Northwest Flight Grounded for Summer

[Don Smith]

....Uhh, yeah, that would be communism. Having the government "check up" on the financial analysis behind a decision on the level of service to provide in a particular market would be the epitomy of a government planned economy, i.e., communism.....
This is a pretty minor news story, Obviously from a Lansing newspaper, so it's getting entirely too much attention here. Just rest assured that your concerns are all things that go into a decision on where we fly our aircraft and at what frequency....

Tell you what Finman...Go to NY and tell Elliot Spitzer he's a communist. After all he's investigating companies all the time up there. In fact, why don't you just contact all the AG offices in every state and tell them that they are communists if they investigate companies practices as related to the consumer.
Yea this started out as a little chat about a minor schedule change but like all things nwa it seems that the consumer gets the short end. I would think that Lansing thinks its important, but now that you've made the promise that it won't impact them too severely and that nwa has taken their concerns to heart in their decision making that the residents and business folk of Lansing will indeed rest easy. Whats that Lansing customer??? Your plane is oversold and there's no way to make your important meeting in MSP (via DTW)??? Oooo..sorry. Heres a meal voucher and a free flight. Forget the fact that your company just lost their biggest account.

 

[Kev3188]

I have a question; I always thought that for every "spoke" feeding into a hub, it created a (possibly) exponential number of new markets? Using that theory, wouldn't cuttng a flight as seemingly minor as MSP-LAN potentially deny NW revenue opportunities on other routes/markets that would justify the RASM(s) on this route?

As for NW making head-scratching routing decisions, they've decided to pare back our LAS flight to 2x weekly. This flight is routinely oversold (Thursdays especially), and it is "SOP" to issue DBC's for it. I know LAS is a notoriously low yield route, but I would think that if demand is that high that they could raise the fares just enough to make it worthwhile, while still maintaining a high load factor (we're the only N/S to LAS, by the way).

 

[finman]

Tell you what Finman...Go to NY and tell Elliot Spitzer he's a communist. After all he's investigating companies all the time up there. In fact, why don't you just contact all the AG offices in every state and tell them that they are communists if they investigate companies practices as related to the consumer.
Yea this started out as a little chat about a minor schedule change but like all things nwa it seems that the consumer gets the short end. I would think that Lansing thinks its important, but now that you've made the promise that it won't impact them too severely and that nwa has taken their concerns to heart in their decision making that the residents and business folk of Lansing will indeed rest easy. Whats that Lansing customer??? Your plane is oversold and there's no way to make your important meeting in MSP (via DTW)??? Oooo..sorry. Heres a meal voucher and a free flight. Forget the fact that your company just lost their biggest account.

Spitzer investigates criminal allegations. Deciding to send 100 widgets to a particular store to sell when there was adequate demand to sell 150 widgets in that store is not a criminal offense. It may be a bad business decision that gets you fired, but it is not against the law in any way, shape or form. That is exactly synonomous with what you are referring to here.

As far as your concern for the Lansing business passenger that will be forced to route through DTW for a couple months if he needs to go to MSP, I really don't know what to tell you. I have to assume that the potential loss in long-term revenue was taken into account in this decision. I really think you're making a mountain out of a mole hill here. The consumer is not entitled to a non-stop flight to every destination they desire. If there were enough demand for this particular route, the flight would not have been suspended. Why would you assume a business pax would not be able to get to a meeting. You do realize that the pricing/yeild management is such that high yield passengers will always be able to buy a seat. What do you think happens when supply is reduced and demand holds constant? You're Econ 101 book would tell you that prices will naturally go up to the point that demand is pushed down to the new supply level. That is what will likely happen in this micro situation. Prices will be adjusted to the point that supply once again meets demand, and the business pax that you're so worried about will have no problem buying a ticket to MSP.

 

[finman]

I have a question; I always thought that for every "spoke" feeding into a hub, it created a (possibly) exponential number of new markets? Using that theory, wouldn't cuttng a flight as seemingly minor as MSP-LAN potentially deny NW revenue opportunities on other routes/markets that would justify the RASM(s) on this route?

Great point, and yes, that is basically true that every unique spoke-hub combination creates a new set of markets equal to the number of spokes in the system. I'm not in marketing, so I really don't have any market analysis explanations behind the decision being discussed, or what the alternatives were in this situation. I do know that due to capacity limitations arising from bankruptcy related aircraft and staffing issues, the schedule had to be slightly reduced over the summer, and thus created the need to selectively suspend certain routes that had the least negative impact on revenue and schedule construction.

 

[robbedagain]

hey finman, my question would be why not keep the MSP-LAN flt and dump the one DTW-LAN flt that doesnt generate that much revenue, then use that plane on another profitable run? that was what I was trying to ask of you

 

[finman]

hey finman, my question would be why not keep the MSP-LAN flt and dump the one DTW-LAN flt that doesnt generate that much revenue, then use that plane on another profitable run? that was what I was trying to ask of you

There's really no way for me to answer that, Robbed. I'm not privy to the various alternatives that existed, or the profitability of the MSP-LAN route vs any one of the DTW-LAN routes. There's entirely too many factors involved to give you a clear explanation as to why the schedule was tweaked in this manner versus another. Maybe someone on this board who currently works or who has worked in a marketing role can shed more light on the subject. I'm going to wash my hands of the MSP-LAN subject, as I think it's been kind of beat to death.

