IT WAS JUST A MATTER OF TIME !

[WorldTraveler]

Yes, it is dated information.. in fact, it was written the day after the merger was announced which makes it no different from the merger spin info that every other airline has put out right after their merger – but which time and time again has been shown to be less than accurate when measured over a longer period of time.
.
WN’s merger PR spin should be questioned in the same manner that every other airline has done but a little truth telling is in order.
1. WN’s merger/acquisition history is very clear…they take what they want from other carriers, remove all vestiges of the former carrier’s identity, and toss out what is not wanted. Ask the former stockholders of Muse, Morris, and ATA what was left of those airlines after WN took what it wanted. While WN puts on the same “we won’t shut anything down” language that other carriers have used in their merger announcement PR, history shows that they very much have reworked their acquired carrier assets into a form that fits their needs. Already, schedules show that FL is not continuing with some of the point to point less than daily flights for the winter that they have operated in the past. It is a given that some of FL’s cities will lose service.
2. WN still has a limited amount of assets/slots in key NE markets to use… and they are heavily concentrated on ATL service right now. It is quite unlikely that WN will keep the current level of flights from LGA and DCA to ATL but likely will shift some of those slots to other WN hubs.
3. As of the date of the merger announcement, WN proclaimed that it would be the US largest domestic carrier over DL – by a tiny 1% margin - 0.2% market share compared to DL’s 22%. Just looking at June traffic reports that were released this week, DL carried 9.4% more RPMs on its domestic system for June than WN and FL did combined.
4. Looking at December 2011 schedules, solely within the US – since that is the market that WN serves, DL is the largest carrier within the US. DL has 4% more flights and ASMs than UA/CO and 35% more flights and 14% more ASMs than WN/FL. Network carrier schedules have probably not been finalized but DL’s lead over WN is large enough that it is highly unlikely esp. since the network carriers typically run higher load factors than WN.
5. Looking at ATL specifically – probably the most telling predictor of how the DL – WN situation might shape up – DL’s ATL capacity for December is up by 1% in flights with seats up by 4% and ASMs up by 5%. FL’s capacity as a wholly owned subsidiary of WN is up 1% in flights while seats and ASMs are down 1%. In other words DL is adding seats to the market particularly by using larger, lower CASM aircraft while FL is using smaller aircraft (717s vs 73Gs) in order to attempt to maintain its flight presence although it is reducing seats in the market.
6. DL has 5 times more domestic seats from ATL than FL – the largest multiple that exists between WN/FL and a network carrier in any network carrier hub in which they compete.
7. As DL adds seats to the M80s and retires 50 seat RJs, including shifting connecting capacity from MEM and CVG to ATL, the number of seats from ATL will continue to grow.
No one including me doubts that WN will grow the current presence in ATL… they note and I have pointed out that FL is about 20% smaller than its peak in ATL. But even WN execs acknowledge that the stimulation factor that the Campbell Hill study predicted is inflated – exactly what I have said because most markets from ATL have already been stimulated by low fares. Also, because acquiring a single operating certificate and single res platform is still months if not a year or more away, WN will be operated in ATL through its WN subsidiary which means they will be competing on the same basis they current are.
.
What I hope is becoming obvious in this long discussion is that I don’t doubt that WN is a potent competitor and that they intend to use their FL acquisition to grow their presence on the east coast including in ATL which is one of the nation’s top travel markets – and one which has been absent from WN’s network.
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But I hope it is also very obvious that some network carriers have defended their networks very well against low fare carriers while others have not.
The fact that DL has grown its share of the domestic market faster than any other network carrier and even more so on the east coast – the backbone of its network – shows that DL strongly believes that it can profitably serve the domestic market in spite of the growth of low fare carriers that has resulted in many network carriers pulling down domestic capacity – and again esp. on the east coast.
Despite being a larger airline overall, UA’s domestic presence is smaller than DL and UA/CO is shrinking its domestic presence while DL is growing it.
DL’s domestic presence is 70% larger than AA’s.
The two largest airlines in the domestic marketplace will be DL and WN… they offer different types of products and have different networks but those two will increasingly be the two carriers that will define the domestic marketplace. Only an AA/US merger – assuming each keeps its current market share – would rival either DL or WN’s domestic presence; given that both AA and US have lost domestic share in the US and AA particularly still is losing market share to other carriers in key domestic markets, it is unlikely that DL and WN will be challenged as the two largest domestic carriers.
It is also likely that the two will be very closely matched in size – DL probably leading by RPMs and revenue and WN leading by passengers carried, a reflection of DL’s longer length of haul and larger presence in higher value markets such as NYC.
The fact that they will compete in ATL – the world’s largest airport and the US city with the largest amount of domestic capacity - is only symbolic of the role they will play in domestic air transportation overall.

