txjim
Posts: 244
Joined: Fri May 16, 2008 1:44 pm

Re: How to Revive Airline Competition

Fri Mar 02, 2018 7:27 pm

IPFreely wrote:
AWACSooner wrote:
How about the traveling public actually decide to vote with their wallets against the 28" seat pitch, crappy service, and paying to load your own bags in their overhead bin?


People have voted with their wallets.

This board is chock full of posters who vote for tiny seats and poor service with their wallets then complain when they get what they pay for. It’s pretty entertaining, really.

I recently booked AS DFW/SEA and paid $100 extra (about 25%) higher for Premium Class seating. Seat map showed about 60% of economy seats occupied (5 months out) and zero PC seats taken. People have voted.

I agree with AWACSooner (BTW, I always enjoy work trips to Tinker) in that some Y+ seats are overpriced but they don't have to be. Delta and AS have a little extra room and amenities for a little extra money. That's all I'm looking for, especially on relatively short trips. Have not seen what AA will be offering yet.
 
ual777
Posts: 1636
Joined: Thu Aug 14, 2003 6:18 am

Re: How to Revive Airline Competition

Fri Mar 02, 2018 7:51 pm

klm617 wrote:
DFWAviator76 wrote:
klm617 wrote:


First of all let's go a step further what are the margins that BA, LH, AF and KL operate at and the we can get a better picture of if the US3 is to greedy or not. So those margins include all the incidental fees or just based on the ticket price paid ? Southwest has been profitable year after year because of good management and for a long time was a great value for the price. I would say the reasons many airlines failed was because of very poor management not because their fares were to low if anything the reason people say this is because airlines didn't charge enough to make up for their bad managing or recourses. Now with most of the competition eliminated through mergers they can basically call the shots in the market always charging more to cover their blunders sort of like when airlines were regulated

First of all, let's be clear: the "competition" that was "eliminated" via mergers, by and large, wasn't what you would call the "good" competition. PanAm and Eastern were "eliminated" not by mergers but poor management. TWA would have been liquidated if it weren't for AA purchasing it. The list goes on and on. There are many issues surrounding the history of airline service, profitability, customer satisfaction, and the like, but the overarching fact remains that, in a post-deregulation world, the "legacy" carriers had to deal with a multitude of changes to their business model. The most dramatic effect was that customers, by and large, made their airline decisions almost exclusively on price. Trying to survive in that new world took time, and many carriers didn't make it because they weren't nimble or smart enough. Others have made it, and even thrived. And, for customers willing to pay a true market price for the privilege, they have in-flight luxuries few could have imagined even 20 years ago.



Let's face it though the only reason they survived is because of the elimination of the competition. They haven't made it because they were significantly better than the others. They just bought them up until there was nobody left but the big 3. The only really well run airlines have been AS and WN and they have survived everything but not wanting the whole pie but just a portion of the pie. The real problem is everybody thought they had to fly everywhere to be profitable and as AS and WN proved that is not the case. We give credit to the airlines for being well run now but the reality is the only reason they can turn the profits they do now is because of lack of customer choice for 75% of the US traveling public. Outside of the top ten metro areas in the US you are pretty much screwed at getting a reasonable fare.


Untrue.

First, what do you consider a reasonable fare? Smaller markets will of course not have as much competition because they simply cannot sustain the service.

The US airline industry beat the absolute crap out of itself for decades before the "big 3" emerged and it wasn't good for anyone in the long term. If you actually compare small/medium markets in the US and Europe and adjust for distance (the US tends to be much longer) the prices are often quite similar.

This talk about no choice is also a myth. Doing a search of a few random small/mid market airports in the US results in this:

LFT (metro 490,000) - AA, DL, UA
CHS (metro 744,526) - AS, AA, G7, DL, UA, B6, WN, F9
OMA (metro 915,000) - AC, AA, AS, G7, UA, DL, WN

Only the truly smallest of markets have one or two airlines flying there, and its usually due to it being so small and geography relative to hubs.

Looking at Germany for example, even mid sized cities like Dresden, Leipzig, and Hannover all have metro populations above 1,000,000 people. Population density and public transport is also much higher and better respectively. If you look at small markets like Muenster (population 300,000) the level of air service drops dramatically compared to mid-sized markets.

The point is, not only is the population in the EU higher and denser, the markets themselves are quite different. Stage lengths in the US are much longer between smaller markets than in the EU. New York to Sacramento is over 1,000 miles further than Moscow to London for perspective.
It is always darkest before the sun comes up.
 
AWACSooner
Posts: 2414
Joined: Tue Jan 22, 2008 12:35 am

Re: How to Revive Airline Competition

Fri Mar 02, 2018 8:30 pm

txjim wrote:
I agree with AWACSooner (BTW, I always enjoy work trips to Tinker) in that some Y+ seats are overpriced but they don't have to be. Delta and AS have a little extra room and amenities for a little extra money. That's all I'm looking for, especially on relatively short trips. Have not seen what AA will be offering yet.

UA seems to the be the worst by a long shot at pricing for E+ (at least at booking)...nearly ALL my flights over the past 6 months with them, the starting price is $89, and that's on an OKC-IAH run...a whopping ONE HOUR flight!

