Us Airways Comments On Southwest & Airtran
- Thread starter USA320Pilot
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Not at all. As long as you can be more efficient than your potential competitors, you simply price at a level that keeps them out. And, even if you did have to keep your family in lower middle class, it beats living the high life for a few years, followed by the poorhouse.nycbusdriver said:
Not yet. You can take it there if you want, of course.
OMA to JAX, via MDW and BNA. just under 2 yrs ago. ended up cheaper to drive him to KC and have him take Airtran.
And as for what Jim said, that matches exactly up with what I wrote. Load factors go up. But yeilds go down, and as a result, most carriers retreat to markets in which they have a revenue premium or some form of leverage to protect themselves.
Let me make it clear. SWA is a great at what they do, but only at what they do. The trick is to not to try to play their game. When it comes to going against them in most situations, it reminds me of that Indiana Jones movie, where the big guy waving around the big sword loses, because Indy just pulls out a gun and shoots him instead.
If you compete head to head with Southwest, on the same point to point market, you will take a bath... Which is why IMO our management has been clever to shift our flying into places in which we have either a decent hub, or some form of leverage to shelter ourselves.
BWI and ISP are great airports, but many people will pay extra to fly directly into DCA or LGA... RDU is a great airport, but we have the feed and revenue premium that a hub/spoke provides in CLT to offset such. Florida is a great market for filling up aircraft, but our island and international connections will be what makes FLL profitable. And last but not least, PHL has the feed, international connections, and physical limits upon how much SWA can grow...
The key is not to try and beat SWA, rather to strengthen your own market presence where it counts, and get your costs down to a level so that you can make a profit with the lower yeilds no matter what SWA does looking in from the outside... Afterall, people will drive a ways to save 400-700$, they will not for only 100$ or so...
But like I said, SWA is starting to take a back seat to the competitive threat that jetBlue offers. BOS is a great example of that. Even SWA is worried about JB, and has some tough choices to make in regards to how they too will compete with jetBlue. Making aggresive moves into markets that jetBlue is not yet established is part of that, and THAT is the reason they are going into PIT in my opinion, not anything really to do with US Airways...
usairways_vote_NO
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BillLumbergh said:
I would answer your question but then I would have to look up vitriolic.
HP has managed to avoid taking a bath.Rico said:
It could have remotely been considered clever when US did that out west in 1991. I think the label of "clever" faded as Florida and BWI also saw the same retreat. It's not even close to clever anymore...it's suicidal. How long can this game go on?
That's fine, but that's a short-term solution.
As for B6, you're a long way from worrying about being like B6 to WN.
ClueByFour
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Rico said:
That might have been before LUV capped their fares. You won't pay more than $299 one-way today.
That won't work. It did not work by retreating to the domestic hubs--Southwest is now in the "crown jewel," the "crown focus city," and will probably be "walking in the queen (city)" before too long. You can't run.
"To the islands?" Airtran and Jetblue are already going there. And, it picks a fight with AA, who has more cash to burn.
Extra? Sure. There is no longer a huge population who will pay double or triple. Consider a trip from DCA to SFO. US wants between $1200 and $1500 for a departure on 2/23 and a return on 2/25 (I'm excluding a $600 fare that involved a triple connect via DCA-PIT-LAS-SFO with the last leg being Ted). BWI-OAK can be had for $600 on Southwest. I can get the limo from DCA-BWI (and return) and OAK-SFO (and return) and still be up several hundred bucks. Multiply that by maybe 10-15 truly last minute trips a year, and for a guy in my shoes it's real money (either mine or my company's depending upon the type of trip). Also, both DCA and LGA are handicapped by their perimeter rules if you are talking about long haul traffic. With the exception of Love Field, I don't think Southwest has this problem.
Sooner or later, CLT will get B6 or LUV. Count on it. Then what?
Wave at the Airtran 717s in the Bahamas. Say hello to the B6 Airbi in SJU. That's just the start.
I remember reading somewhere that US' gate leases in B/C are up at the end of 2006. After the beating that US gave both ends of the state of PA in BK1, I can assure you that if LUV wants gates, gates they will get (thru leases changing hands, or new gates). Besides which, the feds don't look kindly upon the kind of thing you are describing (limiting new carrier entry and/or growth by hogging facilities).
