Economy Grew @ a 2.4% Rate In 2Q

[N628AU]

There is not a whole lot of news here to tell you the truth. Once again consumer spending is driving the economy and keeping it above water. Without significant business investment and spending, it cannot continue forever. As for business travel, I expect demand to remain below what we saw in the 80s and 90s for the very fact technology makes many trips obsolete. If you can videoconference or teleconference meetings now, it takes out a major incentive to business travelers to get in the car, drive to the airport, show up an hour before departure, fight their way through security, then board 30 minutes before departure, and take an hour to deplane and drive to where you are going on the other end. I am sure PineyBob can attest this is especially true on shorter hops.

The fact remains the travel environment for high paying business travelers has changed, and most likely it has changed forever.

 

[SETMAXTHRUST]

This is a precursor to an improvement in activity down the road, said James Glassman, an economist with J.P. Morgan Chase.

No matter how you slice it, this run in data points to the American economy acclerating as we move into the second half of the year, says Neal Soss, chief economist at Credit Suisse First Boston.

Adding to the drumbeat of positive economic news, several major companies reported solid profit results. Proctor & Gamble Co., for instance, reported a 5% gain in net income. Exxon Mobil Corp.''s net rose 58% topping Wall Street estimates despite a drop in crude-oil prices.

Meanwhile, the Chicago Purchasing Managers index, a measure of manufactturing activity in the Midwest, jumped to 55.9 in July from 52.5 in June, well above estimates and the best reading since January.

In conference calls with analysts, some business leaders are expressing subtle improvements in their outlooks and plans that reflect that. While we are still cautious about the outlook for economic growth, we plan to increase our spending on business-building initiatives during the second half of the year, Kenneth I. Chenault, chairman and CEO of American Express Corp., said earilier this week.

The latest GDP figures offered some positive signals about the outlook for business spending. Business fixed investments rose at a 6.9% annual rate, the fastest pace since the second quarter of 2000, well before the recession of 2001 set in. That increase included a 7.5% annualized increase in investment in equipment and software--most notably in computers--and also was the fastest investment rate in three years.

Contrast these statements from Fridays'' WSJ with what Dave Seigel has been saying for the last several months, then factor in U''s 2Q whopping 13M Net Income figure.....I am not impressed nor am I satisfied with current and future senior management strategies!

 

[Seatacus]

I've been told that the airline business is the first to feel the recession and the last to come out of it.

 

[SETMAXTHRUST]

628AU.....I agree with you regarding the consumer driving the recovery...also employement will weigh in heavily, determining economic growth.
I will have to disagree with you on your statement regarding business travel though. The communications revolution of the past few decades has made personal and business contacts easier and faster. Cell phones, fax machines, the Internet, e-mail, teleconferencing, and electronic whiteboards have all enabled individuals to be more productive and aware of their environment. Yet the big decrease in travel predicted as a result of using these modern marvels has not materialized. In fact, these electronic tools actually have increased our need to travel simply because they have increased our productivity and improved our view of the marketplace. Moreover, these communication tools have increased the speed with which we recieve info about markets to the point where rapid and decisive action is required to take advantage of the info recieved. While many issues can be handled remotely, people still subscribe to the following truisms:

1. Deals are made in person
2. Individuals like to be courted in person
3. People learn more when they can see, touch, and hear in person.

The lack of focus from the U senior management to keep, grow, and retain the business traveler as well as the 'high net-worth' pax is sub-optimal. This is a serious revenue shortfall that U's management team has failed at miserably! If as much effort and planning would be devoted to this revenue stream as they have devoted to cost reduction, that $13M might have been $130M.....

 

[USFlyer]

ITRADE, well put!

 

[ITRADE]

----------------
On 8/3/2003 6:35:28 PM SETMAXTHRUST wrote:

628AU.....I agree with you regarding the consumer driving the recovery...also employement will weigh in heavily, determining economic growth.
I will have to disagree with you on your statement regarding business travel though. The communications revolution of the past few decades has made personal and business contacts easier and faster. Cell phones, fax machines, the Internet, e-mail, teleconferencing, and electronic whiteboards have all enabled individuals to be more productive and aware of their environment. Yet the big decrease in travel predicted as a result of using these modern marvels has not materialized. In fact, these electronic tools actually have increased our need to travel simply because they have increased our productivity and improved our view of the marketplace. Moreover, these communication tools have increased the speed with which we recieve info about markets to the point where rapid and decisive action is required to take advantage of the info recieved. While many issues can be handled remotely, people still subscribe to the following truisms:

1. Deals are made in person
2. Individuals like to be courted in person
3. People learn more when they can see, touch, and hear in person.

