B787 From Australia, joined May 2005, 152 posts, RR: 0 Posted (7 years 8 months 3 weeks 4 days 5 hours ago) and read 3327 times:
It seems to me that US carriers are finding the going considerably harder than their European and Australasian counterparts. Is this so and if so why?
Is it because;
Many us carriers have networks that are dominantly domestic?
Low carriers are more established and thus more competitive?
Of the cost of Labour?
Of the multiple hub structure of the majors, and in efficiencies in it?
Competition on US domestic and international routes are more competitive?
Etc etc etc...
I can think of many reasons that may affect US carriers harder than other airlines, but I don't know of anything definative other than it's a combination of large domestic networks, large fleets, lots of domestic competition and an economy not favourable to business travel.
Leej From United Kingdom, joined Apr 2001, 287 posts, RR: 0 Reply 1, posted (7 years 8 months 3 weeks 4 days 4 hours ago) and read 3297 times:
A recent observation from a UK point of view - AA and US Airways experiences by some relatives of mine in the last week.
US - my sister in law, who is not much of a keen flyer anyway, recently attended a conference in Nashville, flying from LGW with US Airways. I asked her about her flights, with her reply going along the lines of 'I have never experienced such bad service in all my life'. 'Not a smile, nothing, anything I asked for was either ignored or done with a surly attitude'. 'The last time I saw employees with this sort of attitude were bus drivers in Cardiff'.
AA - my cousin and 2 small children, aged 2 and 5 flew to Chicago (after being rerouted by BA during the strike) MAN - ORD. She was on a 767. 'I have never flown on such an old and tatty aircraft'. Elderly hostesses who made sure that everybody stayed in their seats, requests ignored, no child meal at all for the youngest (her request was met with 'don't you know these meals cost $30.00 honey'
Her flight back with BA couldn't have been more opposite. A caring and can do attitude.
Now while I am sure that there are many many factors in why airlines in the US aren't making money (bar a few), here are 2 people that have told a lot more people what airlines not to fly with. I'll be one of them.
Teva From France, joined Jan 2001, 1868 posts, RR: 17 Reply 3, posted (7 years 8 months 3 weeks 4 days 1 hour ago) and read 3236 times:
Because those unionized bastards want to get a decent salary to work.
They should work for free (or better... even pay), for the privilege of working for the great American companies.
Only top executives and shareholders sould get the money !
(of course this post is humoristic, sarcastic and provocative. But isn't there a part of truth, when I read some comments in this forum? )
Ecoute les orgues, Elles jouent pour toi...C'est le requiem pour un con
Mrniji From , joined Dec 1969, posts, RR: Reply 4, posted (7 years 8 months 3 weeks 4 days 1 hour ago) and read 3238 times:
- Absolute overcompetition in the US (excess in demand, as well as "artificial markets" through cheap prices that are not sustainable) and to/from the US
- It is difficult to establish on key markets, as alliance networks are tight --> hence the entire market is highly competitive - unlike Europe, where "homemarkets" exist for AF, LH, KL, BA etc
- that very overcompetition forces carriers to offer cheap prices --> keep costs down, (as labor etc --> loss in working morals/culture??), cut down service - especially the domestic market is highly overserved.. how to gain adequate revenue?
- foreign carriers (especially from Asia) often offer cheaper flights to/from US (MH, KE et al Westwards, AI/PK/KU et al from Europe) --> and why flying a US carrier if foreign airlines are cheaper and offer better service?
Deregulation is good, but some control could be better in the longterm
Ssides From United States of America, joined Feb 2001, 4059 posts, RR: 23 Reply 7, posted (7 years 8 months 3 weeks 3 days 23 hours ago) and read 3105 times:
I think, in general, Americans are much more cost-conscious than their European or Asian counterparts.
When it comes to service, this is case in point: AA experimented with its "More Room Throughout Coach" service, which effectively reduced the number of revenue-paying passengers in coach. AA hoped that people would be willing to pay a premium to fly with more space.
Most of the people on this board, myself included, would easily pay an extra $20-$50 for this. However, we do not make up the majority of the flying public. Most people are going to search on the internet, and when they see that CO or UA is $20-$50 less than AA, they'll by that ticket regardless of the service.
Air travel in the US is also much more of a necessity than it is elsewhere. Therefore, it is going to appeal to the masses more than in Europe, and this means keeping costs down. It's just an cultural-economic difference.
