toltommy
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AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 8:51 am

Interesting comments from AA officials while showing off their new gates at Love Field:

"Southwest has more than 90 percent of the flights at Love Field, where the carrier has operated for more than 30 years. American plans to steal some of those customers, according to David Cush, an American vice president and general sales manager.

With the recent relaxing of Wright to include Missouri, American is now on the defensive to stem any losses of its customer-base in the North Dallas area. American has a huge customer base in the area, said Cush.

But chances are American -- which has seen a near steady run of losses since Sept. 11, 2001 -- won't make money doing it, he indicated.

"It's tough to forecast a profit anywhere in the airline business," said Cush. "My guess is it will be tough to make a profit here. ...It will be tough sledding."

Tim Smith, a spokesman for American, added however that "It would cost us lots more in lost business to not compete."

Even Southwest chimed in with an opinion...

"According to Beth Harbin, a spokesperson for Southwest Airlines, "American's interest in Love Field is to make a point, not a profit."

Even so, she said in an e-mail response to American's comments, American will no doubt benefit from the well-known "Southwest effect" that has found passenger volumes increase at airports where Southwest and other airlines compete.

However, she added, Southwest believes American's strength and best product offering locally has always been from its hub at D/FW "and not stringing itself out at Love Field."

http://biz.yahoo.com/bizj/060220/1231031.html?.v=1

So let me see if I understand this... It's better to enter a market and lose money, just to keep a few customers, rather than deploy resources elsewhere, where they could be used to make money and improve the return on investment for the company and shareholders. That makes sense! Does anyone thing WN would employ that strategy?
 
nateDAL
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 8:57 am

AA entering DAL is incredibly stupid.

If I were a shareholder, I would be pissed.
Set Love Free
 
N1120A
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 9:02 am

Quoting NateDAL (Reply 1):
AA entering DAL is incredibly stupid.

If I were a shareholder, I would be pissed.



Quoting TOLtommy (Thread starter):
AA Officials: We Don't Expect Profit At DAL

Then what do you expect? A Cookie?

Signed,
AMR Corp. Shareholders.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
DL WIDGET HEAD
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 9:09 am

Looks like he said it would be tough to make a profit not that they won't.

Quoting TOLtommy (Thread starter):
"It's tough to forecast a profit anywhere in the airline business," said Cush. "My guess is it will be tough to make a profit here. ...It will be tough sledding."
 
MAH4546
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 9:28 am

Quoting TOLtommy (Thread starter):
It's better to enter a market and lose money, just to keep a few customers, rather than deploy resources elsewhere, where they could be used to make money and improve the return on investment for the company and shareholders. That makes sense! Does anyone thing WN would employ that strategy?

Yes, Southwest and many other smart businesses employ this strategy. It is similar to offering a loss-leader to retain customers. Car companies do it, retail stores do it, and airlines do it. A very common business practice.
a.
 
ckfred
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 9:42 am

I'm an AMR shareholder, and I applaud management for taking on Southwest at DAL.

If WN is going to continue to push for repeal of the Wright Amendment, when a far more modern airport is available at DFW, then it might as well get used to seeing silver airplanes at DAL.
 
nateDAL
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 9:44 am

Quoting N1120A (Reply 2):

Then what do you expect? A Cookie?

Maybe Herb will provide warm milk and graham crackers?
Set Love Free
 
iowaman
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 10:07 am

We enjoy doing useless battles to make a point to WN and FL, but we don't seem to care that we loose money.

Signed,
Northwest, Delta, and American.
 
mrstl
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:03 am

Quoting Iowaman (Reply 7):
We enjoy doing useless battles to make a point to WN and FL, but we don't seem to care that we loose money.

Signed,
Northwest, Delta, and American.

Yes, and if I were an employee I would be thrilled with the fact that my pay cuts are helping to fund emtpy planes (have you looked at the load factors on AA.com? UGH ) flying out of Love Field so AA can stick it to Southwest.
 
