will happen is through collusion. Even if it does, there's no guarantee that it would remain 500M pax. In fact, it's a virtual certainty that it would drop; the only real question is by how much, as you said.

But, again, the meat of this conversation is going on in the AA thread.

Unfortunately, they will have to all act together to get healthy.

That's called collusion, and it's illegal.

 

[mweiss]

What has happened to gasoline prices over the last four years?

[post="239312"][/post]​

That's not what we were talking about. He said that it was the most heavily taxed industry, and I proved that it's not.

Now are you talking about the average of posted rates or the rates at which tickets are actually sold?

[post="239315"][/post]​

The rates at which they are actually sold.