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alberchico
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Why Hasn't American Started Their Own LCC

Wed Mar 02, 2005 10:37 pm

They could just divert some of their fleet like Delta and United.
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Orion737
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RE: Why Hasn't American Started Their Own LCC

Wed Mar 02, 2005 10:40 pm

American are already no-frills on domestic flights!!! just not low fares! there service levels have been cut so much, there wouldnt be anything to cut in a LCC operation
 
luv2fly
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RE: Why Hasn't American Started Their Own LCC

Wed Mar 02, 2005 11:08 pm

Orion737 I have to agree with you. What is sad is now the likes of B6, Frontier and Airtran are starting to offer more entertainment options that the so called full fare majors. Though like others will be quick to point out that the new LCC's do not have the route maps that the established majors now fly. And to some extent that might be the problem of the majors, trying to be all things to all people?
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galapagapop
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RE: Why Hasn't American Started Their Own LCC

Wed Mar 02, 2005 11:09 pm

We also have yet to see if such a venture would work seeing as its the same crew and same planes. Metrojet lasted for years but it eventually failed. Delta has yet to release any comprehensive numbers on Song and judging by their losses last year it doesn't look great. We know nothing about Ted in terms of finances. AA does not need to go into this area of the market because they are not half as desperate as some of those majors for extra revenue.They also could turn profits this year if fuel stays at or around $50 per barrel. Their revenue unlike other majors is still increasing without a frill or gimmick.

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LY4XELD
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RE: Why Hasn't American Started Their Own LCC

Wed Mar 02, 2005 11:27 pm

I think a portion of it would also be the fact that unions would be opposed to an introduction of an LCC for AA (pay scale, seniority, etc.). It would probably cost them more in the end to reconfigure aircraft, roll out a new marketing campiagn, etc, to implement this rather than just continue down the path AA is currently following.

Quoting Orion737 (reply 1):
American are already no-frills on domestic flights!!! just not low fares! there service levels have been cut so much, there wouldnt be anything to cut in a LCC operation


Get rid of first class and add more coach seats...there's your LCC for American.
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KKMolokai
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:21 am

AA stated last year that they are "monitoring" the success of Ted and Song, however, that they do not have any interest or intent to start a new "airline-within-an-airline," as this concept has proven track record of failing.
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burnsie28
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 3:07 am

The same reason why CO and NW have not, they are too smart to create something that in the next few years will be worthless.
 
MaverickM11
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 3:30 am

'Cuz they're not flippin' idiots like United, and realize that they can do the exact same thing as retard-Ted without incurring any incremental costs...
E pur si muove -Galileo
 
hz747300
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 4:35 am

Probably because flying AA is like flying an LCC without a PTV already. What is interesting is that as fuel prices have risen, airfares have gone down. It is not sustainable, and I suspect that massive failures will start to shake out unless oil can come off its highs.

However, with rising demand for oil from China and India, it is unlikely that oil prices will drop, in fact they will probably rise even more.

Less inflation, prices are actually in line for oil right now when studying it.
Keep on truckin'...
 
iowa744fan
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 5:29 am

They have likely seen how many times the "airline within an airline" has failed and are not about to waste capital in a similar venture.

For instance:
Continental Lite
United Shuttle
Metrojet
Delta Express
Go
Buzz
Zip (not sure of whether this was a failure or not)

And the current ones:
Song (rumored to be in poor financial condition)
Ted (no clue...have heard both ways.)
 
NWAFA
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 5:31 am

Because they are being smart....Song I hear is "having some problems" TED hasn't done much for UA as it still costs them the same amount to fly as mainline. MetroJet..gone. CO Like-gone...UA Shuttle-gone (too bad they did not learn their lesson with that mess)
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jacobin777
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 6:29 am

Quoting Galapagapop (reply 3):
They also could turn profits this year if fuel stays at or around $50 per barrel. Their revenue unlike other majors is still increasing without a frill or gimmick.



Problem is fuel cracked the $53/barrel today

Quoting HZ747300 (reply 8):
What is interesting is that as fuel prices have risen, airfares have gone down.



actually, since I fly SFO-ORD-SFO every couple of weeks, I've noticed that the average fare (especially for AA) is up about $40-$50....one can get good fares still, but I've certainly seen higher fares the past 4-6 weeks...come to think of it, they are even higher than $40-$50.....I use aa.com/orbitz/travelocity/expedia/sidestep.com for my fares...
"Up the Irons!"
 
gigneil
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 6:45 am

The whole idea is stupid, that's why.

Ted offers almost no differentiation in product from mainline, and it costs UA the same amount of offer it.

They're marketing schemes, not real LCCs.

