Lets Look At Making Additional Revenue

[Hope777]

Dave and Company keeps saying we need to reduce costs, OK there is watse and there are some thing we can cut. However there are more ways to increase revenue and it appears to me that the Company would rather not try to make additional money. Two things come to mind real quick and I am sure you all have ideas how to increase revenue. 1) Would be to do Contract Maintenance for other Cariers. 2) Use our excess Gate Space to Handle other Carriers. In our Station alone, we have turned away REVENUE numerous times.

 

[700UW]

Lufthansa wanted US Airways to do all the ground handling, maintenance, cleaning and customer service of thier CLT-MUC flight and US told them no!

 

[Ch. 12]

Dave and Company keeps saying we need to reduce costs, OK there is watse and there are some thing we can cut. However there are more ways to increase revenue and it appears to me that the Company would rather not try to make additional money. Two things come to mind real quick and I am sure you all have ideas how to increase revenue. 1) Would be to do Contract Maintenance for other Cariers. 2) Use our excess Gate Space to Handle other Carriers. In our Station alone, we have turned away REVENUE numerous times.

The problem with performing Mx for other carriers is two-fold:

1) Increasing liability based on recent exposure to contract mx issues. Even though US would have experience and skills that outperform the contract mx companies that have had issues, costs would still be high due to increased liability insurance and potential of legal liability.

2) The costs of labor that U has been trying to decrease would increase due to the extra man hours involved in performing additional mx. Overtime would also increase costs even further. Even though U could set a price to cover these costs, other carriers would not be saving money by outsourcing to U b/c the fee would have to be high due to cost structures.


I hate to take it back to costs, but that is the most legitimate place to begin looking at improving revenue in U's instance. Performing extra activities with highly paid labor will only drive costs exponentially upward. Passenger revenue is also nearly impossible to increase due to the immense competition of LCCs in many of U's primary markets.

I do like the idea of subleasing gates, though. Seems that U has plenty of down gate time on their hands. Maybe they could even prospect gates by obtaining them for the sole purpose of subleasing.

 

[local 12 proud]

The problem with performing Mx for other carriers is two-fold:

1) Increasing liability based on recent exposure to contract mx issues. Even though US would have experience and skills that outperform the contract mx companies that have had issues, costs would still be high due to increased liability insurance and potential of legal liability.

2) The costs of labor that U has been trying to decrease would increase due to the extra man hours involved in performing additional mx. Overtime would also increase costs even further. Even though U could set a price to cover these costs, other carriers would not be saving money by outsourcing to U b/c the fee would have to be high due to cost structures.


I hate to take it back to costs, but that is the most legitimate place to begin looking at improving revenue in U's instance. Performing extra activities with highly paid labor will only drive costs exponentially upward. Passenger revenue is also nearly impossible to increase due to the immense competition of LCCs in many of U's primary markets.

I do like the idea of subleasing gates, though. Seems that U has plenty of down gate time on their hands. Maybe they could even prospect gates by obtaining them for the sole purpose of subleasing.

ch 12 that excuse does'nt jive, i worked for a third party chop shop out of a&p school in "87" the rate of pay was roughly $16.00 an hour tops and the contractor charged a shop rate of $55.00 an hour depending on locale, and they managed to rake in $$$$$$$ millions with a capital M. your saying a company who pays thier mechanics even twice that rate cant turn a profit? well i guess if thier as mismanaged as U are your correct!

 

[700UW]

US Air in CLT use to do third party maintenance overhaul for Air South, America West, Challenge Air Cargo and The Charlotte Hornets and never had any liability issues, and to this day we do some third party line maintenance and the Landing Gear Shop in Winston-Salem, NC does third party work also.

 

[Ch. 12]

The liability issues are recent with the incidents at Mesa, Valujet, Alaska, et all. As with anything...insurance companies raise liability insurance with high-exposure fatal incidents such as these. It's the same in healthcare where liability has sky-rocketed with the increasing volume of malpractice lawsuits.

I can also say that U will not make anywhere near $23/hour by providing mx for other carriers. The shop rate cannot be that extraordinarily high compared to costs with the recent fall of the economy. 87 ws a different time and the only cost cuts made by carriers were cutting the number of olives in a salad from 2 to 1. Wages have risen sharply since 1987 when compared to passenger revenues that have actually dropped. Inflation has affected the costs at the legacy carriers but has not had any influence on the price passengers are willing to pay. Same goes for carriers looking to shop out mx.

And back to the liability...major carriers are not as willing to place their names on outsource mx with the recent incidents. One incident involving a U-maintained a/c...even if it is completely unrelated to U's mx...will add drastic costs to U just in proving that they were not involved in the mishap. U does not have any extra cash laying around to handle any sort of investigation of this sort. It's quite a gamble to lay the viability of the company on the line for a few dollars of extra revenue that is much diminished since the 80's.

 

[aerosmith]

What about the PIT automated baggage system that could of been bid by company and made roughly $3m profit annually. Nope, rather get rid of people. Being about liability is a hollow argument because after all isn't hauling planeloads of people around a "liability"

 

[mweiss]

Being about liability is a hollow argument because after all isn't hauling planeloads of people around a "liability"

But someone else hauling planeloads of people in aircraft maintained by you exposes you to additional peripheral liability. That's Ch.12's point.

 

[BoeingBoy]

Guys,

We've gotten off topic a little but since we're here I have a question. Do we do any "on-call" maintenance for other airlines at stations where we have line maint?

