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Why Don't US Carriers Make Money?  
User currently offlineQantasclub From Australia, joined Nov 2003, 757 posts, RR: 2
Posted (10 years 12 months 3 days 18 hours ago) and read 6911 times:

I wonder sometimes why the US carriers in recent years have run into so much trouble financially. Sure, there's sept 11 and all it's aftermath, but the industry was in dire straits even before then. They seem to have such huge and amazing domestic networks; this enormous market to serve, and yet proportionally, rather meagre profits or huge losses. Of course there are some profitable LCCs but most of the majors I think, aren't in great shape.
Why? Is it:
Over-regulation and union rules that keep costs high?
Aging and large fleets that are difficult to manage?
Debt?
Poor management?
Over-competition?
Or all of the above.



Long Haul is the only way to go
45 replies: All unread, showing first 25:
 
User currently offlinePaulinbna From United States of America, joined Feb 2003, 1114 posts, RR: 5
Reply 1, posted (10 years 12 months 3 days 18 hours ago) and read 6868 times:
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if I am not mistaken JetBlue and Southwest are making money

both US carriers



Canon 50D user; 100-400 MM L IS 10-22 MM, 60MM Macro
User currently offlineShenzhen From United States of America, joined Jun 2003, 1712 posts, RR: 2
Reply 2, posted (10 years 12 months 3 days 18 hours ago) and read 6850 times:

If this were a mulitiply choice question, I would have marked...all of the above.

Cheers


User currently offlineUAL777CONTRAIL From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 12 months 3 days 18 hours ago) and read 6849 times:

Isn't CO making money? Or are they under investigation from the IRS?

qantasclub,
That is a very good question, and all of the things you listed are very good reasons, I think that the airlines got to comfy with the middle to late 90's and theN traffic dropped off.


UAL 777 CONTRAIL


User currently offlineBoingGoingGone From , joined Dec 1969, posts, RR:
Reply 4, posted (10 years 12 months 3 days 10 hours ago) and read 6764 times:

Maybe because they have competition? Maybe because they aren't normally subsidised. Maybe it's because people were hesitant to fly after 9/11... Not to sound arrogant, but that's a pretty stupid question with a pretty "plain as th enose on your face" answer.

Whay does Austrailia only have one truly successful airline?


User currently offlineANstar From United Kingdom, joined Nov 2003, 5295 posts, RR: 7
Reply 5, posted (10 years 12 months 3 days 10 hours ago) and read 6747 times:

I think alot of it is due to their size. It is quite difficult to change things in a 1000 aircraft airline. Also, over the years costs get high, and I don;t think they become so much of an issue until there is a downturn, and new competitors that have a lower cost base. this then moves them to lower there costs...

Australia has 2 successful airlines, they are Qantas and Virgin Blue.

I think both are real success stories. And both are quite profitable.

Not many airlines can grow they equivalent of 7 years over night the ay WF did, so good on them.

As for Virgin Blue, I think they had it slightly easy, but all the same, they are successful.

I'd rather have successful airlines, than failing airlines that receive subsidies...
(there are too many to mention)


User currently offlineAirbazar From United States of America, joined Sep 2003, 8571 posts, RR: 10
Reply 6, posted (10 years 12 months 3 days 9 hours ago) and read 6695 times:

[BoingGoingGone] Maybe because they have competition? Maybe because they aren't normally subsidised

Yes, there is no competition in the travel industry anywhere else in the World but the US.

[ANstar] I'd rather have successful airlines, than failing airlines that receive subsidies... (there are too many to mention)

You mean, like pretty much every US airline? Yes folks, jet fuel is subsidized. And then there are those post 9/11 "bailout" subsisdies. Sorry, couldn't resist  Smile I'm just tired of people throwing out the "s" word as an excuse to explain why they're not as good, rather than face their own shortcomings.

