MRTC vs. TV

[KCFlyer]

----------------
On 5/21/2003 9:44:30 AM FWAAA wrote:

Now AA plans to offer no TV OR MRTC on its 757s or A-300s. Why would anyone choose AA over B6 now?

----------------​

I can''t believe I am about to say this but....How about this - AAdvantage. You''ll still get AAdvantage miles, and while they may still be restricted as hell, you can still get a trip to the Caribbean (other than San Juan) or Europe, or Hawaii, or many of the "fly over" states in the Continental US that JetBlue doesn''t serve. For $300 more than a full Y class seat on a transcon, you can get a first class seat on AA. And that new pricing on those flights might mean that you''ll have more paying passengers sitting in first class rather than someone who upgraded a $200 round trip transcon ticket. Price still rules - TV won''t bring you passengers, and while MRTC is nice, if you can get more passengers on a NYC-FLA flight then you can make more money. And the announcement was that MRTC was pretty much being phased out on NYC-FLA markets - one of the most price sensitive markets out there. AA should be commended for operating these type flights as part of the AA system rather than starting up some new airline called "Dance" to operate those selected routes. It''s actually a pretty good start.

 

[Diesel8]

LaBradford22 wrote:


1. Every major hub-and-spoke carrier either has already significantly cut its labor costs or will move to do so in the very near future

Absolutely right, few catches though, Song for example plans on a CASM of around 7 cents (the actual remark was it starts with a 7), USAir CASM is still way too high, compared to the rest of the industry, do not have the numebr in front of me. They already have cut to the bone!

2. In its own cost structure, Jetblue enjoys a tremendous advantage due to its new fleet (planes less than about 3 years old enjoy a maintenance honeymoon). As planes age, expect Jetblue''s maintenance costs to increase significantly

Not significantly, but yes it will of course rise, I believe Neeleman said .3 cents, so from 6.5 to a 6.8 CASM (not actual numbers). Still very good numbers, amongst the lowest of the industry.

3. Speaking of Jetblue''s costs, in terms of pilots (the most significant labor cost at any airline), the first-year rate for a Jetblue pilot is $50.96 per hour.

Labor cost is the biggest single expense, not pilots per se. Pilots are in the minority in an airline and while they make the most, never have seen the numbers broken down into specific work groups, although it would be interesting. As of right now, there is very little increase over the course of the contract, that is not to say, that it will not change. I cannot speak for all the pilots, but I for one would mauch rather the SWA style of life, than always worrying about furloughs and loosing money. The stock options are also a good help and it reinforces the relation between company and the employee.

4. As mentioned in this thread, other carriers may launch DirecTV or other similar inflight service, and/or the novelty of the DirecTV may wear off.

Did the novelty of movies inflight wear off? Yes, other people may start offering TV, Song will. It may be the new standard for all I know.

5. As they expand their network, they may find that the A319/320/321 is not the ideal airplane for every market that they wish to serve.

There is a lot of flexibility in the Airbus A-320 line, as there is in the Boeing line of 73''s. It may be, that one day it will change, but I doubt it. The latest orders are again for 320, with option to take 319 or 321.

All great points though it will be interesting to see.

 

[AAmech]

----------------
On 5/21/2003 10:49:53 AM Diesel8 wrote:

Good point, KCFlyer, about the AA miles, but, how many people actually accrue enough for a free ticket? Unless you are a frequent flyer, not many, particularily since those miles expire.

Most miles don''t expire any more. If you use a bank card hooked up to a FF plan you can aquire a bunch of miles quickly! My wife pays for everything on her check card and earned a free ticket in a year. A good long distance plane helps too!

Secondly, how much is a full Y fare? I would imagine rather more than jetBlues regular fares. As a matter of fact, the 300 dollars the upgrade alone cost, you can get a ticket on jetBlue.

The new fares where AA competes with B6 (LGB, Orange County and SJU) will be a maximum walk up of $299.00 one way !

As much as I love the MRTC concept, I still look at price, as I think most people do. If AA is to compete on price, they have to spread the cost over more seats, MRTC sadly will have to go. However, AA has only
decided to match fares on SJU and Transcons, according to their latest press release. Starting to look like the intent of killing another PEX. Will it work, only time will tell?

I hardly think AA will be killing JB anytime soon! JB has set the bar. Now AA must Match!
----------------​

 

[KCFlyer]

----------------
On 5/21/2003 10:49:53 AM Diesel8 wrote:

Good point, KCFlyer, about the AA miles, but, how many people actually accrue enough for a free ticket? Unless you are a frequent flyer, not many, particularily since those miles expire.

It''s not a selling point for everybody, but there are those who will view their AA miles as a selling point

Secondly, how much is a full Y fare? I would imagine rather more than jetBlues regular fares. As a matter of fact, the 300 dollars the upgrade alone cost, you can get a ticket on jetBlue.

