Qantasclub
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Why Don't US Carriers Make Money?

Thu Nov 27, 2003 3:18 pm

I wonder sometimes why the US carriers in recent years have run into so much trouble financially. Sure, there's sept 11 and all it's aftermath, but the industry was in dire straits even before then. They seem to have such huge and amazing domestic networks; this enormous market to serve, and yet proportionally, rather meagre profits or huge losses. Of course there are some profitable LCCs but most of the majors I think, aren't in great shape.
Why? Is it:
Over-regulation and union rules that keep costs high?
Aging and large fleets that are difficult to manage?
Debt?
Poor management?
Over-competition?
Or all of the above.
Long Haul is the only way to go
 
paulinbna
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RE: Why Don't US Carriers Make Money?

Thu Nov 27, 2003 3:20 pm

if I am not mistaken JetBlue and Southwest are making money

both US carriers
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Shenzhen
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RE: Why Don't US Carriers Make Money?

Thu Nov 27, 2003 3:26 pm

If this were a mulitiply choice question, I would have marked...all of the above.

Cheers
 
ual777contrail
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RE: Why Don't US Carriers Make Money?

Thu Nov 27, 2003 3:26 pm

Isn't CO making money? Or are they under investigation from the IRS?

qantasclub,
That is a very good question, and all of the things you listed are very good reasons, I think that the airlines got to comfy with the middle to late 90's and theN traffic dropped off.


UAL 777 CONTRAIL
 
Guest

RE: Why Don't US Carriers Make Money?

Thu Nov 27, 2003 11:28 pm

Maybe because they have competition? Maybe because they aren't normally subsidised. Maybe it's because people were hesitant to fly after 9/11... Not to sound arrogant, but that's a pretty stupid question with a pretty "plain as th enose on your face" answer.

Whay does Austrailia only have one truly successful airline?
 
anstar
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RE: Why Don't US Carriers Make Money?

Thu Nov 27, 2003 11:37 pm

I think alot of it is due to their size. It is quite difficult to change things in a 1000 aircraft airline. Also, over the years costs get high, and I don;t think they become so much of an issue until there is a downturn, and new competitors that have a lower cost base. this then moves them to lower there costs...

Australia has 2 successful airlines, they are Qantas and Virgin Blue.

I think both are real success stories. And both are quite profitable.

Not many airlines can grow they equivalent of 7 years over night the ay WF did, so good on them.

As for Virgin Blue, I think they had it slightly easy, but all the same, they are successful.

I'd rather have successful airlines, than failing airlines that receive subsidies...
(there are too many to mention)
 
airbazar
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 12:40 am

[BoingGoingGone] Maybe because they have competition? Maybe because they aren't normally subsidised

Yes, there is no competition in the travel industry anywhere else in the World but the US.

[ANstar] I'd rather have successful airlines, than failing airlines that receive subsidies... (there are too many to mention)

You mean, like pretty much every US airline? Yes folks, jet fuel is subsidized. And then there are those post 9/11 "bailout" subsisdies. Sorry, couldn't resist  Smile I'm just tired of people throwing out the "s" word as an excuse to explain why they're not as good, rather than face their own shortcomings.

One reason why a lot of US airlines can't be profitable is because they emploded and management and the Unions alike were too busy getting rich. They just became too big to be efficient. The "majors" wanted to be everything for everyone and it didn't work. Operating costs are too high. Some airlines (i.e. Continental), were lucky because they had just gone through a bankrupcy re-org which allowed them to slim down and get back in at the right time. That's my opinion.
 
AA717driver
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AA CFO Resignation...

Fri Nov 28, 2003 1:00 am

Some airlines have been ruined by "robber baron" management which more than offset any effeciency generated by the employees.

Also, no matter how low you price your tickets, there is always someone out there who will sell a seat for $5 less than you.

The big majors in the U.S. have WAAAAY too much infrastructure they have to support and they can't raise ticket prices because of the new airlines that don't have(or haven't built) the big infrastructure. I think Australia is a microcosim of this problem. Virgin Blue is making money at Qantas' expense because Qantas had all the big "toys" that cost money but don't add to the bottom line. Overhaul bases, huge training centers that are empires unto themselves, bloated management ranks, etc.