One more thought: The ability of network carriers to compete effectively in the domestic market is directly related to their cost structure. DL has long had one of the lowest CASMs among US network carriers; they sought NW as a merger partner who had an identical labor CASM as of the date of the merger and who was also jealously protective of its midwest turf. US post BK has had a very similar CASM to DL and in recent quarters has improved relative to DL.
The voluntary programs that DL just completed will go a long ways toward decreasing DL's CASM back to levels post-merger and which also match its reduced capacity throughout the winter. When DL and the rest of the industry add capacity next year - in part because of the slot deal, it will be from a lower CASM basis.
AA and UA on the other hand have been on the upper end of CASM of the industry and have also given up far more ground to LFCs. CO's fairly well protected hubs and lower historical CASM has now given way to more competition from a higher CASM base and now which will be harder and harder to distinguish from UA's... thus UA and CO are focusing their growth on the int'l market and are reasonably content that their domestic presence is large enough, esp. since it is heavily weighted to the top domestic business markets.
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It isn't a secret how the competitive shakeout will take place in the domestic segment of the network carrier industry over the next five years; network carriers that win will be those carriers that have low enough costs to compete against low fare carriers - which are now nationwide like WN, carriers that have a presence in the top markets and are able to maintain them as well as strong nationwide systems that connect small and medium sized markets, and carriers which have a large enough size advantage over low fare carriers to be able to ensure that low fare carriers cannot grow their presence in key markets.

 

[eolesen]

I think you need to brush up on your WN merger history... Muse and ATA were fire sales. Muse was already on the verge of shutting down when Herb threw Lamar a lifeline. The pilots at Muse balked when faced with working under WN's workrules. Herb decided that since they thought they deserved better, he sold Transtar to Lorenzo. Poetic justice, I might add... Oh, and they were never integrated into WN.

ATA was already in bankruptcy when WN invested in them with the intent of getting a minority stake (less than 30%?) on exit from Ch.11 (which never happened). After the shut down, WN did buy some assets e.g. slots at LGA and perhaps their operating certificate, but again, in no way was that ever presented as a merger or an acquisition.

Morris.... That was an actual acquisition. Nobody ever paid attention to them until after WN bought June and Neeleman out, mainly because they'd only been their own operation for about two years (everything operated from 1984 to 1992 was flown by other carriers like Ryan).

Sure, WN dropped a few cities which made no sense for their network (e.g. Anchorage, Bullhead City and Eugene), but for the most part still serves the rest of the Morris cities.

I know a lot of people at and from WN, and this isn't being treated along the same lines as Morris. It's not even a starting point for discussions as far as they're concerned...

 

[does this plane go to paris]

e,

You beat me to the punch on the history lesson. Muse/Transtar was one of many start post-deregulation airlines. The difference is that they happened to be started by the same man that started WN. Things didn't work out like they did at WN and because WN tried to help, they have been chastised for being the evil company that shut them down. WT referred to the lost stockholder value. I would suggest reading the history of Muse Air before placing blame.

Remaining on the shareholder value referred to my friend WT, as I understood it, June Morris, the founder, president and major stockholder of Morris Air approached WN and she accepted the deal and was on the BOD. WT, are you arguing that she didn't like the deal?

Concerning ATA, they had been in BK and HP tried to make a deal and Airtran attempted a deal, but who did they make make the deal with? WN gave them a lifeline in the form of loans and a codeshare and allowed them to operate separately. Since they couldn't make it, it must be the evil WN that failed them. I know that you're a fan of DL, should we talk about the PA share holder value and what they lost? PA was promised additional loans by DL were they not? I think DL saw the books and decided that it needed to stopped and they did.

WN has never laid off any employee's and remains committed to that point. I seem to recall that both DL and WA employed their own ramp agents, had company seniority etc. IIRC, were they not let go entirely and a new subsidy formed? How's that for being loyal and committed.

One final note, I'm sure that there will be lost service. Once a week service doesn't fit into WN's profitable model. Much like not having 3 hubs in the Mid-West. CVG has seen a huge pull down. And if we go back to the PA deal, what happened to FRA? In the WA merger, they had a hub in LAX, is that around? I could go on and on, but need to stop before it becomes 2000 words or pages.

