Re-regulation talk on the hill

[eolesen]

Europe did it right...they took their time, phased it in over a decade.

Yet, the effect has been pretty much the same.

A few carriers adjusted (BA, BMI, Virgin, LH, Aer Lingus), a few died along the way (Sabena, Swissair), a few are on life support (Olympic,Alitalia), and then a bunch in the middle of the pack who do well in spite of themselves (IB, AF/KL, Finnair, Scandanavian).

If foreign bankruptcy and antitrust laws mirrored the US's, it would be a much different story.

Several carriers only survived because they were state owned (i.e. Air France and Alitalia) and either received a lot of state aid, or were allowed to conduct mergers that would have never passed US antitrust review (e.g. France essentially was allowed to absorb all of their domestic competitors).

 

[TIME FOR CHANGE]

Yet, the effect has been pretty much the same.

A few carriers adjusted (BA, BMI, Virgin, LH, Aer Lingus), a few died along the way (Sabena, Swissair), a few are on life support (Olympic,Alitalia), and then a bunch in the middle of the pack who do well in spite of themselves (IB, AF/KL, Finnair, Scandanavian).

If foreign bankruptcy and antitrust laws mirrored the US's, it would be a much different story.

Several carriers only survived because they were state owned (i.e. Air France and Alitalia) and either received a lot of state aid, or were allowed to conduct mergers that would have never passed US antitrust review (e.g. France essentially was allowed to absorb all of their domestic competitors).

And the companies in the USA survive at the exspence of the employee. Through massive concessions while the corporate elite reap the benefits.

Even with huge bailout money from the govt after 9/11 carriers still went bankrupt but still fly today.

:down: :down:

 

[777 fixer]

Historically, it was one of the most poorly thought out pieces of legislation ever. Europe did it right...they took their time, phased it in over a decade.

Deleted by self.

 

[FWAAA]

I'm appalled at the very notion of a government agency regulating the price and supply of domestic travel. Fortunately, the President and Congress agreed in 1978.

Yes, air travel is still heavily regulated - but not in the area of price and supply.

Those who worship Stalin, Mao and Castro can pine all they want for centralized planned economies, but I'll take our screwed up system anyday.

 

[Redbone]

Yet, the effect has been pretty much the same.

A few carriers adjusted (BA, BMI, Virgin, LH, Aer Lingus), a few died along the way (Sabena, Swissair), a few are on life support (Olympic,Alitalia), and then a bunch in the middle of the pack who do well in spite of themselves (IB, AF/KL, Finnair, Scandanavian).

If foreign bankruptcy and antitrust laws mirrored the US's, it would be a much different story.

Several carriers only survived because they were state owned (i.e. Air France and Alitalia) and either received a lot of state aid, or were allowed to conduct mergers that would have never passed US antitrust review (e.g. France essentially was allowed to absorb all of their domestic competitors).

It depends on your perspective. Employees of European airlines did not lose their pensions, they are paid a livable wage. Their governments look out for them. You do not have airline CEOs walking away with tens of millions of dollars while employees live near poverty. As an airline employee, I don't give a flying peacock about rural towns having air service if it means I have to live in poverty to support that BS.

The US government found a sucker to support deregulation and air service for rural towns...the US airline employee.

You left out BA(ba "adjusted' after being given a silver platter) whom was given a zero balance sheet and paid for fleet/ dominate position at Heathrow by the UK government prior to setting it up on it's own. Had we done the same for Pan Am it would have still been dominating the globe.

Excellent read:
http://www.im.shinshu-u.ac.jp/staff/shibata/intro.htm

p.s. AF/KLM is the most financially successful of all European carriers.

 

[Bear96]

Just like they "regulate" the oil industry.

???

How so? The government doesn't decide on which street corners Exxon can open up a store and doesn't decree gas prices.

I'm not seeing your point. How does it answer the question I posed?

 

[eolesen]

It depends on your perspective. Employees of European airlines did not lose their pensions, they are paid a livable wage.