Right now, Delta and UAL are being hurt by early retirements by pilots. These lump sum retirements have to be paid from somewhere. It comes off the bottom line. The new LCC's don't(and won't) have that problem. AA has huge debt to service because they had several large projects going on when the bottom fell out. Again, the LCC's don't have that drain.

Even the LCC's aren't immune to getting caught in a sqeeze. ATA was in the early stages of a fleet replacement program when 9/11 happened. They have some pretty big debt payments coming due and are sweating that.

Also, the U.S. has the least regulated airline environment and has been deregulated longer than the rest of the world. I think you are beginning to see the same "realignment" in Europe and Australia. Airlines must adapt or perish. Unfortunately, there is little time to experiment.

Sorry to be so long-winded.TC
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schreiner
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:12 am

Making money is not their core-business...  Smile The Federal Bank does!  Smile

I think that as much EU as US carriers make profit, or loose money.

Cheers,
Schreiner
Soaring the internet...
 
AmtrakGuy
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:28 am

Also, the major airlines have been around much longer -- thus the salaries are higher. LCC hasn't been around as long as the major airlines.

There's a gentleman here on board thinks (he's not saying it out loud) that all employees with the airlines, including the majors, should be making miminum wage (i.e. $6.50 an hour) because he wants to travel cheap.

Dave
 
Qantasclub
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 10:37 am

Boeinggoinggone; with all due respect; if you think it's a stupid question, then don't click on it or respond to it. Let others who don't think the same way you do have their say.
Australia has two very successful domestic carriers Qantas and Virgin and they are both extremely different in their own right-one being a global airline and theother, being a truly LCC. Qantas is about to start a third airline (JUMP or QJET-will be announced next week), a new LCC to compete with Virgin, although I think it is in grave danger of drawing business away from it's own core business rather than actually steal pax away from virgin, which is what it is set up to do. (kinda like exactly what happened to BA with GO in the Europe)
The answer to your question as about why Australia has only one truly successful domestic airline is as 'plain as the nose on your face'; compare the two markets!! There are 250 million people in the US. We have 20 million, and much lower population densities.
And I think the CEO of Virgin would have to strongly disagree with you about your ommision regarding 'truly successful'. They started with 10 million dollars and a couple of planes a 2 years ago and are about to float the airline for abour 2-3 billion dollars. Thats a pretty big success in my book!

cheers,
Qantasclub
Long Haul is the only way to go
 
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mariner
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 11:17 am

Qantasclub:

Um - I think you're forgetting the role of the Australian government in maintaining minimal competition in Australia.

The "two airline" policy was enshrined after WW2, and has been in effect ever since - even now.

It was supposed to end some time ago, but there has not been a point in Australian civil aviation since about 1950 when more than two airlines have existed for anything more than a short period of time.

I'm excluding protected territory, such as MMA which had the lock on WA air travel, and was finally bought by Ansett - which gave Ansett the lock on WA air travel.

When Sir Reg Ansett died, the two airline policy was supposed to die with him. But it didn't.

How many airlines are there in Australia now? Just two. Qantas, in all it's forms and guises, and Virgin Blue.

Call me cynical, but I'm hard pressed to believe that this is accidental. It has been true for many years that if Qantas sneezes, Canberra catches a cold.

cheers

mariner
aeternum nauta
 
Qantasclub
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 11:36 am

Good point, Mariner. It's definedtly a smaller and more regulated market. My point is that because of this, it's rather difficult to compare it with the US market. (getting back to the topic).
Long Haul is the only way to go
 
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mariner
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 11:47 am

Qantasclub:

Getting back to the topic, there are several US carriers that make money.

Southwest and JetBlue have already been mentioned.

Add America West, AirTran, Frontier, Alaska and even ATA. There is a pattern here - they're mostly LCC's.

Then there are the regionals, that fly for the majors on a cost plus basis. They make money - it would be very difficult for them to lose money.

So, in the end, it's really only the majors, the legacy carriers, that are not, for the most, part profitable.

Some blame the unions and high wages and salaries (which may, in part, be true), but the two most heavily unionized airlines in the world (arguably) are Qantas and Air France. And both of them have continued to be profitable during the downturn.

So perhaps there is too much competition in the US. Perhaps - and this is heresy to some - there are too many airlines competing for a fairly static number of passengers. And perhaps - greater heresy - a couple of airlines need to - disappear?

cheers

mariner
aeternum nauta
 
Midway2AirTran
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 12:47 pm

I must say that AA717driver hit it right on the money in combination with 9/11, recession and rise of the LCC's.
"Life is short, but your delay in ATL is not."
 
