Delta to reduce by 50%

Greg Bockelman said:
On this we agree.



I tend to have a different view. The reason that the fares are so cheap, IMO, is that the airlines were flying around with a pot load of empty seats, so they started taking what they could for those seats. People were getting these seats at below cost and got addicted to them. If there weren't as many seats, then supply and demand would dictate higher prices, and the airlines could (in theory) be in a better financial position. (This is MY opinion, based on nothing more than my observations of how the industry works.)
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Greg, I beleive the argument for existing over capacity could be argued either way. I don't however, think that mergers and cutbacks actually do anything to actually reduce the overall system capacity. As someone stated below, it's way to easy for startups to come in and sell tickets below cost until they leave and someone else steps in. The federal government, local cities, and airport management will fall all over themselves wooing other carriers in to fill the ATC slots, gates, commercial space etc that have just been vacated by the struggling airlines. They'll offer tax breaks, reduced lease rates and lower landing fees enabling the entrants to sell tickets at even lower prices. All this combines to negate any pricing advantage the struggling carriers might get from reducing their own capacity. The adage "You can't shrink to profitability" is true for this reason.

Maddog
 
SCCutler said:
Greg, I sort-of agree with you and sort-of don't.

The persistent problem in the industry is and has been wretchedly poor management. With few exceptions (and you know who they are), you have companies with a pack of greedy bastards at the top, focused principally upon, at the same time, chiseling their employees and gouging their customers.

Note well: the most profitable carrier out there (and the only consistently-profitable one) is known as a "low fare" carrier, but their fares are rarely the lowest in any given market. They *are* consistently reasonable fares, though, making the decision to buy travel from them always a safe decision. And, in addition, when plans change (as they so often will), while you will be bumped up to a higher fare level than a discount fare you may have bought in advance, the money you spent before does not evaporate. This generates loyalty.

At the same time, this same outfit is paying what are now the industry-leading wages to its employees- and they actually ask for, listen to, and implement, employee suggestions for greater efficiency and customer service.

After 9/11, they laid off... no one.

Bottom line is, when an airline has the efficiency to run with rational fares (not dirt-cheap, note, just not offensively high) and business-reasonable conditions, and make money, and pay its people well, it is proof that an airline can be a good business.

There just are not many which have managed to do that, are there?
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SC,

The success of the above example can be summed up in one word. Leadership!! Their senior management seems to have studied the principals and actually practices the fundamentals of leadership.

Maddog
 
SCCutler said:
I completely agree that expectations of $200.00 cost-to-coast round-trips are ridiculous. But I am also offended when I am quoted a $750.00+ R/T fare on a 330NM trip.
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I'm also offended by policies that charge $120 and $1200 for the same seat. And that say my ticket is non-refundable, non-cancellable, and non-transferrable but they sell more tickets than they have seats.

-lance
 
Wow, Spike! You make some great points and I really agree with you. We were just having a similar conversation over on the HoustonSpotters.net forum, but unfortunately you have to be a registered member to view it. I recommend just joining - it's free and they won't spam you, and they have some really good conversations (not to mention some GORGEOUS airplane pictures) over there. It stemmed from an article link from the Houston Chronicle.

http://www.chron.com/disp/story.mpl/business/steffy/5639683.html

I had a couple of lengthy diatribes in that thread, and I'll put one here regarding my views on the hub-and-spoke system. To give a bit of a background to this post, I had posted a long itemization of the costs of doing 5 ERJ-145 flights from IAH to STL (just an example out of thin air) vs. the costs of doing 2 737-700 flights daily. My argument was to cut costs, the airlines should do less frequency with larger aircraft instead of reducing the overall capacity. My "devil's advocate" on the other forum argued that it was that way prior to deregulation and that the customers wanted more frequency, so that's the route the airlines took. He went on further to say that if the airlines went back to this system, Southwest would continue what they did before and continue offering higher frequency on the "Baby 7-3's". Here is my response:

Originally posted by Me
I'm not suggesting that we go back to airline regulation. That implies that I think the guv'mint should step in and say how free enterprise businesses should run. I do not think that at all. Yes, it is easy to say that this is one of the casualties of deregulation, but I think that blaming it on deregulation is misguided. Deregulation simply made it possible, the airlines did this to themselves.

Do I think that this is the one and only true answer and the main cause of the airlines' woes? No, of course not... the issue is far more complex than that. This is just one thing that they can do to reduce operational costs, but not capacity. Another thing that they can do to cut costs is quit paying these executives millions of dollars in salaries and bonuses while whining to the pilots', flight attendants', and mechanics' unions that there's not enough money to cover costs and that these groups need to take pay cuts for the airline to survive. And, if they don't, then they'll be the ones publicly blamed for the airline's ultimate demise since they weren't "team players".

In response to a couple of other things... Do we miss the food? I absolutely do when on a long flight. That's one of the best parts of traveling on COA! On flights over 3 hrs. that fall during a meal-time, they actually give everyone in coach a hot sandwich and a salad! Yet they manage to remain in a better position than a lot of the other legacy airlines who have discontinued that service.

You also mention the example of SWA and their ability to offer more frequent flights at lower costs. There are a few other contributing factors to why they can do this:

1) They don't use a hub-and-spoke system. For this reason, they can put larger aircraft on the city-pair routes that need them, instead of having to route traffic from two out-stations through a hub. This allows them to do more direct flights, thus cutting costs (it's cheaper to take someone directly from STL-MSY than it is to go STL-IAH and then IAH-MSY for about the same ticket price). How can they do this when every other airline requires one? Well, that brings me to the second point -
2) They only use one type aircraft. The 737. Now, there are some differences amongst the various models, but for the most part, they can swap parts back and forth, and that allows them to buy in bulk and keep a large stock on-hand at a reduced cost. Also, it allows them to stock parts for nearly all of their aircraft at nearly all of the airports they serve. This harkens back to my first point - most airlines need a hub-and-spoke system because they have multiple types of aircraft, thus needing to set up a maintenance base for even minor maintenance items, since it would be cost-prohibitive to stock parts at all airports they serve for all aircraft types that would serve that airport. Now, SWA does still have maintenance bases to handle the heavy maintenance on their aircraft (such as those rather large hangars on the east side of HOU), but it doesn't need those as frequently (or at all in 46 cases
wink.gif
). Also, why can't other airlines go to a single-type model? COA almost has - they are all-Boeing now. Domestically, it's almost all 737's, with very few domestic routes using a 757, 767, or 777. Getting rid of the "Mad Dogs" has probably save COA a lot of money the past couple of years. JBU is two types - A320 and E190, not as cost-effective maintenance-wise as a single type, but the savings on the routes that don't require as much capacity probably makes up for it. Frontier is one type. The majors can't realistically go to one type because they have too many different mission profiles. COA has a lot of long-haul flights overseas that require the range of the larger aircraft. SWA, JBU, Virgin America, Frontier, and others do not. That being said, NWA could probably do well by retiring their DC-9's and going for an all A319, A320, A321 fleet.
3) They pioneered the "quick turn". SWA knows that a plane on the ground is not making any money, and is often quite the opposite - costing money. So, during peak operational periods of the day, most SWA planes are only on the gate for 30 mins or less. One of the benefits of not having to re-cater the flight for every leg.

I guess my point with all this is that while SWA is a serious competitor and has the ability to provide more flights at a lower fare, it is unrealistic for other airlines to try to emulate their service under their current hub-and-spoke system. They would need to completely restructure the entire way they operate to be able to do something like this and still operate in the black.

That being said, I wonder how an airline that runs a "point-to-point" domestic system that integrates with a few international hubs would work? Food for thought...
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