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Topic: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-16 11:01:07 and read 12658 times.

People seem to want VX to fail on a.net, but I agree with Branson that the industry needs competition and it is beginning to be sorely lacking. I agree that VX's investment probably was obtained by dodging the ownership laws, but regardless we need every airline left.

"When American Airlines went into Chapter 11 a few slots became available. Virgin America entered the market and fares from Newark to California dropped by 40% and suddenly consumers had better options with new planes, in-flight wi-fi and exemplary service. But instead of competing based on quality, United then conjured up a whole batch of previously "non-existent" slots to double their capacity on San Francisco-New York and Los Angeles-New York flights to try to squeeze Virgin America out."


"They have been playing this game against Virgin America by putting on extra capacity on our other routes at a massive loss to themselves. My estimate is that the extra capacity out of Newark will cost them $130 million per year - just to try to drive us out of the marketplace.

Well, we won't be driven out. It didn't work in Chicago or Dallas and it won't work here...we would ask the Department of Transportation to consider looking into what United has been up to these past couple of years and consider taking appropriate action."

http://centreforaviation.com/members...me-big-airlines-never-learn-105498

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: United1
Posted 2013-04-16 11:06:04 and read 12643 times.

This was already discussed...and locked.

Virgin America And Newark (by olympic472 Apr 10 2013 in Civil Aviation)

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-16 11:10:06 and read 12580 times.

Quoting United1 (Reply 1):
This was already discussed...and locked.

Virgin America And Newark (by olympic472 Apr 10 2013 in Civil Aviation)

The linked article is dated today.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-16 11:12:10 and read 12565 times.

I read both. The comments are similar, but they are not the same. The ones I linked explicitly say DOT should investigate where in your link Branson said they were evaluating whether to ask.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: VCy
Posted 2013-04-16 11:20:01 and read 12485 times.

I think VX is a unique airline. Would definately choose them over all airlines on any day! They seem to care more about giving passengers a unique on board product, whereas the majority of US domestic airlines lack that special connection (that i see) with their passengers  

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: hereandthere41
Posted 2013-04-16 11:23:36 and read 12443 times.

Bottom line....if VX wants to compete against UA or any other airline, let them compete with the resources they have available. And if their product is preferred by customers, then let them prevail. Every airline is in the business of making money. Why should anyone just roll over when a new competitor enters the marketplace? Compete or leave the market. But something tells me that VX will have a hard time winning over the most important customers who will sustain an operation. They can have the low-end crowd. They're fickle anyway. Entering a market and selling the product way below cost is just as detrimental as flooding the market with seats. What's good for the goose.....

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: United1
Posted 2013-04-16 11:23:59 and read 12436 times.

Quoting enilria (Reply 3):
The ones I linked explicitly say DOT should investigate where in your link Branson said they were evaluating whether to ask.

...its still from the same line of comments that Branson made from the original article. More grandstanding by Branson and no action taken....nothing has been filed with DOT and as such its simply hot air. This topic has been discussed to death and as several members were not able to control themselves in the last thread it was locked. I don't see any purpose in discussing it further as your article doesn't add anything new to the topic...

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ORDBOSEWR
Posted 2013-04-16 11:29:10 and read 12372 times.

Is UA acting like a child? probably, but they have every right to move around where and when they fly.

If they feel they need more flights to a specific destination then they should be free to reallocate to do that.

We all make this seem like this is new behavior. DL is a king at this. AA, NW and US have all done it. Some do it more than others. People may not like it, but we have a free market.

I personally do not feel this is anti-competitive. How can it be that way if the fares have gone down by 40%?
One can only prove it is anti-competitive if after VX leaves the market and UA reduces the number of flights to jack fares back up. Then it is anti-competitive, but as of now they are competing in a specific way. If people want choice between SFO & LAX to EWR then they have tons of them on UA. VX is limited because of slots and they are a new entrant. The same reason that they would get slots at any slot controlled airport that UA can't (like DCA).

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ikramerica
Posted 2013-04-16 11:52:57 and read 12198 times.

VX is acting anti competitively by selling product below cost for half a decade. They lowered fares in a market by 40%? Yeah, by offering fares that don't make a profit against other airlines who barely make money as it is.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: Flighty
Posted 2013-04-16 12:04:49 and read 12142 times.

Quoting hereandthere41 (Reply 5):
if VX wants to compete against UA or any other airline, let them compete with the resources they have available.

It is not lawful for UA to use predatory pricing (lose money) to exhaust VX of funds on the route. If it were legal, then UA has an invincible monopoly on the route.

Branson is putting them on notice. Anti-trust laws are coming back to life. Their relevance is increasing as airlines/telecom/internet networks get more consolidated.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: lightsaber
Posted 2013-04-16 12:06:11 and read 12116 times.

If there is a valid complaint, VX should file. Their customer satisfaction is high.

But its not just UA. VX goes after already established routes. That means every flight triggers a reaction by a competitor.

IMHO, VX showed B6 there is more of a market for TCON premium product. While B6 was picking up some of that on their own, I believe if there had never been a VX then B6 would not be discussing adding TCON flights with first class. Is it anti-competitive for B6 to compete?    Should UA play a bit more fair?   

But lets look at what happend New York to the West coast. Fares plummeted which spikes demand. UA brought in new aircraft to fill. Whenever prices drop, demand goes up. If UA doesn't add capacity to a market VX enters, they are forfeiting that market to VX. So it becomes a question of "if VX can lose money on a flight, why not UA?" I hold no illusion UA is playing nice (or necessarily smart). I think this is for the DOT to look into as there are many factors.

Quoting enilria (Thread starter):
but regardless we need every airline left.

Huh? 3 big network carriers, WN #1 domestically, B6, AS, F9, Spirit, Allergiant, and VX. I think we could loose one or two more without 'needing' the remaining to survive. I'm not anti-VX, I just do not get their business plan (lack of profit). Its not just UA...

Lightsaber

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: as739x
Posted 2013-04-16 12:17:41 and read 12079 times.

Where was this complaining when VX started ORD-SFO and UA proceeded up to 21 daily flight (from 12-14)?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: psa1011
Posted 2013-04-16 12:18:28 and read 12074 times.

BTW, where did UA find all of those extra slots @ EWR?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: FriendlySkies
Posted 2013-04-16 15:22:17 and read 11642 times.

Oh boo hoo. If you want to enter a market with dirt cheap fares, you can't expect the largest carrier in that market to roll out the red carpet. UA is doing what any other airline would do, and Branson knows that. If he can opt to lose money on a route, so can UA.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ORDBOSEWR
Posted 2013-04-16 15:32:31 and read 11563 times.

Quoting psa1011 (Reply 12):
BTW, where did UA find all of those extra slots @ EWR?

They are not any extra slots at EWR. I can be 100% certain, but I expect that UA was forced to cut back flights in other markets to get the slots to LAX and SFO flights.
And if UA decides to dedicate certain planes to the route to try to match the amenities (ie international 757's, etc) that is up to them as well.

I think it is fair to say that UA views these hub to hub routes as very important (just like SFO to ORD) and wanted to show VX that they should not expect UA to just sit around while they added flights on to their home turf. If VX did not expect a response from UA they were dreaming.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: HiFlyerAS
Posted 2013-04-16 15:39:36 and read 11521 times.

Quoting FriendlySkies (Reply 13):
Oh boo hoo. If you want to enter a market with dirt cheap fares, you can't expect the largest carrier in that market to roll out the red carpet. UA is doing what any other airline would do, and Branson knows that. If he can opt to lose money on a route, so can UA.

  

Waa waa...poor SRB. Every airline has the right to defend their turf/hub/routes. If it isn't fare sales it's upping capacity, mileage bonuses, special promotions. Branson is the king of that....all hat and no cattle.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: MaverickM11
Posted 2013-04-16 15:44:59 and read 11470 times.

Quoting HiFlyerAS (Reply 15):

Waa waa...poor SRB.

Did they wheel him out when AS added all that capacity? I'm surprised I haven't seen him squawking in a while in support of VX

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: HiFlyerAS
Posted 2013-04-16 16:44:32 and read 11147 times.

Quoting MaverickM11 (Reply 16):
Did they wheel him out when AS added all that capacity? I'm surprised I haven't seen him squawking in a while in support of VX


AS SEA-SFO 6x-7x daily
VX SEA-SFO 3x-4x daily

AS SEA-LAX 10x-12x daily
VX SEA-LAX 3x-4x daily

Barely hanging on in SEA it appears. Three flights a day seems pretty much the minimum you could offer to still be considered much of a player.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ikramerica
Posted 2013-04-16 16:52:27 and read 11107 times.

Quoting Flighty (Reply 9):
It is not lawful for UA to use predatory pricing (lose money) to exhaust VX of funds on the route. If it were legal, then UA has an invincible monopoly on the route.

A. It isn't legal? Are you sure? What is predatory pricing here?
B. VX is the one doing this. They entered a market with below market fares to try to steal pax from competitors. They offered a premium product for a non-premium price, which they have proven quarter after quarter is a MONEY LOSING ENDEAVOR. But UA can't respond? Please...
C. UA has nowhere near a monopoly on New York to Los Angeles. EWR is not considered a market. It's a port into a market.

Quoting lightsaber (Reply 10):
So it becomes a question of "if VX can lose money on a flight, why not UA?" I hold no illusion UA is playing nice (or necessarily smart). I think this is for the DOT to look into as there are many factors.

I think it's sad that the DOT is getting more and more involved in pricing, slots, etc. We are moving more and more back to regulation, rather than more and more away.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: dbo861
Posted 2013-04-16 17:01:58 and read 10984 times.

Quoting psa1011 (Reply 12):

BTW, where did UA find all of those extra slots @ EWR?

Well, from this weeks OAG thread:

Quoting enilria (Thread starter):
UA EWR-DSM JUN 1.6>1.0
UA EWR-GRR JUN 3>1.7
UA EWR-MCI JUN 5>4
UA EWR-MDT SEP 1.2>2
UA EWR-MSP JUN 6>5
UA EWR-PWM JUN 5>4

There are a couple of the slots.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: commavia
Posted 2013-04-16 17:06:04 and read 10888 times.

Quoting enilria (Thread starter):
But instead of competing based on quality

And yet VX hasn't yet proven that they can profitably compete based on quality!

Besides, "quality" is highly subjective. To some people it means mood lighting. To others it means hourly frequency and a global frequent flyer program. To each their own.

Quoting enilria (Thread starter):
Well, we won't be driven out.

We'll just lose millions staying in!

  

Quoting ORDBOSEWR (Reply 7):
Is UA acting like a child? probably, but they have every right to move around where and when they fly.

  

Quoting lightsaber (Reply 10):
But its not just UA. VX goes after already established routes. That means every flight triggers a reaction by a competitor.

Exactly. If VX wants to avoid a competitive response, they can try flying their mood lit A320s on SFO-BHM or LAX-BIL. But if they want to continue to try and skim the choicest customers away from the biggest carriers on the busiest trunk routes, it's kind of laughable for them to feign intrigue when said biggest carriers respond with all the tools at their disposal. What are competitors supposed to do?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: 727LOVER
Posted 2013-04-16 17:14:59 and read 10788 times.

Quoting ORDBOSEWR (Reply 7):
Is UA acting like a child? probably, but they have every right to move around where and when they fly.

If they feel they need more flights to a specific destination then they should be free to reallocate to do that.

I totally DISAGREE when it it involves a federally slot-controlled airport.........but that's just me

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: cosyr
Posted 2013-04-16 17:33:43 and read 10567 times.

