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Topic: WN Buyout Of F9 Beneficial For UA In DEN
Username: N104UA
Posted 2009-08-11 11:41:22 and read 5499 times.

It is now looking more and more likely that F9 will be bought out by WN, I know that combined WN and F9 would be 36% of the market in DEN with UA at 37%, it is very unlikely that WN will keep 100% of F9's routes, especially with them selling off their entire fleet of Airbuses. I also know many frequent fliers in DEN that in the past have refused to fly WN because they do not assign seats, and that is one thing that people have told me why they will not fly WN.

So my question is really this would WN cutting routes and F9 Frequent Fliers still refusing to fly WN would this buyout actually give UA more strength in DEN

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mattnrsa
Posted 2009-08-11 12:44:21 and read 5415 times.

Everyone is saying that WN is paying $170 million (at least) to get rid of a competitor, but they are forgetting that UA will be competing against one less competitor too, without having to pay the $170 million. WN has not been doing as well in DEN as they would have liked. This purchase will reduce capacity and restore pricing power in DEN, two things that will benefit UA as much as WN.

UA and WN have competed well against each other for decades across the country, and UA and F9 have competed well against each other in DEN for many years too. The recent problem in DEN was that UA was competing against a WN that was (unsuccessfully) trying to push F9 out of business. This 3-way battle was not sustainable for the long-term - not many airports (certainly not DEN) can have three carriers main carriers. With WN's bid calling for only 40 of F9's planes, we will soon see a further 20% capacity reduction in F9's traffic, allowing fares to go up, helping both WN and UA.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Flashmeister
Posted 2009-08-11 14:08:31 and read 5314 times.

I think that you might be overestimating the benefit that UA will realize:

Quoting N104UA (Thread starter):
It is now looking more and more likely that F9 will be bought out by WN, I know that combined WN and F9 would be 36% of the market in DEN with UA at 37%

Those statistics include connecting traffic, I suspect. The O&D Denver market statistics (DB1B), as posted by Enilria in the WN Bid for F9 official thread are:

2006Q1 F9 20.0% UA 32.0% WN 5.5%
2007Q1 F9 21.2% UA 31.7% WN 8.8%
2008Q1 F9 21.2% UA 29.5% WN 12.8%
2009Q1 F9 17.9% UA 24.1% WN 22.4%

United goes into this with about 24% of local traffic. If WN acquires F9, 20% of F9's fleet will be cut at closing, so let's assume that 20% of their local traffic splits between WN and UA. In that case, you'd have F9 with 14.3%, UA with 25.9%, and WN with 24.2%. F9+WN would be 38.5%.

That's a very theoretical case, but no matter how you slice it, WN would "own" significantly more O&D traffic at DEN than UA would on day 1 post-closing.

Quoting N104UA (Thread starter):
it is very unlikely that WN will keep 100% of F9's routes, especially with them selling off their entire fleet of Airbuses.

You need to read the details of the bid. First, WN has already said that it will keep 100% of F9's cities, including markets that they don't presently serve (significantly, DCA, ATL, ANC, Lynx cities, and the international flying). That was made explicitly clear in the WN conference call.

Second, although 20% of the Airbus fleet would be gone on day 1, the rest operate for up to 2 years as they are gradually replaced with WN's 737s. WN and F9 already have significant overlap, so the immediate 20% cut can likely be handled with WN capacity already in place or easily added here and there without major fleet changes, and then there's plenty of time to move capacity from F9 to WN as the Airbus fleet is drawn down over time.

Finally, WN has said that they intend to open new markets from DEN where there's only a single carrier on the route, and specifically called out UA's monopoly on a number of routes from DEN as their target.

Quoting Mattnrsa (Reply 1):
This purchase will reduce capacity and restore pricing power in DEN, two things that will benefit UA as much as WN.

I agree that this will reduce capacity, although not by a tremendous amount after the initial 20% fleet reduction. I also agree that this will improve the overall pricing power for UA and WN in the Denver market.

I sharply disagree, however, that UA will be able to benefit from this as much as WN will. As WN introduces competition on more UA monopoly routes from DEN, UA's yields have nowhere to go but down.

Quoting N104UA (Thread starter):
I also know many frequent fliers in DEN that in the past have refused to fly WN because they do not assign seats, and that is one thing that people have told me why they will not fly WN.

This is not your father's Southwest Airlines. Think of it: in the old days, WN avoided the "high cost, high delay" airports like the plague, proudly flying to secondary airports and labeling them as a major metro (Miami via Ft. Lauderdale is a prime example). They didn't interline or codeshare, they didn't have a prominent Frequent Flyer program, they didn't have in-flight entertainment, they served fewer meals than everyone else, and they didn't fly international.