 

[signals]

Yes, it is dated information.. in fact, it was written the day after the merger was announced which makes it no different from the merger spin info that every other airline has put out right after their merger – but which time and time again has been shown to be less than accurate when measured over a longer period of time.
.
WN’s merger PR spin should be questioned in the same manner that every other airline has done but a little truth telling is in order.
1. WN’s merger/acquisition history is very clear…they take what they want from other carriers, remove all vestiges of the former carrier’s identity, and toss out what is not wanted. Ask the former stockholders of Muse, Morris, and ATA what was left of those airlines after WN took what it wanted. While WN puts on the same “we won’t shut anything down” language that other carriers have used in their merger announcement PR, history shows that they very much have reworked their acquired carrier assets into a form that fits their needs. Already, schedules show that FL is not continuing with some of the point to point less than daily flights for the winter that they have operated in the past. It is a given that some of FL’s cities will lose service.
2. WN still has a limited amount of assets/slots in key NE markets to use… and they are heravily concentrated on ATL service right now. It is quite unlikely that WN will keep the current level of flights from LGA and DCA to ATL but likely will shift some of those slots to other WN hubs.
3. As of the date of the merger announcement, WN proclaimed that it would be the US largest domestic carrier over DL – by a tiny 1% margin - 0.2% market share compared to DL’s 22%. Just looking at June traffic reports that were released this week, DL carried 9.4% more RPMs on its domestic system for June than WN and FL did combined.
4. Looking at December 2011 schedules, solely within the US – since that is the market that WN serves, DL is the largest carrier within the US. DL has 4% more flights and ASMs than UA/CO and 35% more flights and 14% more ASMs than WN/FL. Network carrier schedules have probably not been finalized but DL’s lead over WN is large enough that it is highly unlikely esp. since the network carriers typically run higher load factors than WN.
5. Looking at ATL specifically – probably the most telling predictor of how the DL – WN situation might shape up – DL’s ATL capacity for December is up by 1% in flights with seats up by 4% and ASMs up by 5%. FL’s capacity as a wholly owned subsidiary of WN is up 1% in flights while seats and ASMs are down 1%. In other words DL is adding seats to the market particularly by using larger, lower CASM aircraft while FL is using smaller aircraft (717s vs 73Gs) in order to attempt to maintain its flight presence although it is reducing seats in the market.
6. DL has 5 times more domestic seats from ATL than FL – the largest multiple that exists between WN/FL and a network carrier in any network carrier hub in which they compete.
7. As DL adds seats to the M80s and retires 50 seat RJs, including shifting connecting capacity from MEM and CVG to ATL, the number of seats from ATL will continue to grow.
No one including me doubts that WN will grow the current presence in ATL… they note and I have pointed out that FL is about 20% smaller than its peak in ATL. But even WN execs acknowledge that the stimulation factor that the Campbell Hill study predicted is inflated – exactly what I have said because most markets from ATL have already been stimulated by low fares. Also, because acquiring a single operating certificate and single res platform is still months if not a year or more away, WN will be operated in ATL through its WN subsidiary which means they will be competing on the same basis they current are.
.
What I hope is becoming obvious in this long discussion is that I don’t doubt that WN is a potent competitor and that they intend to use their FL acquisition to grow their presence on the east coast including in ATL which is one of the nation’s top travel markets – and one which has been absent from WN’s network.
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But I hope it is also very obvious that some network carriers have defended their networks very well against low fare carriers while others have not.
The fact that DL has grown its share of the domestic market faster than any other network carrier and even more so on the east coast – the backbone of its network – shows that DL strongly believes that it can profitably serve the domestic market in spite of the growth of low fare carriers that has resulted in many network carriers pulling down domestic capacity – and again esp. on the east coast.
Despite being a larger airline overall, UA’s domestic presence is smaller than DL and UA/CO is shrinking its domestic presence while DL is growing it.
DL’s domestic presence is 70% larger than AA’s.
The two largest airlines in the domestic marketplace will be DL and WN… they offer different types of products and have different networks but those two will increasingly be the two carriers that will define the domestic marketplace. Only an AA/US merger – assuming each keeps its current market share – would rival either DL or WN’s domestic presence; given that both AA and US have lost domestic share in the US and AA particularly still is losing market share to other carriers in key domestic markets, it is unlikely that DL and WN will be challenged as the two largest domestic carriers.
It is also likely that the two will be very closely matched in size – DL probably leading by RPMs and revenue and WN leading by passengers carried, a reflection of DL’s longer length of haul and larger presence in higher value markets such as NYC.
The fact that they will compete in ATL – the world’s largest airport and the US city with the largest amount of domestic capacity - is only symbolic of the role they will play in domestic air transportation overall.

