Because Of Ted?

[C54Capt]

Busdrvr,
I thought my post might bring you back into the discussion. Welcome. Good post. I wish I had the time to do the research you did, but I've been busy flying. I think the main reason F-9 showed a loss in the Jan-Mar quarter was primarily due to the start-up of Jet Express and the relatively high training costs of mainline pilots during the transition. They also had some write downs for Boeing parts etc...
Be careful with the YOY data though. It may be deceiving given the expansion throughout the system. LAX mini started out very poor and is getting better every day, which won't be reflected until 2nd or 3rd quarter.

Fly,
You know I don't want you to go out of business, c'mon. And you are absolutely right about not wanting me to be in charge. I have been a COO in a large aviation company (albeit smaller than UAL) and I have no interest in the challenge. Sorry.

 

[Busdrvr]

"Be careful with the YOY data though. It may be deceiving given the expansion throughout the system."

That's why I specifically excluded YOY data. FRNT adopted a fairly successful "value pricing" scheme approx 1 year ago, trading per pax revenue for a higher LF. My data compares two relatively equivalent months, March and April of this year. The drop in RASM is STAGGERING.

Big Sky,
FWIW, it is rather interesting that the two LCC's having the biggest problems are the two that got ATSB loans and call UAL hub cities their largest markets. I think those two airlines, seeing an "opportunity" aggressively expanded based on the notion that UAL would either collapse or capitulate it's markets. It doesn't look like that will happen, and considering UAL's improving operating performance. UAL's operating margin was apparently significantly better in April than FRNT's (-7% vs -10% or worse). It also appears that FRNT's average fare has dropped below $100 to approx $95

 

[C54Capt]

Has ATA paid back their ATSB loan?

 

[ac500]

Pretty sad when AAI hires tons of scabs and convinces them to prostitute themselves further by working for obscene wages, and then they're considered one of the "darlings" of the airline industry. Thanks, but I'd rather keep my dignity.

What is sad is that your on your computer at 10 o'clock on a Saturday night posting about something that happened 10 yrs ago... And probably pounding yourself on the chest thinking how noble you are.

 

[HPearlyretiree]

Its sad that the pissed off union mentality is still living 25 years in the past and is spending all of its time lamenting the past rather than working towards a future. Times have changed, either change with the times or be left behind.

This ain't 1975, Eastern and Pan Am don't rule the skies anymore.

 

[Bigsky]

You should thank your lucky stars that the union mentality is alive and well fighting cabotage and pilots rights. Bush and company would love nothing more than to take away your right to strike, take away all of your work rules and pay you peanuts for hauling passsangers around the world safely time after time. The absolute worst cancer in the industry has been and will always be the scabs who sold their soul and screwed over their fellow pilots while trying to advance their pathetic careers. Forgive them? Never.


cheers

bigsky

 

[737nCH11]

Pretty sad that folks still have a scab mentality. What's even worse are folks who justify their behavior.

 

[mweiss]

My data compares two relatively equivalent months, March and April of this year. The drop in RASM is STAGGERING.

It does seem bad. Any sense of what the typical seasonal change is between March and April? I ask because RASM dropped for both airlines, as did LF. Why? Was capacity added? Or did demand drop?

 

[HPearlyretiree]

Hey Bigsky, riddle me this, why are airline employees subject to the railway labor act? Its not 1934!

If airline union members want to decertify and go non union, they can't, but in all other industries (save the railroads) they can?

Unions are not what they used to be, the airline biz is not what it used to be. Deregulation means that its a more open playing field, companies are gonna actually compete for profit, and the customers actually benefit! And the big bloated union carriers either learn to compete or die. That is capitalism, and its a good thing, or I suppose you'd rather have big daddy government come and spend everyone else's money to protect your posterior and subsidize you?

But you always have the 'scabs' as your strawman don't you? The times have changed, competition flourishes and the public gains from a more free market. Change with it, or be left behind. Sorry to be so harsh, but none of the muckety-mucks in the union management will tell you that, they are too busy counting your $$$.

 

[JetClipper]

"If an airline is fortunate enough to maintain nearly 90% load factors, it should certainly be making money... lots of money. That is not the case with UA. They are pricing their product below profitability in order to maintain marketshare. And as we all know, marketshare means squat when yields are negative. I think that it is irresponsible from a revenue and pricing standpoint. I would certainly trade some marketshare for profitability if I wanted to stay in business for the long-term."

