US Airways & Spirit

[700UW]

I was in CCY during the 2nd chapter 11, was on the NC for the IAM M&R, , Triple B and Glass led the presentation, nothing about US becoming an ULFC.

 

[SparrowHawk]

I was in CCY during the 2nd chapter 11, was on the NC for the IAM M&R, , Triple B and Glass led the presentation, nothing about US becoming an ULFC.

Without betraying any confidences there were high level discussions about re-branding US Airways.

One of the things that given serious consideration was changing the name back to Piedmont in order to shed the negative image of US Airways. The primary reason it didn't happen was US didn't have enough money to repaint the fleet and redo the stations & Hubs.

One of the business models they looked at seriously right down to web page design was British Midland (BMI). IIRC their business model is similar to what US has now.

I'm not surprised that this wasn't shared as they never really made up their minds as financial reality set in and the merger took place and the Killer B's left before that by a few months. Lime boy couldn't spin that one.

 

[BoeingBoy]

Jim,
of course revenue and costs are scaled by the size of the enterprise...that is why the revenue and cost per ASM metric is used - since no two airlines are exactly the same size. Not a perfect metric but it is the basis of comparison in the airline industry just as sales per square foot is for the retail industry.

All of which I know. So why not say unit cost or CASM if that is what you mean? If you say, for example, that DL's costs are not much higher than WN's it obviously a false statement. If your intent is that DL's unit costs are not much higher than WN's they say that. Someone with the tag line of "The Whole Truth" should know that spoken communications are imprecise and written communications are moreso so make every attempt at being as precise in their choice of words as possible to avoid confusion.

Jim

 

[WorldTraveler]

All of which I know. So why not say unit cost or CASM if that is what you mean? If you say, for example, that DL's costs are not much higher than WN's it obviously a false statement. If your intent is that DL's unit costs are not much higher than WN's they say that. Someone with the tag line of "The Whole Truth" should know that spoken communications are imprecise and written communications are moreso so make every attempt at being as precise in their choice of words as possible to avoid confusion.

Jim

because I presumed (perhaps incorrectly - or maybe you just felt argumentative) that someone who injects themselves into discussions about airline finances understands that the metric for comparison is unit costs and not absolute costs.
Show me an article about comparison of costs between two airlines that is based on absolute and not unit costs and attemping to make a point about cost competitiveness and you will have made your point.

Without betraying any confidences there were high level discussions about re-branding US Airways.

One of the things that given serious consideration was changing the name back to Piedmont in order to shed the negative image of US Airways. The primary reason it didn't happen was US didn't have enough money to repaint the fleet and redo the stations & Hubs.

One of the business models they looked at seriously right down to web page design was British Midland (BMI). IIRC their business model is similar to what US has now.

I'm not surprised that this wasn't shared as they never really made up their minds as financial reality set in and the merger took place and the Killer B's left before that by a few months. Lime boy couldn't spin that one.

precisely... every US network airline that has gone through restructuring has looked at significant changes to its business model... but as Jim noted, the cost is very high and the larger the airline, the more difficult it is to change the business model (a principle not unique to the airline industry). When you consider that changing strategies is also risky, US' creditors likely would not support a change in BK and the BOD would not support it outside of BK unless there were clear benefits that didn't require a lengthy recovery time - and changing strategies on a large scale basis just doesn't happen.
When you compound that w/ the failure of airline within airline strategies, it shows how difficult it is to get the costs out even of a sub-operation in addition to the challenge of retraining the customer.
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Keep in mind BMI's business model hasn't exactly worked out for them so I'm not sure that there are exactly equals in execution.
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With the slot swap, US has probably completed as much restructuring of its network and strategy as it can do unless it acquires or mergers with another carrier. Other than perhaps some opportunitistic growth that might present itself outside of US' current hub structure, US will live or die based on the network and business strategy it now has.

 

[SparrowHawk]

because I presumed (perhaps incorrectly - or maybe you just felt argumentative) that someone who injects themselves into discussions about airline finances understands that the metric for comparison is unit costs and revenue and not absolute costs.
Show me an article about comparison of costs between two airlines that is based on absolute and not unit costs and attemping to make a point about cost competitiveness and you will have made your point.

You know if I hear that word "Metric" about one more time people are gonna start dying!

BTW, before I make my point, I'm NOT argumentative! I'm Combative. Just a point of clarification.

Now then onward and upward. In business there is but ONE "metric" that matters and you can find it at the bottom of the spreadsheet. That's the line that states the Profit or Loss over a stated period of time. It's the ultimate measuring stick. (Think that's why it's call the Bottom Line") Spirit performs better than US Airways! GAME OVER, End of Story, Case Closed!

