Southwest Going Back To Denver

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Let's think about this for a minute in the framework of Economics 101: business competition --

-- A Low Cost Carrier enters a market where none exist and prices their fares at a low but profitable rate.

-- The incumbents must either a) match the LCC dollar-for-dollar, or B) attempt to differentiate themselves in order to display a competitive product. If their products were, in fact, superior in the eyes of the marketplace, they would easily be able to maintain a respectable market share. Alas, they are viewed simply as "different" products, not commanding a premium afforded to "better" products.

-- Thus, the incumbent neither able to reduce costs to the level necessary to generate a profit at the matching fare nor to establish themselves as "worth the cost" effectively price themselves out of the market.

Our example uses SWA as the LCC entrant. In fact, any number of new LCCs could be inserted except, ironically, the carrier whose NYSE symbol is "LCC"!


Lets look at it from an Econ 611 standpoint instead.
- Cheap airine comes in.
- Incombant airline that brought value to the entire community cuts back service. Residents may even realize that flying the turd in blue water painted jets is bad for the economy, but they are simply out to save a few bucks for themselves (see "free rider")
- Businesses flee that city due to lack of Global reach of new dominate carrier. Economy becomes centered even more around major business centers (that still enjoy "feed"), making vibrant small cities a thing of the past.
- City has low fares.....and now needs them.
- SWA then threathens nearly BK city with pulling out if they don't lower all the fees for SWA's service
- Already devistated economy then must give in to SWA's tactics, taxpayers suffer even more.
- local radar sectors gridlocked due to 37 daily flights between 1 city pair with 130 seat jets (instead of using BIGGER jets).
- Government raises fee's on ALL airlines, even the responsible ones, to cover the higher costs.
- Responsible airlines cut back even more.
- SWA keeps costs low on the back of low pay and no retirement plan. Management plays the Stock option game. Oldest employees do VERY well in Ponzi Scheme. Convince young employees they'll get rich also. Young employees too stupid to understand doubling rates.
- Payrates and retirement plans at responsible carriers collapse to SWA "costs", not payrates (additional cost of upgrades and of other legacy costs such as healthcare). SWA proudly boasts of "high payrates" that are nowhere near the rates they so wisely forced down. IOW, SWA is proud to be the richest resident of Somolia instead of being the richest in New York. Yippee, Airline career now only for those too old to retrain or too stupid to graduate college. Senior employees, confident of their ability to snow young stupid employees, already working to low the now dismal industry pay rates by arguing for paycuts. Should make options of old f@rts worth more, under the promise that "everybody will get rich". Once again, not enough young employees smart enough to understand doubling rates.

I could go on and on. I personally like competition, I just have a problem with the government player favorites. If one company raises the costs for everyone else, then THEY should pay ALL of the increased cost. If the FAA has to hire two or three more employees to read clearances so SWA can save the $0.20 cents it costs to uses ACARS, then SWA should pay the costs. If SWA makes a 10 hop across the U.S. then they should pay at least 10 times as much for the service as a 747-400 that goes direct. Level the playing field, then we can talk.
 
I could go on and on. I personally like competition, I just have a problem with the government player favorites. If one company raises the costs for everyone else, then THEY should pay ALL of the increased cost. If the FAA has to hire two or three more employees to read clearances so SWA can save the $0.20 cents it costs to uses ACARS, then SWA should pay the costs. If SWA makes a 10 hop across the U.S. then they should pay at least 10 times as much for the service as a 747-400 that goes direct. Level the playing field, then we can talk.

Bussie....the government is going to pay UAL's pensions that were dumped during that little bankruptcy period. If that ain't playing favorites, I don't know what is.
 
Like I said, there is at least one UAL pilot who's jet I'd pull my family off of. But I stand behind my previous statement, prior to Sept 11, FRNT's seniority list was comprised of people either building time (ie INEXPERIENCED) in a hope of getting hired elsewhere, or simply put, people unable to get hired elsewhere despite "experience". If you think FRNT is now "safer" due to competant Co's being hired post 911 to keep the Capts out of the weeds, then more power to ya. As for me and my family, I'd rather drive. And I also stand behind my comment about FRNT's past propensity to avoid the De-ice pit. I was there, I saw it. A penny saved is a penny earned, right.....? So again, I won't fly FRNT for free, much less buy a ticket. Get a grip. Nobody asked you to like it. It's MY opinion, and I'm entitled to it.

