UA/UA merger?

[oldiebutgoody]

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On 9/27/2002 12:22:54 PM KCFlyer wrote:






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On 9/27/2002 11:57:31 AM Winglet wrote:

KC Flyer seems to think that United makes a 90% profit on each ASM ($1 per ASM ticket price vs. cost of about .10). Wow.----------------[/BLOCKQUOTE]





Do the math Winglet...I am taking your CASM (11.38 cents per mile)... Does that not cover the costs? If not, sorry for my mistunderstanding, but I always figured that the CASM was the Cost to Fly a Seat a Mile. If you are charging $1,200 for a 1200 mile flight, what is the charge per mile, and did your cost per mile just increase because a body is now sitting in a seat? My understanding is that your costs are your costs, whether a body is in the seat or not. Is this wrong?

It would appear to me that on a 1200 mile flight you are charging me a dollar per mile, and your costs are eleven cents per mile, then yes, you are making a 90% profit on my ticket. But it doesn't appear that you are getting many people who are paying a dollar per mile to fly you. No, given your "average fares" filling over 70% of your seats, it would appear that you are charging ten cents a mile. And you're losing money.

But you're right...it's far better to ask for $9 billion in concessions and threaten to file for Chapter 11 than it is to actually try to charge a fare that will make a profit. But here's the thing...anything over 11.38 cents per mile is a profit... Why rely so heavily on the dollar a mile flyers to bail you out, because they aren't. All I am saying is that a lower price that still makes you a profit will spur demand, and help to stem your losses. But lowering fares seems to be an anathema to both airline managment and airline labor. But it is nice to see that y'all can at least agree on SOMETHING.

Better yet - here's something to illustrate my point - SWA's cost are about 34% lower than UAL's. UAL's highest one way fare on a specific flight is about 400 percent higher than SWA's higest fare. One airline is making money. Which one?
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Who pays $1200 for a 1200 mile flight? It's probably more like $250 for a 2500 mile round trip....

 

[UAL777flyer]

KCflyer,

How much pricing power do you think a high-cost airline like UA has in the marketplace these days? If your competitors won't go along with fare changes, do you honestly expect a carrier like UA to revamp its pricing without a requisite lowering of unit costs? The fact of the matter is that UA has become pretty price competitive on a flight specific basis with the other carriers in a given market. Increasing demand? What do you think we've been trying to do? In the last year, have you seen how competitive we've gotten against Frontier in DEN? It hasn't done much for the revenue picture. Costs must be lowered and excess capacity must come out of the system as a whole.

 

[KCFlyer]

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[BLOCKQUOTE][BR][BR][BR]----------------[BR]On 9/27/2002 1:16:52 PM oldiebutgoody wrote:[BR][BR]Who pays $1200 for a 1200 mile flight?  It's probably more like $250 for a 2500 mile round trip....

 

[Flufdriver]

Hate to break it to you KCFlyer, U simply did what they are entitled to do. I guess Chrysler shouldn't be making cars and Jeeps now either. Tell Gordon he shouldn't be flying. U, your now Free to Move about the Country. By the way...bet their ON-TIME!

 

[KCFlyer]

[P]
[BLOCKQUOTE][BR]----------------[BR]On 9/27/2002 3:02:16 PM UAL777flyer wrote:
[P]KCflyer,[BR][BR]How much pricing power do you think a high-cost airline like UA has in the marketplace these days?  If your competitors won't go along with fare changes, do you honestly expect a carrier like UA to revamp its pricing without a requisite lowering of unit costs?  The fact of the matter is that UA has become pretty price competitive on a flight specific basis with the other carriers in a given market.  Increasing demand?  What do you think we've been trying to do?  In the last year, have you seen how competitive we've gotten against Frontier in DEN?  It hasn't done much for the revenue picture.  Costs must be lowered and excess capacity must come out of the system as a whole.[/P]----------------[/BLOCKQUOTE]
[P]You are increasing demand for money losing fares. And you haven't done squat to encourage business travel. YES United and others are very price competitive, and many a business might have been tempted to book them. BUT THEN, came the use it or lose it policies. Along with the good old change fee for a flight. As I see it then one of two things will have to happen. Either you revamp the revenue mangement model rather quickly, so that it doesn't depend on a thousand dollar fare on a 500 mile flight to cover a money losing fare on a transcon flight, or you might as well shut down UAL and U. If the capacity must go, then let it go, and don't let it drag yet ANOTHER airline into bankruptcy as they try to compete with a lean mean competin' machine courtesy of the US Bankruptcy laws. [/P]