How is this "anti competitive" ? Seems specifically competitive. A new entrant came into a market and they are competing aggressively. I think VX's business model has just been flawed from the start. They seem to be going after a very small group of customers that are already aggressively sought after. I just don't think that Branson gets the US. I don't know any other airlines with a fleet the size of VX that flies so few routes to so few destinations. It could never serve my needs. WN can't even with as few destinations as they serve.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-16 17:39:18 and read 10502 times.

Quoting United1 (Reply 6):
...its still from the same line of comments that Branson made from the original article. More grandstanding by Branson and no action taken....nothing has been filed with DOT and as such its simply hot air.

Predatory pricing - or predatory action - is extraordinarily difficult to prove, or to have upheld.

One of the most famous cases was Northwest dumping on Reno Air - on the surface an almost text book case of predatory behaviour. Reno eventually filed a $5 million law suit against Northwest, but the case was eventually dismissed.

http://www.lasvegassun.com/news/1999...o-air-antitrust-lawsuit-dismissed/

"Northwest Airlines said Wednesday it was pleased with the dismissal of a 1997 lawsuit filed against the Minnesota carrier by Reno Air."

I don't have a problem with SRB making a noise. I'm not sure why anyone does.

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: jayunited
Posted 2013-04-16 17:53:34 and read 10313 times.

The position VX has taken is complete ridiculous UA has the right to defend those routes and nothing that UA is doing violates any laws so having the DOT look into UA's practices for the past few years will yield nothing.

VX faced the same competition when they entered the ORD-LAX and ORD-SFO markets. UA and AA both significantly increased the number of daily nonstops they operated between ORD and LAX; and UA nearly doubled the number of nonstops offered between ORD and SFO. If AA or DL entered the SFO-EWR market UA would have the same response but the difference is both AA and DL would be able to effectively compete against UA, and neither of those airlines would go crying to the DOT to investigate UA because they feel like UA is being anti-competitive.

The problem here is VX does not have the planes or the network to compete effectively against UA on this route. VX picked this fight with UA and while VX'x customer service and onboard product beats UA product and customer service hands down that is only part of the battle, the other part or should I say the major part of the battle is convenience and choice. With UA you may get crappy customer service but at least you can leave almost whenever you want to because UA has numerous nonstops to fit your schedule. VX on the other hand has flights that may fight your schedule and then again they may not. In today's environment U.S. customers like having choices and they love convenience if VX wants to compete against UA on this route they need to devote more of their fleet to the SFO-EWR-SFO route. But then that would require them to cut flights to other cities because they (VX) are not able to compete.

I don't want to see VX go bankrupt or be put out of business but they need a better business model that will make them profitable and they need to learn how to better compete against the majors.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-16 17:56:06 and read 10645 times.

Quoting hereandthere41 (Reply 5):
if VX wants to compete against UA or any other airline, let them compete with the resources they have available. And if their product is preferred by customers, then let them prevail. Every airline is in the business of making money. Why should anyone just roll over when a new competitor enters the marketplace?

Then no business will ever be able to start again because when a company doubles the produce they have to sell like UA did in EWR-LAX/SFO in order to flood the market with seats in order to drive out a competitor and then jack up prices even further after they have run them out to recoup their losses we have a problem. A new carrier will NEVER EVER have the financial resources of an established 1000 plane airline. That's an impossibility.

Quoting Flighty (Reply 9):
It is not lawful for UA to use predatory pricing (lose money) to exhaust VX of funds on the route. If it were legal, then UA has an invincible monopoly on the route.

Exactly

Quoting lightsaber (Reply 10):
If there is a valid complaint, VX should file.

I suspect the reason they don't is that the DOT is toothless whether it be investigating anti-competitive behavior or foreign ownership complaints.

Quoting lightsaber (Reply 10):
Quoting enilria (Thread starter):
but regardless we need every airline left.

Huh? 3 big network carriers, WN #1 domestically, B6, AS, F9, Spirit, Allergiant, and VX. I think we could loose one or two more without 'needing' the remaining to survive. I'm not anti-VX, I just do not get their business plan (lack of profit). Its not just UA...

The big 3 don't compete with each other on price and we all know it. B6 is not longer a low price carrier. AS never was. Both seem to want to employ the "if you can't beat 'em, join 'em" philosophy. Allegiant and F9 have very constrained "models" and will have no effect on the travel needs of 99% of the passengers in the USA. NK is probably the best hope and people generally hate them.

Quoting commavia (Reply 20):
Quoting ORDBOSEWR (Reply 7):
Is UA acting like a child? probably, but they have every right to move around where and when they fly.


I argue that they don't. If your son opens up a lemonade stand and MinuteMaid opens up 4 locations on all sides of the street until he is out of business and then shuts their stands I'd say that is not capitalism. It is an attempt to create Communism through monopolism.

Quoting mariner (Reply 23):
I don't have a problem with SRB making a noise. I'm not sure why anyone does.

We agree. If they didn't wish to revive their ownership battle I'd suggest they push DOT, but they are in no position to do that unfortunately. Frankly, DOT should investigate these things without needing to be asked.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: XT6Wagon
Posted 2013-04-16 17:58:00 and read 10623 times.

Quoting mariner (Reply 23):
I don't have a problem with SRB making a noise. I'm not sure why anyone does.

I just think its really really Ironic since VX was created to push UA under, and now he is complaining that his target didn't go quietly in the night.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-16 18:08:42 and read 10641 times.

Quoting XT6Wagon (Reply 26):
I just think its really really Ironic since VX was created to push UA under, and now he is complaining that his target didn't go quietly in the night.

I find it extraordinarily difficult to imagine that SRB - or anyone associated with Virgin America - thought they were going to "push United under".

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: maxamuus
Posted 2013-04-16 18:22:57 and read 10439 times.

Quoting ikramerica (Reply 8):
VX is acting anti competitively by selling product below cost for half a decade. They lowered fares in a market by 40%? Yeah, by offering fares that don't make a profit against other airlines who barely make money as it is.

I agree. It's almost like airline murder-suicide. "If we cant make it, we will take them down with us"

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: TW870
Posted 2013-04-16 19:15:21 and read 9968 times.

I feel little sympathy for SRB. One of the biggest reasons that VX has a cost advantage over United is because it has a young, junior workforce. In particular, United has to pay top-of-payscale pay to many work groups, and it has to pay for health insurance for an older group of employees, which is much more expensive.

No one is innocent here. United dumped its pension liability on the taxpayers – which is why its costs are more “competitive” than they used to be. But part of the reason they did that was because of scorching competition from younger carriers that had far lower retirement costs.

At the end of the day, we all are going to need a place to work when we are middle aged and older. And we might want to work somewhere until we get senior on that job. VX got into the game at the moment when financing costs on new airplanes were low, and wagered that by running a carrier without older and senior employees, it could eat United alive. United has opted to fight back with its own massive resources, and I fully understand why.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: lucky777
Posted 2013-04-16 19:23:17 and read 9873 times.

Quoting enilria (Reply 25):
A new carrier will NEVER EVER have the financial resources of an established 1000 plane airline. That's an impossibility.

And a new carrier also doesn't have to worry about D checks, pensions, a VERY senior workforce with 5+ weeks of vacation etc, etc, etc...

Which of course, gives the upstart artificially low overhead (no pensions to speak of, a junior workforce which is far from topped out, little accrued vacation time, very little or no heavy maintenance to speak of thus far)

So what does the fledgling upstart do? Try to use its lower cost structure (at least temporarily, until its faced with those same things the legacies are dealing with...pensions, topped out workforce etc....) and tries to muscle into an 800 pound gorilla's backyard and actually has the gall to think that this gorilla will just sit idly by as it cherrypicks its customers away from under its nose.

Can a legacy ever hope to match VX on a CASM basis? Of course not, for the very reasons stated above. What it does have, however, and you alluded to it in your comment above, Enilria, is the deep pockets necessary to bleed the little engine that could dry if it wishes for a fight.

What would you rather UA do, just throw up their hands and say "Oh well, we can't match the artificially low fares of VX so we might as well throw in the towel now", or fight tooth and nail?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: XT6Wagon
Posted 2013-04-16 20:24:02 and read 9351 times.

Quoting mariner (Reply 27):
I find it extraordinarily difficult to imagine that SRB - or anyone associated with Virgin America - thought they were going to "push United under".

Its hard to imagine today, but at the time United was shrinking rapidly, losing cash faster than you can think. AA was also even deeper in trouble than it was when it went into BK, so clearly there was a chance that *something* would have popped.

In the end, the problems getting it started delayed it long enough that the whole US industry was on the mend. VX also was crippled in its ablity to source capital to fund an agressive expansion so it also lost power to affect the industry there too.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-16 20:50:30 and read 9136 times.

Quoting XT6Wagon (Reply 31):
Its hard to imagine today, but at the time United was shrinking rapidly, losing cash faster than you can think.

By 2005, there wasn't much doubt that United was going to pull through in fairly reasonable shape and in the beginnings of Virgin America, United still had the many protections of the bk court at its disposal.

Virgin America might surely have expected an easier path but many of its problems were of its own making and I don't think it's a good idea to start an airline on the basis that "something might pop."

Nor do I know how a fleet of A320's was going to take a major airline like United down, but if you want to say that SRB & Co were overly-optimistic then I probably wouldn't argue.

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: osubuckeyes
Posted 2013-04-16 21:20:13 and read 8898 times.

Quoting lucky777 (Reply 30):
What would you rather UA do, just throw up their hands and say "Oh well, we can't match the artificially low fares of VX so we might as well throw in the towel now", or fight tooth and nail?

Costs aren't artificially low. They are smaller, which means they have lower costs. That is not artificial. Whether they will be able to sustain those costs or become profitable is another thread.

As stated earlier Anti-trust/Anti-competitive lawsuits are very difficult to prove to be true. If somehow VX can prove that UA is flooding their markets with excess supply in order to intentionally exhaust the funds of a competitor at an artificially low price, then they may have a case. Even then the cost of going to court might be greater.

Airline consolidation has brought about an interesting environment in today's industry. It will be interesting to see in the coming years how the smaller airlines and start ups deal with 4 mega carriers with seemingly unlimited resources and a too big to fail attitude.

Last point, I have a feeling SRB is really just tooting his horn to get some publicity. Not a bad strategy if one wants to create a negative image of one of its largest competitors. Big bad UA vs the upstart VX. Whether that is true or not is irrelevant, but that is how some will see it.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: EA CO AS
Posted 2013-04-16 22:21:53 and read 8550 times.

I see Branson's complaining for what it really is; the last act of a desperate man.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: FlyDeltaJets
Posted 2013-04-16 22:22:05 and read 8553 times.

What did VX expect. Did they expect UA to have a competing carrier enter their fortress hub and it would just be business as usual. To me VX had to see this coming and they are just going through the motions in the hopes that litigation will give them a leg on UA in UA's airport.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: Max Q
Posted 2013-04-16 23:55:59 and read 8053 times.

It's a free market, you take your chances, if you want to take on the 800LB Gorilla don't expect him to just sit there.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ORDBOSEWR
Posted 2013-04-17 05:47:21 and read 6578 times.

Quoting 727LOVER (Reply 21):
I totally DISAGREE when it it involves a federally slot-controlled airport.........but that's just me

So now you want to further control where those slots are used?
That seems ridiculous to me...... This not considered reasonable in the airline business, unless you go back to a completely regulated market. Which we do not have. So you have to give the companies the right to make business decisions and that should include any decisions.

Quoting Flighty (Reply 9):
It is not lawful for UA to use predatory pricing (lose money) to exhaust VX of funds on the route. If it were legal, then UA has an invincible monopoly on the route.