(BTW, I always enjoy work trips that take me AWAY from Tinker) ;)
 
Aliqiout
Posts: 282
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Re: How to Revive Airline Competition

Fri Mar 02, 2018 9:21 pm

klm617 wrote:
AAvgeek744 wrote:
LAX772LR wrote:
No offense, but all this does is showcase that you don't know what the term signifies.
"Legacies" are the remaining airlines who had interstate operational authority prior to deregulation in 1978.

Of mainline carriers, only four remain: DL, AA, UA, and AS.
IINM, there are some regional operators remaining as well, though I'm at a loss for naming any off hand.

That is the "legacy" that is being referred to.
It has nothing to do with size nor transoceanic flights.

WN is not, nor will they ever be, a Legacy airline.


No offense, but I absolutely know what the term legacy means, I come from an airline family whose father and brother both flew for airline long before deregulation.. My comment stands that it is an out-of-date way to refer to airlines. I consider WN as much of a "legacy carrier" as anyone. Means zero to the public, means zero to me. Cheers.



I agree Southwest is a legacy carrier it operates along the same line as the US3 it is no longer the huge value it once was against the majors.

What are you trying to say? You cant just agree with one person to change the definition of a word. We might as well give up talking. If you are just trying to say WN is similar to the legacies, fine, but there are plenty of real words to use to say that. US4 works well.
 
AAvgeek744
Posts: 750
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Re: How to Revive Airline Competition

Fri Mar 02, 2018 9:46 pm

Aliqiout wrote:
klm617 wrote:
AAvgeek744 wrote:

No offense, but I absolutely know what the term legacy means, I come from an airline family whose father and brother both flew for airline long before deregulation.. My comment stands that it is an out-of-date way to refer to airlines. I consider WN as much of a "legacy carrier" as anyone. Means zero to the public, means zero to me. Cheers.



I agree Southwest is a legacy carrier it operates along the same line as the US3 it is no longer the huge value it once was against the majors.

What are you trying to say? You cant just agree with one person to change the definition of a word. We might as well give up talking. If you are just trying to say WN is similar to the legacies, fine, but there are plenty of real words to use to say that. US4 works well.


I'm not sure who are are addressing, but it's my opinion. I know airline history. I choose to put WN on an equal level with the other three. Not hard to wrap your head around.
 
c933103
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Re: How to Revive Airline Competition

Fri Mar 02, 2018 11:09 pm

klm617 wrote:
c933103 wrote:
Is there currently not enough competition among airlines in the states?



Not even close to enough. There was a time when there were 15 major airlines operating now there are 4. The najot markets will always have enough competetion but in secondary market the competition suffers.

I am under an impression that many of those smaller cities in the US are not large enough to sustain multiple services offered by multiple carriers with reasonable economic of scale for all? With a small market, If a new airlines flying into the market competing against existing airlines then oversupply would occur, then either existing carrier have to down gauge which would result in an increased cost per seat, or until one of them can't sustain it and revert back to fewer choice?
Say NO to Hong Kong police's cooperation with criminal organizations like triad.
 
strfyr51
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Re: How to Revive Airline Competition

Fri Mar 02, 2018 11:30 pm

mia wrote:
I look at flights to New Orleans from New York, and South Florida from New York. You used to be able to find $200-$250 on the routes for a weekend trip. Now, the only way to find those fares is to fly on a Wednesday or morning on Saturday and fly back Tuesday morning. We do not have enough real competition.


We have plenty of competition! Have you LOOKED at the price of things lately?? A GMC Terrain that I bought my wife for $25,600 in 2012 now costs $35,500 for the Base model while I added Leather interior and damn near every option known to man for $31,300.. Wages for Airline employees Especially Mechanics were $18.00 per hour in 1984 are now $38.50 HR in 2017 (because there are a Lot Fewer to be had) and you want prices to stay the same?? Are you Kidding??
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

Re: How to Revive Airline Competition

Sat Mar 03, 2018 1:15 am

DFWAviator76 wrote:
First of all, let's be clear: the "competition" that was "eliminated" via mergers, by and large, wasn't what you would call the "good" competition. PanAm and Eastern were "eliminated" not by mergers but poor management. TWA would have been liquidated if it weren't for AA purchasing it. The list goes on and on. There are many issues surrounding the history of airline service, profitability, customer satisfaction, and the like, but the overarching fact remains that, in a post-deregulation world, the "legacy" carriers had to deal with a multitude of changes to their business model. The most dramatic effect was that customers, by and large, made their airline decisions almost exclusively on price. Trying to survive in that new world took time, and many carriers didn't make it because they weren't nimble or smart enough. Others have made it, and even thrived. And, for customers willing to pay a true market price for the privilege, they have in-flight luxuries few could have imagined even 20 years ago.


Exactly.