I'm no lawyer, but the liability sounds a little far-fetched to me too. Delta does 3rd-party maint for others, so does Air Canada. We lease some of our old 737-200's I believe - they were all worked on by our mechanics at one point and apparently liability isn't too much of a worry.

Back on topic - many ideas have been mentioned on this forum to increase revenue. Fare simplification/rationalization and selling last minute F/C upgrades are two that come immediately to mind.

Jim

 

[Ch. 12]

But someone else hauling planeloads of people in aircraft maintained by you exposes you to additional peripheral liability. That's Ch.12's point.

Mweiss,

Thank you...I seem to be having trouble stating the liability issue in a manner that makes sense to everybody.

BoeingBoy et all,

I am referring to both, the perfipheral liability as well as direct cost associated with liability. The way that insurance works is that with higher perceived risk comes higher premiums. Despite no major incidents over the past few years, the "perceived" risk has increased dramatically with outsourced mx as companies as large as Boeing have felt the impact of litigation stemming from aircraft incidents. Again, reference healthcare. Medicine is actually MUCH safer now that it was even 15 years ago so liability insurance should not be any higher than that rate + inflation, right? Wrong...it is nearly 10x as much as it was 15 years ago because of an increasing number of lawsuits brought onto practices. Same holds true with the airlines. It takes much less to bring a lawsuit against a carrier and the insurance companies recognize that. They leverage against the higher risk by increasing insurance.

My whole point is on topic and is just stating that being a mx service provider is not going to be the golden egg to revenue generation because with those revenues come significant costs.

I do think that there are many opportunities with FC as HP has shown recently. Outside of aligning fare structures with LCC's, I don't think U has much leverage in the world of fares. But by coming along with the structures of the LCC's, U would see cost benefits as it would not be as difficult to maintain and it would be easier to market.

 

[N628AU]

Lufthansa wanted US Airways to do all the ground handling, maintenance, cleaning and customer service of thier CLT-MUC flight and US told them no!

This is not entirely accurate. US did not bid on the work that LH was putting up for bid. I am close personal friends with a representative that was involved in the bid process for a 3rd party handler (which despite working LH in 10 different US cities did not get the bid either), and LH was primarily looking for bids on cost. Signature got the work, and hired a bunch of part-time people at very low wages to do the work. Signature has an inside on this work because they can combine the work with fuel sales to the carrier and low ball pretty much everyone, making up the difference in fuel sales.

 

[BoeingBoy]

I'll bow to others with better info on the liability issue. I do know that common sense flys out the window when liability insurance enters the door. Just seems like some airlines have decided that the revenue is worth it. Guess it's a matter of incremental increase in revenue vs incremental increase in liability exposure.

On fares, I agree that it's a given that the LCC's dictate the bottom of the fare structure by virtue of their costs. I have yet to see any analyst say that a network carrier shouldn't be able to get a 10% - 20% average yield premium over a LCC, though. There is room at the upper end of the fare schedule to reap revenue for those things the LCC's don't offer. Just not the outrageous top fares the network carriers try to charge.

Jim

 

[Bud8EE]

There is room at the upper end of the fare schedule to reap revenue for those things the LCC's don't offer. Just not the outrageous top fares the network carriers try to charge.

Jim

I always use the word comparitvely when talking about high fare as there is nothing high about a $2000 dollar PHL-LAX ticket. Comparitively to other fares available. In the grand scheme airlines are giving tickets away.

It s a 5400 mile haul. using the goverment allowed deduction for mileage it would be 2200 dolars of value in driving. It's a10 day trip so another 1000dollars in hotel expenses and food expenses . 3200 dollars of expense by car and the loss of ten days of productivity. When you think of the mney, equipment personnel and capital involved airline fares are blue light specials.

 

[BoeingBoy]

Bud8EE,

No disagreement here except for a couple of things.

1) If someone else is charging $300 for an airplane seat on the same route, that $2000 starts to look pretty high.

2) You can put a family of 4 in that car and make the trip for only a little more cost. Try fitting that same family in 1 airplane seat and you have a problem. Or you can pay $8000 for the same number of seats as you used in the car. The car starts to look cheap.

Actually, you do have a point. Air travel is a decent bargain when compared against historical (30-50 years ago) standards. One of my favorite "old-time travel" stories comes from my parents-in-law. They were visiting relatives in S. Florida one winter in the early 50's when the car broke down and the dealer had to order the part. Faced with a 2 week delay, they priced a 1-way train ticket for her from FLL to Wilmington, DE. The price - over $500.

Jim

 

[700UW]

Guys,

We've gotten off topic a little but since we're here I have a question. Do we do any "on-call" maintenance for other airlines at stations where we have line maint?

I'm no lawyer, but the liability sounds a little far-fetched to me too. Delta does 3rd-party maint for others, so does Air Canada. We lease some of our old 737-200's I believe - they were all worked on by our mechanics at one point and apparently liability isn't too much of a worry.

Back on topic - many ideas have been mentioned on this forum to increase revenue. Fare simplification/rationalization and selling last minute F/C upgrades are two that come immediately to mind.

Jim

Yes we do on-call maintenance for other airlines at numerous stations, and Delta is the largest provider of third party maintenance out of all US airlines, According to MRO magazine. Delta makes a tremendous profit from this work. Also if you recently read DL's pay freeze the mechanics who are non-union are not subject to it and their pay will be reviewed this July.