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Topic: No Wonder Airlines Are Going Under
Username: Flying_727
Posted 2003-04-21 16:40:58 and read 3918 times.

After hearing a few things in the last couple of days I have been shown the light as to why Major U.S. Airlines are collapsing. American Chief Execs take a huge bonus while others give up money and only turn it away when they've been caught (idiots).

Plus today a teacher of mine told me that about 2 years ago on United she was bumped from a flight and received a free voucher, but later when she used that voucher she was bumped from that flight and received another free voucher, and this has happened to her 4 times. Now she has traveled on United for "free" 4 times. Now I'm not the CEO of a big corporation but I have the common sense to know that if you keep giving things for free then eventually you don't make money.

What kind of morons do we have running our airlines?

Flying_727

Topic: RE: No Wonder Airlines Are Going Under
Username: AIR757200
Posted 2003-04-21 16:53:56 and read 3922 times.


What AMR did, and I'm not defending what they did, was legal. Don't forget when UAL went into BK, the BK judge did give Mr. Tilton (sp?) a bonus check. So, if AA was to file, I'm sure and employees know that Mr. Carty and Co. will still see some of that money. Basically, what they did was a moral issue and now they have created distrust among workgroups and management.

I doubt you can blame the airline's troubles over VOL/DBC (denied boarding compensation). Just because someone got a voucher, doesn't mean they use it. We come across a lot of expired vouchers. Actually, VOL/DBC has nothing to do with poor management.

Topic: RE: No Wonder Airlines Are Going Under
Username: AS_GSC
Posted 2003-04-21 16:58:23 and read 3861 times.

Depending what the airline's break even factor is, they can provide voluntary denied boarding compensation to passengers and still make a profit on the flight.

Airlines have a yield management department which strategically analyze the historical loads, market conditions and demand in order to establish what the "authorized" load can be.

For instance, most airlines will not oversell flights during the holiday seasons as the no-show factor is quite low. A high business travel market with a substantial proportion of tickets sold at a full coach fare will likely have more no-shows due to the flexibility in that fare class. As a result, the flight will be authorized to sell more seats than its capacity.

Cheers!
AS_GSC

Topic: RE: No Wonder Airlines Are Going Under
Username: DIA
Posted 2003-04-21 17:17:54 and read 3834 times.

AS GSC said:"Airlines have a yield management department which strategically analyze the historical loads, market conditions and demand in order to establish what the "authorized" load can be.

For instance, most airlines will not oversell flights during the holiday seasons as the no-show factor is quite low. A high business travel market with a substantial proportion of tickets sold at a full coach fare will likely have more no-shows due to the flexibility in that fare class. As a result, the flight will be authorized to sell more seats than its capacity."


This is directly from the fabled Airline Bible. A.netters take note.

Good job AS GSC, and well-put.

DIA

Topic: RE: No Wonder Airlines Are Going Under
Username: MxCtrlr
Posted 2003-04-21 18:23:35 and read 3721 times.

...and the major airlines prove daily that yield management DOES NOT WORK! When it first started, it was brilliant but, what has happened as it has evolved, is the growing disparity between the leisure fares and last-minute fares became so great, that the last-minute passengers quit flying or went somewhere else. Now, to lessen that disparity, the majors would have to raise leisure fares and lower walk-up fares - something that not all of them will agree to - so market share would be lost by the carriers with higher advance-purchase fares. Basically, the majors painted themselves into a corner and now cannot get out!

You don't see the same disparity among the LCC's (SWA, B6 and others) so they are making money while the majors founder. Everyone agrees that the current airline model is broken but no one wants to do the unpopular things it will take to fix it - basically, give up the low-yield leisure passengers by raising fares a little, and give a break to the bread-and-butter travelers!

The other thing that needs to stop is the FFP points awarded for nothing more than a shopping spree on a particular credit card. My company paid for me to fly one one-way flight on TWA and, because the credit card they used was part of TWA's FFP, and because my FFP # was associated with that credit card, every time my company used the card (which they did frequently) FFP miles got added to my account. I flew four or five free round-trip flights, first class, on TWA because of this. Was I a loyal customer being rewarded? Of course not but it cost TWA many round-trip First Class flights!

Alas, none of this change will most likely happen for the majors as they value that most holy market share too much - so much so, they are willing to become extinct in the process.

As to the subject of "executive retention bonuses" these people are getting paid quite well to begin with. If the only reason they are staying at XYZ Airlines, is because of bribes, then XYZ Airlines is better off without them. So far, none of them has shown that they are worth even the money they make in salary, much less hundreds of millions of dollars to keep them from leaving!