ChrisNH From United States of America, joined Jun 1999, 3804 posts, RR: 2 Reply 8, posted (7 years 8 months 3 weeks 3 days 23 hours ago) and read 3077 times:
This is my oversimplified view: too much capacity at a time when the economy can't support it. Companies aren't sending their workers on all-expenses-paid junkets like trade shows and such like they did at the turn of the century. Then you had 9-11 piled on top of that.
So, if the number of people flying plummeted, why are all the airlines still around? In a word: Politics. Airlines represent voting constituents because of the unions, and all the workers spread throughout the land. Would a congressman or senator from Georgia vote to subsidize Delta? Damn right he would! How about a politician from Texas called upon to 'prop up' AA? Or someone from IL asked to turn on the rescue $$$ for UAL? They all would, and that's the lesser evil, apparently, to all the jobless claims from laid-off airline workers. So, that is why all these airlines--many of whom should just be allowed to die like any other company--are allowed to live on artificial respiration. Washington doesn't want a spike in the unemployment figures, so they let these moribund airlines limp along.
The way the airlines are battling this is easy: RJs. AA is fielding 737s (!!!) on the BOS-LAX route!! You can go transcon on little A319s...from Boston to Vancouver for goodness sakes!!! So, that is all window dressing in my opinion. The airlines are essentially re-arranging the deck chairs on the Titanic by fiddling around with RJs in place of mainliners; and smaller jets overall. The underlying problems are still there. But getting back to my earlier point: Washington politics allows sick airlines to simply limp along and live life beyond their means. If someone asked, 'What's the downfall of letting Delta die?' The answer would invariably be, 'Well! What about all the laid off workers?' 'Well! What will happen to Georgia's economy?' No one will say that Delta is NECESSARY, because that airline (or any airline) isn't NECESSARY; there are enough airlines in the U.S. to serve the needs of the flying public. We can do away with at least ONE legacy carrier. Problem is, everyone is afraid to pick the short straw.
Chris in NH
HT From Germany, joined May 2005, 6471 posts, RR: 27 Reply 10, posted (7 years 8 months 3 weeks 3 days 23 hours ago) and read 3067 times:
AFAIK, most overseas-routes are profitable also for those struggeling carriers like UA.
It´s the homemarket that drags these carriers down. Especially the very high labour costs (which often also includes the US-style of retirement pensions) is the MAIN problem of all legacy carriers in the U.S.
From an economical point of view, the only option is: "Bring down the labour costs". To achieve this, the "usual measures" have to be used, while every single "measure" will a) hurt a lot of souls and b) probably will cause a strike (which, of course, is the last thing a debt-ridden carrier can use). So it´s basically a loose-loose-stituation, which can only be mastered with baby-steps (which OTOH must be big enough to reduce losses quick).
All U.S.-carriers can be happy, that they can seek the umbrella-protection of Chapter 11. Most other nations do not have such an instrument; in those countries a carrier has to cease op´s if they are unable to settle their bills !
Other quoted reasons like high fuel prices are the same for all carriers worldwide (unless they have "hearded" fuel for a fixed timespan), so this is no special threat to the viability of U.S.-carriers.
There ARE other big carriers outside the U.S. operating in hostile environments but posting profits ! Most of these carriers have brought down their labour costs earlier ...
Carpe diem ! Life is too short to waste your time ! Keep in mind, that today is the first day of the rest of your life !
Ssides From United States of America, joined Feb 2001, 4059 posts, RR: 23 Reply 11, posted (7 years 8 months 3 weeks 3 days 23 hours ago) and read 3064 times:
Quoting ChrisNH (Reply 8): So, that is all window dressing in my opinion. The airlines are essentially re-arranging the deck chairs on the Titanic by fiddling around with RJs in place of mainliners; and smaller jets overall. The underlying problems are still there.
While I agree with most of your post, I don't understand where you're coming from here. Are you saying that airlines should still be flying mainline aircraft (or widebodies) on these routes, or that they should drop them altogether?
If you look at most airlines' balance sheets (AA comes to mind), you'll see that RJs have been a godsend to many. As demand has slackened, they have allowed airlines to serve their customers with nonstop flights while keeping costs low. For example, the DFW-CLE route has seen a major dropoff in demand. Instead of dropping the route entirely, AA has been able to serve its customers with continued nonstops due to the RJ factor.
SlamClick From United States of America, joined Nov 2003, 10062 posts, RR: 71 Reply 13, posted (7 years 8 months 3 weeks 3 days 22 hours ago) and read 3021 times:
It is naive to believe that poor service can explain financial losses when the airplanes are full.
If the airplanes were empty it might account for it.
The money is coming in by the truckload.
Where is the money going?
Answer that and you have your answer.