The evolution we are witnessing in the industry today is the inevitable, eventual adjustment to consumers' own behavior. Airlines figured out decades ago that different passengers had different willingness to pay, and discriminated accordingly - charging higher fares to consumers willing to pay more, and charging lower fares to consumers willing to pay less. But the product received varied far less than the prices paid - domestic flights basically all had the same two cabins, and international flights had two and maybe in some cases three. But then consumers got new choices - airlines willing to charge even lower fares to people willing to not only pay less, but also willing to get less in return. And millions of consumers responded favorably, happily giving up seat assignments and free drinks and carry on bags in exchange. So now that consumers have signaled a desire to purchase such offerings, I don't know why some seem so offended by airlines ... sell it to them.

c933103 wrote:
I am under an impression that many of those smaller cities in the US are not large enough to sustain multiple services offered by multiple carriers with reasonable economic of scale for all? With a small market, If a new airlines flying into the market competing against existing airlines then oversupply would occur, then either existing carrier have to down gauge which would result in an increased cost per seat, or until one of them can't sustain it and revert back to fewer choice?


Well of course. This is another example of something that is - or at least should be - so intuitively obvious that I'm not sure why it's even worth discussing. Of course small markets have less competition and higher fares than big markets. In an industry as capital intensive as the airline industry, where such a high portion of the costs are (at least over the short-term) fixed, it's exceedingly economically rational that carriers would attempt to maximize the revenue generating potential of each asset they have - and that means, for instance, flying their $50M jets into NYC rather than PIA. Thus precisely why the U.S. carriers with the lowest unit costs tend to focus primarily on such larger markets - there's a reason jetBlue doesn't fly A320s into TOL and Southwest doesn't fly 737s into LRD. There is of course money to be made in smaller markets, but generally that also requires higher costs in the form of smaller and less efficient aircraft more appropriately sized to the lower demand, diminished economies of scale and more operational complexity. And naturally, that cost gets passed onto consumers.
 
Aliqiout
Posts: 282
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 3:41 am

AAvgeek744 wrote:
Aliqiout wrote:
klm617 wrote:


I agree Southwest is a legacy carrier it operates along the same line as the US3 it is no longer the huge value it once was against the majors.

What are you trying to say? You cant just agree with one person to change the definition of a word. We might as well give up talking. If you are just trying to say WN is similar to the legacies, fine, but there are plenty of real words to use to say that. US4 works well.


I'm not sure who are are addressing, but it's my opinion. I know airline history. I choose to put WN on an equal level with the other three. Not hard to wrap your head around.

You can choose to put them on the same level, and I won't argue with that, but that's not what you said. You called them a legacy. That word has specific meaning and that meaning is not "on the same level". AS and AA are both legacies but they are not on the same level.
 
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LAX772LR
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 4:28 am

AAvgeek744 wrote:
No offense, but I absolutely know what the term legacy means, I come from an airline family whose father and brother both flew for airline long before deregulation.. My comment stands that it is an out-of-date way to refer to airlines. I consider WN as much of a "legacy carrier" as anyone.

That's called confusing an opinion with fact. :roll:

I mean, you're free to refer to them as whatever you want; hell, call them a spaceline for all it matters.
But be aware that your purposeful misuse of the term, does not change the fact that they are not, nor could they ever be, an actual legacy carrier.

They can't continue a legacy of something that they never possessed.





DarthLobster wrote:
US airlines are plenty competitive as it is. Now if it’s service you want improved, that starts with the paying passengers. They’ve proven time and time again they’d rather save a few bucks and get crap accomodations (ie the ULCC garbage currently plowing the skies on behalf of the Big Lots crowds) then pay a little more and be treated like a human.

^ This.

AA's failed MRTC was likely the last gasp. The public can say what they want, but they've shown with their wallets time and time again that when you offer a more luxurious option, versus a cheaper one; the latter (for the majority) will prevail. For the few for whom it doesn't: there's Y+, W, J, F, etc.

I won't be surprised if soon EVERY airline is NK, so far as Y service goes.
Even the oh-so-revered Asian carriers. Probably only a matter of time.



zeke wrote:
The only people I think that are making a really big deal out of it is a.nettters.

A congregation of enthusiasts making a big deal out of a technical detail?! ...no wayyy! :irked:



zeke wrote:
The ULR has a number of aero and structural changes, the MTOW was never the key to the additional range, it more about flying further more efficiently.

Obviously not, but no one was contending otherwise.

Just surprised that Airbus et al made such a comparative big deal over PR's weight choice, if it's only a ton in excess of what already



Blotto wrote:
Tedd wrote:
I naturally assumed it would be special inside, but as you point out weight saving will be everything for this model.
What I heard recently in Toulouse is that they really remove everything they can to save weight to get to the performance they'll need. What I've been told is that they actually rendered the front cargo hold useless just to save weight. Wonder if that turns out to be true.

I have a hard time believing that. What if a carrier wants to use it for a short turn in between ULHs, which SQ used to do even with their old A345s; why should they be denied the option to use?


Flighty wrote:
We are in such a golden age for airliner development! I love it.

Many would argue that we're in an age of convergent evolution... that development continues to produce more or less the same design to do the job, with only minor differences.

Comparing an A350 and 777 is like looking at a Sugar Glider vs a Flying Squirrel; two things with completely different origins/development, but whose design (and external appearance) have essentially rendered them mirror aspects of each other.

Image

The whiny 4holer-nostalgic types, sure notice it too.



Slug71 wrote:
Peterwk146 wrote:
The landing gear doors will remain hydraulically powered.

See post above. Looks like they will be electric.

That's on the A35K. The current A359s are hydraulic, not electric.