Who lowered the prices first? That is a key aspect to this argument. You are assuming that UA lowered the price BEFORE VX. However, if VX began pricing then UA changed the price to MATCH VX then how is that anti-competitive? A company is reacting to the market and competition. That is 100% legal.

NO company is prohibited from selling something below cost, in retail, grocery stores often sell some products below cost to get consumers in the stores. that has not been deemed anti-competitive.
If pricing was the only aspect that determined anti-competitive then VX would be anti-competitive. Anti-competitive behavior is not derived from a single action it is the sum of many actions.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: MIflyer12
Posted 2013-04-17 05:52:30 and read 6573 times.

Quoting enilria (Reply 25):
Quoting lightsaber (Reply 10):
If there is a valid complaint, VX should file.

I suspect the reason they don't is that the DOT is toothless whether it be investigating anti-competitive behavior or foreign ownership complaints.

VX doesn't need DOT enforcement - it could file a federal suit against UA. It's very unlikely to prevail given airline pricing vs. standards of 'fair cost' pricing established in federal law, and that's a reason for Branson's jawboning.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: lightsaber
Posted 2013-04-17 06:11:22 and read 6448 times.

In all this talk, does SRB realize that the Virgin airlines aren't perceived as 'upstart underdogs' so much anymore? He has overplayed that card for too long. Oh, 20 years ago it was a believable routine. But B6 came in and was that upstart for TCONs. There simply isn't the void there was a decade ago. WN, B6, and to a lesser extent Spirit have filled it.

Next will see SRB hanging out with a woman in a bikini young enough to be his granddaughter.    I personally think its time for him to retire.

Quoting ORDBOSEWR (Reply 37):
However, if VX began pricing then UA changed the price to MATCH VX then how is that anti-competitive? A company is reacting to the market and competition. That is 100% legal.

That is it in a nutshell. Until VX starts making money, they simply won't win that argument.

Quoting commavia (Reply 20):
If VX wants to avoid a competitive response, they can try flying their mood lit A320s on SFO-BHM or LAX-BIL.

You forgot BDL.   But you are right in that:

Quoting commavia (Reply 20):
But if they want to continue to try and skim the choicest customers away from the biggest carriers on the busiest trunk routes, it's kind of laughable for them to feign intrigue when said biggest carriers respond with all the tools at their disposal. What are competitors supposed to do?

Every competing airline is going to react when a trunk route is invaded. IIRC, DL peaked at 21 flights/day LAX-ATL to keep B6 out of LGB-ATL. I didn't like that, but that was a legal reaction. Airlines have certain 'must have' routes. For UA, it is LAX to New York (both EWR and JFK).

Quoting EA CO AS (Reply 34):

I see Branson's complaining for what it really is; the last act of a desperate man.

Considering how poorly most of his airlines are doing financially, excluding VA which, IIRC, he doesn't control anymore...

Quoting mariner (Reply 32):

Virgin America might surely have expected an easier path but many of its problems were of its own making and I don't think it's a good idea to start an airline on the basis that "something might pop."

If I may rephrase, it is a horrid business plan to expect competitors to keep making mistakes and not adapt. All 3 majors have lowered their costs dramatically.

Lightsaber

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-17 06:31:19 and read 6311 times.

Quoting XT6Wagon (Reply 26):
I just think its really really Ironic since VX was created to push UA under
Quoting mariner (Reply 27):
I find it extraordinarily difficult to imagine that SRB - or anyone associated with Virgin America - thought they were going to "push United under".

I don't often agree with Mariner, but he is 100% right. Who from VX ever said they were going to push UA "under". BTW, they already went "under" and came back after dumping all their obligations on taxpayers and bondholders. VX and any start-up are happy to survive, much less kill a legacy.

Quoting lucky777 (Reply 30):
And a new carrier also doesn't have to worry about D checks, pensions, a VERY senior workforce with 5+ weeks of vacation etc, etc, etc...

Legacies don't have to worry about pensions either. The U.S. taxpayer does. Legacies don't have to worry about unsecured debt like VX does, you just file Ch11 and wipe it away. ...and BTW, you have to accrue for D checks so VX's financial results which everybody hates includes an accrual for that. and UA's vacation policy is their choice.

Quoting lucky777 (Reply 30):
So what does the fledgling upstart do? Try to use its lower cost structure (at least temporarily, until its faced with those same things the legacies are dealing with...pensions, topped out workforce etc....) and tries to muscle into an 800 pound gorilla's backyard and actually has the gall to think that this gorilla will just sit idly by as it cherrypicks its customers away from under its nose.
Quoting lucky777 (Reply 30):
What it does have, however, and you alluded to it in your comment above, Enilria, is the deep pockets necessary to bleed the little engine that could dry if it wishes for a fight.

The deep pockets are the problem and that needs government intervention to remain in balance. Capitalism is supposed to be survival of the fittest. It is not supposed to be all the old bucks ganging up to suffocate the younger and stronger as they are born so that the species ultimately withers and dies. That's what is happening. Ch11 and wrecked what is supposed to be the "circle of life" in this industry. Companies have their hey-day and then adapt or lose. Myspace? IBM? Microsoft? All sat atop the heap only to be replaced by FB, Apple, and Google. There is a life-cycle. All we have in this industry is consolidation, mergers, and Ch11. It is stagnation with the possible exception of NK.

Quoting lucky777 (Reply 30):
What would you rather UA do, just throw up their hands and say "Oh well, we can't match the artificially low fares of VX so we might as well throw in the towel now", or fight tooth and nail?

That's what the airlines have done with NK. They don't match them. That's why they are doing so well and growing like a weed. Of course, NK has designed a fee structure that the legacies really can't match (carry on bag fee) , so they are also smarter...and expect no favors from DOT. In fact, the opposite has actually happened. DOT, at the insistence of the other legacies, has been pushed toward adopting the same fare policies (advertised prices we all fees included) so that the legacies can match them again and thus kill them. So far it has failed really only because the carry on bag fee has been excluded from being required in the advertised fare.

Quoting MIflyer12 (Reply 38):
VX doesn't need DOT enforcement - it could file a federal suit against UA. It's very unlikely to prevail given airline pricing vs. standards of 'fair cost' pricing established in federal law, and that's a reason for Branson's jawboning.

The issue is not pricing. They will never win on pricing because of the way the game is set up. They definitely should win on capacity. UA should not be allowed to double their flights the day they announce. That is clearly predatory and measurable.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: PanAm1971
Posted 2013-04-17 06:39:51 and read 6236 times.

I've heard really good things about VX... and I'm probably going to book on them next month. There seems to be so much fear and loathing on a.net about VX that they must be on to something. I'm very curious.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: PHX787
Posted 2013-04-17 07:33:34 and read 5867 times.

Hmm Where are our "big hub big airlines" guys right now?  

I don't like Branson that much. he's a nutcase, he tries too much, etc. etc. etc. I can go on forever, but I won't because he has a good point here. America DOES need more competition! Especially with the legacies. As I've stated before, it's not just hurting the industry, it's hurting the consumer. Which, therefore, hurts in the industry.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: commavia
Posted 2013-04-17 07:39:54 and read 5801 times.

Quoting enilria (Reply 40):
The deep pockets are the problem and that needs government intervention to remain in balance.

In a functioning democracy, property rights are sacrosanct. It is not the government's job to "intervene" and keep "in balance" the distribution of assets among multiple competitors in an already-vibrantly-competitive market. That's a very, very scary notion.

Quoting PanAm1971 (Reply 41):
I've heard really good things about VX... and I'm probably going to book on them next month.

They definitely have a great product - no question about that.

Quoting PanAm1971 (Reply 41):
There seems to be so much fear and loathing on a.net about VX

Not so much "fear and loathing" as lack of patience with VX's constant whining that they should be handed things for free and get special treatment seemingly just by virtue of the fact that they're so wonderful, and yet so chronically unprofitable.

Quoting PanAm1971 (Reply 41):
that they must be on to something.

They most definitely are on to something - offering a top-notch product at a loss. Actually making money is the trick they haven't quite caught onto yet.

Quoting PHX787 (Reply 42):
Hmm Where are our "big hub big airlines" guys right now?

Right here - in "hiding" - where you last left me.   

Quoting PHX787 (Reply 42):
America DOES need more competition!

No it doesn't, at least not when it comes to airlines. Air fares - adjusted for inflation and stage length, and even including ancillary fees - have decreased by essentially half in 30 years. Competition and choice is not something the U.S. air travel consumer lacks, the misguided protestations of A.net members notwithstanding.

[Edited 2013-04-17 07:41:01]

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: RDH3E
Posted 2013-04-17 07:42:30 and read 5782 times.

Quoting TW870 (Reply 29):
which is why its costs are more “competitive” than they used to be.

Which is laughable because UA has the highest cost in the industry by a large margin now that AA hit the BK button.

Quoting enilria (Reply 40):
Legacies don't have to worry about pensions either. The U.S. taxpayer does.

Well that's actually false. UA pays a significant amount to the PBGC that took over the pensions. Last year alone we paid something like 400M.

Quoting enilria (Reply 40):
Legacies don't have to worry about unsecured debt like VX does,

....Yes they do, anything after their BK and often now some unsecured creditors can get stock in the new company...

Quoting enilria (Reply 40):
It is not supposed to be all the old bucks ganging up to suffocate the younger and stronger

Ha, good joke, VX stronger   

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: superjeff
Posted 2013-04-17 07:50:58 and read 5683 times.

Quoting enilria (Thread starter):
Legacies don't have to worry about pensions either. The U.S. taxpayer does. Legacies don't have to worry about unsecured debt like VX does, you just file Ch11 and wipe it away. ...and BTW, you have to accrue for D checks so VX's financial results which everybody hates includes an accrual for that. and UA's vacation policy is their choice.

I think you don't have a clue about bankruptcy laws and how they work. Yes, UA did dump its pension plans, and got rid of or renegotiated other obligtations. But their shareholders were totally wiped out and lost everything. So filing Chapter 11 is not something you do simply to dump overhead - there is a major downside to it as well, and it isn't pretty. Not to mention that there is no guarantee of ever coming out of a Chapter 11 (see Braniff, Eastern, Pan Am, etc.).

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: sirloin
Posted 2013-04-17 07:53:08 and read 5660 times.

I can see both sides of the issue. On the one hand, I have no issue with competitors dumping capacity if they have it available to protect their turf. I do, however, agree that using Chapter 11 as a get-out-of-jail-free card, thereby putting everyone who has avoided it at a massive disadvantage, ought to come with some stipulation. Honestly, where does it end? At what point can the bankruptcy courts tell a carrier they won't offer them the Chapter 11 option? US Airways got it twice. Does every carrier get extended that courtesy?

It was said above that capitalism is survival of the fittest. It was also said that Chapter 11 destroys that system, and I'm inclined to agree. If anything, don't get rid of it, but I would think that it should come with stipulations about not being allowed to actively participate in what are surely unprofitable activities. If you've had to essentially get bailed out, you shouldn't be able to use that for a predatory advantage.

I don't profess to fully understand the financial side of the industry, so take my comments for what they're worth, but I just don't think it's fair that some carriers who had properly managed their way through the trying times of the industry without having to go bankrupt should suffer a disadvantage against those who have. Whose to say that if one of the remaining legacies bit the dust back during bankruptcy, others might have avoided it and the remaining carriers would be better off?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: olddominion727
Posted 2013-04-17 07:54:41 and read 5646 times.

AA did this at JFK to fend off B6 with n/s service to SFO, OAK, SJC, ONT, LAX, SNA, LGB, SAN... Where are those flights now? In the history books, because flooding the market didn't work.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: LHCVG
Posted 2013-04-17 08:13:42 and read 5475 times.

