LUVs take on the AA BK

[NYCDelta]

The same is true for a lot of places and most legacy competitors, although with "reasonable" you have to ask "Compared to what?" The question I always have when this comes up is "What are carriers with higher costs than WN doing charging lower fares than WN?" Competition means the legacies have to match the lowest WN fare, but undercut WN?

Of course, at the other end of the fare structure - the highest fare end - WN can be a lot less than it's legacy competition. Right now, with a two-week advance and traveling on Saturday, the highest WN coach fare RDU-LAX is $497 one-way. US is charging as much as $2310, UA $1440, AA $1302, DL $1014. That's what pays for those "less than WN" fares.

Jim

You're right. I always buy months in advance and search multiple websites before making my purchase. If I had to go last minute, WN would surely be my choice.

 

[whatkindoffreshhell]

At WN everyone (labor, mgmt and customers) is pulling in one direction for the common good.

AA does not enjoy the same single-minded pursuit.

AA has people on the same boat rowing in different directions.

Attitudes do not form overnight. Even in bankruptcy. Or a merger.

There -- now I've stood up for what I believe very simply and clearly.

 

[WorldTraveler]

a few people might want to take a look at DOT data, including table 1F which includes the percentage of ancillary revenue (defined by the DOT) and it will be noted that WN is in the top 10 airlines in terms of % of ancillary revenue to total revenue while AA and UA do not make that list.
It will also be noted that WN's % of ancillary revenue has DECREASED since buying FL.. which kinda blows the theory that WN's ancillary revenue has spiked because of the FL acquisition - plus FL still reports separately.
Everyone understands that NK is an ala carte airline... but alot of people don't view WN in that way... when they generate ancillary fee revenue in line with what the network carriers do, yet one more myth of WN's marketing machine is thrown out of the water... but then there is a lengthy thread about how WN would create all kinds of havoc to a certain network carrier - and true to form they are starting to sound a little unsure of themselves compared to their former "full steam ahead" method of taking on competitors.
We get the concept of ratios.. the same ones that show that WN is NOT the lowest CASM (a measure of costs at the unit level of production for the industry) carrier among the big 4..... AA's BK could well mean that 40% or more of the industry capacity could be operating at costs lower than WN.

Fresh,
you are indeed correct... but business is about numbers... and if AA can succeed at slowing a competitor and regaining ground, they will do so regardless of whether employees have chipper smiles and sing their safety announcement or read it verbatim out of a book from HDQ.

 

[FWAAA]

a few people might want to take a look at DOT data, including table 1F which includes the percentage of ancillary revenue (defined by the DOT) and it will be noted that WN is in the top 10 airlines in terms of % of ancillary revenue to total revenue while AA and UA do not make that list.

WT, I did look at the table 1F and I downloaded the spreadsheet data, and unfortunately, the DOT data is, in this case, unreliable. How am I so certain of this fact? For some reason, AA, UA, CO and US are not reporting all of their frequent flyer mileage sales to partners to the DOT.

Table 1D is the key to uncovering the problem with the DOT data in this case. Table 1D includes pet transportation fees, frequent flyer mileage sales to partners and standby passenger fees. For Q2, DL reported $264 million and WN reported $215 million; both of those numbers are believable. DL charges pet fees, sells miles to partners and may charge standby fees (but I admit that I don't know). WN sells RR credits to partners and charges pet fees but does not charge standby fees.

For Q2, AA reported $20.7 million and MQ reported $10.6 million. I would argue that MQ numbers be added to AA for consistency, since Comair and ASA report zero as it appears that DL includes the amounts collected by its regionals, but that's not the key problem. AA charges pet fees and sells a lot of frequent flyer miles to Citi and lots of other partners. In 2010, it sold 115 billion miles to partners and that equals a billion dollars for the year (about $250 million per quarter) even if each mile sold for a little less than a penny each. AA does not charge "standby" fees but does charge a $50 same day confirmed fee (dunno if that fee is counted by DOT as a standby fee).

See the problem? AA (including MQ) reported a whopping $31.3 million total for the quarter for pet fees, frequent flyer mileage sales and standby fees. That doesn't pass the smell test. The $215 million reported by WN is just about all of its "other revenue" from its 10-Q, lending some credibility to its number. The DL total of checked bag fees plus reservation change fees plus misc revenue adds up just about all of its "other revenue" from its 10-Q. The AA total is only about 1/2 of its quarterly "other revenue" as shown in its 10-Q.

The DOT data for US, UA and CO appear to be similarly lacking.

Sometimes you have to do more than just download the BTS data and parrot it. Sometimes you have to employ some critical thinking to analyze whether the data is within the realm of reality. In this case, table 1F is unreliable.

WT: I frequently challenge your summaries of various data, not because I don't like you but because I would like to rely on the numbers you post. You post a lot of "DL is getting this percentage of that revenue and AA is getting only this percentage of that revenue" sort of posts. To the extent that your dataset consists of BTS filings, they may or may not be accurate. I don't ever want to rely on your numbers and then be blindsided with a successful challenge to my (your) numbers.