Today, Denver (definitely "high cost") ranks 7th of 66 cities in terms of departures for WN, built over just the past three years. WN is or will soon be flying to BOS, LGA, PHL, MSP, MKE, and IAD. They've announced (albeit delayed) codeshares (and interlining) with WestJet in Canada and Volaris in Mexico. Their Frequent Flyer program now includes a growing list of partners. They're testing onboard WiFi, and as the rest of the industry has seen inflight service slashed, WN's onboard food is on par (or often more substantial) than competitors.

I think that WN has shown that they're willing and able to tweak other parts of their business model, and they've been willing to look at seating in the past. Plus, they're acquiring an airline that has more experience (and raw data to analyze) with a la carte pricing programs. So, is it out of the question that you'd be able to buy an assigned seat on WN sometime in the future? I don't think that it is... and I think that WN has shown that they're willing to tweak themselves to fit the market in a way that they weren't just five or ten years ago.

Quoting Mattnrsa (Reply 1):
UA and WN have competed well against each other for decades across the country

You really think so? When WN arrived in California in 1991, it slashed UA's market share on intrastate routes with amazing speed, and despite UA's Shuttle response, UA never regained it, even today. Since the rise of Southwest, United has been through bankruptcy and quarter after quarter of less-than-stellar profit... and a good part of this is because Southwest waltzed in and took United's profits from them before United even knew what hit them.

How is that "competing well", exactly?

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-11 14:40:02 and read 5263 times.



Quoting Flashmeister (Reply 2):
Those statistics include connecting traffic, I suspect. The O&D Denver market statistics (DB1B), as posted by Enilria in the WN Bid for F9 official thread are:

2006Q1 F9 20.0% UA 32.0% WN 5.5%
2007Q1 F9 21.2% UA 31.7% WN 8.8%
2008Q1 F9 21.2% UA 29.5% WN 12.8%
2009Q1 F9 17.9% UA 24.1% WN 22.4%

The numbers are quite wrong.
UA is almost 50% of DEN boardings, something SWA even mentioned on yesterdays telcon.

From DEN airport statistics.

The dominant air carrier at Denver International Airport is United Airlines, one of the world’s largest airlines. The Airport currently is the second largest connecting hub in United’s route system, both in terms of passengers and flight operations. United together with its United Express commuter affiliates, accounted for 47.6% of enplaned passengers at the Airport in the first three months of 2009.

Page 22
http://flydenver.com/diabiz/stats/financials/reports/2009qtr1.pdf

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: AirFrnt
Posted 2009-08-11 14:48:27 and read 5238 times.



Quoting N104UA (Thread starter):
it is very unlikely that WN will keep 100% of F9's routes, especially with them selling off their entire fleet of Airbuses.

They will be keeping 80% of F9's fleet, my understanding and will immediately add destinations to WN that neither F9 nor WN flew to previously. They intend to grow quite rapidly.

Quoting N104UA (Thread starter):

So my question is really this would WN cutting routes and F9 Frequent Fliers still refusing to fly WN would this buyout actually give UA more strength in DEN

No.

Honestly, it's as simple as that. No. UA is hemorrhaging cash in Denver. F9 was a bit cheaper then WN, but if WN buys F9, it actually establishes more pricing control for WN, but not for UA.

Quoting Flashmeister (Reply 2):
That's a very theoretical case, but no matter how you slice it, WN would "own" significantly more O&D traffic at DEN than UA would on day 1 post-closing.

True. UA is not very popular in Denver.

Quoting Flashmeister (Reply 2):
Today, Denver (definitely "high cost")

Not anymore. It's pretty much average. It's also much more efficient then other airlines. They get better turn times (and thus gate utilization) at DEN then their other large stations.

Quoting LAXintl (Reply 3):
UA is almost 50% of DEN boardings, something SWA even mentioned on yesterdays telcon.

LAXintl, please reread his post. He clearly is stating O&D, and those numbers are correct for O&D. UA makes up the difference in connecting passengers.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: EXAAUADL
Posted 2009-08-11 15:16:04 and read 5193 times.



Quoting Flashmeister (Reply 2):
You need to read the details of the bid. First, WN has already said that it will keep 100% of F9's cities, including markets that they don't presently serve (significantly, DCA, ATL, ANC, Lynx cities, and the international flying). That was made explicitly clear in the WN conference call.



Quoting AirFrnt (Reply 4):
They will be keeping 80% of F9's fleet, my understanding and will immediately add destinations to WN that neither F9 nor WN flew to previously. They intend to grow quite rapidly.

Both of these are BS. Airlines lie thru their teeth to get mergers/buyoutds thru. I never heard an airline state they would buy a competitor and promptly lay off the employees, close routes and sell aircraft. But in the end they do exactly that. Youll never see a A319 in WN colors

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-11 15:37:00 and read 5139 times.



Quoting AirFrnt (Reply 4):
LAXintl, please reread his post. He clearly is stating O&D, and those numbers are correct for O&D. UA makes up the difference in connecting passengers.

