KCFlyer
Veteran
- Aug 20, 2002
- 11,207
- 1,422
Oh please, Frank Lorenzo? Let's try something more realistic -- Bob Crandall. He certainly wasn't known as a union-friendly CEO, was he? Yet now we have some of the same "abused" AA union people crying over Bob Crandall's position at Amtrak, wishing for the good old days of Crandall busting their chops. Some people will never be happy!
For some reason, AA labor will never be happy with who is CEO. The only choice for AMR is bust their chops ala Crandall.
Crandall did play hardball with the unions, but he didn't set out in his "mission statement" (as you did) that the goal was to rid the property of unions.
Remember what happened with UAL and their labor-friendly choice of Goodwin? He almost put the airline out of business!
Big difference - Goodwin didn't lay it on the line with managment when times got tough. I believe that the what has to be reached is a situation where labor and management have equal amounts of skin in the game. It some members of the management team don't like that, then I want them off the property.
As far as the other details on your AMR CEO plan, they look suspiciously like Southwest. As a result of value pricing, are you planning to terminate service to TYR, GGG, TXK, ABI, ILE, etc.? Shrinking airlines are not a good idea, especially if you announce it up front before taking the helm.
Who said anything about shrinking the airline? But when your costs are 10 cents per mile and you charge fares on some routes that are 5 cents a mile, is it really necessary to charge somebody going from Tyler Texas to Abilene over a buck amile? I didn't realize that Tyler Texas traffic was what was keeping AA from suffering even more losses. I wonder though - if I priced an unrestriced MCI-DFW round trip for $250, I wonder how much more business I could stimulate between the two cities...A similar fare from MCI-MDW seems to justify 15 daily flights between the cities - betcha Dallas would become a LOT more attractive to the business community if I did that. Heck...they might even continue on to Tyler.
Charging a reasonable fare for First Class (subject to availability) is something the airlines have finally figured out. However, they still end up giving away many of the seats. It seems that even with a discount First Class fare that is a several hundred dollar cut from the full fare, most people would rather buy the coach fare and upgrade for free.
And let's see what Delta's response would be to my suggestion of value pricing...Let's say I sell 90% of my first class seats in advance. Delta sells 60% of their first class seats in advance, so they offer an upgrade for those paying full coach to fill the cabin. Will they keep their current price structure, meaning that my flights on competing routes would have an unrestricted coach fare of several hundred dollars less than they do? Could you tell me what company would be willing to pay several hundred dollars more for the same thing so that their employees could stand by for a first class upgrade? Or would Delta have to meet my prices - and lose money because they couldn't recoup the losses of their bogus 21 day advance heavily restricted money losing fares?
In an ideal world, your ideas will work just fine, but in the real world, they won't. All the other airlines, even the "evil" Delta, give complimentary upgrades to frequent flyers. If you boot out all of your AAdvantage members from their cushy First Class seats, they will run, not walk, to Delta, Continental, United, etc.
So, will the other airlines increase the size of their first class cabins in response so that they can accomodate the increased numbers of those folks who want to upgrade? Or will they get a bunch of people who flock to them, only to find that they STILL can't get a freeloader upgrade on that airline either.
Same problem with across-the-board value pricing coach fares -- the only advantage to raising your advance purchase fare is that you'll save a little on fuel and you'll never have to ask for volunteers on an overbooked flight. People don't like to pay more money for the same product. Weird!
Really...Offer them a menu of only 5 fares, with no penalties and few restrictions, and people (corporate travel departments specifically) will opt for the lower fare that is loaded with penalties and restrictions? Or will the slightly higher fare, with no penalty other than paying the difference in airfare, that doesn't require a Saturday stay provide them with much more value? You're tripping over yourself to grab that ever important "leisure" market that thinks $200 to fly a round trip transcon is a ripoff. But that's great -because while you do that, I will be grabbing the "high yield" business passengers who can't afford to fly your airline. Either that, or you'll have to match my highest priced tickets, which would make your "high yield" traffic bring in yields that flat out won't cover you low yield losses.
Why did Crandall's value pricing fail? Because Crandall was hoping the other airlines would collude with him. Turns out that meanie Northwest chose to compete.
A bit of history - value pricing failed because of Crandall's ego. When NWA decided not to play along and geared a promotion to grab the ever important leisure market, rather than give them a middle finger and stick with value pricing, he set out to "teach them a lesson". Had he not let the ego get in the way, IMHO, NWA would have "seen the light" rather quickly.