Okie
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:06 am

Quoting TOLtommy (Thread starter):
It will be tough sledding

Cough, Cough, Bovine Manure

AA will be operating head to head with WN with about 4 MD-80's with near equal operational costs if you figure a well used probably paid for MD-80 against a newer not yet paid for 37.
WN has one of the highest paid employee groups in the industry which is probably equal to or close to AA.
Operating cost at the airports should be equal for both AA and WN.
The only real edge WN has on costs is fuel hedges which could be partially offset by airframe costs.

AA might actually end up like using DAL and end up putting pressures on DFW to lower costs. Sounds like a win-win situation for AA.
Heaven forbid maybe some WN enthusiasm might rub off on some AA employee's

Okie
 
dalneighbor
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:17 am

Quoting Ckfred (Reply 5):
I'm an AMR shareholder, and I applaud management for taking on Southwest at DAL.

If WN is going to continue to push for repeal of the Wright Amendment, when a far more modern airport is available at DFW, then it might as well get used to seeing silver airplanes at DAL.

How long would you suggest they stay there and lose your money?
Wright Amendment = Federally Engineered AA Price Gouging
 
luv2fly
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:20 am

Quoting Ckfred (Reply 5):
I'm an AMR shareholder, and I applaud management for taking on Southwest at DAL.

If WN is going to continue to push for repeal of the Wright Amendment, when a far more modern airport is available at DFW, then it might as well get used to seeing silver airplanes at DAL.

If I was a shareholder I would be apAAlled to say the least.

Quoting MrSTL (Reply 8):
Yes, and if I were an employee I would be thrilled with the fact that my pay cuts are helping to fund emtpy planes (have you looked at the load factors on AA.com? UGH ) flying out of Love Field so AA can stick it to Southwest.

I agree 110% here.
You can cut the irony with a knife
 
aa1818
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:28 am

Hey. I don't think it's fair to speak as though AA doesn't know what they are doing. I've read these forums for years and recently joined to post and I've grown accustommed to the armchair CEO mentality on this forum; however, we must understand that the persons running these companies though seemingly stupid actually DO know what they are doing. We don't have facts and figures to refure the decisions AA takes. Perhaps it really is worthit!!?? It's one thing to disagree with, but to be cynical about the decisions of people who know aviation better than many of know our way around our homes is really disturbing.
Long Live AA!!!!!!!

AA1818
“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
 
dalneighbor
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:42 am

AA's gravy train the DFW - LGA route could really be hammered if NY is exempted from Wright and TZ starts codeshare service LGA - DAL just like their soon to be LGA - HOU service.
Wright Amendment = Federally Engineered AA Price Gouging
 
ScottB
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:52 am

Quoting Okie (Reply 9):
AA will be operating head to head with WN with about 4 MD-80's with near equal operational costs if you figure a well used probably paid for MD-80 against a newer not yet paid for 37.

The vast majority of Southwest's 737 fleet is paid-for; they typically pay cash to Boeing for their new 737's. Not only are they paid-for, but most of Southwest's owned 737's are also unmortgaged. Southwest also has its entire existing DAL operation across which to spread any incremental handling costs for eight additional daily departures, while American is incurring the costs of an entirely new operation at DAL. To be fair, AA was already paying lease costs on gates -- an obligation stemming from "office space" leased back in the late 1990's to keep Legend from having gates to use at DAL.

From looking at the loads on aa.com, the inaugural STL flights look to be nearly empty less than two weeks out. And this is even with AA trying to undercut WN on fares from both DFW and DAL. I suspect that WN will be more than happy to let AMR bleed itself right into Chapter 11.
 
qqflyboy
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:55 am

It sounds like WN shouldn't expect a profit on the route anytime soon, either. I just read an article where both airlines have slow bookings for the new service.
The views expressed are mine alone and do not necessarily reflect my employer’s views.
 
ctbarnes
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 12:27 pm

Quoting N1120A (Reply 2):
Then what do you expect? A Cookie?

Signed,
AMR Corp. Shareholders.

Not on board their flights...

Quoting AA1818 (Reply 12):
Hey. I don't think it's fair to speak as though AA doesn't know what they are doing. I've read these forums for years and recently joined to post and I've grown accustommed to the armchair CEO mentality on this forum; however, we must understand that the persons running these companies though seemingly stupid actually DO know what they are doing.