One more thought: The ability of network carriers to compete effectively in the domestic market is directly related to their cost structure. DL has long had one of the lowest CASMs among US network carriers; they sought NW as a merger partner who had an identical labor CASM as of the date of the merger and who was also jealously protective of its midwest turf. US post BK has had a very similar CASM to DL and in recent quarters has improved relative to DL.
The voluntary programs that DL just completed will go a long ways toward decreasing DL's CASM back to levels post-merger and which also match its reduced capacity throughout the winter. When DL and the rest of the industry add capacity next year - in part because of the slot deal, it will be from a lower CASM basis.
AA and UA on the other hand have been on the upper end of CASM of the industry and have also given up far more ground to LFCs. CO's fairly well protected hubs and lower historical CASM has now given way to more competition from a higher CASM base and now which will be harder and harder to distinguish from UA's... thus UA and CO are focusing their growth on the int'l market and are reasonably content that their domestic presence is large enough, esp. since it is heavily weighted to the top domestic business markets.
.
It isn't a secret how the competitive shakeout will take place in the domestic segment of the network carrier industry over the next five years; network carriers that win will be those carriers that have low enough costs to compete against low fare carriers - which are now nationwide like WN, carriers that have a presence in the top markets and are able to maintain them as well as strong nationwide systems that connect small and medium sized markets, and carriers which have a large enough size advantage over low fare carriers to be able to ensure that low fare carriers cannot grow their presence in key markets.

It's a 10 year game plan for WN, see you then!

 

[eolesen]

I think DL saw the books and decided that it needed to stopped and they did.

Yep. "The world has changed" is how I recall it being stated. Then again, maybe they were just demonstrating their ability to be more flexible at adjusting to market conditions...

WN has never laid off any employee's and remains committed to that point.

Not entirely certain they've never laid people off. They've closed a few cities along the way and a not too long ago, a Res center, and I don't think everyone from the Res center chose to relocate.

Reunification and allowing LH back into certain markets is what killed off the regulatory justification for the FRA hub. Even I can't blame DL for that one.

 

[WorldTraveler]

It’s good to return to this discussion and to be conversing with you, E, again.

This has been one of the longer running threads not involving labor so perhaps it is good to clarify what is actually being debated.
From my perspective, there have been a number of people on this thread who have tried to argue (debate) that WN will grow ATL in such a way that in my opinion is inconsistent with its business plan or model or how it has competed with other carriers in the US – and how other carriers have competed with WN.

Is that a fair assessment of the basic gist of the discussion?– because if it is not, then it would be helpful to get on the same page.

….
I am well aware of which companies were acquired by WN through mergers and which were asset acquisitions just as I do with other merger/acquisition activity in the industry.
Whether they were acquired as mergers or asset acquisitions doesn’t change the fact that none of them retain anything of their former business models or identity – because WN, just like all other airlines that have successfully acquired other carriers, worked quickly to integrate their acquired companies/assets into the mold of what the acquiring company was before the merger.
There are very few cases in business history let alone in the airline industry – where the acquiring company gave up its own business model in favor of the model of the acquired company. While it does happen more frequently, it is rare – including in the airline industry – for airlines to take on the identity of the acquired – and that appears to be no different with WN.
DL – whose network has probably been built more by merger than any other existing US airline – never gave up its long-term identity or business model and values. Northeast and Western were mergers, Pan Am was an asset acquisition, NW was a merger but the result is still the same – DL moved quickly to pick out of each transaction what it wanted, eliminated the identity of the former airline, and has adopted the culture of PMDL, regardless of where the leadership came from.
UA/CO is shaping up the same way… despite talk that it would be a merger of equals, one of the few vestiges of CO that is being retained is the tail identity… many of the values, identity, etc of CO are being dropped in favor of UA. What is common is that DL and UA both took senior leadership from the acquired company – but given that Grinstein and Tilton both wanted out of the top leadership position, it was to be expected that leadership would arise from the “other side” and it only makes sense since CO and NW were both well run airlines. \

