What Will The East Coast Look Like

[USA320Pilot]

I believe US Airways announced the rejection of the PIT leases just prior to exiting bankruptcy I because post September 11 it was "excess" to the pending corporate transaction with United Airlines, either the UCT, ICT, or a derivative.

Dave Siegel knew that more capacity would need to come out of a US Airways - United integration and hubs in PHL, CLT and ORD would create an East Coast to Midwest triangular hub relationship.

The same thing holds true for the DEN, LAX, and SFO West Coast to east of the continental divide triangular hub relationship.

The Marketing & Planning Departments at both airlines called this relationship ORD East and ORD West. The two hub patterns would have created the strongest domestic airline hub relationship in the country, but as events unfolded US Airways' senior management rejected United's attempt to merge (again) last spring. Instead US Airways chose America West as its merger partner.

Meawnhile, as events unfolded PIT became more and more expensive to operate and now is excess to the America West merger too.

US Airways' E&FA reports indicate PIT has some of the worst yields and traffic in the route network. Oddly enough Southwest has not expanded much in PIT since its initial flights and is adding Fort Myers to its network instead of more PIT flights.

Regards,

USA320Pilot

 

[trvlr64]

US Airways' E&FA reports indicate PIT has some of the worst yields and traffic in the route network. Oddly enough Southwest has not expanded much in PIT since its initial flights and is adding Fort Myers to its network instead of more PIT flights.

Regards,

USA320Pilot

[post="280015"][/post]​

HHHMMM. The PIT airport passenger loads have increased on every airline at the airport since the downsizing of US. WN just added another PIT - PHL flight too. PIT's "worst yields & traffic" are a cause of the US downsizing. Cause and effect.

US doesn't get me to my destinations in a timely manner so I now have to fly the other carriers out of PIT. Even having to fly WN now. HHHMMM!?! Guess those CCY braintrusts thought the customers wouldn't start flying on the other carriers and remain loyal to US. WRONG!!

Guess what?! I think every customer in PIT has gotten used to making connections. So your comment about adding service is assinine. To get most anywhere out of PIT on US we have to connect anyway. On WN, I connect in MDW or PHL, UA it's ORD or that hellhole IAD, NW it's DTW, CO it's EWR and DL it's CVG or ATL.

So you see your statement about adding more service out of PIT by WN is nonsense. Will PIT see more direct flights? Who knows. But I do know I'm not being raped by overpriced airfares anymore because now I have more choices.

If you bothered to read any newspaper article about the WN entry into PIT or even the WN website, the WN CEO stated that service will be increased when demands are needed. Seems to me that extra PIT - PHL flight only after 2 months of service was demand. Interesting. I don't remember US adding any flights when demand was needed. I do recall them downsizing. Or replacing full size jets with barbie jets.

And what does the addition of Fort Myers have to do with PIT? WN is or has become the INTRAFLORIDA carrier. Seems once upon a time that honor belonged to US. Interesting. They , the WN management, sees a demand out of that area of Florida and they are jumping on it. Something US doesn't know how to do. OH WAIT!!??! They did. It's called FLL. And only after 2 months of operating that "minihub" US management downsized that too.

 

[totobird]

I remember last Fall US320 posted that USAirways would have a major downsizing in PIT. Sure enough come November 2004 PIT lost many flights.
If he says PIT will downsize again this October/November my money is with him. I realize that it may not be reasonable to downsize PIT but looks like it will continue. Just the fact Republic is taking over the Mid Atlantic planes may account for the loss of 15 to 20 flights alone from mainline and move over to the Express operation.

 

[trvlr64]

I remember last Fall US320 posted that USAirways would have a major downsizing in PIT. Sure enough come November 2004 PIT lost many flights.
If he says PIT will downsize again this October/November my money is with him. I realize that it may not be reasonable to downsize PIT but looks like it will continue. Just the fact Republic is taking over the Mid Atlantic planes may account for the loss of 15 to 20 flights alone from mainline and move over to the Express operation.

[post="280033"][/post]​

I'm not arguing that point. He was correct. But only because he knows who to talk to within US.

I'm arguing his other comment. Which is totally offbase. Cause and Effect have resulted in poor traffic for US in PIT. Reduce the number of flights and customers will look elsewhere for their travel needs.

 

[ClueByFour]

I'm not arguing that point. He was correct. But only because he knows who to talk to within US.

