Labor concessions alone cannot close the cost gap between the LCC's and the network airlines. The company and the other network airlines need a comprehensive solution to the economic problems and market forces.
Siegel always signals his moves and last week's speech to the Washington Aero Club was a third-party communication to interested parties. I'm not sure where this will go, but three of Siegel's comments got my attention. They are:
1. "Network carriers will need to find a new cost paradigm, one based on competitive levels of productivity and smarter ways of managing across every level of our business."
2. "Hopefully, government regulators will recognize that that the new competitive market realities, including the dramatic rise of the LCC sector, have dramatically changed the context for judging the benefits and risks of inter-carrier cooperation and coordination."
3. "Again, I don't have all the answers, but I do sense that increased cooperation, coordination, and potentially consolidation between and among network airlines must be another source of strength through enhanced efficiencies, in both marketing and operations."
Separately, were comments by Jeffrey Stanley, manager of economic analysis and regulatory affairs at United, coincidental or purposely timed to occur shortly after Siegel's speech? Stanley's interesting comments were:
1. "We haven't seen recognition by the federal government that low-cost carriers have moved in."
2. Stanley said to avoid extinction, the network carriers have to adapt to compete in revenue and costs. On the revenue side, the carriers are developing lower-fare airlines, tapping into new markets with regional jets and linking with other carriers through efforts like code sharing. On the cost side, the network carriers have to deal with wage and overcapacity issues, Stanley said, along with shrinking hubs and reducing flight schedules.
3. "If things stay the way the are now, there will be several Chapter 7 ( bankruptcy liquidations) down the road, and that's not good for anyone," he said. The most feasible solution to the situation is consolidation in the domestic airline industry, he said.
Regards,
Chip