Now we agree. However, (and I've been beating this drum for months) CCY has done nothing in this regard. Nada. Until LUV came in, PHL-PVD cost a fortune. Had it been sane (and maybe $100 more than what LUV charges), they would not have schooled US the way they did. Same thing with PIT-PHL.
Perhaps. Jetblue will, at a certain point, lose the advantage of a "rented fleet" and start to face heavy MX costs. Sooner or later, they will be looking at unions on the property. LUV has already beat these issues, and still makes more money than anyone else.
It has everything to do with US. The market is underserved and overpriced. Why do you think they went into PHL--despite the horrid operational problems? Underserved and overpriced. What have PIT and PHL shared for years? US as the monopoly carrier.
Crown jewel...? Please,
I always thought PIT was "ok", but it always struck me as the most vunerable of our former Hubs. Both to LCC flying, and RJ's from nearby CLE and CVG.No, SWA is getting into PIT long after US Airways decided to stop pretending PIT was the "center of the universe". NOT the other way around like with BWI...
CLT on the otherhand is a viable hub, with over 500+ daily departures and a much better cachement to draw from than PIT ever had as a hub. That is what provides the revenue boost to weather LCC entry into that city, or from nearby airports...
Time will tell, but everything we have done down there so far has been a money maker, and FLL looks just as promising.
I will say it once again, MANY people, business travellers in particular, and government travellers in particular will pay the premium to travel directly into DC or NYC rather than drive.
Reread my post, I mentioned a hundred or a few hundred dollar premium that could be obtained for such, not the 600-900$ hit you mentioned. As the low cost structure begines to take place, we can further offer fares that will entice people to fly us instead and skip the hassle.
Look to the record loads we are already carrying out of DCA. It is not just because we have increased capacity there. It is because we have offered low fares that people will gladly pay to fly from the town's primary airport. Change is already occuring, if people were not so negative they might be able to see such things happening.
Then what what... I already mentioned, if we get our cost structure down where it needs to be, it will not matter, as WN and B6 will not have the revenue advantages a major hub/spoke operation brings to the dominant carrier. THAT is why we have been going through all of this, as as long as we are profitable in the new marketplace, it will no longer kill us to have other LCC's in the same market. Look to America West's PHX hub as a good example of this in action.
That is a stupid premise, let's not go and make a profit somewhere, just because someday later on someone else might come in and try to do the same. I guess you think that the DOT will just allow everyone to go everywhere down there eh...? Even so, every market has a saturation point, and if we are already there with CAL and AAL, then too bad for anyone else. Thus the reason it is good to get in while the getting is good.
Sure, they can be stupid like Allegheny County, and lose a viable hub operation with international connections, or they can be smart like CLT, and realize that too much SWA is not always a good thing for an airport.
You been to BNA lately...? Not much of a hub anymore, and nowhere as many direct or international flights anymore. How about riding on something other than a RJ in and out of CLE lately. What had been a nice little hub for CAL is now devoid of all but a few mainline CAL flights...
No, as long as U gets out costs in-line, we can price the market like we plan to even in places we dominate. Trading high yeild for high volume... Then the last thing PHL will want to do is kill the golden goose, just for additonal frequency to MDW... No such thing as "hogging" if we just keep what we already had, and even increase use of those very same gates.
IMO SWA views jetBlue as threat number one, not because of size, or because of style, but rather jetblue is doing what SWA did to everyone else in the past, and is redefining the industry. Gien their size, age, and operating enviorment, jetBlue has more than proven itself in the eyes of smart observers, and smart competitors.
Ever wonder why SWA now has leather seats...? Changed their seating configs to add more room, moving directly into major markets rather than cherry picking them from the outside...?
jetBlue.
SWA is in no danger of going out of business, but they sure as heck are paying close attention to, and adapting their business plan to react to jetBlue. It is obvious. And it will be a very long time until the many advantages that SWA alone had enjoyed, no longer apply to jetBlue...
Wrong.