Yeah, just ask Frank Lorenzo.  

Charles, SJ

[Edited 2006-02-21 04:33:49]
The customer isn't a moron, she is your wife -David Ogilvy
 
sccutler
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 12:32 pm

Couple of things-

1. AA has tried to compete head-to-head with WN before, with remarkably bad results. AA had a state contract for the DAL-AUS service and, even with this booking advantage, flew largely-empty MD-80s back and forth between Dallas and Austin, while Southwest's loads were largely unaffected.

2. Defending market share can be a valid basis for flying at a loss, but based upon AA's prior experience, the DAL service is unlikely to achieve that goal. Hence, it is not ridiculous to conclude that, in this instance, AA's start-up of its likely-losing service is more for the purpase of bolstering the fear-mongering they have been promulgating since the Wright Amendment debate reignited.

I still do not understand why AA does not simply tout the substantial advantages they can deploy by comparison to Southwest, and sell to their strengths.
...three miles from BRONS, clear for the ILS one five approach...
 
luv2fly
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 12:36 pm

Quoting SCCutler (Reply 17):
I still do not understand why AA does not simply tout the substantial advantages they can deploy by comparison to Southwest, and sell to their strengths.

Well said and I agree 110%, though in order for them to sell to there strengths they need to figure out what they are or what they want them to be. Though you have hit the nail on the head.
You can cut the irony with a knife
 
toltommy
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 12:44 pm

Quoting MAH4546 (Reply 4):
Yes, Southwest and many other smart businesses employ this strategy.

I disagree with you on this one. I doubt very much that there has EVER been a city that WN entered in which they did not expect to post a profit. There may be loss leading products to get customers in the door, but no smart company expects to open a branch or new location and not expect to profit. That's the impression I get from AA's comments about DAL. Perhaps eventually it'll turn a profit, but nobody from AA is saying when they expect it to. I doubt they can ever turn a profit in the station, it's about making a point.
 
Okie
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 1:03 pm

Quoting SCCutler (Reply 17):
I still do not understand why AA does not simply tout the substantial advantages they can deploy by comparison to Southwest, and sell to their strengths

 checkmark 

AA needs to get back in the business of selling seats.


While the WA is neither here nor there to me. I have been utterly amazed at all the hoopla that I see when in the Dallas-Ft Worth area, whether signage, print or any other media.

Quoting ScottB (Reply 14):
I suspect that WN will be more than happy to let AMR bleed itself right into Chapter 11.


IMO I do not think an equalivent of a 4 plane commitment on AA part with 300+ MD-80's in their fleet is either going to bankrupt nor make a huge impact on AA's bottom line whether the flights operate out of DAL in the Red, break-even or in the Black.

Worst case if DAL does not succeed for AA, is a new head light for the tug, a couple sixpacks of Lonestar, and they can sneak the ground equipment back to DFW down the freeway in the middle of the night.

Okie
 
AA737-823
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 1:11 pm

Well, I've been against it for a while, but after reading this article, I see their point:
"We HAVE to enter the DAL-Missouri market, or we'll lost valuable walk up business customers. So we're willing to lose money on this limited scope in order to make money on the other flights these same customers must make- flights that WN doesn't and can't do." That's my synopsis.
See, if AA keeps Joseph Greenwald happy on the DAL-MCI run, he's more likely to stick with AA for DFW-PHX, rather than turn to Southwest for DAL-HOU-PHX. If he starts accruing points on Southwest Rapid Rewards, then he's more likely to fork over the extra dough to get on Southwest to Phoenix. But if AA can keep him, they're better off.

And yes, I am SURE that Southwest does the same thing, in the sense that all businesses do. Ford was losing upwards of a grand on each Escort they sold. That's part of the reason they came out with the Focus- to try to command a higher sales price. BUT- Ford would rather lose money selling you a Focus and then hope that someday you buy a Five Hundred than, say, watching you take your checkbook to the profit making Honda dealer for a new Civic. Have you seen how expensive Civics are lately? You can easily spend $19 grand on a stinking econobox! Granted, it's a very well equipped, safe, and reliable econobox, but that's well into bigger car territory. So come on down and by a Focus until you can afford something nicer.