MxCtrlr  Smile/happy/getting dizzy
Freight Dogs Anonymous - O.O.T.S.K.  Smokin cool

Topic: RE: No Wonder Airlines Are Going Under
Username: Scottb
Posted 2003-04-21 18:43:00 and read 3674 times.

Actually, those credit cards which award frequent flyer miles for purchases are big revenue makers for the airlines. The credit card issuer pays the airline a certain amount for every mile awarded to its cardholders. While the airline does eventually have to provide travel when those miles are redeemed, the cost of providing that travel is generally far lower than the revenue received from the card issuer. MxCtrlr, the company that issued that credit card paid TWA money for every mile you got and used -- and the cost of providing those First Class seats to you was far lower than what TWA received from the card issuer.

The cost of those "free" vouchers is pretty tough to quantify. After all, if United managed to accomodate a full-fare passenger at the cost of a voucher which (by the restrictions placed upon it) is equivalent to a deeply discounted fare, there is still a net revenue benefit to the company. And many of those vouchers do expire without ever being used.

Topic: RE: No Wonder Airlines Are Going Under
Username: ONT 737
Posted 2003-04-21 19:27:03 and read 3604 times.

I don't think that many know this, but B6 does not oversell any of their flights. There are 162 seats on our A320s and there can only be 162 seats sold. Sometimes this KISS (keep it simple stupid) method works best and this may well be one of these times. At the airport it keeps the agents and passenger's sanity in that they don't even have to deal with the possibility of an oversale. Plus you don't need the fancy computer's or ever have to issue travel vouchers. (or ever take delays due to oversales) From an agents perspective this is how it goes down.

Lets say it you have a plane with 100 seats in it and some high priced computer says that about 15% of the people will not show up so it is booked to 115. Off the bat you have 15 people peeved that there were no seats available for an advanced seat assignment. Then you get the airport and those people are now wondering why they have to go to the gate in order to get a boarding pass. At the ticket counter you tell them that the flight is technically oversold, but the computer estimates that x many people are going to be a no show so if they could just wait as the gate we will get them a seat when we release assigned seats 15 min prior to take off. At this point regardless of what you say, the pax now thinks that he/she is getting bumped. It is about this time that the pax starts getting really upset. In the meantime the gate agent has to spend time soliciting for volunteers just in case the computer guessed wrong. (Over at SNA our sups would *start* the vouchers at $300 a pop, that’s more than 3 full fare SNA-PHX one-way tickets) So in the end you have 15 people who were upset that they did not have a seat until 15 min prior or 15 people pissed off that were bumped, a few agents that are a little more stressed now from working an oversale, and a few vouchers given out at a few hundred. And for what, another few notches on the load factor? B6's load factor is around 81% YTD.

Topic: RE: No Wonder Airlines Are Going Under
Username: Scottb
Posted 2003-04-21 20:55:34 and read 3521 times.

jetBlue doesn't need to oversell its flights because all of its fares are non-refundable. And if you don't cancel your booking before departure, the money paid for the fare goes bye-bye. No matter what, jetBlue is guaranteed to at least make the $25 cancellation/change fee on the seat (and the entire fare if the reservation isn't changed or cancelled).

Topic: RE: No Wonder Airlines Are Going Under
Username: Goingboeing
Posted 2003-04-21 21:12:43 and read 3482 times.

jetBlue doesn't need to oversell its flights because all of its fares are non-refundable. And if you don't cancel your booking before departure, the money paid for the fare goes bye-bye. No matter what, jetBlue is guaranteed to at least make the $25 cancellation/change fee on the seat (and the entire fare if the reservation isn't changed or cancelled).

Scott - how is this any different from the rest of the majors? Almost all of their advance purchase fares are nonrefundable and use it or lose it. If a person doesn't show up for a flight, they are out the money, and if they change the ticket, it's a $100 fee. The glaring exception is Southwest - their advance fares are nonrfundable, but if you don't use it, you've still got a year to use it and you aren't assessed any kind of change fee. And they are making money. Go figure.

Topic: RE: No Wonder Airlines Are Going Under
Username: Artsyman
Posted 2003-04-21 21:22:15 and read 3467 times.

Scott - how is this any different from the rest of the majors? Almost all of their advance purchase fares are nonrefundable and use it or lose it.
*************************

Yes, but there are lots of refundable tickets sold too. At Continental, the 777's seat 48/235 for a total of 283. Now it is commoon to see a drop off on the day of around 10-15%. Thats 30 + seats that go out with no bums in them and no possibility to redeem that revenue. The airlines know that roughly 30 seats will consistantly no show, so they oversell them.

