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AMR Gets In Shape To Fight With Airtran  
User currently offlineRumorboy From United States of America, joined Aug 2002, 356 posts, RR: 1
Posted (10 years 10 months 1 week 6 days 19 hours ago) and read 3719 times:

American gets in shape for fight with AirTran
By Mitchell Schnurman
Star-Telegram Staff Writer

American Airlines has some of its swagger back, and just in time.

"We're through retreating," Chief Executive Gerard Arpey said last week, after a year marked by deep cost-cutting and threats of bankruptcy.

That's good to hear, because low-cost competitor AirTran Airways is getting rowdy in American's back yard at Dallas/Fort Worth Airport.

This is the reason that American went through the pain of restructuring: So it could compete with the discounters that are gobbling up market share.

Now its new business model -- leaner and supposedly more efficient -- gets a test in its hometown.

Are the cuts deep enough? Is the brand name worth enough?

For years, American has been under assault in most of its network. But its fortress hub at D/FW has been, well, pretty much a fortress. Impenetrable.

Now AirTran, an Orlando, Fla., discounter, has begun an expansion there. AirTran has long flown from D/FW to Atlanta, but it added nonstop service to Orlando last month; it's adding Baltimore next week and Las Vegas in February.

The smart money is betting that Los Angeles will join the itinerary soon.

The competition is already heating up, lowering fares for a region with some of the country's highest ticket prices.

For AirTran, this is a bold move, considering how American vanquished others that ventured onto its home turf.

Remember Vanguard, Legacy, Sun Jet, and Western Pacific? They challenged American in North Texas, and all were driven out of business.

American matched their fares, offered more flights, touted its frequent-flier program and bet on its brand name. That was more than enough then.

But AirTran is much different than the others and won't be easily dislodged. It has strong financials and a management team that has already proved its mettle against Delta, another large legacy carrier.

American may not have the deep pockets of past years. But the stakes are so high at D/FW that it has to take a stand, regardless of the costs.

One airline consultant, Scott Hamilton, called the showdown, "American's battle of the Alamo," with American trying to hold discounters at bay.

Not that anyone expects AirTran to unseat American as the No. 1 carrier. The question is what AirTran will do to American's bottom line.

AirTran usually drives down fares by almost 50 percent, and we've seen that already on tickets to Orlando, Baltimore and Vegas. AirTran could significantly cut into American's profits, as it has with Delta in Atlanta, and as Frontier has done with United in Denver.

American dominates traffic at D/FW, its most profitable hub, and enjoys a big premium on fares. It's vital to match fares and keep its customers, even if some flights lose money.

In some cities, American will walk away from business that's not economical. Not D/FW, where American doesn't want to give competitors any foothold, much less a reason to expand faster.

Delta is countering low-cost carriers with a discount airline within an airline, an upstart called Song. American's plan is to cut costs across the network -- a process that's still under way -- and then use its strengths to generate more revenue.

The strategy was evident in a Tuesday newspaper ad. American emphasized low fares, lots of flights, double the number of frequent-flier miles and the airline's cachet. Then it listed fares to three cities, all served by AirTran.

American has a huge edge on frequency, according to Bestfares.com: twice as many daily nonstops to Atlanta; nine to one to Orlando; seven to one to Baltimore; 10 to two to Las Vegas.

Eventually, AirTran will add flights, after it opens three more gates in January. But American will probably always have the edge in frequency.

That's one reason, said airline consultant Mike Boyd, that American will hold its ground, and he predicts that AirTran will be a minor player here.

Maybe, but in other markets, airfare wars have attracted more passengers, growing the pie. Ultimately, it was the discounters that gained the most ground.

That's a long-term trend that's hard to stop, said consultant Stuart Klaskin, even at an airline's fortress hub.

"A win for American is not too bad a loss," he said.


--------------------------------------------------------------------------------
Mitchell Schnurman's column appears Wednesdays and Sundays. (817) 390-7821 schnurman@star-telegram.com

36 replies: All unread, showing first 25:
 
User currently offline727LOVER From United States of America, joined Oct 2001, 6439 posts, RR: 17
Reply 1, posted (10 years 10 months 1 week 6 days 17 hours ago) and read 3585 times:

If Airtran was able to take on DL when they were nothing/just starting out, I think the can handle anything AA throws at them. What might AA try to pull?

I hope Lone Star Mike doesn't mind, but here is part of an e-mail response he sent me regarding a question I had about AA's tactics against Braniff:


Regarding your question on airliners.net about the tactics AA used
against Braniff at DFW, these are just things I've read from various
sources, including airliners.net. It was well known in the DFW about AA
requesting to take off on the west runway even though their own terminal
was on the east side of the airport.