 

[robbedagain]

alright finkman i was just curious cause to kme, as another airline employee, this would make ore sense and a better way to keep as kmuch rev flowing in especially during the ch11

 

[local 12 proud]

In case you missed it, I wasn't defending the marketing decision itself, but rather explaining how normal a slight change like this is in a dynamic domestic route structure. Naturally, during the BK, those changes have been even more frequent as the available capacity has been moving around much more than normal.

I have actually learned a lot about other areas of airline operations and labor unions from you guys (and gals) that I never would have picked up if not for this site. I certainly don't claim to be any sort of one-stop shop for all things finance related, but I really don't understand why you'd find it necessary to completely ignore my insights. I have to some extent play the devils advocate on this board, since 95% of the members only have negative things to say about NWA. I'm not too pleased with some of the decisions that have been made either, but this would certainly not be the appropriate forum for me to express them. Kev and a few of the others that do seem to come from a place of reason and thoughfulness would likely be able to share my misgivings in an adult manner, but that would be shouted down by those like yourself that seem incapable of just analyzing something on it's own merits without reverting back to name calling and poisenous rhetoric.

Please finny, your shining bias illuminates the board. Its ok though, I understand where your coming from, I get to see it everyday over at AA. we have our fair share of suck ups who defend every action by the CompAAny no matter how ignorant the decisions may seem. Fact is if it was'nt for a government who stands beside these corporate B/K friendly judges we would not be in a race to the bottom, in terms of employee morale and the most pathetic customer service since the end of deregulation. Remember cancer also feast's on its host, in the end its undoing was self generated.

 

[local 12 proud]

alright finkman

Robbed was that a type o error?.. I like that, Finkman

 

[robbedagain]

Robbed was that a type o error?.. I like that, Finkman

yes but hey it sounds pretty good to me too!!! 😀 😛

 

[Don Smith]

As far as your concern for the Lansing business passenger that will be forced to route through DTW for a couple months if he needs to go to MSP, I really don't know what to tell you. I have to assume that the potential loss in long-term revenue was taken into account in this decision.

Maybe I missed it but exactly what beancounting department are you in at nwa??? You seem to imply that you have inner knowledge but then you come up with this "basic econ 101" stuff. Then "I don't know," or "I assume". You either don't work at the airline and get your stuff from the net or you're in charge of paper clips. You seem to think that business travel goes down significantly in the summer but its the leisure travel that increases so greatly that naturally the business numbers look smaller. It may reduce a small amount, but not enough to justify killing a service. Yea, yea its only ONE route...to YOU. But I'm with RobbedAgain...keep the MSP leg but drop one of the other 6 to DTW. GIVE THE PEOPLE CHOICES!

 

[finman]

Maybe I missed it but exactly what beancounting department are you in at nwa??? You seem to imply that you have inner knowledge but then you come up with this "basic econ 101" stuff. Then "I don't know," or "I assume". You either don't work at the airline and get your stuff from the net or you're in charge of paper clips. You seem to think that business travel goes down significantly in the summer but its the leisure travel that increases so greatly that naturally the business numbers look smaller. It may reduce a small amount, but not enough to justify killing a service. Yea, yea its only ONE route...to YOU. But I'm with RobbedAgain...keep the MSP leg but drop one of the other 6 to DTW. GIVE THE PEOPLE CHOICES!

I don't work in the marketing department. I'm in one of the operating divisions in a finance role.

I have a cursory understanding of what drives the route selection process, but obviously I don't have the detailed analysis behind a particular route decision. Since the mission of the schedule construction is to maximize revenue with the existing capacity, I have to "assume" that the MSP-LAN route fell out (temporarily) during this process, while all of the DTW-LAN routes made the cut.

I have no idea if this will turn out to be the optimum decision, since I don't know what the alternatives were or the relative profitability of each route. It's easy to criticize a decision on its surface, but without knowing what the alternatives were and the relative excected profitability of each route during the time period in question, I'm not sure how you can make a conclusive determination that it is a bad business decision. Is it suspect? Sure, it appears counterintuitive on its surface. But, since I don't know the comparitive assumptions described above, I can't say whether I agree with this decision or not.

With any optimization process, if you take a very complex macro solution, and dissect it down to a very micro level, you'll naturally find solution results that seem counterintuitive. But if you force those micro results to be something different, it creates a mulititude of problems in the macro solution.

I think this dead horse has been adequately beaten.

 

[Kev3188]

I think this dead horse has been adequately beaten.

It has, but I'm taking another swing anyway..... B)


Historically, in the summer capacity has come up north (ie 757's and A320's), while the "sun" destinations received smaller gauge equipment; no need to run a 757 to FLL in August.

In the winter, of course, the opposite happened, with all the seats going south...sometimes at the temporary cost of flights to other cities. For example, we used to lose one DTW frequency in the winter months due to the A320's going to southern routes....*but* we still had N/S service on that route.

My guess is this year with the reduced fleet, they have no other A/C to backfill this route with...

I wonder what will happen to the staffing at LAN during this time...That leaves only one originator at 0700ish, then nothing until 1100ish....

 

[finman]

It has, but I'm taking another swing anyway..... B)
Historically, in the summer capacity has come up north (ie 757's and A320's), while the "sun" destinations received smaller gauge equipment; no need to run a 757 to FLL in August.

In the winter, of course, the opposite happened, with all the seats going south...sometimes at the temporary cost of flights to other cities. For example, we used to lose one DTW frequency in the winter months due to the A320's going to southern routes....*but* we still had N/S service on that route.

My guess is this year with the reduced fleet, they have no other A/C to backfill this route with...

Very good synopsis. You're probably dead on (unrelated to the dead horse).