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Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 1:41 am

This post is due to the news out of Airtran yesterday. The stock got hammered due to increased competition from Delta. I am now thinking if airlines such as Airtran and Frontier truly have a chance. The reason I bring these 2 carriers up is because they have done everything right from buying new fleets of efficient airplanes and to having great service. Even with doing everything perfectly they could get destroyed by United and Delta within a few months. All UA and DL have to do is add more flights at a cheaper price and that would probobly be the end of Frontier and Airtran. Does anyone have any ideas that could save these companies from an all out price war that they have no chance in.

RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 1:44 am

yes. co-operation with each other, a "low fare alliance" of some sort. just an idea...

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RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 2:40 am

US antitrust law, specifically the Sherman Antitrust Act, bars large dominant companies in an industry from using predatory pricing or capacity dumping to put a competitor out of business. The Cartel-Six Families airlines operate as a cartel precisely to protect each others' bloated cost structures, and don't take kindly to carriers like AirTran spoiling their fare-gouging fun.

So, for instance, it is legit for Delta to *match* AirTran's capacity on ATL-CAK, which they just decided to do, and to match AirTran's fares. But it is not legit for Delta to flood the market with more capacity and then undercut AirTran's fares. Despite the well-known complexity of airline pricing, predatory pricing (or the lack thereof) can be demonstrated; the lack thereof was demonstrated in the DOJ vs. AMR case.

And event though Delta's move might pass the legal test, it fails the smell test miserably. Delta can't possibly make money flying MD-80's to CAK. The move is purely predatory, and glaringly so.

Up until the last few years, the Six Families and their predecessors pretty much pulled whatever s**t they felt like on low-fare airlines and got away with it. However, a new day is dawning...consumers are furious about fare gouging, and so are their Congressmen and Senators. The very fact that DOJ prosecuted the American case at DFW was a major achievement. To say nothing of a conservative AG like John Ashcroft properly enforcing antitrust law and killing the anticonsumer UA-US supermerger.

The Six Families are desperate due to the loss of the business market's 1995-2000 willingness to tolerate their obscene $500-2500 fares. They need every last dollar they can extort out of defenseless medium and small size cities, so they're turning nasty.

However, if AirTran, JetBLue, or Frontier were to really suffer financial reverses due to predatory moves by the Mafia, there would be a swarm of furious Congresspeople and Senators demanding that DOJ act. Their constituents like low fares, and aren't going to take the Mafia's thug tactics lying down.

So far the Cartel competitive responses of summer 2001 have all been capacity matching, but as I sad that's really dumping since they can't make money matching AirTran or JetBlue's fares. Fortunately, the current crop of low-fare carriers has good management and a great product, as you observed Jaws. I think they're here for the long haul.


Need a new airline paint scheme? Better call Saul! (Bass that is)
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RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 12:49 pm

I was just thinking the same idea about a low fare alliance. Maybe Jetblue, Frontier, Airtran and a few others (National, Spirit?) should join up. I doubt that WN will want in since they are practically the seventh member of the cartel but I could even see ATA, Alaska and a few others jumping in.
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RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 1:56 pm

Long live the Mafia
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RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 1:59 pm

I don't really know much about AirTran. My guess is they are doing pretty well, and are able to take DL.

As for Frontier, they have been consistently doing better and better since they started in 1994. Each year has been better than the year before.

Infact, Frontier is causing United to bleed a bit here in Denver (DEN).

It really depends on how the airline is managed. The reason why most low fare carriers are disappearing is because of poor management.

JetBlue, Frontier, and AirTran all seem to have good management, therefore they can take the big monsters.

"Generosity is giving more than you can, and pride is taking less than you need." - Khalil Gibran
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RE: Can Smaller Airlines Truly Compete?

Sat Aug 25, 2001 5:54 pm

An alliance of smaller airlines does make an incredible amount of sense. AirTran and Frontier used to have an alliance of sorts, AirTran handled Frontier's flights at ATL, and Frontier handled AirTran's flights at BMI. Then AirTran lost the contract with Frontier (partially due to ground handling incidences. Examples being the marshaller guided the right engine on a Frontier 737 right into the jetway; and the death of an animal checked as baggage due to being placed in the rear cargo bin. Surprisingly, nobody at AirTran got fired for either of these incidents. On the jetway collision, the ramp crew handling the flight were suspended pending the results of a drug test; and the dog killer (as we referred to the lead on the gate after said incident) was demoted.) By joining forces, airlines like AirTran, Frontier, ATA, U.S. Airways (who already has interline and reprotection agreements with AirTran), Alaska, and either Spirit or America West, they could compete on a better level than just going at it alone. Several of the smaller majors will have to form alliances with some of their smaller brethren in order to compete with the Airline Mafia.

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