That's the strategy. I don't think it always works, but it's not a BAD idea.
 
ScottB
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 2:41 pm

Quoting Okie (Reply 20):
IMO I do not think an equalivent of a 4 plane commitment on AA part with 300+ MD-80's in their fleet is either going to bankrupt nor make a huge impact on AA's bottom line whether the flights operate out of DAL in the Red, break-even or in the Black.

If AA's little "we have to make a point by serving DAL" temper tantrum is limited to just this 4-aircraft commitment, then I'll agree that the negative impact to the bottom line will only end up being somewhere in the neighborhood of ten million per year or so.

If Wright is further loosened and AA decides that they need to "protect their market share" in additional key markets...well, that could get uglier. But it is obviously AA's right to run their business as they see fit...as long as the shareholders ultimately approve.

Quoting AA737-823 (Reply 21):
See, if AA keeps Joseph Greenwald happy on the DAL-MCI run, he's more likely to stick with AA for DFW-PHX, rather than turn to Southwest for DAL-HOU-PHX. If he starts accruing points on Southwest Rapid Rewards, then he's more likely to fork over the extra dough to get on Southwest to Phoenix. But if AA can keep him, they're better off.

I still don't follow this logic, largely because one could apply it to a number of large business markets which Southwest has served from DAL for two-and-half decades or longer -- places like HOU, MSY, ELP, ABQ, AUS, SAT, OKC, TUL, LIT, MAF...well, you get the picture. It seems to me that flights from DAL to STL or MCI are no more likely to lead to passenger loyalty than DAL-HOU and DAL-ABQ, as an example.
 
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antoniemey
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 2:53 pm

Quoting AA1818 (Reply 12):
however, we must understand that the persons running these companies though seemingly stupid actually DO know what they are doing.

If these people know what they're doing, then why are several legacies hemorraging money with near-record load factors and (in some cases forcibly) lowered labor costs?

ANd don't tell me it's all because of the cost of fuel, because in EVERY OTHER transport-related industry that cost is passed off to the end customer. Be it the person putting their trash out on the curb for the trash company to collect or the drunk hailing a taxi to get home at night, rates are going up everywhere EXCEPT the airlines due to fuel.

Now, I may be the only one, but it doesn't seem to me that, as a group, they know what they're doing.
Make something Idiot-proof, and the Universe will make a more inept idiot.
 
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yyz717
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 2:58 pm

Quoting TOLtommy (Thread starter):
"It's tough to forecast a profit anywhere in the airline business," said Cush. "My guess is it will be tough to make a profit here. ...It will be tough sledding."

Talk about a defeatist attitude. This dude should be fired.

It's actually easy to predict profit.....I think we all predict that WN will be profitable in the near term.

If AA cannot make a profit in DAL, yank the routes and fire the bone-head managers who recommended moving into DAL.

It's time for AA to make consistent profits. Period.
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
N600RR
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 3:28 pm

Quoting Antoniemey (Reply 23):
because in EVERY OTHER transport-related industry that cost is passed off to the end customer. Be it the person putting their trash out on the curb for the trash company to collect or the drunk hailing a taxi to get home at night, rates are going up everywhere EXCEPT the airlines due to fuel.

That is curious... Even FedEx (ground and air) have (or had) fuel surcharges added to shipping costs -- don't know about UPS, DHL, etc.

Quoting Antoniemey (Reply 23):
Make something Idiot-proof, and the Universe will make a more inept idiot.

 checkmark 
"And the fluffy white lines that the airplane leaves behind are drifting right in front of the waning of the moon" -Cake
 
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antoniemey
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 3:33 pm

Quoting N600RR (Reply 25):
That is curious... Even FedEx (ground and air) have (or had) fuel surcharges added to shipping costs -- don't know about UPS, DHL, etc.

Honestly, I hadn't even thought about them. But I'd bet that UPS and DHL have too, though when I ship stuff it goes USPS... cheaper for the most part, and a lot easier to find.