Its still incorrect.

Look at it this way -- The 3 airlines that account for 90%+ of DEN movements between them only make up 64.4% of local boardings in 01Q09?
In otherwords is the 8 or so % of other airlines movements carry the remaing 35% of DEN locals? I dont think so.

Numbers simply dont dont jive.

Me says the United numbers are missing boardings from its UAX partners at DEN - Mesa, Skywest, GoJet, Great Lakes, Shuttle America, and Trans States, which between them nearly board as many passengers at all OALs combined at DEN (sans F9 and WN.)

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Ikramerica
Posted 2009-08-11 15:40:07 and read 5130 times.

UA will benefit greatly, because they won't have to compete with F9 over minor routes. WN doesn't do 1 a day routes, or even 3 a day on small aircraft. If it can't support 3 737s a day, WN won't be interested.

So the people of Denver will lose, as will those in smaller communities that were flying into and connecting at DEN, because prices on those routes will go UP UP UP.

Hooray...

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Ytib
Posted 2009-08-11 16:14:14 and read 5066 times.



Quoting LAXintl (Reply 6):
In otherwords is the 8 or so % of other airlines movements carry the remaing 35% of DEN locals?

No they are also picking up all of the people who fly to Denver and terminate their trip in Denver in addition to the locals, which is usually 100% of the flight in most instances.

JetBlue
AirTran
Continental
British Airways
American
Mexicana
Delta/Northwest
Alaska

The following could connect to codeshare partners:
Lufthansa, Air Canada, US Airways, Great Lakes

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mattnrsa
Posted 2009-08-11 16:38:50 and read 5025 times.



Quoting AirFrnt (Reply 4):
it actually establishes more pricing control for WN, but not for UA

Pricing control is by market or station, not by one specific airline in a market. If WN is able to raise their prices, UA will be able to also, as they won't have to match WN's lower fares. UA already has, on average, a revenue premium over WN and F9. This will allow all fares to go up.

Quoting Flashmeister (Reply 2):
When WN arrived in California in 1991, it slashed UA's market share on intrastate routes with amazing speed

When one airline has a huge market share in any market, the arrival of another airline will always shrink the first airline's share, as the pie is now being shared by more airlines. UA has maintained a huge presence in each of its hubs, even though WN competes aggressively at all five of them (LAX, SFO-SJC/OAK, ORD-MDW, DEN, IAD-BWI).

Quoting Flashmeister (Reply 2):
United has been through bankruptcy and quarter after quarter of less-than-stellar profit... and a good part of this is because Southwest waltzed in and took United's profits from them before United even knew what hit them

UA had record profits through most of the 90s, long after WN arrived in California, even though WN was competing with them all over the place. I think the reasons behind UA's profits and losses are more complicated than WN.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Enilria
Posted 2009-08-11 17:28:38 and read 4950 times.



Quoting N104UA (Thread starter):
So my question is really this would WN cutting routes and F9 Frequent Fliers still refusing to fly WN would this buyout actually give UA more strength in DEN

UA benefits more than WN over the next couple of years because they benefit from the capacity reduction, subsequent fare increase, and don't have the expense and mess of an F9 purchase.

Quoting Flashmeister (Reply 2):
Those statistics include connecting traffic, I suspect. The O&D Denver market statistics (DB1B), as posted by Enilria in the WN Bid for F9 official thread are:

2006Q1 F9 20.0% UA 32.0% WN 5.5%
2007Q1 F9 21.2% UA 31.7% WN 8.8%
2008Q1 F9 21.2% UA 29.5% WN 12.8%
2009Q1 F9 17.9% UA 24.1% WN 22.4%

Thanks for the credit!  Smile

Quoting LAXintl (Reply 3):
The numbers are quite wrong.
UA is almost 50% of DEN boardings, something SWA even mentioned on yesterdays telcon.

Boardings are irrelevant as they include passengers connecting through Denver. The topic at hand is the war for Denver local passengers. Connecting passengers can go through any hub they choose, plus WN is not a "hub" airline so connections in DEN aren't even their focus.

Quoting LAXintl (Reply 6):
Its still incorrect.

As the original poster of the data let me jump in on this. You don't get to simply say sourced data is wrong. That's BS. Go to bts.gov and pull DB1B yourself if you think it is wrong and tell us what number you get. Jeez...

If you think DB1B is wrong from the source then please file a complaint with DOT which could result in criminal enforcement action against whichever carrier you believe is violating the reporting standards.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Lightsaber
Posted 2009-08-11 17:37:17 and read 4929 times.

My *opinion* is that short term this will help UA, but long term hurt them at DEN. F9's #1 'problem' was marketing at its spokes. One reason WN flies 10X+ flights from every station is to have enough butts in the seats to pay for marketing. Thus there should be quick growth through existing WN stations flying through DEN.