One reason why a lot of US airlines can't be profitable is because they emploded and management and the Unions alike were too busy getting rich. They just became too big to be efficient. The "majors" wanted to be everything for everyone and it didn't work. Operating costs are too high. Some airlines (i.e. Continental), were lucky because they had just gone through a bankrupcy re-org which allowed them to slim down and get back in at the right time. That's my opinion.


User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 7, posted (10 years 12 months 3 days 9 hours ago) and read 6666 times:

Some airlines have been ruined by "robber baron" management which more than offset any effeciency generated by the employees.

Also, no matter how low you price your tickets, there is always someone out there who will sell a seat for $5 less than you.

The big majors in the U.S. have WAAAAY too much infrastructure they have to support and they can't raise ticket prices because of the new airlines that don't have(or haven't built) the big infrastructure. I think Australia is a microcosim of this problem. Virgin Blue is making money at Qantas' expense because Qantas had all the big "toys" that cost money but don't add to the bottom line. Overhaul bases, huge training centers that are empires unto themselves, bloated management ranks, etc.

Right now, Delta and UAL are being hurt by early retirements by pilots. These lump sum retirements have to be paid from somewhere. It comes off the bottom line. The new LCC's don't(and won't) have that problem. AA has huge debt to service because they had several large projects going on when the bottom fell out. Again, the LCC's don't have that drain.

Even the LCC's aren't immune to getting caught in a sqeeze. ATA was in the early stages of a fleet replacement program when 9/11 happened. They have some pretty big debt payments coming due and are sweating that.

Also, the U.S. has the least regulated airline environment and has been deregulated longer than the rest of the world. I think you are beginning to see the same "realignment" in Europe and Australia. Airlines must adapt or perish. Unfortunately, there is little time to experiment.

Sorry to be so long-winded.TC



FL450, M.85
User currently offlineSchreiner From Netherlands, joined Oct 2001, 960 posts, RR: 2
Reply 8, posted (10 years 12 months 3 days 8 hours ago) and read 6642 times:

Making money is not their core-business...  Smile The Federal Bank does!  Smile

I think that as much EU as US carriers make profit, or loose money.

Cheers,
Schreiner



Soaring the internet...
User currently offlineAmtrakGuy From United States of America, joined Sep 1999, 500 posts, RR: 0
Reply 9, posted (10 years 12 months 3 days 8 hours ago) and read 6611 times:

Also, the major airlines have been around much longer -- thus the salaries are higher. LCC hasn't been around as long as the major airlines.

There's a gentleman here on board thinks (he's not saying it out loud) that all employees with the airlines, including the majors, should be making miminum wage (i.e. $6.50 an hour) because he wants to travel cheap.

Dave


User currently offlineQantasclub From Australia, joined Nov 2003, 757 posts, RR: 2
Reply 10, posted (10 years 12 months 2 days 23 hours ago) and read 6485 times:

Boeinggoinggone; with all due respect; if you think it's a stupid question, then don't click on it or respond to it. Let others who don't think the same way you do have their say.
Australia has two very successful domestic carriers Qantas and Virgin and they are both extremely different in their own right-one being a global airline and theother, being a truly LCC. Qantas is about to start a third airline (JUMP or QJET-will be announced next week), a new LCC to compete with Virgin, although I think it is in grave danger of drawing business away from it's own core business rather than actually steal pax away from virgin, which is what it is set up to do. (kinda like exactly what happened to BA with GO in the Europe)
The answer to your question as about why Australia has only one truly successful domestic airline is as 'plain as the nose on your face'; compare the two markets!! There are 250 million people in the US. We have 20 million, and much lower population densities.
And I think the CEO of Virgin would have to strongly disagree with you about your ommision regarding 'truly successful'. They started with 10 million dollars and a couple of planes a 2 years ago and are about to float the airline for abour 2-3 billion dollars. Thats a pretty big success in my book!

cheers,
Qantasclub



Long Haul is the only way to go
User currently offlineMariner From New Zealand, joined Nov 2001, 25544 posts, RR: 86
Reply 11, posted (10 years 12 months 2 days 22 hours ago) and read 6464 times:
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Qantasclub:

Um - I think you're forgetting the role of the Australian government in maintaining minimal competition in Australia.