If SWA was not concerned about jetBlue, and their ability to fly out of the city, instead of a secondary airport an hours drive away, they would have gone into Allentown, Trenton, or both rather than deal with PHL.
We already had this discussion. But I will bring it up again in this light. Why would you drive to MHT or PVD when you can fly for the same low fare on jetBlue from BOS...? Why go all the way out to ISP when you can go on jetBlue from JFK for the same...?
And the "hypothetical question of the night": Why drive all the way up to CLE to fly on WN, when you could go out of PIT on jetBlue and get the same fare...? THAT is why WN is coming to PIT, not because is is some supposed jewel that US is throwing into the trash.
Hope that helps...
Rico said:Crown jewel...? Please,
When ClueByFour was speaking of the "crown jewel," he was referring to PHL, not PIT. Was it Dave Siegel that referred to PHL as the "crown jewel?" PIT is the "crown focus city" and CLT, of course, is the "Queen City."
Why was PIT vulnerable to LCC's and competitors like DL, CO, and NW poaching traffic? Well, because US was offering an inferior product in many markets served by turboprops while the competition offered jets, and because the fares at PIT and in the region were so darned high! There were a small number of people willing to pay those fares, but high-priced markets eventually draw low-fare competitors.
It seems to me that US may have chosen to sacrifice PIT in order to circle the wagons around certain of its other key markets from LCC's; perhaps that strategy buys them enough time to restructure the company.
That's not how it happened. After the merger with PI, US chose to scale back the former Piedmont hub at BWI in favor of its operations at PHL and DCA. BWI saw a significant reduction in service in May of 1991. However, in response to Southwest's entry into the market in 1993, US chose to add service at BWI. I quote USAir Group's 1993 Annual Report:
Southwest responded to USAir's decision to deemphasize BWI back in the early 1990's, and history is repeating itself at PIT.
Actually, the catchment area of CLT is no better than that of PIT. The Pittsburgh MSA still has over one million more people than CLT, and PIT still had over 10% more domestic O&D traffic as of the third quarter of 2004. PIT was a viable hub four years ago, but the company's decision to dramatically scale back flying at PIT in the wake of 9/11 essentially doomed it.
CLT's biggest advantage is that it is the only viable alternative (at present) in the region to ATL. And with Delta's Simplifares, competition from ATL could prove to be CLT's downfall as well.
If the company has so many money makers, what exactly is losing enough money to more than offset this?
Absolutely true, but that fare premium is limited. And as far as I knew, government travellers used negotiated fares which are dramatically discounted from normal coach fares.
While we've heard lots of talk, the company still has yet to walk the walk. You can charge a modest premium for a higher-quality, more convenient product -- but the premium being charged by US still remains far from modest.
Would US be offering those fares from DCA if Independence weren't competing with them out at DCA? (Or WN and FL at BWI for that matter).
You know, the funny thing is that WN has a larger share of the O&D traffic at PHX than HP. And America West has never really thrived at PHX, though they got by through charging higher fares in markets where they faced limited competition. I think that AWA has done the right thing by restructuring its fares, but I don't feel that they've managed to get their non-labor costs low enough to be really successful long-term. Southwest will continue to grow its operations at PHX and LAS, and where does that leave America West?
US management has gotten the labor cost structure down dramatically. Unfortunately, I have seen very little progress in getting the rest of the cost structure down so far! Non-labor, non-fuel operating cost was down by less than one percent between 4Q03 and 4Q04. Even if you exclude higher express capacity purchases, the decrease was only about four percent. US Airways Group has a huge line item for "other" expenses at nearly twenty percent of revenue.
Of course US should go where there is profit to be made! The problem is that the LCC's will continue to follow US into those markets even as the airline abandons markets like PIT. The strategy of retreating into the hubs only works until the LCC's enter all of the hubs.
Well, the problem with this reasoning is that US was unwilling to give any guarantees at all to Allegheny County and Pennsylvania regarding the PIT hub. US's standpoint was "give us what we want or we'll close the hub." The state and county wanted the company to commit to maintaining the hub before giving away the store. And if the company had truly intended to keep a hub at PIT, they probably would have made a commitment to do so. US chose to dismantle the hub and end transatlantic service from PIT at least six months before Southwest announced that it would enter the market, so you certainly can't blame SWA for what US did at PIT.