Still, while they are airlines, or at least contract airlines to fly with their logos on the planes, they also do non-airline type stuff (Deliveries). SO I wouldn't strictly consider them airlines as their primary moniker.
Make something Idiot-proof, and the Universe will make a more inept idiot.
 
aaden
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 3:49 pm

this outta show southwest who's boss.  Wink

if american wants to stick it to southwest then they should duplicate their
schedule and make sure that their fares are consistanly $5.00 lower than southwests. i believe that AAs 738s are just as effeicent as southwests735s correct me if i'm wrong. if AA wants to scare off southwest then they are doing a piss poor job of it. if there going to go ahead with dal then they need to realise their is no profit until southwest is gone.

does anyone know if AAs 738s are more fuel effiecent than their md80s?
 
txagkuwait
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 6:58 pm

>>this outta show southwest who's boss.

if american wants to stick it to southwest then they should duplicate their
schedule and make sure that their fares are consistanly $5.00 lower than southwests. i believe that AAs 738s are just as effeicent as southwests735s correct me if i'm wrong. if AA wants to scare off southwest then they are doing a piss poor job of it. if there going to go ahead with dal then they need to realise their is no profit until southwest is gone.

does anyone know if AAs 738s are more fuel effiecent than their md80s?<<


I have a question.

If it were possible for American to show Southwest who was boss, why didn't that technique work when American was throwing 14 MD80 RTs per day between Dallas Love Field and Austin.

American was giving away triple AAdvantage miles, upgrading most everyone to First Class, giving people the much-desired assigned seat. Yet American was only ablt to chip away about 10% of Southwest's market share, despite having the state government contract for all official travel.

Perhaps the bigger picture is that Southwest offers a better product than American, especially on short haul flights.

People trying to compare costs between the two carriers need to look at the ASM costs reported in Q4 of CY2005.

Southwest had a CASM of 8.42 cents, with an ex-fuel CASM of 6.57 cents, on an average stage length of 607 miles.

American, excluding its commuter affiliates, had a CASM of 11.57 cents, an ex-cuel CASM of 7.78 cents, and did not report average stage length. You can bet, however, with all the transcons and international flights, that their average stage length was quite a bit higher than Southwest's. Probably about double.

Thus American is at considerable disadvantage from the git-go with respect to their costs, despite having already chopped the heck out of employee wages.

For all the folks out there who think that just because Southwest pays their employees more than American, that that also means they have a higher labor cost---those folks are forgetting one key factor. Productivity.

Just a cursory look at their costs gives WN a decisive edge. And their advantage only gets bigger when running on identical stage lengths.

And of course, if competing with American ever grew too tiresome, Southwest could solve the problem by buying American....when you consider that Southwest has a market cap of 13.5 Billion, and American's is only 4.1 Billion. Southwest has a healthy amount of cash in the bank with which to do a transaction like that.

In fact, to buy 50% of American would only run about $2.05 Billion, and I believe Southwest has that much in unrestricted cash in the bank.
 
donder10
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 8:56 pm

Quoting TxAgKuwait (Reply 28):
-those folks are forgetting one key factor. Productivity.

And fleet commonality.Not only do AA have quite a few fleet types but they also have some sub-fleets within at least 1 aircraft type(ie the ex TW 752s)
 
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OzarkD9S
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 10:16 pm

Quoting Yyz717 (Reply 24):


This dude should be fired.

For being honest?
Coast to Coast and Border to Border, Ozark Flies YOUR Way!
 
Tornado82
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 10:57 pm

Quoting MrSTL (Reply 8):
(have you looked at the load factors on AA.com? UGH )

You can't look at the pretty pictures of planes on the website to get a look at load factors. They don't account for walkups or any of that, standbys, anything. Case in point, when I left my home on Saturday morning it showed 38 on my UA CRJ, guess what? 90 minutes later when I boarded it was 50/50. There's your little pretty pictures of a plane on the website to show you a load factor. No credibility whatsoever.

Quoting Antoniemey (Reply 26):
though when I ship stuff it goes USPS... cheaper for the most part, and a lot easier to find.