The "two airline" policy was enshrined after WW2, and has been in effect ever since - even now.

It was supposed to end some time ago, but there has not been a point in Australian civil aviation since about 1950 when more than two airlines have existed for anything more than a short period of time.

I'm excluding protected territory, such as MMA which had the lock on WA air travel, and was finally bought by Ansett - which gave Ansett the lock on WA air travel.

When Sir Reg Ansett died, the two airline policy was supposed to die with him. But it didn't.

How many airlines are there in Australia now? Just two. Qantas, in all it's forms and guises, and Virgin Blue.

Call me cynical, but I'm hard pressed to believe that this is accidental. It has been true for many years that if Qantas sneezes, Canberra catches a cold.

cheers

mariner



aeternum nauta
User currently offlineQantasclub From Australia, joined Nov 2003, 757 posts, RR: 2
Reply 12, posted (10 years 12 months 2 days 22 hours ago) and read 6434 times:

Good point, Mariner. It's definedtly a smaller and more regulated market. My point is that because of this, it's rather difficult to compare it with the US market. (getting back to the topic).


Long Haul is the only way to go
User currently offlineMariner From New Zealand, joined Nov 2001, 25544 posts, RR: 86
Reply 13, posted (10 years 12 months 2 days 22 hours ago) and read 6433 times:
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Qantasclub:

Getting back to the topic, there are several US carriers that make money.

Southwest and JetBlue have already been mentioned.

Add America West, AirTran, Frontier, Alaska and even ATA. There is a pattern here - they're mostly LCC's.

Then there are the regionals, that fly for the majors on a cost plus basis. They make money - it would be very difficult for them to lose money.

So, in the end, it's really only the majors, the legacy carriers, that are not, for the most, part profitable.

Some blame the unions and high wages and salaries (which may, in part, be true), but the two most heavily unionized airlines in the world (arguably) are Qantas and Air France. And both of them have continued to be profitable during the downturn.

So perhaps there is too much competition in the US. Perhaps - and this is heresy to some - there are too many airlines competing for a fairly static number of passengers. And perhaps - greater heresy - a couple of airlines need to - disappear?

cheers

mariner



aeternum nauta
User currently offlineMidway2airtran From United States of America, joined Jul 2003, 864 posts, RR: 2
Reply 14, posted (10 years 12 months 2 days 21 hours ago) and read 6372 times:

I must say that AA717driver hit it right on the money in combination with 9/11, recession and rise of the LCC's.


"Life is short, but your delay in ATL is not."
User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 15, posted (10 years 12 months 2 days 21 hours ago) and read 6348 times:

Thanks Midway2Airtran.TC

P.S.--I just had a friend walk my resume into Airtran. I don't have time to wait for AA to sort out its problems... Insane



FL450, M.85
User currently offlineAirways6max From United States of America, joined Aug 2003, 494 posts, RR: 0
Reply 16, posted (10 years 12 months 2 days 21 hours ago) and read 6347 times:

I would say poor management and financial controls. Airline traffic is actually not that much lower than it was before 9/11 and the fact that so many planes fly full and the airlines that fly them are still in the red surely points to poor management. Over-regulation and union rules would not be a problem to an innovative CEO with some imagination and creativity. It cannot possibly be competition because there are only ten major airlines in the United States today, as opposed to forty back in 1983. Low-cost and upstart airlines, such as JetBlue, Southwest, Midwest Airlines and AirTran ARE making profits and they treat their passengers far better than the majors--American, Delta, United, Northwest and US Airways. So the majors ought to look at how they manage their money and actually provide some decent service for a change.