I was wondering if the A359ULR and post-2020 birds will have the electric doors. The poster above seems to believe not.
I myself, suspect a more prosaic motive... ~Thranduil
 
toltommy
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Joined: Tue Dec 09, 2003 9:04 am

Re: How to Revive Airline Competition

Sat Mar 03, 2018 4:54 am

DDR wrote:
If people were willing to pay for more seat pitch, meals, etc., they would be doing it now.


Thats why we have Basic Economy, Economy, and Comfort Plus these days. It gives the US domestic customer the ability to choose the product they want and the price they want to pay. Customers very clearly are doing it now.
A300/A310/A319/A320/A321/A332/A333/707/712/727/732/733/734/735/738/739/752/753/762/763/764/772/789/DC8/DC9-10/30/40/50/MD81/83/87/88/90/L1011-/250/500/CRJ200/440/700/900/EMB135/140/145/170/175/190/328Jet/F70/SF3/BE1/J31
 
AAvgeek744
Posts: 750
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 5:47 am

Aliqiout wrote:
AAvgeek744 wrote:
Aliqiout wrote:
What are you trying to say? You cant just agree with one person to change the definition of a word. We might as well give up talking. If you are just trying to say WN is similar to the legacies, fine, but there are plenty of real words to use to say that. US4 works well.


I'm not sure who are are addressing, but it's my opinion. I know airline history. I choose to put WN on an equal level with the other three. Not hard to wrap your head around.

You can choose to put them on the same level, and I won't argue with that, but that's not what you said. You called them a legacy. That word has specific meaning and that meaning is not "on the same level". AS and AA are both legacies but they are not on the same level.


In my book, they are a legacy. No one outside this forum even knows what it means. It's kinda like the over-used words 'upguaged' or 'downguaged'. I searched several online dictionaries before one actually considers it a word. You believe what you want, I shall do the same. 60 years in an airline family, yeah I guess I don't know anything. :banghead:
 
evanb
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 8:41 am

commavia wrote:
In 2017, on an income statement/accrual accounting basis, AA generated a net margin of 4.5%, United generated a net margin of 5.6%, and Delta generated a net margin of 8.7%. I'm still waiting for a single cogent argument - just one! - as to why any one of those numbers is in any way excessive or unreasonable, let alone constitutes "everything" going to shareholders in the form of "pure profit." The irony is that the airlines in the U.S. that often produce the highest margins are the ones most effective at doing the things that many love to complain about so much, like fare unbundling and ancillary fees.

The disconnect from economic reality remains stunning. Airlines are for-profit businesses owned by their shareholders, and their entire reason for existence is to create economic value which - finally - they're doing, to the tune of, essentially, 5-9% per year. I've been saying for years, and to this day, I continue to be dumbfounded by the fact that people seem to have such a problem with airlines making money. It is as if, after the first three decades of deregulation, some people became so conditioned to airlines offering irrational fares, and destroying astounding amounts of capital in the process, that such individuals are literally offended by the prospect of airlines stopping such economically unsustainable insanity.


I agree with the methodology, however, I disagree that net margins of between 4.5% and 8.7% are low or that they represent the profitability for or return to shareholders. From a shareholder perspective, big airlines are asset management businesses given the very high asset investments airlines must make. In these businesses low margins are a given, similar to large banks where these sorts of margins would be considered brilliant. It's different to service industries where margins are higher. This does not represent competition per se. The correct measure for shareholders in this respect is return on assets. Delta had a 6.8% return on assets in 2017. Considering interest rates in the US, this is an excellent return.

That said, looking at gross and net margins are important. While margins may seem small, they have increased quite dramatically over the last few years, and increased market concentration has been a big difference in this. However, blaming airlines is a straw man since, as you say, they're for profit businesses and just maximizing shareholder return. Some may argue that increased concentration allowed airlines to increase prices, and that is true, but is doesn't raise the point that prior to the increase in concentration that there was an unsustainable over capacity. Given the asset investments that airlines make, overcapacity is always unsustainable. However, it is a free market. While the technical and financial barriers to entry are high, there is nothing stoping more airlines entering the domestic market and we've seen more successful and sustainable new entrants in the last decade than in years. There is no shortage of capital in the US at the moment so the idea that only opening the market to foreign airlines would increase competition would be a strange argument.

The bigger concern with competition is the lack of competition on foreign routes where the US3 and their partners have been very good at creating legalized cartels. These create genuine barriers to entry and are a much bigger threat to competition since it reduces the options for new entrants due to much higher barriers to entry in third countries.
 
coairman
Posts: 155
Joined: Sun Dec 12, 2010 8:31 am

Re: How to Revive Airline Competition

Sat Mar 03, 2018 11:56 am

I think we have enough healthy competition. Fares are even lower now than years ago adjusted for inflation. You can get round trip fares in many markets under $150. I have seen round trip fares to MCO for under $100. One way published fares from IAD-CUN are $81 before taxes, PHL- FLL one way $61.20, SFO-EWR $103.20 with taxes.....etc.