The lack of focus from the U senior management to keep, grow, and retain the business traveler as well as the 'high net-worth' pax is sub-optimal. This is a serious revenue shortfall that U's management team has failed at miserably! If as much effort and planning would be devoted to this revenue stream as they have devoted to cost reduction, that $13M might have been $130M.....

----------------​

Deals are made in person. Deals. Before the tech revolution, all the negotiations took place in person as well. Now that is not nearly so true.

Moreover, its not necessarily true that folks like to be courted in person. That may be valid for the folks that are 40 or above. However, tech-savvy people are more impressed by the ability for future business partners to match high-level tech skills with high-level tech skills. Over time, this will become more common and more prevalent - reducing the need or reliance on air travel.

You're complaining about US's performance. But remember that all the other major network carriers floundered along as well. Are you going to simialrly indict them for failing to turn good profits?

Finally, you've argued that US has not attempted to grab business travel revenue? What do you think the 70 seat and 50 seat RJs are about? Our turbo props compete against Delta's RJs. Our 1x daily mainline service from point X to hub Y competes against CO's 5x RJ service from point X to hub Z. In any event, can you clearly demonstrate how US has failed to lure "'high net-worth' pax" other than a reference to the financials which do nothing but reflect the reality faced by the other majors?

 

[SETMAXTHRUST]

ITRADE....You bear several points which I will address below...

"Deals are made in person. Deals. Before the tech revolution, all the negotiations took place in person as well. Now that is not nearly so true."

I think if you would look at the entire group S & P 500 companies, and evaluate each one of them based on their net income, sales, all of the financial metrics that make them successful, then compare the ones that operate corporate flight departments vs. the ones that don't you would see that the ones that do, outperform the ones that don't. The productivity that is lost via airline travel can be anywhere from minimal to extreme for a executive. I can supply you with data that proves this...

"Moreover, its not necessarily true that folks like to be courted in person. That may be valid for the folks that are 40 or above. However, tech-savvy people are more impressed by the ability for future business partners to match high-level tech skills with high-level tech skills. Over time, this will become more common and more prevalent - reducing the need or reliance on air travel." Who do you think runs the majority of the top Fortune 1000 companies....CEO's under 40? These senior management teams use every available asset in the most optimal stragetic way, that includes all types of air travel.

"You're complaining about US's performance. But remember that all the other major network carriers floundered along as well. Are you going to simialrly indict them for failing to turn good profits?" I am only highlighting U's performance as compared to the other carriers 2Q earnings. For example, JetBlue earned a 16% profit margin, U's was less than 1%!! U cannot continue with this type of financial performance...they will bleed too death again!

"Finally, you've argued that US has not attempted to grab business travel revenue? What do you think the 70 seat and 50 seat RJs are about? Our turbo props compete against Delta's RJs. Our 1x daily mainline service from point X to hub Y competes against CO's 5x RJ service from point X to hub Z. In any event, can you clearly demonstrate how US has failed to lure "'high net-worth' pax" other than a reference to the financials which do nothing but reflect the reality faced by the other majors?" First, your thinking here revolves or centers on the paradigm that a biz or 'high net-worth' pax will continue with airline travel. The issue is not mainline vs. RJ's....it is that these people are tired of flying on any airline! My point here is how do we capture/recapture this revenue to 'enhance' the bottom line, given that the airline experience is sub-optimal? Conversely, how can we improve the product to keep this most important customer?

 

[ITRADE]

----------------
On 8/3/2003 9:49:18 PM SETMAXTHRUST wrote:

I think if you would look at the entire group S & P 500 companies, and evaluate each one of them based on their net income, sales, all of the financial metrics that make them successful, then compare the ones that operate corporate flight departments vs. the ones that don't you would see that the ones that do, outperform the ones that don't. The productivity that is lost via airline travel can be anywhere from minimal to extreme for a executive. I can supply you with data that proves this...

----------------​

You're basing success on whether or not companies have travel departments? Thats beyond absurd. Remember also that corporate travel is increasingly aimed at fractional private jet ownership - clearly a detriment to airlines. In any event, you simply cannot dismiss the fact that business travel is down and, given the post 9-11 security measures and the increase in technology, will continue to be down.