As far as not exiting the runway in time, possibly forcing an incoming
Braniff flight to go around, I read that in the book Splash of Colors:
the Destruction of Braniff International by John Nance.

Something else AA used to do was call over to Braniff and say one of
their planes was out of service and ask Braniff if they could take some
passengers. Braniff would order extra meals, etc, then at the last
minute AA's plane would suddenly be fixed.


Bottom line: AA plays dirty, so AirTran better watch their back.



Listen Betty, don't start up with your 'White Zone' s*** again.
User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4506 posts, RR: 33
Reply 2, posted (10 years 10 months 1 week 6 days 17 hours ago) and read 3530 times:

Very interesting points, 727lover. The fact that AirTran doesn't interline probably will prevent AA from pulling dirty tricks related to that.

Good for AirTran, and good for the overcharged travelers of the Metroplex. AA has held the Metroplex hostage to its high-cost, high-fare planatation at DFW long enough. American will still prosper due to its particular strengths, and AirTran will offer travelers a badly-needed low-fare option. Expect AA to cry lots of crocodile tears, though, (like they always do about DAL and their precious Wright Amendment that protects their fare racket) and pull more dirty tricks.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineProudtoflyaa From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 10 months 1 week 6 days 17 hours ago) and read 3486 times:

Very interesting points, 727lover. The fact that AirTran doesn't interline probably will prevent AA from pulling dirty tricks related to that.

This is also a different age of the airline industry with different management and a government that is more likely to get involved than it was in the post-deregulation utter chaos of the early 1980s.


AA has held the Metroplex hostage to its high-cost, high-fare planatation at DFW long enough.

Amazing that many people are already able to find reasonable airfares. Reasonable does not mean fire-sale cheap. Especially on this LAS-DFW route where three carriers already have no problem filling their aircraft. I find it offensive you'd accuse other carriers of pulling such childish stunts today. Oh, and Braniff was no angel either.... they were the first to try and destroy Southwest.


Expect AA to cry lots of crocodile tears, though, (like they always do about DAL and their precious Wright Amendment that protects their fare racket) and pull more dirty tricks.

If Southwest wanted the Wright Amendment gone, it'd be gone. They're content with it in place, as it protects their niche market at Love (and provides a nice PR battle cry).


User currently offlineMidnightMike From United States of America, joined Mar 2003, 2892 posts, RR: 14
Reply 4, posted (10 years 10 months 1 week 6 days 16 hours ago) and read 3422 times:


Go for it American, you will lose.....



NO URLS in signature
User currently offlineAIR757200 From United States of America, joined Jul 2000, 1579 posts, RR: 7
Reply 5, posted (10 years 10 months 1 week 6 days 16 hours ago) and read 3397 times:


I think its time for AA to dump capacity on these routes.

Oh wait! ....AirTran may tell the government that AA is being to competitive.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4506 posts, RR: 33
Reply 6, posted (10 years 10 months 1 week 6 days 16 hours ago) and read 3375 times:

Amazing that many people are already able to find reasonable airfares. Reasonable does not mean fire-sale cheap. Especially on this LAS-DFW route where three carriers already have no problem filling their aircraft. I find it offensive you'd accuse other carriers of pulling such childish stunts today. Oh, and Braniff was no angel either.... they were the first to try and destroy Southwest.

Good heavens, I wasn't defending Braniff, just criticizing AA. It's certainly true that BN tried to destroy WN too, and that's a point worth noting. You've said elsewhere that $700 on DFW-XNA is a "reasonable" airfare, so your standard is different from the vast majority of the flying public. DOT found in a 1996 study that the Wright Amdt cost Metroplex travelers over $500 million in artificially inflated fares per year.

AA has enjoyed artifical protection from market reality at DFW for years, and they're not likely to be happy about it entering any more than the tiny extent it already has. I don't see anything offensive about noting historical precedent, either. It may not be the chaotic early 1980's, but the stuff 727 noted would be tough to prosecute and AA has lots of motive.

If Southwest wanted the Wright Amendment gone, it'd be gone. They're content with it in place, as it protects their niche market at Love (and provides a nice PR battle cry).

I'm not convinced of that. You're right that if WN wanted the WA gone it would be. But taking out the Wright Amendment would cost WN a lot of political chits--probably at least a couple of stations in markets not on top of their list, like they did for Lott at JAN. DAL has enormous profit potential as a hub with coast to coast flights, and it's highly unlikely that WN is happy about losing out on that.