Quoting HiFlyerAS (Reply 15):
Quoting FriendlySkies (Reply 13):Oh boo hoo. If you want to enter a market with dirt cheap fares, you can't expect the largest carrier in that market to roll out the red carpet. UA is doing what any other airline would do, and Branson knows that. If he can opt to lose money on a route, so can UA.


Waa waa...poor SRB. Every airline has the right to defend their turf/hub/routes. If it isn't fare sales it's upping capacity, mileage bonuses, special promotions. Branson is the king of that....all hat and no cattle.

This is what makes this a non-starter for me -- VX has opted to compete against entrenched legacy hub routes for much of their route network, and so they to some extent get what's coming to them. Predatory pricing is what it is (if they can prove it in court, fine, but as said above that's tough to do), but overall I'm not sure what their complaint is when they seem to go after UA prime routes in particular.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: avek00
Posted 2013-04-17 08:14:48 and read 5460 times.

Quoting PHX787 (Reply 42):
America DOES need more competition!

No, it doesn't. We've have enough of an irrational competitive landscape that led to many carriers, few profits, and communities and employees left holding the bag. Consolidation has produced the healthiest air carriers America -- and indeed, the world --- has ever seen.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: PHX787
Posted 2013-04-17 08:21:48 and read 5428 times.

Quoting commavia (Reply 43):
No it doesn't, at least not when it comes to airlines. Air fares - adjusted for inflation and stage length, and even including ancillary fees - have decreased by essentially half in 30 years. Competition and choice is not something the U.S. air travel consumer lacks, the misguided protestations of A.net members notwithstanding.

Really? Why? So your precious bigtime legacy can make the most money?  

Ok I hope you read my other message about competition in the other thread, because clearly you are not seeing into the eyes of a customer.

I fly DL simply because that's my only option into CVG, where my parents and family and loved ones live.

If I fly to PHX, I'll most likely use NH somewhere, then will have so many options (most likely will use US) to get to PHX. I choose the best option to get to PHX, and clearly PHX is in a great position with all of the options offered.

BUT That's me. I like spending money for getting good service.

Now for the average joe, which I associate with most, they are worried about pricing, comfort, and product.

You can't keep saying "suck it up this is the aviation industry today," because frankly, it's not.

We are far behind the likes of other countries' aviation industries. ( I wonder why, especially since someone on here works for a major airline and spouts this kind of stuff all the time )

When you say "adjusted for inflation," you immediately lose your argument. Fares are outrageous these days! And they always have been in some cases.... The flier today doesn't give a crap what the price is today adjusted for inflation...when they buy a ticket online, they immediately see "holy crap why does it cost $2000 to get to LHR?!" and would probably choose a different ticket on a different price.....IF THEY HAD THAT OPTION.

Here's something my japanese friend did once to avoid DL's and UA's high fares...
She booked a $50 ticket on WN from PHX to LAX, then somehow obtained a $600 ticket on SQ from LAX to NRT. She does this all the time, and tells me she would never fly an American legacy because of these prices.

A similar example from a buddy of mine who frequents both PHX and CVG from Japan as per his work:
When flying to PHX, he uses NH (he has a frequent flyer account) and then either WN directly to PHX, AS to PHX, or F9 from his port of arrival to DEN then DEN to PHX. He has these options.

Because of the stranglehold DL has on CVG, when he flies there, he typically connects in MSP because of the long lines at LAX, DTW, and ATL's immigration areas. Even then, he tells me he always has to run to his CRJ flight in concourse B from MSP to get to CVG. He's missed his connection 4 times. He hates flying to CVG because of this, but because of the options he has, he's pretty screwed. (He doesn't like UA or AA much, but he told me last time he went to CVG was NRT-ORD-CVG....he again barely made his connection at ORD....which was then called back to the gate for fuel....seriously, he posts this stuff on FB all the time.) Also- he says his flights to CVG are the most expensive flights he's ever been on.


I don't know why you personally seem to target me or my credibility, especially when I am giving you good examples.

To summarize- Because the customer is getting screwed, in many ways, more competition is needed for airlines to simply be able to survive. People are simply going to stop flying. Especially since business these days can also be conducted via Skype, for example.


So are you listening?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: osubuckeyes
Posted 2013-04-17 08:25:46 and read 5410 times.

Quoting superjeff (Reply 45):
So filing Chapter 11 is not something you do simply to dump overhead - there is a major downside to it as well, and it isn't pretty. Not to mention that there is no guarantee of ever coming out of a Chapter 11 (see Braniff, Eastern, Pan Am, etc.).

US, DL, NW, UA, and now AA pretty much have all been able to use this as a giant crutch. The airlines were too big to fail before the banks were. I would be shocked if one of these airlines was allowed to fail now and going into the future. The airlines you mention Braniff, Easter, Pan Am, etc... Had these airlines existed in the same federal environment as we have today I would imagine that they would emerge from Chapter 11 with a merger or a large influx of investment with some kind of vague subsidy implication.

Quoting commavia (Reply 43):
Air fares - adjusted for inflation and stage length, and even including ancillary fees - have decreased by essentially half in 30 years. Competition and choice is not something the U.S. air travel consumer lacks, the misguided protestations of A.net members notwithstanding.

Doesn't necessarily matter what the price is relative to inflation but rather what it is relative to supply. If supply has more than doubled, fares should reflect that in some fashion depending on the price elasticity of the market. The thing that is becoming more apparent in a consolidated industry is that fares are generally beginning to increase again, but supply is decreasing as well. Is it a bad thing? No. But when lots of local economies rely on tourism and air travel it can have negative effects. Also consolidation leads me personally to be weary of future monopolies, oligopolies, and barriers to entry.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: UALWN
Posted 2013-04-17 08:27:51 and read 5336 times.

Quoting superjeff (Reply 45):
So filing Chapter 11 is not something you do simply to dump overhead - there is a major downside to it as well, and it isn't pretty.

It isn't pretty for who? For shareholders, for employees, for competitors, and for taxpayers. For management, on the other hand, it seems to be quite OK: see the $20m severance package Tom Horton negotiated for himself...

[Edited 2013-04-17 08:29:00]

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: MaverickM11
Posted 2013-04-17 08:32:36 and read 5301 times.

Quoting olddominion727 (Reply 47):
AA did this at JFK to fend off B6 with n/s service to SFO, OAK, SJC, ONT, LAX, SNA, LGB, SAN... Where are those flights now? In the history books, because flooding the market didn't work.

True, but B6 was also consistently profitable from day 1. Guess Branson just picked the wrong time to start a terrible business plan in the world's most hypercompetitive market  
Quoting PHX787 (Reply 50):
We are far behind the likes of other countries' aviation industries

Who is "we"? If we=Japan then yes I agree completely.

Quoting PHX787 (Reply 50):
When you say "adjusted for inflation," you immediately lose your argument

...but then a quick google shows that unit revenue has been on a brisk deflation since deregulation, but costs including fuel and labor have not. How much do you think it costs to fly a seat across the Pacific? You honestly believe it can be done for $250 each way?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: RDH3E
Posted 2013-04-17 08:45:51 and read 5195 times.

Quoting UALWN (Reply 52):
see the $20m severance package Tom Horton negotiated for himself...

Which got thrown out by the judges...

Quoting PHX787 (Reply 50):
So are you listening?

Yeah, and it sounds like your buddy needs to complain about immigration processing speed more than anything else. Likely Japan will become part of global entry soon enough and he'll be speeding through customs in no time.

Quoting PHX787 (Reply 50):
We are far behind the likes of other countries' aviation industries.

And you're proposing throwing it back into the pits of 2005. Things are just starting to get better, US on time percentages are at all time highs, all operational metrics are improving, a decent demand environment means airlines can afford to spend on customer service, complaints are down.... I don't see us being behind at all actually.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: tugger
Posted 2013-04-17 08:48:27 and read 5158 times.

Quoting MaverickM11 (Reply 53):
...but then a quick google shows that unit revenue has been on a brisk deflation since deregulation, but costs including fuel and labor have not. How much do you think it costs to fly a seat across the Pacific? You honestly believe it can be done for $250 each way?

The question is inaccurate, if every seat were priced at that price then for a 179 seat aircraft that would generate about $90,000 round trip. But not every seat is priced at that amount and so the revenue is much higher per flight. And when you include premium seating, fees, etc. the revenue is higher still which what allow the airlines to offer those lower cost seats to fill the last few seats.

Tugg

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: LHCVG
Posted 2013-04-17 08:56:26 and read 5091 times.

Quoting PHX787 (Reply 50):
When you say "adjusted for inflation," you immediately lose your argument. Fares are outrageous these days! And they always have been in some cases.... The flier today doesn't give a crap what the price is today adjusted for inflation...when they buy a ticket online, they immediately see "holy crap why does it cost $2000 to get to LHR?!" and would probably choose a different ticket on a different price.....IF THEY HAD THAT OPTION.

No he doesn't. It's important to keep in mind that "outrageous" fares today are often times far lower than in the past, which matters because many more people have access to many more flights than they used to. Look up what fares were like in the 70's, say, and they would be astronomical in current dollars. In heavily saturated markets like transcons nowadays, carriers sometimes essentially break even on the cutthroat fares charged. As for your LHR example, if there profit to be made by selling lower fares TATL somebody would be doing it, but the market seems to clear at those prices so it still works for the airlines.

Quoting PHX787 (Reply 50):
Because of the stranglehold DL has on CVG, when he flies there, he typically connects in MSP because of the long lines at LAX, DTW, and ATL's immigration areas. Even then, he tells me he always has to run to his CRJ flight in concourse B from MSP to get to CVG. He's missed his connection 4 times. He hates flying to CVG because of this, but because of the options he has, he's pretty screwed. (He doesn't like UA or AA much, but he told me last time he went to CVG was NRT-ORD-CVG....he again barely made his connection at ORD....which was then called back to the gate for fuel....seriously, he posts this stuff on FB all the time.) Also- he says his flights to CVG are the most expensive flights he's ever been on.

This is an easily solved problem: book longer connections. Especially when you're connecting onward from an inbound int'l flight to a domestic one, you need to allow lots of extra time. Granted, sometimes things happen no matter how long a connection you build in, but still, there are good (and well known) rules of thumb to be used for how long is a safe bet. Tales of "always [having] to run to [make] his CRJ" and "missed his connection 4 times" should be a red flag that he isn't booking tickets with reasonable accommodation built in, and that's no one's fault but his own. Same goes for the NRT-ORD-CVG connection. In other words, maybe he does have to take a later flight MSP- or ORD-CVG instead of the current one, but doing so would likely alleviate most of these near misses, and that is all entirely under his control.

Quoting PHX787 (Reply 50):
I don't know why you personally seem to target me or my credibility, especially when I am giving you good examples.

To be fair, and I will be the first to support everyone's right to express whatever views on here, you do have a history of posting wild speculation based on hearsay and rumor (sans facts or references/citations) and generally stating your own views as facts.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: UALWN
Posted 2013-04-17 09:40:05 and read 4806 times.

Quoting RDH3E (Reply 54):
Quoting UALWN (Reply 52):
see the $20m severance package Tom Horton negotiated for himself...

Which got thrown out by the judges...

For now:

"(...) the airline says it will continue to push for CEO Tom Horton to get the payoff. And the judge left the door open to reconsider the request in future, or for the company to approve the windfall for Horton once its merger with US Airways is complete."

Eventually it will happen.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: commavia
Posted 2013-04-17 09:59:16 and read 4648 times.

