From This Observer's Perch

[iflyjetz]

All the best to everyone at UAIR. I'm hoping that you pull through, but it's starting to look coyote ugly.

I'll be flying on UAIR (full revenue passenger) down to CUN in early May (I'll be partying in Mexico for Cinco de Mayo ... dos cervezas por favor). I haven't flown on U in a long time, but the United/* alliance FF miles hooked me. I look forward to flying on UAIR.

 

[novaqt]

Major changes are coming your way and you better hope and pray that Rono Dutta is not one of them. He almost destroyed UAL with his leadership. He is self-serving totally.

 

[funguy2]

Regarding HP's costs, although they are a factor, let me remind you all that AS costs are not much lower than US, yet they are making money with their rationalized fare structure. If we raise the bottom by a small margin (and let the once a year flyers go to WN if they want), then lower the high end to tolerable levels, you will fill the planes with more business travelers. By doing so, you will see an increase in AVERAGE RASM, thereby increasing revenue overall. If you couple this with the operational cost savings which can be realized (I know workrule changes are needed), you would be in a much better position to survive and grow the airline.

Another thing which I have not mentioned lately, is how many of us frequent business travelers are beginning to resent subsidizing the once a year traveler who uses the $29 to $49 fares most? I don't recall ever paying less than $99 one way for any trip.

As long as fares are FAIR and we get value for the dollar, I think this can work.

My best to you all......

The problem with the comparison of US or HP or anyone with AS and its revamped revenue structure is that AS enjoys a virtual monopoly within the state of Alaska and a near monopoly on flying to/from the lower 48. So, it is probably very difficult to tell from the outside the real effect of their fare structure change. AS's Alaska monopoly has been credited previously with helping the company through the recessions, etc.

I think the HP/AS concept, which is also used by most LCC's like F9, FL, and B6, is a good one. However, I would hesitiate to say that if AS can do it, so can US because its not an apples-to-apples comparison, because of AS's monopoly pricing on intra-AS flying (not to mention that there are few land alternatives making AS not only an "airline" monopoly, but also a "transportation" monopoly).

 

[mweiss]

...let me remind you all that AS costs are not much lower than US, yet they are making money with their rationalized fare structure.

Actually, that's not yet clear; we haven't had a full quarter of rationalized fares on which to base an assessment of the impact of the fare structure changes.

They lost money on an operational basis in Q403. Their "net income" came from the $71.4M given to them by the feds. Without that money, they had an $11.1M operating loss.

Granted, it's an immense improvement over the two years prior, but it's still a loss. I'll be most interested in seeing the Q104 report.

 

[mweiss]

...AS's monopoly pricing on intra-AS flying (not to mention that there are few land alternatives making AS not only an "airline" monopoly, but also a "transportation" monopoly).

It'd be interesting to see how big of an impact this monopoly has. If their pricing in Alaska is high enough, someone else (WN?) will ultimately want to move in and take some of that away from them. Who knows when, though.

 

[funguy2]

It'd be interesting to see how big of an impact this monopoly has. If their pricing in Alaska is high enough, someone else (WN?) will ultimately want to move in and take some of that away from them. Who knows when, though.

I think the problem is that there is not enough volume to justify a low-fare carrier. Discounters need volume to survive. It should not be surprising that America West added transccns at the same time they went low-fare. They need to be in high volume markets. You can't have high volume to Fresno, let alone Nome.

About 10 years ago, Alaska was challeneged by a small Alaskan airline, MarkAir, which was a "commuter" type operation which acquired some 737's, and flew intra-Alaska and to the lower-48. I think a combination of not enough demand for both, loyalty to Alaska Airlines, and disastrous planning by MarkAir, forced the failure of MarkAir.

As long as Alaska remains a "small" market, I doubt you'll see any LCC's there (other than a few flights to ANC, like AWA and Frontier). The only intra Alaska market of any size is ANC-FAI, but I suspect Alaska Airlines loyalty and tie ins with very small operators to bush out-stations would make it difficult for a low-fare operator to enter.

But I agree with you... I would like to see the P/L of the Alaska flying separated from the Lower-48/Mexico Flying to make more apples to apples comparisons. Unfortunately, AS doesn't have any obligation to do so.

 

[mweiss]

Discounters need volume to survive.

I thought the same thing until I started looking at WestJet. There are only six markets in Canada that have enough population to meet WN's threshold, yet they serve 16 markets. How do they manage to make the other ten be so profitable?

Clearly, whatever WestJet is doing would apply well to Alaska, which has a very similar population profile.

 

[funguy2]

Excellent point! I did not consider West Jet. I was thinking mainly about the way US discounters (i.e. Southwest / Air Tran) do business... 1 gate 10 flights/day type service. West Jet presumably does ok in some of those small Canadian markets...

 

[ClueByFour]

It'd be interesting to see how big of an impact this monopoly has. If their pricing in Alaska is high enough, someone else (WN?) will ultimately want to move in and take some of that away from them. Who knows when, though.

WN won't be in Alaska until real LAAS approaches come to light (particularly after project Capstone runs it's course). Alasks spends a fortune on the necessary equipment and training for the pilots to get into a few notable airport up there (particularly Juneau).