I'm arguing his other comment. Which is totally offbase. Cause and Effect have resulted in poor traffic for US in PIT. Reduce the number of flights and customers will look elsewhere for their travel needs.

[post="280034"][/post]​

Bingo. The "cause" of the poor traffic levels is/was US, and the fares that it tried to extract. And yes, LUV has (within about a month) announced a %10 expansion of flights in PIT, on a US trunk route no less.

US is still trying to find a way to hide from the LCCs. Vegas will only support so many night flights. O&D traffic (the kind that everyone wants) has increased since US began pulling out of PIT. Increased. Heck, they are building a new security checkpoint because of it.

Notice that neither 320 nor the US spokespeople ever address this very important point.

 

[bluetoad]

I think the east coast is going to look alot like JFK does now with the exception that there will be jetblue 190's flying all over the east coast.

 

[BoeingBoy]

The Prudential report on the merger I mentioned in this post gave their analyst's opinions on what changes could be expected in the N-S service on the East Coast.

Unfortunately, I can't link the report since it comes from a "authorized access" only source - my broker's site. It's also too big to attach - 550K. But if anyone would like me to email it to them, just let me know.

As for the basics, it said that AWA management would be unlikely to compete with WN (or B6) like US has attempted to in the past - try to "out-Southwest Southwest". They would be more likely to do as they do in PHX/LAS - serve markets WN doesn't and taylor capacity in markets where they do compete with WN to that which will pay some premium (note - not Blofares) for the amenities AW offers (FC, interline, etc).

Jim

 

[Winglet]

And what is Plan Z to deal with $60-70 oil?

 

[BoeingBoy]

The Prudential report has tables & charts that I'm not going to try to reproduce, but here are the route discussions.....

AWA Has Provided Some Guidance On East-West Cutbacks…

In merger announcement presentations, AWA talked openly about the need for change in the Pittsburgh (PIT), Charlotte (CLT) and Philadelphia (PHL) to West Coast markets. AWA has an existing set of flights connecting PIT and PHL to PHX and LAS, with numerous beyond connections to all of California and the Northwest. AWA indicated that capacity would be cut approximately in half in these markets. Total seats offered will approximate the number of local passengers in each market. Connecting customers who are traveling from competitive points beyond on the UAIRQ system will be accommodated, but capacity will not be built into the system for these typically low-yielding customers.

As shown in Figure 4, these planned reductions should remove about 24 transcon roundtrips from the existing UAIRQ system and eliminate the need for about 21 aircraft. Given the substantial losses UAIRQ is suffering in these markets, and because the beauty of cutting flights in overlapping markets is intuitively easy to relate to employees, vendors, and investors, this is an easy first decision for AWA management. Although the company did not provide details as to current losses by market, we have reviewed certain traffic and revenue data available from the Department of Transportation for the first full quarter after the arrival of LUV in Philadelphia, related to the East-West routes. It is clear from this review that in most markets, over 50% of the revenue is derived from passengers originating beyond PIT, PHL, or CLT. Although exact data has not been provided, it is easy to see how the East-West routes could be losing $50+ million per year, on a fully allocated basis. Cutting 50% of the flights will clearly shrink the losses, but one must remember that cutting the flights will only cut the variable costs.

Reducing the nonstop historic UAIRQ flights, routing the higher yielding of the connecting travelers over existing AWA flights through LAS and PHX, and not carrying the lowest yielding traffic is clearly a good idea. We expect that the full 50% cuts in East-West flying will reduce losses by a net of $20 – 30 million per year.

…But The East-West Cuts Account For Only 1/3 The Aircraft Returns And Solve Just A Fraction Of UAIRQ’s Problems

Given the announced savings target of $150 to $200 million from route restructuring, and with 60 total aircraft to be returned, there have to be more and larger savings expected from elsewhere in the system.

UAIRQ’s Biggest Route Problem Is LUV’s Invasion Of PHL And PIT
Southwest Airlines began serving PHL, UAIRQ’s largest hub, in May of 2004. From data available for markets entered by LUV in its first full quarter in PHL, it is clear that LUV’s arrival has been a major factor in the current UAIRQ difficulties. As Figure 5 indicates, in each of the early markets, the average ticket collected drops from 18% to as much as 83%.