Quoting Flashmeister (Reply 2):
You need to read the details of the bid. First, WN has already said that it will keep 100% of F9's cities, including markets that they don't presently serve (significantly, DCA, ATL, ANC, Lynx cities, and the international flying). That was made explicitly clear in the WN conference call.

If WN does indeed keep Lynx, it will be a HUGE strategy change for them that could only hurt UA. For with more 'anchor cities' to feed traffic through DEN, Lynx will have more substations they could serve. My favorite example is BOS. WN will have no problem filling multiple Boston market cities fligths per day to DEN. F9 just couldn't gain any 'mindshare' there.  Sad This will allow growth to western destinations (LAS, PHX, LAX, ONT, OAK, etc.). The grown from the Western cities will feed Eastward destinations (e.g,. BOS, ICT, ATL, etc.).

I've speculated that WN wishes to move the LAS hub partially to DEN due to the economics at of the Las Vegas economy right now. That would not drive up UA yeild...

Quoting LAXintl (Reply 6):
Me says the United numbers are missing boardings from its UAX partners at DEN - Mesa, Skywest, GoJet, Great Lakes, Shuttle America, and Trans States, which between them nearly board as many passengers at all OALs combined at DEN (sans F9 and WN.)

Ahhh... Interesting point to note. Most of my flights through DEN have been UA-Skywest or UA to Mesa. Heck, I've flown UA-F9 as many times as I've flown UA to UA!  duck  (Serious!) This makes more sense to me now... While 8% of the flights are going high O&D (due to few connections excluding *A), DEN is supposed to be 65% O&D. Thus, I doubt either F9 nor UA overall have < 50% O&D. It will be less than 65% (for they do almost all of the connecting traffic), but it should be at a healthy O&D level.

Lightsaber

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-11 17:47:03 and read 4910 times.



Quoting Enilria (Reply 10):
As the original poster of the data let me jump in on this. You don't get to simply say sourced data is wrong. That's BS. Go to bts.gov and pull DB1B yourself if you think it is wrong and tell us what number you get. Jeez...

If you think DB1B is wrong from the source then please file a complaint with DOT which could result in criminal enforcement action against whichever carrier you believe is violating the reporting standards.

The manner which your data has been presented is innacurate as it under reports the United Airlines local market share.

Add in boardings for the 6 UAX partners - Mesa, Skywest, GoJet, Great Lakes, Shuttle America, and Trans States and you'll get a truer picture.

I hope you understand that Marketing Carrier and Reporting Carrier in the DOT reports are two different things, so filtering just by United will not provide the UAX data. Same does with Frontier for which Lynx (L4) reports seperately.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: BA
Posted 2009-08-11 18:07:14 and read 4874 times.



Quoting AirFrnt (Reply 4):
True. UA is not very popular in Denver.

I disagree, I think UA is actually quite strong among Denver fliers.

That's not to say that F9 and WN aren't popular either, but UA is still very popular.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Enilria
Posted 2009-08-11 18:11:49 and read 4870 times.



Quoting LAXintl (Reply 12):
The manner which your data has been presented is innacurate as it under reports the United Airlines local market share.

Add in boardings for the 6 UAX partners - Mesa, Skywest, GoJet, Great Lakes, Shuttle America, and Trans States and you'll get a truer picture.

I hope you understand that Marketing Carrier and Reporting Carrier in the DOT reports are two different things, so filtering just by United will not provide the UAX data. Same does with Frontier for which Lynx (L4) reports seperately.

So it isn't wrong. You just want to include all the other operators. Please make that distinction in the future rather than simply saying it is wrong when you know it isn't. Please go add the other carriers and tell me what you get.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-11 18:28:22 and read 4839 times.



Quoting Enilria (Reply 14):
So it isn't wrong. You just want to include all the other operators. Please make that distinction in the future rather than simply saying it is wrong when you know it isn't. Please go add the other carriers and tell me what you get.

Well when you speak about "United" and make statements abouts its market share its disingenuous to forget the Big slice of the United pie called United Express.

A discussion about a carriers market presence must include the large slice of the US airline transportation system which the express carries represent. In many cases these carriers are the sole face of a marketing airline that an airport or customer might ever see.

So ultimately the DEN number posted are wrong, as they fail to represent the true market reality.
Choose to ignore this fact if you wish, but its akin to garbage in, garbage out.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: AirFrnt
Posted 2009-08-11 19:01:05 and read 4789 times.



Quoting Mattnrsa (Reply 9):

Pricing control is by market or station, not by one specific airline in a market. If WN is able to raise their prices, UA will be able to also, as they won't have to match WN's lower fares. UA already has, on average, a revenue premium over WN and F9. This will allow all fares to go up.

Pricing premiums typically tend to follow the largest carrier. Pricing control erodes the closer the two carriers are to even. WN is very very close to even with this deal.

Quoting BA (Reply 13):
I think UA is actually quite strong among Denver fliers.