Bus,
The pre 9-11 hires at most non-major airlines had an element of what you describe, but in F9's case most people wanted to work there because they were from Denver and wanted to work and live in Denver.

Us post 9-11 guys comprise the majority of the current seniority list and most of us came from major airlines. The ones you describe have largely been shown the door, while the inexperienced ones have gained valuable experience in the last four years of industry stagnation, gleaning from their FOs. I respectfully disagree with your opinion (its outdated) but agree that you are intitled to it. I was surprised that you would make such a post, therefore the "get a grip" comment was misdirected.

Respectfully
 
Bussie....the government is going to pay UAL's pensions that were dumped during that little bankruptcy period. If that ain't playing favorites, I don't know what is.


WRONG!

The government is not going to be paying the pensions.

The PBGC is and they are funded thru premiums paid by members (all companies that have a defiend benefit pension). Just like you pay an insrance premium on your car/life/house.

And while taxpayers (in the end, first Congress would appropiate the money and then figure how they would pay for it) certainly could be on the hook should the PBGC fail, that final step has not come to pass nor likey will it in the near future.

DC
 
WRONG!

The government is not going to be paying the pensions.

The PBGC is and they are funded thru premiums paid by members (all companies that have a defiend benefit pension). Just like you pay an insrance premium on your car/life/house.

And while taxpayers (in the end, first Congress would appropiate the money and then figure how they would pay for it) certainly could be on the hook should the PBGC fail, that final step has not come to pass nor likey will it in the near future.

DC

That's not what I read in business week. Just like your pension fund, the PBGC is terribly underfunded itself. And that means that should the PBGC fail, all of us will be paying the pensions UAL dumped. And that my friend is "playing favorites".
 
Bussie....the government is going to pay UAL's pensions that were dumped during that little bankruptcy period. If that ain't playing favorites, I don't know what is.

Do you have an insurance policy KC? If you need it, do you consider that "dumping" on the government? The PBGC was an insurance policy. No more, no less.
 
Do you have an insurance policy KC? If you need it, do you consider that "dumping" on the government? The PBGC was an insurance policy. No more, no less.

Odd thing is, if Firemans Fund goes bankrupt and I have a fire in my house, looks like I'm SOL. If the "insurance policy" that UAL opted to use to compete fails, everybody pays.
 
Odd thing is, if Firemans Fund goes bankrupt and I have a fire in my house, looks like I'm SOL. If the "insurance policy" that UAL opted to use to compete fails, everybody pays.


Nice "try" but for a little perspective, lets consider the causes of the "failure" of the UAL pension plan
1. The Country failed in it's most important roll, keeping it's citizens safe from foreign agressors.
2. Ual and other airlines with international presense suffered even more due to the fear that ouyr government hadn't done an adequate job in keeping us safe.
3. Due to the slowdown, long term rates hit levels not thought possible, increasing the pension obligation (for now)
4. The wonderful PBGC, in an effort to "save" the pensions, actually end up costing the employees much more. UAL's pension were not that bad off. They appeared bad off when the extremely conservative assumptions of the PBGC were applied. Unfortunately, UAL and the Union could not agree to lower pension rates for those who had already earned a certain amount. So if it weren't for our Nanny goverment and the efforts of the left you support, UAL would actually have been able to provide the employees with a higher pension that the PBGC is granting and have had change left over.
5. UAL would have had no trouble maintaining the pension had EVERY Airline had similar plans, and priced their product as such. So a bunch of cheapo's who have no regard for the employees of the companies they choose to use, end up destroying something that was once a staple of the U.S. economy, pensions the elderly can live on.
5. I'm sure if you did the math, the average UAL pensioner spent WAY more in taxes than you have over the course of a career. they helped pay for all those little public projects you enjoy, but were unwilling to pay for. Now they could possible get a fraction of the excess they put in on your behalf back. Get your payments to uncle Sam up to their level, then you will have the moral authority to b1tch. until then, I think you should be thankfall for all the things they financed with their higher salaries on your behalf.
 