As a part of the same announcement, the fares I mentioned were for NYC-LGB - $299 one way, $599 one way for First class. I realize that $300 is a bit much, but for a 5 hour plane ride, I feel there is a better chance that some will opt for the extra $300 for a first class seat. Charge $2,500 and some of those folks might opt for the $200 ticket and take their chances with an upgrade.

As much as I love the MRTC concept, I still look at price, as I think most people do. If AA is to compete on price, they have to spread the cost over more seats, MRTC sadly will have to go. However, AA has only
decided to match fares on SJU and Transcons, according to their latest press release. Starting to look like the intent of killing another PEX. Will it work, only time will tell?

I suppose my point is that I believe that AA has a better chance of succeeding with this than the other airlines will with the "airline in an airline" concept. I think they are coming around to understanding that "price rules". Could the next step be systemwide "value pricing"....only time will tell.


----------------​

 

[Diesel8]

Good point, KCFlyer, about the AA miles, but, how many people actually accrue enough for a free ticket? Unless you are a frequent flyer, not many, particularily since those miles expire.

Secondly, how much is a full Y fare? I would imagine rather more than jetBlues regular fares. As a matter of fact, the 300 dollars the upgrade alone cost, you can get a ticket on jetBlue.

As much as I love the MRTC concept, I still look at price, as I think most people do. If AA is to compete on price, they have to spread the cost over more seats, MRTC sadly will have to go. However, AA has only
decided to match fares on SJU and Transcons, according to their latest press release. Starting to look like the intent of killing another PEX. Will it work, only time will tell?

 

[LaBradford22]

Jetblue has had a heck of a run the past couple years, and it''s no small feat what Neeleman has been able to do there. But Jetblue is not completely bullet-proof. They''ll face their own set of challenges in the coming years. Among them:

1. Every major hub-and-spoke carrier either has already significantly cut its labor costs or will move to do so in the very near future

2. In its own cost structure, Jetblue enjoys a tremendous advantage due to its new fleet (planes less than about 3 years old enjoy a maintenance honeymoon). As planes age, expect Jetblue''s maintenance costs to increase significantly

3. Speaking of Jetblue''s costs, in terms of pilots (the most significant labor cost at any airline), the first-year rate for a Jetblue pilot is $50.96 per hour. Jetblue captains max out in 10 years at $126.46 per hour. Jetblue has been hiring rapidly, so their pilot work force is very junior (i.e. they don''t even have any 10 year captains yet - in fact, they probably don''t have many 4 or 5 year captains). The average hourly rate for a Jetblue pilot is less than $100.00 per hour right now. Contrast that with the hub-and-spoke majors (and even Southwest), where the average is more in the range of $150.00 to $200.00 per hour. Like the maintenance advantage, this is an advantage that Jetblue simply cannot sustain over the long-term. The work force will become more senior, and the work force will demand its share of the pie (especially if the company remains profitable)

4. As mentioned in this thread, other carriers may launch DirecTV or other similar inflight service, and/or the novelty of the DirecTV may wear off

5. As they expand their network, they may find that the A319/320/321 is not the ideal airplane for every market that they wish to serve. At that point, they will be faced with the issue that Southwest has been faced with for years now - hold fast to the single fleet-type strategy and forgo potential revenue growth, or abandon the single fleet-type strategy and try to make up for the added cost on the revenue side. True, Southwest has done just fine by doing the former, but this is still a significant barrier to Southwest''s expansion into certain markets and may become the same for Jetblue

 

[G4G5]

It''s not MRTC VS TV

It''s MRTC/TV/Food VS $$$$$$

I live 50 miles from JFK and my neighbor is sending his entire family to MCO today(6 tickets). He''s not doing it on Jet Blue and he''s not doing it on AA. He''s doing it on LUV, out of ISP with a transfer in BWI.

Why? I''ll give you 69 reasons $.

The LCC''s are not about TV, food or more room, they are about LOW COSTS. My neighbor told me in no uncertian words. "My kids have TV at home, in the car and at the hotel, they can live with out it for 3 hours". "I like more room but not for more price".

The reason I mention this is because you can argue all day about what''s important to the public but the common theme is $$$$$.

This should be even more disturbing to the JB folks because LUV is attacking Long Island out of ISP with expansion, again my neighbor, "why would anyone drive to JFK (for the same price) when I can leave out of ISP?" I hear the same thing from my friends up in Westchester and CT. Why cross the bridge($8) and put up with traffic to fly Jet Blue or AA when I can leave out of HFD for the same price?

Who cares if they watch, Everybody loves Raymond live on JB or on tape at AA. It''s all about the $$$$.