I live here. I travel regularly on WN, F9 and UA. It's been a little under a decade since I heard anything say a single word positive about UA's domestic flying.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Enilria
Posted 2009-08-11 19:42:34 and read 4734 times.



Quoting LAXintl (Reply 15):
So ultimately the DEN number posted are wrong

It would appear to me that you are just too lazy to get the data to present it in the way you wish to see it.  banghead 

"Marketing Carrier" as you refer to it isn't a DOT field in DB1B. I assume you mean "Ticketed Carrier". OK, here it is your way using Ticketed Carrier, same story pretty much. WN bigger than F9, UA is cratering, and F9 is shrinking. BTW, next time how about getting it yourself, I'm not your secretary.

2006Q1 F9 22.0% UA 40.7% WN 5.5%
2007Q1 F9 22.6% UA 40.2% WN 8.8%
2008Q1 F9 23.7% UA 36.7% WN 12.8%
2009Q1 F9 18.5% UA 31.4% WN 22.4%

Another interesting point is that in the last 12 months, F9 lost 22% of their share (18.5/23.7) to WN, while UA lost 14.5% of their share (31.4/36.7). That makes it very clear that WN has hurt F9 more than UA in the last year.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-11 20:05:28 and read 4694 times.



Quoting Enilria (Reply 17):
It would appear to me that you are just too lazy to get the data to present it in the way you wish to see it

Not at all. I have no interest in pulling the numbers, or personal stake what they are.

I'm just highlighting the fact that the posted share data about United was wrong as it failed to account for a meaningful slice of their United business. Just glancing at the numbers I could tell they did not represent the full picture.

Quoting Enilria (Reply 17):
"Marketing Carrier" as you refer to it isn't a DOT field in DB1B. I assume you mean "Ticketed Carrier".

See DOT's DB1B Terms and Definitions

Marketing Carrier:
An air carrier that issued a flight reservation or ticket under a codeshare agreement.

http://www.transtats.bts.gov/Databas...nd%20Destination%20Survey%20(DB1B)

Quoting Enilria (Reply 17):
BTW, next time how about getting it yourself, I'm not your secretary.

Dont worry, I'm not hiring.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: KGAIflyer
Posted 2009-08-11 21:03:01 and read 4625 times.



Quoting AirFrnt (Reply 4):
Quoting Flashmeister (Reply 2):
That's a very theoretical case, but no matter how you slice it, WN would "own" significantly more O&D traffic at DEN than UA would on day 1 post-closing.

True. UA is not very popular in Denver.

Please help me understand this.

From the perspective of an outsider, I see United with over 70 gates, with few empty planes, with international service, and with the lion's share of the market.

Where I come from, if something is unpopular, that means people avoid it.
They don't give it the majority of the market.

You can see why I'm confused.  worried 

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: BA
Posted 2009-08-11 22:20:48 and read 4546 times.



Quoting AirFrnt (Reply 16):
I live here. I travel regularly on WN, F9 and UA. It's been a little under a decade since I heard anything say a single word positive about UA's domestic flying.

I live here too. Whether UA receives positive or negative feedback from DEN fliers is not the issue. The issue is that UA is heavily used by Denver-based travelers, whether they like them or not. They have a big clientele base here just as F9 and WN do.

UA's DEN hub cannot simply sustain on connecting traffic. O&D is a very big part of it.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Flashmeister
Posted 2009-08-12 00:47:34 and read 4469 times.



Quoting EXAAUADL (Reply 5):
Both of these are BS. Airlines lie thru their teeth to get mergers/buyoutds thru. I never heard an airline state they would buy a competitor and promptly lay off the employees, close routes and sell aircraft. But in the end they do exactly that. Youll never see a A319 in WN colors

In the long run, you have a point: most mergers don't meet expectations from the announcement, but especially in this day and age, companies tend to be too conservative with the detail of their public disclosures to avoid the risk of being sued if things don't turn out the way they thought. If WN wins, they'll be held to the letter of what they said, at least for the transition period.

Quoting EXAAUADL (Reply 5):
Youll never see a A319 in WN colors

No kidding. Please read before reacting: I never said that we would.

Quoting Ikramerica (Reply 7):
UA will benefit greatly, because they won't have to compete with F9 over minor routes. WN doesn't do 1 a day routes, or even 3 a day on small aircraft.

Hmm. Southwest executives seem to disagree with you. The snippet below is part of the transcript from their Aug 10 conference call to discuss their binding bid.

Andy Compart (Writer with Aviation Daily): And I guess my follow up question on this is why? I mean (Gary Kelly) has said we originally had been one operator with regional service.

And really Frontier operates as a feeder and Southwest isn’t really about feeding or doing small routes to feed bigger routes. Why? What changed your mind in the last ten days? Why do you think Lynx is a good idea and definitely something you’re going to keep?