My own theory: WN has so many profit opportunities that don't require the political cost going after the Wright Amdt, that they've left it on the back burner. WN is more interested in profits than battle cries; when they decide going after the WA is worth it among their opportunities, they will.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineTbird From United States of America, joined Oct 2001, 851 posts, RR: 19
Reply 7, posted (10 years 10 months 1 week 6 days 15 hours ago) and read 3283 times:

The article talks allot but only mentioned how they'll protect DFW by cost cuts. The only advantage AA has over AirTran is frequency of flights, and perhaps the Advantage program, but even AirTran has an FF program. Even if AA tries to under cut AirTran, AirTran has the money to fight back. I'm rooting for AirTran in this fight.

User currently offlineProudtoflyaa From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 10 months 1 week 6 days 15 hours ago) and read 3276 times:

American does have the intense connecting feed at DFW that AirTran doesn't.... so in actuality local traffic fares may still lower but AA will still have all of those connecting pax, over which AirTran will have no control.

User currently offlineProudtoflyaa From , joined Dec 1969, posts, RR:
Reply 9, posted (10 years 10 months 1 week 6 days 15 hours ago) and read 3247 times:

Looking here for a random weekend in March on DFW-LAS round trip:

American is showing 8 flights at $221 round trip.
AirTran is showing 2 flights at $221 round trip.
America West is showing 3 flights at $221 round trip.
Delta is showing 2 flights at $434 round trip.

Looks reasonable across the board.

However, American is offering very reasonable fares from smaller markets in Texas as well.
Waco: $285 round trip to Vegas
Tyler: $290

Still, in my opinion, better option to fly out of the smaller towns if they are more convenient and connect rather than drive to Dallas, considering the hassle of driving to DFW and paying $10-16 a day for parking rather than having free parking at a smaller airport.


User currently offlineSprxflySWA From United States of America, joined Nov 2003, 597 posts, RR: 0
Reply 10, posted (10 years 10 months 1 week 6 days 15 hours ago) and read 3243 times:

Maybe they will raise fares in areas where AA has no competition from DFW,to subsidize any action vs. AirTran. But I think FL will be around there for awhile.Got to start those BOI flights!!!! LOL

User currently offlineBNE From Australia, joined Mar 2000, 3183 posts, RR: 12
Reply 11, posted (10 years 10 months 1 week 6 days 13 hours ago) and read 3171 times:

Why didn't Southwest enter the DFW market and fly to all the places that are outside the Wright Amendment. They would have already had brand recognition in Dallas market. I am sure there would be a lot of people that would do their short flights on Southwest but would have to use American for all their longer flight needs. Is DFW to congested for Southwest.








Why fly non stop when you can connect
User currently offlineLuv2fly From United States of America, joined May 2003, 12110 posts, RR: 48
Reply 12, posted (10 years 10 months 1 week 6 days 13 hours ago) and read 3104 times:
Support Airliners.net - become a First Class Member!

I think it will be interesting to say the LEAST. Tho look AirTran is better financially then any of the other start ups... Also I believe AirTran will take the slow and steady growth in DFW.


You can cut the irony with a knife
User currently offlinePSU.DTW.SCE From United States of America, joined Jan 2002, 7591 posts, RR: 27
Reply 13, posted (10 years 10 months 1 week 6 days 12 hours ago) and read 3039 times:

Some of you people get all bent out of shape over this.

First of all, AA is so huge in DFW, the flights that AirTran will operate are just a tiny blip in the whole prespective of things. As mentioned AA has much greater frequency, and the FF addicts in the DFW area. This will always attract a loyal following, and the many corporate accounts that AA has aren't suddenly going to be flocking to AirTran's few flights to BWI, LAS, ATL, and MCO. The market is more than big enough, and one thing is that lower fares do stimulate the market. Many of these routes already have competition from other airlines on them in the first place. They tap demand that otherwise wouldn't travel or would drive. I'm sure AirTran will do well in DFW, and AA will be able to hold its own. They are making changes to compete in the new business environment.

Remember people have to go more places than just MCO and LAS in this world. The networks and the LCC each serve a purpose and are equally important to this nation's air transportation system.


User currently offlineBR715-A1-30 From , joined Dec 1969, posts, RR:
Reply 14, posted (10 years 10 months 1 week 6 days 12 hours ago) and read 3015 times:

Here is my question. When AirTran offers $221.00 fares, they can make a profit from that due to their simple structure, but can AA really turn a profit competing with a LCC. Only time will tell, and this will be an interesting battle to watch. If AirTran starts doubling A+ Credits, and touting their 8 flights=1 One-Way ticket, then AA could very much be in trouble. That would only mean 2 Roundtrips for 1 free one-way ticket. AirTran is like "Bear" Bryant. They will always have a way to trick the big guys. It is like a Big Bulldog trying to detect a small mouse. AirTran (Mouse) will always be able to sneak around AA (Bulldog) in some way.