Yeah, but their fuel surcharge was this latest stamp price increase. Don't kid yourself.
 
mrstl
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:10 pm

Quoting Tornado82 (Reply 31):
You can't look at the pretty pictures of planes on the website to get a look at load factors. They don't account for walkups or any of that, standbys, anything

I agree, but when not a single seat is occupied on the pretty picture it is pretty telling, I fly enough and use the seat maps enough to know these planes are empty!
 
tockeyhockey
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:36 pm

lost, i think, in all this conversation is that this is happening only because of the expansion of wright to include STL. AA needs to protect STL -- a loss of a midwestern hub that is teetering on the brink anyway could be too much for them to handle.
 
txagkuwait
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:39 pm

You know, one thing you haven't thought about....maybe American's seat maps are showing nobody on the plane....

BECAUSE THEY INTEND TO THROW OUT THE SEAT MAPS AND WELCOME IN THE NEW, MODERN ERA OF OPEN SEATING!!!

Naaaah, never happen, American isn't that creative.
 
FURUREFA
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:52 pm

Quoting MrSTL (Reply 32):

I agree, but when not a single seat is occupied on the pretty picture it is pretty telling, I fly enough and use the seat maps enough to know these planes are empty!

It only shows peoples with assigned seats; if they dont have an assigned seat, they won't show up.

Matt
 
SeeTheWorld
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:57 pm

At some future point, AA will have to co-exist with WN in a non-WA environment. When the WA eventually goes away, and it will, the financial hit to AA will be significant, but pawltry as a percent of total revenues.

Every U.S. carrier has or will have to co-exist with WN, and AA has decided that it's worth losing a BUNCH of money now to delay the inevitable. Their analysis may suggest that they will lose less money operating out of DAL for a couple of years if the result is a delay in the chipping away of the WA. While that may be good business in the short-term, it seems that their efforts might be better spent preparing to compete in a non-WA environment, i.e. in a free market. Being forced to compete in a free market, (i.e. no WA, no hogging of gates, no dumping seats in markets as so many carriers do) forces these legacy carriers to get their houses in order and provide a better product/service over the longer-term. Competition is good, it prepares you for the tough times when you don't have the ability or option to delay the inevitable.

Has NW's hardcore competitive strategy been good over the long term? We'll see, but they to, will have to co-exist with WN soon. I just hope they used all this time to prepare for the inevitable. If they haven't, then it's going to be a big shock when they have to pay the piper.

Finally, I'm tired of listening to so many people talk about how Southwest would be losing money if they didn't have hedges. Please keep in mind, that of all the carriers in the U.S., Southwest probably has the most pricing power ability. Given that, as their hedges expire, their fares are likely to be priced at a level to ensure reasonable profitability. And, I suspect, all the carriers that have lost billions over the past few years, will be none too happy that the increase in fares will finally stick - we're already seeing it happen. Sure, there will be greater pressure on Southwest's financials, but I'd put my money on them before I'd put it on anyone else.
 
Tornado82
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RE: AA Officials: We Don't Expect Profit At DAL

Tue Feb 21, 2006 11:58 pm

Quoting TxAgKuwait (Reply 34):
BECAUSE THEY INTEND TO THROW OUT THE SEAT MAPS AND WELCOME IN THE NEW, MODERN ERA OF OPEN SEATING!!!

Naaaah, never happen, American isn't that creative.

Why should they pander to the de-gentrification of aviation? There are many of us who PREFER not to be boarded on like cattle, and that should be one of American's big selling points for DAL passengers.
 
MalpensaSFO
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 12:05 am

Quoting AA1818 (Reply 12):
I don't think it's fair to speak as though AA doesn't know what they are doing.

They have openly stated they dont intend to make money on the DAL flights. Someone at American Airlines has to be thinking: Is it worth it?

Quoting DALNeighbor (Reply 13):
AA's gravy train the DFW - LGA route could really be hammered if NY is exempted from Wright and TZ starts codeshare service LGA - DAL just like their soon to be LGA - HOU service

Well there may be a suprize added to the DFW market ala TZ!  wink 
TO FLY IS TO SERVE
 
SCEagle
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 2:08 am

Slightly offtopic...

