Profit Estimates

[Art at ISP]

I agree completely with you Wings, up to the point of charge away. IF the airlines want to have ala carte charges for services, they must be structured differently to reflect true transparency.

There should be limits on the number of seats knowingly sold under the cost of providing the service. In ANY other industry it's plain illegal, and called dumping.

 

[Black Magic]

How much profit the company would have if the Pilots or Flight attendant had joint contracts? My guess is surely not as much. Other carriers showed profit too and the employee groups get paid more on average than US Airways, makes you wonder.

 

[john john]

Does USAirways generate more money for fees for there size than the other airlines when comparing the available seats?

 

[Art at ISP]

John John,

I am not sure but here is an interesting statistic:

US Profit = $447M
Bag Fees = $480M

Profit/Loss without Bag Fees = -$33M

I do not think any other carrier had fees equal to or in excess of their profit...and I do not think this sustainable over time.

I will also clarify to say that my objection to ancillary fees does not necessarily include bag fees....I think they are actually justified in most cases..

I am also glad to see they are finally making some investment in product....it's about time.

 

[Itestwell]

Itest,

Anyone can manipulate the numbers, but I do believe that other carriers actually make money from their core operations other than just ancillary fees.

As I stated before, with the exception of Choice Seats, which is driving high value customers away despite what Tempe thinks (the actual customers have told me), most airlines are similar with their charges. IF they insist on charging extra for special seating, the seats better be more special than just in the front of the cabin...E+ is a perfect example of some value added, but at least UA respects their elites and Star Gold members and allows them to have those seats for free...

The pricing model across the board is broken and needs to be fixed.

That said I do hope everyone gets a nice bonus (except for management)...your colleagues in CLT and up and down the east coast are earning their money today!!!

Fair enough.

As a comparison, I just listened to snippets of the Delta Investor Day webcast, which was presented on 12/15/10. In the webcast, President Ed Bastian said that ancillary fees were indeed carrying Delta forward. He said that in 2010, Delta received $2.1B in ancillary revenue from "Unbundled ticketing"- which he described as service change fees, baggage fees, etc (DL was the #1 ancillary fee generator for 2010). In addition, he said that an additional $1.6B came from "SkyMiles"; or injections straight from American Express, which was coded as ancillary revenue. Those two figures alone are huge numbers, and there were other Ancillary "streams" in the webcast as well, which I chose not to add.

I guess my question is, if Delta's profit was $1.4B for 2010, and their Ancillary revenue was well above that, how is that different from US (albeit a much smaller scale)?

 

[SS255]

The fact that the added fees are driving profits, just goes to show that the base fares aren't enough to cover costs. We all know that the employees of US have been beaten up more than enough with wage and benefit reductions to put our operating cost in line or below those of other major airlines. I know that my wages are nearly what they were 20 years ago, and some fares are as well, possibly even lower. Compare the cost of a car, food, housing, or any other consumer product to what it was 20 years ago, and I'm sure we can all agree that they have increased considerably. Then take a look at most of the airfares during that time frame. They have been flat for years while fuel and the cost of operating a multi-million dollar aircraft have increased along with everything else. It doesn't take a professor to see what is wrong with this picture. Air travel was once a premium service, and you paid for it. Today it cost less than a bus or a train in most cases even though it gets you there much faster under normal circumstances. If fees are what it takes to make US or any airline profitable, Charge Away Baby.

I agree 100% with all but the last sentence. The problem with relying upon fees for profitability is that fees are OPTIONAL. US is still offering to transport customers from Point A to Point B below cost. If they choose to check a bag, or to make a change to a restricted ticket, or to buy a Choice Seat, US breaks even or makes money on the customer. If they choose not to, US loses money. Sounds like a real gamble to me.

I suspect that as people became more savvy to the bag fees, they did not check as many bags. The airlines responded by raising the bag fees. How much higher can the bag fees go before customers check one less bag, or stop flying altogether? And what will happen when the DOT steps in to force the airlines to disclose their entire menu of fees upfront, so that customers are not surprised at having to pull out their wallets at the check-in counter? And let us not forget that the cost of fuel is rising.

Until air fares are rationalized so that airlines can make money from selling transportation and not "extras," and airlines can afford to give their employees fare wages, I do not hold out much hope for the future of air transportation.

 

[USFlyer]

Another interesting tidbit from today's earnings report was the fleet update: 13 737s being returned to the lessor in 2011, being replaced by 12 A321s and 1 757. US seems to be in love with the A321 ... I'm somewhat surprised they are using A321s to replace 737s (as opposed to additional A319s or A320s).

 

[Art at ISP]

Fair enough.

