Us Airways Burning Through Cash Stash

[usairways_vote_NO]

If US had the money and the people they could probably get a very good grasp on it, but they have neither.

[post="252793"][/post]​

They used to. Who's fault is it.. nevermind.. employees

 

[whlinder]

They used to.

[post="252795"][/post]​

I dunno, I might disagree that they ever had the people

 

[usairways_vote_NO]

Art and Bob and a number of people have commented, over time, about how sorry an airline Southwest must be.

[post="252565"][/post]​

Good post ELP I would submit that some passengers want to be pampered in first class and/or want the bigger seats in first class and are willing to pay for it or get that free upgrade. Therefore Southwest will never live up to their expectations of a real airline. To me I could care less (about first) but it really is a matter of taste but to call an airline sorry because of ones tastes is just wrong and not fair at all.

 

[usairways_vote_NO]

I dunno, I might disagree that they ever had the people

[post="252797"][/post]​

Sorry I should have clarified that. I meant more people then they do now and the money to pay for the people that could get the job done then. Not that they had people qualified doing the job.

 

[funguy2]

Herein lies one major problem. Due to connecting traffic, I would submit many airlines, and in particular US, have no clear way to determine if a particular route and/or city is profitable or unprofitable. And, does dropping the connecting traffic coming from an unprofitable route then make other routes unprofitable, resulting in an ever downward spiral (part of the 'you can shrink into profitability' mantra)? It's a tough analysis and I don't really think US has a good handle on it (well, it's clear they don't). Up until about 2-3 years ago, they just priced the possibly unprofitable cities to be profitable, and folks were paying those fares. Now that game has changed, which has led to the mess we're now in.

[post="252781"][/post]​

I will echo whlinder's comment: good point.

I know some academics who debate this very topic. They generally come down on the side of you cannot determine profit/loss of any individual flight/route because it is extremely dependent on the rest of the network.

Of course, in order to make decisions, airline planners have to use something to figure out what within their network works and what does not work... However, it then becomes a game of pro-rating revenues, which can change depending on how you do it... There in lies the problem, you can have two answers, neither of which are wrong, which lead to very different answers and conclusions.

 

[ELP_WN_Psgr]

Good post ELP I would submit that some passengers want to be pampered in first class and/or want the bigger seats in first class and are willing to pay for it or get that free upgrade. Therefore Southwest will never live up to their expectations of a real airline.

My objective wasn't to turn the threat into a WN -vs- U deal....fortunately it didn't. My basic point was this---> Look at the industry. Look at the industry for the last 32 years. WN has made money...quite a bit of money. In good times and in bad. At the other end of the spectrum you have the legacy carriers. Their financials make me think you have a whole bunch of reform school graduates in a bank vault with matches to see how much money they can actually burn.

The whole point is to make a few bucks while providing a service. Why, then, hasn't management knocked themselves out trying to turn this outfit into as close a clone of Southwest Airlines Co as they possibly can? They already have the labor cost piece of the equation fixed....heck, they actually have an advantage there.

They either can't...in which case you need to hire management that can.....or they won't, in which case you need to hire management who will. It doesn't take a rocket scientist to look at the various business models and see...this one is making money, and all those others aren't. So which businbess model should I embrace?

 

[mweiss]

I would suggest to you that if a route can make money, it is worth having. if it doesn't, then it needs to be chopped and the assets deployed elsewhere.

I agree, but determining whether or not a route is profitable is not quite as simple as you make it sound. Certainly, it's a good starting point (and, in the early days of WN, was the only analysis necessary, since there were far too many low-hanging fruit out there).

Yeah yeah yeah people can argue about "feed to the network" and "synergistic connecting traffic" and all that bs.

It's not totally bs. The "feed to the network" and "synergistic connecting traffic" is the little push that can convert an otherwise slightly losing route into a slightly profitable one.

If it doesn't, it ought to be abandoned and the resources put somewhere else that offers a better chance at a return on investment.

And this is why eventually one has to look at the marginal routes. It's one thing to be the WN of 1988, with a small-but-growing fleet and a small-but-growing network. It's another thing entirely to be the UA of 2000, with a massive fleet and massive network. What do you do if you're handed the reins of UA? You can't apply the same logic, because there are huge costs associated with grounding fleets, closing stations, and laying off large numbers of employees. At the same time, you can't keep all of those airplanes, stations, and employees and simultaneously fly only the routes that are profitable on their faces.

A lot of people on a lot of airline boards have pooh-poohed the idea over the years that "they don't want to become another Southwest." My question has always been "what is it about making money that you really don't like?"

My question, in response, is "why would Macy's ever want to try to compete head-to-head with Wal-Mart?" Before you respond, I want to make it clear that I don't think US has the level of consistency that Macy's does...but I think it makes more sense to carve out a different niche than to try to compete in the same niche.

 

[mweiss]

Thank you that was exactly my point but I needed you to clarify your "nothing else"

[post="252792"][/post]​

Point taken. I could have, and should have, been clearer.

 

[Schwanker]

WOW,

$543M at the end of Jan. With a burn rate of approx $6.5M per day, that leaves the cash balance today around $300M. Looks like enough for another 6-7 weeks, if the creditors / judge lets it go that long. Sorry, I didn't use a calculator so feel free to correct my quick mental approximations.

Schwanker :down: :angry:

 

[Dog Wonder]

WE NEED MORE PAY CUTS!

 

[luvn737s]

Why should airline management paralysis surprise anyone? There have been basically 3 generations of airline managements: Those who started the airlines, those who managed under deregulation and those who have been there since deregulation. The last group can be divided into those before the LCC tidal wave and those after.

Aside from Herb Kelleher, there is noone who has spanned all 3 categories. Aside from Neeleman and Parker (WN) there is noone who has a clear vision of what a successful airline would look like and probably none of them would be in the airline business by choice except for the relatively easy access to cash that their position offers them. They look around and copy each others failed strategies, dump more seats out on Travelocity and complain that their costs are too high.

When I see Expedia, Travelocity and Hotwire headed for CH 11, then I'll know that the airline business has turned the corner and may have a chance for survival.

 

[luvn737s]

As for the exorbitant cost of RJ feed, I would like to see Lakefield throw the timetable on the counter in front of Orenstein and the others and say, "Here are our flights, see if you can run an airline that connects to them and make money. But you're going to do it without our help."

 

[mweiss]

When I see Expedia, Travelocity and Hotwire headed for CH 11, then I'll know that the airline business has turned the corner and may have a chance for survival.

[post="253074"][/post]​

How would their demise do anything to help the airlines???

 

[BoeingBoy]

I think the theory is that they increase the cost of selling tickets. While I'm certainly not familiar with the agreements with these three, Orbitz & US have had an ongoing spat over payment of fees.

Besides, WN seems to do ok without them.

Jim

 

[mweiss]

Assuming that's the theory, and the goal is to stop paying CRS fees, one doesn't have to wait for Expedia, Travelocity, and Hotwire to file. Simply pulling out of the CRSes would do the trick.