JA
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My Plan To Restructure Comair

Sat Sep 15, 2012 2:55 pm

It is my personal belief that Comair can be restructured into a viable point to point operation supporting the Delta network. There are several markets that could benefit from the type of S-curve effect that a new Comair could provide. In addition, a point to point structure (operations that are heavily O/D based) would support the kind of cost structure that is the new reality for 50 seat aircraft. As part of this new business model, I would propose a reduction in seating capacity from 50 seats to 46 seats as numerous markets currently take some sort of penalty above 46 seats. Comair would continue to fly under a codeshare agreement with Delta.

The new Comair would continue to use the current 21 aircraft and would also take on 41 Delta owned aircraft from Skywest. As the former Skywest aircraft come in, other CRJ200s with viable medium term value (let's say 5 years) would receive an engine overhaul. Allegedly, all of the Comair aircraft and half of the Skywest aircraft will need both engines overhauled before 2015 at a cost of $2M per airplane. I can certainly see why Delta would park the aircraft first, but there are other options.

In my sketch of what a restructured Comair would look like, I decided to focus on several focus cities that offer the largest potential for point to point operations. This includes STL, PIT, BNA, and MSY. In addition, a new BWI focus city would be opened to focus on connecting the DC area with numerous medium sized business markets. There are also opportunities to be opportunistic in this environment with regards to flying EAS and SCASD markets where sensible.

The following markets would be flown:

To/From STL 2x daily: SDF, LIT, MKE, OKC, JAX, BHM, BNA, AUS, CMH
To/From STL 3x daily: MSY, SAT, OMA, RDU, MCI

To/From PIT 2x daily: ALB, RDU, ORF, MEM, BNA

To/From BNA 2x daily: GSP, OKC, BUF, RIC, RSW, CHS
To/From BNA 3x daily: JAX, MSY, AUS
To/From BNA 4x daily: MCI, RDU

To/From MSY 2x daily: JAX, BHM, IND, SAT, AUS, TUL, OKC

To/From BWI 2x daily: RSW, JAX
To/From BWI 3x daily: ALB, BOS, BUF, CLE, BDL, IND, BNA, MSY, PIT, PBI, PVD
To/From BWI 4x daily: STL
To/From BWI 6x daily: MDW

EAS flying 2x daily: PDT-SLC, JBR-ATL, DEC-DTW, BRL-DTW, HGR-DTW, LNS-DTW, MKL-DTW, VCT-MEM, MCN-ATL


Before mentioning ExpressJet or Independence Air, remember that Comair had a codesharing relationship with Delta as an independent airline. It is more helpful when flying thin point to point markets to have a large hub and spoke network to support you. That way, customers can fly one way on the nonstop and make a connection on the way back.
 
rampart
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 3:04 pm

I like it.

I will mention ExpressJet, but in a positive way. At least 1/3 of ExpressJet in their stand-alone venture was very successful. Are you saying that the DL code-share in place would be enough to float the remaining 2/3?

Second, how would you handle direct and probably fierce competition from WN, in STL, BNA, MSY, and BWI?

-Rampart
 
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Polot
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 3:13 pm

Quoting JA (Thread starter):
This includes STL, PIT, BNA, and MSY. In addition, a new BWI focus city would be opened to focus on connecting the DC area with numerous medium sized business markets.

So..you want this new Comair to just be destroyed by WN?

Quoting JA (Thread starter):
Before mentioning ExpressJet or Independence Air, remember that Comair had a codesharing relationship with Delta as an independent airline.

When? Comair has been wholly owned by Delta since 1999, and DL has had a financial stake in them since 1986. Comair hasn't been an independent airline in a long time. If you are talking about this theoretical airline and are using the past tense by mistake, why would DL codeshare with this airline versus putting its passengers on its planes and routing them through their hubs, collecting all of the revenue?
 
Mir
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 3:20 pm

Quoting rampart (Reply 1):
Second, how would you handle direct and probably fierce competition from WN, in STL, BNA, MSY, and BWI?

And that's the real problem with this proposal - every focus city is a WN stronghold (maybe not MSY, but that still leaves three). You'd have to shoot for some markets that don't have a carrier like that, but unfortunately WN is pretty big in all of them.

-Mir
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usflyer msp
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 3:22 pm

I don't see the point? Most of those markets are precisely the type of markets that 50-seat RJ economics do not work on - medium sized markets with LCC competition.
 
EricR
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 3:37 pm

Would not work. WN has the pricing power (and frequency) in these cities (STL, BWI, BNA). The only way Comair could penetrate is via low fares, but I don't see how that could financially work considering those RJs would not be very cost effective against WN's 73s.
 
xjramper
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 4:07 pm

The biggest flaw with this plan is that Delta is going to be done with all 50-seat jet flying here soon regardless of what you want to spin OH into. IIRC, FL utilized ZW CR2s a few years back to cover some of the thin markets that just couldn't sustain 717 flying, and after a while, FL realized that they could fly an almost empty 717 and lose less money than they would flying a full CR2, which is why they cut that service. They tried it again with OO and their contract with OO was terminated prematurely, although I suspect that had something to do with the WN takeover but money loss was a definite factor as well.

Secondly, DL has tried variations to P2P flying and EAS flying and it just isn't lucrative. Certain non-hub cities have some P2P routes, but mostly they have cut those routes way back.

Thirdly, as others have pointed out, WN would crush the already money-loss CR2s.

So what was the question again?
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DeltaMD90
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 4:11 pm

I know we'd all love to see Comair stay, but we're thinking in the wrong mindset here... Delta is a business. The easiest and cheapest way to reduce costs at OH is to shut them down and transfer their assets to OO. I hate it too but that's the way it's gonna be. If you could find a plan (and quickly) that is more cost effective than Delta's plan, shoot it their way and I'm sure it'll be implemented. Delta didn't get this far by being a charity.

