Comments on: Obituary: The Modern-Day US Airline Industry, Transporter of Passengers, Dies at 30 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/ The Daily Airline News by Jared Blank Sat, 22 Nov 2008 02:38:00 +0000 http://wordpress.org/?v=2.5.1 By: Online Travel Review » The End of the World as We Know It; or, American to Charge for Checked Baggage http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-3095 Online Travel Review » The End of the World as We Know It; or, American to Charge for Checked Baggage Thu, 22 May 2008 10:36:30 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-3095 [...] I wrote in my obituary to the airline industry a couple of months back, we are already in the era of the no-frills full-frills carrier, and this [...] [...] I wrote in my obituary to the airline industry a couple of months back, we are already in the era of the no-frills full-frills carrier, and this [...]

]]> By: NYNY Solutions » Blog Archive » Travel is reaching a strategic inflection point http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1984 NYNY Solutions » Blog Archive » Travel is reaching a strategic inflection point Sun, 13 Apr 2008 20:24:26 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1984 [...] with carrier shutdowns and bankruptcies in the US acting as the canary.  Jared Blank wrote this Obituary at onlinetravelreview.com that puts things in [...] [...] with carrier shutdowns and bankruptcies in the US acting as the canary.  Jared Blank wrote this Obituary at onlinetravelreview.com that puts things in [...]

]]> By: iahphx http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1915 iahphx Wed, 09 Apr 2008 03:59:23 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1915 I've always had the impession (which I can't prove) that current US Airways President Scott Kirby saved America West by being a brilliant pricing analyst. He took pricing off auto-pilot and outfoxed what was some pretty predatory pricing activities going on against America West at the time. Continental just always has their act together and will undoubtedly be the "last man standing" in any legacy carrier shake-up. I think the primary victims of low airfares is labor. That's whose hide the savings are coming out of. Now you can argue that labor was overpaid as a result of regulation, but I think you can now also argue that labor is underpaid. Folks like Parker and Kirby were going to consolidate (monopolize?) and pay labor more, but Delta pilots weren't smart enough to understand this. I still think the most likely outcome of the current "crisis" is that fuel prices go down and the industry soldiers on. IMHO, the distortion in the oil market currently equals the bubbles we've previously seen in NASDAQ and the housing market. But we won't know until the bubble pops. I’ve always had the impession (which I can’t prove) that current US Airways President Scott Kirby saved America West by being a brilliant pricing analyst. He took pricing off auto-pilot and outfoxed what was some pretty predatory pricing activities going on against America West at the time.

Continental just always has their act together and will undoubtedly be the “last man standing” in any legacy carrier shake-up.

I think the primary victims of low airfares is labor. That’s whose hide the savings are coming out of. Now you can argue that labor was overpaid as a result of regulation, but I think you can now also argue that labor is underpaid. Folks like Parker and Kirby were going to consolidate (monopolize?) and pay labor more, but Delta pilots weren’t smart enough to understand this.

I still think the most likely outcome of the current “crisis” is that fuel prices go down and the industry soldiers on. IMHO, the distortion in the oil market currently equals the bubbles we’ve previously seen in NASDAQ and the housing market. But we won’t know until the bubble pops.

]]> By: onlinetravelreview http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1909 onlinetravelreview Tue, 08 Apr 2008 14:35:03 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1909 I completely agree -- I've been saying for years that America West (now US) has the smartest management team in the business. I'm not sure if they regret the US Airways takeover, but it's a moot point. And you are correct - Continental is a hub/spoke carrier that seems to be working as well as anyone. But they're really the only one left that's having any success at all with the model. And the fact that there's 1 airline that can succeed at it doesn't mean it's a model that's alive and well. I'm not 100% convinced that there are too many airlines. As soon as one goes out of business, another seems to pop up (or an existing airline fills the capacity). For reasons I still don't understand, no airline will allow others to raise prices. As ridiculous as the fuel situation is, the yield situation is equally crazy. Given the cost structures, I'm not sure how it's possible that I can fly transcon for the same $129 today that I could in 1981. The answer is, of course, because they're losing money charging that amount. But why other airlines that are losing money keep driving fares to a point where they're losing money too is beyond me. I remember listening to an earnings call 3 or 4 years ago from America West and they were saying that some other airline had dropped fares from Orlando to Seattle to $99 each way. They flew the route via PHX but decided that that was a crazy fare and they wouldn't match it. They added that they would gladly charge $99 a seat from Orlando to Phoenix and $99 a seat from Phoenix to Seattle and fill up each leg of the plane with passengers who are actually paying something to fly. That makes sense to me... I completely agree — I’ve been saying for years that America West (now US) has the smartest management team in the business. I’m not sure if they regret the US Airways takeover, but it’s a moot point.
And you are correct - Continental is a hub/spoke carrier that seems to be working as well as anyone. But they’re really the only one left that’s having any success at all with the model. And the fact that there’s 1 airline that can succeed at it doesn’t mean it’s a model that’s alive and well.
I’m not 100% convinced that there are too many airlines. As soon as one goes out of business, another seems to pop up (or an existing airline fills the capacity). For reasons I still don’t understand, no airline will allow others to raise prices. As ridiculous as the fuel situation is, the yield situation is equally crazy. Given the cost structures, I’m not sure how it’s possible that I can fly transcon for the same $129 today that I could in 1981. The answer is, of course, because they’re losing money charging that amount. But why other airlines that are losing money keep driving fares to a point where they’re losing money too is beyond me.
I remember listening to an earnings call 3 or 4 years ago from America West and they were saying that some other airline had dropped fares from Orlando to Seattle to $99 each way. They flew the route via PHX but decided that that was a crazy fare and they wouldn’t match it. They added that they would gladly charge $99 a seat from Orlando to Phoenix and $99 a seat from Phoenix to Seattle and fill up each leg of the plane with passengers who are actually paying something to fly. That makes sense to me…