Lets look at it from an Econ 611 standpoint instead.
- Cheap airine comes in.
- Incombant airline that brought value to the entire community cuts back service. Residents may even realize that flying the turd in blue water painted jets is bad for the economy, but they are simply out to save a few bucks for themselves (see "free rider")
- Businesses flee that city due to lack of Global reach of new dominate carrier. Economy becomes centered even more around major business centers (that still enjoy "feed"), making vibrant small cities a thing of the past.
Please provide the name of a city where any of this has happened.
 
Nice "try" but for a little perspective, lets consider the causes of the "failure" of the UAL pension plan
5. UAL would have had no trouble maintaining the pension had EVERY Airline had similar plans, and priced their product as such. So a bunch of cheapo's who have no regard for the employees of the companies they choose to use, end up destroying something that was once a staple of the U.S. economy, pensions the elderly can live on.
I never realized that you were such a liberal!

But seriously, why are you for free markets and rational economic consequences everywhere except your pay and your pension?
 
Lets look at it from an Econ 611 standpoint instead.
I followed your theoretical sequence of events. Fact remains, in a competitive marketplace, if a city deserves a certain level of service it will be provided. Part of "competing" is negotiation -- not only with enterprise but with governments. Some days you win, some days you lose.

(And by the way, the Legacy's successfully convinced Congress to apply the lastest round of ticket taxes on a "per segment" basis vs. per ticket. Thus, SWA's passengers already pay additional fees to compensate for the additional legs.)

Level the playing field, then we can talk.
No, I don't think that's what's needed before we can talk. I think you need to come to terms with the fact that the industry has changed significantly from what you "signed up for" however many years ago and you obviously don't like it. You're intent on bashing SWA as being the "evil one" and I'll stay out of your way while you rant. I sympathize for your plight as well as those in the rest of the industry who have suffered. Be honest, however, and recognize that nothing in life is guaranteed. Your choice to go to UAL was no less a gamble as mine was to go to SWA.

I know my day to suffer is probably coming, too. My goal is to work at delaying that day as long as possible and to use the good times to prepare for the bad. Personal responsibility sucks, doesn't it?

(Edited 11/01/05 12:30 pst to modify some phraseology. The thoughts remain unchanged.)
 
Not as bad as the places you fly to. :p

You must be right! According to BusDrvr, SWA takes all the good cities and destroys their economic viability such that the best place in town is the Motel 6 -- and even they can't afford to leave the lights on anymore! :shock:

I guess Denver's next! :up:
 
That's not what I read in business week. Just like your pension fund, the PBGC is terribly underfunded itself. And that means that should the PBGC fail, all of us will be paying the pensions UAL dumped. And that my friend is "playing favorites".


Did you read my entire statement?

I acknowledged the possibility of Congress having to step in and bail out the PBGC. But for now and in the near future that is not an issue. Congrees itself is complicent in this underfunding. They never raised the premiums, or changed from an outdated interest rate calculation, and allowed to many loopholes for Corporations to use. So in the end UAL and all the others have done what was allowed by law.

Congress just doesnt want to admit that they screwed the pooch too by writing such a swiss cheese law.

And either way, the employees are the ones that bear the brunt of the pension meltdown game.

DC
 
Did you read my entire statement?

I acknowledged the possibility of Congress having to step in and bail out the PBGC. But for now and in the near future that is not an issue. Congrees itself is complicent in this underfunding. They never raised the premiums, or changed from an outdated interest rate calculation, and allowed to many loopholes for Corporations to use. So in the end UAL and all the others have done what was allowed by law.

Congress just doesnt want to admit that they screwed the pooch too by writing such a swiss cheese law.

And either way, the employees are the ones that bear the brunt of the pension meltdown game.

DC

So your definition of "not anytime soon" is 2013?
 
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