Plus, I don't see how deploying inefficient 46/50 seaters on WN routes without much feed would solve anything. That's probably the worst thing OH (DL) can do

[Edited 2012-09-15 09:12:20]
Ironically I have never flown a Delta MD-90 :)
 
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seabosdca
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 4:16 pm

Quoting JA (Thread starter):
It is my personal belief that Comair can be restructured into a viable point to point operation supporting the Delta network.

I think no matter how much clever network design you try to do, you can't build a comprehensive network that works today with 50-seaters. They are now a niche tool, suitable only for a few markets that 1) have meaningful business traffic but 2) are too thin to attract LCCs or legacy mainline. As has been pointed out already, many of your proposed routes have LCC competition, and a few more have mainline legacy competition.

Also, I should just point out:

Quoting JA (Thread starter):
In addition, a new BWI focus city would be opened to focus on connecting the DC area with numerous medium sized business markets.

Business travelers out of DC will not use BWI in any great numbers. It's too far away from the center of gravity of business in DC, which is between the western half of the District and Northern Virginia.
 
strfyr51
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 5:19 pm

This is pretty much a dead issue, DELTA hasn't the SLIGHTEST interest in saving comair and they own them AND the leases on their airplanes... Comair's days were numbered after the. Last pilots strike. UAL bought,cut up and flushed Air Wisconsin in the same manner in the previous decade. Maybe you armchair CEO's might want to do more research. The demise of the regionals was a foregone conclusion once they hopped lustily in to bed with the majors. Before all of this incestuous behavior began. Regionals had their own CSR, reservations,ground handling and catering staffs. they shed all of that to becomes indentured slaves. And NOW?? Slavery has run it's course and regionals are summarily being tossed on the scrap heaps.. They should return to the previous arms length partnerships. And again live or DIE on their OWN merit and Business plan..
 
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seabosdca
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 5:37 pm

Quoting strfyr51 (Reply 9):
They should return to the previous arms length partnerships. And again live or DIE on their OWN merit and Business plan..

It's not about how independent they are from the majors (although without the majors' customer-facing systems they'd quickly be dead in the water today). It's about the fact that 50-seat jets just don't work in today's economic environment, no matter who's flying them. Even 70-seaters are in jeopardy.
 
PHX787
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 6:53 pm

Quoting Polot (Reply 2):
Quoting JA (Thread starter):
This includes STL, PIT, BNA, and MSY. In addition, a new BWI focus city would be opened to focus on connecting the DC area with numerous medium sized business markets.

So..you want this new Comair to just be destroyed by WN?

   Exactly. The only reason OH survived this long is because WN never wanted to touch their home turf- CVG. CVG was the main fortress for OH and their relationship (rocky, albeit) with DL is what made OH survive this long, until the apparent inevitable happened.
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flyby519
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 8:18 pm

I think the 50seat CRJs would have a better chance being turned into all-first class, maybe 15-20seats total, and flown between big O&D markets like JFK-MIA, JFK-LAX (if they have the range?), LGA-ORD, etc and keep the codeshare with DL.
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PHX787
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 8:31 pm

Quoting flyby519 (Reply 12):
JFK-LAX (if they have the range?)

Unless you put extra fuel tanks inside them I don't think they'd have the range
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AA94
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 10:18 pm

Quoting seabosdca (Reply 8):
Business travelers out of DC will not use BWI in any great numbers. It's too far away from the center of gravity of business in DC, which is between the western half of the District and Northern Virginia.

  

I love BWI, it's a great medium-sized airport, but it's primary clientele is not business travelers. It's a perfect airport for leisure travel, hence why WN carries ~55% of passengers who pass through there.

DCA is usually the go-to for businessmen in the city.
If you can't take the heat, you best get out of the kitchen
 
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hOMSaR
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 10:21 pm

Quoting flyby519 (Reply 12):
I think the 50seat CRJs would have a better chance being turned into all-first class, maybe 15-20seats total, and flown between big O&D markets like JFK-MIA, JFK-LAX (if they have the range?), LGA-ORD, etc and keep the codeshare with DL.

At that point, you might as well cut 10 more seats out of them and call them business jets.
The plural of Airbus is Airbuses. Airbii is not a word, and doesn't even make sense.
There is no 787-800, nor 787-900 or 747-800. It's 787-8, 787-9, and 747-8.
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lhcvg
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 10:35 pm

Quoting HOMsAR (Reply 15):
At that point, you might as well cut 10 more seats out of them and call them business jets.

  

The only way you'll see premium RJ service is if someone else buys the CRJ-705, or configs an E-Jet in a similar manner. I believe AC is the only current customer for those, and even then they are more akin to PS as they still have Y, rather than all F. A route like LGA-ORD could probably work with an all-F large RJ, but then you get to the point where you're better off just throwing a 757 or 321 on the route to get the same number of F pax plus all the rest. But you'd certainly never see that on a 50 seater due to the economics, and plus anyone paying the premium for that flight wouldn't be cool with the low windows on a CRJ.
 
Bobloblaw
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RE: My Plan To Restructure Comair

Sat Sep 15, 2012 11:14 pm

Quoting JA (Thread starter):
It is my personal belief that Comair can be restructured into a viable point to point operation supporting the Delta network.

There is too much 50 seat capacity.

Quoting JA (Thread starter):
The following markets would be flown:

Ever hear of ExpressJet??? 50 seat point to point doesnt work, period. Plus there is no way Delta would ever agree to a capacity buy in these markets.

Quoting JA (Thread starter):

To/From BWI 2x daily: RSW, JAX
To/From BWI 3x daily: ALB, BOS, BUF, CLE, BDL, IND, BNA, MSY, PIT, PBI, PVD
To/From BWI 4x daily: STL
To/From BWI 6x daily: MDW

Why in the world do you want 50 seat CRJs to compete with WN????
 