As a comparison, I just listened to snippets of the Delta Investor Day webcast, which was presented on 12/15/10. In the webcast, President Ed Bastian said that ancillary fees were indeed carrying Delta forward. He said that in 2010, Delta received $2.1B in ancillary revenue from "Unbundled ticketing"- which he described as service change fees, baggage fees, etc (DL was the #1 ancillary fee generator for 2010). In addition, he said that an additional $1.6B came from "SkyMiles"; or injections straight from American Express, which was coded as ancillary revenue. Those two figures alone are huge numbers, and there were other Ancillary "streams" in the webcast as well, which I chose not to add.

I guess my question is, if Delta's profit was $1.4B for 2010, and their Ancillary revenue was well above that, how is that different from US (albeit a much smaller scale)?

Itest,

While I originally thought US was alone in having fees make up the whole profit or more, I see I was wrong, and stand corrected.

That said, I think it is a precarious position for ANY airline to be in when their add ons and nickel and diming make up ALL or more of their total profits. This highlights the fundamental weakness in the current pricing structure.

As I said earlier, my issue with US is not the fees themselves, but the charges they assess their MOST loyal customers, in which they are alone...

For the industry as a whole, however, I will continue to advocate for more transparent pricing, ala AC or up until their merger closes, Airtran....and WN as well....
Pricing comes up as a menu with 3 to 5 choices....pick the lowest you get nothing. Pick the next, you get A & B. Pick the next you get A B and C, and pick the next you get all services/features....so the customer knows up front the TOTAL cost.....

Again, my congratulations to the front line employees---you HAVE earned your profit sharing checks--use them well....

As for me, I am stuck in CLT tonight--it could be worse..... 😉

 

[BoeingBoy]

US seems to be in love with the A321 ... I'm somewhat surprised they are using A321s to replace 737s (as opposed to additional A319s or A320s).

The A321, while not a complete replacement for the 757, at least keeps about the capacity of the 757's already gone. If they're replacements for the 737's, it adding capacity for relatively little extra cost.

Jim

 

[Art at ISP]

Jim,
Check your PMs...

I agree- while the capacity of the 321 may be similar to the 757, I do believe they are underpowered and have considerably less range than the 757, therefore are somewhat less versatile...or have they upgraded the newer 321's to make it transcon without fuel stops in winter?

 

[BoeingBoy]

or have they upgraded the newer 321's to make it transcon without fuel stops in winter?

Art, message received and sent you an answer via PM.

I'm certainly not an Airbus expert but I haven't seen anything that indicates the newer A321's having more range than the one's that have been around a decade. The NEO version should have more range, but it's still a paper airplane so how much more range with the new wingtips and engines is open to debate.

Jim

 

[Itestwell]

Itest,

While I originally thought US was alone in having fees make up the whole profit or more, I see I was wrong, and stand corrected.

Thanks. It is a shame that you once again chose to bash just US instead of doing some simple research.

[quote/]That said, I think it is a precarious position for ANY airline to be in when their add ons and nickel and diming make up ALL or more of their total profits. This highlights the fundamental weakness in the current pricing structure.[/quote]

Well, you better copy and paste this on the Delta board. Not only are they looking to "aggressively" grow their ancillary revenues in 2011 (from the DL Investors Day I referenced above), they are looking to "monetize" their First Class cabins going forward. Looks like the plan is to sell more FC "upsells" when tickets are purchased, when customers check in online, at check-in kiosks, and at the departure gate. Is FFOCUS taking a position on this, as it could potentially cut into Elite Complimentary Upgrades? (We won't get into the CO Elites that have seen their UDU's plummet over the last year...)

[quote/]As I said earlier, my issue with US is not the fees themselves, but the charges they assess their MOST loyal customers, in which they are alone...[/quote]

Agreed. But let's be fair. While US has a ways to go to improve, other airlines are not perfect, and what entertains me is the way you harp endlessly on US, yet everyone else seems to get a pass (judging from FFOCUS, your posts here, and your posts on FT).

As small examples:

-CO charges for Stirring's Mixers in FC (more petty than revenue generating IMO), has no pillows and blankets in domestic FC, and is, in some cases, selling it's exit row to non- elites.. They've also just recently downgraded some FC meal options. (Dare we mention E+?)
-DL FF's are outraged with the devaluation of SkyMiles, with specific focus on "low" award redemption, and the ability to upgrade internationally.

These simple policies affect/ cost both CO and DL's "MOST loyal customers" as well. Yet, I do not see you addressing these. Why such a focus on US only, and their Elite unfriendly policies?


[quote/]Again, my congratulations to the front line employees---you HAVE earned your profit sharing checks--use them well....[/quote]

Thank you.

 

[Art at ISP]

Itest,

We are aware of all the downgrades by US and other airlines. I did mention somewhere that I was pleased to see US investing in product after so many years.

With regard to CO and DL, we are having the same conversations, however, their managements don't blow us off as we have been by US. I know more than I am allowed to discuss with regard to the others, but suffice to say that some others have thought these things through to a much higher degree than I believe US has.

Let's face it, you can't compare Choice Seats to E+....

