Would A Stronger United Mean A Weaker Industry?

[Wretched Wrench]

Love all your comments about UAL failing. Just one problem...ain't gonna happen. You might as welll not even count on it.

I fear you are correct in that. But, UAL will limp along, gaining further cuts from Judge Wedoff and even deeper concessions from the unions. This will increase the "death Spiral" of other, healthier, airlines blackmailing their employee groups into more concessions yet.

 

[boeing787]

And AMR is healthy? Hah...there business plan was for us to go out of business. So much for that one. Let the games begin...we will take back that #1 spot again soon enough.

 

[local 12 proud]

yea when your working for third party wages and benefits! 😉

 

[jsn25911]

And AMR is healthy? Hah...there business plan was for us to go out of business. So much for that one. Let the games begin...we will take back that #1 spot again soon enough.

First, I am a TWA f/a. I just wanted you to know that I agree with you that United will remain flying and someday will take back the #1 spot. Why? Life has a way of coming around and teaching others a lesson. Every airline has "its time" and the circle begins. Just because AA is number 1 now does not mean they deserve nor will remain there.

 

[mweiss]

Nor does it mean that UA will regain the spot. My bet is that it'll be WN...something I wouldn't have guessed a few years back.

 

[jsn25911]

Nor does it mean that UA will regain the spot. My bet is that it'll be WN...something I wouldn't have guessed a few years back.

You may be correct about that - then after them another carrier. Who would have thought 20-30 years ago that TWA would be gone. Like I said before - everyone has their time in the "limelight" then they take their slot down the line and eventually in bankruptcy. It is like a circle. That is why it is important to watch what you wish upon another airline - cause the same thing may be coming your way in a ______ number of years.

 

[funguy2]

FWAAA:

Right on! I think anyone who has questions should go back and re-read FWAAA's posts.

The issue is not that there is excess capacity overall, the issue is that there is excess "high-cost" capacity. This falls right in line with:

1. Explaining why the legacies are losing money and the low-fare segment is making money. There is not enough traffic at the price level required to suppost the cost structure of the legacies. This is partially due to competition (from low-fare airlines and telecom), partially due to economic times.

2. Projections that the low-fare segment will grow to 40% of industry capacity from the current 20%. Some of that growth will be fueled at the expense of of the legacy carriers. Hence the legacies can give up some capacity as a group (unlikely, would probably require collusion of legacy carriers to actually implement) or individually (like a Ch. 7, more likely due to its "relative" simplicity - survival of the fittest).

To get back to the freeway analogy... Its like the Dulles toll roads or the Riverside freeway in SoCal, where there is a toll highway and a "free" highway built simultaneously... There is excess demand (i.e. no excess capacity) for the free lanes and plenty of excess capacity for the toll lanes. (Completely hypothetical example, I really don't want to discuss the actual congestion on those roads.)

 

[local 12 proud]

Nor does it mean that UA will regain the spot. My bet is that it'll be WN...something I wouldn't have guessed a few years back.

i must agree with mwiess on this one, major changes must occur at all "major's" before any will ever hold the #1 spot again. including AA!

 

[ntm]

Who cares about holding the number 1 spot ?
I think the majors are beyond that now !!
They just want to hold on. Any number will do.
Anyway once you are number one, there is only one way to go.


C'est la vie.

Later.

 

[twasilverbullet]

In this case being #1 does not mean being the best. :down:


Boing787, if you are United....GOOD LUCK!........I know you will make it.

 

[ual777fan]

I keep wondering why everyone is hammering on the over capacity in the industry. Last time I checked United was loading in the 80's and occasionally in the low 90's... that is extraordinarily full for an airline. I read at one point that when loads breach a certain level, I think it is in the low 90's, the airline is basically asking for an operations meltdown.

As for fuel prices, they are hurting everyone right now. The fact that UAL posted an operating profit in a month when oil crossed $40 a barrel is a significant accomplishment that needs to be recognized.

 

[FWAAA]

I keep wondering why everyone is hammering on the over capacity in the industry. Last time I checked United was loading in the 80's and occasionally in the low 90's... that is extraordinarily full for an airline. I read at one point that when loads breach a certain level, I think it is in the low 90's, the airline is basically asking for an operations meltdown.