WN is no different – and again there is no evidence to support that WN will give up what it has successfully built over many years in favor of a model which is very different from WN’s including at ATL:
1. FL’s operation at ATL is much more dependent on connections than anything WN has
2. FL’s average fares across their system are lower value than WN’s
3. FL operates a fully banked operation, a more costly and different operation than what WN has operated; WN simply says (per the article) that they want to study FL’s network and flows… they have made no commitment then or since that they will keep FL’s hub and spoke network at ATL as it stands.
4. FL controls the vast majority of slots the combined FL/WN will hold; it would be very naïve to think that WN will continue to use all of those slots where they currently are, including heavily too from ATL.
Despite saying the day after the merger announcement that they were not completely opposed to FL’s assigned seats, dual class, or bag fees – time has shown which model will win out… and it once again validates that WN is sticking to what it has done well.
WN had very clear objectives that they wanted to achieve with the FL acquisition; the article states 3 according to WN’s Kelly– Atlanta, small cities, and international – somehow failing to note the slots in the NE which WN was fighting to gain even while it was negotiating with FL to gain more.
Nowhere has WN or FL leadership post merger announcement ever said that would grow to the size FL once had in ATL. They have said they will connect the WN and FL networks – fully expected and in so doing grow their presence in ATL.
What I have said numerous times – and which no one has been able to counter – is that there are very clear metrics which have been shown to determine whether low fare carriers can succeed in a network carrier dominated market – primarily related to the size advantage the network carrier has and the financial strength including the CASM difference between the low fare carrier and the network carrier.
WN has not succeeded in changing those dynamics in any matchup involving a network carrier – and there is no reason to think they will do anything any different this time – esp. since it is only a few people on internet chat boards – certainly no industry experts or better yet the executives who would have to make it happen who are saying it.
…
The issue of Germany was raised – and I’ll gladly respond to it.
DL acquired Pan Am’s assets because it wanted a presence in the NE and across the Atlantic that complemented what it had from ATL and from the NE to Florida and the south where DL was traditionally strong.
Reunification killed the intra-German operation from TXL and in so doing made it less cost effective to operate narrowbody aircraft from FRA to serve points within Europe. What killed FRA was the high costs of operating 727s intra-Europe (DL had to deadhead pilots from the US after the IGS was shut down) but far more importantly LH outgunned DL in frequency and capacity in every market from FRA where DL competed. The FRA hub failed for the same reason nearly every other hub fails: DL could not garner the local market revenue to justify the expense of a hub – which in this case was really just about getting passengers from the US to other points in Europe (with a small amount of intra-Europe traffic).
HOWEVER, DL began service from most of the former PA cities in Europe NONSTOP to JFK and/or ATL – the first time many of these cities have ever been served from a US point other than NYC by a US carrier. DL also formed the Swissair/Sabena alliance which was used to serve markets which did not justify nonstop service to the US… (later replaced by AF and then AF-KL) AND most importantly, DL remained the largest US network carrier in Germany until UA obtained ATI with LH just a couple years ago. In other words, DL achieved all of its objectives – kept the German local market, served the cities east of FRA on new nonstops to the US, and became the largest airline between the US and continental Europe, a title which it has not given up since and, as of last year’s data, DL continued to hold even when combining the UA/CO revenue shares.
Delta achieved its goals in Europe whether it operated a hub in FRA or not.
We won’t get into LAX but suffice it to say that DL has achieved a revenue presence in LAX comparable to its total revenue share in the rest of the western US. DL also has retained a position in LAX-Hawaii and is now because of NW the largest US airline in LAX-Japan and LAX-East Asia overall, a position that will only increase with the addition of LAX-HND. DL also added Australia and there are some indications that the Virgin-DL ATI approval will lead to expansion of DL's flights in Australia.
As for SLC – which was a larger portion of the Western operation than LAX – it is very possible that UA’s pulldowns at DEN will leave DL as the only network carrier hub in the Rockies… rather hard to believe but DL’s SLC hub is currently three-quarters of the size of UA’s at DEN.
Companies define their goals and the most successful companies adapt to the market to figure out to achieve those goals.
WN can achieve all of its stated goals – plus have a decent presence in the key NE business markets without achieving the size of operations in ATL that some have suggested are necessary. And simply by bringing their ATL operation on par REVENUE-wise with their other large operations, ATL will become one of their most valuable operations.
...

As for the DL employee issue, yes, it is true that DL violated its cultural promise of not laying off full-time employees on several key occasions – but they also did not do it on other key occasions such as the ATC controllers strike decades ago and most recently post-NW merger. Despite DL employees having the choice to challenge DL’s trustworthiness through unions, there has not been any further unionization at DL in decades even after acquiring one of the most heavily unionized companies in the industry – a number of which did not support their own unions.
While promises are a dime a dozen – whether it be regarding keeping hubs or laying off employees, DL has apparently kept its word well enough that one of the few checks and balances that could have been put in place was not exercised.
And as E notes, it isn’t clear that WN has even held up that cultural promise; and as their business model becomes as complex as their network peers and as they move in and out of markets and as the company ages and accrues costs like their network carrier peers, WN too might have to break some of its promises – written or not.
….
WN’s model could change and they could be something they weren’t before…. But the most successful companies – of which WN is certainly one of them – stick to doing what they have done well. They can achieve their goals through the FL acquisition and retain the well-established balance that has developed between WN and DL as well as other network carriers that have successfully competed against low fare carriers.