Quoting PHX787 (Reply 50):
Ok I hope you read my other message about competition in the other thread, because clearly you are not seeing into the eyes of a customer.

I'm a consumer! I don't, nor have I ever, worked for any airline!   

Quoting PHX787 (Reply 50):
Now for the average joe, which I associate with most, they are worried about pricing, comfort, and product.

Guess what - aren't we all?! I, too, am worried about pricing, comfort and product. But again, the real issue comes in the balance of those somewhat conflicting priorities.

For the last 30+ years since deregulation, consumers have spoken loud and clear with their feet and their wallets that while they may say they want all of those things, for all but the most discerning of business travelers, price is really what matters most. As Bob Crandall used to say, the "three most powerful motivating factors in airline purchasing decisions are price, price and price." If that is the way the public behaves, how do you expect airlines to respond?

So people can decry the allegedly horrid state of airline service today, but the reality is that you get what you pay for. The airline industry (and hopefully the federal government with which it is, sadly, so inexorably intertwined) will naturally begin to invest again in infrastructure, reliability, service, product, etc. when they feel it's worth it for their shareholders. That's how business works. When airlines feel they are able to recoup that investment in a better, more reliable, product through the ability to actually get customers to pay for it (what a concept), they'll make the investment. Until then, they would basically be throwing away shareholder money.

Quoting PHX787 (Reply 50):
When you say "adjusted for inflation," you immediately lose your argument. Fares are outrageous these days!

And when you say that, you lose all credibility whatsoever.

Quoting PHX787 (Reply 50):
Because the customer is getting screwed, in many ways, more competition is needed for airlines to simply be able to survive.

Again, fascinating.

So the way airlines can "survive" is by excessively competing with each other to the point of charging prices so low that they do not allow these (mostly) publicly-traded companies to deliver a sustainable return to shareholders.

I swear, you can't make this stuff up ...

Quoting PHX787 (Reply 50):
People are simply going to stop flying.

Please alert us when that happens.

Quoting osubuckeyes (Reply 51):
Doesn't necessarily matter what the price is relative to inflation but rather what it is relative to supply. If supply has more than doubled, fares should reflect that in some fashion depending on the price elasticity of the market. The thing that is becoming more apparent in a consolidated industry is that fares are generally beginning to increase again, but supply is decreasing as well. Is it a bad thing? No. But when lots of local economies rely on tourism and air travel it can have negative effects. Also consolidation leads me personally to be weary of future monopolies, oligopolies, and barriers to entry.

No argument, in general.

My point isn't that somehow the cost of air travel going up somewhat (through either fares and/or fees) isn't going to have some negative consequences for certain constituencies - like, for example, travel/tourism-dependent industries, and/or individual consumers. Of course it will. My point is that this is inevitable anyway, and free markets don't guarantee only positive outcomes for everyone all the time.

At some point our society is going to have to start paying for the product of air travel a sufficient price so as to allow the producers of that product to earn a reasonable return for their shareholders.

The cost of air travel eventually catches up with rising cost through higher fares and fees, or through airlines simply exiting the industry. One way or another, economics will always win.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ItalianFlyer
Posted 2013-04-17 10:27:04 and read 4446 times.

Quoting osubuckeyes (Reply 33):
Airline consolidation has brought about an interesting environment in today's industry. It will be interesting to see in the coming years how the smaller airlines and start ups deal with 4 mega carriers with seemingly unlimited resources and a too big to fail attitude.

Not to get to esoteric, but I think you hit the 'big picture' nail on the head. Now that the industry is evolved into a de facto oligopoly, it is a matter of time before the Nash equilibrium takes effect. Actors make competitive decisions based on the decisions of other actors, but decisions are made to maximize returns for the actors....not customers. Eventually all parties adopt the same strategy because of the loss-risk involved by changing strategies. This presents serious problems for new entrants because established players are able to adjust pricing to barely above marginal costs and make money. By their nature, start ups have higher marginal costs and have to compete by pricing at a loss to draw customers.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: osubuckeyes
Posted 2013-04-17 10:35:33 and read 4370 times.

Quoting commavia (Reply 58):
Of course it will. My point is that this is inevitable anyway, and free markets don't guarantee only positive outcomes for everyone all the time.

At some point our society is going to have to start paying for the product of air travel a sufficient price so as to allow the producers of that product to earn a reasonable return for their shareholders.

The cost of air travel eventually catches up with rising cost through higher fares and fees, or through airlines simply exiting the industry. One way or another, economics will always win.

Well, I guess it depends on if you think free markets are inherently monopolistic or inherently competitive. I tend to lean to the premise that they are inherently cyclical and we are in a market that is moving towards monopoly, but eventually when competitors move in and can offer the same product at a lower cost because they do it on a smaller scale we will move back towards a competitive equilibrium, possibly become over competitive then the cycle of mergers and bankruptcies begins again.

I also think it is difficult to say that society has to pay a sufficient price for air travel now because the predecessors of the current environment mismanaged the airlines and abused resources. I think to say that is to ignore the fact that many airlines have been able to wipe out there shareholders and debts in Chapter 11 (broad generalization) and be essentially treated as a too big to fail entity. Had these airlines actually been subjected to the free market and been allowed to fail then you may have a very different looking industry.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ItalianFlyer
Posted 2013-04-17 10:52:33 and read 4230 times.

Quoting osubuckeyes (Reply 60):
Had these airlines actually been subjected to the free market and been allowed to fail then you may have a very different looking industry.

Ultimate irony: the policies designed to prevent the US airline market from being concentrated into a few carriers led to the market being concentrated into a few carriers.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: Flighty
Posted 2013-04-17 11:09:51 and read 4137 times.

Quoting osubuckeyes (Reply 60):
eventually when competitors move in and can offer the same product at a lower cost because they do it on a smaller scale we will move back towards a competitive equilibrium

That can only happen if mega-carriers like UA, DL, AA are barred from predatory pricing.

An example for clarity. UA charges say $600 on LAX-EWR. VX comes in at $400, still profitable price. UA replies with hourly 757s and a $69 fare, obviously losing money. VX exits the market after losing all its meager cash. That's clearly illegal IMO (and some will disagree, but only a few). The key there is that UA initiated the price cut to $69.

Now, what if UA starts at $600, VX comes in at $400, and UA merely price-matches to $400, and doubles or triples seat count. __It is really the same thing__, killing the RASM of the market in order to bleed the small carrier. (By definition) the small carrier will lose the fight. A giant increase in capacity by UA also could be predatory, money-losing and not legal... AFAIK.

If UA can behave that way, a small carrier will never enter the market to begin with, no matter how high the yields are.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: jumpjets
Posted 2013-04-17 11:55:15 and read 4040 times.

I guess that now VS is hooking up with DL SRB can no longer sustain his 'No way BA/AA' mantra and he needs a new axe to grind and he has found it in UA playing 'nastily' with VX.  

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: toxtethogrady
Posted 2013-04-17 13:35:18 and read 3833 times.

All Branson has to do to send a shot across UA"s bow is to start flying to IAH. Or HOU.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: commavia
Posted 2013-04-17 13:37:18 and read 3835 times.

Quoting osubuckeyes (Reply 60):
I also think it is difficult to say that society has to pay a sufficient price for air travel now because the predecessors of the current environment mismanaged the airlines and abused resources.

That's not what I said. I didn't say society had to pay a sufficient price because of mistakes made in the past. I said society has to pay a sufficient price to deliver returns for airline shareholders today.

Quoting osubuckeyes (Reply 60):
Had these airlines actually been subjected to the free market and been allowed to fail then you may have a very different looking industry.

No argument - but that's a different topic. But either way, the outcome would be the same. Competitors would decrease, and fares would increase. As I said previously - one way or another, it had to happen, and was going to. It's just that bankruptcy laws made it easier for big airlines to stick it out longer and consolidate, rather than simply exiting the market through liquidation sooner.

Quoting Flighty (Reply 62):
An example for clarity. UA charges say $600 on LAX-EWR. VX comes in at $400, still profitable price. UA replies with hourly 757s and a $69 fare, obviously losing money.

So what you're basically saying is that if one competitor in a given market has a lower cost than another competitor, the higher-cost competitor is barred from competing on the basis of price (i.e., by responding to/matching the price of the lower-cost competitor). If that's the case, what you're essentially indirectly endorsing is a continuous race-to-the-bottom commoditization of said product. If the higher-cost competitor is barred from competing on price unless it can always match the lower-cost competitor's costs, then all that will happen is the higher-cost competitor will cut every cost they possibly can (labor, amenities, etc.) to compete.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: Flighty
Posted 2013-04-17 14:15:29 and read 3715 times.

Quoting commavia (Reply 65):
If the higher-cost competitor is barred from competing on price unless it can always match the lower-cost competitor's costs, then all that will happen is the higher-cost competitor will cut every cost they possibly can (labor, amenities, etc.) to compete.

Thank you for your close reading and yes, AFAIK the high-cost competitor is OK to match low prices, but probably not dig way deeper on price (way below cost), and probably not ramp up capacity by a whole lot -- both of which are money-losing acts of intimidation according to, say, VX. So, is UA legally limited by its costs, yes -- cost is a part of the law. Any price higher than cost (profitable flying) is always fine in terms of predatory pricing questions. So the carriers do have different legal loopholes depending on how low their costs are.

Is it a race to the bottom? Yes -- it ensures you can start a viable business and not be crushed by a monopolist. The goal is to reduce consumer prices and protect 'vibrancy' of the market. You are right that the consequence is 'market' wages (for the people at UA) also known as 'bottom' wages.

But UA has a revenue premium, or it ought to, because of its huge network. And UA should have _lower_ ex-flight crew costs than VX, again because of size. Of course crews will try to get as much of those structural $$ as they can. If the Big 4 run free of the above constraints, and rake in profits, the days of $300k mainline pilots could come back.... 'monopoly money'... my 2c.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: osubuckeyes
Posted 2013-04-17 14:15:46 and read 3730 times.

Quoting commavia (Reply 65):
So what you're basically saying is that if one competitor in a given market has a lower cost than another competitor, the higher-cost competitor is barred from competing on the basis of price (i.e., by responding to/matching the price of the lower-cost competitor). If that's the case, what you're essentially indirectly endorsing is a continuous race-to-the-bottom commoditization of said product.

If UA dumps capacity and lowers the price intending to drive VX out of the market by doing this by creating and artifically low market then it can be considered anti-competitive predatory pricing. It can force new entrants to stay out and is a monopolistic strategy. There is an extremely gray area between legitimate price competition and predatory pricing that is why it is very difficult to prove and rarely holds up in court. Historically predatory pricing is presented in a pro-competition way, but is intended to be able to create marginal revenues with lower by keeping competitors out.

UA may be providing the appropriate response to compete. VX is also facing an uphill battle because my guess is that the DOT looks at LAX/SFO-EWR as a LAX/SFO-NYC market in which there is plenty of competition.

My overall more general point is that the landscape in the airline industry has evolved is that society today is potentially paying a price for past mismanagement and being able to use Chapter 11 as an artificial crutch.

Great Discussion!

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: bobnwa
Posted 2013-04-17 14:28:45 and read 3670 times.

Quoting enilria (Thread starter):
People seem to want VX to fail on a.net, but I agree with Branson that the industry needs competition and it is beginning to be sorely lacking. I agree that VX's investment probably was obtained by dodging the ownership laws, but regardless we need every airline left.

"When American Airlines went into Chapter 11 a few slots became available. Virgin America entered the market and fares from Newark to California dropped by 40% and suddenly consumers had better options with new planes, in-flight wi-fi and exemplary service. But instead of competing based on quality, United then conjured up a whole batch of previously "non-existent" slots to double their capacity on San Francisco-New York and Los Angeles-New York flights to try to squeeze Virgin America out."