User currently offlineGigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 17, posted (10 years 12 months 2 days 21 hours ago) and read 6336 times:

Unions and labor rules are the top two reasons.

N


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6341 posts, RR: 34
Reply 18, posted (10 years 12 months 2 days 20 hours ago) and read 6304 times:

Mariner:

"Some blame the unions and high wages and salaries (which may, in part, be true), but the two most heavily unionized airlines in the world (arguably) are Qantas and Air France. And both of them have continued to be profitable during the downturn."

Don't forget to add Southwest. Many people think that it is non- or barely unionized, which is not the case at all.





Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineMariner From New Zealand, joined Nov 2001, 25544 posts, RR: 86
Reply 19, posted (10 years 12 months 2 days 20 hours ago) and read 6288 times:
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Planemaker:

You are correct. Southwest is a unionized airline, and has remained profitable throughout the downturn.

Mind you, I think even Southwest would have palpitations if their unions asked for the same things that Air France gives it's workers.

cheers

mariner



aeternum nauta
User currently offlineGigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 20, posted (10 years 12 months 2 days 20 hours ago) and read 6270 times:

Southwest's unions and management have an amazing relationship, and they have different work rules.

At Southwest, everyone pitches in and does whatever job needs doing and does it the best they can.

N


User currently offlineXFSUgimpLB41X From United States of America, joined Aug 2000, 4223 posts, RR: 37
Reply 21, posted (10 years 12 months 2 days 20 hours ago) and read 6274 times:

side note-

AA717driver- good luck! One of the captains that recently helped me get on with Pinnacle had his resume walked into Airtran also... I know they have been picking up some guys recently, I know you'd make a great addition to the company. I'm sorry with all the crap that has gone on with American for you- really wish the best of luck to ya.








Chicks dig winglets.
User currently offlineAA7573E From United States of America, joined Nov 2003, 475 posts, RR: 2
Reply 22, posted (10 years 12 months 2 days 20 hours ago) and read 6266 times:

@Airbazar

It is quite ironic to say that US Airlines are not successful b/c of subsidies, when some of the most successful airline stories of the past ten years have been products of 100% government ownership/subsidies.

Check out who owns Emirates, Qatar Air and Gulf Air. These airlines are buying up planes, sending them out full and recreating an industry in a part of the world that has been badly under served for years. These airlines are owned by the Flags for whom they fly. Yet, they are the picture of post 9/11 success? So don't point the finger at subsidies alone.


Now the real reason that the bigs have problems making money, have been nailed down many times in the preceding posts: and they age of the company and the extent to which the unions have taken over. You wait and see what happens when B6 and WN get unionized, and they will. Wait and see what happens when they are a 70 year old unionized carrier, and they have to pay accordingly. They will have the same cashflow problem that most major unionized industries have had since the industrial revolution.

The union, in combination with subsidies and operating costs, is the prime reason that airlines are not as profitable as they should be. Until the union is removed entirely from the process, ownership will be held over the barrel, while those who are unwilling to respond to economic changes and demands like every other industry in the world does, call in sick and refuse to work in order to protect their inflated salaries. And the cycle continues, until the unions kill another airline.

P.S. - ATA will not be profitable when their debt payment comes due in the next 18 months.



See you up front!
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6341 posts, RR: 34
Reply 23, posted (10 years 12 months 2 days 19 hours ago) and read 6235 times:

AA7573E:

"You wait and see what happens when... WN get unionized, and they will."

I guess you didn't read these posts:

You are correct. Southwest is a unionized airline, and has remained profitable throughout the downturn.

Mind you, I think even Southwest would have palpitations if their unions asked for the same things that Air France gives it's workers.


AND

Southwest's unions and management have an amazing relationship, and they have different work rules.

At Southwest, everyone pitches in and does whatever job needs doing and does it the best they can.





Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineMandala499 From Indonesia, joined Aug 2001, 6953 posts, RR: 76
Reply 24, posted (10 years 12 months 2 days 16 hours ago) and read 6160 times:

WN is one of the most unionized airlines in the US!

What's different with them is that they focus on productivity and profitability of routes/sectors/bases, instead of looking at the whole national scale zero sum game!

WN also didn't suffer from the egomaniac management of the 80s in the likes of Carl Icahn and Frank Lorenzo... Those are the guys who killed the majors. Their practices are just short of being economic terrorists!

That's why WN has a non-hostile but very strong union! The union and the management need to have an open trusting environment on which to bargain each other, otherwise, it's everyone defending their turf at the cost of the airline's viability!

Mandala499



When losing situational awareness, pray Cumulus Granitus isn't nearby !
25 Lutfi : FEDEX and UPS are both profitable US airlines, that are heavily unionised. Atlas/ Polar/ Evergreen aren't highly unionised, and are basket cases.
26 BigB : You wait and see what happens when B6 and WN get unionized, and they will. Wait and see what happens when they are a 70 year old unionized carrier, an
27 ANstar : Mariner: Australia abolished the 2 airline policy over 10 years ago. It now has a fully dergulated domestic market. The fact that no more than 2 'majo
28 RiverVisualNYC : Carriers like Emirates are growing with cash from the Royal families, they don't have to publicly report their financial data, so who knows how profit
29 Post contains links LastBaron : Mariner, an eloquent post! One reason you may have forgotten to mention as to why mainly the LCCs seem to make money here - most passengers really don
30 Lhr001 : To many Airlines..... To little In-Flight Service.....
31 Alpha 1 : Lhr001, in flight service does not determine profit and loss. I will agree one of the problem is too many seats in the market. That is a definite reas
32 LastBaron : Alpha 1, as I said, in-flight service could be the answer to more profitability for the majors. Majors would do well to distinguish their product from
33 Qqflyboy : I am surprised with all the talk of Southwest and it's unions in this post no one has mentioned WN Flight Attendants. I bet they would beg to differ w
34 Lhr001 : Qqflyboy, What airline pays only $13.00 per flight hour..... In addition most airlines no longer offer service... so in turn the Flight Attendants don
35 LastBaron : WN's FAs are among the industry's worst in every way - slovenly in appearance, unprofessional (silliest and most unserious cabin crews I have ever enc
36 Mariner : ANstar: "Australia abolished the 2 airline policy over 10 years ago." That was exactly my point. The 2 airline policy may be officially "dead" - but h
37 MaverickM11 : It's interesting how everyone chastises the EU for protecting and subsidizing their airlines, yet at the same time no one chastisez unions for protect
38 ANstar : Mariner: The main Domestic airlines in Australia are Qantas Virgin blue Rex Though there are smaller ones which aren't worth mentioning. I think the m
39 Mariner : ANstar: I meant "national" domestic airlines - I wouldn't put Rex in this category. I guess in the US it would be called a regional. Can Rex grow to n
40 Mariner : LastBaron: I agree with much of what you say - except for one thing. I'm not yet convinced that "cheap" is the driving force behind all fare purchases
41 ANstar : Meant to take Rex off that list, but the edit is way to slow atm. I think NZ would be foolish to attempt an entry into the OZ domestic market, as ther
42 Cptgirmaytesfa : service is just not good + costs too high; fatal combination....
43 Post contains images Aussieboggie : Is NWA making money? I think so At least they're on the right direction now. NWA Q2 = $227 mil. and the latest Q3 = $ 42 mil. vs. Q1 $ (399) mil. loss
44 Cloudy : Someone said..... ----- Check out who owns Emirates, Qatar Air and Gulf Air. These airlines are buying up planes, sending them out full and recreating
45 Gigneil : Carriers like Emirates are growing with cash from the Royal families, they don't have to publicly report their financial data, Emirates is a public co
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