Although this is not music to seniority based employee thinking, there is too much capacity in the U.S. for the current demand. Average load factors are running in the low 70-percentile area and we are now entering the traditional slowest time of the year.
In July the industry experienced the fourth month in a row of falling revenues and for this or any other company to be successful management must match capacity to demand.
This will be the only way to create true pricing power, which is especially true in the short-haul markets.
The industry has a over capacity problem because of the economic slowdown, low cost carrier expansion that now controls 20 percent of the domestic ASM's, alternative short-haul alternatives, rising costs associated with labor, the perceived hassle factor, fuel expense, and war risk insurance.
If capacity is removed from the system there will be higher load factors, which will permit airlines to raise ticket prices.
This is just part of the equation to produce more RASM, but the other key element is to reduce CASM primarily through productivity, which is being addressed through the restructuring agreements.
Regardless of whether we like it or not, there has been a dramatic secular change in the buying habits of the consumer. How many Americans shop at Costco or Sam's Club to obtain a lower price versus shop at a major department store?
The same issue holds true for the traveling public who are price conscious and will flock to Southwest or JetBlue because these fine company's can produce a quality product at a lower price, just like Best Buy, Wal-Mart, Sam's or Costco.
I'm not going to go into detail of specific points to change the company, my post is more macro in nature, but a few points could be (that all require job protection to permit job reduction through attrition versus furlough): improved IT, internet sales, Kiosk expansion, automated scheduling, and integrate all ground employee functions to the title of Ramp Personnel versus having two work groups (Fleet Service & Utility).
Each employee can contribute to improved results by simple actions, such as flight crews using cell phones or Dialnet (company WATTS system) for company calls, all employees turning off lights when they leave the office, intense focus on fuel conservation and purchasing, and a focused effort to unused rooms to use flight crew hotel room cancellation program, etc.
Although some of these points may seem mundane, with leveraged business models, each point adds up and will cumulatively help the company regain financial strength.
However, maybe the least expensive and most important point is for us to have smiles on our face.
Chip
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