Thank you for playing, Carol Merill has some lovely parting gifts for you!

 

[BoeingBoy]

Show me an article about comparison of costs between two airlines that is based on absolute and not unit costs and attemping to make a point about cost competitiveness and you will have made your point.

Show me an article by anyone who knows something about the industry that doesn't specify unit costs if that's what is being discussed, and that is my point...clarity in communication.

Jim

 

[SparrowHawk]

Let's take a look at what Steve Jobs had to day regarding mature companies. Quite interesting and I'll post just a few snippets and the link to a lengthy article.

Don’t forget the money men
The activities of these people further dispirit the creators, the product engineers and designers, and also crimp the firm’s ability to add value to its customers. But because the accountants appear to be adding to the firm’s short-term profitability, as a class they are also celebrated and well-rewarded, even as their activities systematically kill the firm’s future.

In this mode, the firm is basically playing defense. Because it’s easier to milk the cash cow than to add new value, the firm not only stops playing offense: it even forgets how to play offense. The firm starts to die. NOTE: Sound like US or NK?

If the firm is in a quasi-monopoly position, this mode of running the company can sometimes keep on making money for extended periods of time. But basically, the firm is dying, as it continues to dispirit those doing the work and to frustrate its customers. NOTE: US DOT stats support the contention

As the managers find it steadily more difficult to make money playing solely defense, they become progressively more desperate and start doing ever more perilous things, like looting the firm’s pension fund or cutting back on worker benefits or outsourcing to a foreign country in ways that further destroy the firm’s ability to innovate and compete. NOTE: Sound like US or NK?

what would happen if the firm opted to keep playing offense and focus totally on adding value for customers? The result? The firm makes tons and tons of money. In fact, much more money than the companies that are milking their cash cows and focused on making money.

The above sounds far more like Spirit.

Why do managers keep on this path that is systematically killing their firm? For one reason, it’s more difficult to add value than to cut costs. For another, the executives have found ways to reward themselves lavishly. As Upton Sinclair has noted, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”

Did Mr Jobs know Mr Parker and the Tempe Clown Posse? Sounds like he did. Given the above is it any wonder NK out performs US?

 

[Iclubbabyseals]

Did Mr Jobs know Mr Parker and the Tempe Clown Posse? Sounds like he did. Given the above is it any wonder NK out performs US?

That is why I stay out of "cost" discussions. They only work when comparing companies exactly competing with each other with everything the same. It may offer only trend information to a knowledgable analyst. When a corporation gets serious about only cutting costs, that is when I start looking for the death spiral.

It is amazing to me how many otherwise pretty smart pilots get all wrapped up over vague trend information. I am certain Mr. Jerry $10-million-a-year Glass loves jacking those people, providing endless entertainment as well as cost "savings" for the officers. I am reminded of a snake eating it's tail, it is just a matter of time before it consumes itself, completely.

I guess one could generalize that when a corporation treats their operations people as clerks, the end is at hand.

 

[lostplanetairman]

If I'm not mistaken, top pay at Spirit DOS+5 which is full maturity is north of $180 for CA and around $105 for FO's.

Correct $185.32 for CA and $109.27 for FO's.

 

[lostplanetairman]

MORE HERE


Spirit has 36 planes with a hard order for 33 more and a "Memo of Understanding" for another 75 from Airbus.
US Airways has continually reduced or managed capacity.

Spirit is hiring! 39 openings on their web site. There are Pilot and F/A openings that may be for more than one person so the actual number of open positions is unclear.

We took delivery of one of the two planes scheduled for delivery in 2011 on 11/15 on schedule, so we have one more for 2011. The last for 2011 is sceduled for 12/2011. We have been hiring crews since the summer and will continue to do so. We have a bunch of planes scheduled to arrive in 2012 and need to be prepared to fly them to the new destinations. So, we are hiring a tad bit more than 39 people!

As someone who worked in the US Airways system for 11 years, I can only attest to the fact that it's more than the top that are at Spirit. The best of the best from all levels are represented.

