FWIW, the product WAS better when blu could actually operate on time, with new jets, without losing luggage. They built a good reputation. Now that the jets are getting older, and the operational performance is in the toilet, the gold paint will start to turn your skin green. Don't forget, people used to think IROC Z28's, Member's only jackets and Jordache jeans all represented "quality" and people lined up to pay a premium....
B6 Continues to Blame DL for Over-Capacity
- Thread starter Ch. 12
- Start date
FWIW, the product WAS better when blu could actually operate on time, with new jets, without losing luggage. They built a good reputation. Now that the jets are getting older, and the operational performance is in the toilet, the gold paint will start to turn your skin green. Don't forget, people used to think IROC Z28's, Member's only jackets and Jordache jeans all represented "quality" and people lined up to pay a premium....
Busdriver -
Great analogy...except for the Members Only jacket - those never go out of style!!!
Seriously, you're exactly right. If B6 doesn't stick to what created all the "buzz" in the first place, it will simply become an also-ran. However, that's a danger for any new airline. They're simply entering a new phase of maturity now. Time will tell whether they age well.
Great analogy...except for the Members Only jacket - those never go out of style!!!
Seriously, you're exactly right. If B6 doesn't stick to what created all the "buzz" in the first place, it will simply become an also-ran. However, that's a danger for any new airline. They're simply entering a new phase of maturity now. Time will tell whether they age well.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
as for the DL/B6 NYC-FLA comparisons, if you replaced DL's 200 seat 757s with 150 seaters comparable to B6, the math looks much better for DL - DL has too much capacity per operation but B6 has too much capacity in total operations. thus DL's focus on replacing the big Song 757s with mainline equipment - some of which are smaller but also have first class cabins, the combination of which increases revenue. now how will B6 respond? their strategy of high frequency flights in low fare markets is flawed and must change. WN, the king of low fares, knows when a market has too much capacity and pulls it down. B6 has yet to demonstrate it. Lower costs give B6 a bit more headroom than DL but the problem in the NYC/NE-FLA markets is fundamentally one of revenue and B6 has to take its own steps to improve revenue. meanwhile DL's costs are coming down while B6's are going up.
If that is the case, then why was DL Song doing the exact same thing and you praise them for doing it, yet in the case of B6 it is flawed? Secondly, if an airlines can make $5 profit per passenger even while having high frequency, then what is the problem?
As for B6 cost going up, yep they are, but the devils is in the details and the rise is not, as of yet, to dangerous levels. As for DL, they will probably continue to have much higher cost than B6. Reintroducing 1st is a good move by DL, there may indeed be a market for it on those routes.
Overcapacity, well, there may not be, with a drawdown of DL and it may indeed benefit both carriers.
It's sad that Neelman and his cronies can't accept the fact they have screwed up. They just try and pass the buck to someone else for their mistakes.
corl737
Veteran
- Jun 13, 2005
- 565
- 6
Ah, come on, B.O.B.! They haven't "screwed up." They're just creating new case studies for the next edition of "Hard Landings"!
Good luck to the B6 employees.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
I think this is the 1st statement that I have to agree with BOB on. You have saved yourself from annhilation, BOB.
Dizel,
DL has never offered anywhere close to the number of flights or seats in any JFK market that B6 has offered - even considering the 30% bigger aircraft they fly. I repeat: B6 is the carrier that has flooded the market with seats. B6 now has 60-70% of the seats in most of its JFK markets and the only reason they haven't done it at LGA is because of slot controls. B6 is the carrier that has irrationally tried to run everyone out of the market - only to now find the seat dumping strategy doesn't work.
It's a good thing you aren't a management type (or maybe you should be). B6 is now losing money. Revenue doesn't cover costs. It's not a good thing for businesses to lose money. B6 has a problem. You either have cancer or you don't.
Dizel,
DL has never offered anywhere close to the number of flights or seats in any JFK market that B6 has offered - even considering the 30% bigger aircraft they fly. I repeat: B6 is the carrier that has flooded the market with seats. B6 now has 60-70% of the seats in most of its JFK markets and the only reason they haven't done it at LGA is because of slot controls. B6 is the carrier that has irrationally tried to run everyone out of the market - only to now find the seat dumping strategy doesn't work.