----------------
On 8/3/2003 9:49:18 PM SETMAXTHRUST wrote:

Who do you think runs the majority of the top Fortune 1000 companies....CEO's under 40? These senior management teams use every available asset in the most optimal stragetic way, that includes all types of air travel.
----------------​

Who cares whose running them? The CEOs are not the only ones doing traveling. Mid-levels can do plenty of traveling - but they aren't as much. Moreover, why limit it to Fortune 1000 companies? If only Fortune 1000 company execs flew, youd need only one airline in the United States. There are thousands of medium to small companies that used to send employees and consultants out on calls all of the time. Owing to budgetary constraints and advancements in technology, the simply are not doing it anymore.

----------------
On 8/3/2003 9:49:18 PM SETMAXTHRUST wrote:

For example, JetBlue earned a 16% profit margin, U's was less than 1%!! U cannot continue with this type of financial performance...they will bleed too death again!
----------------​

You can make that argument for most every major carrier - including AA and UA. The losses continue to be awful.

----------------
On 8/3/2003 9:49:18 PM SETMAXTHRUST wrote:
First, your thinking here revolves or centers on the paradigm that a biz or 'high net-worth' pax will continue with airline travel.
----------------​

You seem to think so.

----------------
On 8/3/2003 9:49:18 PM SETMAXTHRUST wrote:
The issue is not mainline vs. RJ's....it is that these people are tired of flying on any airline! My point here is how do we capture/recapture this revenue to 'enhance' the bottom line, given that the airline experience is sub-optimal? Conversely, how can we improve the product to keep this most important customer?
----------------​

Hmmm....Lets see....as a business customer, I would rank the following:

Frequency of service
Customer service
Fares
Network Availability

As a passenger who has spent about $12,000 in the past two months on airfares, I like the frequency and the ability to fly where I want the fastest the most. If that means taking a non-stop RJ from DCA to CVG on DL over a US connection through CLT, I'm going to do it. If I can connect only once through SFO to get to PVG instead of connecting via DFW and LAX on AA, I'm going to take UA. If I have to wait four hours to take a mainline flight on US when I can hop on a RJ flight via CO within 90 minutes, I'm going to take CO.

 

[SETMAXTHRUST]

ITrade....

"You're basing success on whether or not companies have travel departments? Thats beyond absurd. Remember also that corporate travel is increasingly aimed at fractional private jet ownership - clearly a detriment to airlines. In any event, you simply cannot dismiss the fact that business travel is down and, given the post 9-11 security measures and the increase in technology, will continue to be down."

Absurdity? I don't need to be reminded of the various air travel alterntives....I am fully aware of the competitive air travel alternatives. Let's just say for now, that I'm probably more well-versed than you are regarding what you the customer may need/desire in this area. We could go on and on with this....back to your point....I do agree that post 9.11, the biz travel demand is a smaller pie. Your other 'absurdity' comment regarding corporate success....my point again is strictly the financial performance of S & P 500 corporate flight operations vs. non-Operators. Very simply, the ones that have corporate flight departments outperform the ones that don't. As I stated before, I have the data.

"Who cares whose running them? The CEOs are not the only ones doing traveling. Mid-levels can do plenty of traveling - but they aren't as much. Moreover, why limit it to Fortune 1000 companies? If only Fortune 1000 company execs flew, youd need only one airline in the United States. There are thousands of medium to small companies that used to send employees and consultants out on calls all of the time. Owing to budgetary constraints and advancements in technology, the simply are not doing it anymore."

They care....in fact the top five corporate executives of every US corporation care! And, mid-level executives care also. Every executive out there, including you care about how productive you are on the road, how long your away from your family, etc.

"Hmmm....Lets see....as a business customer, I would rank the following:

Frequency of service
Customer service
Fares
Network Availability

As a passenger who has spent about $12,000 in the past two months on airfares, I like the frequency and the ability to fly where I want the fastest the most. If that means taking a non-stop RJ from DCA to CVG on DL over a US connection through CLT, I'm going to do it. If I can connect only once through SFO to get to PVG instead of connecting via DFW and LAX on AA, I'm going to take UA. If I have to wait four hours to take a mainline flight on US when I can hop on a RJ flight via CO within 90 minutes, I'm going to take CO."

See....you concluded my case...your values are what are important to many business and 'high-net-worth' pax....and I feel that there needs to be improvement with all of these regarding airline choices. Now one last question....who paid the $12,000, you or your company?