Yes, we charge for bags. But we don't charge you $1000 plus for the ticket too! My wife had to fly PHL-LAS on US Airways and her ticket was $1,075. She had to pay to check her bag (she had suffered a horrific fall down an entire flight of stairs a week prior, was terribly bruised and was using a cane because she could not walk well--so she needed to check the bag). The company that booked her ticket insisted she fly USAirways. Had she flown NK, she would have cost them $450 plus the cost of the checked bag. Did she get superior service for the $1,075? Nope! In fact, on the way home, the flight was delayed and there were connecting pax. The FA asked everyone to let the connectors off first. They did. My wife was in the bulkhead and all the connectors deplaned. So she started out and the FA physically stopped her (remember she was bruised and using a cane) saying she was ordered to let the connectors off first. At that point, I emerged from the cockpit, having jumpseated on the flight (I went with her to help her because there was no way she could attend this must show conference without assistance after her accident). My wife told her that they were all off and the FA told her she'd have to check first because she was sure she was just "jumping the line." I interjected that I'd handle things and the FA backed off. That's how to treat a high paying pax? That's how to treat any pax?

And the strategy to charge less for checked bags than for carry-on bags has worked at NK. Our flights board on time and take off on time because people are not trying to stuff the entire contents of ther home into the overheads.

BBB has made it clear that Spirit isn't in business to promote that it flies to all 50 states (Delta from a few years ago) or that it dominates a market. Quite simply every flight has to make money. If it doesn't, then it's changed to a time that makes money or pulled to go to a route that makes money. 89% load factor at fares that make money can't be wrong. In the 10 + years at Spirit, there has been a complete change in the business model. The best of the best is emphasized. It's fun to be a part of that!

My best wishes are for all my former (although not many are left) co-workers at US Airways.

 

[ggiby]

Nice catch! It did say West rates on the web site. Pretty pathetic, yet somehow Spirit is debt free and more profitable on a percentage basis. How could that be? What with all that scary talent in Tempe, US should be running rings around Spirit. Hell, what could two "Dummies" from old US know? Except how to grow a business.

When Tempe took over, they fired all of the talent now at Spirit... they decided to compete with USAirways... and started a new airline.... do you think that Tempe is thinking???
We should have just taken these people on with us at HQ... or maybe just kept HQ in Arlington??? LOL

 

[WorldTraveler]

BBB has made it clear that Spirit isn't in business to promote that it flies to all 50 states (Delta from a few years ago) or that it dominates a market. Quite simply every flight has to make money. If it doesn't, then it's changed to a time that makes money or pulled to go to a route that makes money. 89% load factor at fares that make money can't be wrong. In the 10 + years at Spirit, there has been a complete change in the business model. The best of the best is emphasized. It's fun to be a part of that!

My best wishes are for all my former (although not many are left) co-workers at US Airways.

The notion that baggage charges define or not a "valid" airline is bogus at best. Consumers don't like unbundled pricing but EVERY airline has their fair share of non-transportation revenue (ticket change fees, reservation charges, in-flight fees, etc). According to DOT data, WN gets a higher percentage of its total revenue from incidential charges than do some network carriers that charge for baggage.
I agree w/ the DOT that the primary consideration w/ extra charges is that they be revealed at the time of booking and be very apparent to consumers... unless you are buying a premium priced product (as defined by the seller as "all inclusive" not the buyers perception of "I've paid what I think should be for a full service ticket") then you should expect incidental charges.
I have flown some of the ultra low fare carriers in Europe from whom Spirit developed its business model and there are plenty of people who have no problem doing what the airlines say in order to avoid extra charges.
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Also, it is fun to be a part of a growing company - regardless of the industry - but it is exactly true that low fare carriers have been able to pick and choose the markets they want to serve in order to maximize the amount of money they can make... but networks can't do that.... US does not have the nationwide network but it is still a network carrier and basically serves all the airports in the eastern US that can support commercial air service. Network carriers can't decide to exit a bunch of markets in order to retain others because if they do their network will collapse... thus, the focus on cutting costs and serving the lower performing markets most economically.
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It is fun to be able to build your business model from scratch because you can pick and choose what services you want to provide based on the profit potential of each market... but part of the reason the network carriers struggle is precisely because their business model does not allow them to do that kind of thing.
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NK has a unique business model in the US - they are one of the few ultra LFCs and in a market as big as the US, there is a market for ULFCs. They are well run but they also were able to choose a business model based on their young age that allowed them the freedom to pick and choose markets based on profit potential.

 

[BoeingBoy]

When Tempe took over, they fired all of the talent now at Spirit... they decided to compete with USAirways... and started a new airline....

While the "Killer B's" ended up at NK as you say, they certainly didn't start the airline. NK traces it's routes back to 1980, when it began as Charter One, primarily flying junkets to Atlantic City from cities in the northeast - at that time the only place with legalized gambling east of the Rockies. About 1990 they converted to a more traditional low cost scheduled carrier and in 1992 changed their name to Spirit Airlines. In 2007 Spirit adopted their current model of ULFC.

Jim