FWA2500
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 2:57 am

As much as i wish we werent closing down, there its no turning back now. Delta could have forced a drastic restructure if they wanted, but they didnt, which is why were are now less than two weeks from ceasing ops permanently.
ex-OH@CVG
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 3:34 am

Quoting rampart (Reply 1):
Second, how would you handle direct and probably fierce competition from WN, in STL, BNA, MSY, and BWI?
Quoting Mir (Reply 3):
And that's the real problem with this proposal - every focus city is a WN stronghold (maybe not MSY, but that still leaves three). You'd have to shoot for some markets that don't have a carrier like that, but unfortunately WN is pretty big in all of them.
Quoting usflyer msp (Reply 4):
I don't see the point? Most of those markets are precisely the type of markets that 50-seat RJ economics do not work on - medium sized markets with LCC competition.

Has anyone done the math regarding 50 seaters? The system cost (all in) is around $3,000 per hour. That is around $65 per hour per seat in a 46 seat configuration. Has anyone seen the WN fares lately? More than 50% of the WN fares being sold work on an RJ. The idea that RJs would get creamed by WN is ridiculous. Rather, you let WN fill up on low fares until you reach the RJ break even number and then you match them from there.

17% of WN customers buy full fares. This is an indication that there are a LOT of business travelers on WN.

I'll use STL-BHM as an example. The seat cost is $71.74 for this route on an RJ in this direction. My estimate is that WN is 39% less per seat on the sector. Here is the fare distribution for direct flights on WN from FlightAware:

Minimum: $50.76
Median: $138.99
Maximum: $271.99

Minimum to Median is 50% of the tickets sold. Median to Maximum is the other 50%.

Mathematically, I would be fine competing with more than 50% of WN's nonstop tickets. WN can continue to set the pricing and I would engage them somewhere below the median.

Quoting rampart (Reply 1):
Second, how would you handle direct and probably fierce competition from WN, in STL, BNA, MSY, and BWI?

It's not a problem to have WN set the price. The profit/loss estimates assume that these routes would ignore the first 30% of the WN fare structure and adopt the rest. WN is not cheap anymore. They target the business traveler intensely. WN's network is essentially a web, with nodes in key medium and large business centers as well as leisure points. Many cities double as both. DL has so many hubs that the implementation of point to point operations by OH would essentially make the DL network a web in the East. DL has corporate contracts, so being able to minimize overnight stays is a top priority. Point to point service can speed thousands of trips by giving people a nonstop on at least one side. Even if they have to go through the hub on the other, that is more business to DL.

Quoting AA94 (Reply 14):
I love BWI, it's a great medium-sized airport, but it's primary clientele is not business travelers. It's a perfect airport for leisure travel, hence why WN carries ~55% of passengers who pass through there.

DCA is usually the go-to for businessmen in the city.

DCA has rail access. The Metro is a big part of why DCA is the preferred airport. Everyone cannot fly through DCA (even if the perimeter restrictions are lifted). The BWI plan would include a plan to put in premium rail service every 20-30 minutes directly to Union Station and New Carrollton. Amtrak does the trip in 22 minutes. Two train sets would make a 30 minute schedule. MARC would operate it at a premium fare (about $10-12). It isn't that hard to do, particularly outside the peak rush hour. During rush hour, there are tons of trains already.

Quoting DeltaMD90 (Reply 7):
I know we'd all love to see Comair stay, but we're thinking in the wrong mindset here... Delta is a business. The easiest and cheapest way to reduce costs at OH is to shut them down and transfer their assets to OO. I hate it too but that's the way it's gonna be. If you could find a plan (and quickly) that is more cost effective than Delta's plan, shoot it their way and I'm sure it'll be implemented. Delta didn't get this far by being a charity.

Plus, I don't see how deploying inefficient 46/50 seaters on WN routes without much feed would solve anything. That's probably the worst thing OH (DL) can do

This isn't about keeping Comair's big birds. Those are already gone. The idea here is to take premium traffic from WN. DL likes premium traffic and the premium flyers are generally more time sensitive. WN is not the Borg to DL. They already know that WN's pricing is substantially higher than an FL or a B6. Premium travelers on WN aren't flying for price. They are flying for TIME. Save them time and they will bring you cash.

Delta isn't a charity. They will have to replace engines on the entire OH CR2 fleet by 2015 and more than half of the DL owned OO fleet by the same time. In addition, DL has to NEGOTIATE the modification of contracts with other carriers. They do not have to do so with OH. You eat the low hanging fruit to give you the energy to climb the tree and deal with the highest fruit. However, the market rate for leasing CRJ200s is $30,000 per month. The 21 50 seaters at OH would yield $7.5M in lease revenue. In addition, I have proposed bringing 41 DL owned frames from OO to OH that they have both agreed to remove. That is another $14.7M in lease revenue. In addition, they are no longer responsible for replacing engines on the aircraft. So, they will still save $82M between now and 2015 by not replacing engines. It is going to cost some money to close down OH. So, you can spend money to close the carrier or you can collect $22M per year for at least another 2-5 years until the aircraft are replaced. We haven't even discussed the potential S-curve effects yet.
 
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DeltaMD90
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 3:41 am

Quoting JA (Reply 19):

I don't know what to tell you, the fact that real airlines are moving away from 50 seaters tells me that your assumption is wrong/mostly wrong. If some person on A.net finds a way for an airline to make tons of money, odds are that it's already been thought of (and dismissed.) Legacy spin offs have always done horribly going against LCCs... Song, DLX, Metrojet, Ted, etc so what makes some inefficient 50 seaters special?
Ironically I have never flown a Delta MD-90 :)
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 3:48 am

Quoting fwa2500 (Reply 18):
As much as i wish we werent closing down, there its no turning back now. Delta could have forced a drastic restructure if they wanted, but they didnt, which is why were are now less than two weeks from ceasing ops permanently.

