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Why Are Airline Employees Paying And Not Customers  
User currently offlineApodino From United States of America, joined Apr 2005, 4280 posts, RR: 6
Posted (8 years 6 months 2 weeks 5 days 16 hours ago) and read 10520 times:

In recent years I have seen employees at airlines give concession after concession because the airlines are in such bad financial shape. My question is this. If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even? I can see if flights aren't attracting enough passengers, but I find it hard to believe on some of these routes? I mean, not long ago I flew DL from BOS-LAX and only paid $170 for a round trip ticket? Thats insane, and I know that there is demand on that route. And if you can't operate a flight profitably, drop it. For example, NW on a route like FAR-LAS? There is no way that there is enough demand on that route to make it profitable so why fly it? And then ask the pilots for concessions later on in Chapter 11 to pay for it?

I know the consumers are benefitting in the short term, but I don't see how anyone benefits in the long run. For one thing, the pay and benefit cuts are driving a lot of good people out of the industry, and keeping a lot of good people from joining the industry. Qualified pilots will not be as easy to find because schools like Embry-Riddle, which has been a great school for years, is now charging $12,000 a semester not including flight training or room and board, and there is no return on investment. Some Skyway pilots in fact are living below the poverty line. Flight attendants won't be as easy to find for the same reason. Dispatchers won't be as qualified, which is ashamed cause its not an easy job and there is a lot you have to know just to get a license. Mechanics will not be as competent, leading to more mx delays, and cancellations, inconveniencing a lot more customers. I just don't see why there is no panic button being pushed. As much as I hate to say it, I don't like where its heading, and I fear it will take another incident, or reregulation, to fix the problem.

64 replies: All unread, showing first 25:
 
User currently offlineHighguy76 From United States of America, joined Jun 2003, 184 posts, RR: 1
Reply 1, posted (8 years 6 months 2 weeks 5 days 12 hours ago) and read 10323 times:

Good points, but I am biased (airline employee.) I am sure you will hear from some investor/shareholder capitalist clones with messages of "employees are paid what the market allows, who cares if its below the poverty level" and "if they don't like it, they should find another job."
Not much is done in the airline industry anymore to ensure anything long term. If short term investors and high paid execs aren't making quick millions, they figure there's something wrong. I wish it were different.
Just my opinion, but I expect you will get others.
Highguy76


User currently offlineFXRA From United States of America, joined Jul 1999, 706 posts, RR: 2
Reply 2, posted (8 years 6 months 2 weeks 5 days 11 hours ago) and read 10296 times:

Quoting Apodino (Thread starter):
In recent years I have seen employees at airlines give concession after concession because the airlines are in such bad financial shape. My question is this. If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even? I can see if flights aren't attracting enough passengers, but I find it hard to believe on some of these routes? I mean, not long ago I flew DL from BOS-LAX and only paid $170 for a round trip ticket? Thats insane, and I know that there is demand on that route. And if you can't operate a flight profitably, drop it. For example, NW on a route like FAR-LAS? There is no way that there is enough demand on that route to make it profitable so why fly it? And then ask the pilots for concessions later on in Chapter 11 to pay for it?

I'm biased too, also an airline employee, but the answer is this. You have Airline X that can sell a seat from BOS-LAX for $170 roundtrip and at least break even. So, Airline Y has to match that far einorde rto attract customers..and my have a higher cost structure and cannot not sell the same seat profitably. Here u have the "new" LCC with lower employee wages and fixed costs vs the "old" legacy with higher average employee wages and costs. But the legacy does not want to give up amrket share to the LCC... and thus your losing money on flights.

I would make the preidiction that in about 20years, you'll see a new round of start up "LCC" and similar problems competing facing the Frontiers and Aitrans and Jetblues as their costs rise... but i could be wrong, Southwest seems to be bucking that trend for the moment. Just my opinion.

later



Visualize Whirled Peas
User currently offlineApodino From United States of America, joined Apr 2005, 4280 posts, RR: 6
Reply 3, posted (8 years 6 months 2 weeks 5 days 11 hours ago) and read 10276 times:

Quoting FXRA (Reply 2):
But the legacy does not want to give up amrket share to the LCC... and thus your losing money on flights.