N
 
SHUPirate1
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 7:47 am

Gigneil-It actually costs MORE for United to offer Ted than mainline, because of the configuration of the plane. For United mainline flights, the A-320 requires three flight attendants, whereas the Ted-bus requires four flight attendants. It is the same reasoning why I wonder why jetBlue doesn't pull another row, this one in front of the wings, to get down to 150 seats, which would allow them only three flight attendants (certainly the revenue from those six seats aren't going to make up for the pay of a flight attendant)
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Cactus739
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 8:12 am

Quoting MaverickM11 (reply 7):
'Cuz they're not flippin' idiots like United


I think that sums it up nicely don't you?
You can't fix stupid.... - Ron White
 
alb222
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 8:37 am

Part of it I think has to do with competition.
DL has JetBlue at JFK and Airtran at ATL.
UA has Southwest and Alaska on the West Coast and Frontier at DEN.

What they are trying to do is protect their piece of the action by offering more leisure type ideas with lower costs.
As DL says, Song is also being used to experiment with concepts that could be brought to mainline services.

Successful? Nobody knows except the airlines themselves. Forget the rumors, for that is all that they are, rumors with no basis of fact. What the future holds is still the big question. We'll see and the fact is nobody knows the answer. BTW, DLX might still have been around had it not been for 9/11. The competition is what drives the Songs and Teds.................should B6, WN, F9, etc. falter, then we go to another palying field, but until then ,the legacy carriers are looking for anything to drive a wedge into the hearts of the LCCs!
 
ckfred
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 1:48 pm

Back in the mid 90s, when AA had very contentious negotiations with the pilots, I believe that the pilots suggested do something like CO Light, as a means of getting some flexibility for pilot pay.

AA turned down the idea because, in the mid 90s, AA had a very good product, and management felt that an airline within an airline would hurt the reputation of AA.

Now, if AA wanted to try something like Song or Ted, it would want further concessions from pilots and F/As, and that won't happen. Further, by offering first class on routes that compete against Ted and Song, AA has an opportunity to compete for UA and DL frequent flyers that are mad that they have no upgrade opportunities.

The reason that AA doesn't offer IFE on so many flights is that the MD-80 was not purchased to be a long-haul aircraft. So, it never had an IFE system. According to a friend of mine who flies for AA, there was talk of installing IFE when the fleet received new interiors in the late 90s, but the cost was horribly expensive, the equipment would have been very heavy, taking away cargo capability, and the MD-80 cabin has a lower ceiling, so that meant no TV screens in the aisle.
 
DfwRevolution
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 1:58 pm

Quoting Alberchico (reply 0):


AA has chosen to lower opperating cost rather than cutting ticket prices to boost traffic flow. They cut something like 6 (?) fleet types since 2001, they renegoiated their aircraft delivery schedules, they narrowly avoided a Ch.11 filing, ect.

I would actually say their method of retooling has been more successful than UA/DL's "airline within an airline."
 
lvkewlkid
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:02 pm

Quoting Ckfred (reply 16):
The reason that AA doesn't offer IFE on so many flights is that the MD-80 was not purchased to be a long-haul aircraft. So, it never had an IFE system. According to a friend of mine who flies for AA, there was talk of installing IFE when the fleet received new interiors in the late 90s, but the cost was horribly expensive, the equipment would have been very heavy, taking away cargo capability, and the MD-80 cabin has a lower ceiling, so that meant no TV screens in the aisle.



but now on select MD-80 flights, they have digEplayers. I think AA has some great IFE.
 
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ODwyerPW
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:05 pm

I loved MetroJet. It was my first flying experience. Was sad to see it go.
learning never stops.
 
wgw2707
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:08 pm

I think the obvious answer to this question, is because LCCs within an airline generally do not work.

The more complex answer is that for sure, creating a Southwest Airlines within an airline doesn't work (see: Continental Lite, Shuttle by United, Delta Express, Go, Metrojet, Zip and Buzz). However, it remains to be seen whether creating a jetBlue within an airline, which appears to be the concept of Song, and to a lesser extent Ted, is viable. Delta claims Song is working, and United hasn't given off any indications of problems with Ted, so we'll have to see. It could be that creating a highly customer-centric, single class, Target-style upscale discount model is viable in the airline industry.

However, given AA's precarious finances, there is no incentive at all for them to attempt to find out, at least not at the moment. Also, with some saying that oil will hit $80 a barrell, you have to wonder...will any airline business plan, no matter how sound, work?

-WGW2707
 
aa777jr
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:13 pm

I almost started a blog yesterday about this, here is what I had proposed.

When AA bought out TW, they could have used those planes and turned TW into there LCC, kept ALL TW staff, and turned STL into their hub. I'm sure they could have got rid of the TW a/c they didn't need and use stored MD80s.

Comments?
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TWA902fly
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 2:36 pm

Quoting MaverickM11 (reply 7):
'Cuz they're not flippin' idiots like United, and realize that they can do the exact same thing as retard-Ted without incurring any incremental costs...



