DL CEO says value fares are coming.

[LD3]

ULCCs will decide DL's hubs aren't good places to grow and they will refocus their efforts elsewhere.

Like a couple of counties from ATL???

 

[eolesen]

which is why DL excels as well as it does at revenue mgmt. ULCCs don't offer robust schedules so it isn't hard for a network carrier to offer a few seats here and a few seats there and end up with as many or more seats in a market as the ULCCs... with a whole lot more schedule options.

All fine and good, but matching a few frequencies in a few markets isn't what Richard was talking about in the video. He's talking about a cabin within a cabin style no-frills fare.

Sure, you can revenue manage availability, but the scope sounds larger than just where the ULCC's are.

 

[WorldTraveler]

and it still requires revenue and capacity to manage.

undoubtedly, DL will pull it off and be one step ahead of AA and UA who will have to deal with the invasion of carriers into its key markets.

 

[topDawg]

the ULCCs die?

I believe the idea is that the more carriers pile on, the faster the demise of the cattle class of carriers.

highly unlikely. I bet you'll find that Delta will limit this fare class pretty hard and basically use it as filler for whats left. The majority of the people flying on NK and G4 are PAX Delta, American, United, hell even the LCCs like WN and B6 don't really want. 
 
But you have to find a balance to keep the ULCCs from growing huge market shares. (however airlines like G4 are mostly less than daily and secondary airport flying. NK/F9 are a bigger issue but even most of their flying outside of FLL(NK) and DEN(F9) are 1x daily or less) 
 
I bet AA and UA are watching to see how this works out. I also bet Delta will move quickly to back off the idea if early results aren't good.  
 

Yeah, that "let's price them out of business" approach didn't work too well the last couple times it's been tried.

Employees took it in the shorts, and it hasn't stopped new ULCC's from appearing.

this
 

and what examples of DL failing to successfully compete with LCCs or ULCCs would you like to cite?

seems to me that DL has stated that NYC has become profitable for them at the same time that B6 just presented that their financial results in JFK are not what they need them to be.

WN has pulled down multiple routes from ATL, SLC is not growing... looks to me that DL is being quite successful in competing with LCCs - and is now turning up the heat on the ULCCs which have essentially replaced the LCCs as the bottom feeders of the industry.

in the now you are correct
 
but LCCs are a key reason why the BKs happened for the big carriers. Now the cost bases are the same its not a big deal. FL's CEO at one point said they were kicking Delta's butt in Atlanta, (went over 250 daily flights) but as soon as Delta hit BK the rolls switched and that is why FL started moving capacity out of Atlanta. (170ish flights at the end I think) 
 
but yes, chasing marketshare with failed ideas like Song and Ted is one of the reasons why the legacies almost went bust. (of course other things like the high fuel costs in the post 9/11 world, the economy, the aging fleets with that high fuel cost etc played a part too) 

 

[WorldTraveler]

the legacy carriers ended up in BK because of debt and high costs; they came out of BK with clean balance sheet - and at least DL is determined to not get run up their debt again.

employee costs are far lower than they were and there is a great degree of flexibility that didn't exist before.

further, the ULCCs have the advantage because the legacy carriers have ignored them - just like the legacies did with the LCCs a couple decades ago.

the ULCCs don't have the networks to threaten legacy carriers when they first move into major markets. but all you have to do is look at legacy hubs like ORD and DFW where multiple frequencies per day exist in several markets and it isn't hard to see where schedules will end up if the ULCCs are not challenged.

low fuel prices and high fares at legacy carriers are the ideal breeding ground for ULCCs - and if legacies don't act, the ULCCs will be a major force in the industry.

Song and Ted didn't come close to bankrupting any carrier. Those operations lost money but high fuel costs, debt, and high labor costs were far bigger factors.

DL once again is looking for a means to grow revenue by going after the highly price sensitive segment while at the same time protecting its key markets.

as with all things we can look back in a few years but I can guarantee you that DL will do a better job of protecting its key markets than AA or UA will.

 

[topDawg]

employee costs are far lower than they were and there is a great degree of flexibility that didn't exist before.

and why do you think those employee cost mattered so much?
 
because WN and co didn't have those high employee cost.
 
Washington refuses to allow employees any self-help anymore is the flexibility in labor now.   
 
 

Song and Ted didn't come close to bankrupting any carrier. Those operations lost money but high fuel costs, debt, and high labor costs were far bigger factors.

burning money in operations like Song not only cost Delta in the short term but it also cost Delta money in the long term. 

the legacy carriers ended up in BK because of debt and high costs; they came out of BK with clean balance sheet - and at least DL is determined to not get run up their debt again.

errr no they didn't. Delta/Northwest had over 20 Billion dollars in debt at the time of the merger 
 
And legacies ended up in BK because they had a string of stupid asses running them. Hey lets buy Comair for 2 billion dollars...... 
 
just an example. 