Ron Ricks (Exec VP of Southwest): Andy, this is Ron. I’ll take a stab at that. I think as Bob said, we have learned a lot about Lynx just as we have learned a lot about Frontier.

So we have learned that Frontier has a strong franchise in Denver, has devoted employees and a very strong brand and that includes Lynx. Lynx is a very popular part of the Frontier brand and serves a lot of important smaller communities.

And we have learned through this process that Lynx has a strong operation that works very well with the mainline operation. And we learned a long time ago that just because we have one way of doing things doesn’t mean we can’t learn from someone else.

And we’re learning from Frontier in this case that Lynx is a valuable asset and we wanted to make sure that it was part of our business.

Andy Compart: And you believe it’s a profitable operation?

Ron Ricks: Yes we do. And we think it can become more so particularly when you think about Southwest Airlines being the largest carrier of passengers in the United States of America with a very extensive national network providing more feed to Lynx and vice versa.

So we think there is a growth opportunity there as well whether it’s operated directly by Southwest Airlines or by some other for example, experienced commuter type operator that might be interested in a marketing alliance with Southwest.


So in the case of regional traffic, whether or not it's flown by WN pilots or a contract carrier, Southwest seems pretty serious that they're going to keep the capacity in those markets going either on their own or using a regional operator. Looks like UA won't be getting those "minor routes" back to themselves after all.

Quoting BA (Reply 20):
UA's DEN hub cannot simply sustain on connecting traffic. O&D is a very big part of it.

True: and that's why UA should be even more alarmed. The more dots that WN can connect, the more vulnerable UA's O&D base becomes (and hence, the hub's profitability). Whether they're 3, 10, or 15 points apart in terms of market share isn't really the big deal: it's that if WN can properly pull this off, and if they execute on what they've stated as their intentions, UA will see a lot more competition on a lot more routes ex-DEN than they have before.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Enilria
Posted 2009-08-12 06:05:28 and read 4365 times.



Quoting LAXintl (Reply 18):
See DOT's DB1B Terms and Definitions

Marketing Carrier:
An air carrier that issued a flight reservation or ticket under a codeshare agreement.
http://www.transtats.bts.gov/Databas...nd%20Destination%20Survey%20(DB1B)

Here is the field list from bts.gov for DB1B, show me "marketing carrier"?
http://transtats.bts.gov/Fields.asp?Table_ID=247

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mcdu
Posted 2009-08-12 07:37:06 and read 4295 times.



Quoting Flashmeister (Reply 2):
Since the rise of Southwest, United has been through bankruptcy and quarter after quarter of less-than-stellar profit... and a good part of this is because Southwest waltzed in and took United's profits from them before United even knew what hit them.

But you are forgetting a huge difference between the CA markets and what is occurring today with WN/F9 and UA in DEN. In the California issue WN had the benefit of some extremely well hedged positions for fuel. Now the dynamics of WN have changed. Their labor cost are well above the competition, their is unrest in their pilot ranks (recently voted down pay increases) and WN is removing ASM from the markets as opposed to increasing ASM's.

The situation in DEN is going to be a big cost for WN no matter what happens. Basically the 170mil is getting them the ability to buy the debts of F9. WN will be faced with some interesting choices in the labor relations that result from a WN bid. There were protest in DEN recently as employees demonstrated against WN and the "we will hire F9 employees as we need them" term.

This is not a merger of a true sense as WN has to dispose of the F9 fleet. While some interest in the Airbus have been mentioned by VX this is a buyers market for used airplanes. Not sure WN will get top dollar for their investment. Also, if they don't they will need to pay some penalties to the leasing companies for their return.

While many see this as a bold move by WN it appears from some industry experts (Boyd included) that this is more of an act of desperation by WN to try and win DEN.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Flashmeister
Posted 2009-08-12 09:07:22 and read 4218 times.



Quoting Mcdu (Reply 23):
While many see this as a bold move by WN it appears from some industry experts (Boyd included) that this is more of an act of desperation by WN to try and win DEN.

It's absolutely a desperation move on the part of WN: they can't beat F9, they're losing buckets of money on their existing DEN service, and this is a way to cut their losses. It's expensive, for sure. My point on this thread, though, is that whatever WN's rationale for taking over Frontier might be, there's very little upside for United in this deal. Should WN's stated vision of further expansion in DEN actually take place, things stand to get quite a bit bumpier for UA.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: TxAgKuwait
Posted 2009-08-12 09:10:54 and read 4208 times.



Quote:
It's absolutely a desperation move on the part of WN: they can't beat F9, they're losing buckets of money on their existing DEN service, and this is a way to cut their losses.

Is that your opinion, or do you have some way to document or demonstrate that Southwest is losing buckets of money in Denver? Lots of people have said this as if it were gospel yet I have not heard where they are getting their data.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Lightsaber
Posted 2009-08-12 10:37:37 and read 4193 times.