AA717driver
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AA CFO Resignation...

Fri Nov 28, 2003 1:03 pm

Thanks Midway2Airtran.TC

P.S.--I just had a friend walk my resume into Airtran. I don't have time to wait for AA to sort out its problems... Insane
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airways6max
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:05 pm

I would say poor management and financial controls. Airline traffic is actually not that much lower than it was before 9/11 and the fact that so many planes fly full and the airlines that fly them are still in the red surely points to poor management. Over-regulation and union rules would not be a problem to an innovative CEO with some imagination and creativity. It cannot possibly be competition because there are only ten major airlines in the United States today, as opposed to forty back in 1983. Low-cost and upstart airlines, such as JetBlue, Southwest, Midwest Airlines and AirTran ARE making profits and they treat their passengers far better than the majors--American, Delta, United, Northwest and US Airways. So the majors ought to look at how they manage their money and actually provide some decent service for a change.
 
gigneil
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:07 pm

Unions and labor rules are the top two reasons.

N
 
planemaker
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:46 pm

Mariner:

"Some blame the unions and high wages and salaries (which may, in part, be true), but the two most heavily unionized airlines in the world (arguably) are Qantas and Air France. And both of them have continued to be profitable during the downturn."

Don't forget to add Southwest. Many people think that it is non- or barely unionized, which is not the case at all.


Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
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mariner
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:53 pm

Planemaker:

You are correct. Southwest is a unionized airline, and has remained profitable throughout the downturn.

Mind you, I think even Southwest would have palpitations if their unions asked for the same things that Air France gives it's workers.

cheers

mariner
aeternum nauta
 
gigneil
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 1:56 pm

Southwest's unions and management have an amazing relationship, and they have different work rules.

At Southwest, everyone pitches in and does whatever job needs doing and does it the best they can.

N
 
XFSUgimpLB41X
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 2:00 pm

side note-

AA717driver- good luck! One of the captains that recently helped me get on with Pinnacle had his resume walked into Airtran also... I know they have been picking up some guys recently, I know you'd make a great addition to the company. I'm sorry with all the crap that has gone on with American for you- really wish the best of luck to ya.





Chicks dig winglets.
 
AA7573E
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 2:03 pm

@Airbazar

It is quite ironic to say that US Airlines are not successful b/c of subsidies, when some of the most successful airline stories of the past ten years have been products of 100% government ownership/subsidies.

Check out who owns Emirates, Qatar Air and Gulf Air. These airlines are buying up planes, sending them out full and recreating an industry in a part of the world that has been badly under served for years. These airlines are owned by the Flags for whom they fly. Yet, they are the picture of post 9/11 success? So don't point the finger at subsidies alone.


Now the real reason that the bigs have problems making money, have been nailed down many times in the preceding posts: and they age of the company and the extent to which the unions have taken over. You wait and see what happens when B6 and WN get unionized, and they will. Wait and see what happens when they are a 70 year old unionized carrier, and they have to pay accordingly. They will have the same cashflow problem that most major unionized industries have had since the industrial revolution.

The union, in combination with subsidies and operating costs, is the prime reason that airlines are not as profitable as they should be. Until the union is removed entirely from the process, ownership will be held over the barrel, while those who are unwilling to respond to economic changes and demands like every other industry in the world does, call in sick and refuse to work in order to protect their inflated salaries. And the cycle continues, until the unions kill another airline.

P.S. - ATA will not be profitable when their debt payment comes due in the next 18 months.
See you up front!
 
planemaker
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 2:19 pm

AA7573E:

"You wait and see what happens when... WN get unionized, and they will."

I guess you didn't read these posts:

You are correct. Southwest is a unionized airline, and has remained profitable throughout the downturn.

Mind you, I think even Southwest would have palpitations if their unions asked for the same things that Air France gives it's workers.


AND

Southwest's unions and management have an amazing relationship, and they have different work rules.

At Southwest, everyone pitches in and does whatever job needs doing and does it the best they can.


Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
mandala499
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 5:30 pm

WN is one of the most unionized airlines in the US!

What's different with them is that they focus on productivity and profitability of routes/sectors/bases, instead of looking at the whole national scale zero sum game!