Is that before or after the 30 to 50% taxation for social programs?..

As an airline employee, I don't give a flying peacock about rural towns having air service if it means I have to live in poverty to support that BS.

Airlines don't subsidize it -- taxpayers do, to the tune of approx $120M per year.

And to some degree, that $120M guarantees jobs for airline employees. Mesa, Skywest, Great Lakes and a couple other small carriers depend to some degree on EAS subsidised routes.

You left out BA(ba "adjusted' after being given a silver platter) whom was given a zero balance sheet and paid for fleet/ dominate position at Heathrow by the UK government prior to setting it up on it's own. Had we done the same for Pan Am it would have still been dominating the globe.

BA was privatised in 1987, which isn't exactly recent history. I don't think they have too many aircraft left which predate privatization, and they've certainly spent a lot of money on infrastructure since then while remaining profitable every year since 1987 with the exception of 2002.

Plus, with BMI and Virgin, there's quite a bit of competition at LHR, with the sole exception of service to the US.

p.s. AF/KLM is the most financially successful of all European carriers.

Yep, keep drinking that NWA supplied koolaid.

How so? The government doesn't decide on which street corners Exxon can open up a store and doesn't decree gas prices.

No, but they do regulate the ability to build new pipelines and refineries, and to perform exploration. Having freedom in the retail arena means nothing if you can't expand the supply side or the infrastructure.

It's the same with deregulating electric and gas utilities -- you can't just go out and build a new power plant, transmission lines or gas distribution systems...

 

[Bear96]

No, but they do regulate the ability to build new pipelines and refineries, and to perform exploration. Having freedom in the retail arena means nothing if you can't expand the supply side or the infrastructure.

It's the same with deregulating electric and gas utilities -- you can't just go out and build a new power plant, transmission lines or gas distribution systems...

That's nice and all, but, like Redbone's response, irrelevant to my question.

Let's refocus.

The Senators quoted in the article seemed to indicate they wanted to re-regulate to ensure small communities have frequent, cheap service.

How are they proposing that re-regulation will accomplish that? Are they going to force airlines to serve small communities with cheap fares at a loss until they go out of business? Who benefits in that situation?

Or are they going to throw tax money at the supposed "problem" to support unprofitable routes? They can do that now through the Essential Air Services program.

Anyone know what they are thinking by way of how reregulation will create frequent cheap service to small communities?

(PS -- It's OK to simply refrain from posting if you don't know the answer.)

 

[Redbone]

"Yep, keep drinking that NWA supplied koolaid." (how did they get into this?)

Now, that's a bright answer...full of facts.

If you don't know the answer "pretend" you do with insults or generalities.

Put your facts where your big mouth is. Show us who has the highest revenue in Europe.(when you say successful, I'm assuming you mean MONEY making)

"It depends on your perspective. Employees of European airlines did not lose their pensions, they are paid a livable wage. Their governments look out for them. You do not have airline CEOs walking away with tens of millions of dollars while employees live near poverty."

I see your little twisted quote left out the part about OVER PAID US airline CEOs, or the free for all dive in wages that support cheap tickets.

While you're at it, tell us about how the UK cut it's strings to BA in 1987 (or I can give you a detailed FACTUAL rundown if you're only pretending to know).
[/quote]

"Plus, with BMI and Virgin, there's quite a bit of competition at LHR, with the sole exception of service to the US."

Sure there is, that's why their N.Atlantic traffic is their LARGEST source of revenue and why the UK ensured they had a lock down on Heathrow.

Wonder what would have happened to Pan Am if the US had given it a hand up prior to deregulation.(in the SAME manner that the UK did for BA). Not a bad way to be sent off into the tough world of competition.

 

[Redbone]

dupe

 

[eolesen]

(how did they [KL] get into this?)

Let's see... NW and KL have been tied together for the past 10 or 15 years, and KL is now merged with AF. The only valid reason a NWA junkie would think highly of AF/KL is by buying into the corporate propaganda from Eagan.