If the primary duty of a company is to make money for their shareholders, then let me put this question at you, is it better to take the market share at a loss, or concede it and focus on more profitable routes.

Doug Parker said years ago that there is no reason for them to match fares on service from DFW-SEA because they aren't going to be able to get much market share on that type of route, so they don't try to undercut people, they just charge a premium for it. Many carriers would try to compete, and would do so at losses. If this type of thinking has caused airlines to lose money for many years, why do they still practice it? You would think they would try something different.


User currently offlineGoingboeing From United States of America, joined Dec 1999, 4875 posts, RR: 16
Reply 4, posted (8 years 6 months 2 weeks 5 days 11 hours ago) and read 10218 times:

As long as legacy carriers put market share ahead of profits, nothing will change. Southwest doesn't care if they lead in market share. In a recent interview, Airtran's CEO said they really don't pay attention to market share. Both those airlines are profitable. It's true that legacies have to meet the price of an LCC in a market, but in far too many cases, the legacies not only meet...but BEAT the LCC's on price...all in the quest to "maintain market share".

User currently offlineLuv2fly From United States of America, joined May 2003, 12110 posts, RR: 48
Reply 5, posted (8 years 6 months 2 weeks 5 days 10 hours ago) and read 10157 times:
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Quoting Goingboeing (Reply 4):
As long as legacy carriers put market share ahead of profits, nothing will change. Southwest doesn't care if they lead in market share. In a recent interview, Airtran's CEO said they really don't pay attention to market share. Both those airlines are profitable. It's true that legacies have to meet the price of an LCC in a market, but in far too many cases, the legacies not only meet...but BEAT the LCC's on price...all in the quest to "maintain market share".

This sums it right up. And if all airlines saw this and operated this way it would be a whole nother ball game. Sure it sounds to simple to work, though look at the airlines that are making money right now.



You can cut the irony with a knife
User currently offline3201 From , joined Dec 1969, posts, RR:
Reply 6, posted (8 years 6 months 2 weeks 5 days 10 hours ago) and read 10096 times:

Quoting Apodino (Thread starter):
My question is this. If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even?

For some flights, there is no such price -- as you raise the price, fewer people buy tickets, and the total revenue stays the same or goes down. Even if you're not looking at sub-optimal profitability to capture market share or other higher-order issues, just at the price for a single flight, price should not have anything to do with cost -- it should be set to maximize revenue at fixed cost or to maximize profit with variable cost, and value-based pricing is always more optimal than cost-markup-based pricing.

The short answer to why employees take concessions while fares don't rise is that the traveling public is more willing to "not travel" based on price than the airline workforce is to "not work" based on pay. People work for airlines because they like to or they have no other option, and as long as there are more willing to work for lower pay, and as sleazy as it is to take advantage of people trapped into a career choice made when the career was very different (i.e. the pay and working conditions were a lot better industry-wide), that's what the economic situation dictates doing for the airlines.

And as much as people say "the industry really needs one or more large airlines to liquidate," that will further hurt the equation, since that many more employees will be on the market looking for work.

It SUCKS, and the rest of us definitely sympathize, but it's life, and it's happening in other industries too.


User currently offlineKen777 From United States of America, joined Mar 2004, 8278 posts, RR: 8
Reply 7, posted (8 years 6 months 2 weeks 5 days 10 hours ago) and read 10085 times:

The legacies and their employees had a very good time for many years, but a lot of factors have changed the industry - the dot com bust, 9/11, LCCs, fuel costs, etc.

One of the challenges for the legacies is their fleet, which was established when times were good. These flees are now either out of sync with the directions the companies want to take, or are demanding heavier maintenance costs than the newer planes - and consuming more fuel. It's going to be difficult for the legacies to convert their fleets to a more efficient configuration, and it is going to take years.

On the personnel side, the unions took care of their members when times were good and those were very good years indeed for many. Things are dramatically different today and there will be an on-goign need to adjust the approach both the unions and airlines take in keeping the airlines viable. I do see changes in pension plans as well as other benefits.