Not in a few years, but let's compare PIT as a US "focus city" and BNA as a Southwest "focus city":
Daily flights to LAX: PIT - 2; BNA - 4 (3 on WN, 1 on AA, plus 1 on WN to ONT)
Daily flights to SAN: PIT - 1; BNA - 2
Daily flights to SEA: PIT - 1; BNA - 1
Daily flights to SFO/OAK: PIT - 2; BNA - 1
Daily flights to LAS: PIT - 2; BNA - 3
Daily flights to PHX: PIT - 3 (2 on US, one on HP); BNA - 4
Daily flights to HOU/IAH: PIT - 5 (5 on CO); BNA - 14 (7 each on WN and CO)
Daily flights to AUS: PIT - 0; BNA - 2
Daily flights to MCI: PIT - 0; BNA - 4
Granted, BNA does not have non-stop service to exciting places like AOO, BFD, LNS, JHW, PKB, AVP, MGW, SHD, etc. But it does have more O&D traffic than PIT, in spite of only having a bit over half of Pittsburgh's population.
Well, US needs PHL as much as or more than PHL needs US. Without the Philadelphia market, US Airways' transatlantic ambitions simply don't work, and the Caribbean network is substantially weakened. And it is in PHL's best interest to have Southwest stimulate more markets from PHL in order to drive up passenger counts (and it makes passengers happy because the fares are lower).
Until US adopts GoFares in markets that don't compete directly against WN or FL, the city can't count on US to increase volume.
I agree that Southwest will continue to maintain a watchful eye on jetBlue, but Southwest's priority number one is maintaining the company culture. Southwest was offering roomier seating on the -700 fleet over two years before jetBlue took flight. And they've been serving major markets like LAX, SEA, SAN, SLC, MCO, TPA, STL, CLE, DTW, PHX, and LAS for years.
JetBlue would probably still be shut out of BOS if 9/11 hadn't happened and if Mitt Romney and Neeleman weren't pals. BOS wouldn't have been an option for Southwest at the time that they entered PVD or MHT because they wouldn't have had access to the number of gates they would have wanted.
I think Southwest pays close attention to all of its competitors. And if it becomes necessary to add TV's or assigned seating to the product, they will. If anything, Southwest has historically shown a remarkable ability to adapt to changes in the industry.
TTN was off the table due to NIMBY issues. To be honest, I think Southwest went into PHL versus ABE because of the long-term expansion opportunities -- especially if they think thought that the chances of US going out of business were significant. PHL has the long-term potential (ten years out) to be one of their largest cities, and ABE simply doesn't as a reliever airport.
I don't think there was great urgency to get into PHL before jetBlue simply because they'd likely only overlap in flying to Florida and the West Coast at first. And you can see that that is only a small part of what Southwest has chosen as its markets from PHL.
You wouldn't. But why would you deal with the hassle of Logan if you live in the Boston suburbs (Rte. 128/495 areas) and the travel time to MHT or PVD is actually shorter? The parking is cheaper, there are fewer delays, and the terminals are nicer in RI and NH. Why would you fight with the awful traffic on the Van Wyck if you are one of the couple of million folks who live closer to ISP? These reliever airports are actually more convenient to a heck of a lot of people.
I would frame their rationale for going into PIT in a different way. The dominant carrier at PIT has cut service by roughly 60% in the past four years, and has essentially given the middle finger to much of its workforce and the taxpayers of the region. The dominant carrier has reduced schedules to a level at which a new entrant can come in and rapidly become competitive, and many of its formerly loyal customers have become somewhat disenchanted. Fares are still high, in spite of promises of lower fares some day. PIT is primed for low-fare stimulation.
And if WN were so worried about jetBlue coming to PIT, don't you think they would have added service to LAX, FLL, ISP, PVD, or MHT in the first wave (since the likely jetBlue cities would be JFK, FLL, and BOS)?
(Sorry, I'm not trying to inflate my post count but the board software seems to choke on too many quotes...)
ClueByFour
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