As for fuel prices, they are hurting everyone right now. The fact that UAL posted an operating profit in a month when oil crossed $40 a barrel is a significant accomplishment that needs to be recognized.

What we're talking about here has nothing to do with load factor, since millions of those pax are paying extremely low fares. They're not enough to make UAL profitable for Q2 2004, and no other legacy network carrier will report a Q2 profit either. What it amounts to is that all 6 legacy network airlines are carrying millions of unprofitable pax. And they are willing to bid for the no-profit business because it is better to get some money to help pay for fuel than to leave those pax at home.

That airlines are bidding down the fares to attract some bumpkins to fly doesn't mean that overcapacity is not real.

Every legacy network carrier has some high-yield pax. Problem is, no legacy network carrier has enough high-yield, full fare customers.

If we only had 2 or 3 network full service carriers, instead of the 6 we currently have, fewer companies would be competing for the finite sized pool of people willing to pay higher fares, and the current model would probably survive a while longer.

There would be fewer high-yield, high cost seats chasing the elusive profitable pax, leaving WN, B6, FL and the other LCCs to fight over the castoffs.

Frequent Fliers like me would scream bloody murder, however, as F and J seats would be occupied more often by those paying full fares and less often by upgraders. I like to upgrade, but I also like the option of flying a full-service airline, and if things don't change, all 6 of them will keep bleeding money.

 

[mweiss]

ual777fan,

Let's assume for the moment that the only way to get to that 80+% LF is be selling half of the tickets at $10/ea, and the other half at $100. And let's assume that the cost of transporting those people was $90 each. On half of the passengers, you're making $10 apiece. On the other half, you're losing $80 apiece...which is better than losing $90 apiece on empties, but still it's there to cut losses, not generate profits.

If, on the other hand, you had half as many seats, and comparable CASM, then every seat on the airplane is a profitable seat.

This is the industry's problem. Sure, LFs are up, but they're up in order to cut the losses, not to put profitable butts in the seats.

I've oversimplified in the above scenario. Different CASMs will produce different results, and since CASMs vary by close to 10c in the industry right now, "overcapacity" means something very different to US than to B6.

 

[upsilon]

If the consensus is that six of the existing HCC carriers are "legacy", then I predict that during 2005, at least one will be gone and by the end of 2006 there will be no more than four and probably only three.

Having seen the demise of once powerful and dominant Eastern, PanAm, TWA and Braniff, I no longer think it likely that all six will be around in 2½ years. All of these four tried to stave off extinction by selling assets, e.g. the Shuttle, Pacific routes, Atlantic routes, S.A. routes. airport gates. All it did was insure their ultimate failure.

Before it happens again, creditors, lessors and bondholders should/will step in and see that the value of these assets are not squandered in eeking out a few more years of unprofitable operations.

I have been a business flyer for a lot longer than any current legacy carrier pilot has had any kind of license and I flew regularly on these dinos. I also have now or have had FF status on the six legacy carriers.

But I have seen the future. It is the LCC flying mainline equipment on direct flights. This includes ATA, JB, AW, TransAir and SW. I've flown them all and can't help notice the obvious suit types (male and female) that are increasingly in evidence.

It appears to me that the HCC are operating on the principal that if they fill the plane by selling lots of unprofitable tickets, they will "make it up in volume". Thus, I won't try to predict which carrier will go and which will still be here in future years. I just know for certain that they will go in the order that they run out of money!

 

[Winglet]

Upsilon - You may be right. A natural fallout to that will be that a lot of smaller cities are going not going to be subsidized by the "HCCs" in order to attract feed to a low price ticket. That'll mean that a lot of smaller cities are either going to have to start paying the "real" cost of a ticket flying on a high CASM 50-seat tiny jet (TJ) or they're not going to get service at all. The LCC model isn't going to work for as a national transportation system. Given the propensity of today's American to "get mine" at absolute cheapest cost and screw everybody else on the planet . . . that is what we're going to get. So, if you live in NY and want to go to the Mouse House, you're all set.