Southwest has indicated that PHL has been their best and quickest startup in 30+ years of operations. With that, it is easy to assume they are likely planning on ultimately building PHL into an operation comparable to their existing largest operations—approximately 200 flights a day to 20+ non-stop destinations. LUV started PIT service in May 2005 and immediately began serving Florida, Chicago, and Philadelphia. Given the population pool in the Pittsburgh metro area, we assume PIT will eventually grow to about 125 flights per day, also to 20+ destinations.

UAIRQ’s Anti-LUV Strategy Has Not Worked – And, Arguably, Has Been Making Things Worse…

Since Southwest’s first announcement that it was planning service to PHL, US Airways has taken a “We can’t let them run us out of Philly like they did in Baltimore†approach to competing with LUV. In general, this seems to have meant that whenever LUV added a flight or two in a market, UAIRQ would counter by adding as many flights, or even more. It often seemed like UAIRQ was trying to offer so much added capacity, at prices equivalent to some of LUV’s lowest promotional fares, that there would be no need for anyone to try LUV, thus starving LUV for traffic, with the hope that LUV would give up and leave town. This obviously has not worked nor has anyone else ever found that approach to work since LUV first started flying from Dallas to Houston in the early 1970s.

…As They Have Been Adding Capacity In Markets Where 100% Full Airplanes Still Lose Money

Figure 7 provides specifics as to the problems with UAIRQ’s methods of competing with LUV. In this figure, we have drawn what we estimate is the total cost curve for UAIRQ and have plotted several data points reflecting the average fares collected in the markets where LUV and UAIRQ compete. The fact that the average fare is below the cost line in these markets means that UAIRQ’s Break Even Load Factor (BELF) is over 100%. UAIRQ has been adding flights into markets and then discounting seats to the point where it needed to sell over 100% of the seats just to break even. As illustrated in the table below, relying on traffic to points north of PHL is not the solution either. Fares continue at roughly these levels today. We thus see cutbacks to Florida against LCCs AirTran and LUV as one obvious place where AWA will likely change UAIRQ’s direction.

AWA Has Prospered Along Side LUV In Its Hubs…

The AWA/UAIRQ combination may seem particularly attractive to the AWA team, but not to other airlines and traditional airline investors. AWA’s view of the PHL hub, in comparison to AWA’s home PHX hub, quite likely looks extremely inviting, given that the PHL metro area has two-times the population of PHX and that UAIRQ serves 99 cities nonstop from PHL that LUV does not serve from any destination.

…By Seeking Coexistence Not Dominance

As Figure 8 illustrates, AWA’s largest PHX markets include several not served by LUV. In addition, several of LUV’s biggest markets are not among AWA’s Top Ten. Importantly, in markets where both AWA and LUV operate, AWA typically schedules fewer flights in the markets than LUV, reflecting AWA’s efforts to tailor capacity to match the needs of those customers not drawn to LUV. This is in stark contrast to the competitive posture of US Airways in its efforts against Southwest.

AWA’s Approach To PHL And PIT Should Go A Long Way Toward The Forecast Route Synergies

Although not mentioned in the early announcements regarding how UAIRQ and AWA will integrate operations, we believe AWA will focus its efforts on reducing North-South capacity. It is not surprising to us that AWA did not mention the North-South capacity specifically. Both current and previous management at UAIRQ repeatedly emphasized the need to compete with LUV in a manner that keeps LUV from taking over PHL. Accordingly, UAIRQ’s employees would surely take any discussion of wholesale pullbacks against LUV as a sign of defeat. However, given AWA’s history and expressed methods of dealing with LUV, we can’t imagine the combined company taking any other course.

After One Year, LUV Serves 8 Of The Top 10 Nonstop PHL Markets

Per Southwest, the PHL opening has been the fastest and best new city opening in their history. They have indicated that their ability to grow in PHL has been limited only by the availability of airport gates. This is often the case for new airlines entering an airport. However, city and airport authorities almost always find a way to accommodate a low-fare carrier. As such, we think the current slowing of growth in PHL by Southwest is only a temporary issue. There is no reason to believe PHL will be anything other than one of LUV’s largest hubs. Figure 8 above shows the relative service levels of UAIRQ and LUV in the largest PHL markets.

UAIRQ Serves 99 Other Nonstop PHL Markets And That Should Support A Smaller Yet Profitable AWA/UAIRQ Hub

In spite of the fact that LUV serves most of the larger cities, there is clearly a way to maintain a meaningfully profitable hub in PHL. As is the case in PHX, where AWA serves 67 cities that are not served by Southwest, given the PHL markets not likely to be served by LUV and the much denser population pools in the Eastern half of the country, we are optimistic that the predicted route synergies will be easily achievable.