You may be right, but I have actually contacted DL about Comair. Granted, I didn't go into this detail (and there are small, but important pieces missing here), but the absolute worst thing they can say is no. There is a difference between buying a carrier and assuming a feed contract and buying a carrier and operating completely at-risk. I would estimate that the likelihood of this happening is 30% and that is enough to put time and effort into.
 
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DeltaMD90
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 4:10 am

Quoting JA (Reply 21):
I have actually contacted DL about Comair

Well touche, I give you credit for at least trying. I think 30% is extremely high but if you do save OH, I'll buy you a beer   
Ironically I have never flown a Delta MD-90 :)
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 4:16 am

Quoting DeltaMD90 (Reply 20):
I don't know what to tell you, the fact that real airlines are moving away from 50 seaters tells me that your assumption is wrong/mostly wrong. If some person on A.net finds a way for an airline to make tons of money, odds are that it's already been thought of (and dismissed.) Legacy spin offs have always done horribly going against LCCs... Song, DLX, Metrojet, Ted, etc so what makes some inefficient 50 seaters special?

Some good quotes about the airline business:

These days no one can make money on the goddamn airline business. The economics represent sheer hell.
— C. R. Smith, President of American Airlines.

A recession is when you have to tighten your belt; depression is when you have no belt to tighten. When you've lost your trousers - you're in the airline business.
— Sir Adam Thomson

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.
— Warren Buffett, annual letter to Berkshire Hathaway shareholders, February 2008


As of 1992, in fact—though the picture would have improved since then—the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero.
— Warren Buffett, billionaire investor, interview 1999.


Why all of these quotes? Airline management is conservative and reactive. We take JetBlue's existence for granted now, but look at this quote from an industry professional:

I don't think JetBlue has a better chance of being profitable than 100 other predecessors with new airplanes, new employees, low fares, all touchy-feely ... all of them are losers. Most of these guys are smoking ragweed.
— Gordon Bethune, Continental Airlines CEO, Time magazine, June 2002.


JetBlue "broke the glass" in some respects and did what other people were doing better in many other respects. Allegiant also "broke the glass" with regards to its business model and continues to outperform its peers by picking up the business that was ALWAYS THERE. Now, there are lots of CEOs claiming that they cannot support 50 seaters and in their current structure, they are correct. Several airlines have tried exclusively point to point and destroyed themselves. Song, DLX, MetroJet, and Ted were all airlines within an airline using large aircraft. Are you really going to kill yourself?  

The closest thing to a fused hub & point to point structure is WN. WN has the highest large aircraft unit costs in the industry and they are STILL making money. There is a reason for that. They offer lots of nonstops in their web structure. They have reasonable fares which are high enough to make money. Their marketing is excellent. However, their reach is limited. This is where the DL network (and other legacy networks) maintain their advantage. A 50 seat aircraft is the right size to do point to point flying. In fact, even an ER3(!) can make money flying point to point. Since everyone is scared to fly against WN and even more scared to take the 50 seaters point to point to augment their hubs, it makes it cheaper for OH to do this. The price of the planes get forced down and you get ignored just long enough to get your feet set.

It is my hope that no one figures out that I am right except for DL. It would make my life much easier.
 
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ERJ170
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 4:19 am

Available P2P from RDU which should be profitable which Comair could look to do at-risk:

MSY 2x --> 4x
BDA 1x --> 2x
YUL 1x --> 2x
JAX 2x --> 3x
MCI 2x --> 3x
BUF 2x --> 3x
HPN 2x --> 4x
ISP 2x --> 3x
CHS 1x --> 2x
Aiming High and going far..
 
slcdeltarumd11
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 4:26 am

I would say their best bet is to seek EAS or airports with large subsidies. That would certainly help the economics of fuel. Smaller would probably be the best bet and mean small. Use the planes that dont need an expensive overhaul only or ditch them when they do. I think they would have to be very small to survive and only EAS or subsidy airports on one end.

What value do all these have on the market? Wiki lists comair fleet size as "74" and "15 CRJ700" and "5 CRJ900" ? What are the staus of those planes?
 
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DeltaMD90
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 4:26 am

Quoting erj170 (Reply 24):
which Comair could look to do at-risk:

Problem is Comair can't do it "at-risk" as they ARE Delta

Quoting JA (Reply 23):

Well you are right in saying new strategies pop up, but I really don't see how 1: using 50 seaters and 2: going primarily against WN in P2P routes would work since trends have shown that these two ideas don't seem to work. I have no figures or anything to back what I'm saying up, but you can just look at the airlines now to see what they are doing... although they may mismanage at times, the airlines know the airline business best, and they all seem to be going away from 50 seaters and picking their fights with LCCs (at hubs and away from most P2P routes)
Ironically I have never flown a Delta MD-90 :)
 
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seabosdca
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 7:02 am

Quoting JA (Reply 19):
The BWI plan would include a plan to put in premium rail service every 20-30 minutes directly to Union Station and New Carrollton. Amtrak does the trip in 22 minutes. Two train sets would make a 30 minute schedule. MARC would operate it at a premium fare (about $10-12). It isn't that hard to do, particularly outside the peak rush hour. During rush hour, there are tons of trains already.

First, it's still no DCA. From the airport, you have to get on a crowded bus and ride 10-12 minutes even to get to the train station, and then you end up at Union Station which is not close to where you want to be unless you happen to be doing Hill business.

Second, MARC is having trouble obtaining enough revenue to operate its current trains, let alone adding a bunch of new airport-only trains that would not come close to breaking even.

Quoting JA (Reply 19):
ather, you let WN fill up on low fares until you reach the RJ break even number and then you match them from there.