"They have been playing this game against Virgin America by putting on extra capacity on our other routes at a massive loss to themselves. My estimate is that the extra capacity out of Newark will cost them $130 million per year - just to try to drive us out of the marketplace.

Well, we won't be driven out. It didn't work in Chicago or Dallas and it won't work here...we would ask the Department of Transportation to consider looking into what United has been up to these past couple of years and consider taking appropriate action."
Who made the statement quoted above? SRB or someone else?




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67 replies: 8 compressed (already read), showing first 25 unread out of 59




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Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: LoneStarMike
Posted 2013-04-17 14:29:17 and read 3689 times.

It seems like we've been down this road before - back in 1999 when the DOJ sued AMR corp for predatory practices. At DFW, every time a new LCC came in, AA added capacity, matched the new airline's prices, gave triple AAdvantage miles, etc.

United States of America vs AMR Corporation, American Airlines Inc. and AMR Eagle Holding Corporation

The government lost its' case against AMR.

Quote:
The government's claims in the present case fail because American did not price below an appropriate measure of cost, because it at most matched the prices of its competitors, and because there is no dangerous probability (even assuming below-cost pricing) of recoupment of American's supposed profits by means of supra-competitive pricing. With respect to costs, the evidence shows that American priced its fares consistently above its average variable costs. Alternative, creative measures of costs proposed by the government are inconsistent with existing law, and inconsistent with an antitrust regime which seeks to nurture rather than throttle vigorous price competition. With respect to the question of recoupment, the government's claims suffer from a pervasive failure of proof. The evidence shows that, following the period of low fare competition, American's fares roughly returned to their previous level. Actual or likely recoupment by supra-competitive pricing finds no basis in the evidence.

The government has virtually abandoned its expansionist claims of liability with respect to over 50 airline flight markets, providing no evidence or allegation that American monopolized or sought to monopolize these markets by specific anticompetitive acts. The government's theory of liability by reputation is not the law, and should not be. A fundamental principle of antitrust law is that it be capable of effective and accurate administration, and not chill the competition it seeks to foster. The government's reputational liability approach would violate this principle, permitting claims of predation based solely upon the subjective and unverifiable complaints of a defendant's competitors.

The low fare carriers in question entered the core markets seeking to play a new sort of ball game. The government's theory -- that an established competitor should not, and indeed, cannot deviate from its existing market strategy in the face of aggressive price cutting by a new entrant -- represents a whole new mid-game spin on time-honored rules. Here American played by the traditional rules. It competed with the low fare carriers on their own terms. It did not price its fares below cost; it did not undercut the other carriers' fares. There is no doubt that American may be a difficult, vigorous, even brutal competitor. But here, it engaged only in bare, but not brass, knuckle competition. Summary judgment is appropriate.

IT IS ACCORDINGLY ORDERED this 27th day of April, 2001, that the defendant American's Motion for Summary Judgment (Dkt. No. 382) is hereby granted.

I don't see how the current case being discussed here will wind up being any different.

LoneStarMike

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: ikramerica
Posted 2013-04-17 14:38:24 and read 3659 times.

Quoting commavia (Reply 43):
In a functioning democracy, property rights are sacrosanct. It is not the government's job to "intervene" and keep "in balance" the distribution of assets among multiple competitors in an already-vibrantly-competitive market. That's a very, very scary notion.

No doubt. The new york-la market has DL, AA, UA, VX and B6, offering multiple options to multiple airports in both areas. This doesn't even count one-stop options from all airports to all airports and on other carriers like WN, F9 etc.

Where is the lack of competition? Where is the rule that says VX must be able to fly this route, from EWR, at a loss, without competition on price?

Quoting Flighty (Reply 62):
UA charges say $600 on LAX-EWR. VX comes in at $400, still profitable price. UA replies with hourly 757s and a $69 fare, obviously losing money.

I'd like to find me some of these $69 RT fares you claim.

Lowest I'm seeing is $400 or so midweek.

As for your claim VX entered at a profitable fare, prove it please. VX doesn't run at a profit. So how does entering a transcon route at the low-end of the fare scale magically turn a profit?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: commavia
Posted 2013-04-17 15:58:19 and read 3545 times.

Quoting Flighty (Reply 66):
Thank you for your close reading and yes, AFAIK the high-cost competitor is OK to match low prices, but probably not dig way deeper on price (way below cost), and probably not ramp up capacity by a whole lot -- both of which are money-losing acts of intimidation according to, say, VX.

Aye, but there's the rub (as Shakespeare might say).

The problem with the above is the definition of "probably," "way deeper," "way below cost," "by a whole lot," and "intimidation." They are entirely subjective and open to interpretation. Does United get to define "way below cost?" Does Virgin get to define "by a whole lot?" What you might view as unacceptable would be completely fine with me.

Quoting osubuckeyes (Reply 67):
If UA dumps capacity and lowers the price intending to drive VX out of the market by doing this by creating and artifically low market then it can be considered anti-competitive predatory pricing.

So again, following this argument to its logical end, what you're saying is that if a lower-cost competitor enters a market and attempts to gain market share by undercutting price, a higher-cost competitor already established in that market should be prohibited from trying to hold on to that market share by utilizing the same strategy?

The net effect of that type of policy would be to turn air travel into a commodity product with competition based solely on price. If a higher-cost competitor were only permitted to respond to a new entrant by cutting prices if they could somehow prove that they were not cutting below cost, then the only way that competitor would ever survive would be to mercilessly reduce their cost - a nonstop race to the bottom that would never end.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: UAL747DEN
Posted 2013-04-17 16:12:10 and read 3515 times.

Quoting Flighty (Reply 9):
It is not lawful for UA to use predatory pricing (lose money) to exhaust VX of funds on the route. If it were legal, then UA has an invincible monopoly on the route.

Branson is putting them on notice.

You are wrong that is not illegal, if that was the case VX is violating the law and has been since the beginning of the introduction of service.

Quoting 727LOVER (Reply 21):
I totally DISAGREE when it it involves a federally slot-controlled airport.........but that's just me

Again you are wrong, the slots at EWR can be used how the airline sees fit.

Quoting jayunited (Reply 24):
while VX'x customer service and onboard product beats UA product and customer service hands down that is only part of the battle, the other part or should I say the major part of the battle is convenience and choice. With UA you may get crappy customer service but at least you can leave almost whenever you want to because UA has numerous nonstops to fit your schedule.

Really? The customers that VX is after are some of United's best customers and VX isn't even capable of providing the type of service UA provides to these customers. UA's best customers have a level of service that no one else can compete with. You might not see UA providing the same level of service to the passenger paying $350.00 twice a year to fly to MCO. You have to know your passenger and that is something United does better than anyone else.

Quoting enilria (Reply 25):
Then no business will ever be able to start again because when a company doubles the produce they have to sell like UA did in EWR-LAX/SFO in order to flood the market with seats in order to drive out a competitor and then jack up prices even further after they have run them out to recoup their losses we have a problem. A new carrier will NEVER EVER have the financial resources of an established 1000 plane airline. That's an impossibility.

You have to know what you are doing. Frontier managed to compete with United in DEN and they started from the ground up also. If you think that you are going to compete with the worlds largest airline on their largest hub to hub routes and actually make that work you're out of your mind! Someone over there at VX isn't doing their job.

Quoting enilria (Reply 40):
BTW, they already went "under" and came back after dumping all their obligations on taxpayers and bondholders.

That's not really how it works, its pretty clear that you don't understand bankruptcy very well.

Quoting enilria (Reply 40):
Legacies don't have to worry about pensions either. The U.S. taxpayer does. Legacies don't have to worry about unsecured debt like VX does, you just file Ch11 and wipe it away

Again that's wrong, although the PBGC took over the pension United still pays for it. You just think that they walked away!!! What a joke, do some research before you pretend to know what you are talking about.

Quoting enilria (Reply 40):
The deep pockets are the problem and that needs government intervention to remain in balance. Capitalism is supposed to be survival of the fittest. It is not supposed to be all the old bucks ganging up to suffocate the younger and stronger

This statement just again shows your complete lack of knowledge! Please explain to us how VX is stronger than anyone? They have never made a penny, EVER!

Quoting enilria (Reply 40):
The issue is not pricing. They will never win on pricing because of the way the game is set up. They definitely should win on capacity. UA should not be allowed to double their flights the day they announce. That is clearly predatory and measurable.

That is called competition and if VX didn't expect it they don't really know what they are doing. Do you really think that other airlines can just throw some aircraft on any route they want without having to think of what the competition is going to do?

Quoting PHX787 (Reply 50):
Really? Why? So your precious bigtime legacy can make the most money?

Ok I hope you read my other message about competition in the other thread, because clearly you are not seeing into the eyes of a customer.

Clearly you don't get it, since when has running a business ever been about the customer? All publicly traded companies are in business for one reason, to return money to the shareholders, that's it.

Now if you want to play up the customer thing just look at what a customer pays for a flight. Fares cannot get any lower.

Quoting PHX787 (Reply 50):
When you say "adjusted for inflation," you immediately lose your argument. Fares are outrageous these days! And they always have been in some cases.... The flier today doesn't give a crap what the price is today adjusted for inflation...when they buy a ticket online, they immediately see "holy crap why does it cost $2000 to get to LHR?!" and would probably choose a different ticket on a different price.....IF THEY HAD THAT OPTION.

Fares are outrageous!?!?!?!?! So you disagree and are more knowledgeable than every financial advisor who give information on the industry? I dare you to find one who agrees with your position! And BTW I was looking at flights from DEN-LHR today for a friend and booked the flight with about a weeks notice for under a thousand dollars.

Quoting PHX787 (Reply 50):
To summarize- Because the customer is getting screwed, in many ways, more competition is needed for airlines to simply be able to survive. People are simply going to stop flying. Especially since business these days can also be conducted via Skype, for example.

More people are flying than ever before. This one statement has you talking out of both sides of your mouth!

Quoting tugger (Reply 55):
The question is inaccurate, if every seat were priced at that price then for a 179 seat aircraft that would generate about $90,000 round trip. But not every seat is priced at that amount and so the revenue is much higher per flight. And when you include premium seating, fees, etc. the revenue is higher still which what allow the airlines to offer those lower cost seats to fill the last few seats.

Don't be confused and think that the airline is MAKING $90,000 on that flight! Figure out what an airline pays to operate that flight.

Quoting Flighty (Reply 62):
An example for clarity. UA charges say $600 on LAX-EWR. VX comes in at $400, still profitable price. UA replies with hourly 757s and a $69 fare, obviously losing money. VX exits the market after losing all its meager cash. That's clearly illegal IMO (and some will disagree, but only a few). The key there is that UA initiated the price cut to $69.

VX came in and messed with United and United responded. Why is that a problem? Who determines that VX is able to undercut United but United can only match their price?

Quoting Flighty (Reply 62):
Now, what if UA starts at $600, VX comes in at $400, and UA merely price-matches to $400, and doubles or triples seat count. __It is really the same thing__, killing the RASM of the market in order to bleed the small carrier. (By definition) the small carrier will lose the fight. A giant increase in capacity by UA also could be predatory, money-losing and not legal... AFAIK.

If UA can behave that way, a small carrier will never enter the market to begin with, no matter how high the yields are.

