Here's The Issue!

USA320Pilot

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May 18, 2003
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www.usaviation.com
Last week Kevin Mitchell of the Business Travel Coalition wrote, "As a recent Business Travel Coalition survey suggests, while the falloff in business travel may have bottomed out, the foward looking revenue environment appears anemic. Indeed, much of the 4% growth in business travel traffic that BTC projects for 2004 will likely be atributable to low-fare carriers' stimulation of demand as they enter an ever expanding number of markets and discipline major airlines' pricing, he said."

"Major network airlines have still not fully grasped that the market place for commercial air transportation services is not only experiencing a cyclical squeeze, but is in the throes of structural change, which carries vastly different implications. For example, when any industry enters a cyclical downturn, layoffs are made with the assumption that workers will be rehired afrter the cycle turns up again. On the other hand, when an industry experiences structural change, it is expected that the laid off workers will never be replaced," Mitchell noted.

"The airline industry has changed structurally, but not everyone agrees yet. Just last week at an indusry conference, a leading airline economist stated with absolute conviction one of the largely debunked "immutable laws" -- the business traveler is price insensitive. He said that if a business traveler has a need to go to Atlanta, he is going irrespective of price. In his example, if a major airline lowered its business airfares, the airline would simply receive less revenues, and gain nothing, said Mitchell.

"This analysis is flat out wrong, ignores the structural shift the industry is experiencing and perpetuates flawed strategies and lost market shares at the major network airlines.....the business traveler is now permanently price sensitive...."

"The conclusion is inescapable, whether assessing the imminent assault on Philadelphia by Southwest, or the phenomenal expansion plans of JetBlue. No major network airline can survive without radical changes to the way they currently operate their businesses. No major network airline has restructured to the extent neccessary for success. Costs must be significantly lowered, asset productivity levels must be vastly improved and airlines must discover true customer-centered strategies," Mitchell said.

Regards,

USA320Pilot
 
Nobody, and I mean nobody, disputes this. What they have problems with is that the comapny is back threatening employees again without doing all they can first. They haven't even presented a plan that can be embraced before again threatening paycuts, furloughs and even liquidation. I, for one, would quickly and completely embrace some plan that looked to me as though it had even an outside chance of success. To date, nothing! Where is it? Cough something up or face criticism, and more than likely failure. :angry:
 
GadgetFreak said:
Someone should hire that guy to run an airline. Somone that actually gets the picture. Pretty amazing.
The dude's an agitator for business travellers - he's been bellyaching about high fares and poor service for years. That does not mean he can't make salient points, but they must be taken with a grain of salt, considering his angle.
 
One you didn't highlight:

"This analysis is flat out wrong, ignores the structural shift the industry is experiencing and perpetuates flawed strategies and lost market shares at the major network airlines.....the business traveler is now permanently price sensitive...."

Didn't our vaunted leader say the opposite? Simplified fares increase revenue, not decrease revenue. And the whiz kid is going to lead us to Nirvana!!

Jim
 
Actually orwell, I had no idea who he is, so point taken about the grain of salt. Although I think most people would agree that the best path for the "legacy" carriers is a combination of fare rationalization/simplification and providing better service than the Southwests of the world. People will pay more for it, US shouldnt try to match the prices. But they have to have fares that in combination with their service make them a good value for the customer. I made my comment basically on his criticism of the guy who said that busiiness fares were inelastic. As BoeingBoy points out, that is just crazy. I am allowed to buy up to full Y fare on domestic flights and probably full business on international. But I seldom do that. The reason is because I also have a budget and the money has to come from somewhere. So I pay in between, and try to get reasonable value. I dont fly Southwest because I get more value from other carriers, but I would likely pay them if faced with full Y very often. It is about value, and the prices of old dont cut it value wise, and they never will again.