Bob McAdoo
(816) 531-2182
[email protected]
Prudential Equity Group, LLC One New York Plaza 15th Floor New York, NY 10292

Jim

 

[gso-crew]

So what he is saying is that when Southwest cherry picks one of our routes, we move over, cut our flights in half on the route and move on.

On the east-west plan is he saying that he thinks we will cut 24 transcon roundtrips out of PHL, CLT, PIT and then select a couple of east coast cities for non-stop service to PHX and LAS? If so, which cities do you think will be selected?

How will frequent travelers get from RIC to SAN on the new US Airways? RIC to CLT to PHX to SAN?

How will someone in SEA get to FRA? SEA to PHX to PHL to FRA?

I don’t believe passengers originating from major business markets like ORF GSO CHS BUF SYR will tolerate making two connections to get where they are going. They will choose another airline.

 

[markkus757]

I think they have to pick several cities that US is already a major carrier in regards to the amount of flights and traffic that is generated on their route structure. This would help minimize any more startup costs with new flights while enhancing the current product portfolio. Places like PVD(sorry, I'm a homer) have plenty of O&D to both LAS and PHX untapped by nonstop service to support new US flights. They are the second largest carrier at TF Green right now and have plenty of gate space to utilize. WN does not have anywhere to grow right now until more gates are found. US has plenty of room for these extra flights and already have a loyal following on a local base.

 

[MarkMyWords]

The August schedule change was loaded this week. It takes effect at the end of August - after the peak summer travel and prior to the return of 10-11 airplanes in Sept. Here are some of the highlights of the flight reductions:

Hub/Focus Cities

STA....JUL....Aug

BOS....116....114
BWI.....40.....28
CLT....576....536
DCA....188....185
LGA....203....203
PHL....495....475
PIT....225....217
TTL...1843...1758

Florida



EYW......3......3
FLL.....35.....29
JAX.....13....13
MCO....28....25
MIA......9......8
PBI.....11.....10
PNS......4......3
RSW....10.....7
SRQ......3......3
TLH.......4......4
TPA.....21....19
TTL....141....124

West Coast

STA....JUL....Aug

DEN.....10....8
LAS......9.....9
LAX.....11...10
PHX.....8.....8
SAN.....6.....4
SEA.....6.....5
SFO....10....9
TTL.....60....53

Now some of this may be normal seasonal pull down, but I think it reinforces some of the predicitons of things to come of reductions in East-West and Florida flying. The reduction in CLT seems to be primairily from the elimination of the 2300 departure bank.

Just some food for thought.....With another 25-30 airplanes coming out of the system, reducing east-west flying to half of the August schedule would free up about 20 airplanes. (As stated above)

 

[gso-crew]

We should be able to make most of these work if we pull that much east-west out of CLT, PHL, PIT:


3 BOS-PHX
2 BDL-PHX
2 PVD-PHX
3 PIT-PHX
3 PHL-PHX
3 LGA-PHX
3 DCA-PHX
2 RIC-PHX
2 ORF-PHX
2 GSO-PHX
2 RDU-PHX
3 CLT-PHX
2 ATL-PHX
2 JAX-PHX
3 TPA-PHX
3 MCO-PHX
3 MIA-PHX
2 BNA-PHX
2 MEM-PHX

 

[700UW]

You are failing to grasp that 61 less planes will mean a decrease in flights and cities served, you won't see many point to point east coast to PHX, they will flow through CLT, PIT and PHL.

 

[gso-crew]

Boeingboy's post says; " In merger announcement presentations, AWA talked openly about the need for change in the Pittsburgh (PIT), Charlotte (CLT) and Philadelphia (PHL) to West Coast markets. AWA has an existing set of flights connecting PIT and PHL to PHX and LAS, with numerous beyond connections to all of California and the Northwest. AWA indicated that capacity would be cut approximately in half in these markets(PHL, PIT, CLT). Total seats offered will approximate the number of local passengers in each market. Connecting customers who are traveling from competitive points beyond on the UAIRQ system will be accommodated, but capacity will not be built into the system for these typically low-yielding customers."

The aircraft to be used on the PHX routes I posted may come from the AWA side. I think AWA was looking at those cities before the merger announcement.