It's a good thing you aren't a management type (or maybe you should be). B6 is now losing money. Revenue doesn't cover costs. It's not a good thing for businesses to lose money. B6 has a problem. You either have cancer or you don't.
markkus757
Veteran
- Jul 26, 2004
- 598
- 1
I think the major problem that B6 has going forward is that they want to fly in a lot of markets that have substantial capacity already. I think they're model has always represented the need to take passengers from other established carriers. Southwest has always been able to generate and stimulate their own. When the competition heats up, jetBlue has to be able to run their airline better in all categories if they are to keep taking passengers away from the incumbents.
You hit the nail on the head, WorldTraveler. B6 comes along and floods the market with cheap seats in an artificially low cost environment and then blames the other carriers when B6's costs rise and their business model fails. What amuses me most is Neeleman has the nerve to blame his failure on "irrational competition." What did he expect the established carriers to do, just let him steal market share?
BOB, WT, Diversion -
I would invite you to look back on some of the earlier posts that Ch 12 and I had on this thread. We discussed a lot of this earlier...and I believe the arguments that B6 is responsible for "excess" capacity didn't hold water.
First, define excess capacity. I've done it. No one else on the board has challenged that defintion or come up with a better one. If you have 100 flights a day on a particular route, is that overcapacity? I would argue that it's not *IF* the flights have a good load factor and are actually there to make money.
Since B6 is running its NYC to Florida flights with a load factor of more than 85% AND is commanding a revenue premium (i.e. - getting a higher ticket price than Delta and the other carriers), AND until the most recent quarter has actually been making money, how is that excess capacity?!
My distinction on overcapacity is simple. If flights are thrown onto a route with no rational plan to make money and solely to attack a competitor then that's excess capacity. A few examples:
- AA at Long Beach in response to B6
- AA at DAL in its fight with SW
- DL in Akron in response to FL
- Song
If flights are launched with a rational plan to actually turn a profit, then it's not overcapacity, it's legitimate competition!...and, yes, in legitimate competition, sometimes there are winners and losers.
I would invite you to look back on some of the earlier posts that Ch 12 and I had on this thread. We discussed a lot of this earlier...and I believe the arguments that B6 is responsible for "excess" capacity didn't hold water.
First, define excess capacity. I've done it. No one else on the board has challenged that defintion or come up with a better one. If you have 100 flights a day on a particular route, is that overcapacity? I would argue that it's not *IF* the flights have a good load factor and are actually there to make money.
Since B6 is running its NYC to Florida flights with a load factor of more than 85% AND is commanding a revenue premium (i.e. - getting a higher ticket price than Delta and the other carriers), AND until the most recent quarter has actually been making money, how is that excess capacity?!
My distinction on overcapacity is simple. If flights are thrown onto a route with no rational plan to make money and solely to attack a competitor then that's excess capacity. A few examples:
- AA at Long Beach in response to B6
- AA at DAL in its fight with SW
- DL in Akron in response to FL
- Song
If flights are launched with a rational plan to actually turn a profit, then it's not overcapacity, it's legitimate competition!...and, yes, in legitimate competition, sometimes there are winners and losers.
Introducing more capacity into a market that already has too many seats flying for too little money would be called adding excess capacity. Jetblue tried to jump in when other carriers were shrinking to increase yields. It worked for a while, but for a price. Now they have an expensive cost structure and are a part of the capacity problem. THAT is called adding excess capacity.
You say that Jetblue receives a revenue premium, well it's a start. They're still losing money. Too many seats + too few dollars to pay for them = excess capacity. Most of the carriers are flying full. They may not lose as much per seat as an established carrier, but live TV can only carry you so far. The cost side of the equation will only get worse for B6, and the so-called "irrational competition" will only get bolder as the sharks smell blood in the water. This isn't healthy for any of the industry, but what does B6 expect the other carriers to do? Surrender market share?