]]> By: iahphx http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1908 iahphx Tue, 08 Apr 2008 14:14:57 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1908 I don't know, I think a reasonable argument can be made that Continental is still a "full service hub and spoke carrier." Their business model seems as good as anyone else's right now. It does seem like there are too many airlines in America right now. Try to think of another $200 billion national industry with so many players. Logic suggests to me that, eventually, there will be fewer major airlines in our future. There are some smart guys out there who will figure this out. The smartest proponents of consolidation are at US Airways. Their competitive position is weak at the moment, but give it time, and they will start shaking things up. I don’t know, I think a reasonable argument can be made that Continental is still a “full service hub and spoke carrier.” Their business model seems as good as anyone else’s right now.

It does seem like there are too many airlines in America right now. Try to think of another $200 billion national industry with so many players. Logic suggests to me that, eventually, there will be fewer major airlines in our future. There are some smart guys out there who will figure this out. The smartest proponents of consolidation are at US Airways. Their competitive position is weak at the moment, but give it time, and they will start shaking things up.

]]> By: onlinetravelreview http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1903 onlinetravelreview Mon, 07 Apr 2008 19:53:41 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1903 I was actually hoping you'd comment on this... Oil is a huge issue, obviously. But there was talk of the supposed necessity of consolidation when oil was $50. DL/NW, CO/UA, DL/US, US/HP were all discussed before the oil issue came into play. I think the notion of the "full service hub-and-spoke carrier" is dead (which was my 1,300 word point). There are other models out there, tho it's interesting that once JetBlue started to move a bit in the hub/spoke direction -- even just a bit-- it started to go to hell for them. It'll be interesting to watch, but I don't see how the industry in 2010 looks like it did in 2000... thx for the note, -jared I was actually hoping you’d comment on this…

Oil is a huge issue, obviously. But there was talk of the supposed necessity of consolidation when oil was $50. DL/NW, CO/UA, DL/US, US/HP were all discussed before the oil issue came into play.

I think the notion of the “full service hub-and-spoke carrier” is dead (which was my 1,300 word point). There are other models out there, tho it’s interesting that once JetBlue started to move a bit in the hub/spoke direction — even just a bit– it started to go to hell for them.

It’ll be interesting to watch, but I don’t see how the industry in 2010 looks like it did in 2000…

thx for the note,
-jared

]]> By: iahphx http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1902 iahphx Mon, 07 Apr 2008 19:32:10 +0000 http://boardingarea.com/blogs/onlinetravelreview/2008/04/07/obituary-the-modern-day-us-airline-industry-transporter-of-passengers-dies-at-30/#comment-1902 Well, that's certainly a pessimistic view! I'm not sure you have it right -- but I'm also not sure you have it wrong, either. There are too many variable to know. For example, oil right now is being propped up by a crazy speculative financial bubble. If it returns to "normal" -- which most folks in that industry (as opposed to Wall St) think is below $60 -- a lot of your assumptions fly out the window. In the meantime, what is certain is that you're going to have to pay a lot more money to fly. Have you checked out summer airfares? Yowza! Even cheapie airlines like Southwest are trying to sell $500 transcons. Will people pay that? Beats me. But you can certainly write the obituary for the $99 transcon. At least as long as oil is above $99. Well, that’s certainly a pessimistic view!

I’m not sure you have it right — but I’m also not sure you have it wrong, either. There are too many variable to know. For example, oil right now is being propped up by a crazy speculative financial bubble. If it returns to “normal” — which most folks in that industry (as opposed to Wall St) think is below $60 — a lot of your assumptions fly out the window.

In the meantime, what is certain is that you’re going to have to pay a lot more money to fly. Have you checked out summer airfares? Yowza! Even cheapie airlines like Southwest are trying to sell $500 transcons. Will people pay that? Beats me. But you can certainly write the obituary for the $99 transcon. At least as long as oil is above $99.

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