WN also didn't suffer from the egomaniac management of the 80s in the likes of Carl Icahn and Frank Lorenzo... Those are the guys who killed the majors. Their practices are just short of being economic terrorists!

That's why WN has a non-hostile but very strong union! The union and the management need to have an open trusting environment on which to bargain each other, otherwise, it's everyone defending their turf at the cost of the airline's viability!

Mandala499
When losing situational awareness, pray Cumulus Granitus isn't nearby !
 
lutfi
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 6:23 pm

FEDEX and UPS are both profitable US airlines, that are heavily unionised.

Atlas/ Polar/ Evergreen aren't highly unionised, and are basket cases.
 
bigb
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 6:23 pm

You wait and see what happens when B6 and WN get unionized, and they will. Wait and see what happens when they are a 70 year old unionized carrier, and they have to pay accordingly.
AA7573E, do some homework before posting such comments.
ETSN Baber, USN
 
anstar
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 6:42 pm

Mariner:

Australia abolished the 2 airline policy over 10 years ago.

It now has a fully dergulated domestic market.

The fact that no more than 2 'major' airlines can exist is not the governments fault. I do believe however there is a market for a 3rd airline, I mean if QF can fill 767's every 30 mins between MEL/SYD surely these could be spread by another carrier.

So I'm afraind your comment to 'Qantasclub' isn't to relevant now.

ANstar
 
RiverVisualNYC
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RE: Why Don't US Carriers Make Money?

Fri Nov 28, 2003 10:32 pm

Carriers like Emirates are growing with cash from the Royal families, they don't have to publicly report their financial data, so who knows how profitable they really are. In the case of EK, the airline exists more for the prestige of Dubai and to drive tourism to the Emirate than for making a consistent return on investment. Even Abu Dhabi, just a short ride down the road from Dubai, had to get in the act and go start its own airline recently, and there can't be much financial justification for that....On the other hand, US carriers are owned by shareholders who demand a return on their investment in line with the stock market as a whole, if not better than that, otherwise why would they invest? The pressures of making short term quarterly financial objectives for investors in an industry in which most financial commitments (like leases and union contracts) are long term led the airlines to operate with very little in the way of financial reserves, and when 9/11 hit many would have been out of business overnight without the government bailout/loan guarantees. So now it has been just a little more than 2 years since 9/11, and we have also had the Iraq war and until recently, a weak US economy. So with sluggish topline growth only those airlines with a low cost structure, or with the ability to cut costs dramatically, have been able to make any money. As American consumers have gotten used to cheap fares, I imagine that longer term those carriers that can't reduce costs will not be able to survive, as the public is increasingly viewing air travel as a commodity and is not willing to pay even a slight premium to fly a major carrier. Sad for us enthusiasts and industry employees, but that's just the economics of it.
 
LastBaron
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 2:34 am

Mariner, an eloquent post!

One reason you may have forgotten to mention as to why mainly the LCCs seem to make money here - most passengers really don't care who they fly or what kind of airline or plane, as long as they get there cheap, as WN has proved for quite some time now. Having no real railroad infrastructure here to speak of thanks to the foresight and intelligence of the U.S. government in the 1960s, the development of a large LCC sector was inevitable from a historical perspective. And the fact that start-ups always will be able to undercut established behemoths like UAL and AA is not a fluke - they have to make money to survive whereas the cash cushions in the majors usually may allow for a few quarters of heavy losses before investors are up in arms. Even when those "few quarters" and the loss-leader strategies sometimes turn sour, lenient bankruptcy laws in the U.S. permit the continued operation of outfits that elsewhere would either have had to be heavily (and directly) subsidized to survive (read: government-controlled flag carriers) or sold off to foreign investors (also not possible under current restrictive U.S. law governing ownership stakes).

By the way, as a shareholder in HP, I am glad they are posting profits again, but they have a long way to go until I can get even my initial investment back! It has been far easier to see shares I own in FL, WN and B6 turn a profit or at least rise back to break-even again...

A new distinction between LCCs and majors needs to be found by the majors (the LCCs have obviously found theirs in their mere existence) - service. It used to be that when you flew a major U.S. carrier, you could expect good service, punctual flights, a degree of comfort and also cities that were served on a more frequent basis. That list of core-values needs to be revisited, and perhaps the idea of doing away with food was a very bad one, too. If I am paying (even marginally) more for a seat to fly a "major name" I want to see something that arguably cannot be had on the LCC rivals.