Partial answer: Airline takes in a dollar. Airline pays 30-40 cents of that dollar directly back to Federal, State, County, City, Bourough, Township and Airport Authority in user fees. Airline is then taxed by some of these same entities at the same rate as other businesses on the whole dollar.
Happiness is not seeing another trite Ste. Maarten photo all week long.
RichardJF From New Zealand, joined Mar 2001, 792 posts, RR: 1 Reply 14, posted (7 years 8 months 3 weeks 3 days 12 hours ago) and read 2830 times:
Quoting HT (Reply 10): All U.S.-carriers can be happy, that they can seek the umbrella-protection of Chapter 11. Most other nations do not have such an instrument; in those countries a carrier has to cease op´s if they are unable to settle their bills !
American politicans should take a close look at what happened in Australia.
Ansett and Qantas were not unlike US legacy carriers. Ansett fell over and was replaced by Virgin Blue which is far more efficient.
B744F From Germany, joined Jan 2006, 0 posts, RR: 0 Reply 15, posted (7 years 8 months 3 weeks 3 days 12 hours ago) and read 2811 times:
In general Americans do not have the income to fly often nor the days off. Only a small percentage of people, either for work, or pleasure, fly often enough to make up the market share these countless airlines are competing to get. Top it off with outrageous salaries and bonuses for executives, and the almighty shareholder who is the only person these companies want to please, it is not surprising almost all are in financial trouble.
B787 From Australia, joined May 2005, 152 posts, RR: 0 Reply 16, posted (7 years 8 months 3 weeks 3 days 10 hours ago) and read 2763 times:
Thanks for the responses.
Quoting Homer71 (Reply 12): Actually, the number of pax flying so far in 2005 is exceeding pre-9/11 levels. Unfortunately, the cost of fuel is the difference...
The cost of fuel is high everywhere. How is this affecting US carriers more than Asian or European? Are US carriers adding fuel levies like QF and DJ here in Australia?
Quoting RichardJF (Reply 14): American politicans should take a close look at what happened in Australia.
Ansett and Qantas were not unlike US legacy carriers. Ansett fell over and was replaced by Virgin Blue which is far more efficient.
Don't forget Canada with Canadian and now Westjet etc
Quoting B744F (Reply 15): In general Americans do not have the income to fly often nor the days off. Only a small percentage of people, either for work, or pleasure, fly often enough to make up the market share these countless airlines are competing to get
Hang on. Doesn't the US have the highest concentration of wealth in the world, and the most even spread of this wealth? What about business travellers? Holiday's to Disneyland, Las Vegas etc.
Spacecadet From United States of America, joined Sep 2001, 3249 posts, RR: 14 Reply 17, posted (7 years 8 months 3 weeks 3 days 9 hours ago) and read 2736 times:
Quoting SlamClick (Reply 13): It is naive to believe that poor service can explain financial losses when the airplanes are full.
I think it more than "can" explain it, I think it does explain it.
The airlines, since the 1970's and 80's, have conditioned customers to expect a certain level of service. That level of service is, by world standards, quite awful. Customers know this. They know what sort of experience they're going to have when flying. They know they're not going to enjoy their flight, almost regardless of carrier.
How much do you think this experience is worth to them?
I disagree with those that say people will pay the least amount they can for anything. If that was true, premium car makers like BMW and Mercedes would have been out of business long ago. People will pay more, to the extent that they can, if they know they will get value for their money. This does not mean they're going to waste $10,000 on a first class ticket when that's 6 month's salary.
But the airlines have demonstrated to the public through repetition and experience that a flight on a US carrier is worth almost nothing. Therefore, people will pay almost nothing for it. If an airline is going to do nothing but get you from point A to point B, then people are not going to pay any more than they think that's worth. If they can get a certain fare on a bus, why pay more to fly? The experience is not going to be any better, and in some ways may actually be worse (even smaller seat pitch, fear of flying, etc.).
Other people have brought up AA's experiments with charging a premium over their competitors, and there have been other failures like that. The problem is this horrid level of service has been ingrained over a period of decades; it is not going to change overnight, nor is simply a few extra inches of legroom going to make the difference. It is a whole change in attitude that's required. But at this point, it's a chicken or egg thing; it's going to take so long and so much marketing money to convince people that your airline offers any significant difference in service over the others that most just probably think it's better to just continue lowering fares and cutting frills. But it is a self-destructive cycle.