I can't wait to see the outcome. FL started up with only 3 gates in ATL with DL practically controlling every concourse. Today they have 22 gates and are growing strong. Even the big dogs are having to have puppies to try to compete with FL.

GO AIRTRAN!!!!!!!!!!!!!!


User currently offlineWilliam From United States of America, joined Jun 1999, 1285 posts, RR: 0
Reply 15, posted (10 years 10 months 1 week 6 days 10 hours ago) and read 2949 times:

You guys are funny,looking at the airline business as if its some kind of sport. PSU post is spot on,the one problem Airtran will run into immediately is room to GROW. The only terminal under contruction is the new international terminal and when that opens,there still will not be enough gates opened the former terminal to start a descent hub operation.

Airtran wants the O/D traffic from the Metroplex,in which there is plenty to go around between Airtran,AA,and DL. But without more gates Airtran hands are tied,but they will stil make money on the few destinations they choose out of DFW.


User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 16, posted (10 years 10 months 1 week 6 days 10 hours ago) and read 2914 times:

AirTran does interline. When I worked there, I did on several occassions take bags that were coming off of an AirTran flight and took them over to other airlines (these were not reprotections either). AirTran has interline agreements with a number of carriers, such as US Airways, Delta, British Airways.

LCCs can make a profit with a $221 fare as they don't have the higher salaries to pay out, nor do they have the large number of retirees to pay pensions out to. Why do you think Delta is reporting such a high loss for the past quarter, as they are having to pay out a larger number of pensions than they had the year before (I guess offering early retirement wasn't much of a cost-cutting measure as they thought).


User currently offline727LOVER From United States of America, joined Oct 2001, 6439 posts, RR: 17
Reply 17, posted (10 years 10 months 1 week 5 days 22 hours ago) and read 2804 times:

the one problem Airtran will run into immediately is room to GROW. The only terminal under contruction is the new international terminal and when that opens,there still will not be enough gates opened in the former terminal to start a descent hub operation.

How many gates will open up?  Confused





Listen Betty, don't start up with your 'White Zone' s*** again.
User currently offlineHeavyMx1 From United States of America, joined Jun 2003, 305 posts, RR: 1
Reply 18, posted (10 years 10 months 1 week 5 days 22 hours ago) and read 2802 times:

William:
"You guys are funny,looking at the airline business as if its some kind of sport. PSU post is spot on,the one problem Airtran will run into immediately is room to GROW. The only terminal under contruction is the new international terminal and when that opens,there still will not be enough gates opened the former terminal to start a descent hub operation."

---------------------------------------------------------------------------

As for not having enough gates, I'm not sure how many gates they will have so lets say 4 gates. Those 4 gates could run 100 flights for FL. On many occasions management has said that they are shooting to run 20-30 flights out of one gate. That seems to me that they could have a very healthy operation with 4 gates if they wanted to. How many flights does AA have out of a gate in one day? FL may not have as much room as AA but they definitely know how to utilize what the have to the max.

Kevin



I am better than you because I live on an Island
User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
Reply 19, posted (10 years 10 months 1 week 5 days 21 hours ago) and read 2732 times:

I'm not sure if anyone has won a battle with AA???...So..bye...bye Airtran in Dallas. You'll exist at DFW only as long as AA allows.

It's a seriously dumb move on their part (AirTran).

Not a huge fan of AA..but you gotta respect the clout and power they have...even in the bad times.


User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 20, posted (10 years 10 months 1 week 5 days 20 hours ago) and read 2725 times:

William--This is a sport, isn't it? I look at this as my issue of "People" or "Sports Illustrated". We are just sharing opinions and stories... It's a good thing.

I agree with you and PSU. AA will take a long time to feel any impact from the realatively slow encroachment from LCC's in DFW. The problem is that AA's costs will never match the LCC's and their only salvation is that AirTran and the others won't be competing for the traffic from ACT-LAS for a long, long time.

AA is now saying they need a 15% cost advantage over the LCC's to make money instead of the 30%(which I thought was wildly optimistic when Carty outlined it last March) they got from the recent concessions. Another 15% will be tough to wring from the employees and even tougher to wring from the entrenched empire-builders in Centerpork.