Last airline standing wins, I suppose.
And today, Blu announced they were dropping yet another route (all the while continuing to take delivery of new jets) and start routes that will compete directly with SWA. If you thought DAL was fighting you to the death, you ain't seen nuttin yet. The next year will be "interesting times" for Blu.
- Thread Starter
- #43
Flying Titan-
Whoa there before declaring a victory! I've refuted your "definition" of excessive capacity so whatever is making you believe that B6 has had no influence at all of capacity issues in the industry is also tainting your views of recent history.
So many things...First, the consultants you mentioned earlier (Back Aviation) are not independent. That was also clearly a B6 influenced article as everything was quoted from B6 execs. And do you know how these "consultants" check average fares? For recent periods, they use constant fare checks in the online channels such as orbitz or they do GDS searches in Sabre, etc. Anyone with an ounce of understanding of airline economics knows that cheaper seats can be had on less-full planes. Seeing that even B6 reported a wide disparity in LF's between B6 and DL (with DL much lower) proves that DL wasn't filling planes enough to generate higher yielding fares. It's simple for most to understand.
Now...back to excessive capacity. You narrow-mindedly look at it carrier by carrier to see who is profiting and who is not. The excess capacity issue is an INDUSTRY-WIDE phenomenon. Excess capacity simply means that INDUSTRY-WIDE, there is too much capacity and that is bringing yields FOR EVERYONE down significantly. When that happens and there is such a cost disparity between a carrier such as DL (that has a senior workforce, shrinking network, and legacy costs) and B6 (that has a very junior workforce, vastly expanding network, and low costs due to deferred mtc, etc), the higher-cost carriers cannot profit at the extremely low yields. And again...looking INDUSTRY-WIDE, B6 is most-responsible for adding the capacity in recent years. I'd say that the answer is glaring and you simply choose to pretend it isn't there and blame others for the obvious.
So quit claiming false victories and start thinking about things a little more globally to get the real answers. If you ever choose to think more broadly, you will be quite surprised by what you find
Whoa there before declaring a victory! I've refuted your "definition" of excessive capacity so whatever is making you believe that B6 has had no influence at all of capacity issues in the industry is also tainting your views of recent history.
So many things...First, the consultants you mentioned earlier (Back Aviation) are not independent. That was also clearly a B6 influenced article as everything was quoted from B6 execs. And do you know how these "consultants" check average fares? For recent periods, they use constant fare checks in the online channels such as orbitz or they do GDS searches in Sabre, etc. Anyone with an ounce of understanding of airline economics knows that cheaper seats can be had on less-full planes. Seeing that even B6 reported a wide disparity in LF's between B6 and DL (with DL much lower) proves that DL wasn't filling planes enough to generate higher yielding fares. It's simple for most to understand.
Now...back to excessive capacity. You narrow-mindedly look at it carrier by carrier to see who is profiting and who is not. The excess capacity issue is an INDUSTRY-WIDE phenomenon. Excess capacity simply means that INDUSTRY-WIDE, there is too much capacity and that is bringing yields FOR EVERYONE down significantly. When that happens and there is such a cost disparity between a carrier such as DL (that has a senior workforce, shrinking network, and legacy costs) and B6 (that has a very junior workforce, vastly expanding network, and low costs due to deferred mtc, etc), the higher-cost carriers cannot profit at the extremely low yields. And again...looking INDUSTRY-WIDE, B6 is most-responsible for adding the capacity in recent years. I'd say that the answer is glaring and you simply choose to pretend it isn't there and blame others for the obvious.
So quit claiming false victories and start thinking about things a little more globally to get the real answers. If you ever choose to think more broadly, you will be quite surprised by what you find
Ch 12,
I was kinda hoping for a tickertape parade!
I don't know how good, bad or otherwise Back Avaition is, though I know they've been around for quite a while. I cited them because they were in an article that was published shortly after you seemed to assume that I was making up the fact that B6 owns a fare premium in the NYC-Florida markets. Back Aviation is not the first to point this out...and again, DOT publishes this data as well and it is available for the public to wade through. You also seem to concede that this is correct due to the disparity in LF. However you arrive at it, B6 is pulling down a higher average fare between NYC and Florida than its competitors, plain and simple.