 

[eolesen]

All fine and good, except for that "stick to what you've always done" statement.

On one hand, you regularly laud DL for being innovative and taking business risks, and slam AA for sticking to their old, tired game plan.

So why are you expecting WN to to stick to their old game plan? One thing they've made clear is that there are no sacred cows when it comes to scheduling. The low hanging fruit have long been harvested, the easily extractable oil is gone. There is talk of a third, maybe a fourth fleet type... They're operating at slot controlled airports more and more. And yes, they do occasionally tweak for optimizing connections at the expense of the 20 minute turn...

I seriously doubt Gary Kelly is interested in simply maintaining the status quo with other airlines like DL. Doing so simply invites guys like Spirit and new entrants to grow.

The arguments here really boil down to about two lines of thought :

1) "WN will stick to what they've always done,"

2) "Expect the unexpected"

Sure, it will take a while to realize which one holds up. But I think you're kidding yourself if you expect business as usual once the two schedules are integrated.

 

[WorldTraveler]

I made it clear that I fully expect WN to evolve... the fact that they have moved from their strategy of competing largely from airports that they dominate to ones where they have to compete against other airlines proves as much.
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And yes in order to be a viable competitor in the whole of the US they must have a presence in the key slot controlled NE airports.
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but that isn't the real issue we are debating.
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The issue which I have strongly argued against is that WN will change its business model in just a way that will harm DL, which is the argument that a number of people in this thread have made.
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I and others have argued for quite some time that DL and WN will co-exist in ATL, just as they have in other hubs and what WN has done with some other network carriers in other hubs.
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I don't have any doubts that WN's business model is adapting - increased ground times, more connections, a larger presence in the NE, etc.... but DL and other network carriers have done that for decades and have managed to do quite well whatever WN might try to do in the ATL market.
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I have yet to hear any substantive ways that WN will be able to achieve their increased presence in ATL - nor have I heard how they will address a number of things with the FL model that are not compatible with WN's - the largest of which is that FL's average fares are about 20% lower than WN's in similar markets and they must correct that deficiency before they can talk about growing ATL.
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When I see substantive evidence that WN is succeeding at achieving what some here have argued they will do - despite the fact that many of the things espoused here have not even been identifed by FL or WN execs as part of their goals, then I'll agree that something has changed.
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For now, though, I continue to see DL increasing the size of its ATL hub faster than FL - and DL doesn't have to wait for reservation automation, single operating certs, etc to strengthen its position in ATL.
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While it might not be what some want to hear, the most likely scenario is that DL and WN will both succeed in ATL and WN will still achieve all of its objectives.
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BTW,
DL has changed its strategies and taken risks - some have worked and some have not. If you remember, DL (and I believe AA in DFW also) tried to implement a full rolling hub and then quickly returned to its heavily banked structure.
Good companies take risks... they just know when to quit experimenting and when to stick w/ what works. See the book Good to Great for more on the subject.
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further, AA clearly does some things well... including its Latin operations, LHR, and its DFW hub.... problem is that all of those all are under competitive assault to one degree or another - in addition to its ORD and JFK hubs.
AA's problem is not that it doesn't do some things well... but that it has been very slow to adapt to new realities and thus protect itself as other airlines have done.
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Doing things the way they have always been done only is good if it works.

 

[southwind]

All fine and good, except for that "stick to what you've always done" statement.

On one hand, you regularly laud DL for being innovative and taking business risks, and slam AA for sticking to their old, tired game plan.

So why are you expecting WN to to stick to their old game plan? One thing they've made clear is that there are no sacred cows when it comes to scheduling. The low hanging fruit have long been harvested, the easily extractable oil is gone. There is talk of a third, maybe a fourth fleet type... They're operating at slot controlled airports more and more. And yes, they do occasionally tweak for optimizing connections at the expense of the 20 minute turn...

I seriously doubt Gary Kelly is interested in simply maintaining the status quo with other airlines like DL. Doing so simply invites guys like Spirit and new entrants to grow.

The arguments here really boil down to about two lines of thought :

1) "WN will stick to what they've always done,"

2) "Expect the unexpected"

Sure, it will take a while to realize which one holds up. But I think you're kidding yourself if you expect business as usual once the two schedules are integrated.

When you start adding different fleet types, the cost of maintaining those different fleet types goes up, hence the price of a ticket on these different fleet-types goes up, which in the end, no longer qualifies WN as a LCC !