The assertion that WN gets a higher percentage of its revenue from ancillary sources defies reason, when you consider that WN does not charge change fees or first or second bag fees. All it has are RR credit sales plus pet fees plus its early bird boarding fees. And those are about 6% of revenue. AA charges bag fees, change fees, pet fees and sells over 100 billion AAdvantage miles each year. AA's ancillary revenue percentage is nearly double that of WN.

 

[WorldTraveler]

WT, I did look at the table 1F and I downloaded the spreadsheet data, and unfortunately, the DOT data is, in this case, unreliable. How am I so certain of this fact? For some reason, AA, UA, CO and US are not reporting all of their frequent flyer mileage sales to partners to the DOT.

Table 1D is the key to uncovering the problem with the DOT data in this case. Table 1D includes pet transportation fees, frequent flyer mileage sales to partners and standby passenger fees. For Q2, DL reported $264 million and WN reported $215 million; both of those numbers are believable. DL charges pet fees, sells miles to partners and may charge standby fees (but I admit that I don't know). WN sells RR credits to partners and charges pet fees but does not charge standby fees.

For Q2, AA reported $20.7 million and MQ reported $10.6 million. I would argue that MQ numbers be added to AA for consistency, since Comair and ASA report zero as it appears that DL includes the amounts collected by its regionals, but that's not the key problem. AA charges pet fees and sells a lot of frequent flyer miles to Citi and lots of other partners. In 2010, it sold 115 billion miles to partners and that equals a billion dollars for the year (about $250 million per quarter) even if each mile sold for a little less than a penny each. AA does not charge "standby" fees but does charge a $50 same day confirmed fee (dunno if that fee is counted by DOT as a standby fee).

See the problem? AA (including MQ) reported a whopping $31.3 million total for the quarter for pet fees, frequent flyer mileage sales and standby fees. That doesn't pass the smell test. The $215 million reported by WN is just about all of its "other revenue" from its 10-Q, lending some credibility to its number. The DL total of checked bag fees plus reservation change fees plus misc revenue adds up just about all of its "other revenue" from its 10-Q. The AA total is only about 1/2 of its quarterly "other revenue" as shown in its 10-Q.

The DOT data for US, UA and CO appear to be similarly lacking.

Sometimes you have to do more than just download the BTS data and parrot it. Sometimes you have to employ some critical thinking to analyze whether the data is within the realm of reality. In this case, table 1F is unreliable.

WT: I frequently challenge your summaries of various data, not because I don't like you but because I would like to rely on the numbers you post. You post a lot of "DL is getting this percentage of that revenue and AA is getting only this percentage of that revenue" sort of posts. To the extent that your dataset consists of BTS filings, they may or may not be accurate. I don't ever want to rely on your numbers and then be blindsided with a successful challenge to my (your) numbers.

The assertion that WN gets a higher percentage of its revenue from ancillary sources defies reason, when you consider that WN does not charge change fees or first or second bag fees. All it has are RR credit sales plus pet fees plus its early bird boarding fees. And those are about 6% of revenue. AA charges bag fees, change fees, pet fees and sells over 100 billion AAdvantage miles each year. AA's ancillary revenue percentage is nearly double that of WN.

I appreciate your gracious but honest challenge... really.
The problem is, as you note, that data is not unform and carriers DO report differently. But let's also keep in mind that no other industry reports as much data to the degree that occurs in the airline industry... that is both a blessing and a curse.
There is some data that is pretty reliable, other data is not as reliable and we really can't compare accurately. Network airlines LIVE on the sales of frequent flyer revenue - but they aren't about ready to tell you how important that is.... and I suspect they are just as interested in the government not knowing.
.
Honestly, I don't really care if WN is X percent larger than AA or DL or anyone else in sales of incremental transportation. What is of far more interest is that the network carriers have chosen to incorporate incremental revenue as part of their model and they aren't ashamed of it. When you consider that there could be several billion dollars worth of revenue to each network carrier every year that is not subject to the government's increasing tax on the aviation industry, then maybe it is the network carriers that have adapted better than the low cost carriers.... and the bottom line numbers right now show the network carriers are adapting very well to the changes in the industry.
.
THAT is precisely what AA needs... the flexibility to adapt and win in the market place... AA for years was HIGHLY INNOVATIVE and that was a big reason AA won in the marketplace. We can say in all honesty but humility that it is DL that has become the most innovative, most aggressive, most adaptable airline in the industry and thus it is no surprise that DL is accomplishing so much strategically...
In short, AA needs to get its mojo back and you and I can hope that is as much as what happens in BK as what happens on the balance sheets.
To the degree that we have access to financial data to understand what is happening, we can better understand what is helping AA win.

again, thank you for taking the high road and for focusing on the business at hand... even if we don't agree on the issues, maintaining a respectful discussion is absolutely essential