What I would hope to see when these changes take place is an agreement where the employees share in the profits to a large degree. When you reduce the pay of employees who are in contact with customers then you had better provide them with something that strongly motivates them to take very good care of the customer. I would put profit sharing for the workers ahead of profit sharing for the management level. (Managers are not living below the poverty line.)

As far as the pax goes, they will generally head to the cheapest product. Most really don't care who they fly with. Frequent flyers will give more weight to the airline/alliance they are loyal to, unless there is a huge difference in fares. The public has supported this Wal-Mart of the Skies approach to flying and the legacies (and their employees) are stuck with playing in that game. There is a lot of work ahead of both in order for them to have some long term security. I hope they make it.


User currently offlineSeeTheWorld From United States of America, joined Dec 2005, 1325 posts, RR: 4
Reply 8, posted (8 years 6 months 2 weeks 5 days 10 hours ago) and read 10056 times:

Wow!!

It's so nice to read messages in a topic stream that are thoughtful and on target. What a nice change from some of the BS spewed out by some of members on this site!


User currently offlineMD11Engineer From Germany, joined Oct 2003, 14026 posts, RR: 62
Reply 9, posted (8 years 6 months 2 weeks 5 days 10 hours ago) and read 10048 times:

At the moment with all the fight going on for market shares and airlines outpricing each other I see in near future several airlines going bust or being bought up by more successfull competitors and after some years a consolidation (due to less competition) when the fares will rise sharply.


Jan


User currently offlineIkramerica From United States of America, joined May 2005, 21532 posts, RR: 59
Reply 10, posted (8 years 6 months 2 weeks 5 days 9 hours ago) and read 10032 times:

Quoting Apodino (Reply 3):
If this type of thinking has caused airlines to lose money for many years, why do they still practice it? You would think they would try something different.

Airlines need to look at John Nash's theories a bit more, stop all fighting over the hottest chick in the bar...

Quoting 3201 (Reply 6):
The short answer to why employees take concessions while fares don't rise is that the traveling public is more willing to "not travel" based on price than the airline workforce is to "not work" based on pay.

Also a very good point. There are obviously many people willing to work as airline employees at these lower wages, but there aren't as many (so the theory goes) willing to pay higher prices to fly. I'm not sure I buy that, because our USA society has become so reliant on air travel, we've spread out so much from family, etc., that we'd still have to fly for the large part, and cut back spending elsewhere.

When gas prices went up, studies have shown we haven't stopped driving as much, but have cut back on entertainment expenses like movies instead.

Quoting Ken777 (Reply 7):
One of the challenges for the legacies is their fleet, which was established when times were good. These flees are now either out of sync with the directions the companies want to take, or are demanding heavier maintenance costs than the newer planes - and consuming more fuel.

One of the reasons CO is in better shape than many legacies. Relatively modern fleet, heavily weighted toward narrowbodies, all widebody planes are less than 10 years old.



Of all the things to worry about... the Wookie has no pants.
User currently offlinePlanespotting From United States of America, joined Apr 2004, 3527 posts, RR: 5
Reply 11, posted (8 years 6 months 2 weeks 5 days 9 hours ago) and read 10022 times:

Market Economics.

In market economies, there are no principle elements of self organization...that is, everything about the market itself is based on each participant persuing its own interests...generally, ad-hoc self organization and fair pricing develops based around the needs of nearly all participants...except the workers.

This is evident in the airline industry. The airlines biggest expense is still labor (although fuel is getting to be a close second), and it just happens to be the cost that is easiest to manipulate. The airlines can't control what their customers are willing to pay, or what their suppliers are willing to charge.

But people do need jobs, and the only real stipulations they face when it comes to what they pay their workers are from the federal government minimum wage requirements. This of course does input some limitations on the sort of people they employ (not saying that everyone who is willing to work for lower wages are irresponsible or bad employees, because that is hardly the case, but it does dictate that some of these people may be less than ideal job candidates).

