Does America West Want National Out Of Business?

Sat Jul 20, 2002 7:03 am

The question is simple enough. With America West entering the LAS-SEA and LAS-IAD market, it seems like America West is trying to drive National Airlines out of business. Here is the article that was in a recent edition of the Las Vegas Sun newspaper. After reading this, I got the idea that America West wants to drive National out of business. What do you guys think?

CEO: National Airlines not a target
By Richard N. Velotta


Is part of America West Airlines' strategy to become Las Vegas' hometown airline and put Las Vegas-based National Airlines out of business?

"Of course not," America West Chief Executive Officer W. Douglas Parker says emphatically.

"That's ridiculous," adds airline analyst Mike Boyd of the Boyd Group, Evergreen, Colo. "It's called competition."

National officials are purposely quiet about the issue, considering any formal accusation against America West would likely wind up in court.

But more than a few eyebrows were raised when America West announced it was entering the Seattle market from Las Vegas a few days after National began serving the route.

The Las Vegas-Seattle market already has some heady competition with Alaska Airlines battling discount leader Southwest Airlines. When National announced it was going in, Alaska removed one of its flights. And then, America West announced it would put three flights into the market with its new pricing strategy that removes many ticket purchase requirements, such as a Saturday night stay.

In America West's press releases, it called itself "Las Vegas' hometown airline," a tag that quickly disappeared on subsequent releases after National complained it had registered the phrase.

"Our strategy is to compete," Parker said. "We'll do what's necessary to the extent that certain competitors fly to places that we don't fly. You may see us add services because we want to be the preferred airline of Las Vegas. It's hard to be that when some of your competitors fly to places we don't fly."

National officials are waiting anxiously to see if America West adds service to Washington, D.C.'s, Dulles International Airport or to Reno from Las Vegas -- two destinations National will add later this year. Parker said America West has no plans to add those markets.

"It's understandable that National would be a little nervous," said Robert Mann of R.W. Mann & Co. Inc., Port Washington, N.Y. "If I'm an airline CEO and someone is taking resources out of my rice bowl, I will always claim it's predatory."

"Predatory pricing" is often the cry of the small competitor against the giant. It occurs when a company reduces its prices below its costs in an effort to steal a competitor's customers.

The theory is a large competitor can flood a market with cheap seats to force a smaller foe to eventually give up and, better yet, bow out of the market. A larger airline has deeper pockets and time on its side.

Mann said companies such as United and American have been accused by smaller airlines of being predatory in some markets. When it was flying, Reno Air often accused American of being predatory on its Reno routes.

"It's an easy claim to make and a hard claim to prove," Mann said. "American and United haven't been convicted of anything at the end of the day."

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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 7:26 am

The only reason National may go out of business is that they have had a management team with their heads stuck where-the-sun-dont shine for way too long. Maybe the HP moves will finish 'em off, but if they were a book they would be mighty close to the end of chapter 6 already....
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 7:47 am

You bring up a very good point B747. I also think the management team is to blame for National's troubles. If they don't get this bailout loan, they are pretty much finished.

You know what the funny thing is though, most of National's management are ex HP employees. The CEO of National is the co-founder of America West!
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 8:19 am

Las Vegas has been the Number 2 city for America West for a long time, at one point Phoenix and Las Vegas were referred to as a "Super Hub" for them. Whether these new services are simply viewed as responding to new competition or predatory depends on how the fares and all the rest plays out.
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 8:38 am

This is a little more complicated than it seems.......of course, America West would prefer if National closed down, they would eliminate a major competitor at their number two hub. But the Las Vegas market is not that simple, with the huge casino-hotels in Las Vegas with zillions of hotel rooms to fill up, Las Vegas hotel owners have constantly complained that LAS is underserved and that they are in need of many more flights. On the other hand, the airlines have always complained that LAS is a low-yeild market, and that the planes are filled mainly with tourists on bargain fares and thus, LAS was not a market in which they could make a lot of money. America West has had a hub in LAS for years, since its founding I guess, that has grown and shrunken over time depending on America West's finances (that airline has also had a less than perfect financial history, including a reoganization, and some less than effective management). Also, dont forget the Southwest factor, they are also quite strong in LAS and do OK with the low fares.

Enter National, which is (was) strongly supported by the Casino owners......National cannot really decide if its a low-fare or full-service airline and, as mentioned above, seems to need mangement that will give it a direction. Also, its single type strategy is a difficult one, as its only type is the 752; I am all sure we agree that the 757 is a very versatile and effecient type, but is it the right type to be flying back and forth between LAS and LAX or SFO? 200 seats is a lot to fill up on short-haul services with frequent departures. Something was said about a second smaller type (wouldn't 717s be ideal for many of their LAS-California routes?), but nothing materialized.

While HP would probably be glad to see National gone, they are really unable to fill the void that would be left, and another, bigger and stronger airline looking for somewhere to increase service, could end up in LAS and that is the last thing HP wants.
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 8:39 am

actually for the month of June, America West was the #2 airline, just after Southwest, in terms of passengers carried :P

ranks @ LAS:

#1. Southwest
#2. America West
#3. United
#4. National
#5. Delta
#6. American
#7. Continental
#8. Northwest
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 8:40 am

one other thing, America West ADDED flights to SEA from LAS once Conway said he's gonna try to fly to SEA. America West just had red-eyes back and forth from LAS, the rest of the flights were via PHX.

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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 3:39 pm

National needs to move to MCI... Bottom line.

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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 9:16 pm

I think HP is would be more concerned with Southwest than National, since WN is a major presence at HP's two main hubs, whereas National is only a real factor at one. Just my $0.02.
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RE: Does America West Want National Out Of Business?

Sat Jul 20, 2002 10:08 pm

Lots of potential change in LAS could occur over the next 18 months.

Consider this scenario.

Rumours DL buying America West could really change the entire spectrum in this market. A combined DL and HP operation means they now have three strong hubs in SLC, LAS, PHX, Allowing them to boost services to the west coast, mainy LAX and SFO.

With the potential of UA going bankrupt, this part of the world could become very interesting, as they look to reduce capacity in low yield cities, such as LAS.

Jet Blue and comes to town, forcing out National.

The new order in town would be:
#1. Delta
#2. Southwest
#3. American
#4. Jet Blue
#5. United
#6. Continental
#7. Northwest
#8. Alaska

Must stop dreaming!
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RE: Does America West Want National Out Of Business?

Sun Jul 21, 2002 2:03 am

i think you are dreaming bestwestern,DL is doing just as bad as the other majors.they are in no position to buy anything right now.

i think it will be WN,HP at number 1 and 2 for a long time.

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RE: Does America West Want National Out Of Business?

Sun Jul 21, 2002 5:57 am

with exceptions to the Charter Airlines and ATA, United has the highest load factors out of LAS. 757s to LAX AND SFO are always packed :P The Brasilia flights to Palm Springs and Fresno are always very very heavy (Skywest does very well out of LAS!)... even if UA declares Chap 11, that won't keep passengers away (ala TWA for most of the 90s, even CO filed). Chap 11 may be the best thing for UA... finally get its financial house in order.

Anyway, what makes you think JetBlue can trump AA or UA with only a few flights w/ A320s? Granted the LAX corridor is a busy one, I doubt B6 will do very well with that route... they'll get some traffic, but B6 will NEVER be larger than Northwest @ LAS... that's pure dreaming... heh

I don't see Vegas as a crucial market for everyone... it is low yield and there are lots of high yield flyers out of here (there ARE businesses here, believe it or not!) but it's more or less a place to fill a plane to connect on to other destinations...
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