It's Official!

[mweiss]

Maybe they just plan on having twice as many flight attendants as other jobs.

 

[mga707]

Yeah, I noticed that as well. Figured it was not worth calling out, but yeah.

Or maybe they chose SFO as a matter of principle...

....or a matter of principal, as they'd probably put it.


Sending out a press release with such a boneheadedly obvious grammatical error (not once, but THREE times) does not send a positive message as to their overall competence!

 

[ual777fan]

I have a feeling that United is going to make VirginUSA's existence a very interesting one. That is United's turf at SFO, they already deal with SouthWest in Oakland. I think United will welcome them to town the same way they welcomed IndyAir to Washington, a huge marketing blitz, and a nice fare sale to starve the new airline of needed revenue.

 

[trolly dolly]

I'M LOVING IT VIRGIN USA GO JET SET GOOOOOOO

 

[sfb]

I'm glad someone else noted the frequent misuse of "principle" in that press release -- that seemed a bit amateurish to me.

I'm not sure I get how they're going to be a low-cost carrier with the "airline HQ" in Manhattan and the "operations HQ" in San Fran -- two of the highest-cost cities in the U.S. Not to mention that if they intend SFO to be their primary hub (at least initially), both WN and UA will likely respond quite aggressively to protect the routes on which they compete. Though Branson's a billionaire (and I'm not), he hasn't met with great success in all his airline ventures; Europe's Virgin Express has been quite the dud.

Unless the product is just unbelievably buzzworthy and cheap to boot, I give this venture about the same chances as the LAS-based National.

 

[mweiss]

N7 was hubbed at one of the lowest-fare airports in the country. That was an accident waiting to happen.

While I agree that it makes little sense to have the headquarters of the company be 2,500 miles away from the primary base of operations, and in one of the most expensive cities in the nation to boot, I don't think that SFO is a horrible place to try to build a low-fare hub. It's not like UA has a large amount of cash sitting around waiting for a battle with yet another low-fare airline.

 

[trolly dolly]

A LOT NEGATIVE FEELINGS HERE.. DONT HATE ME CAUSE I'M BEAUTIFUL ..GO JET SET GOOOOO

 

[trolly dolly]

GO JET SET GOOOOOOOOOO

 

[Ch. 12]

...and I'm not so sure how much power UA will have in this battle. They are now facing lowfare battles directly on three of their fronts (SFO, DEN, IAD) and indirectly on the fourth (ORD-MDW). You can't agressively attack every front when resources are extremely tight. This may be interesting for UA once Virgin begins to ramp up.

 

[jimntx]

I thought SFO was plagued with delays--weather and otherwise--and that was the reason that WN gave up on SFO and moved to OAK.
I know that AA moved a lot of its SFO "hub" operations to SJC though I was told that they were simply "ceding" SFO to United.

Couple this with the spike in the fuel prices...The chairman of ExxonMobil was quoted in the Dallas Morning News this week as saying that we will never see $1.50/gal gas again. So, I assume that jet fuel prices ain't coming down either.

So, can anyone enlighten me? Why SFO and why now?

 

[sfb]

N7 was hubbed at one of the lowest-fare airports in the country. That was an accident waiting to happen.

While I agree that it makes little sense to have the headquarters of the company be 2,500 miles away from the primary base of operations, and in one of the most expensive cities in the nation to boot, I don't think that SFO is a horrible place to try to build a low-fare hub. It's not like UA has a large amount of cash sitting around waiting for a battle with yet another low-fare airline.

Well, as far as I see it, SFO has three positives that are outweighed by a slew of negatives. The positives are high average fares, a large and prosperous local population, and a bankrupt incumbent hub carrier. The negatives, though, are the existence of an incumbent hub carrier, high airport costs, high local cost of living for employees, poor airfield configuration at SFO, and the abundance of low-fare alternatives at OAK and SJC. Not to mention that recent attempts to offer low-fare transcon service from SFO haven't met with great success; ATA gave up on SFO-EWR fairly quickly while AWA hasn't done as well on their transcons to and from SFO as they would like.

SFO can handle the increased traffic that Virgin USA (for lack of the real name) would add -- but only when the weather is nice. When the weather is poor (or even if there's just a marine layer of stratus clouds), the airport can only handle about 30 arrivals per hour. Having frequent weather-related delays is not conducive to operating a successful low-fare carrier, especially when there's an alternate across the bay with far fewer delays.