You know as immature as it may seem, that quote just put me in a good mood, always good to get humor out of airliners.net. but anyways, i dont really agree however, i think theres both good and bad sides to an airline within an airline, i think it works better for United/Delta rather than American... maybe because AA is trying to get business passangers to destinations in Song/Ted's main domain: Florida... AA is optimizing on MIA/FLL - Central/South America... while UA/DL are filling their planes with people heading to the beaches... for example AA on ORD-MIA is filled with people connecting to GRU,EZE,SJO,UIO,SCL etc... while UA's A320 is filled with passangers who are using all their miles to fly to Lauderdale for free for some fun in the sun... United figured they'd rather sell $150 a roundtrip on an all-coach A320 instead of flying a mainline A320 full of free pax.. Assuming Ted's costs are somewhat lower than UA's... and people treat miles like cash... whereas UA would charge $300 ... and say now they charge $150, and people buy the ticket instead of getting it for free, and First class isnt all upgrades, theres no first class to lose... so after some time i could see Ted/Song makign profit... and AA is doing something like it on BOS-SNN, BOS-MAN... so i think theyre testing the waters of all-coach transatlantic 757 we'll see...

all prices i said are just for example, and yeah i understand that for Ted to lower costs, UA costs will have to be lowered as well, but making a seperate product to differentiate business and leisure travelers might work pretty well...

TWA902
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padcrasher
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 4:44 pm

Why hasn't AA started an LCC? Because they are locked into union contracts all the way around. It would be another TED. More or less a paintjob.

The fact of the matter is AA cannot outsource like Delta can due to contractual provisions. They cannot start a B scale like Song has. They must go to the unions before they could make an LCC work.
 
nwa man
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 5:37 pm

Quoting Burnsie28 (reply 6):
The same reason why CO and NW have not, they are too smart to create something that in the next few years will be worthless.



Never heard of CO Lite, I take it...
Create your own luck.
 
b737100
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 7:02 pm

With tongue in cheek, because the name American Express was already taken.
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chrisnh
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 9:11 pm

As has been said, there's NO evidence out there that this sort of thing even WORKS! No one can prove to me that any of these LCCs that were borne from the legacy carriers have succeeded. Wintness CAL Lite, Shuttle By United, and MetroJet just to name three. As for TED and Song, well, you'll have to sing and dance a fair bit to convince me that these are successful ventures. Indeed, kudos to AA for NOT jumping into this foolish fray.

Chris in NH
 
contrails
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 10:26 pm

I think Orion737 is right, AA is already there. No meals, no magazines, no blankets, and no pillows. Pretty soon they'll be cramming passengers in again, since they've killed MRTC.

Of course, there are other steps AA could take, such as charging for water. There are all sorts of possibilities.

Robert Crandall would be proud.
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Thrust
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 10:47 pm

AA does not need an LCC, for one. They have already slashed their prices in half. For a second reason, AA would be cutting their own throats by starting an LCC of their own. The only thing starting LCCs have done for the U.S. megacarrier have been that they have made their precarious financial situations even more precarious. It is cheaper to slash your own fares in half rather than spend millions starting another LCC.
Fly one thing; Fly it well
 
padcrasher
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 11:25 pm

thrust

Lower fares do not an LCC make. It is lower costs. You must get your daily utilization up in the 12 to 13 hour range. You must get as many seats into each flight as possible. Pay employees lower wages and less benefits. Replace workers with as much IT and automation as possible. Outsource whatever functions can be done at lower costs. ie heavy maintenance, payroll, etc.

Regarding the Song critics. It makes no difference whatsover if lower cost divisions failed or did not fail in the past. It is a known fact that Song has higher utilzation rates than mainline Delta. It is a fact that Song has more seats per flight than mainline Delta 757s. It is a fact that Song employees are compensated less. It is a fact that Delta is seeing higher measured customer satisfaction rates with Song than mainline Delta. The Director is on record as saying Song has cost 20% below mainline Delta.

Now you can poo poo this all you like but you cannot go wrong lowering your costs and increasing your customer satisfaction rates.
 
padcrasher
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RE: Why Hasn't American Started Their Own LCC

Thu Mar 03, 2005 11:48 pm

Yes AA and UA, by all means don't start a LCC...LOL

http://msnbc.msn.com/id/7044231/
 
Thrust
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RE: Why Hasn't American Started Their Own LCC

Fri Mar 04, 2005 12:16 am

I simply meant that cutting your own fares is just a better solution than spending money starting a whole new airline. UA has tried twice to succeed with an LCC now...both times it appears that it has done them more harm than good. DL pretty much drained its health down the toilet by starting Song. The fair-slashing deal they just made could be too little too late now, because they have AA and NW competing too, and they are more flexible right now than DL. Who knows? All I'm saying is, I have yet to see starting an LCC being healthy for any megacarrier. I think it is a huge waste of money....that just simply slashing your own fares is a better solution.
Fly one thing; Fly it well
 
padcrasher
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RE: Why Hasn't American Started Their Own LCC

Fri Mar 04, 2005 12:30 am

Delta's health has little to do with the Song startup. Delta's problems are of the same nature that drove UA and US into bankruptcy. That nearly drove AA into bankruptcy two years ago. Song is only a small part of an effort to lower Delta's cost system wide and put out a competitive product.

AA has a huge problem now. They are operating 11 daily higher CASM widebodies on the JFK-LAX route with an inferior coach product. What are they going to do?

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