Article

2004-10-21 Home Front: Economy

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by Mark Espinola 2004-10-21 2:33:41 AM|| || Front Page|| [6 views since 2007-05-07] Top

#1 The money quote, "...a weak revenue environment which meant that despite our best efforts - and unlike other fuel-intensive businesses - we have been largely unable to pass the higher fuel costs on to our customers."

Translation, "Our fat union paychecks and benefits and massive fixed cost structures are killing us."

I say let 'em die and bring on a dozen more money making "discount" carriers like Midwest Airlines.

Posted by AzCat 2004-10-21 3:02:47 AM|| 2004-10-21 3:02:47 AM|| Front Page Top

#2 SW and Frontier are other examples.

A thought (no facts to support it): Maybe the days of the massive airlines are over - the business model is broken?

Posted by OIdSpook 2004-10-21 3:18:27 AM|| 2004-10-21 3:18:27 AM|| Front Page Top

#3 I singled out Midwest because they fly planes with only first class seats (2 on either side of the aisle where a normal airline would have 3 on each side) and they do it at a cost of about 75% of what a non-refundable advance purchase coach seat runs on a major carrier. So with 2/3 the seats @ 75% of the cost they're running a revenue stream that's at best 50% lower per plane than major carriers and they seem to be doing fine. Clearly the dinosaurs should be allowed to face extinction.

Posted by AzCat 2004-10-21 3:39:52 AM|| 2004-10-21 3:39:52 AM|| Front Page Top

#4 AzCat, wish they flew from YWR/SEA to TUL. Darn.

Speaking of airlines... here is some other issue to ponder.

Posted by Memesis 2004-10-21 4:04:08 AM|| 2004-10-21 4:04:08 AM|| Front Page Top

#5 YWR=YVR. Yea, am Canuck. So what. Nobody's perfect.

Posted by Memesis 2004-10-21 4:05:12 AM|| 2004-10-21 4:05:12 AM|| Front Page Top

#6 Another factor in airline ticket prices are the outrageous landing fees exacted by most large airports. So much hack hiring, corruption, featherbedding, unneeded construction (billion dollar projects are always in the works) is done at large airports and they make sure it comes out of the hide of the airlines. Meaning the customer.

Posted by dennisw 2004-10-21 5:27:13 AM|| 2004-10-21 5:27:13 AM|| Front Page Top

#7 Yep, inefficient airline companies have been propped up for too long. Let the dinosaurs fail, and a thousand innovative and customer-friendly ones will bloom. Privatize all airports. The deregulation of the 80s was incomplete.

Posted by Kalle (kafir forever) 2004-10-21 7:05:45 AM|| [http://radio.weblogs.com/0103811/categories/currentEvents/] 2004-10-21 7:05:45 AM|| Front Page Top

#8 I can't understand how airlines have survived so long. Isn't the combined profits of airlines over the last 75 years still a negative number?

Posted by Shipman 2004-10-21 7:41:18 AM|| 2004-10-21 7:41:18 AM|| Front Page Top

#9 Ship-
Do you have any reference for that negative number statistic? I'd very much like to show it to someone.
Frankly, IMHO, there is ABSOLUTELY no reason an airline should ever have been losing money, though I could understand problems associated with the fuel price increases. The problem is that in the 80s when they were de-reg'd, their boards and CEOs treated them as a license to print money rather than businesses - and then a lot of them diversified out into other areas that had nothing to do with flying people around. Now they're paying for it.

Mike

Posted by Mike Kozlowski 2004-10-21 8:22:08 AM|| 2004-10-21 8:22:08 AM|| Front Page Top

#10 Mike, check this. Search for the word inception as the sentence you want is near the botom in a paragraph begining , In 1989.

Posted by Mrs. Davis 2004-10-21 8:45:55 AM|| 2004-10-21 8:45:55 AM|| Front Page Top

#11 Didn't notice Southwest in there?