SFO itself does have high fares, but the region already has significant low-fare competition at OAK and SJC. WN offers a broad selection of short-haul service from both airports, while OAK has jetBlue offering low-cost/low-fare service to most of the largest East Coast cities. And there are low-cost alternatives from either SFO or OAK on other airlines to ATL, DEN, SLC, MCI, etc. The questions that will determine Virgin's sucess here are: (a) how much additional traffic from the region can they stimulate with lower fares, over and above people who use OAK and SJC for lower fares, (B) how many people will choose to use SFO over OAK and SJC when prices are more equal, © how will the airlines with service from OAK and SJC respond to Virgin's entry into the market, and (d) how will United respond on competitive routes. You can see that traffic counts to most short-haul destinations from OAK (largely dominated by WN) are dramatically higher than from SFO due to average fares that run about 50% of SFO's average fares. And I think it's really questionable how much additional traffic could be generated by a hypothetical "Virgin Effect" at SFO.

Southern California (LA area + San Diego) in 3Q03 generated a bit over 40% more domestic O&D traffic than Northern California (Bay Area + Sacramento) but has over twice the population. By comparison, the NYC area still has less domestic O&D traffic per capita than either California region (though this is skewed a bit by the proximity of BOS, WAS, and PHL).

 

[mweiss]

Of all of the negatives you mentioned (and, yes, they are all very true), the biggest is the runway configuration. SFO has been problematic in that regard for years, one of the reasons I was baffled by the addition of a new international terminal.

Nonetheless, I can assure you that many people who currently go to OAK would far prefer going to SFO if the fares were closer. Crossing the Bay Bridge during most daylight hours is a bear, and the 880 near Hegenberger isn't much better. As bad as the 101 is, generally flows well between SF and SFO. It's between SFO and Mountain View that's particularly unpleasant.

As a result, anyone from Palo Alto to well into Marin County would choose SFO over OAK, all else being equal. That's a pretty hefty population from which to draw.

 

[sfb]

Nonetheless, I can assure you that many people who currently go to OAK would far prefer going to SFO if the fares were closer. Crossing the Bay Bridge during most daylight hours is a bear, and the 880 near Hegenberger isn't much better. As bad as the 101 is, generally flows well between SF and SFO. It's between SFO and Mountain View that's particularly unpleasant.

As a result, anyone from Palo Alto to well into Marin County would choose SFO over OAK, all else being equal. That's a pretty hefty population from which to draw.

You're probably right about SFO picking up some traffic with lower fares, but interestingly enough, SFO has the weakest "natural" catchment area of the three Bay Area airports. Marin, SF, and San Mateo Counties together (as of 2000) were 1.73 million people, or just a shade under 25% of the metro area population. Alameda and Contra Costa Counties were just under 35% (closest to OAK), while Santa Clara and Santa Cruz Counties (closest to SJC) had about 27% of the Bay Area population. Solano and Napa Counties probably split traffic between OAK and SMF, depending on location, and that's a bit over 7%. The rest are up by Santa Rosa, and I couldn't tell you which airport would be less inconvenient from there.

So yes, Virgin could hypothetically pick up people closer to SFO who aren't (today) willing to pay close to $300 each way for a walk-up ticket to, say, LAX (United calls this "Everyday Low Fares" on its website), but it's unlikely that they'll be able to steal that much from OAK and SJC. And it's probable that UA will match or undercut them, but my thinking is that the incremental traffic may not be enough to support both carriers in most markets. WN, B6, AS, and HP will all probably make things even more difficult by matching fares on competitive routes.

 

[mweiss]

it's unlikely that they'll be able to steal that much from OAK and SJC.

If you mean from Alameda/Contra Costa/Santa Clara/Santa Cruz counties, you're right. The question is how many people from Marin/SF/SM counties are currently going to OAK or SJC. Those people, in addition to the ones who currently fly out of SFO, are all potential customers.

But you're right, of course, that UA will match the fares, because they have little choice. HP will probably undercut them, because they undercut pretty much everyone out there. B6 is only a concern in two markets, and they don't fly to SFO anyway.

If they're going to fly up and down the coast, they'll have to worry about AS, who's a more formidable competitor than UA.

 

[lpbrian]

Looks like the old international terminal is going to have a new tenant....