Would the airlines rather attract all around better employees by offering higher wages? Probably, but if they can get by paying lower wages even if it means getting less than ideal employees, they will do it, especially if there is no other option.



Do you like movies about gladiators?
User currently onlineVV701 From United Kingdom, joined Aug 2005, 7535 posts, RR: 17
Reply 12, posted (8 years 6 months 2 weeks 5 days 9 hours ago) and read 10022 times:

Quoting Apodino (Thread starter):
If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even?

There are two very different break even figures for every passenger journey.

The first is the break even figure for a fully costed passenger journey. Included in the cost for this journey is a small part of every expense that the airline incurs from the cost of buying a 10 cent pencil to the salary of the CEO.

Then there is the break even figure incurred that is calculated by subtracting the total costs that the airline would have incurred if the passenger had not bought a ticket from the airline's total costs if the passenger did buy the ticket and use it. Effectively this incremental cost is the sum of all the extra costs of ticketing , boarding, carrying and disembarking that passenger. If the cost of ticketing, boarding, transporting and disembarking a passenger flying BOS-LAX return is less than $170 then selling one ticket at that price will make the airline more profitable (or less unprofitable) than if that passenger's seat remains empty. But if the airline sells too many seats at this price . . . Well if you added together all the losses of the US legacy carriers it would be, comparatively, small beer - unless, of course the airline's CEO received a $0 remuneration package and employees supply their own pencils at their cost - plus, of course, the rest!!


User currently offlineMrocktor From United States of America, joined Jan 2005, 1668 posts, RR: 49
Reply 13, posted (8 years 6 months 2 weeks 5 days 9 hours ago) and read 9943 times:

Good answers. To flesh it out a bit:

Price and demand are tightly correlated. The "demand curve" depicts this correlation, basically the lower the offered price the greater the demand for the product (and this goes for any product at all).

LCCs usually enter the market with a lower cost structure (they don't have years or decades of short sighted management on their backs). They usually use the low fare strategy to gain market share quickly (they want to become "majors") and count on the demand curve to make up for the loss of margins due to low pricing ("make it up on volume").

The established carriers usually can't compete on these terms due to their debt, pensions, pay rates and a myriad of other liabilities aquired during the "boom" years or due to mismanagement. They either compete at a loss (to keep their share), demand a premium for their service (which works, if the service is actually better than the LCC competition - which is not always the case) or cut loose and run.

Long term, the LCC's cost base is bound to move a bit higher - if they are well managed though they will not necessarily get to the point where current "legacies" are. Conversely, good chrisis management (and some visits to Ch11) may unburden the legacies of their unsustainable obligations.

What must be learned from this convulsion in the market is that the business exists to serve the customer and to make money doing this. The current chrisis in the major airlines can be put entirely at the doorstep of management and employees with incorrect priorities. Managers who put status ahead of results and employees who put wages ahead of company viability (and the managers who capitulate to them) are the responsibles for the troubles.

The seniority system and other barriers to free labor in the market are the distortions that allow an unbalance in wages versus company profitability to endure long enough to become a chrisis.

If there are so many qualified people to fly planes that the market wages are not what they used to be (or even are "poverty wages", as some here put it) it's certainly not the customer's fault. Regulation, of course, is not the answer. The best thing that could possibly happen for pilots and airlines would be the scrapping of the seniority system - it's doubtful that this will happen in a sensible time frame though.

mrocktor


User currently offlineMich From United States of America, joined Feb 2006, 36 posts, RR: 0
Reply 14, posted (8 years 6 months 2 weeks 5 days 9 hours ago) and read 9886 times:

Dont blame the passengers blame management.

Would venture a guess though that a half full plane is losing less money then a plane sitting on the ground. No cargo or pax revenue.. May be an empty plane but whats in the cargo..


User currently offlineApodino From United States of America, joined Apr 2005, 4280 posts, RR: 6
Reply 15, posted (8 years 6 months 2 weeks 5 days 8 hours ago) and read 9810 times:

Quoting Mrocktor (Reply 13):
The best thing that could possibly happen for pilots and airlines would be the scrapping of the seniority system - it's doubtful that this will happen in a sensible time frame though.

