Your Top Ten

[Ch. 12]

Funguy,

On WN's LA-area schedule:

Here are the actual non-stops for WN out of So Cal (SNA/BUR/ONT):

SNA-SJC/OAK/SMF/LAS/PHX
BUR-SJC/OAK/SMF/LAS/PHX
ONT-SJC/OAK/SMF/LAS/PHX/BNA

Not many cities...plenty of room for NS from LA to anywhere else.

On CASM...HP vs. WN

...and this is why CASM isn't always the telltale sign. WN's average stage for the 1Q was 568 compared to HP's 1,037. Ain't nothing better than long flights to lower the CASM. The core of fixed costs are spread out over twice the number of miles.

On JetBlue in LGB

Perhaps they weren't the perfect example b/c their operation is focused on trans-con and that is the core of their LGB ops. The western cities out of LGB are just place holders. From the perspective of finding a slot-restricted airport and pirating slots (ala AMR), I have to hand it to JB in this case, though!


But we are straying way off topic and to get back there, I just feel that there needs to be an open-mindedness for U to try new things. When looking at the new market opportunities, why choose either NY-FLA or any U city to and tiny town with no competition which have both proven to be major challenges to profitability? I am simply challenging that there are other options out there and that it's laughable how quickly they are dismissed b/c it overextends the comfort zone of the company. Many companies have found that they can have tremendous success by taking chances (JB, WN) while is US's case...they may have to take a chance in order to survive...

 

[ringmaruf]

The western cities out of LGB are just place holders. From the perspective of finding a slot-restricted airport and pirating slots (ala AMR), I have to hand it to JB in this case, though!

Don't you just love how everyone thinks B6 was so brilliant to hog all of the slots at LGB? Meanwhile, those same people scream bloody murder that US has "too many" slots at LGA/DCA.

 

[dfw79]

I've personally been waiting for OKC for the longest time. The only real operation for my employees to go between TOL and OKC (we have a call center in each) is Delta. All of the other airlines have too limited of a schedule out of TOL. As far as OKC goes...Southwest is actually #3 there, behind AA and DL.

The current make up at OKC...

American: DFW (5 MD-80s and 2 CR7s and 2 ERJs per day), ORD (1 CR7 and 4 ERJ-145s), and STL (3 ERJ-145s).

Continental: IAH (2 735s and 4 ERJs), EWR (1 ERJ)

Delta: ATL (3 732s), CVG (2 CR7s and 2 CRJs), SLC (5 CRJs), DFW (3 CRJs and 3 ERJs).

Frontier: DEN (3 CR7s)

Northwest: MSP (2 ARJs), MEM (3 ARJs), and DTW (2 ARJs). DC-9-30s are typically rotated in.

Southwest: DAL (7), HOU (4), MCI (6), PHX (3), and STL (1).

United: DEN (4 733s and 1 CRJ), ORD (4 CRJs).

The airport is getting ready to begin the construction of the second of the new terminal. When all is said and done over 25 gates will be located in the new terminal. More www.flyokc.com

 

[dfw79]

double post

 

[Kev3188]

I've personally been waiting for OKC for the longest time. The only real operation for my employees to go between TOL and OKC (we have a call center in each) is Delta. All of the other airlines have too limited of a schedule out of TOL.

Just out of curiosity, does OKC-DTW-TOL on NW not work, or is it prohibitively expensive?

 

[ual777fan]

How about some service to Portland, Oakland, Orange County, Salt Lake City? I think a general expansion in transcontinental flying would be a very good thing because not only would it open new markets, it would lengthen USAir average flight and help reduce CASM. New mexico service would also help.

Still don't forget that some more NorthEast to Florida and the Carribean would also help accomplish the above goal.

 

[funguy2]

On CASM...HP vs. WN

...and this is why CASM isn't always the telltale sign. WN's average stage for the 1Q was 568 compared to HP's 1,037. Ain't nothing better than long flights to lower the CASM. The core of fixed costs are spread out over twice the number of miles.

Ch. 12:

You are of course right about the stage length affecting CASM. But so what? If US Airways flew more long-haul flights, it would be an easy way to reduce CASM... Seems like something they should do. No need to "punish" AWA by saying they aren't low cost because they fly long-haul, and that doesn't count.

Regardless, while I have heard of "stage-adjusted CASM" mentioned in various industry sources, I do not know how to calculate it. If anyone does know the calculation, please share. (My delay in response was because I was looking for the calculation.)

While I believe that America West's "stage adjusted CASM" would be higher than Southwest, I don't believe it will be in the range of the stage-adjusted CASM for the 6 Legacy carriers.

 

[Ch. 12]

Funguy,

I am totally with you that HP is not in the same category as the legacies. In my eyes, though, they seem to fall into their own category...maybe joined by Alaska. Maybe we need a "MCC" (Mid or Moderate Cost Carrier) designation?

I still stick by my WC presence. I think that the entire industry has turned their focus to transcons, international, and NE-FLA. Perhaps U's best chance is when noone is looking...

 

[BoeingBoy]

funguy2,

I don't have a formula for adjusting for stage length and have never seen one, but.....

Assumption starts here...