One of many online articles showing airfares are very low in relation to inflation:

https://www.google.com/amp/s/www.theatl ... le/273506/
The views I express are of my own, and not the company I work for.
 
commavia
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 2:42 pm

evanb wrote:
I agree with the methodology, however, I disagree that net margins of between 4.5% and 8.7% are low or that they represent the profitability for or return to shareholders. From a shareholder perspective, big airlines are asset management businesses given the very high asset investments airlines must make. In these businesses low margins are a given, similar to large banks where these sorts of margins would be considered brilliant. It's different to service industries where margins are higher. This does not represent competition per se. The correct measure for shareholders in this respect is return on assets. Delta had a 6.8% return on assets in 2017. Considering interest rates in the US, this is an excellent return.


Well, to be clear, I never said that net margins "represent the profitability for or return to shareholders."

But having said that, I disagree that airlines are "asset management businesses" and thus the relevant comparable is financial institutions. On the contrary, while airlines are clearly extremely capital-intensive businesses where asset utilization is, indeed, critical, they also undeniably contend with phenomenal operational and logistical complexity, and enormous competitive, legal, regulatory and economic risk. I believe that complexity and risk, in addition to the asset-heavy nature of the business, naturally justifies margins higher than mid-to-high single digits.
 
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FlyCaledonian
Posts: 1927
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 2:44 pm

mia wrote:
I look at flights to New Orleans from New York, and South Florida from New York. You used to be able to find $200-$250 on the routes for a weekend trip. Now, the only way to find those fares is to fly on a Wednesday or morning on Saturday and fly back Tuesday morning. We do not have enough real competition.

We do not have enough real competition.

or is it really

We need more airlines struggling to fill seats so that they heavily discount to prices we like.

Back in 2004 I did a Gatwick - Newark - San Francisco round trip with CO in the February for £250 all in; and a Gatwick - Newark - Honolulu round trip with CO in the November for £280 all in. That was TATL flights booked separate to the domestic ones and having time in New York each time. Do I bemoan a lack of competition for not seeing those prices anymore? No, I recognise I got a pretty good deal.

I equally in the 2000s did some great value European trips on BA, including some in Club Europe. Can I get those sort of fares today? Yes in Euro Traveller, but the flight times are maybe not as desirable and the 34'' pitch and complimentary food/bar service has gone. But I wouldn't say there is no competition when you have the likes of U2 and FR on shorthaul and Norwegian building up a presence at Gatwick.

Deregulation in the US saw consolidation as well as new carriers. Some survived, and through mergers or bankruptcy you have the situation you do today. In that time the cake got bigger, but everyone was still fighting for their slice. It was cut-throat at times, but also look at how many airlines had to go through Chapter 11 or Chapter 7 - it wasn't necessarily profitable (hence that saying about the quickest way for a Billionaire to become a Millionaire - buy an airline).

From time to time some on here say that maybe going back to regulation would work. But then you only had the slice of cake the CAB wanted you to have. You might have fancied a slice of key lime pie or New York cheesecake, but no, the CAB wanted you to stick with a good slice of Mississippi mud pie.
Let's Go British Caledonian!
 
Planesmart
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Re: How to Revive Airline Competition

Sat Mar 03, 2018 8:03 pm

FlyCaledonian wrote:
We do not have enough real competition.

or is it really

We need more airlines struggling to fill seats so that they heavily discount to prices we like.

.

The problem is margins aren't spread consistently. Domestic subsidises international operations, except where JV's inflate. But major domestic operations subsidise small (so airline accounting suggests).

Then you have cost and profit transfer used to justify other behaviour.

And are margins even accurate, after tax smoothing and minimisation initiatives?
 
gwrudolph
Posts: 397
Joined: Sat Sep 13, 2008 3:46 pm

Re: How to Revive Airline Competition

Sat Mar 03, 2018 8:59 pm

caverunner17 wrote:
bgm wrote:
The problem is you get poor value for money. Compared to Europe, for example you can fly Ryanair for 10 euros. In the US, you can fly southwest for $59 and that’s considered a good deal.

The legacies are even poorer value for money. They have high fares, nickel and dime you anyway, plus you get crap service from horrible staff (look at the daily incidents reported here).

What are you afraid of? Let the foreign carriers in and if your product is as solid as you claim it to be, it’ll stand up just fine.

I agree with you for the most part. While I'll occasionally see $40-60 fares on both ULCCs and Legacies in the US, it's increasingly rare. What's even worse is that many legacies are introducing the ULCC (economy basic) fares and continuing to charge higher prices.

And then you get continual inconsistent experiences on legacy airlines. Look at UA. Their Denver catering facility has been down for over 6 months so any first-class passenger only gets the BOB options. International flight crews can be lovely or act like they've been held at gunpoint to do their job. They introduce "upgrades" only to strip them away a few months later by penny pinchers (or take months to years to roll out the upgrades).


$40-$60 -- are you kidding me? A one-way ride to the airport in a car service is $50 for a 25 mile ride. Oh, and that's pure fare unlike airfare which includes federal taxes and fees.
 
caverunner17
Posts: 263
Joined: Tue Jun 14, 2016 9:50 pm

Re: How to Revive Airline Competition

Sun Mar 04, 2018 5:51 am

gwrudolph wrote:
caverunner17 wrote:
bgm wrote:
The problem is you get poor value for money. Compared to Europe, for example you can fly Ryanair for 10 euros. In the US, you can fly southwest for $59 and that’s considered a good deal.