As for overcapacity being an "industrywide" problem, you may be correct, however that's an entirely different issue than the one that started this thread. Getting off track for just a moment, I would say that "industrywide" issues such as this probably deserve more attention from carriers with hundreds and hundreds of planes than from a carrier with dozens and dozens of planes. I don't know if it's still the case, but didn't DL at one point have somewhere around 400 RJs? Please correct me if I'm wrong about that. Is there really room domestically for 400 RJs at one carrier? Add those to the RJs from AA, UA, US, CO, and NW and there's a huge chunk of the industry's high cost, overcapacity problem, right there.
Getting back to our original issue, NY to Florida routes. If a carrier is filling more than 85% of its seats, and drawing a fare premium over its competition, why should that airline draw down its capacity? Historically, isn't that a scenario for adding capacity? However, if you're the competition and you're losing money, you can't fill as many seats and you're pulling down less money per seat, then what should you do???
As for my definition of overcapacity, I stand by it. You mention that you've refuted it, but do you have an alternative?
I was kinda hoping for a tickertape parade!
I don't know how good, bad or otherwise Back Avaition is, though I know they've been around for quite a while. I cited them because they were in an article that was published shortly after you seemed to assume that I was making up the fact that B6 owns a fare premium in the NYC-Florida markets. Back Aviation is not the first to point this out...and again, DOT publishes this data as well and it is available for the public to wade through. You also seem to concede that this is correct due to the disparity in LF. However you arrive at it, B6 is pulling down a higher average fare between NYC and Florida than its competitors, plain and simple.
As for overcapacity being an "industrywide" problem, you may be correct, however that's an entirely different issue than the one that started this thread. Getting off track for just a moment, I would say that "industrywide" issues such as this probably deserve more attention from carriers with hundreds and hundreds of planes than from a carrier with dozens and dozens of planes. I don't know if it's still the case, but didn't DL at one point have somewhere around 400 RJs? Please correct me if I'm wrong about that. Is there really room domestically for 400 RJs at one carrier? Add those to the RJs from AA, UA, US, CO, and NW and there's a huge chunk of the industry's high cost, overcapacity problem, right there.
Getting back to our original issue, NY to Florida routes. If a carrier is filling more than 85% of its seats, and drawing a fare premium over its competition, why should that airline draw down its capacity? Historically, isn't that a scenario for adding capacity? However, if you're the competition and you're losing money, you can't fill as many seats and you're pulling down less money per seat, then what should you do???
As for my definition of overcapacity, I stand by it. You mention that you've refuted it, but do you have an alternative?
Just curious, but when the yields on this route are cited, do they account for connecting traffic? If so, how? Do they allocate the revenue from a ticket from Frankfurt to FLL via NYC on a per mile basis?
Titan, will you be telling us all this crap about the cheap new guy not destroying yields industry wide when it's the much lower cost Virgin America doing it on your already overserved markets to the point you then have to pull down capcity, and all those 'contracts' between Dave and the "team" start to get voided because you're now too expensive?
Fact: Jetblu is losing money.
Fact: despite that, Jetblu is adding capacity
Fact: There are two options, either blu quits adding capcity, or someone else reduces capacity. So this plain and simply means that Blu's intended effect is to replace good job with pensions and benefits with much lower paying ones, all to make ADD Dave richer.
Titan, will you be telling us all this crap about the cheap new guy not destroying yields industry wide when it's the much lower cost Virgin America doing it on your already overserved markets to the point you then have to pull down capcity, and all those 'contracts' between Dave and the "team" start to get voided because you're now too expensive?
Fact: Jetblu is losing money.
Fact: despite that, Jetblu is adding capacity
Fact: There are two options, either blu quits adding capcity, or someone else reduces capacity. So this plain and simply means that Blu's intended effect is to replace good job with pensions and benefits with much lower paying ones, all to make ADD Dave richer.
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