I will not disagree with that at all. I say make pay based on merit instead of scales. And have the pay scales for captains determined by qualifications, not time spent on the company. Assuming that a captain at jet blue has had 20 years experience flying jets, why shouldn't he be entitled to the same amount as someone who has been with united for 20 years? This should have happened with the TWA pilots. Eastern Pilots and Pan Am pilots as well. It seems to me like pay is determined by how lucky you are to land with the right airline at the right time, not by qualifications or market value. That seems wrong to me.


User currently offlineIkramerica From United States of America, joined May 2005, 21532 posts, RR: 59
Reply 16, posted (8 years 6 months 2 weeks 5 days 7 hours ago) and read 9765 times:

I don't agree that a B6 pilot with 20 years experience is "entitled" to the same pay as a UA 20 year pilot. If someone wants to fly for B6 with 20 years experience, they are entitled to what B6 wants to pay them. If the value is there, they will do it.

The problem is the concept that seniority matters. Beyond a 2-3 year "probation" period, seniority should NOT matter. Do the same job, get the same pay. Want more pay, do more work or work to get promoted and take more responsibilities. Why airline employees (and other union employees) think they deserve a cost of living increase per year AND a seniority pay scale increase for just showing up for another year is beyond me.

Teachers think the same way, and fought tooth and nail in California to squash an initiative that would have paid teachers based on merit, qualifications, performance and responsibilities, not just on how long they've been sitting in their seats. But the unions are too powerful and killed it, and unlike the airline industry, there's no alternative for "customers" to get a better education at a better price.



Of all the things to worry about... the Wookie has no pants.
User currently offlineLightsaber From United States of America, joined Jan 2005, 13130 posts, RR: 100
Reply 17, posted (8 years 6 months 2 weeks 5 days 7 hours ago) and read 9713 times:
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The one thing I haven't seen on this thread is the impact of price transparency. Once upon a time, one had to really work to compare two or three airfares. Now it takes seconds to compare dozens. Remember when travel agents would "forget" to mention switching a flight time would save you $100 a leg? I do (and thus I switched a travel agents over this). Last year the WSJ had an article that noted the median air travel will check two internet sites for prices before purchasing.

Quoting 3201 (Reply 6):
It SUCKS, and the rest of us definitely sympathize, but it's life, and it's happening in other industries too.

Its definitely happening in other industries, my department has over doubled its efficiency in the last five years and that has just barely kept ahead of the pace of the industry. One thing that strikes me about the airline industry is how few people are held accountable for the customer experience. I'm not implying people don't take their job seriously, but for instance in other industries employees who receive the same pay as a pilot are held accountable for productivity, sales, or some other metric.

Quoting Mrocktor (Reply 13):
The seniority system and other barriers to free labor in the market are the distortions that allow an unbalance in wages versus company profitability to endure long enough to become a chrisis.

This continues the thought on what I was saying above. Since there is no benefit for exceptional service in a seniority system, how does one motivate employees to be exceptional? We do it by holding out the carrot for the next promotion.  Smile A win-win situation.

Quoting SeeTheWorld (Reply 8):
Wow!!

It's so nice to read messages in a topic stream that are thoughtful and on target. What a nice change from some of the BS spewed out by some of members on this site!

 checkmark 

Quoting MD11Engineer (Reply 9):
and after some years a consolidation (due to less competition) when the fares will rise sharply.

And if fares rise sharply it only encourages new entrants and the cycle repeats... Alcoa used to intentionally keep their profits moderate to impede the entrance of competition into their markest. (One example)

Quoting Ikramerica (Reply 10):
here are obviously many people willing to work as airline employees at these lower wages, but there aren't as many (so the theory goes) willing to pay higher prices to fly. I'm not sure I buy that, because our USA society has become so reliant on air travel, we've spread out so much from family, etc.,

Then why is air travel used as an example of an elastic market where demand is very price dependent? For example, in April my girlfriend and I are taking a vacation. We had a choice between a driving vacation and a flying vacation. Since the tickets were less than $500/pair, we decided to fly to an area we would like to see. Due to reasons of convention schedules the hotel discounts more than made up for the cost of airfare.  Smile Like it or not, the reality is that for this trip, meals and entertainment will end up costing us more than airfare, hotel, and local transportation combined. But if that wasn't the case, I would have picked a driving trip despite my love of air travel.