Sadly, in the U.S. market there is no such distinction - seat pitch is frequently better on LCCs than majors, some LCCs offer free in-flight tv and better entertainment value as well as a better selection of "food" (if you can call a choice of fattening snacks that).

I feel the solution is for American major carriers to a) reestablish a class-type distinction between their product and the products of LCCs; b) for majors to cut fares to tertiary airports so that people flying from places like LYH or MSO and thousands of others are not in effect being penalized by high fares and also providing the majors with a de facto subsidy which they then use to compete with LCCs on routes to Florida and elsewhere with heavy traffic; and c) for majors to possibly undergo yet another round of consolidation. It is obvious we have too many big behemoths flying in this country.

By the way - the LCC market is about to get just a little more crowded - http://www.flyi.com!
 
LHR001
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 2:58 am

To many Airlines.....

To little In-Flight Service.....
 
Alpha 1
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:04 am

Lhr001, in flight service does not determine profit and loss.

I will agree one of the problem is too many seats in the market. That is a definite reason.
 
LastBaron
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:16 am

Alpha 1, as I said, in-flight service could be the answer to more profitability for the majors.

Majors would do well to distinguish their product from that of the "cheapos" - offer more and better in-flight service to justify slightly higher fares; those who really watch every penny will stay with the LCCs. Those valuing convenience (better airports than LCCs frequently use, better seat pitch, etc.) will gladly pay the difference. Both types will survive and be profitable, after a few consolidations and shake-outs.

It has worked in the hotel sector for many years. Airlines could learn a thing or two from hotels... airline seats and hotel beds are identically volatile/perishable products.
 
qqflyboy
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:39 am

I am surprised with all the talk of Southwest and it's unions in this post no one has mentioned WN Flight Attendants. I bet they would beg to differ with those who think Southwest management and its unions/employees have a blissful relationship. If I am not mistaken, WN ended in the past year or two pretty contentious negotiations with its ground staff, and have, for the first time, sought mediation in negotiations with its flight attendants. WN F/As were doing informational picketing this week with signs saying, "Working for free!" Someone above mentioned how when the LCCs get older, they will start to have the same labor cost issues as the legacy carriers. WN is starting to make this transition, having to finally pay its employees what they earn.

As to why I think AA's legacy carriers don't make money, they are so over complicated, its astounding. They all have been forced to look at their operations and realize their is a tremendous amount to be gained by streamlining. This, I suppose, could boil down to poor management. And I agree. Upper management should have been conserving and watching costs long before 9/11, but didn't. Now we're seeing the majors playing catch-up. AA, UA and Detla are making strides in simplyfying their fleets, saving hundreds of thousands of dollars a year. Look at AA, four years ago they had some 15 a/c types/sub types, now they're down to eight, and soon to be seven.

And anyone who thinks it's the employees to blaim, you're obviously mis-informed. A flight attendant who makes $13/hour and can only work around 80 hours a month, is hardly making a living. I bet you'd feel differently about F/A salaries if that flight attendant saved your life.
The views expressed are mine alone and do not necessarily reflect my employer’s views.
 
LHR001
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:47 am

Qqflyboy,

What airline pays only $13.00 per flight hour..... In addition most airlines no longer offer service... so in turn the Flight Attendants dont have to work as hard as before!

-Galley Pay....
-First Class Pay....
-Business Class Pay....
-Purser/IFSM Pay....

These are not valid on most U.S. airlines as they do not offer service!
 
LastBaron
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:55 am

WN's FAs are among the industry's worst in every way - slovenly in appearance, unprofessional (silliest and most unserious cabin crews I have ever encountered; I'd hate to be in an WN-aircraft in a genuine emergency or hijacking) and often so over-worked (in terms of hours on duty) that it is pathetic. I hate flying WN when I don't absolutely, positively have to be there quickly.
 
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mariner
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 4:15 am

ANstar:

"Australia abolished the 2 airline policy over 10 years ago."

That was exactly my point. The 2 airline policy may be officially "dead" - but how many domestic Australian airlines are there now?

And is it entirely true to say that Australia has "a fully deregulated market"?

There is, supposedly, an effective open skies between Australia and New Zealand, and QF has flown within NZ.

However, I'd venture a guess that if Air NZ wanted to fly domestically within Australia, they would get the same response they got from Paul Keating some years ago. No.