The legacies are even poorer value for money. They have high fares, nickel and dime you anyway, plus you get crap service from horrible staff (look at the daily incidents reported here).

What are you afraid of? Let the foreign carriers in and if your product is as solid as you claim it to be, it’ll stand up just fine.

I agree with you for the most part. While I'll occasionally see $40-60 fares on both ULCCs and Legacies in the US, it's increasingly rare. What's even worse is that many legacies are introducing the ULCC (economy basic) fares and continuing to charge higher prices.

And then you get continual inconsistent experiences on legacy airlines. Look at UA. Their Denver catering facility has been down for over 6 months so any first-class passenger only gets the BOB options. International flight crews can be lovely or act like they've been held at gunpoint to do their job. They introduce "upgrades" only to strip them away a few months later by penny pinchers (or take months to years to roll out the upgrades).


$40-$60 -- are you kidding me? A one-way ride to the airport in a car service is $50 for a 25 mile ride. Oh, and that's pure fare unlike airfare which includes federal taxes and fees.


Apples to oranges. A number of short haul flights in Europe and Asia can be had for the same or cheaper. Hell, I remember flying Air Asia 2 years back for like $70 from Hong Kong to Thailand and that included a few paid upgrades like a meal. Or Ryanair. I just put in Munich-Dublin randomly next month and see a round trip fare for $58.
 
KD5MDK
Posts: 802
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 6:18 am

commavia wrote:
evanb wrote:
I agree with the methodology, however, I disagree that net margins of between 4.5% and 8.7% are low or that they represent the profitability for or return to shareholders. From a shareholder perspective, big airlines are asset management businesses given the very high asset investments airlines must make. In these businesses low margins are a given, similar to large banks where these sorts of margins would be considered brilliant. It's different to service industries where margins are higher. This does not represent competition per se. The correct measure for shareholders in this respect is return on assets. Delta had a 6.8% return on assets in 2017. Considering interest rates in the US, this is an excellent return.


Well, to be clear, I never said that net margins "represent the profitability for or return to shareholders."

But having said that, I disagree that airlines are "asset management businesses" and thus the relevant comparable is financial institutions. On the contrary, while airlines are clearly extremely capital-intensive businesses where asset utilization is, indeed, critical, they also undeniably contend with phenomenal operational and logistical complexity, and enormous competitive, legal, regulatory and economic risk. I believe that complexity and risk, in addition to the asset-heavy nature of the business, naturally justifies margins higher than mid-to-high single digits.

Would you permit Delta and Southwest to merge? Or any airline merger that included the US4?
 
ckfred
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 6:49 am

I learned in college economics that in any given sector, there is an optimal range of competitors. If there are too few competitors, then businesses earn monopoly profits, but they don't feel the need to plow those profits into capital spending to offer better products or an expanded product line, and they won't make capital expenditures to make the production goods or delivery of services more efficient, there by reducing costs which are passed on to the consumer.

If there are too many competitors, then consumers get low prices. But, businesses don't earn enough money to make capital investments. So, products aren't improved, and production doesn't become more efficient.

I think with 3 legacy carriers, Southwest, Jet Blue, Alaska, and the ULCCs, we are probably in the optimal range of competitors. Certainly, carrier are earning enough profits to purchase new aircraft, offer better premium seating, and refresh cabins and airport space.

The problem that we face is that many consumers feel that air travel is a commodity. It's simply the lowest cost, regardless of carrier. For all of the road warriors who are loyal to one carrier, you find the infrequent flyer thinks that AA, UA, DL, and even WN, and B6 are pretty much the same. If anything air travel competes with travel by car and Amtrak in the Northeast. Air travel has gotten to be a lot like a gallon of milk or a fill-up on gasoline.

AA learned the hard way in the early 2000s that people were not willing to pay higher fares for more legroom in Y. More Room Throughout Coach was removed within a few years. Granted, AA started MRTC in 2000, and 9/11 through the entire industry for a loop.
 
brian415
Posts: 207
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 8:11 am

ilovelamp wrote:
That’s such a great idea that it hasn’t gotten close to becoming a reality in the 4.5 years since that article was written.

There’s a bill that has been introduced in the House and referred to the appropriate subcommittees by a Republican rep from VA that addresses this very thing. The bill proposes to amend the law preventing foreign ownership of US airlines. So far it has zero co-sponsors. It is likely to go nowhere.

Foreign "control" of US airlines is already prohibited. Foreign entities are only allowed to own a maximum of 24.99% equity of US carriers. By contrast, the UK allows up to 49.99% foreign ownership of their carriers; Delta owns roughly the legal maximum of VS.
 
brian415
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 8:23 am

DaufuskieGuy wrote:
How to Revive Airline Competition - Let foreign-owned airlines fly in the United States.

http://www.slate.com/articles/health_an ... _able.html

If foreign carriers were allowed in, presumably, they would be domiciled in the U.S., and there would be U.S. crewbases of these foreign owned carriers. Nothing would stop their workforce presumably from joining ALPA, AFA, etc., or would they?
 
ilovelamp
Posts: 299
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 12:22 pm

brian415 wrote:
ilovelamp wrote:
That’s such a great idea that it hasn’t gotten close to becoming a reality in the 4.5 years since that article was written.