You can probably get an idea by looking at the charts of CASM vs stage length for various carriers. Nearly all the charts have the some curve. For WN, for example, use the chart to estimate how much their CASM would change if you followed the curve from their actual stage length to some other stage length (say AWA's). Then adjust their actual CASM by that amount.

Assumption ends.....

Jim

 

[dfw79]

Just out of curiosity, does OKC-DTW-TOL on NW not work, or is it prohibitively expensive?

Northwest is typically more expensive when going through DTW from OKC. Besides the limited schedule, if we wanted a flight that was fairly cost effective it would require a double connection in MEM.

DL offers the best option with 9 flights from TOL to CVG. Of course if US Airways goes into OKC, it still won't help much since Shuttle America has all but destroy the TOL service (now down to 4 flights a day...first time it has been that low since mainline left in 2001).

 

[funguy2]

funguy2,

I don't have a formula for adjusting for stage length and have never seen one, but.....

Assumption starts here...

You can probably get an idea by looking at the charts of CASM vs stage length for various carriers. Nearly all the charts have the some curve. For WN, for example, use the chart to estimate how much their CASM would change if you followed the curve from their actual stage length to some other stage length (say AWA's). Then adjust their actual CASM by that amount.

Assumption ends.....

Jim

Boeing Boy...

Not a bad idea, but I would suspect that using different companies and different stage lengths (for the individual companies) would cause some problems, but not a bad way to estimate.

In my reseach, I found a UNISYS analysis entitled "Are Southwest's costs rising?" or something like that. It included a chart which shows Southwest's CASM over different stage lengths for the last few years (proving Southwest's CASM increasing, BTW). I did notice that the extreme end of the longer stages were under 6 cent CASM. Maybe I can look that up again, see Southwest's CASM at roughly 1000 miles, and get back to you on here...

Ch 12...

You may be right about creating a "middle" designation. Maybe its something we can get to catch on in the industry!

 

[EyeInTheSky]

US

RENO!!!
Albuquerque
Salt Lake City
San Antonio
Austin

Canada

Vancouver
Calgary

South America

Rio de Janeiro
San Paulo
Buenos Aires

Europe

Zurich
Venice
Athens
Barcelona
Prague
Budapest
Stockholm
Copenhagen

 

[funguy2]

As promised, here is the link:

Is Southwest Past Its Prime?, Scorecard 14

This document shows that Q2 2003, Southwest CASM on 1,000 mile stage was at 6.00 cents... so we can reasonably assume that their long-haul CASM today is close to jetBlue's 6.08 cents for Q1 2004, and certainly less than AWA's 7.58 cents on 1,000 mile stage.

Similarly, we can assume that America West's short-haul CASM is roughly 1.5 cents higher than Southwest.

Lastly, US Airways CASM was 11.68 cents on a stage of 773 miles. According to the Unisys document, Southwest CASM at roughly 750 miles was just under 7 cents in Q2 2003, probably making it right on 7 cents today. That means Southwest can undercut US Airways on RASM by upto 4.5 cents and still be profitable.

 

[funguy2]

Two more comments...

Q1 2004, jetBlue CASM was 6.08 cents on a stage of 1297miles from Q1 2004 results... This is off the Unisys chart, but for Southwest, Q2 2003, 1100 miles, CASM was under 6 cents... so, at jetBlue's stage, Southwest actually has lower CASM. I guess this makes sense because jetBlue has a great portion of its system at "higher cost" airports (like JFK), and given that they have a number of stations with less than 5 flights/day etc, they don't get all the efficiency benefits that Southwest gets... Although, this must be somewhat offset by jetBlue's red-eye services, since Southwest does not do red-eye's (i.e. jetBlue probably has close or higher aircraft utilization than even Southwest.)

Also, note that the Unisys document shows US Airways Q2 2003 CASM at 13 cents and stage less than 700 miles... So it looks like US Airways management is at least attemplting to increase stage and reduce CASM. This is the first evidence I have seen of this.

 

[sfb]

Ch. 12-

The problem with the West Coast is that it has been highly competitive (far more so than the East Coast) for years. It's difficult to find any high-fare short-haul routes out there due to the presence of WN on most of them. If you look at DOT's domestic airline fares consumer report, you'll see that the vast majority of high-fare markets are on the east coast still. While WN holds a monopoly (or commanding market share) in a large number of markets out there, they have kept fares low enough to make those markets unappealing to other airlines. AS, HP, AA, UA, and WN (and even DL from SLC) all compete quite vigorously out there.

As for L.A. Basin airports, SNA is slot-restricted and US is unlikely to get enough slots there to start any sort of focus operation. BUR is very short on terminal facilities and local opposition makes the addition of gates for US extremely unlikely. LGB has no slots available, and LAX has large operations by UA, AA, DL, and WN. That leaves ONT, which has nice facilities and room to expand, but which is also a weak market. After nearly four years of JFK-ONT service, jetBlue only offers a single daily round-trip, While they offered two daily round-trips on this route in 2001, it was cut back to a single daily round-trip after 9/11 which has not been restored. If jetBlue isn't making JFK-ONT work very well, I don't exactly see how US would succeed with transcons from ONT. The focus on transcons has come because AA and US made huge profits for years on their transcon services. Both jetBlue and America West (and less so ATA) have seen opportunities to steal lucrative traffic by undercutting the incumbents. International expansion is happening because the LCC's fly very few international routes.