Anyone else read the topic title as:
AA Officials: We don't expect profit at Delta Air Lines?
 
petmbro
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 2:25 am

Quoting Ckfred (Reply 5):
I'm an AMR shareholder, and I applaud management for taking on Southwest at DAL.

If WN is going to continue to push for repeal of the Wright Amendment, when a far more modern airport is available at DFW, then it might as well get used to seeing silver airplanes at DAL.

I too am an AMR holder and I find this move just foolish. Although I support the repeal of Wright, there is no logical reason why they need to be flying out of DAL because sticking it to WN doen't work. AA is at least a little better off than others and now they have to go and f_ck themselves over by doing this. Congrats to throwing away my money!
"don't pee on my leg and tell me it's raining!" - Judge Judy
 
Tango-Bravo
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 2:29 am

Quoting TOLtommy (Thread starter):
So let me see if I understand this... It's better to enter a market and lose money, just to keep a few customers, rather than deploy resources elsewhere, where they could be used to make money and improve the return on investment for the company and shareholders.

Which is way the legacies think, which is why they do not and cannot sustain profits with any consistency. It's all about stroking bloated egos in the executive and marketing suites with market share and load factors first and foremost, profits only if they happen in spite of obsession with these priorities.



Quoting TOLtommy (Thread starter):
Does anyone thing WN would employ that strategy?

My answer is a resounding no. Which is why Southwest can and does sustain profitability wth consistency, through the best of times and the worst of times.
 
Pope
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 4:47 am

Guys,

"Paid for" and "depreciated" are two different accounting issues. A plane can be paid for in cash and still show up as an expense on a company's income statement through depreciation. Depreciation is unaffected by how you acquire the asset.

Conversely, a plane can be fully depreciated and still be encumbered by debt.
Hypocrisy. It's the new black for liberals.
 
txagkuwait
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 4:50 am

>>Why should they pander to the de-gentrification of aviation? There are many of us who PREFER not to be boarded on like cattle, and that should be one of American's big selling points for DAL passengers.<<

Yes, we all remember how well that worked when American wandered on in to Love Field expecting to take over the Austin market.
 
KarlB737
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:01 am

Courtesy: Fort Worth Star Telegram

American Shows Off Love Facility

http://www.airportbusiness.com/artic.../article.jsp?siteSection=1&id=5440
 
N600RR
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:03 am

Quoting Antoniemey (Reply 26):
when I ship stuff it goes USPS... cheaper for the most part

I find FedEx Ground cheaper for packages over 2lbs, and with fedex.com I don't need to stand in line at the post office or worry about stamps  no , and can do insurance and online tracking  yes . Don't want to say it's "idiot proof", but it's darn close.  biggrin 

But, we digress...

Quoting Antoniemey (Reply 26):
they also do non-airline type stuff (Deliveries). SO I wouldn't strictly consider them airlines as their primary moniker.

Agreed. But your point was -- I think -- that airfares don't seem to reflect increases in the cost of providing a service (e.g. rising fuel costs). They are inelastic or elastic -- for some reason I get those two mixed up  confused .
"And the fluffy white lines that the airplane leaves behind are drifting right in front of the waning of the moon" -Cake
 
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lightsaber
Crew
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:29 am

Quoting Okie (Reply 9):
The only real edge WN has on costs is fuel hedges which could be partially offset by airframe costs.

Not to mention WN has shorter turn times (reduces CASM).

Quoting Okie (Reply 9):
AA might actually end up like using DAL and end up putting pressures on DFW to lower costs.

This is an interesting theory... Good point. AA to DFW: lower costs! It also fills up DAL reducing the economic benifits to WN of operating out of a nearly empty airport. Although, with multiple runways, DAL should be pretty delay free up to about 400 flights/day...

Quoting AA737-823 (Reply 21):
So we're willing to lose money on this limited scope in order to make money on the other flights these same customers must make- flights that WN doesn't and can't do.

Wait a second... if "WN doesn't and can't do" a flight, than AA is going to make the money anyway (out of Dallas, at least). So I'm missing something here in the logic.