 

[N628AU]

Itrade is correct, and I am sure PineyBob can attest. As I have discovered in my life after U, you may make the deal in person, but you can find cheaper ways to negotiate that deal. Big deals don't get done overnight, and take many visits and talks to pin down. Nothing happens until a sale is made. While you will pay any cost to get somewhere you need to go to get a 7 figure deal done, you are not going to cough up that Y fare until you know it is a done deal. Before that, presentations and negotiations can be done from across the country or across the globe. Sure travel may not have fallen off as a whole, but the facts bear out it is the discretionary leisure traveller commonly in the sky, not the deal makers.

 

[TomBascom]

... Sure travel may not have fallen off as a whole, but the facts bear out it is the discretionary leisure traveller commonly in the sky, not the deal makers.​

Where are all these discretionary leisure travelers? Why are so many of them traveling in groups of 1 carrying a briefcase with a preferred luggage tag?

When Dave and Ben say that "business travel is off" they mean that they aren't selling as many walk-up fares. It's not an evaluation of why people are sitting in seats. Simple observation shows that, in fact, "business travel" is not off in any significant way if you define it as persons flying for the purpose of doing business. The fact that airline executives define it as walk-up fares purchased rather than as the reason the customer is on the plane amply demonstrates why they're in so much trouble.

The number of people out there closing 7 figure deals and buying Y fares at the drop of a hat has always been and always will be small. Us ordinary Joes going from place to place "doing stuff" have simply learned to plan better. We aren't going to unlearn that any time soon -- especially since those other guys usually put us through the belt tightening wringer once they close their deals...

 

[ClueByFour]

----------------
On 8/4/2003 11:07:40 AM SETMAXTHRUST wrote:
Now one last question....who paid the $12,000, you or your company?

----------------​

And this matters, how?

I'm a relative "Joe Nobody" on the corporate ladder at my current employer (Fortune 500), but I can assure you that as long as prices are competitive, _I_ am the one making the choice on who I travel with (in the sense that we've got contracts with 3 of the 7 majors--and non-major carriers are a valid choice if the price delta for a given trip is >10%). From the airline's standpoint, it does not matter that my firm pays for the travel, as I'm the "arranger" or "decisionmaker" if you will.

And yeah, we've got a flight department with 5 or 6 shiny bombardier products of various sizes. People (including execs) still fly lots of commercial. Often, particularly for non-executive travel, we _are_ using the private fleet more extensively, usually when the cost of sending >4 people on a last minute trip exceeds the R/T block hour cost to operate the aircraft (when you consider that sending 4 guys from PIT-PHL can often cost north of $4k, this makes sense).

 

[N628AU]

TomBascom...

Point taken. By business travellers I did mean to imply a walkup, unrestricted fare. You are right, there are plenty of solo passengers in suits still flying, but they are in fact on fares intended fo the "discretionary leisure traveller". They have figured out the pricing games better. I state this as another reason that technology has changed the travel playing field, in the ability to use the net to search fares on your own, instead of relying on an agent or whomever answers the carrier's 1-800 number. The quesiton is, who in upper management or marketing will find a way to properly harness this reality and deal with it in a way both profitably to the company, and fair to the customer?

 

[tadjr]

----------------
On 8/4/2003 802 PM N628AU wrote:


You are right, there are plenty of solo passengers in suits still flying, but they are in fact on fares intended fo the "discretionary leisure traveller----------------
​

I seem to recall many of the fares on Metrojet being higher than the fares we offer now (walkup then vs advanced purchase now). Seems like Metrojet had a greater number of "walkup" fares than we are seeing now, even though they were cheaper than many current walkup fares (Full Y), they were still more than many of the advanced purchase fares we are seeing people use now and people thought they were getting a deal then. Maybe something to look at again? One way fares that are "bargains", but are more expensive than the round trip excursions we currently offer.

 

[SETMAXTHRUST]

628AU....

"I state this as another reason that technology has changed the travel playing field, in the ability to use the net to search fares on your own, instead of relying on an agent or whomever answers the carrier's 1-800 number. The quesiton is, who in upper management or marketing will find a way to properly harness this reality and deal with it in a way both profitably to the company, and fair to the customer?"

Your statement hear was my orginal intent of this post! Excellent! Your question is better than I ever could have stated. In my opinion, this is one of U's current and future key challenges. Safety, service, and value must be some of the drivers for the U senior management team to focus on, while retaining and obtained a return (as the economy improves, per my original post) of biz pax's. Focus on top line earnings management has been a shortfall at U.