So where's their advantage ? If you want to play in the majors, you better have Major League equipment ! You can only cram so many people onto a 37 ! :blink:

 

[signals]

When you start adding different fleet types, the cost of maintaining those different fleet types goes up, hence the price of a ticket on these different fleet-types goes up, which in the end, no longer qualifies WN as a LCC !

So where's their advantage ? If you want to play in the majors, you better have Major League equipment ! You can only cram so many people onto a 37 ! :blink:

Nice to hear from you again, SW

The way I can see it is that the reason the legacies were able to drive off the completion was because they a-stuck together, b- could sustain a loss for a greater amount of time than their competition, c-would make a great profit once the competition was gone!

Enter WN who a-divides and conquer. It's every airline for themselves nowadays. B-WN is in better shape than any other airline and I seriously doubt if FL will be a liability. C-everything WT has said about LUV have been DL's tactics for years!

Kelly calls for a 10 year plan...see you theni

 

[WorldTraveler]

Nice to hear from you again, SW

The way I can see it is that the reason the legacies were able to drive off the completion was because they a-stuck together, b- could sustain a loss for a greater amount of time than their competition, c-would make a great profit once the competition was gone!

Enter WN who a-divides and conquer. It's every airline for themselves nowadays. B-WN is in better shape than any other airline and I seriously doubt if FL will be a liability. C-everything WT has said about LUV have been DL's tactics for years!

Kelly calls for a 10 year plan...see you theni

So was every other airline too stupid to not realize that DL and WN were in cohoots to drive the rest out of business?

Interesting theory.... I'll be waiting for the anti-trust case against DL and WN to begin.

or perhaps DL figured out a long time ago that in a commodity business - which is essentially what domestic air transportation is - that the best way to win is to have the lowest costs.... and by religiously sticking to being the lowest cost domestic network carrier, they have now ended up as being the only viable competitor to WN in most of the connecting markets... while at the same time they ended up being the largest domestic carrier in a number of large markets of their own - soon to include NYC after the slot deal - which ALL added together makes them the largest domestic network carrier - on par w/ WN - while the rest of the network carrier airlines have been in retreat in the domestic market.

nice theory... let's check back in a couple years... but you might be onto something.

maybe in 10 years DL will be the only network airline flying domestic routes... how's that for a 10 year DL and WN vs. the rest of the industry plan?


---

hey Sig, one more thing,
while you are working on your 10 year plan, you might take a look back on the last 10 years....
'cause if you do, you would see that DL and WN have both managed to grow their domestic revenue share during the decade and it has largely come at the expense of other network carriers.
So much so that DL and WN now pretty much evenly split 45% of US domestic revenue; even a two year plan for the industry which will include DL's growth at LGA due to the slot deal and WN's growth on the east coast will see them together carrying more than half of all US domestic passengers between the two of them.

We'll leave a few things to imagination but it isn't too far fetched to believe that the 50-50 split between DL and WN and the rest of the industry for US domestic passengers will widen considerably in the final 8 years of your plan.

And, BTW, DL as of right now is also the #2 US int'l airline and they are still adding int'l capacity.

You see, when you look at what got us to this point in the industry, it isn't so far fetched to figure out where we go from here.

 

[uniquelyAM]

Well.. the airlines like every other industry are,definitely in a race to the bottom. Rest assured it won't stop,unti we all have been hit by the outsourcing bug, or we've all jumped on the band wagon to stop industry and economic decay. I'm speaking of unionizing. Fighting for the middle-class. I'm sure you won't agree.

Go Southwest. Good pay and just as importantly benefits for the employees. YOU ARE RIGHT Delta... we can't compare ourselves to Southwest.

 

[WorldTraveler]

Welcome to airline forums, AM.