 

[TomBascom]

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On 9/27/2002 3:02:16 PM UAL777flyer wrote:

KCflyer,

How much pricing power do you think a high-cost airline like UA has in the marketplace these days? If your competitors won't go along with fare changes, do you honestly expect a carrier like UA to revamp its pricing without a requisite lowering of unit costs? The fact of the matter is that UA has become pretty price competitive on a flight specific basis with the other carriers in a given market. Increasing demand? What do you think we've been trying to do? In the last year, have you seen how competitive we've gotten against Frontier in DEN? It hasn't done much for the revenue picture. Costs must be lowered and excess capacity must come out of the system as a whole.
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You're not competitive.

You sell highly restricted fares at a similar price. But the restrictions turn the product into something quite different from the other guys product -- and they detract significantly from the value. You're now selling what amount to priceline tickets for 3x what priceline sells them for. How long do you expect that to last?

Simultaneously you cling to the idea that there is some sort of justification for charging 8 or 10 times as much for the ability to make changes to your intinerary, standby for an earlier flight and to enjoy such priceless benefits as assigned seats, upgrades to a seat that is less than 50% larger, in flight meals and access to airport lounges (which, by the way, are paid for separately...)

Show some backbone and break from the pack. Keep the low, low fares but bring the top end down -- nobody is buying them at the current price point so what have you got to lose? Market the differences between a low fare airline and a business airline -- the benefits aren't priceless but they are worth something so find that price point and go after it. (Hint: it's not worth anything remotely close to 8x the discount fare.)

 

[UAL777flyer]

Exactly. The bankruptcy laws exist for all corporations, not just airlines. Why should other industries have the right to reorganize, but not airlines? Granted, many of the problems of this industry are of their own making due to lousy management strategies. But that doesn't mean they shouldn't be allowed to reorganize when their business is failing. Everyone says revamp the revenue management model like you simply snap your fingers and change it like that and everything will be fine. In reality, it doesn't work that way. As a high-cost airline, UA can't revamp their pricing structure unless the other majors go along. Otherwise, they're walking away from a lot of revenue and the bleeding gets worse.

We haven't done squat to lure back the business traveler? That's not ture. We've thrown numerous incentives out there since 9/11 and it didn't bear fruit, because in order for us to bring in that business traffic, we had to lower fares to competitive levels with Frontier, ATA, Southwest, etc., because the business traveler isn't willing to pay higher fares anymore. And in doing that, it only highlights the fact that our costs are simply too high.

 

[KCFlyer]