Quoting Mrocktor (Reply 13):
demand a premium for their service (which works, if the service is actually better than the LCC competition - which is not always the case) or cut loose and run.

Excellent post. I would add also market momentum or the tendency of consumers to hesitate switching unless the cost benefit is there. (e.g., why people buy the same brand of running shoes even though another brand might fit better, be more cost effective, etc.)



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offline9KBOS From United States of America, joined Dec 2005, 63 posts, RR: 0
Reply 18, posted (8 years 6 months 2 weeks 5 days 7 hours ago) and read 9683 times:

I think it is important to remember that we (airline workers) have a real passion for the industry...I don't want to say we feel priviledged to work at an airline...but I do think we have a general interest for the industry, the company and the passengers. The wages passed down from those above us are not what is keeping us working, because that is not the reason we work for the airlines. This is my opinion....and by the way, a great topic.

User currently offlineJayinKitsap From United States of America, joined Nov 2005, 769 posts, RR: 1
Reply 19, posted (8 years 6 months 2 weeks 5 days 6 hours ago) and read 9637 times:

WN now has been flying a few decades, thier pilot & FO pay scales have risen some relative to F9 or other LCC's. However, when I fly FCC's their planes are generally cleaner, the crew seems happier (at least neutral). I certainly don't get the "I hate my job" look from the FA's like I do on a United domestic or US Air flight. WN was the most profitable airline in the US last year (about $500m profit).

Alaska was the 2nd most profitable at $50 M, they were a small legacy type carrier that has embraced much of being a LCC, but also have a lot of routes with little competition.

I think many of the legacies suffered with their use of RJ's or tie ins to commuter lines to feed passengers to their system. A couple years ago I needed to fly to South Dakota. Well flying a RJ from Salt Lake to Rapid City alone was like $300, but SEA to Rapid City via was only $330. So where was Delta eating costs (subsidizing the regional or cutting their own).

I think the retreat of regionals & the legacy problems opening up routes that a LCC could find profitable, possibly some milk run routes.

Airlines are not the only one facing this - look at the Auto Industry. GM has huge costs for workers that are no longer there. Can they compete when these costs exceed $2,000 per car? I think we are watching a death spiral.

ESOP's and employee owned companies do work well and allow for profit sharing in the good times without jacking up costs in the bad times. However, I am unaware of any good example where ESOP's have worked well with strong unions involved. United is a great example of how it can fail when strong unions are involved.


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6193 posts, RR: 34
Reply 20, posted (8 years 6 months 2 weeks 5 days 6 hours ago) and read 9630 times:

Quoting Goingboeing (Reply 4):
It's true that legacies have to meet the price of an LCC in a market, but in far too many cases, the legacies not only meet...but BEAT the LCC's on price...all in the quest to "maintain market share".

No one has yet brought up the obvious that legacies are mainly network carriers while LCCs are mainly P2P... thus, legacies do have to maintain market share or their network business model looses efficiency. Somewhat simple example but... over time, imagine the consequences of continually losing connecting pax from several spokes onto a hub-to-hub flight... coupled with losing some O&D pax on that flight... and then some more pax from hub-to-spoke flights at the other end.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineG-CIVP From United Kingdom, joined Mar 2001, 1325 posts, RR: 10
Reply 21, posted (8 years 6 months 2 weeks 5 days 5 hours ago) and read 9356 times:

"If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even?"

They do attempt to price the flights to make a profit. I think what you are trying to say is 'why don't airlines price their flights so that they get bums on seats to at least make some revenue'. It's all to do with service cost accounting; you've got to pitch the price at the 'best price' (for want of a better phrase) to make a profit. In short, there isn't a lot of point selling cheap as the margins will be thin.
This is BA's argument; 'yes, we can fill planes with loads of punters but we're interested in moving punters at higher ticket prices so our profits are higher'. The most obvious examples of this shift was the move from B757's to A319's were the tourist class is smaller. (and please, no arguments about Boeing -v- Airbus).