 

[JS]

----------------

This should be even more disturbing to the JB folks because LUV is attacking Long Island out of ISP with expansion, again my neighbor, "why would anyone drive to JFK (for the same price) when I can leave out of ISP?" I hear the same thing from my friends up in Westchester and CT. Why cross the bridge($8) and put up with traffic to fly Jet Blue or AA when I can leave out of HFD for the same price?

Who cares if they watch, Everybody loves Raymond live on JB or on tape at AA. It's all about the $$$$.

----------------​

TV or no TV, a lot of people will also do the opposite -- purposely fly out of JFK on B6 or AA rather than ISP on WN because they want to fly non-stop.

 

[G4G5]

You can fly non stop out of ISP and HFD and almost all of LUV's Northeast airports directly to FL. Given the choice, and I do ask. Most folks will choose to go through the "eaiser" airport. Just look at SWA's business model, it proves my point. They don't service the major airports when a rural airport is readily available. ISP and HFD costs less to operate then JFK/LGA, PVD is less then BOS, BMH is less then ATL, BWI is less then DCA/IAD and so on and so on.......So let me ask you how does a LCC compete against LUV, in a price driven market, when LUV's costs are automaticly lower based upon the airports they serve (where/closer to the LCC folks)?

That was part of my point. LUV is the same price if not cheaper then JB and AA, for a direct flight. But my neighbor, willing choose to fly through BWI because he could save $50+ a seat each way (over $600+ for his family).

Again it's part of my point, when you are a LCC, you need to concentrate on price not TV, MRTC or food. The vacation folks looking to travel to FL or the West coast(from the NE) are going to choose $$$ over TV, food or MRTC, 7 days of the week.

AA is not competing with JB, they are both competing against SWA.

 

[FWAAA]

----------------
On 5/22/2003 3:17:36 PM JS wrote:

What is HFD? It''s in your last two posts.

----------------​

Probably Hartford''s initials before someone decided to honor Bradley.

Is Denver DIA or DEN, ''cause people use both.

 

[JS]

What is HFD? It''s in your last two posts.

 

[MrMarky]

More than any other thread I've seen on this forum, this one strikes at the heart of the issue facing the industry. Namely, what is the formula for long term success, and directly associated with that, what is it customers really want (besides cheap fares) and what amenities are most of them willing to pay for.

I suppose the answer to long term success is finding the key to what customers really want and those amenities they're willing to pay for, or perhaps pay a premium for. So they really are two questions joined at the hip.

We know what works for Southwest and jetBlue. But what works for American and United? They are different animals offering very different services. The majors offer alliances, partnerships and code shares that the LCC's cannot come close to matching, particularly in terms of global route structures and universal FF programs. They also offer first class, which has essentially become an upgrade product domestically. But in order to cut costs, particularly on domestic routes where they compete with WN or B6, they have cut coach amenities to the bone and have reached the point where the level of service is virtually indistinguishable or the LCC actually has better customer service.

So what's the answer? Does TV make a difference? Are fares too low? I don't think we know the answer yet. The LCC's can make money at these fare levels, so they can't be too low, yet the majors are bleeding. Nobody is picking flights because of TV, yet it is an attractive amenity. To me, MRTC is more of a competitive edge than meal service or TV, but others may not agree.

Personally, I want something more than bare-bones service and I'm willing within reason, to pay more for a plusher seat and a quasi-elegant meal, particularly on longer flights. How much? I'm not willing to pay ten times the price as is the current practice, but I am willing to pay something like a 50% premium, which is much closer to the added value I am gaining. On a short flight that means nothing more than a more comfortable seat. On a long flight you can add in the nice meals and other service perks. I think AA's new "kill jetBlue" pricing between Southern California and JFK, $299 coach walk-up and $599 first class, strikes the balance much closer and I also think they can make money at those rates. If they can't, they don't belong in business, especially after the concessions they have squeezed out of their workers, suppiers, aircraft lessors and the government.

Perhaps we should look more closely at the hotel business, where there are plenty of Motel 6's, yet the Hiltons and Marriotts are also ubiquitous and they have expanded their products to multiple brands at a variety of price levels, yet all are plugged into their benefits program. Airlines within airlines have failed to date, yet hotels within hotels seem to thrive. What are the hotels doing that the airlines are missing?


Maybe where we're headed are alliances of necessity, where the LCC's provide domestic feed and the majors become boutique international carriers with a few choice domestic routes here and there. In the shorter term, I think we will start to see code-share and interline agreements among some of the LCC's as they try to bolster their girth and connect the route map dots. Ultimately, regardless of anything else, what constitutes a fair price is not going to be based upon costs. It's going to be based upon what the market will bear, and somebody is always going to find a way to provide that -- at a profit.

In the meantime, the majors are becoming dinosaurs while the new "mutants" begin to thrive. I suppose we can call it aero-darwinism.

Marky