Which response led to Air NZ's takeover of Ansett and the disastrous consequences thereof.

The theory that Australia can support a third airline is one that many people hold dear. It may be true - in theory.

I have yet to see any evidence that it will ever be allowed to happen in practise, though.

cheers

mariner
aeternum nauta
 
MaverickM11
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 4:39 am

It's interesting how everyone chastises the EU for protecting and subsidizing their airlines, yet at the same time no one chastisez unions for protecting their workers. Both support the poorly performing airlines/workers and reward them with state aid/artificially high wages. Both ultimately hurt the vast majority more than they help it. The protected airlines hurt consumers by keeping fares high and service low, well-run airlines because of the subsidized competition they engender, and workers because the lack of growth and progress means no hiring. Unions hurt consumers by setting above market wage rates which means higher costs and ticket prices, their own workers becuase they remove any incentive to work harder and do a better job, and the unemployed since they make it difficult to hire and fire, especially firing the poor workers. They try to cloak themselves in defenders of safety, which is akin to those arresting liberals in the name of patriotism. They're both hogwash. If the unions were concerned with safety, they'd fully support the privatization of control towers in the US, since a report they commissioned found that unionized towers made twice as many errors on average as privatized ones. That is not to say that management is innocent. Unions are inherently bad, and bad management is obviously inherently bad as well.
E pur si muove -Galileo
 
anstar
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RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 5:13 am

Mariner:

The main Domestic airlines in Australia are
Qantas
Virgin blue
Rex

Though there are smaller ones which aren't worth mentioning. I think the main reason is that the majors really do block out and squash/takeover the 3rd, but I will stand by my feelings that a 3rd carrier could be supported.
It may be just a 10 (737/A320) operation, but I'm sure that there is a market

Especially if they offered international connections to rival QF, as alot of Australians have no loyalty to QF. Perhaps SIN, Tokyo to hook up with an alliance partner.

However, in saying that, I don't think it will happen anytime soon, I'm sure if it was that viable, SQ would of done what they have been talking about for years.

As for NZ flying domestically in Australia, they actually do have the rights to do this, they even made a mention of it in one of their CEO speeches, however they also noted that due to the resentment in Australia of Air NZ after Ansett, it is not something they wished to pursue at this time.
 
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mariner
Posts: 18261
Joined: Fri Nov 23, 2001 7:29 am

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 5:42 am

ANstar:

I meant "national" domestic airlines - I wouldn't put Rex in this category. I guess in the US it would be called a regional.

Can Rex grow to national proportions? Maybe. Do they want to? I don't know. They may be content to be the "outback" airline, and as such I think they could do very well.

Believe me, I'd be very happy to see a 3rd airline in Australia. I wouldn't invest in one, because I think it would soon go the way of Compass or Impulse, unless it were backed by someone like SQ.

As for Air NZ flying domestically in Australia, theoretically - the one sky concept - they had those rights back then. It didn't happen. I'm not holding my breath for it to happen now or any time in the foreseeable future.

cheers

mariner
aeternum nauta
 
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mariner
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Joined: Fri Nov 23, 2001 7:29 am

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 6:13 am

LastBaron:

I agree with much of what you say - except for one thing. I'm not yet convinced that "cheap" is the driving force behind all fare purchases.

In the case of Frontier, they are sometimes more expensive (by a few bucks) than the competing majors - yet people seem happy to pay the difference.

I think it is more a case of "perceived value for money."

But you raise an interesting concept. In show business there's an old rule - your core audience is your meat and potatoes, anything else is gravy.

In other words, not all airlines can be all things to all people. Southwest has succeeded because it has never attempted to be all things to all people. They have often said, publicly, that there are people who will never fly Southwest - even if the fares were a buck - so why chase them?

(I think, from another post, that you're one of those. Yes? No?)

The majors/legacy carriers (what you will) seem determined that they can be all things to all people - thus we get TED.

But TED isn't where the money is - TED is where the market share is. The money is at the high end.

Some people claim that the "high end" market has gone away, never to return, but I wouldn't tell that to Singapore, or Qantas, or Virgin - it's a long list.

For example, both UAL and AMR have been dragged, kicking and screaming, to provide sleeper seats/suites on the high end trans-ocean flights, but the only reason they introduced them is because the competition got there first.