While the discussion has largely been about network aspects of DL and WN – or perhaps as some see it DL vs. WN – it might be time to look at other aspects of DL vs. WN including labor. No one has been able to come up with valid evidence to show that DL and WN won’t coexist when all the evidence seems to show that DL and WN have managed to coexist and grow together at the expense of other carriers.
But let’s look at the labor situation you raise.
If the issue is merely whether DL is largely unionized like most of the rest of the airlines in the world, then I’m not sure there is any answer anyone will like other than that the majority of DL employees have chosen repeatedly not to outsource their labor relations…. and are receiving “services” from the company as good as if they outsourced the function of management relations and negotiation of salaries and benefits to a union.
That of course is the value proposition behind outsourcing and it applies to labor relations just as much as it does to other services.
If the issue is really the level of outsourcing that airlines do over all, let’s look at that.
As you may know, DL’s decision to outsource most of its small and medium sized domestic stations came during the mid 90s when DL launched its “leadership 7.5” program to bring costs down to 7.5 cents/ASM – not surprisingly in order to be competitive with WN.
DL maintained its level of airport outsourcing largely through BK until the NW merger – perhaps you joined DL through that merger – when it acquired a number of new small and medium sized cities.
Others know the details better than I but DL has since added DL mainline back to some of the cities where NW had mainline… I’m not sure what stations were outsourced and are now DL mainline –including PMNW personnel.
NO one can reasonably expect DL to undo overnight decisions that were made 15 years ago but they have not expanded airport outsourcing and they have brought some outsourced activities back to DL mainline employees, again including PMNW.
Where DL is bringing airport jobs back to mainline, it is using ready reserve and other reduced benefit/entry level pay jobs – not a whole lot different from what many other US consumer companies do. However, good luck finding much in the way of products at just about any US consumer goods store that are made in the USA – or even countries with comparable standards of living to the US.
What DL is doing now – distinct from every other network airline – is that DL is shrinking its Delta Connection operations and adding DL mainline jets. Just as WN dropped FL’s RJ based operation, DL recognizes that there are places where mainline makes more sense and they are doing more to bring jobs back to mainline DL than any other network carrier is doing.
DL’s addition of mainline jets includes the M90 which DL is configuring with 160 seats, 10 more than they currently fly – and which requires adding a 4th flight attendant.
In addition, IIRC, 100% of DL’s flights to/from the US are flown by US-based flight attendants while other carriers have foreign crew bases that operate flights to/from the US.
As for maintenance outsourcing, I am sure you are aware that DL Tech Ops INSOURCES a significant amount of work such that DL says they are the largest North American airline based MRO. In contrast, WN outsources a lot of maintenance but to my knowledge does little if any insourcing.
Finally, you might consider that DL employee salaries are now above average for the US airline industry as a whole… and DL employees received more profit sharing than their network airline peers. Even PMNW employees who are still governed by the pre-merger contracts did no worse than other network carrier peers.
So, yeah, DL outsources more of its total labor than WN – but it is shrinking that amount and the salary and benefits for DL employees is above average compared to other carriers….
Perhaps that is the reason why DL employees voted on multiple occasions not to outsource their labor relations….
And why DL and WN have both been able to demonstrate that what is good for the business overall usually is good for the employees… and sharing the benefits with employees is what helps develop loyalty to the company – whether there are middlemen involved in representation or not.
.
You actually can compare DL and WN; there are perhaps more similarities between DL and WN than there are between DL and other network airlines with respect to domestic operations – and it is also why it is very likely that within a couple years, the majority of all US domestic passengers will fly DL or WN with every other carrier splitting the rest of the pie.

one more thing, IIRC, AS engaged in a significant outsourcing of their ramp operations not too many years ago... and in so doing took on their union. AS is one of the more respected airlines in the US and also one of the few that has been able to directly compete successfully against WN.
I'm not sure if it is necessary for a network carrier to have to outsource labor in order to successfully compete against WN - I don't really think so - but like WN, AS is a legacy airline that recognized it needed to get rid of alot of its legacy costs in order to compete against WN. WN simply does not have the same level of costs as traditional network airlines including AS who are much older - and thus have more senior people and more retirement related costs. AS is the 2nd largest airline on the west coast - after WN - and AS' west coast operations are more than twice the size of the largest nationwide network carrier - UA.
.
We'll see financial statements for all airlines in a couple weeks but it wasn't too long ago that DL actually had a lower CASM (cost per available seat mile) than AS did...although if stagelength adjusted (since AS operates shorter haul flights than DL), DL would end up a couple percent higher than AS.
Still, AS is yet one more example that it is possible to effectively compete against WN but network airlines - even AS - have had to adapt their model to be able to compete against WN... but when they did, they have been able to compete quite effectively.

 

[tech2101]

Welcome to airline forums, AM.
(lots of stuff deleted)
... quite effectively.

Damn, WT, you could have stopped at Welcome. Try not to come on so strong and you might not be the last post on so many threads..

 

[WorldTraveler]

I'm hear to discuss the merits of the post.
Given that there are still people on this forum that relish the idea that WN will inflict harm on DL and don't have the self-esteem to recognize that there are airline others than WN that do something right, it is obviously still time to post what I have said.
.
If going past the formalities and the tough language are necessary to make that point, so be it.
.
I'll stop posting when people understand the industry for what it is ... not holding anyone at a position higher than they are supposed to be and not deprecating where it is not necessary.