So, they will lose a few bucks on the DFW-LAS run and soak the connectors who are too far from DFW to drive or live in non-LCC cities. But the sand is running through the hourglass... IMO(but that's what this board is, right? Big grin )TC



FL450, M.85
User currently offlineYyz717 From Canada, joined Sep 2001, 16282 posts, RR: 56
Reply 21, posted (10 years 10 months 1 week 5 days 20 hours ago) and read 2674 times:

The problem is that AA's costs will never match the LCC's

Why not? What if the shareholders demand it? By saying "never" you are effectively relegating AA to being an "also ran". The LCC's will continue to grow & eventually become larger than the legacy carriers unless you guys learn to fight back. A critical component is cost reduction.



Panam, TWA, Ansett, Eastern.......AC next? Might be good for Canada.
User currently offlineJmhLUV2fly From United States of America, joined Dec 1999, 559 posts, RR: 0
Reply 22, posted (10 years 10 months 1 week 5 days 15 hours ago) and read 2595 times:

Don't think for a second that AirTran chose to increase capacity out of DFW over night. The market was researched in detail, AirTran does not make a move without first having stastitical numbers to go by, and the data shows that the demand is there.
For nearly two years, AirTran operated a through flight
DFW-ATL-BWI the numbers showed that an increasing number of pax were staying on board in ATL after traveling from DFW and they were contining on to BWI...it was a test and the same test was made in the MCO market, again many many pax staying on board in ATL and flying on to MCO, so AirTran has done its homework in regards to those two cities and let us all remember the better more economical carrier will prevail, the management team in the AirTran drivers seat are not fools and they were not born yesterday...AirTran has an experienced upper managment staff...while American shall use many tricks most like Delta in ATL, in the end it will come down to economics how much can you XYZ airline charge to make a profit. American, well you have to charge a larger amount for the simple reason its more expensive for you to operate, you have more airplanes, thousands more eomployees, you serve worldwide cites and not to mention the airline is in DEPT and you are going to take in less dollars per seat and per flight to compete...ummm...you cannot survive long without oxygen and American must have cash flow to survive....oh well...I shall hush...it will be interesting however to see how it all plays out...let the fare wars begin!
JMH


User currently offline727LOVER From United States of America, joined Oct 2001, 6439 posts, RR: 17
Reply 23, posted (10 years 10 months 1 week 5 days 13 hours ago) and read 2563 times:

I think you mean DEBT

On many occasions management has said that they are shooting to run 20-30 flights out of one gate

Could be wrong, but I think that is IMPOSSIBLE!!



Listen Betty, don't start up with your 'White Zone' s*** again.
User currently offlineTravatl From United States of America, joined Mar 2001, 2173 posts, RR: 7
Reply 24, posted (10 years 10 months 1 week 5 days 12 hours ago) and read 2514 times:

The fact that AirTran doesn't interline probably will prevent AA from pulling dirty tricks related to that.

Unlike Southwest, AirTran does, in fact, interline.

Travis


25 DCA-ROCguy : Thanks SRBmod and Travis for the correction. One more benefit AirTran offers its passengers! Also, 30 dailies from a gate is probably impossible as 72
26 Proudtoflyaa : I'm sure AirTran has been wise in keeping operations from their single (soon to be 4?) DFW gate conservative. I wouldn't want to see the schedule back
27 717-200 : AirTran does not interline with American yet.....
28 SHUPirate1 : 727Lover-Impossible? Improbable, I'd agree with, but Delta has (about, not sure of the exact numbers in DL's case) 90 daily non-shuttle flights schedu
29 Proudtoflyaa : Improbable, I'd agree with, but Delta has (about, not sure of the exact numbers in DL's case) 90 daily non-shuttle flights scheduled out of their 6 n
30 SHUPirate1 : Proud: At the US Airways gates at LGA, all USX passengers pass through the gate's jetway, then go down steps placed next to the jetway, then back up t
31 Proudtoflyaa : At the US Airways gates at LGA, all USX passengers pass through the gate's jetway, then go down steps placed next to the jetway, then back up the air
32 AA717driver : Why won't AA reach LCC CASM levels? Because they are sitting on $20-$22 BILLION in debt and they have committments to HUGE facilities they have to hon
33 Midway2airtran : DFW is just a start. I think AA might be in for a double-take if FL makes a move at ORD; I'm thinking future hub action at ORD for us though AA will h
34 William : So Airtran will offer 20 flights a day compared to AA's 500. Hmmm. AA has been dealing with LCCs for the last 30 years. There is this small LCC called
35 Heavymx1 : The American sided attitude seems a lot like that of what USairways had of SWA in BWI and look how they ended up. You can only say we are just too big
36 Luv2fly : Heavymx1 I think you said it best. They should and will watch them tooth and nail, because in this day and age who can afford to lose even just one cu
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