Meanwhile, foreign carriers have a much better reputation and a lot of people will choose to fly them even if they cost more money. If you recognize my name from other threads then you may know I fly from JFK-NRT fairly often. Whenever I do, I go through a travel agent, and what do I hear? "If you want ANA or JAL, book early. Otherwise you'll be stuck with Northwest, AA or United." The one time I flew United and the one time I flew Northwest were because I waited too long and JAL/ANA were long since full, and that at higher fares than NWA or UA were charging.
It's not just about loads. It's about perceived value. Demonstrate that your service is worth nothing for long enough and you will condition people to pay nothing for it. That's the problem with the US airlines.
I'm tired of being a wanna-be league bowler. I wanna be a league bowler!
Carpethead From Japan, joined Aug 2004, 2769 posts, RR: 4 Reply 18, posted (7 years 8 months 3 weeks 3 days 9 hours ago) and read 2708 times:
Revenue is smaller than cost. Thus leading to losses. Simple.
Most airlines in the world have raised fares or added fuel surcharges to offset higher fuel costs, providing more security, etc.
If you look at most US airlines their load factors are sky high compared to other airlines in the world. Yet, which ones are making money.
Seems like airline accountants and management need to review economics 101 (except at WN).
Highliner2 From United States of America, joined Nov 2000, 692 posts, RR: 1 Reply 19, posted (7 years 8 months 3 weeks 3 days 8 hours ago) and read 2696 times:
Well said, service has hit the basement on most carriers. But the flying public has also demonstrated that they want a cheap fare over a meal, pillows, etc.
It will be interesting to see how United's P.S. does. This is catered towards people who may be willing to pay more for extra service, if P.S. does well than there will be an argument that people are willing to pay more in exchange for service above and beyond the norm. If it flops, it'll be another example of how the American public has decided with their wallets how much service they're willing to pay for. Cheers to United for trying something innovative though.
Also, contrary to popular belief.
1. People are flying less. Wrong. Load factors are sky high. The problems is that aircraft are flying completely full on some routes and still losing money. It's not like load factors are hovering in the 50s and 60s. Most of the carriers have had record load factors the past few quarters. There are plenty of people who want to fly. Planes are freaking full! The problem is the cost of fuel is rising faster than the air carriers can increase fares to compensate. CO and AA turned a profit this last quarter, even UA managed an operating profit. And that was WITH the high fuel prices, imagine is the go-juice was at $40 a barrel as it was when these carriers started their massive restructuring campaigns. They'd have both turned in massive amounts of money. People are flying, they're just no paying enough for it. Overcapacity is something everyone wants to point to and yet the airlines are flying full airplanes all over the place?
2.The network carriers model is out-of-whack. A few years ago, yes. Now? Wrong. Again, look at AA and CO as an example. Both embarked on sizable international expansion. One place where the darling LCC's can't compete with them. International expansion not only brings in revenue on it's own, it also generates additional connecting traffic on the domestic network for those traveling to and from foreign countries. AA made far reaching adjustments to their hubs such as assigning specific aircraft to specific hubs and attempting to schedule crews and aircraft so that they remain together throughout the day, both initiatives appear to be reaping financial rewards. Many of the legacies are increasing point to point flying while also connecting the dots from their fortress hubs, (witness AA in Miami). Costs are down. Revenues are on the rise.
Let's also not forget that at some point the LCC model runs into a problem. There's only so many markets that can suppurt and A319 or 737. And Indy showed everyone you can't operate RJs on the LCC model. The LCC's are running out of markets to cherry pick and their costs have RISEN while network competitors with their 'out-of'whack' business models have lowered their costs. The legacy carriers have been finding more and more ways to cuts costs, and not necessarily in regards to labor. IF they can find ways to increase revenues further, catch even a slight break in fuel costs, than the carriers that did their restructuring properly, AA, CO, and MAYBE even UA. Will be profitable again...
So what is it than? Fuel.
Even Southwest, Mighty Southwest would find itself in unfamiliar territory without its fuel hedges. They bet smart. Bet big. And are reaping the benefits, but those hedges don't last forever. Eventually even they are coming to face the dilema of rising costs vs. keeping fares low.
As long as fuel prices continue to loiter in the upper atmosphere the airlines are in trouble. They must find ways to increase fares and make it stick. There's also further savings out there. Like say, how about demanding the FAA get off its incompetent a$$ and fix the ATC system which costs the airline industry BILLIONS of dollars every year in delays and cancellations?
Centrair From Japan, joined Jan 2005, 3597 posts, RR: 21 Reply 20, posted (7 years 8 months 3 weeks 3 days 8 hours ago) and read 2691 times:
Smiles cost too much and had to be cut from Airline budgets. Good attitudes and a kind heart were eating into the botttom line.
