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RayChuang
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Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 12:13 pm

Folks,

There has been considerable talk on Airliners.net about another low-cost airline moving into Colorado Springs, CO (COS).

Right now, I can envision both WN and FL seriously looking at using COS a major destination city, capitalizing on the winter sports and increasingly year-round traffic from Pueblo in the south and the southern suburbs of Denver in the north.

Yet, both airlines have yet to announce service to COS. Why?

I'll take an educated guess at this: there is a "Gentlemen's Agreement" of sorts in place for WN and FL to stay out of COS until UA's financial situation improves. This is because some of the highest yields for UA are at DEN, and any serious competition for UA in the Denver, CO area will be financially devestating for the airline. I don't think WN founding CEO Herb Kelleher and and FL CEO Joe Leonard wants to be remembered as the airline that killed UA.

In short, I don't think WN or FL will fly to COS until the economy improves and UA is back on firm financial ground.
 
jessman
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RE: Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 12:20 pm

I don't know; "The Airline That Killed UA" sounds like something Southwest would print in its advertising.  Smile

I would venture to say that for just the reasons you mentioned WN and FL don't want to spark a war with UA; even in their current state UA has a good number of resources with which they could play dirty.
 
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OA412
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RE: Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 1:10 pm

I agree with Jessman on this one. Killing UA is not what is keeping FL and WN from operating into/out of COS. Honestly, UAs weak position should make COS all the more attractive to these two airlines. On the surface, COS seems like a perfect destination for both. It could attract business from COS and points south as well as siphon off traffic from UAs hub in DEN. Obviously, there is some other reason that is keeping both from opening service to COS.
Hughes Airwest - Top Banana In The West
 
Shawn Patrick
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RE: Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 1:23 pm

As the Japanese say, business is war. I highly doubt that WN and FL are playing nice, it just doesn't work that way unfortunately.  Smile
 
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RayChuang
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RE: Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 1:23 pm

Jessman,

UA cannot afford to get into a war with WN. You must remember UA's capitalization is something like US$370 million, while WN's capitalization is US$10 billion.

In short, if WN does decide to start flying to COS it would immediately spark a price war with UA fighting for Denver, CO passenger loads, which would be a serious financial killer for UA.

DEN is UA's only hub where they're strong enough to keep their yields high; they're not doing that great in San Francisco, Chicago and Washinton-Dulles, the other major hubs on UA's domestic system because of heavy competition.
 
jessman
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RE: Gentlemen's Agreement Regarding Cos?

Wed Aug 07, 2002 1:40 pm

Ray;
I said they had enough resources to play dirty; something like dumping a huge ammount of capacity into COS, Undercutting WNs fares and offering Triple Miles toward elite status and awards. This is where the FF programs make the big difference. Many people in Colorado are loyal to United because of the FF program. Part of the reason that Southwest is so successful is that they don't fight battles that will be difficult. They choose routes they know will win. When they feel that way about COS, they'll be in there.

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