If it were that easy, there would be giant fleets of 50-seaters buzzing all over everywhere in the country with even a splash of business travel activity.

But it's just not that easy. WN (or any other large-aircraft competitor) can easily absorb lowering fares temporarily to capture even the business travelers for long enough to bleed an RJ operator out of money. The 50-seater makes it impossible to engage in a fare war... which will inevitably happen if you attack an incumbent on its home turf.

Many, many operators have actually discovered this in recent years. Think about DL's painful experience in Los Angeles, a very good example, and you get the picture.
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 7:06 am

Quoting erj170 (Reply 24):
Available P2P from RDU which should be profitable which Comair could look to do at-risk:

MSY 2x --> 4x
BDA 1x --> 2x
YUL 1x --> 2x
JAX 2x --> 3x
MCI 2x --> 3x
BUF 2x --> 3x
HPN 2x --> 4x
ISP 2x --> 3x
CHS 1x --> 2x

MSY, JAX, MCI, BUF are on my list. I haven't run these markets in my profit/loss spreadsheet yet, but I'll get to them. YUL is interesting, as is HPN and ISP, but I'm not sure DL would be up for RDU flights from HPN and ISP.

MSY - 199 pax
JAX - 99
MCI - 234
BUF - 148

The model I built will penalize MCI unless the fares are very good, much as fuel generally hits routes over 750 miles pretty hard.
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 7:19 am

Quoting seabosdca (Reply 27):
Second, MARC is having trouble obtaining enough revenue to operate its current trains, let alone adding a bunch of new airport-only trains that would not come close to breaking even.

MARC would make money at $10 per passenger. I don't claim DCA is good enough for everyone, but there is lots of business traffic that is going through it right now.

Quoting seabosdca (Reply 27):
If it were that easy, there would be giant fleets of 50-seaters buzzing all over everywhere in the country with even a splash of business travel activity.

But it's just not that easy. WN (or any other large-aircraft competitor) can easily absorb lowering fares temporarily to capture even the business travelers for long enough to bleed an RJ operator out of money. The 50-seater makes it impossible to engage in a fare war... which will inevitably happen if you attack an incumbent on its home turf.

Many, many operators have actually discovered this in recent years. Think about DL's painful experience in Los Angeles, a very good example, and you get the picture.

WN does not want to lose money right now. Digesting another carrier is expensive. DL is positioned very differently now than in 2008. In addition, WN's fares are at least 20% higher now than in 2008 in most markets. The idea is not to engage in a fare war. The idea is to recapture business traffic under the WN fare structure. The vast majority of the markets listed for BWI passed a special profit/loss test that assumes 70% load factor at the lowest average fare in the market and no connections. It is why DL isn't panicked about WN metal in ATL. They know that WN is going to raise FL's fares to something that DL can make money at. WN's powder is largely being used in DEN.
 
PHX787
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:29 am

Quoting JA (Reply 21):
I have actually contacted DL about Comair.

I would like to know what they said.



Also I would like to point out this: Comair is a Cincinnati airline. There's no way THEIR brass is gonna want to move away from CVG. You all need to take this into consideration.

OH was founded after de-reg which left a huge hole in CVG, a hole which OH filled, and which DL bought. Now the hole is back, and the people at CVG are scrambling to figure out what defines "profitability" for themselves and trying to get DL or other airlines to continue their routes to CVG (or with other airlines, ADD routes) despite the airline's notion of profitability.

Be that so, route planning falls solely on DL.


There's your brief history of OH.

Now you intend to take OH (Ohio, remember) and turn it into some WN thing? from STL?    It's not making too much sense to me.

edit: Cincinnatians also aren't gonna like the fact that their Cincinnati airline is going to their arch-rival city, STL   
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xdlx
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 12:38 pm

With all due respect..... OH is a success story for commuter-regional airline.
Its demise is directly related to SCOPE & the inability to secure 70-90 seat flying in a competitive enviroment.
Their crews are top notch and experienced. But the marketplace disregards those accolades in favor to lower cost and wages.

No reason to spin this around....... I have many friends in OH and feel for them! But they are leaving the industry
with their head high and so they should. They where a very important part of DL history in CVG.
Good luck my OH friends.......Best paid til last day!
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 12:50 pm

Quoting PHX787 (Reply 30):
Cincinnatians also aren't gonna like the fact that their Cincinnati airline is going to their arch-rival city, STL

Delta is operating a few miles from home as well. Don't those folks hate New York?  
 
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Polot
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 1:19 pm

Quoting JA (Reply 29):
MARC would make money at $10 per passenger. I don't claim DCA is good enough for everyone, but there is lots of business traffic that is going through it right now.

So assuming that every Comair flight is full and every passenger is using MARC that is only $500 a plane...no where near enough to support new trains/lines.

Quoting JA (Reply 29):
WN does not want to lose money right now. Digesting another carrier is expensive.

They don't want to lose money right now...no carrier ever does. But that is different that deluding yourself into thinking they aren't willing to get in a turf war with another carrier. Especially one that would be easy to squash as this one.

Quoting JA (Reply 29):
In addition, WN's fares are at least 20% higher now than in 2008 in most markets. The idea is not to engage in a fare war. The idea is to recapture business traffic under the WN fare structure.

But why would a business traveler chose Comair over WN if they are the same price? Why would I choose an airline with a limited network and limited frequency in cramped, uncomfortable CRJ-200s when I can fly 737s that have more legroom on a carrier with a good domestic network?

You also must have contingencies in place. What if WN DOES lower its fares in a fare war, how will your airline survive? To run a successful business you need to think of all the worse possible scenarios and how your business will over come them if they come into fruition. You can't just ignore them and only think of sunshine and flowers and think everything is going to be all right with your airline.