Quoting Flashmeister (Reply 21):
And we have learned through this process that Lynx has a strong operation that works very well with the mainline operation. And we learned a long time ago that just because we have one way of doing things doesn’t mean we can’t learn from someone else.

Wow.  wideeyed  Thank you very much for the transcript. WN has discussed a 100 seater in the past. If they chose to use Lynx as the vehicle for this... its a dramatic stategic change. Core competencies=Core regidities.  Sad It looks like WN has decided to use the F9 purchase to change their Core competencies.  spin  I would expect a *fast* expansion of Lynx.

So the question becomes, with what airframe? Would they stay with E-jets or perhaps 'bid around' for another airframe? I love the E-jet concept, but business is business and now is a great time to purchase aircraft at discount prices. The MRJ, E-series, and bombardier (-1000?) would all love to land a WN order... Not to bid them off against each other would be silly on WN's part.  yes 

I wonder what other airports WN would extend Lynx too?  hyper 

I wonder if 'Southwest' will effectively become a holding company of airlines in an attempt to keep costs in order?  scratchchin  They'll instantly have a stable of WN, F9, and Lynx. I doubt they'll keep F9... but might it be worth it (due to the very low CASM)? Possibilities...

Quoting Flashmeister (Reply 21):
True: and that's why UA should be even more alarmed. The more dots that WN can connect, the more vulnerable UA's O&D base becomes

 checkmark  Combine the WN+F9 gates and it is an interesting future at DEN.

Lightsaber

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mariner
Posted 2009-08-12 18:46:15 and read 4054 times.

I still can't access the DOT - gremlins - but does anyone know if Republic's Mexican authorities (flown for Frontier) are still dormant or if they have been given up?

TIA.

mariner

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-12 19:25:37 and read 4030 times.

DOT-OST-2007-27199
DOT-OST-2007-27746
DOT-OST-2007-28499
DOT-OST-2007-28760

Covering

Albuquerque - Puerto Vallarta
Denver - Cancun
Denver - IxtapalZihuatanejo
Denver - Mazatlan
Denver - Puerto Vallarta
Denver - San Jose del Cabo
Kansas City - Cancun
Sacramento - Puerto Vallarta
Sacramento - San Jose del Cabo
San Jose - Puerto Vallarta
San Jose - San Jose del Cabo

Were all surrendered back to the DOT in June 2008.

However it would not be too hard for Republic to reapply. Just a paperwork exercise for some D.C. lawyers and some patience to wait out the DOT process.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mariner
Posted 2009-08-12 19:33:47 and read 4016 times.



Quoting LAXintl (Reply 28):
Were all surrendered back to the DOT in June 2008.

Thanks, LAXIntl. I have it as an application for dormancy on 6/23/08, but that's from the Office of International Aviation.

As I said, the actual DOT website is wayward for me.

mariner

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-12 19:51:03 and read 3981 times.

Correct. In their filing:

All services operated by Republic Airline Inc. pursuant to an Airline Services Agreement with Frontier Airlines, Inc. have terminated. Accordingly, designations held by Republic for the following "Frontier Airlines" U.S.-Mexico routes may be considered dormant and available to other U.S. airlines.

Not the typical dormancy notice where a carrier would like to resume the service in X months etc.. This was a surrender.
Anyhow the routes would have fallen into dormancy automatically after not being operated for 90 days, plus the carrier never applied for route authority renewals as Mexico routes exemptions are good for standard 2-years terms from issuance (early 2007).

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Mariner
Posted 2009-08-12 20:07:26 and read 3956 times.



Quoting LAXintl (Reply 30):
Not the typical dormancy notice where a carrier would like to resume the service in X months etc..

I agree, but now I'm confused by that word "dormant."

Not that it matters because I doubt Republic would start most of the services again, but I wonder if they would consider MCI-CUN (for Midwest), since MKE-CUN won't be available if Sun Country gets it.

At least according to CAPA, who say that Frontier's MKE-CUN authority is "dormant" - that word again.

mariner

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: LAXintl
Posted 2009-08-12 20:34:06 and read 3923 times.

Yes F9s, MCI-CUN while dormant could be easy to resume as its 2-year exemption was just renewed in March 2009.

From what I can gather, Frontier's currently held Mexico exemptions are:
Denver-Cozumel
Kansas City-Puerto Vallarta
Denver-Cancun
Denver-San Jose del Cabo
Kansas City-Cancun
Salt Lake City-Cancun
Denver-Puerto Vallarta
Denver-Mazatlan

But Republic(Midwest) could certainly get authority for MCI-CUN if they were to pursue it.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: Flashmeister
Posted 2009-08-12 20:43:02 and read 3908 times.



Quoting TxAgKuwait (Reply 25):
Is that your opinion, or do you have some way to document or demonstrate that Southwest is losing buckets of money in Denver? Lots of people have said this as if it were gospel yet I have not heard where they are getting their data.

