737doctor
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Posts: 1291
Joined: Mon Mar 19, 2001 4:52 pm

Relying On The Basics - Article On AA & Song

Sun Feb 02, 2003 3:31 pm

From the January 30th edition of the Dallas Morning News:

http://www.dallasnews.com/sharedcontent/dallas/business/stories/013003dnbusgarton.ab0e8.html

Since Song seems to be such a hot topic on this forum, I thought I'd point out this excerpt:

American says it competes with low-cost carriers on 82 percent of its routes. In a Jan. 22 conference call, chief financial officer Jeff Campbell told analysts that when New York-based low-cost carrier JetBlue Airways Corp. entered the Caribbean market last year, American's revenue fell.

The answer isn't to become another JetBlue, American officials say. But getting its costs more in line with JetBlue, while trying to win back premium business travelers, is the goal.

Unlike United Airlines Inc. or Delta Air Lines Inc., American hasn't embraced the idea of starting its own low-cost carrier to combat Dallas-based Southwest Airlines Co. and others.

Delta's carrier – called Song – will debut this spring, while United's remains on the drawing board. American has given it some thought, however, Mr. Garton said.

"I would say we're looking with interest," he said, noting that the concept has failed several times.

Recent research suggests that Delta and other carriers that try the carrier-within-a-carrier route might not fare any better than US Airways Inc.'s Metrojet or Delta's soon-to-be-replaced Delta Express.

Unisys R2A consultants Phil Roberts and Michael Roach say the idea lowers costs for the carrier, but not to the levels of low-cost airlines.

Delta's new airline will have to sell 45 percent more tickets to match Southwest's profit on the same routes, the consultants say in their most recent study.

Mr. Garton and others say that if American were to reshape itself to resemble the nation's most successful low-cost carrier, it would need to dump a third of its planes and half its employees, a wrenching thought for one of North Texas' largest employers.


45% more tickets!?! WOW!  Wow!
Patrick Bateman is my hero.
 
jrlander
Posts: 1025
Joined: Wed Aug 11, 1999 3:47 am

RE: Relying On The Basics - Article On AA & So

Sun Feb 02, 2003 11:56 pm

Well:

1) Delta isn't going to compete head-to-head with SW on its primary routes. SW doesn't fly into JFK, EWR, LGA, BOS, IAD, or DCA. They will compete from different airports.

2) Delta's planes will hold a lot more people than SW's do, therefore they would absolutely have to fill more seats. However, Delta is expecting a break-even load factor of the 70's, which shouldn't be hard to do for them in the NE-Florida corridor.

3) Delta doesn't have to make as much profit as SW does, just some profit.

4) SW is a niche carrier. It is a large niche carrier, a huge niche carrier, but a niche carrier. The major airlines could not become SW, and if they did the air transport system would not work.
 
737doctor
Topic Author
Posts: 1291
Joined: Mon Mar 19, 2001 4:52 pm

RE: Relying On The Basics - Article On AA & Song

Mon Feb 03, 2003 4:09 am

4) SW is a niche carrier. It is a large niche carrier, a huge niche carrier, but a niche carrier. The major airlines could not become SW, and if they did the air transport system would not work.

I agree, Herb said in an interview with BusinessWeek that:

You couldn't have everybody switching to a point-to-point airline in the U.S. The hubs serve a very valuable purpose from the standpoint of customer service and service to small communities, providing you with twice as many frequencies as you might have to a given destination. They're an entirely different type of operator. They perform essentially different missions from Southwest Airlines.
Patrick Bateman is my hero.