People care about value in the end, not just price. I get more for my money with WN than this Comair...what is Comair's hook? Other airlines have TVs or more legroom to help attract passengers at higher fares, all this airline has different is that it is using 50 seat jets, which generally are not the most popular jets among passengers.
 
FlyPNS1
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 1:42 pm

Even if the economics of your plan worked (and I don't think they do), you are ignoring a few other factors. Business travelers HATE the CRJ200. They are cramped, miserable planes to fly in. The customer service level is just poor. Two, DL has already tried a vast array of P2P RJ routes and they've perpetually failed. So why would yours be any different?

Quoting JA (Reply 19):
We haven't even discussed the potential S-curve effects yet.

The "S-curve" effect is a nice sales pitch from a consulting firm, but reality is quite different. Remember, when DL claimed S-curve economics would allow them to add all these new routes from PIT, STL, CMH and RDU. Here we are three years later and those markets have little to show for it.

Quoting JA (Reply 29):
WN does not want to lose money right now.

For the small number of routes you are talking about, WN could easily engage in a fare war. A bunch of $39 specials and the RJ's would be in big trouble.

Quoting JA (Reply 23):
WN has the highest large aircraft unit costs in the industry

False. The fact that you believe this concerns me about the analysis you are doing for the OH CRJ's. While WN does have the highest labor costs, the overall costs at WN are lower than the legacy carriers by a decent margin.
 
Bobloblaw
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 1:52 pm

Clearly youve done a lot of research.
 
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 1:59 pm

Quoting FlyPNS1 (Reply 34):
While WN does have the highest labor costs, the overall costs at WN are lower than the legacy carriers by a decent margin.

I believe this "plan" would leave the new Comair with even higher costs. The only employees left now are the most expensive, most senior. Passengers have shown repeatedly that they are not willing to pay a fare that reflects the cost of such experience. WN now has some of the highest labor costs in the industry (which I believe will come back to haunt them within 5 years), but at least for now they can still spread the cost over a much larger passenger base. Your plan cannot. You'd be better off buying the certificate, and starting a new carrier. But your plan really doesn't support that either. CVG currently has the air service it can support. Cinci-tuckians still think the airport should have 500 daily flights to 150 cities. Those days are over.
 
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 2:01 pm

Quoting xjramper (Reply 6):
They tried it again with OO and their contract with OO was terminated prematurely, although I suspect that had something to do with the WN takeover but money loss was a definite factor as well.

It was 100% to do with the WN takeover. If there was any money to lose, it was OO's. Mum's the word on the financials on that operation, but management seemed to be pleased.
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 2:19 pm

Quoting JA (Reply 19):
Has anyone done the math regarding 50 seaters? The system cost (all in) is around $3,000 per hour. That is around $65 per hour per seat in a 46 seat configuration. Has anyone seen the WN fares lately? More than 50% of the WN fares being sold work on an RJ. The idea that RJs would get creamed by WN is ridiculous. Rather, you let WN fill up on low fares until you reach the RJ break even number and then you match them from there.

If CRJs are so cheap to operate that you could make a profit charging fares starting at just over $65/hour/seat, then why aren't existing regional airlines swimming in money? Typical RJ flights (and, granted, I don't have exact numbers in front of me) generally run far higher than that (heck, typical LCC flights tend to run higher than that unless you're talking bottom-of-the-barrel Spirit fares or something like that). Yet, despite the (supposed) low cost, airlines left and right are trying to dump these planes like a bad date.

So, either the airlines (which have direct, everyday experience operating these planes and are intimately familiar with the costs involved) are doing it wrong, or there's something wrong with your math. Which do you think is more likely?

That's not to say that there isn't something out there that every airline has missed (new things are thought of every day), but I really don't think it's as simple as you make it out to be.

Quoting JA (Reply 19):
DCA has rail access. The Metro is a big part of why DCA is the preferred airport. Everyone cannot fly through DCA (even if the perimeter restrictions are lifted). The BWI plan would include a plan to put in premium rail service every 20-30 minutes directly to Union Station and New Carrollton. Amtrak does the trip in 22 minutes. Two train sets would make a 30 minute schedule. MARC would operate it at a premium fare (about $10-12). It isn't that hard to do, particularly outside the peak rush hour. During rush hour, there are tons of trains already.

You're assuming Amtrak would be okay with adding all that service to their railroad (it's pretty congested during peak times).

Turning at BWI would complicate things even further, as you'd tie up far more track than normal (sitting at the station for 8 minutes, then changing ends and heading out, preventing any other trains from moving in your direction until you've cleared the interlocking). Maybe if you built an extra track and platform, but now you're talking hundreds of millions in investment.

Others have mentioned the shuttle bus from BWI to the rail station, which is the most annoying part of the transfer, so you'd have to spend a bunch to add more shuttles.

All this for what amounts to 15x46 passengers per day. That's 690 people flying into BWI on this new Comair. Not all of whom would even be going to DC.

Granted, other airline passengers could also use this service. But still, besides the capacity issue, if there were a profit to be had by running more frequent Union Station-BWI service, between MARC and Amtrak they'd already be doing it.
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 8:13 pm

Quoting JA (Reply 32):
Delta is operating a few miles from home as well. Don't those folks hate New York?

Well most of us were a little peeved to see service moved from here to NYC
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JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 9:39 pm

Quoting Polot (Reply 33):
But why would a business traveler chose Comair over WN if they are the same price? Why would I choose an airline with a limited network and limited frequency in cramped, uncomfortable CRJ-200s when I can fly 737s that have more legroom on a carrier with a good domestic network?

You would have to make the case that WN's network is better than DL's network (as OH would be codesharing with DL). I would disagree with you. You would also have to make the case that a CRJ200 with 46 seats (which would be the new configuration) would have less legroom than a WN 737. They would end up being about the same (33-34 inches).