So I agree with you. When the legacy carriers offerme better "perceived value" for my money, then I'll fly 'em. Until then, I won't.

As a ps: if you're not in good profit with yoiur HP shares, when did you buy them? if you had bought HP at any time within the two years, you'd have made a bundle by now.

Thus, I'm guessing you've owned them since well before 9/11?

cheers

mariner
aeternum nauta
 
anstar
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Joined: Sun Nov 23, 2003 3:49 am

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 7:33 am

Meant to take Rex off that list, but the edit is way to slow atm.

I think NZ would be foolish to attempt an entry into the OZ domestic market, as there is still alot of resentment towards them.

I also agree that a 3rd main carrier would need the backing of another major airline, not just financially, but also brand wise, as it would be a tough battle on their hands to get market share. I'll still go along that there is a market, perhaps not the easiest to establish, and hence why we won't see it for a while especially in this climate.

Anyways I'm way off topic so will shut up now..

ANstar
 
cptGirmayTesfa
Posts: 374
Joined: Mon Oct 27, 2003 1:43 am

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 9:24 am

service is just not good + costs too high; fatal combination....
 
aussieboggie
Posts: 79
Joined: Thu Sep 14, 2000 12:08 pm

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 12:04 pm

Is NWA making money? I think so  Confused  Confused

At least they're on the right direction now.
NWA Q2 = $227 mil. and the latest Q3 = $ 42 mil. vs. Q1 $ (399) mil. loss. (2003)
Sekarang Sesiapapun Bisa Terbang
 
cloudy
Posts: 1613
Joined: Sat Apr 06, 2002 3:23 pm

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 2:26 pm

Someone said.....

-----
Check out who owns Emirates, Qatar Air and Gulf Air. These airlines are buying up planes, sending them out full and recreating an industry in a part of the world that has been badly under served for years. These airlines are owned by the Flags for whom they fly. Yet, they are the picture of post 9/11 success? So don't point the finger at subsidies alone
----

It was also said that Emirates does not reports its financial data. This is verifiably untrue. It uses a US auditor and reports its financial data according to generally acceptred international accounting principles. Check out their webpage for the info. Emirates was given a small ammount of start up aid but is not given significant government financial support now.

The advantage Emirates has is very low taxes. But these taxes are low for everybody who uses the Dubai airport. They are low for everyone..it is not discriminitory. That is not an unfair advantage in my book, it is simply sound economic policy on the part of the UAE government.

I used to have the same knee-jerk reaction to Emirate's plans as others have on this board..untill I looked at the facts.

Yes, subsidies and regulation are the main thing that masked the failure of the US air industry before regulation. Deregulation simply exposed the mismanagement and excess that was already there, and made the airlines pay for it instead of the public. Now Europe is experiencing the same thing after its own deregulation of intra-European travel. I would be very surprised if we did not lose many more large European lines in the process. We have already lost a couple. In the next ten years or so, we will probably see the European airline industry transformed more and more to match that of the US. A few big, sick network airlines will remain to face a growing and profitable low-cost airline industry. The fact that all players have the US experience to learn from may cause things to fall out a bit differently though.....it will be interesting to see..........

The bottom line is that the transport of airline passengers in a competitive environment will always be a tough, low margin business. There are few exceptions - where airlines are VERY profitable, there is no or little competition. Southwest and some others are profitable but their profits are low compared to those in most non-airline industries. In boom times, most airlines can do OK. In bust times, they suffer greatly. There are no REALLY good times for airlines. Airlines never see the kind of hyper profits that other cyclical industries see durring boom times.

Economists have a name for such low margin, competitive businesses. They call it a COMMODITY business. in a commodity business, there is little to differentiate products except price. The fact that airline seats are a highly perishable COMMODITY just complicates things and makes the whole industry even more difficult. And no, airlines are not unique in this respect. Farm production is another commodity business, and it also is famously difficult to make money in. And this is despite some of the most generous support that government can give - in the US and in most other industrialized countries.
 
gigneil
Posts: 14133
Joined: Fri Nov 08, 2002 10:25 am

RE: Why Don't US Carriers Make Money?

Sat Nov 29, 2003 3:46 pm

Carriers like Emirates are growing with cash from the Royal families, they don't have to publicly report their financial data,

Emirates is a public company mostly held my massive international corporations like Deutsche Bank and Citi. They report their data fully every quarter.

They don't use government money to fund growth.

N

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