I don't have specific numbers, but I do have the comments made recently by Gary Chase, an industry analyst with Barclays who is one of the most knowledgeable Wall Street wizards when it comes to Southwest's markets and profitability. In his latest research note on the F9/WN deal (published last week and excerpted on PlaneBuzz and elsewhere), Chase said:

"Our analysis suggests that Southwest is losing a significant amount of money in Denver while Frontier has been profitable year to date. Frontier has made substantial cost progress during its bankruptcy proceedings and currently enjoys a significant revenue advantage to Southwest in Denver markets. That combination defines the contrast between what we believe is money making at Frontier and a loss position for Southwest."

According to PlaneBusiness Banter, he estimates that Southwest lost over $40 million in Denver in 2008, and will lose much more than that in 2009.

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: F9fan
Posted 2009-08-12 21:16:19 and read 3871 times.



Quoting Enilria (Reply 17):
"Marketing Carrier" as you refer to it isn't a DOT field in DB1B. I assume you mean "Ticketed Carrier". OK, here it is your way using Ticketed Carrier, same story pretty much. WN bigger than F9, UA is cratering, and F9 is shrinking. BTW, next time how about getting it yourself, I'm not your secretary.

2006Q1 F9 22.0% UA 40.7% WN 5.5%
2007Q1 F9 22.6% UA 40.2% WN 8.8%
2008Q1 F9 23.7% UA 36.7% WN 12.8%
2009Q1 F9 18.5% UA 31.4% WN 22.4%

Another interesting point is that in the last 12 months, F9 lost 22% of their share (18.5/23.7) to WN, while UA lost 14.5% of their share (31.4/36.7). That makes it very clear that WN has hurt F9 more than UA in the last

One thing to keep in mind with these numbers is that F9 significantly drew down their ops in '08 after the bankruptcy filing in April. Also, WN was rapidly growing their ops in DEN during this period. IIRC, UA was about 80% of the DEN traffic a decade ago.

Quoting KGAIflyer (Reply 19):
Please help me understand this.

From the perspective of an outsider, I see United with over 70 gates, with few empty planes, with international service, and with the lion's share of the market.

Where I come from, if something is unpopular, that means people avoid it.
They don't give it the majority of the market.

You can see why I'm confused.

UA historically used DEN as a hub. When Boeing designed the 727, they did it specifically so UA could use it at the old DEN. Over the last decade, UA converted most of their mainline service to regional jet operations. In 2002, they, along with AA, had six mainline nonstops from DEN to MIA. Now, I don't think there is any nonstop DEN to MIA service on any airline (although F9 and WN offer two flights total to FLL).

BTW, anyone remember Ted? There was a reason that most of the early flights were DEN-LAS, DEN-PHX, DEN-FLL, etc. Ted was designed to directly compete with F9 out of DEN and WN out of MDW/ORD. Now how did that work out for UA?  sarcastic 

Topic: RE: WN Buyout Of F9 Beneficial For UA In DEN
Username: TxAgKuwait
Posted 2009-08-12 21:27:36 and read 3854 times.

[quote]I don't have specific numbers, but I do have the comments made recently by Gary Chase, an industry analyst with Barclays who is one of the most knowledgeable Wall Street wizards when it comes to Southwest's markets and profitability. In his latest research note on the F9/WN deal (published last week and excerpted on PlaneBuzz and elsewhere), Chase said:

"Our analysis suggests that Southwest is losing a significant amount of money in Denver while Frontier has been profitable year to date. Frontier has made substantial cost progress during its bankruptcy proceedings and currently enjoys a significant revenue advantage to Southwest in Denver markets. That combination defines the contrast between what we believe is money making at Frontier and a loss position for Southwest."

According to PlaneBusiness Banter, he estimates that Southwest lost over $40 million in Denver in 2008, and will lose much more than that in 2009.

[quote]

Thank you for your reply. The bottom line up front is that many analysts think WN has lost (a) a little (b) a lot of money in Denver last year and will do the same thing this year.

Who knows? They may be right. Then again, if you believe the DOT's airfare data, F9 does not enjoy a revenue advantage over WN in Denver, it is the other way around in many cases. Perhaps it is too much to ask to expect analysts to look at readily available public data.

Here's what I know. Garry kelly is a bean counter. They seldom throw good money after bad. They built Denver from nothing to a lot in a hurry. They did not do this with the expectation F9 would implode.

Folks like to make a big deal out of WN losing money 3 of the last 4 quarters....but the truth is Southwest tha airline made money in every quarter and Southwest the fuel oil hedging company lost their butts. Oh well. It happens. It was still a loss.

I always liked PlaneBusiness and a number of analysts although you can't take everything they say as gospel. Michael Derchin used to tell everyone to load up on USAir and Air Wisconsin


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