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[BLOCKQUOTE][BR]----------------[BR]On 9/27/2002 415 PM UAL777flyer wrote:
[P]Exactly.  The bankruptcy laws exist for all corporations, not just airlines.  Why should other industries have the right to reorganize, but not airlines?  Granted, many of the problems of this industry are of their own making due to lousy management strategies.  But that doesn't mean they shouldn't be allowed to reorganize when their business is failing.  Everyone says revamp the revenue management model like you simply snap your fingers and change it like that and everything will be fine.  In reality, it doesn't work that way.  As a high-cost airline, UA can't revamp their pricing structure unless the other majors go along.  Otherwise, they're walking away from a lot of revenue and the bleeding gets worse.[BR][BR]We haven't done squat to lure back the business traveler?  That's not ture.  We've thrown numerous incentives out there since 9/11 and it didn't bear fruit, because in order for us to bring in that business traffic, we had to lower fares to competitive levels with Frontier, ATA, Southwest, etc., because the business traveler isn't willing to pay higher fares anymore.  And in doing that, it only highlights the fact that our costs are simply too high.[/P]
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[P]They shouldn't. The biggest employer in KC is Sprint. Sprint was almost sold to a little company called Worldcom. Turns out that Worldcom was mis-stating a bunch of figures, making AT&T and Sprint look like they were underperformers, when in reality, they were outperforming Worldcom by a wide margin. Didn't matter. Worldcom is going to go into bankruptcy and emerge debt free to undercut Sprint and AT&T on pricing their services. Sprint is taking the let's lay everyone off route of staying afloat. When Worldcom comes roaring back, free of billions of dollars of debt and starts competeing, they are only going to hurt the rest of the competition. [/P]
[P]And you haven't done squat for business. Lowering a fare then telling them that you will nickle and dime them to death with change fees and restrictions is NOT the way to lure business. You guys really could compete with Frontier, ATA, and Southwest. You just choose not to. [/P][/BLOCKQUOTE]
[P][/P]

 

[KCFlyer]

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[BLOCKQUOTE][BR]----------------[BR]On 9/27/2002 4:53:46 PM chipmunn wrote:
[P]UAL777flyers comments regarding a lack of pricing power and excess capacity are accurate.[BR][BR]For a return of profits airlines must reduce capacity to match supply with demand. This idea is widely recognized on Wall Street, the Bush Administration, and in individual major airline Executive Suites.[BR][BR]US has gone through much if not all of its major restructuring whereas the other major airlines have not. But, September traffic figures are extremely disappointing and if revenue does not return to recent levels, there will be undoubtedly even more cuts required.[BR][BR]Chip[/P]----------------[/BLOCKQUOTE]
[P]Fine. But why use bankruptcy court to do it?[/P]

 

[TomBascom]

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On 9/27/2002 1:16:52 PM oldiebutgoody wrote:
Who pays $1200 for a 1200 mile flight? It's probably more like $250 for a 2500 mile round trip....
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You guys really ought to try buying your own tickets sometime.

$1,200 is an extremely common price quote for a last minute walkup fare. You don't have to be going anywhere near 1,200 miles to see it either.

KCFlyer's point is that the reaction of just about anyone who sees that fare is oh, I guess I won't go. If the fare were $250 you'd a) sell the seat and B) make a profit on it. Instead the seat goes empty, a potential customer has had a bad taste left in their mouth and some genius is wondering how to sell more hyper restricted ultra-cheap seats to fill that plane back up.

The idea that business travelers are going to blindly hand over extortionate fares because the airlines assert that they should isn't working. How much more obvious does it need to be?

 

[TomBascom]

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On 9/27/2002 415 PM UAL777flyer wrote:

We haven't done squat to lure back the business traveler? That's not ture. We've thrown numerous incentives out there since 9/11 and it didn't bear fruit, because in order for us to bring in that business traffic, we had to lower fares to competitive levels with Frontier, ATA, Southwest, etc., because the business traveler isn't willing to pay higher fares anymore. And in doing that, it only highlights the fact that our costs are simply too high.
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You might start by acknowledging that the business traveler doesn't agree with you. You're not trying to incentivize us -- you're trying to sucker us.

You're not offering lower fares to business travelers. It's bait and switch combined with nickel and dime. You offer a low fare -- with restrictions out the wazzoo that make the ticket nearly impossible to use for business (which is obviously the point of the exercise.) Then to make any sort of change the traveler gets to pay outrageous and completely non-sensical fees as well as buy up the ticket to some crazy price. And you wonder why we aren't biting?

 

[chipmunn]

UAL777flyers comments regarding a lack of pricing power and excess capacity are accurate.