I can share more with you off line if you like in that regard, but suffice to say, I agree no one airline is perfect, just some suck less than others ...US just seems to be leading the race to the bottom in some of these areas.....which may be by choice if you listen carefully to Doug and Scooter...they continue to view employees and customers as liabilities rather than assets, and THAT is a CORE problem.

I want to reiterate I am very impressed with the improvements I have seen flying US this week....but some of the same concerns still exist....employees are less empowered than their compatriots elsewhere to help customers, and are given less tools with which to do their jobs.

 

[Itestwell]

Itest,

We are aware of all the downgrades by US and other airlines. I did mention somewhere that I was pleased to see US investing in product after so many years.

Again, I ask, if you are aware of the downgrades at other airlines, why is it that we see no threads in public about this, but we hear about your upcoming travel on US weeks before your trip even took place? It's almost as if you wanted US to fail to offer you a solid product to feed some agenda. At least, that's the way it comes across.

[quote/]With regard to CO and DL, we are having the same conversations, however, their managements don't blow us off as we have been by US. I know more than I am allowed to discuss with regard to the others, but suffice to say that some others have thought these things through to a much higher degree than I believe US has. [/quote]

So other airlines have thought these changes through more thoroughly than US-- does that mean they are going away, because of FFOCUS' nudging? And, since their respective managements are not "blowing you off", but have not changed the policies as of yet, will we ever see you condemning them on a public forum, or will you just stick to bashing US?

[quote/]Let's face it, you can't compare Choice Seats to E+....[/quote]

Never meant to compare them; just referring to the fact that UA/CO elites have heard nothing yet.

[quote/]I can share more with you off line if you like in that regard, but suffice to say, I agree no one airline is perfect, just some suck less than others ...US just seems to be leading the race to the bottom in some of these areas.....which may be by choice if you listen carefully to Doug and Scooter...they continue to view employees and customers as liabilities rather than assets, and THAT is a CORE problem.[/quote]

Why do we have to discuss other airlines benefit reductions off line? You certainly have no problem airing US' dirty laundry from years ago, and that's fine. Why do other airlines get a special pass? Because US is the worst? Makes no sense.

[quote/]I want to reiterate I am very impressed with the improvements I have seen flying US this week....but some of the same concerns still exist....employees are less empowered than their compatriots elsewhere to help customers, and are given less tools with which to do their jobs.[/quote]

Glad to hear the operation has improved in your eyes.

One more thing: Are you able to elaborate on how US' front line employees are less empowered to help customers? I am not disagreeing with you, but you think this would be reflected in the DOT complaint metrics, and we would still be dead last, like we were for many months. What, specifically, are US' employees less empowered to do, as compared to the other majors?

 

[Art at ISP]

Itestwell,

The subject of changes at other airlines is discussed ad nauseum on other sites, including our own boards. Look at FFOCUS' boards or at FlyerTalk and you will see similar discussions regarding just about any other airline. This board is US-centric for the most part, and the core readers and posters here are employees not customers. That is why you may see a perception of us only discussing US here.

Management at other airlines has been very receptive to our point of view, and I can say in fact that some pending changes were reconsidered after they became aware of our differing point of view. We all acknowledge that things will not be as they were, and that many of the changes we will have to live with...but in many cases customer groups or advocates (not always me by the way) are consulted in advance and our feelings are valued and considered...and sometimes we win and sometimes we lose, but at least they care what we have to say. US management has the attitude that they know everything and that they don't need to listen to customers or employees. I have spent my own money flying to Tempe on more than one occasion to come out with empty promises and lies.

With regard to US employees empowerment, I can say that they cannot issue certain waivers, nor can managers, agents sometimes get in trouble for issuing meal or hotel vouchers when they are entirely appropriate, and the version of SHARES used by US is of the Walmart variety and stripped to the core. I watched yesterday as agents tried to work and the system would not let them do things that were perfectly in line with policy and perfectly appropriate-some rebookings were rejected for example, when they were certainly appropriate. A certain pet peeve is that no agent or manager can offer a distressed traveler (even a Chairmans Preferred member) a Choice seat without charging for it....but under certain circumstances they CAN upgrade that person to First...things like this make NO sense.

I think there is a perception that the company doesn't trust the employees and field management to make good decisions. They have a history of being penny wise and pound foolish. With regard to the comment about my announcing I was just letting some friends in the system who read here that I was coming through, and that I was giving it another shot. I don't see the need to continue bashing me for that--so let's let that one go.

At the end of the day, if you know my history, you know that I had been one of the most fierce advocates for US and its employees since 1999. It is SOLELY the senior management's attitude and disdain for both customers and employees alike which made me leave and take a few hundred loyal flyers with me...at the end of the day I hope US can re emerge stronger than ever, but time will tell. I will say they appear to be on the right path for the most part.

My BEST to you all.....