So I checked.....

This weekend
DEN-LGA UAL is $250 more than FRNT
DEN-LAX UAL is $250 more than FRNT
DEN-IAD UAL is $45 more than FRNT
DEN-SFO UAL is $300 more than FRNT

In my quick informal study, the only places that UA appeared to be lower were on the profitable TED routes, and even then only by a small margin $10. FWIW DAL and Airtrash were SIGNIFICANTLY cheaper for the walkup fare to MCO.

Now lets look at traffic trends
In March and April of this year, UAL flew roughly the same number of ASM's. UAL's LF in March was 80.1% and in April, it was 79.9% for a drop of .2%

Meanwhile at FRNT, March LF was 74.9%, while April's was 69.1% That's a 5.8% drop. But surely FRNT enjoyed a revenue bump....right.....? Not hardly. In March, PaxRASM at FRNT was 8.27 cents (7.65 for the entire money losing Q4[jan-mar]) How about April? 7.06 That's a 15% drop from March and a 8% drop from the MONEY LOSING Q4!!!!! That is an incredible drop, especially when you consider the increased costs of fuel in April.

Yes Virginia, there is an airline adding capacity at fares lower than it's costs in DEN, but it ain't the big blue U.

Busdrvr:

As the below (albeit limited) examples indicate, "irresponsible" cuts both ways.

6/24 DEN-PHX, 6/29 PHX-DEN; UA$147, F9 $259
6/24 DEN-LAS, 6/29 PHX-LAS; UA$145, F9 $212
6/24 DEN-MCO, 6/29 MCO-DEN; UA$262, F9 $287
6/24 DEN-IAD, 6/29 IAD-DEN; UA$264, F9 $289

If F9, with their significantly lower cost structure, can't make a profit with fares anywhere from 9%-76% higher than UA, it's a good bet UA is losing their pants with these fares as well.

 

[Busdrvr]

"If F9, with their significantly lower cost structure, can't make a profit with fares anywhere from 9%-76% higher than UA, it's a good bet UA is losing their pants with these fares as well."

The numbers from April indicate otherwise.

In any case:
1. I pointed out that TED WAS cheaper in many cases. Thats the point of Ted, more capacity, higher loads and a cheaper price fro those leisure cities. In many of the cases where Ted was cheaper, there was only one flight avail at that Fare. That flight was usually early in the morning.

2. DEN-IAD 24th-29th. Boy, both airlines must have seen your post, because UAL is now $344 while FRNT is $283. Ual must be filling it's seats so they raised the price, and FRNT muct not be since they LOWERED theirs....

 

[mweiss]

Arguing with the data points presented is rather silly. Nowhere near statistically significant.

Something we can look at is the published fares in given markets.

DEN-PHX
HP has the best fare at an astonishing $96 RT! Even DL beats F9 and UA with $116 and $121 fares appearing before F9/UA's $126 and $233 fares.

DEN-IAD
NW and DL have the best fares in this market, at $180. CO has a $206 fare. Then there's a $220 DL fare and a $250 HP fare before finally reaching F9's $263. UA's cheapest published fare? $371! You could do two RTs on NW for that fare!

DEN-LAX
HP wins again here with their $203, $233, and $244 fares. Then comes a $260 fare shared by F9, NW, and HP. There are two more fares, at $263, shared by DL and AS; and HP's $272 fare; before hitting UA's cheapest at $273 (this one shared with F9, NW, AA, HP, US, and DL).

DEN-LGA
NK (Spirit) has $183 and $193 fares in this market, followed by NW's $203. Then comes AA and TZ with $213, NK with $215, F9 and DL with $243, F9/NK/FL at $247, NK at $251, TZ at $253, F9/FL at $263, NK at $265, F9/DL at $283, FL at $287, TZ at $293, NK at $301 and $315, F9/DL at $323, US at $341, NK at $351, US at $358 and $361, TZ/DL at $363, NK at $365, and FL at $367. Finally, after all of those, we reach $371, UA's cheapest fare, which is shared with F9/NW/AA/DL/US. Twice the fare of NK??? Is it worth that much??? Is it worth $160 more than AA, or $130 more than F9?

