Ch 12,
I'll try to respond point by point. If I miss something, it's not intentional.
To your first point, that I'm looking at this issue wrong because I'm focused on particular routes. Well, I know it's been a while, but you might want to look back at your first post in this thread - "flooding already full markets." Speaking in terms of the entire industry is simply changing the debate that started this conversation. Even with systemwide overcapacity (which you and I might be closer to agreement on), there are routes where that is not the case. See the current threads on the upstate NY - BOS routes which are about to heat up. Those are certainly not well served or "full markets." As such, I have chosen to keep my focus on NYC - Florida routes as that is where we began.
As to starting a business in an industry where there is "already excess product," I would point you to a good article I ran across in my morning Washington Post - "
Five Guys, Taking a Bigger Bite." BTW - BEST BURGERS EVER!!! If you ever have a chance, make sure to stop and have one. In any case, few industries could be more saturated (pun intended) than the burger biz. Four years ago, this place had one hole-in-the-wall location in Alexandria, VA. Now there are 87! 100 more coming on line this year. The hope to have upwards of 1000 in a few years.
Burger sales have been flat, or in decline, for years. Now, here comes Five Guys in a big way. Are they flooding the market - or - are they just competing with a product that more people want to buy? Like B6, on average, people seem to be willing to pay a bit more for their product, and like B6, their restaurants are full. You usually have to stand in line and wait a while for your food.
You claim that yields are too low in the NYC - Florida markets, but as I've pointed out several times B6 is pulling down a higher average fare
and is carrying higher load factors than their competitors. Could it be that the public has decided it will pay more for B6's well-marketed leather seats, newer planes, cute little TVs, etc.... than it will for the product that DL and others are offering? Shouldn't DL be pulling in the same dollars for a seat before complaining that others are forcing their fares down? At this point, is it possible that DL (and others) are making it harder for B6 to raise fares on this route?
You say that B6's business plan was to enter already well served markets and compete on price. Personally, I believe it was just the opposite. I think they saw a
huge hole in the number-one market in the country. That hole was JFK. It was arguably the most underutilized major airport in the nation. You remember the reaction when Neeleman announced they would base their operations there? It was along the lines of -
He's crazy. It's been tried before and always failed. It'll never work. Nobody wants to go all the way to JFK for a domestic flight. Yada,yada, yada. Well, people flocked to JFK. So did DL and AA (after B6), but I'm sure it wasn't to beat up on B6.
In short - from the beginning, B6 saw and opening and took it. The opening was a perfectly good underserved airport in a huge market. Offer good service and reasonable fares (not FlyI fares), serve attractive routes, market it well and they will come (and they have). For the most part, they have carefully avoided attacking other airlines' hubs.
Just as Five Guys found that customers are there for the taking if you offer the product they want, B6 discovered the same thing to Florida (even from the wasteland that was JFK domestic). Is Five Guys attacking McD's, BK, and Wendys? I don't see it that way. If the big three burger joints decide they're going to build new restaurants across the street from most of the new Five Guys, I do see that as an attack, because they had no interest in doing so until Five Guys came along and it's not likely to be profitable. Same thing with the airline industry.