Quoting Polot (Reply 33):
What if WN DOES lower its fares in a fare war, how will your airline survive? To run a successful business you need to think of all the worse possible scenarios and how your business will over come them if they come into fruition. You can't just ignore them and only think of sunshine and flowers and think everything is going to be all right with your airline.

I don't see WN cutting their fares by 30% in BWI...or anywhere else for that matter. That is approximately what it would take to make the business not worth doing. WN also initiated a fare increase on both 8/17 and 9/14 and was matched.

http://www.bizjournals.com/philadelp...est-raises-fares-united-delta.html

http://articles.latimes.com/2012/sep...la-fi-southwest-fare-hike-20120914

Quoting FlyPNS1 (Reply 34):
Two, DL has already tried a vast array of P2P RJ routes and they've perpetually failed. So why would yours be any different?

In many of those markets, the average fare was too high. Some of the RDU point to point markets saw 20% average fare increases. My plan is based on running at existing fares.

Quoting FlyPNS1 (Reply 34):
The "S-curve" effect is a nice sales pitch from a consulting firm, but reality is quite different. Remember, when DL claimed S-curve economics would allow them to add all these new routes from PIT, STL, CMH and RDU. Here we are three years later and those markets have little to show for it.

Critical mass. S-curve economics is based on a certain amount of critical mass. Token additions do not cut it. RDU seems to have gained some traction as two of the point to points were saved due to customer outcry. STL has a ton of DL service already and it would not take much to make it a focus city. In fact, DL was looking at 80-100 flights two years ago.

Quoting HOMsAR (Reply 38):
If CRJs are so cheap to operate that you could make a profit charging fares starting at just over $65/hour/seat, then why aren't existing regional airlines swimming in money?

The major keeps it through CPA agreements. The BTS data is there if you want to verify the numbers.
 
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Polot
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:00 pm

Quoting JA (Reply 40):
You would have to make the case that WN's network is better than DL's network (as OH would be codesharing with DL).

So why would Delta go through all this trouble just to keep Comair alive? Why take the planes from Skywest and give them to Comair when they can just have Skywest fly the routes if they think they can make so much money on them? Then Delta can not only reap these supposedly huge profits but also wash its hands with all the troubles that is involved with owning a regional. If the BWI/DC business traveler was such a huge untapped market why did DL get rid of most of its DCA's slots? DCA is by far the preferred airport for business travelers in the region.



Quoting JA (Reply 40):
You would also have to make the case that a CRJ200 with 46 seats (which would be the new configuration) would have less legroom than a WN 737. They would end up being about the same (33-34 inches).

So you are making the CRJ's already poor economics even worse. And reducing the number of seats by 4 is going to do little to make a CRJ attractive compared to a 737 to me and most other people. There are fundamental problems with the passenger experience of the CRJ-200 that cannot be easily fixed (which is something Bombardier recognized and improved with the CRJ-700/900).

Quoting JA (Reply 40):
I don't see WN cutting their fares by 30% in BWI...or anywhere else for that matter. That is approximately what it would take to make the business not worth doing. WN also initiated a fare increase on both 8/17 and 9/14 and was matched.

You don't see it, but what if they surprise you? Your Comair is then SOL. WN doesn't need to cut all their fares by 30%, just on the flights that Comair would directly compete with.

Quoting JA (Reply 40):
In many of those markets, the average fare was too high. Some of the RDU point to point markets saw 20% average fare increases. My plan is based on running at existing fares.

How do you know that the average fare is too high? Maybe the average fare was too low and nobody was making money until the fare increase.

Quoting JA (Reply 40):
Critical mass. S-curve economics is based on a certain amount of critical mass. Token additions do not cut it. RDU seems to have gained some traction as two of the point to points were saved due to customer outcry. STL has a ton of DL service already and it would not take much to make it a focus city. In fact, DL was looking at 80-100 flights two years ago.

Ok, but why does DL need OH to do this? Why not have its remaining partners do the increased flying?

You are just looking for an excuse to keep OH around. DL (rightfully) does not care about OH's heritage, everything you suggested could easily be done by DL without OH around if they actually saw money in it.
 
usflyer msp
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:01 pm

Quoting JA (Reply 40):
I don't see WN cutting their fares by 30% in BWI...or anywhere else for that matter. That is approximately what it would take to make the business not worth doing. WN also initiated a fare increase on both 8/17 and 9/14 and was matched.

A 30% fare cut is very easy to justify if it means getting rid of your competition.

Your entire business proposition seems to based upon some fictional world where airlines do not react to one another. OH does not exist in a vacuum and would be subject to a severe reality check if it ever tried this plan.
 
steex
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:01 pm

Quoting JA (Reply 19):
The system cost (all in) is around $3,000 per hour.

Could you provide a breakdown of what these costs include? I'm just curious where the number comes from as I've certainly not done the research that you have.

Quoting JA (Reply 40):
You would have to make the case that WN's network is better than DL's network (as OH would be codesharing with DL). I would disagree with you. You would also have to make the case that a CRJ200 with 46 seats (which would be the new configuration) would have less legroom than a WN 737. They would end up being about the same (33-34 inches).

For most fliers in the cities you target, it's not difficult to make the case that WN has the better network. Not everyone in STL (for example) is looking to have the world in their reach with one stop, some are just looking to have major domestic markets in their reach non-stop with reasonable fares. Note that "reasonable fares" doesn't always mean cheapest, either - many travelers, especially business travelers, will pay some premium to fly WN because of the inherent flexibility their tickets provide.

Also, legroom isn't the sole reason people find the CRJ uncomfortable. You could put only four seats on a CRJ, and if they were placed 2-2 in a single row such that I would have to try to share my shoulder room with another person, I would still avoid that plane like the plague.
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:06 pm

Quoting HOMsAR (Reply 38):
You're assuming Amtrak would be okay with adding all that service to their railroad (it's pretty congested during peak times).