There’s a bill that has been introduced in the House and referred to the appropriate subcommittees by a Republican rep from VA that addresses this very thing. The bill proposes to amend the law preventing foreign ownership of US airlines. So far it has zero co-sponsors. It is likely to go nowhere.

Foreign "control" of US airlines is already prohibited. Foreign entities are only allowed to own a maximum of 24.99% equity of US carriers. By contrast, the UK allows up to 49.99% foreign ownership of their carriers; Delta owns roughly the legal maximum of VS.


I’m not sure what your point is.

My point is that the bill in question, HR 5000, would change the definition of ownership in the law from “citizen of the United States” to “citizen of the United States, or other person organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States,”

“Other person” is the key and the bill's creator wants to rename the law the “Free to Fly Act.” Gotta love that name because, you know, we're not free to fly or don’t have enough choices right now, therefore we must get big gov to set us free (sarcasm).
 
ilovelamp
Posts: 299
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 12:27 pm

brian415 wrote:
DaufuskieGuy wrote:
How to Revive Airline Competition - Let foreign-owned airlines fly in the United States.

http://www.slate.com/articles/health_an ... _able.html

If foreign carriers were allowed in, presumably, they would be domiciled in the U.S., and there would be U.S. crewbases of these foreign owned carriers. Nothing would stop their workforce presumably from joining ALPA, AFA, etc., or would they?


And where would they get those pilots? Starting new service during the beginnings of a pilot shortage in the US would not bode well for new competitors. The most plausible solution would to go through the hoops to get foreign born pilots certified by the FAA. But the cost of that could be prohibitive if the whole purpose of the new operations were beat existing US carriers on price.
 
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XAM2175
Posts: 1156
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 12:49 pm

ilovelamp wrote:
brian415 wrote:
Foreign "control" of US airlines is already prohibited. Foreign entities are only allowed to own a maximum of 24.99% equity of US carriers. By contrast, the UK allows up to 49.99% foreign ownership of their carriers; Delta owns roughly the legal maximum of VS.

My point is that the bill in question, HR 5000, would change the definition of ownership in the law from “citizen of the United States” to “citizen of the United States, or other person organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States,”


It's interesting to compare how other countries handle this - Australia, for example, permits total foreign ownership of an airline operating domestically, but requires an airline exploiting Australian international traffic rights to have a minimum of 50.01% Australian ownership. Hence VA's ownership structure being so convoluted.
 
klm617
Posts: 4339
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 1:02 pm

coairman wrote:
I think we have enough healthy competition. Fares are even lower now than years ago adjusted for inflation. You can get round trip fares in many markets under $150. I have seen round trip fares to MCO for under $100. One way published fares from IAD-CUN are $81 before taxes, PHL- FLL one way $61.20, SFO-EWR $103.20 with taxes.....etc.


One of many online articles showing airfares are very low in relation to inflation:

https://www.google.com/amp/s/www.theatl ... le/273506/


That's nice but you only used examples of major markets try a flight from say DTW-MCO or DTW-MIA mist markets out of Detroit you can't even touch for less than $100 each way and I'm sire the same holds true for places like CMH, CVG, IND and the like. Let's take it one step further wages in general have not kept up with in flatiron as you say. Also a fare 20 years ago included seat selection a meal and 2 checked bags which you have to add into the price.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
flyguychi
Posts: 55
Joined: Mon Mar 10, 2014 7:43 pm

Re: How to Revive Airline Competition

Sun Mar 04, 2018 5:15 pm

coairman wrote:

That's nice but you only used examples of major markets try a flight from say DTW-MCO or DTW-MIA mist markets out of Detroit you can't even touch for less than $100 each way and I'm sire the same holds true for places like CMH, CVG, IND and the like. Let's take it one step further wages in general have not kept up with in flatiron as you say. Also a fare 20 years ago included seat selection a meal and 2 checked bags which you have to add into the price.


DTW-MCO is about 1,000 Miles with DTW-MIA being even further even. If you take Jetblue’s CASM as an example, sub-$100 fares on a route that long the airline wouldn’t even come close to breaking even. You want lower fares? You’re going to get a Frontier or Spirit product at best. It costs more than most people think to operate a $50,000,000 aircraft with maintenance, fuel, crew training and pay, support services, ground staff, airport infrastructure, crew hotels, corporate overhead, government taxes, etc etc etc

On a route like this $150-$180 seems like a deal to me considering it would take me 17 hours, $70 in gas, plus maintenance and depreciation. I just value my time more, but that’s just me :smile:
 
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flymco753
Posts: 3253
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 5:47 pm

flyguychi wrote:
coairman wrote:

That's nice but you only used examples of major markets try a flight from say DTW-MCO or DTW-MIA mist markets out of Detroit you can't even touch for less than $100 each way and I'm sire the same holds true for places like CMH, CVG, IND and the like. Let's take it one step further wages in general have not kept up with in flatiron as you say. Also a fare 20 years ago included seat selection a meal and 2 checked bags which you have to add into the price.