 

[jcw]

This is a great move - DL will be printing money - let's watch the P&L - the DL stock is going to take off on this move - I guess this is mini-song

 

[FrugalFlyerv2.0]

Song and Ted didn't come close to bankrupting any carrier.

 
So why aren't they around at DL and UA?
If they were such a great idea prior to chapter 11 re-org., then they should be even more lethal LCC killers after, n'est-ce pas?

 

[topDawg]

 
So why aren't they around at DL and UA?
If they were such a great idea prior to chapter 11 re-org., then they should be even more lethal LCC killers after, n'est-ce pas?

because they burned money. 
 
Song is a big reason why Delta has been lagging in the corporate market in NYC. WT will never admit that but its the truth. (who knows, maybe Song was his baby at Delta) 

 

[WorldTraveler]

Song was a product that was targeted at B6 - and not the corporate market. Nowhere did I ever say that DL succeeded in the corporate market in NYC because of Song.

DL IS succeeding in the corporate market NOW because they have a full service network, not a cobbled together strategy that incorporated strategies that weren't connected... DL's int'l strategy and Song didn't work together the way they should.

NW had no low fare carrier within a carrier and neither did AA - and yet both ended up with huge amounts of debt going into BK. You grossly oversimplify the past.

Yes, any losses go to the bottom line and repeated losses end up becoming debt in the airline industry but the debt was due to the huge aircraft spending spree of the late 90s and then enormous losses post 9/11. I guess you never realized that yields dropped as much as 25% post 9/11.

given that every carrier that touched regional carriers has ended up writing most of their investment off, it is more than simplistic to not realize that the regional carrier industry - including the investments in them - were a phase of the industry that had to happen but which are not needed to anywhere near the same degree.

Airlines also invested in res systems - and wait, wait - maintenance facilities that they no longer need - so I guess that was a waste of money too.

 

[eolesen]

Song worked so well at stopping Jetblue's growth...

 

[topDawg]

Song was a product that was targeted at B6 - and not the corporate market. Nowhere did I ever say that DL succeeded in the corporate market in NYC because of Song.

DL IS succeeding in the corporate market NOW because they have a full service network, not a cobbled together strategy that incorporated strategies that weren't connected... DL's int'l strategy and Song didn't work together the way they should.

NW had no low fare carrier within a carrier and neither did AA - and yet both ended up with huge amounts of debt going into BK. You grossly oversimplify the past.

Yes, any losses go to the bottom line and repeated losses end up becoming debt in the airline industry but the debt was due to the huge aircraft spending spree of the late 90s and then enormous losses post 9/11. I guess you never realized that yields dropped as much as 25% post 9/11.

given that every carrier that touched regional carriers has ended up writing most of their investment off, it is more than simplistic to not realize that the regional carrier industry - including the investments in them - were a phase of the industry that had to happen but which are not needed to anywhere near the same degree.

Airlines also invested in res systems - and wait, wait - maintenance facilities that they no longer need - so I guess that was a waste of money too.

you looking for a disagreement? 
 
however generally with hangars you'll find it was the local and state government that paid/owned them. 

 

[Hope777]

WT, Dont let the FACTS get in your way.  NWA in FACT had a low cost unit, called COMPASS.  They purchased the certificate from   Independence Air using EMB175's  ...Copying  USAirways Mid-Atlantic.   Again Your WRONG !

 

[topDawg]

WT, Dont let the FACTS get in your way.  NWA in FACT had a low cost unit, called COMPASS.  They purchased the certificate from   Independence Air using EMB175's  ...Copying  USAirways Mid-Atlantic.   Again Your WRONG !

FWIW Compass wasn't (isn't) comparable to Song/Ted/Delta Express/Shuttle by United etc. etc. but it is just an regional airline like ExpressJet, ASA, SkyWest, Republic, Comair, Envoy etc. etc.  
 
Northwest was, i believe, the only legacy to not true some kind of airline with in an airline LCC. 

 

[WorldTraveler]

Song worked so well at stopping Jetblue's growth...

 
at least dramatically slowed it down.

how about you take a look at B6's last investor conference and see what they had to say about NYC.... and then pull out some data that shows that DL's growth in NYC has largely come in dramatically slowing B6's.

of course a big reason why B6 has been unable to grow in NYC has been because DL has taken AA's market share which B6 was lapping up for years.
 

you looking for a disagreement? 
 
however generally with hangars you'll find it was the local and state government that paid/owned them.

 
and you think governments just let airlines set up shop without paying rent?

 

WT, Dont let the FACTS get in your way.  NWA in FACT had a low cost unit, called COMPASS.  They purchased the certificate from   Independence Air using EMB175's  ...Copying  USAirways Mid-Atlantic.   Again Your WRONG !

at least dawg gets this part.

Compass was NOT an airline within airline strategy. and regional carriers are NOT low cost compared to mainline carriers. They are and have been HIGHER CASM units.

AGAIN YOU'RE IGNORANTLY WRONG and combative too.