My look at this is the same as many. Too many airlines fighting for too little. I would like to see some legacies die out or merge and other thrive. I would like to see some LCCs die and others thrive.
Airlines need to merge, shrink, focus and improve.
Merge with other carriers to be competitive with the remaining carriers.
Shrink to fit a market and be competitive in specific areas.
Focus on making the best product for a specific cost.
Improve services be competitive...low cost with legacy traditions.
I might have over simplified things here but that is how I see it. U.S. Carriers need to stop thinking of just their investors but think about every part of the machine.
A smile in coach costs the same as a smile in business or first. A quick response to your customers needs/requests costs the same in economy as it does in business and first. Respecting those you are serving helps improve the bottom line no matter what industry you are in.
Yes...I am not a KIX fan. Let's Japanese Aviation!
MidnightMike From United States of America, joined Mar 2003, 2892 posts, RR: 16 Reply 21, posted (7 years 8 months 3 weeks 3 days 8 hours ago) and read 2674 times:
Quoting Ssides (Reply 7): When it comes to service, this is case in point: AA experimented with its "More Room Throughout Coach" service, which effectively reduced the number of revenue-paying passengers in coach. AA hoped that people would be willing to pay a premium to fly with more space.
The American Airline experiement was a failure for many reasons:
Lack of advertisement
Was not available on all flights
You can barely see the extra two inches.
SonOfACaptain From United States of America, joined May 2004, 1747 posts, RR: 5 Reply 22, posted (7 years 8 months 3 weeks 3 days 7 hours ago) and read 2634 times:
Quoting B787 (Reply 16): The cost of fuel is high everywhere. How is this affecting US carriers more than Asian or European?
Price of tickets. Foreign airlines have more control over their price of tickets, adjusting to the cost of the product. However, in the US, competition drive the ticket prices to a point where airlines don't control it. If AA and WN are competing on a route, AA would not be willing to raise the price because they know WN would not do so, thus AA doesn't raise the price in fear of losing passengers to WN.
Aeronuts From United States of America, joined Sep 2004, 114 posts, RR: 0 Reply 24, posted (7 years 8 months 3 weeks 3 days 7 hours ago) and read 2612 times:
"Top it off with outrageous salaries and bonuses for executives, and the almighty shareholder who is the only person these companies want to please, it is not surprising almost all are in financial trouble."
Outrageous salaries and bonuses?? Go checkout the AA's executive salaries (posted on any financial pages). They're competitive for a 92,000 employee company! Almighty shareholders... Please, give me a break! The shareholders have been not had a return in 5 years, they're lucky AA's not in Chapter 11.
"The airlines, since the 1970's and 80's, have conditioned customers to expect a certain level of service. That level of service is, by world standards, quite awful. Customers know this. They know what sort of experience they're going to have when flying. They know they're not going to enjoy their flight, almost regardless of carrier."
Another over generalization - of an entire generation!! I've just past my 100 flight on UA this year, and have been flying them since the Pan Am days (yes, I flew back in the 70's). I have yet met those "awful" US legacy services posted - sure there were once or twice "bad" services, but don't go generalizing an entire group of professionals. I've flown twice this year on CX across the pacific, and their "coach" services are no different than UA. The biggest difference, PTV with AVOD.
Until you have run a company with high labor cost, high pensions, and high raw materials (i.e. fuel), in the face of cut-throat competitions, it's easy to complaint.
25 StevenUhl777: One could write a doctoral thesis on this subject...for the past 4 years alone...
26 Fleet Service: Lack of advertisement? MRTC was hyped like crazy here in NYC, bus stop shelters, TV and Radio spots, print ads, the works. Wrong, every aircraft had
27 IRelayer: Actually if you are referring to any shareholders (holders of common stock) I cleaned up on AA stock when it was in the doldrums (when they were tryi
28 BoeingPride800: Well we obviously know why US and AA have bad service in your terms sinply because US is in one of the worst financial position and AA is almost the
29 BoeingPride800: Well we obviously know why US and AA have bad service in your terms simply because US is in one of the worst financial position and AA is almost the
30 Mariner: That is Wall Street trading, that has nothing to do with the airline. Investors are trading United stock, despite the bankruptcy. The most successful
31 Goingboeing: That hits the nail on the head. Son of a Captain seems to want to lay the blame on Southwest because of thier low fares, but the bankrupt carriers (U
32 B787: It seems to me it's fair to say that one of the real differences between US carriers and other developed airline markets is the way the legacy carrier
33 SonOfACaptain: ??????????????? Now that deserves a smack. I don't blame WN! I was clearly making a point that there was overcapacity in the US market. The only reas