Posted by Don 2004-10-21 9:50:58 AM|| 2004-10-21 9:50:58 AM|| Front Page Top

#12 Thanks Mrs. D.

Posted by Shipman 2004-10-21 10:54:29 AM|| 2004-10-21 10:54:29 AM|| Front Page Top

#13 Southwest is about the only major airline that seems to realize they're a business, not a government agency. I'm pretty damn sick of watching our tax dollars go to bail out the other airlines and subsidize their bloated, inefficient ways. There will always be a need for airlines, and where there's a need private enterprise will follow.

Case in point: Pittsburgh, which was a USAir hub until recently. We've been downgraded to a "focus city", if I have the term right. Since then we've had AirTran, Independence Air, America West, and ATA come in to fill the vaccuum left by USAir's cut flights.

I know USAir's problems affect a lot of people in SW PA, and I hate to see that, but subsidizing their incompetence has gone on too long. Propping them up on so many occasions has only encouraged them to continue their inefficient business practices, delaying and intensifying the resulting fall.

Posted by Dar 2004-10-21 12:04:43 PM|| 2004-10-21 12:04:43 PM|| Front Page Top

#14 Southwest was the first to get it. Since then, several have joined, Midwest having been mentioned, and the airline that is really hurting the large carriers, JetBlue. I haven't been on a JetBlue flight that was under 85% full. Yet I never hear of anyone having been bumped or of desperation stand-bys. There are European versions also, RyanAir for example. They are eating the government owned airlines lunch. Air travel is going Greyhound but the majors still think they're St. Bernards.

Posted by Mrs. Davis 2004-10-21 12:59:00 PM|| 2004-10-21 12:59:00 PM|| Front Page Top

#15 Yeah but I wonder who's doing the aircraft maintenance for all these low-fare airlines.

Posted by Rafael 2004-10-21 1:28:46 PM|| 2004-10-21 1:28:46 PM|| Front Page Top

#16 If the oldies can't compete domestically, wouldn't their best bet for survival be to develop an alliance with a good domestic carrier and concentrate on their international capability? I'd figure United would be a good candidate for this sort of approach; they've got the resources for it.

Posted by Bomb-a-rama 2004-10-21 1:31:59 PM|| 2004-10-21 1:31:59 PM|| Front Page Top

#17 A good question, Rafael, but I think (no links at hand) that SW has one of the highest rated service records in the biz. It can be done right, without bilking or cutting maint corners, and it seems SW and others have worked it out. Where it goes wrong: Crandall and his ilk (read: true corp assholes) issue demands that can't be met (i.e "Cut 10% off your Opns, but without reducing flights!"), 2nd-level and middle-tier execs, knowing their bonuses are at stake, approve cuts wherever they can find them - and that is always in personnel and operations. I had an uncle who was Director of Stores for a major US carrier (died in 1986) - which means he was responsible for everything related to keeping the planes flying - and he got raked over the coals regularly for trying to protect his Opns system from insanity. He told me very personal Crandall stories (and others, as well) that would make your hair curl. Only former pilots or mechanics (preferable) should ever be allowed to run a commercial carrier, IMO. They "get it" and know this is not just another biz.

Posted by .com 2004-10-21 1:42:17 PM|| 2004-10-21 1:42:17 PM|| Front Page Top

#18 In the case of SW I'm less worried about their maintenance practices due to their large fleet. An operation of that size means they have the experience. I know most people don't even think about this sort of thing but it is a consideration for me when choosing an airline (that and security). That's why I tend to pick the biggies. Customer service issues play a very very very small part.
One of the smartest things that SW did was to standardize on one aircraft type and get rid of the hub system. Perhaps the full-fare carriers should follow suit.

...develop an alliance with a good domestic carrier and concentrate on their international capability?

I believe that was tried with Pan Am. Though I don't think they had a domestic partner providing feeder services. For some reason, North American airlines tend to do relatively poorly on international routes. Maybe this is because there is no single flag carrier as there is in other parts of the world.