The main issue with the big American carriers is structural (as mentioned above), too many routes, too many aircraft, too many costs.


User currently offlineSllevin From United States of America, joined Jan 2002, 3376 posts, RR: 6
Reply 22, posted (8 years 6 months 2 weeks 5 days 5 hours ago) and read 9285 times:

Quoting Apodino (Reply 3):
then let me put this question at you, is it better to take the market share at a loss, or concede it and focus on more profitable routes.

The best thing to do is keep market share, get your costs down, and make profit. That's why costs -- employee salary being a large part of cost -- are being cut.

Steve


User currently offlineCommavia From United States of America, joined Apr 2005, 11637 posts, RR: 61
Reply 23, posted (8 years 6 months 2 weeks 5 days 5 hours ago) and read 9253 times:

Quoting Apodino (Thread starter):
My question is this. If it costs an airlines X amount of dollars to operate a flight, why can't they price that flight so that they at least break even?

One word: C-O-M-P-E-T-I-T-I-O-N.

If two airlines are both flying the same route, and it costs one airline X to operate the flight, and another Y, whichever is lower -- X or Y -- basically determines the price for the other.


User currently offlineDreamflight767 From United States of America, joined Dec 2008, 90 posts, RR: 0
Reply 24, posted (8 years 6 months 2 weeks 5 days 5 hours ago) and read 9184 times:
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Quoting Apodino (Thread starter):
, NW on a route like FAR-LAS? There is no way that there is enough demand on that route to make it profitable so why fly it?

Not true! The FAR-LAS route is very very popular. People in this region flock to LAS and Mexico. HUGE numbers every winter (escape the cold and family vacation during summer). There is such a demand that NW and Allegiant serve LAS from FAR. Allegiant started service first, that pissed NW off so they jumped on the band wagon too.

The only reason that this route won't/isn't profitable for NW is because of the higher price NW will charge vs. Allegiant. So I'm almost positive most of the pax will fly Allegiant. The only advantage NW has, is that they are the sweet heart airline of this area.