Put your facts where your big mouth is. Show us who has the highest revenue in Europe.(when you say successful, I'm assuming you mean MONEY making)

Why don't you? You're the one claiming AF/KL is the most successful airline in Europe today.

Most European carriers don't follow the calendar year for reporting, so I don't have a good set of financials to refer to.

What I do have shows relative operating margins -- AF/KL had 4.4%, LH 4.6%, and BA had 5.3%. AF/KL did have a higher overall profit, but they didn't perform as well on a margin basis as the other two carriers did (i.e. they kept more of every dollar in revenue than AF/KL did).

Personally, I'm quite content to see lower revenue and higher margins.

Wonder what would have happened to Pan Am if the US had given it a hand up prior to deregulation.(in the SAME manner that the UK did for BA). Not a bad way to be sent off into the tough world of competition.

Oh, Pan Am got more than their fair share from the US government compared to other airlines over time, especially compared to TWA. PA carried most of the government/military travel between Europe and the U.S., and had a virtual lock on service from Berlin to other German cities (Lufthansa was prohibited from flying to TXL until the DDR fell in 1990). All that pre-dated deregulation.

And it didn't end there... They still carried most of the government/military traffic up until their collapse. The USAF upgraded a bunch of PA's 747s to strengthen the main deck to carrying cargo, and in turn Pan Am received a larger share of MAC/AMC flying during Gulf War I.

 

[Redbone]

That's not my quote, phony.

 

[whlinder]

AF/KL's 2005 revenue was #1 in the industry. But as FM said, their margin is another story.

 

[Redbone]

AF/KL's 2005 revenue was #1 in the industry. But as FM said, their margin is another story.

I don't remember reading the industry announcing : and so and so airline made less money but had a better "margin" last quarter.

Or the IATA/DOT airline ranking (based on "margin".)

The sky is orange too. Do you know how ridiculously twisted that sounds. "oh, since our profit is smaller we'll just say we have a better margin"

Get real.

Let me give you a little edu=macation on margin:


Margins tell you how many cents out of each sales dollar are left, after expenses, as profit. That's the easy part. The hard part is deciding which margins you should look at. Gross margins? Pretax margins? Net margins? EBITD margins? This screen is based on strength in Operating margins.

The operating margin measures how much profit is left after deducting the basic expenses of running a business. The best way to understand this definition is to compare operating margin with the alternatives.

Gross Margin
This tells us how much profit is left after subtracting costs that are necessary to actually produce the goods or services the company sells. For a manufacturing company, this would include the costs of raw materials, salaries of factory workers, etc. For an airline, gross expenses include fuel, salaries of the flight crew, etc.

Operating Margin
We know that fuel expenses are deducted when we calculate an airline's Gross Margin. What about the salary of the corporation's Chief Executive Officer? Fuel expense is a "direct" cost of running an airline; this expenditure is clearly and specifically tied to the activity that produces revenue. The CEO's salary, although an essential part of maintaining the business, is not specifically tied to the process of getting passenger-filled planes up into the air. This is an "indirect" cost, or put another way, overhead. Operating Margin tells us how much profit is left after subtracting direct costs and overhead.

Other Margins
The EBITD Margin is similar to the Operating Margin except that the EBITD does not subtract non-cash depreciation charges. The Pretax Margin accounts for all expenses except taxes. And the Net Margin tells us what's left over after deducting ALL expenses.

The best margin to examine depends on what you want to know. Operating Margin is a very effective gauge of the performance of a company's BUSINESS activities. This is not the same as measuring the performance of the COMPANY itself.

 

[eolesen]

I'm really glad you've figured out how to Google and use Wikipedia for getting the definition of "margin"...

Margins are the only measure you can look at to compare large and small companies, and it make a huge difference to investors. That's why Jetblue was such a darling of the stock market -- cranking out double digit margins for their first couple years (and just posted a 10.2% margin) -- while larger airlines who were posting larger dollar value profits were stuck in the mud as far as share prices go.