DEN-SFO
HP wins their third here, at $208. Then AA at $228, HP at $229 and $263 before finding UA's $303 fare, which is shared with US/F9/AA/DL/HP.

In every one of these markets, UA's cheapest fare ranges from a little higher to many times more than the cheapest competitor. Only in the case of DEN-SFO/PHX is UA's cheapest in line with F9's, and in the PHX case they are way out of line with their other nonstop competitor.

 

[Busdrvr]

So in other words, UAL IS NOT THE ONE CAUSING LOW FARES. The notion that they would intentionally burn through a $2 billion loan with ridiculously low fares is farsical at best

 

[C54Capt]

So in other words, UAL IS NOT THE ONE CAUSING LOW FARES. The notion that they would intentionally burn through a $2 billion loan with ridiculously low fares is farsical at best

Agreed. It looks as if all the airlines are irresponsible in their pricing schemes. It doesn't matter who the finger is pointed at. The industry won't recover until all the airlines begin to price reasonably (to make a profit).

 

[jbguppy]

Arguing with the data points presented is rather silly. Nowhere near statistically significant.

Something we can look at is the published fares in given markets.

DEN-PHX
HP has the best fare at an astonishing $96 RT! Even DL beats F9 and UA with $116 and $121 fares appearing before F9/UA's $126 and $233 fares.

DEN-IAD
NW and DL have the best fares in this market, at $180. CO has a $206 fare. Then there's a $220 DL fare and a $250 HP fare before finally reaching F9's $263. UA's cheapest published fare? $371! You could do two RTs on NW for that fare!

DEN-LAX
HP wins again here with their $203, $233, and $244 fares. Then comes a $260 fare shared by F9, NW, and HP. There are two more fares, at $263, shared by DL and AS; and HP's $272 fare; before hitting UA's cheapest at $273 (this one shared with F9, NW, AA, HP, US, and DL).

DEN-LGA
NK (Spirit) has $183 and $193 fares in this market, followed by NW's $203. Then comes AA and TZ with $213, NK with $215, F9 and DL with $243, F9/NK/FL at $247, NK at $251, TZ at $253, F9/FL at $263, NK at $265, F9/DL at $283, FL at $287, TZ at $293, NK at $301 and $315, F9/DL at $323, US at $341, NK at $351, US at $358 and $361, TZ/DL at $363, NK at $365, and FL at $367. Finally, after all of those, we reach $371, UA's cheapest fare, which is shared with F9/NW/AA/DL/US. Twice the fare of NK??? Is it worth that much??? Is it worth $160 more than AA, or $130 more than F9?

DEN-SFO
HP wins their third here, at $208. Then AA at $228, HP at $229 and $263 before finding UA's $303 fare, which is shared with US/F9/AA/DL/HP.

In every one of these markets, UA's cheapest fare ranges from a little higher to many times more than the cheapest competitor. Only in the case of DEN-SFO/PHX is UA's cheapest in line with F9's, and in the PHX case they are way out of line with their other nonstop competitor.

MWEISS,
Again all your examples show how revenue management takes hold when most seats are sold in a given market. UAL's loads out of Denver (system wide for the summer) are higher than most competitors. The airline then can afford to offer the remaining seats at a higher price. That will have them either flying UAL this trip or looking at it the next. For other than those on mileage plus, there is no brand loyalty. Do you really think everyone just goes to SWA because they see the 39 dollar price on a commercial. It just doesnt work that way, there are only 3 of those 39 dollar seats on each aircraft - and you or I will never get one unless we plan a year ahead. The paying customer continues to get more price sensitive and savvy about charges beyond basic ticket price.

Price competitiveness is key to get butts in the seats, but when the aircraft is almost full those last seats come at a premium. When average fares start to rise and oil comes down - you will see some profitability. The plan to bleed your competitor to death is coming to a close. NWAC, DAL, and CAL all have their own problems to deal with. NWAC in fact has huge debt maturity to deal with - everyone was talking about DAL and its un sustainable cost structure a while back - the next story is how will NWAC make all those payments and stay afloat. That huge cash balance is about to get drained. A freshly exited UAL will be waiting in the wings to take advantage of NWAC's distractions as they wrestle concessions from work groups while either filing or narrowly averting. What comes around goes around - it is just business...

JB Guppy