DTW-MCO is about 1,000 Miles with DTW-MIA being even further even. If you take Jetblue’s CASM as an example, sub-$100 fares on a route that long the airline wouldn’t even come close to breaking even. You want lower fares? You’re going to get a Frontier or Spirit product at best. It costs more than most people think to operate a $50,000,000 aircraft with maintenance, fuel, crew training and pay, support services, ground staff, airport infrastructure, crew hotels, corporate overhead, government taxes, etc etc etc

On a route like this $150-$180 seems like a deal to me considering it would take me 17 hours, $70 in gas, plus maintenance and depreciation. I just value my time more, but that’s just me :smile:
Ok but B6 doing ALB-MCO is different? B6 would break even with bags. Use Delta as an example, 225+ bags on a 757-300. B6, with their fares, could probably average 125 bags easily. CASM+Avg. bag price would do it.
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evanb
Posts: 804
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 8:31 pm

KD5MDK wrote:
Would you permit Delta and Southwest to merge? Or any airline merger that included the US4?


I think it's a straw man, but probably not. Given the rising margins & return on assets of all US3 at the moment, I wouldn't permit any merger involving a US3 (possibly with the exception of a merger involving a US3 and HA). However, if there were sufficient concessions, including maintaining or increasing capacity on domestic routes, conceding capacity at key airports to non-US3, plus significant weakening of JVs then I likely would.
 
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hOMSaR
Posts: 2168
Joined: Tue Jan 19, 2010 4:47 am

Re: How to Revive Airline Competition

Sun Mar 04, 2018 9:09 pm

EightyFour wrote:
That's the point, I don't want to pay double the economy fare to get a wider seat, more pitch, better food, more luggage, and better service, when all I want is to pay slightly more to just get a wider seat (more pitch I can take or leave). I was underlining the point that voting with your wallet isn't always an option due to a) large steps between service levels, and b) differing needs and preferences from the customers side.

In purely economical terms, I prefer to pay 500 to sit in 10ab economy for 12 hours, rather than paying 1200 for premium economy on the same route, when what I *actually* want is to pay 570 to sit in 9ab economy. Other people will have different cost/benefit curves and might go for premium economy, business, first, a private jet, or just stay at home.

I hope this makes it more clear :)


Companies that have to make large investments in a product that need to appeal to the most people generally aren't able to customize a product for each customer's specific desires.

You, personally, may want to pay $570 for a slightly wider seat, but the real question is, are there enough people willing to pay, say, 10-15% more for a 10-15% wider seat (but not willing to pay even more for extra benefits), day in and day out, on enough routes to make it worthwhile converting a meaningful enough size of the airplane cabin on enough of the fleet to make the product worthwhile?

I mean, in theory, an airline flying 777s could probably offer 14 or 15 classes of service, with seats ranging from bedroom suites, to 4-across F, 5-across, 6, 7 across business (some lie flat, some almost flat but higher density), 8-across PE, 9-across E+, 10-across E-, all with varying seat pitches (after all, a tall skinny person is going to want legroom but not care about seat width, but a shorter, wider person might care about the opposite). But at some point you have to draw the line, and that line for most carriers is typically 3 or 4 different offerings with 2 or 3 different seat models (for US carriers, E+ uses the same seat as E-, just different seat pitch). This makes it easier to define what the different offerings are, both for the customer and the crews that have to serve them, simplifies things in the event of equipment swaps, and doesn't leave them with a bunch of unsold classes of service because only one or two people wanted that specific configuration (meaning, they have to upgrade people who paid for less, or they have to go with empty seats). So, they wind up going with the configurations that they believe they can sell the most of, for the most total revenue, on the most flights, so they can keep the fleet flexible to rotate through the system while not sacrificing revenue potential.

Yes, that means some people will have individual preferences that aren't met, who are caught in the middle, but, that's life sometimes.
The plural of Airbus is Airbuses. Airbii is not a word.
There is no 787-800, nor 787-900 or 747-800. It's 787-8, 787-9, and 747-8.
A321neoLR is also unnecessary. It's simply A321LR.
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jplatts
Posts: 2685
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Re: How to Revive Airline Competition

Sun Mar 04, 2018 10:56 pm

evanb wrote:
KD5MDK wrote:
Would you permit Delta and Southwest to merge? Or any airline merger that included the US4?


I think it's a straw man, but probably not. Given the rising margins & return on assets of all US3 at the moment, I wouldn't permit any merger involving a US3 (possibly with the exception of a merger involving a US3 and HA). However, if there were sufficient concessions, including maintaining or increasing capacity on domestic routes, conceding capacity at key airports to non-US3, plus significant weakening of JVs then I likely would.


I agree that a DL-WN merger will not occur for several reasons. First, ATL and LAX are both hubs for DL and focus cities for WN. Second, a DL-WN merger would give the combined DL-WN airline a monopoly on domestic service out of MDW. Third, a DL-WN merger could possibly lead to significant reduction of service by a combined DL-WN at many WN stations throughout the U.S. Fourth, there are already many DL-WN overlap routes in the U.S., and a DL-WN merger would weaken competition on these overlap routes. Fifth, the Southwest brand has strong name recognition in many non-DL hub markets throughout the U.S., and a DL-WN merger would eliminate an established airline brand that is well-known in most of the contiguous U.S. Finally, a DL-WN merger would eliminate one of the remaining alternatives to the legacy airlines or ULCC's in the U.S.

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