Amtrak operates the Penn Line under contract. They would try to fit it in. The chokepoint is actually Union Station itself.

Quoting HOMsAR (Reply 38):
So, either the airlines (which have direct, everyday experience operating these planes and are intimately familiar with the costs involved) are doing it wrong, or there's something wrong with your math. Which do you think is more likely?

That's not to say that there isn't something out there that every airline has missed (new things are thought of every day), but I really don't think it's as simple as you make it out to be.

It isn't a matter of "simplicity". The conventional wisdom is often the path of least resistance. No major airline has to make 50 seaters work. They can simply abandon markets that need anything smaller than 70 seats. This improves the performance of the airline that drops the markets and increases the pricing power of those that remain. In the short term, both paths are viable, but one is harder than the other. As with the gas guzzling MD80s, there are people who would choose to make the 50 seater work. I believe the planes can work when backed by a solid network. The fact that majors CHOOSE not to make it work is of no consequence to me.
 
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Polot
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:33 pm

Quoting JA (Reply 44):
As with the gas guzzling MD80s, there are people who would choose to make the 50 seater work.

Well where are they? There are several airlines who would love to have them. People are quickly turning their back on the MD-80 too...don't forget Allegiant's recent A319 announcement.
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:34 pm

Quoting Polot (Reply 41):
So why would Delta go through all this trouble just to keep Comair alive?

Who said anything about DL doing this? I am proposing that an independent Comair do this.

Quoting Polot (Reply 41):
If the BWI/DC business traveler was such a huge untapped market why did DL get rid of most of its DCA's slots?

NYC is a bigger market. The swap was a no brainer. Life is all about tradeoffs.

Quoting usflyer msp (Reply 42):
Your entire business proposition seems to based upon some fictional world where airlines do not react to one another. OH does not exist in a vacuum and would be subject to a severe reality check if it ever tried this plan.

Retaliation is a fact of life in transportation. I get threatened a lot. No one fights you if they aren't making money there. This isn't the first time I have tried this. The only difference between aviation and ground transportation is that people tend to use death threats and violence much more frequently on the ground. So, if the main premise is that WN goes nuclear, you have to do better than that.

Quoting Polot (Reply 41):
How do you know that the average fare is too high?

The market usually tells you.

Quoting steex (Reply 43):
Not everyone in STL (for example) is looking to have the world in their reach with one stop, some are just looking to have major domestic markets in their reach non-stop with reasonable fares. Note that "reasonable fares" doesn't always mean cheapest, either - many travelers, especially business travelers, will pay some premium to fly WN because of the inherent flexibility their tickets provide.

You are 100% correct. In a large number of markets, WN has the better network because they have substantially more point to point flights. The plan is simply to provide similar connectivity using an independent OH under the DL code. My premise is simply that by providing more point to point flights, the DL network will become an option for more itineraries at no additional cost to DL. That is the entire premise of the plan.

Quoting steex (Reply 43):
Also, legroom isn't the sole reason people find the CRJ uncomfortable. You could put only four seats on a CRJ, and if they were placed 2-2 in a single row such that I would have to try to share my shoulder room with another person, I would still avoid that plane like the plague.

I think people will tolerate CRJ200s (in general) to save time. I am sure that when the choir begins singing that 70 seaters are tough to make money with, OH can simply upgauge.
 
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Polot
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:37 pm

Quoting JA (Reply 46):
Who said anything about DL doing this? I am proposing that an independent Comair do this.

You did. In fact in your very first post you suggest OH take Delta owned CRJs from Skywest. You are also trying to argue that this new Comair will be fine because it will have access to Delta's network. Why would Delta allow that but not have the flying under the Delta Connection banner? You are now creating a competitor to Delta and Delta Connection. So in addition to WN trying to squash you you will have DL too.

Quoting JA (Reply 46):
The market usually tells you.

I can fly BZN- MCN and have completely full planes if I price it right. What does that tell you?

Quoting JA (Reply 46):
The plan is simply to provide similar connectivity using an independent OH under the DL code. My premise is simply that by providing more point to point flights, the DL network will become an option for more itineraries at no additional cost to DL. That is the entire premise of the plan.

Again, why would Delta allow this? You are just creating a new competitor for DL that can leech off their network. If DL wants this flying it will have it done under the Delta Connection brands. Whats the point of having an independent OH if Skywest, Republic, or someone else can do the flying too?



[Edited 2012-09-16 15:39:05]

[Edited 2012-09-16 15:43:15]
 
usflyer msp
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:38 pm

Quoting JA (Reply 46):
Retaliation is a fact of life in transportation. I get threatened a lot. No one fights you if they aren't making money there. This isn't the first time I have tried this. The only difference between aviation and ground transportation is that people tend to use death threats and violence much more frequently on the ground. So, if the main premise is that WN goes nuclear, you have to do better than that.

Huh?
 
JA
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RE: My Plan To Restructure Comair

Sun Sep 16, 2012 10:45 pm

Quoting Polot (Reply 45):
People are quickly turning their back on the MD-80 too...don't forget Allegiant's recent A319 announcement.

People have turned their back on the MD-80 for 10 years now. How do you think Allegiant got theirs at the price they got them? No plane lasts forever, but the MD-80 continues to be commercially viable 10 years after the conventional wisdom said they were not. The Allegiant management made them work. All planes have missions and sometimes, the mission assigned isn't right for the plane. If you go to a cornerstone strategy, the 50 seater does not work as well. The strength of the 50 seater may not be the strength of your airline. Therein lies the rub. The 50 seater is no longer the best plane to run hub and spoke. If you are a hub and spoke airline, this could be an issue.

However, a point to point structure is different. The plane can do that just fine.