25 Aogdesk : Let me start by saying that I'm no expert in the area of yield management. That being said, it seems like all the arguments and justifications for the
26 Apodino : Thats why the legacies are losing money, and the carriers that are making money, don't worry about it as much. Lets see, to paraphrase from the book
27 Planemaker : But just how many BMW's are there out there compared to all the Chevy Sprint types? Inversely, in aviation there are too many "BMWs" and not as many
28 Simpilicity : I don't think anyone has metnioned taxes & charges on tickets these days. The TSA is the U.S. is an absolute joke & at same time costing everyone a lo
29 AirRyan : I used to work pricing for NW and their irrationally based pricing combined with the hypocritical hypocrisy from the Goverment really soured my opinio
30 Lightsaber : Good additional point. What is it now, 25% of the cost of a flight is now taxes and fees? And people wonder why we complain about government ineffici
31 Bistro1200 : At last check something like 30% of Southwest's pax were connecting... hardly P2P (at least not as much as believed). The truth is, SWA is becoming m
32 HZ747300 : Actually, I think you summed up the exact problem. If the airlines do not cut costs, unfortunately human costs are usually the easiest slash, they ri
33 Luv2fly : Really? Then what are all those suits doing flying between DAL and HOU to name only one example!
34 Goingboeing : When I want a good meal, I go to a restaurant. When I want to watch a movie, I go to the theatre. When I want to watch Ron Popiel sell his "set it an
35 Cairo : Whoever above said that in the network model market share is key is exactly right - and herein lies the insanity of the extreme network model - route
36 AirWillie6475 : Uh, because there are like 6 airlines that do that route. Still that's unusually cheap though. Pardon but this question sound very stupid and poorly
37 Highguy76 : I would say that's an unfair compairison, pilots are held accountable for the safety and comfort of hundreds of people per flight. I'm not sure it ca
38 Simpilicity : Seriously, we should all protest about these taxes & charges which are a joke. We need to get airlines to issue tickets without taxes & charges & the
39 Post contains images Lightsaber : I'm in a similarly large organization albeit not an airline. One divvies up the responsibilities enough. For instance, one adds mentoring responsibil
40 Post contains links Simpilicity : getting a bit of topic but OzJet in OZ (SYD & MEL) allow check in up to 15 minutes prior to departure, if already checked in online & Carry-On Baggag
41 SpruceMoose : Why can't there be some sort of supervision on every flight? Have a senior FA on every flight supervise and coach the newer folks, and evaluate them.
42 Sllevin : "pound for pound" Southwest employees work much harder for their money. If you look at their work rules, and the roles they play, they really hustle.
43 SpruceMoose : Heh. You posted while I was typing, and said it far better than I did!
44 AeroWesty : When I moved to Oregon in 1995, I could buy a round-trip airline ticket on United or Alaska from PDX to SFO for $78 including taxes. In 1998, Southwe
45 Post contains images Cellardoor : I'm working BOS-LAX on MAR 17 (FL 283/41)! According to the AirTran website, it's only $262. That's less than three Ben's to fly with me... I would c
46 Blueflyer : Besides everything else that has been printed already, there are three additional reasons why airlines are not necessarily in a rush to drop a loss-m
47 Planemaker : And I remember even further back rushing to Logan to catch the N.Y. shuttle without a reservation, running hard through the airport to board the airc
48 Simong : I think it is all the fault of the job .......... in the sense that an airline position is still seen as glamorous..... and every time an airline post
49 Broocy : I beg to differ with the assertion that the customer is not paying with these cut backs. My experience of flying on US airlines domestically is that o
50 Planemaker : If airline employees think things are bad now... wait until industry consolidation happens (as it will at some point.) The AT&T/BellSouth mega-merger
51 Post contains images Lightsaber : Used to be possible in the US. I'm so jealous! Ok, I used a figure from my last purchase which is probably high, but its certainly a lot more than fi
52 AeroWesty : I don't believe it's just delays, but also the increase in the base fares on short hops, as I detailed above. Even in the example you gave for LAX-LA
53 Ikramerica : This example is related to the airline industry how? That's 23,000 out of a new combined force of 320,000 employees, all to be cut over 3 years throug
54 Planemaker : You didn't read the first sentence of my post: "If airline employees think things are bad now... wait until industry consolidation happens (as it wil
55 VV701 : But not in all markets. In 1980 I took my family for our first holiday on the West Coast. The individual fare for an APEX excursion ticket LHR-LAX-LH
56 Post contains images Lightsaber : Ahh, I didn't mean to speak out of both sides of my mouth. Basically, I should have noted that for these short hops some routes would be much more po
57 Ikramerica : Gotcha! It was about mergers. So, with the HP US merger, what kind of redundancy job cuts did we see? I know with US in BK, they could more easily st
58 AeroWesty : Yes, my first trip from SFO to LHR was around $600 r/t in 1982, not a bad deal at the time, but now I could fly from PDX to LHR via YVR for $568 r/t
59 ScottB : Actually, Morris was merged into Southwest in 1994, not 1998. But the average PDX-OAK fare has gone up by over 50% since 1996 while PDX-SFO has doubl
60 AeroWesty : You're absolutely right, and I stand corrected. When I did a quick Google search to get the right date, I took it from the results page, and the entr
61 Planemaker : No, you still don't comprehend it... it was about industry consolidation, and mergers are only one aspect.
62 Post contains links VV701 : To put these figures in context go to http://www.westegg.com/inflation/infl.cgi There you can select your time period and find out the amount of US i
63 AeroWesty : That's very true, and it's hard to make direct comparisons between now and then, especially since Business Class is somewhat on par with the First Cl
64 Jetdeltamsy : It's simple. A legacy airline that charges what it needs to charge to break even will fly empty aircraft. LCC's can charge much less per person and st
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