I really like flying AA... I'm a bit distressed they're throwing good money after bad. DFW is a strength. If one takes a step back, DAL is simply not a large enough airport to ever let WN match AA's domestic route map from DFW.
DFW had 804,865 aircraft movements in 2004. That is 2,204 average movements a day (1,102 round trips per day).
http://en.wikipedia.org/wiki/World%2...iest_airports_by_traffic_movements

Quoting TxAgKuwait (Reply 28):
Southwest had a CASM of 8.42 cents, with an ex-fuel CASM of 6.57 cents, on an average stage length of 607 miles.

American, excluding its commuter affiliates, had a CASM of 11.57 cents, an ex-cuel CASM of 7.78 cents, and did not report average stage length. You can bet, however, with all the transcons and international flights, that their average stage length was quite a bit higher than Southwest's. Probably about double.

Thus American is at considerable disadvantage from the git-go with respect to their costs, despite having already chopped the heck out of employee wages.

For all the folks out there who think that just because Southwest pays their employees more than American, that that also means they have a higher labor cost---those folks are forgetting one key factor. Productivity.

This is the crux of the issue. Let's compare the ex-fuel (even through with the MD-80's this is an apple/orange comparison as AA will consume more fuel than WN per ASM): 7.78 for AA vs. 6.57 for WN. From the get go AA *must* generate 18% more Revenue per ASM than WN just to break even on a ex-fuel basis. While the fuel included difference is 37%! Yikes.

Not to mention, how can AA teach WN a lesson? WN is making money and has $2.53 Billion in cash with only $2.00 Billion in Debt. In a nasty price war, they will last a long time. AA has $3.41 Billion in cash but is carrying $14.19 Billion in debt! AMR has a margin of -4.16% on $20.71 billion, LUV +7.23% on $7.58 billion. Note: I will note AMR is growing revenue at a healthy pace too.

http://finance.yahoo.com/q/ks?s=LUV
http://finance.yahoo.com/q/ks?s=AMR
AA has a strength at DFW... I'm not sure why they are leaving it and operating out of DAL.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
Tornado82
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:36 am

Quoting Lightsaber (Reply 46):
7.78 for AA vs. 6.57 for WN. From the get go AA *must* generate 18% more Revenue per ASM than WN just to break even on a ex-fuel basis. While the fuel included difference is 37%! Yikes.

Let's not forget that AA's inherent CASM for DAL *should* be somewhat lower once they start reaping the benefits of those far-below-market-value fees at DAL. You know, the 20 cents/1000lb, and all that cushy stuff that WN has sucked up for years. That's where the remainder of WN's savings is coming, crap like that, MHT/PVD over Logan, etc.
 
isitsafenow
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:48 am

My two cents worth with commentary

cent one...seems like AA did not learn their lesson they got at STL. from Herb.
cent two...I'm betting the MCI and STL trips from Love field must be
taking customers from AA. Where else are they coming from?

Did you notice through the years Southwest takes customers from other
airlines but other airlines just can not seem to take customersf from Southwest.......most interesting........

Fly routes and NOT expect to make money? In this age of the airline biz as fragile as it is, AA can afford to do this against a very well run and profitable airline and with a loyal customer base?
This may be interesting......if you like the color red.
safe
If two people agree on EVERYTHING, then one isn't necessary.
 
SeeTheWorld
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RE: AA Officials: We Don't Expect Profit At DAL

Wed Feb 22, 2006 5:53 am

Quoting Tornado82 (Reply 47):
Let's not forget that AA's inherent CASM for DAL *should* be somewhat lower once they start reaping the benefits of those far-below-market-value fees at DAL. You know, the 20 cents/1000lb, and all that cushy stuff that WN has sucked up for years. That's where the remainder of WN's savings is coming, crap like that, MHT/PVD over Logan, etc.

Please folks - this is all peanuts. WN primary cost savings comes from a more productive workforce, higher aircraft utilization, more productive use of assets (gates, etc.), significantly lower interest payments (strong balance sheet and access to cheaper capital) ... while lower airport costs definitely help, it's not the reason they are making money, nor are the fuel hedges. They are making money because they are a well-run airline with satisfied employees and they provide the passenger exactly what they tell them going to provide them - safe, frequent, reasonably priced transportation from A to B.