Jetblue is also small, with only 45 planes, and do not have anywhere near the same complexity of network, fleet, employees that the majors have, and therefore cannot be compared in the same light on this issue

Topic: RE: No Wonder Airlines Are Going Under
Username: Airzim
Posted 2003-04-22 18:06:23 and read 3296 times.

Yield management is no doubt a complex business. But it is not directly related the airfares as some have pointed out above. There is a significant mathematical justification for yield management, one that has proved very successful for most airlines.

In fact Boeing, MIT, other institutions, and nearly every major airline have done extensive studies on the benefits of Yield Management. JetBlue at this stage does not overbook flights, but mathematically that is the absolute wrong approach. Even though no fares on JetBlue are refundable (as they are in WN), they have the potential to sell more seats and raise additional revenues. And JetBlue is doing Yield Management, but they are doing it generally manually and guessing. In the end that is all YM is. The scientific justification of your decisions is based on something, either mathematical models or your stomach.

When you run a very simple point-to-point network, you don't have to worry about traffic flows and displacement costs of carrying people through your network. When you are a network carrier with tens of millions of PNR's, with tens of thousands of O&D pairs with the potential to book flights nearly a year in advance and the airlines have to set fares and overbooking levels for all flights it becomes nearly impossible to manage.

As for your teacher, there are two distinct differences in deny passengers seats, voluntary and involuntary. If your teacher was involuntary denied boarding the airlines is required by law (US) to reaccomodate her on the next flight, or potentially a different airline, buy a meal etc. If she was voluntary denied boarding, they generally give you vouchers. She took the vouchers so to me it sounds like she chose to be denied a seat. Big difference.

Mathematically a small amount of denied boardings are revenue positive for the airlines. They would rather give you a $300 voucher for a future flight, which means you may take a trip that you wouldn't normally take, maybe take your kids and spouse, who will by additional tickets and now you a committed to fly them again over a competitor etc etc.

Give the airlines a little credit. They know exactly what they are doing. Also be careful of the LCC hype. It is not the fares it are the costs. LCC's have a advantage because planes are cheap, employees don't care about getting paid crap right now because they entice them with stock. At some point everyone wants to get paid higher wages, and the advantages of stock price over time evaporates, plus it is not liquid. Just look at Southwest. Wage pressure is a real concern there. The original pilots at WN are millionaires from stock, but their pay is not in line with the rest of the majors. The new WN pilots are not going to make millions. There going to want higher wages. Just a matter of time.

Topic: RE: No Wonder Airlines Are Going Under
Username: United_Fan
Posted 2003-04-24 17:17:20 and read 3133 times.

Take a look at this one! A^A was getting ripped off for their mini booze bottles to a tune of $1.5 Mill! That's alot of booze!
http://www.nypost.com/news/regionalnews/74236.htm

Topic: RE: No Wonder Airlines Are Going Under
Username: Cfalk
Posted 2003-04-24 17:39:05 and read 3110 times.

Just a note to correct any misconceptions.

As I heard it, the "bonuses" which were the subject of much anger were retention bonuses. This is not like "You (or the company) performed well, here's a bonus". A retention bonus is something that you use when the company is in bad shape, and when top management feels like there is a high probability that key managers will bail out as soon as they get a chance. When a company is in severe difficulty, you do not want to have to waste time training new managers - you need everyone to know their jobs right now. A retention bonus is something like, "If you are still with the company a year from now (or maybe 2 years), you will be rewarded with a bonus".

Whether it was the managers who caused the whole problem is another issue. But I think what caused the whole stink is the fact that these payments (or promises) are called "bonuses", and people confuse them with other kinds of bonuses.

Charles

Topic: RE: No Wonder Airlines Are Going Under
Username: EA CO AS
Posted 2003-04-24 18:08:49 and read 3080 times.

Scott - how is this any different from the rest of the majors? Almost all of their advance purchase fares are nonrefundable and use it or lose it. If a person doesn't show up for a flight, they are out the money, and if they change the ticket, it's a $100 fee. The glaring exception is Southwest - their advance fares are nonrfundable, but if you don't use it, you've still got a year to use it and you aren't assessed any kind of change fee. And they are making money. Go figure.

Minor correction...Alaska Airlines' nonrefundable tickets (except for non-changeable last minute "web specials") can be applied toward future travel on AS within one year from the outbound travel date, regardless of whether or not the customer cancels beforehand or just doesn't show up.

There is no "you forfeit your ticket if you don't change it before the scheduled departure time" rule.

A $50.00 change fee is assessed, along with any difference in fare if the new ticket you're buying costs more money.


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