United is telling VX that if they want to mess with them not only will they cut prices but they will ALSO flood the market, if you do not want this reaction then stay out of the market. This is nothing new, when I was first starting in my position I learned a valuable lesson, NW will not put up with someone messing around on their trunk routes without retaliation! Not only would they double flights on the one route that you added flights too but then they would add new routes too all of your hubs from the secondary city you were trying to compete with them in. The planners at NW didn't mess around and so when planning a route you would have to take that into consideration, VX didn't do that.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: avek00
Posted 2013-04-17 16:59:55 and read 3434 times.

Quoting ORDBOSEWR (Reply 7):
Is UA acting like a child?

Not at all. Indeed, legacies got themselves into trouble in years past in part by not responding immediately and with zeal to competitive challenges such as a new entrant on an important high-yielding route.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: avek00
Posted 2013-04-17 17:01:13 and read 3436 times.

Talk of a potential antitrust claim is absurd in this instance, since the dynamics of the EWR-LAX/SFO markets are such that it's virtually impossible for an antitrust scenario to arise:

1. Demand between EWR-LAX/SFO is virtually infinite. In years past, United and Continental used to run service frequencies and equipment types on these routes that, taken together, exceed what is being offered by new United today. Lest we forget, it wasn't *that* long ago when Continental routinely scheduled multiple widebodies on hourly ex-EWR transcons, while United used a solid 757/763 mix.

2. United's passenger mix on those hub-to-hub routes is such where it will almost never be shown to be selling its seats below costs when viewed on aggregate basis. A showing of sudden product pricing below cost in the aggregate in response to competition is a key factual element in many antitrust claims. That won't happen here since United carries a solid block of premium traffic on these routes that isn't particularly price sensitive, demands ticket flexibility, and thus won't be buying leisure/discretionary tickets selling for $99+tax.

[Edited 2013-04-17 17:09:50]

[Edited 2013-04-17 17:10:49]

[Edited 2013-04-17 17:11:28]

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-17 17:10:42 and read 3431 times.

Quoting UAL747DEN (Reply 72):
Frontier managed to compete with United in DEN and they started from the ground up also.

But in 1997, Frontier lodged a complaint with the the DOT and the DOJ about United's predatory practices. It wasn't completely upheld - they almost never are - but it caused some scrutiny by the DOT/DOJ and United backed off some.

http://articles.chicagotribune.com/2...irlines-united-airlines-united-hub

"Through trial and error, Frontier learned to understand United's behavior. "You have to know what sets the other guy off," says Sam Addoms, Frontier's chief executive and president."

Quoting UAL747DEN (Reply 72):
If you think that you are going to compete with the worlds largest airline on their largest hub to hub routes and actually make that work you're out of your mind! Someone over there at VX isn't doing their job.

It's exactly the sort of route that Virgin America - with its model - should be doing. You ca n question the model, but that's what it is.

I assume they expected a battle and now SRB having a bit of a yell about it, as SRB usually does, and is getting some publicity for the route.

That's all that is happening here.

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: osubuckeyes
Posted 2013-04-17 17:44:10 and read 3350 times.

Quoting commavia (Reply 71):
So again, following this argument to its logical end, what you're saying is that if a lower-cost competitor enters a market and attempts to gain market share by undercutting price, a higher-cost competitor already established in that market should be prohibited from trying to hold on to that market share by utilizing the same strategy?

It can be deemed anti-competitive, but again there's a huge gray area in the transition from competitive response to predatory pricing. They can use whatever strategy they like, but if it can be proved that they were intentionally flying the route setting revenues below average cost levels then they may have a lawsuit.

I'm all for UA responding they way they did. It is their right to defend their business, and their market share, but if they are doing it in an anti-competitive, monopolistic spirit they should be prohibited. Like me and others have said a few times on this thread VX and SRB are just stirring the pot to get some publicity.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: lightsaber
Posted 2013-04-17 20:03:31 and read 3193 times.

Quoting LoneStarMike (Reply 69):
I don't see how the current case being discussed here will wind up being any different.

Interesting read. There is indeed nothing wrong with 'bare knuckled" competition. I don't like it, but that and two bucks gets me a latte at Starbucks. It is all about if UA set pricing below costs intentionally. I think VX would have an impossible time proving anything.

Quoting ikramerica (Reply 70):
As for your claim VX entered at a profitable fare, prove it please. VX doesn't run at a profit. So how does entering a transcon route at the low-end of the fare scale magically turn a profit?

That will be a big problem with VX's case. They've taken on everyone...

The lawsuit might get UA to back off at SFO/LAX, but only a little. Going from one UA hub to another was bound to create a reaction.

Quoting avek00 (Reply 74):

Talk of a potential antitrust claim is absurd in this instance, since the dynamics of the EWR-LAX/SFO markets are such that it's virtually impossible for an antitrust scenario to arise:

Nitpick, but the market will be New York to LAX/SFO. This is a tough legal fight to win.

Lightsaber

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: XT6Wagon
Posted 2013-04-17 20:18:22 and read 3160 times.

Quoting lightsaber (Reply 77):
That will be a big problem with VX's case. They've taken on everyone...

The lawsuit might get UA to back off at SFO/LAX, but only a little. Going from one UA hub to another was bound to create a reaction.

might have the reverse effect. I expect day 1 United will file for discovery on VX's financials. Atleast in terms of ownership, debt, and operating costs of the route(s) in the complaint.

If United finds out that VX is pricing below cost at 100% LF expect a counter suit.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: RyanairGuru
Posted 2013-04-17 21:22:43 and read 3050 times.

Quoting XT6Wagon (Reply 78):
day 1 United will file for discovery on VX's financials. Atleast in terms of ownership, debt, and operating costs of the route(s) in the complaint.

If United finds out that VX is pricing below cost at 100% LF expect a counter suit.

  

I honestly don't see any scenario in which VX could win this.

I actually think that VX themselves know that, which is why any complaint has only come from Branson who has nothing to do with the running of the business.

I think that some posters have forgotten that, to their credit, the actual senior management at VX haven't publicly complained. It would appear that they have adopted more of a put-up-and-shut-up approach.

Quoting PHX787 (Reply 50):
Because the customer is getting screwed, in many ways, more competition is needed for airlines to simply be able to survive. People are simply going to stop flying

I'm sorry PHX787 but I've got to disagree with you. I'm afraid that I've gotten the impression that you don't understand basic economic theory, and therefore what you said doesn't make logical sense. Please don't be offended!

As pointed out above, it is not the private corporations (airlines) or the government's job to look after consumers. If that's what you want then write to your Congressman and petition them to re-regulate the industry. Bar that, private corporations in an open market must (by law) act in the interestsof , and only in the interests of, their shareholders.

Also, as pointed out previously, (1) fairs are lower than ever on historical bases, and (2) passenger numbers are at record numbers.

[Edited 2013-04-17 21:57:57]

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-17 21:46:10 and read 3005 times.

Quoting RyanairGuru (Reply 79):
I think that some posters have forgotten that, to their credit, the actual senior management at VX haven't publicly complained. It would appear that they have adopted more of a put-up-and-shut-up approach.

SRB has made a life-time career of being the maverick standing up against established corporations - record companies and stores, phone companies, banks - and airlines.

Back in his early days, he - straight - didn't buy Heaven - the gay disco - because he thought it would make his fortune. He did it because it gave him mega-media coverage and put him publicly at the forefront of pop music.

Love him or hate him, take him seriously or not, no amount of debate is going to change him. I'm glad he's around - in an industry largely run by anonymous suits, he sure ain't dull.

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: RyanairGuru
Posted 2013-04-17 21:49:28 and read 3001 times.

Quoting mariner (Reply 80):
SRB has made a life-time career of being the maverick standing up against established corporations

Oh I know, and I shouldn't have expected anything else from SRB. My point is that what he says might, in fact, not be the official line coming out of Burlingname.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-17 21:53:50 and read 3007 times.

Quoting RyanairGuru (Reply 81):
Oh I know, and I shouldn't have expected anything else from SRB. My point is that what he says might, in fact, not be the official line coming out of Burlingname.

Sure.

Thats why I'm puzzled that people attach so much weight to what he says. But - he capitalizes on that.  

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: LHCVG
Posted 2013-04-18 06:56:30 and read 2629 times.

Quoting RyanairGuru (Reply 79):
I actually think that VX themselves know that, which is why any complaint has only come from Branson who has nothing to do with the running of the business.

I think that some posters have forgotten that, to their credit, the actual senior management at VX haven't publicly complained. It would appear that they have adopted more of a put-up-and-shut-up approach.

Very true! Much as we may rip them on here, credit to VX mgmt. that they don't shy away from taking on entrenched legacies. They don't just nibble around the edges or try to move in on one or two routes, and as you point out, their management seems to be ok with the costs of that approach.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: hohd
Posted 2013-04-18 07:00:01 and read 2627 times.

I dont care what UA does or does not do. But if UA succeeds in driving out VX, will the fares go back up. If the fares remain as is, then I have no problem with UA. From the customer point of view I want the lowest fares.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: wingman
Posted 2013-04-18 07:30:57 and read 2573 times.

For one longtime UA flyer, and now unabashed convert to VX, I pray to the aviation gods that they make it. From check in at T2 to the lounges, the decor, the runway views, the onboard experience....all of it just blows UA to smithereens in every conceivable category. The only exception, the ONLY one, is the alliance connection. I would love to see SRB and Tim Clark upend this industry by announcing the start of a new global alliance driven by a mega global carrier in EK and a handful of regional/large market carriers like VX.

Psalms 23:4 Yea, though I walk through the valley of the shadow of death (T3), I will fear no evil (UA): for thou (SRB) art with me; thy beautiful purple mood lighting and thy staff (nice looking and exquisitely pleasant). And now I walk in the valley of light at T2 and enjoy the plentiful and shiny bounty that Airbus has provided.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: Flighty
Posted 2013-04-18 07:42:42 and read 2548 times.

Quoting UAL747DEN (Reply 72):
You are wrong that is not illegal, if that was the case VX is violating the law and has been since the beginning of the introduction of service.



Interesting point, that if VX is losing money, then their price cuts are illegal. But I don't think it is credible that VX could put UA out of business. In a war of attrition, UA would win because it has more money. So, the point of the law is to restrict the larger carrier from killing the small one.

UA could just say all VX routes are $39 RT until VX liquidates. UA could physically do that, but that particular line of attack is not legal, and the feds would stop it.

[Edited 2013-04-18 07:43:40]

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-18 07:44:06 and read 2547 times.

Quoting PHX787 (Reply 42):
I don't like Branson that much.

I'm not a big fan either. He's not much better than Trump.

Quoting commavia (Reply 43):
In a functioning democracy, property rights are sacrosanct.

Apparently the USA isn't functioning. You can have your land taken for a highway (acceptable), an airport runway (acceptable), or a new Walmart (not acceptable).

Quoting commavia (Reply 43):
It is not the government's job to "intervene" and keep "in balance" the distribution of assets among multiple competitors in an already-vibrantly-competitive market. That's a very, very scary notion.

Welcome to the USA or Europe or pretty much any country...Capitalism unchecked by the proper balances turns into Communism with one company running each industry or even all industries...

Quoting UAL747DEN (Reply 72):
Quoting enilria (Reply 40):
BTW, they already went "under" and came back after dumping all their obligations on taxpayers and bondholders.

That's not really how it works, its pretty clear that you don't understand bankruptcy very well.
Quoting UAL747DEN (Reply 72):
Quoting enilria (Reply 40):
Legacies don't have to worry about pensions either. The U.S. taxpayer does. Legacies don't have to worry about unsecured debt like VX does, you just file Ch11 and wipe it away

Again that's wrong, although the PBGC took over the pension United still pays for it. You just think that they walked away!!! What a joke, do some research before you pretend to know what you are talking about.
Quoting RDH3E (Reply 44):
Quoting enilria (Reply 40):
Legacies don't have to worry about pensions either. The U.S. taxpayer does.