Posted by Rafael 2004-10-21 2:19:44 PM|| 2004-10-21 2:19:44 PM|| Front Page Top

#19 I love JetBlue...but their fleet is all EU-subsidized Airbuses. Dunno if that's a factor in their economics.

Posted by Seafarious 2004-10-21 2:23:21 PM|| 2004-10-21 2:23:21 PM|| Front Page Top

#20 Sea - You fly Airbust?

Posted by .com 2004-10-21 2:40:00 PM|| 2004-10-21 2:40:00 PM|| Front Page Top

#21 Rafael--One reason I'd trust SW's maintenance is because they fly only ONE type of airplane: the Boeing 737. They don't need to send airplanes to some particular hub for specialized maintenance based on make and model. They don't need to cross train mechanics to handle multiple types of plane. There's only one plane type to know (although it has variants within the class), and every SW maintenance person eats, sleeps, and breathes only 737's.

Posted by Dar 2004-10-21 2:42:40 PM|| 2004-10-21 2:42:40 PM|| Front Page Top

#22 The single aircraft absolutely is a factor in the operation of low cost airlines. It is also part of the reason their maintenance costs are lower. I have less concern about the maintenance of these aircraft than of the aged, mongrolized fleets of the big carriers whose employees sabotage their planes as we saw in the story about Delta yesterday. Also, the regulator of the aircraft maintenance companies came down hard on them after the accident with the oxygen bottles on the airline that is now using a new name. Airline travel is the safest way to travel, by far.

Perhaps the reason North American airlines do poorly on international routes is that there is not a lot of money to be made, other countries subsidize their captive carrier, and other countries discriminate against the US carriers because they cannot fly domestic US routes.

Posted by Mrs. Davis 2004-10-21 2:48:35 PM|| 2004-10-21 2:48:35 PM|| Front Page Top

#23 [Minor correction]The possible sabotage story yesterday was USAir.

Posted by Dar 2004-10-21 3:00:05 PM|| 2004-10-21 3:00:05 PM|| Front Page Top

#24 AirTran is heading toward the single model aircraft (may already be there) with Boeing's new 717 (I think it's called). And here in Atlanta, they often force Delta to cave in to their prices. Didn't like AirTran at first (not many destinations out of Atlanta), but seeing as how they now have basically an entire fleet of brand new planes (and with that came more fuel efficiency, lower maintenance costs as described above) and have started to fly to even west coast cities...I don't see how Delta (Atlanta is their hub) can survive against them and the other "discount" carriers. Maybe the lack of competition for years proved fatal (Eastern used to be Delta's main competitor in ATL until they went belly up in the 80s...then Delta basically owned Atlanta's airport until recently).

Posted by BA 2004-10-21 3:33:48 PM|| 2004-10-21 3:33:48 PM|| Front Page Top

#25 Thanks Dar.

Posted by Mrs. Davis 2004-10-21 3:54:23 PM|| 2004-10-21 3:54:23 PM|| Front Page Top

#26 Hey Rafael, I can't speak for down here, but I hear Celine Dion is helping out up there.

Posted by Asedwich 2004-10-21 10:37:11 PM|| 2004-10-21 10:37:11 PM|| Front Page Top

16:00 Crerert Ebbeting3481
17:02 Crerert Ebbeting3481
18:01 2b
12:17 Ptah
12:00 Ptah
10:55 Jules 187
10:49 Mrs. Davis
10:47 Jules 187
10:37 Frank G
10:33 lex
10:26 Jules 187
10:12 Mrs. Davis
10:05 Mrs. Davis
10:04 Frank G
09:59 lex
08:32 Tom
08:20 Frank G
06:51 Shipman
01:17 eLarson
00:54 Kalle (kafir forever)
00:52 Sock Puppet of Doom
00:50 Asedwich
00:20 Sock Puppet of Doom
00:18 Sock Puppet of Doom