For a return of profits airlines must reduce capacity to match supply with demand. This idea is widely recognized on Wall Street, the Bush Administration, and in individual major airline Executive Suites.

US has gone through much if not all of its major restructuring whereas the other major airlines have not. But, September traffic figures are extremely disappointing and if revenue does not return to recent levels, there will be undoubtedly even more cuts required.

Chip

 

[KCFlyer]

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[BLOCKQUOTE][BR]----------------[BR]On 9/27/2002 4:15:13 PM Flufdriver wrote:[BR][BR]Hate to break it to you KCFlyer, U simply did what they are entitled to do. I guess Chrysler shouldn't be making cars and Jeeps now either. Tell Gordon he shouldn't be flying. U, your now Free to Move about the Country. By the way...bet their ON-TIME! ----------------[/BLOCKQUOTE][BR][BR]Flufdriver - If you'll read my posts closely, you'll see that I am trying to put out some ideas that just might help save some jobs and some airlines. Using numbers that are based on current costs, not some projection of cost reductions brought about by $9 billion dollars in concessions. But all I hear is...We have to get costs under control...there is just too much capacity in the system. The concept of gaining by cutting fares is an anathema. [BR][BR]Fine. If there is too much capacity then what will a filing by U accomplish? UAL777 says there is about 15 to 20% too much capacity. Even scaling back, U isn't going to reduce system capacity by much...certainly not 15 to 20%. So, you've sucessfully unleashed a gnat to go bother the big boys who still have debt and high costs. Then, THEY have the rights to go to bankruptcy court, relieve themselves of some debt, cut some costs, and reduce a little capacity. But still not that 15 to 20%. So now there is a gnat and a housefly buzzing around the other big boys ( who still have high costs and debts), so yet ANOTHER airline marches into bankruptcy and trims down. Sorry, but that's not acceptable. If capacity has to be reduced, then the easiest way to accomplish that is to let an airline or two fail. Now the question becomes - who should we sacrifice? Employees of one airline wouldn't be too keen on having their airline offered to the capacity reduction that the industry needs. [BR][BR]I offer up a thought....a concept that only one airline has tried (HP) and surprisingly, their operating losses are stemming. They're not out of the woods yet, but by golly, we can see the edge of the forest. But I'm told how there's NO WAY trying that would work. I'd say, before we go offering up an airline or two to rightsize the industry, they ought to try something a little different. What have you got to lose? If it works, you've got a job and didn't have to take drastic pay cuts. If it doesn't, you're no worse off than you currently are.

 

[TomBascom]

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On 9/27/2002 4:53:46 PM chipmunn wrote:

For a return of profits airlines must reduce capacity to match supply with demand. This idea is widely recognized on Wall Street, the Bush Administration, and in individual major airline Executive Suites.
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There are two ways to increase profits in that equation. One is to reduce capacity. The other is to spur demand. The fixation on reducing capacity is strangely at odds with SWA and company's ability to grow. Where do you guys think all the missing business travelers have gone? Sure, corporate travel budgets have been cut -- but people are still traveling on business. The number of trips hasn't been reduced nearly as steeply as you might think. Hotels don't have as many empty beds as the big 6 have empty seats...

I was booking a flight last night.

I wanted to try to buy some sort of refundable ticket because I know there's a good chance that some sort of change will pop up on this one. But I gave up after a while and just bought the cheap tickets that the web site suggested. I couldn't find any reasonable middle ground to work with.

 

[UAL777flyer]

The comparison to Southwest ignores the fact that the very reason they are able to continue to grow is by KEEPING THEIR UNIT COSTS LOW! This has been something the majors have been unable to do. You cannot expect high cost airlines to simply revamp their fare structure by lowering walkup fares to WN and F9 levels and not expect to see some revenue erosion. Let the majors address the obvious over-capacity in this industry and get their costs in line. Then they can get a more firm handle on the pricing structure. It has become ludicrous in this country that everyone now expects to be able to fly from coast to coast for $250 roundtrip.