Well that's actually false. UA pays a significant amount to the PBGC that took over the pensions. Last year alone we paid something like 400M.

The U.S. taxpayer is on the hook for $7.4 billion in United Airlines underfunded pension obligations. According to Google there are about 140 million individual tax returns filed per year in the USA, so each person filing a tax return is essentially giving United Airlines $53 that they should have paid. I guess that seems tiny to you???

Before you say the PGBC is a self-funding entity, I hope you note it about to be bailed out by U.S. taxpayers.

http://www.workforce.com/article/201...rd-34-billion-in-2012-fiscal-year#

Quoting RDH3E (Reply 44):
Quoting enilria (Reply 40):
Legacies don't have to worry about unsecured debt like VX does,

....Yes they do, anything after their BK and often now some unsecured creditors can get stock in the new company...

There is no obligation to pay any kind of return on stock like there was on the debt PLUS they only got pennies on the dollar on top of that.

Quoting superjeff (Reply 45):
I think you don't have a clue about bankruptcy laws and how they work. Yes, UA did dump its pension plans, and got rid of or renegotiated other obligtations. But their shareholders were totally wiped out and lost everything.

Who said they weren't? That was another group of people suckered by the USA Ch11 system, although they deserved it more knowing that stock is definitely more risky than debt.

Quoting ItalianFlyer (Reply 61):
Quoting osubuckeyes (Reply 60):
Had these airlines actually been subjected to the free market and been allowed to fail then you may have a very different looking industry.

Ultimate irony: the policies designed to prevent the US airline market from being concentrated into a few carriers led to the market being concentrated into a few carriers.

If you mean they allow anybody to merge if they give up a few slots at DCA/LGA then yes.

Quoting commavia (Reply 65):
Quoting Flighty (Reply 62):
An example for clarity. UA charges say $600 on LAX-EWR. VX comes in at $400, still profitable price. UA replies with hourly 757s and a $69 fare, obviously losing money.

So what you're basically saying is that if one competitor in a given market has a lower cost than another competitor, the higher-cost competitor is barred from competing on the basis of price (i.e., by responding to/matching the price of the lower-cost competitor). If that's the case, what you're essentially indirectly endorsing is a continuous race-to-the-bottom commoditization of said product. If the higher-cost competitor is barred from competing on price unless it can always match the lower-cost competitor's costs, then all that will happen is the higher-cost competitor will cut every cost they possibly can (labor, amenities, etc.) to compete.

Forget price. It's about capacity. The govt should institute a rule that says:

if there is a competitive incursion by a carrier with less than 10% share of the nationwide total of ASMs (a small player) and an existing carrier increases capacity by more than 20% (or adds one of the carriers' other markets) within 12 months it is a violation of anti-competitive rules and subject to fine.

Quoting Flighty (Reply 66):
Thank you for your close reading and yes, AFAIK the high-cost competitor is OK to match low prices, but probably not dig way deeper on price (way below cost), and probably not ramp up capacity by a whole lot

The capacity is the key. If they didn't flood the market with seats they couldn't trash the fare that much because the planes would be quickly full.

Quoting LoneStarMike (Reply 69):
There is no doubt that American may be a difficult, vigorous, even brutal competitor. But here, it engaged only in bare, but not brass, knuckle competition. Summary judgment is appropriate.

There needs to be a new lawsuit like that one to re-establish balance.

Quoting commavia (Reply 71):
The problem with the above is the definition of "probably," "way deeper," "way below cost," "by a whole lot," and "intimidation." They are entirely subjective and open to interpretation. Does United get to define "way below cost?" Does Virgin get to define "by a whole lot?" What you might view as unacceptable would be completely fine with me.

Again, my capacity idea above is what they should do.

Quoting UAL747DEN (Reply 72):
You have to know what you are doing. Frontier managed to compete with United in DEN and they started from the ground up also.

They filed for Ch11 and nearly did several other times.

Quoting UAL747DEN (Reply 72):
Quoting enilria (Reply 40):
The deep pockets are the problem and that needs government intervention to remain in balance. Capitalism is supposed to be survival of the fittest. It is not supposed to be all the old bucks ganging up to suffocate the younger and stronger

This statement just again shows your complete lack of knowledge! Please explain to us how VX is stronger than anyone? They have never made a penny, EVER!

In terms of survival of the fittest, the parallel in terms of "youngest and strongest" would be "lowest cost" because being younger in business means that you don't have the same accumulation of obligations from past bad mistakes, although with Ch11 those are just washed away. But I love when you say I have a complete lack of knowledge yet pose things in such a simplistic way.

Quoting UAL747DEN (Reply 72):
Quoting enilria (Reply 40):
The issue is not pricing. They will never win on pricing because of the way the game is set up. They definitely should win on capacity. UA should not be allowed to double their flights the day they announce. That is clearly predatory and measurable.

That is called competition and if VX didn't expect it they don't really know what they are doing. Do you really think that other airlines can just throw some aircraft on any route they want without having to think of what the competition is going to do?

They should be able to throw aircraft on any route they want and expect that the other airline isn't going to retaliate in such a way that it drives the upstart out of business through loss-leading.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: RDH3E
Posted 2013-04-18 07:45:04 and read 2545 times.

Quoting Flighty (Reply 86):
So, the point of the law is to restrict the larger carrier from killing the small one.

Agreed, but this is more like VX committing suicide than anything else.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: jayunited
Posted 2013-04-18 07:57:57 and read 2538 times.

VX decided to undercut United's prices but in doing so they have undervalued their own product and because UA has added additional capacity VX has now lost the power to control the prices on the EWR-SFO/LAX routes and because VX initially lowered the prices and UA not only match their price but added more flights VX is taking huge losses on these routes.

So how exactly is this UA fault? Before VX entered the market prices were high and the price needs to be because you are talking about a 5 1/2 to 6 hour nonstop flight . UA's prices were probably high but a least UA priced their tickets to cover their cost and hopefully made a profit in the process which is what you are expected to do in business. VX did not do that in an attempt to beat UA they undervalued or underpriced their own product and when you are a small airline that has not made a profit and is consistently loosing money the first thing you don't want to do is underprice your own product. VX did just that they set the prices in these markets so low and then they claimed that UA was charging to much but now since they are taking heavy loses on these routes because they have lost the power to control the price they now want to complain that UA is being anti-competitive it is ridiculous. If VX would have spent half the time costing out their product (to make sure that they charge a price that at LEAST covers their expenses) as they spent letting people know UA is over charging for their product then perhaps VX would be in this mess. And what I can't understand for the life of me is VX already flies JFK-SFO/LAX so they know what price they need to charge in order to make money on routes like these but some smart person decided to undercut that price at EWR in an attempt to deal United a blow and now it is back firing in their faces.

VX in my opinion were trying to mimic what WN did to UA back in 2007 and 2008 when WN enter the DEN market and UA was to weak to not only defend the market but didn't have enough aircraft to control the price. Back in 2007-2008 WN was holding all the cards and had all the power and there nothing UA could do to stop WN's rise at DEN. However this is 2013 and now UA has the power to defend itself and VX inexperienced managers made a fatal mistake by underpricing their own product and then loosing the power to control those prices..

VX made the mistake here by underestimating UA so for those people on this thread who say UA is wrong in their response my questions are: What should United's response have been? Should United have only match VX's fare? Maybe they should have never added the extra capacity or perhaps UA should not have responded at all? What should United have done in this situation?

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: enilria
Posted 2013-04-18 12:16:52 and read 2366 times.

Quoting jayunited (Reply 89):
VX decided to undercut United's prices but in doing so they have undervalued their own product
Quoting jayunited (Reply 89):
So how exactly is this UA fault? Before VX entered the market prices were high and the price needs to be because you are talking about a 5 1/2 to 6 hour nonstop flight

I'm surprised to see all the comments about VX coming in "with super low fares" and "undervaluing their product". I think all of those comments seem oblivious to the realities of new-entrant marketing in any industry. The new guy always comes in with low prices whether it be a new grocery store, a new dot-com, or a new airline. Even when a legacy like Delta adds LAX-GEG they have "intro fares". That's standard industry practice.

Then there is what I'd call holding VX's head below water. Very few people on a.net understand revenue management at all and if they do they understand very little. When you roll in with an "intro price" the expectation is that you sell a % of the airplane at that price to get things going and then you sell the rest of the plane at a more reasonable price after the market has been stimulated. There are two ways that the existing carrier can act anti-competitively in dealing with that. Both revolve around the real problem here which is the massive capacity dump UA put in these markets. 1) When the intro is over and VX goes to raise prices, UA simply doesn't follow. Now that would be fine if it weren't for #2. 2) By adding all that capacity UA assures that there is *no* sell up opportunity for VX to anything above the intro fare because they prevent VX from raising fares even a little while at the same time offering a nearly infinite number of seats to sell at that cheap level. If VX tries to sell-up as the unknown new carrier in the market they will stop taking bookings. Now, UA loses much much more than VX does in this strategy because 1) UA's costs are higher and 2) they have many more seats to lose money on. That is what makes it anti-competitive. UA is now losing this huge sum of money on EWR-LAX/SFO with the only goal of killing VX and getting them out of the market in order to jack the fares back up and make up the money they lost. That's anti-competitive, but it's the excess capacity that allows all of that. A capacity increase in response of that magnitude shouldn't be lawful.

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: mariner
Posted 2013-04-18 12:45:50 and read 2320 times.

Quoting jayunited (Reply 89):
VX in my opinion were trying to mimic what WN did to UA back in 2007 and 2008 when WN enter the DEN market and UA was to weak to not only defend the market but didn't have enough aircraft to control the price.

United surely tried.

It matched frequency and capacity and fares with Southwest at DEN - and within a year turned DEN from one of its most profitable hubs to its least profitable.

The - sadly now defunct - Rocky Mountain News flat out said that United was losing money in part because of DEN:

http://m.rockymountainnews.com/news/.../united-loses-money-on-denver-hub/

United loses money on Denver hub

United's Denver hub has "changed significantly from one of our more successful profit contributors" a year ago, Glenn Tilton, the carrier's chief executive officer, said Wednesday on a conference call.

Still, Tilton said United is competing "vigorously," noting that it has added capacity at Denver International Airport - its second- largest hub - on a year-over-year basis.

"It's a very important hub for us, and we have every intention of defending it," Tilton said."


At around that time, and also because of the rising oil price, United changed. It ceased to fight for the low end of the market, soon abandoned Ted, and concentrated on yield.

United learned a very great deal about competing with the LCC's from the DEN experience and - largely - no longer bothers when, say, Frontier turns up on a route. It may make a token resistance, as at PSP, and it may match intro fares, but that's about it.

What is happening at EWR is quite standard - both in United's reaction and in SRB's reaction to that reaction - playing the under-dog.

I don't see any legal case for predatory pricing, but there is nothing to stop SRB yelling that there is.

mariner

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: EA CO AS
Posted 2013-04-18 14:37:43 and read 2175 times.

Quoting MaverickM11 (Reply 53):
Branson just picked the wrong time to start a terrible business plan in the world's most hypercompetitive market

Topic: RE: Branson: UA Acting Anti-competitively Against VX
Username: carpethead
Posted 2013-04-20 04:47:17 and read 1678 times.

Ten years ago, UA would have flooded the route with 744s, 777s, and 763s with just a modest increase in frequency.
Too bad all you folks in the States have to put up with six hour plus 737 & A320 flights.


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