BTW, We were all NWA employees first.
Most of us were proud of our union representation. We were the union, not some phantom dues collections collection organization.
Thanks Doug: US Outsourcing 7 cities
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Most of us were proud of our union representation. We were the union, not some phantom dues collections collection organization.
BoeingBoy
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WT,
I guess we'll just have to disagree. All I see is you making rationalizations for why the WN model will untimately fail while the network model, particularly DL, will be victorious. From attempting to use employee productivity, a skewed metric as I pointed out, as a poor substitute for efficiency (CASM is a better metric for that) to your latest pronouncement that WN serves "a fairly small market group" (Does that mean that DL serves "a fairly small market group" too?). It sure seems that the "failed" lcc business model keeps growing it's market share while the legacies shrink, but hey - you've got all the answers.
Jim
I guess we'll just have to disagree. All I see is you making rationalizations for why the WN model will untimately fail while the network model, particularly DL, will be victorious. From attempting to use employee productivity, a skewed metric as I pointed out, as a poor substitute for efficiency (CASM is a better metric for that) to your latest pronouncement that WN serves "a fairly small market group" (Does that mean that DL serves "a fairly small market group" too?). It sure seems that the "failed" lcc business model keeps growing it's market share while the legacies shrink, but hey - you've got all the answers.
Jim
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Jim,
I don't there is a need to disagree but there is a need to hear what each other is saying.
I DID NOT say that the LCC model has failed; I said it is failing at present to deliver the kind of margins that the network carriers are now delivering.
There are a number of reasons for that but fundamentally it says that the network carriers are able to better able to deliver revenue to cover their costs; part of that is the strong international environment, part is because fare increases have reached the limit of how much they can be increased, part is because the network carriers have increasingly been able to stand their ground in their strength markets - witnessed by the WN pullback in key US markets from PHL.
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WN serves a smaller segment of the market, not a small market. The network carriers are the closest thing to trying to be a one size fits all air transportation system; sometimes that works, sometimes it doesn't. But market diversity and breadth can translate into revenue premiums and that is what the network airlines are trying to do - and based on recent performance are succeeding at doing.
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Finally, while the notion remains that network carriers can't compete against low fare carriers, the evidence says that the network carriers have reached the point where they can effectively compete. The final pulldown of US at LAS started years ago so what happened in the past couple weeks isn't really indicative of the climate today.
While you want to point out that the low fare carriers continue to take domestic market share, that isn't entirely accurate. DL and UA each have about 25% of the domestic market; US and AA each split the other approximately 25% of the domestic market that is held by network carriers. The other half (give or take a few percentage points) is held by low fare carriers, of which WN is also close to 25%. So, on balance, if two network carriers each have twice the share of the single largest LFC and AA and US are both larger than the #2 LFC, then it would seem that the network carriers have better succeeded at creating nationwide systems than the low fare carriers have. Further, the network carriers control nearly all of the international market aside from some of the LFC Caribbean flying.
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No one said the LFCs don't have a viable business model. But I also can't accept that the network carriers can't compete effectively against the low fare carriers.
The evidence overwhelmingly says that the industry is reaching a level of stability after 35 years; you did note that nearly AA carriers are reducing or stopping capacity growth in the year ahead - a huge accomplishment that was unthinkable just a few years ago - and possibly only because of consolidation on both the network and low fare carrier sides of the industry.
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Finally, you know, Jim, that not many years ago the market capitalization of LUV was worth more than the entire network carrier segment of the industry. Today, DAL and LUV have been tracking pretty close together (as of right now LUV is worth about $100M more with UAL not far behind); Wall Street no longer sees the restructured network carriers as having failed business models or the network carriers as having models that can continue to generate the level of earnings they once did.
It is also notable that DAL and UAL have attained some level of market value parity with LUV but AMR (which hasn't restructured) and LCC have not - which also validates that size DOES matter in the industry; Parker continues to argue that US doesn't have it but needs it - and there is evidence that DL and UA are obtaining the intended benefits from their mergers.
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While AMR and LCC need to continue to find the "sweet spot" for their business models, the same can be said for JBLU and RJET/F9 which are now assuming a much less significant role than it once did. But for carriers like DL, UA, and WN that have negotiated/are negotiating the changes in the industry, they are equally finding success with their respective business models.
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It is not accurate any longer to talk of any particular segment of the industry being unsuccessful. The focus needs to shift to specific carriers and their strategies.
I don't there is a need to disagree but there is a need to hear what each other is saying.
I DID NOT say that the LCC model has failed; I said it is failing at present to deliver the kind of margins that the network carriers are now delivering.
There are a number of reasons for that but fundamentally it says that the network carriers are able to better able to deliver revenue to cover their costs; part of that is the strong international environment, part is because fare increases have reached the limit of how much they can be increased, part is because the network carriers have increasingly been able to stand their ground in their strength markets - witnessed by the WN pullback in key US markets from PHL.
.
WN serves a smaller segment of the market, not a small market. The network carriers are the closest thing to trying to be a one size fits all air transportation system; sometimes that works, sometimes it doesn't. But market diversity and breadth can translate into revenue premiums and that is what the network airlines are trying to do - and based on recent performance are succeeding at doing.
.
Finally, while the notion remains that network carriers can't compete against low fare carriers, the evidence says that the network carriers have reached the point where they can effectively compete. The final pulldown of US at LAS started years ago so what happened in the past couple weeks isn't really indicative of the climate today.
While you want to point out that the low fare carriers continue to take domestic market share, that isn't entirely accurate. DL and UA each have about 25% of the domestic market; US and AA each split the other approximately 25% of the domestic market that is held by network carriers. The other half (give or take a few percentage points) is held by low fare carriers, of which WN is also close to 25%. So, on balance, if two network carriers each have twice the share of the single largest LFC and AA and US are both larger than the #2 LFC, then it would seem that the network carriers have better succeeded at creating nationwide systems than the low fare carriers have. Further, the network carriers control nearly all of the international market aside from some of the LFC Caribbean flying.
.
No one said the LFCs don't have a viable business model. But I also can't accept that the network carriers can't compete effectively against the low fare carriers.
The evidence overwhelmingly says that the industry is reaching a level of stability after 35 years; you did note that nearly AA carriers are reducing or stopping capacity growth in the year ahead - a huge accomplishment that was unthinkable just a few years ago - and possibly only because of consolidation on both the network and low fare carrier sides of the industry.
.
Finally, you know, Jim, that not many years ago the market capitalization of LUV was worth more than the entire network carrier segment of the industry. Today, DAL and LUV have been tracking pretty close together (as of right now LUV is worth about $100M more with UAL not far behind); Wall Street no longer sees the restructured network carriers as having failed business models or the network carriers as having models that can continue to generate the level of earnings they once did.
It is also notable that DAL and UAL have attained some level of market value parity with LUV but AMR (which hasn't restructured) and LCC have not - which also validates that size DOES matter in the industry; Parker continues to argue that US doesn't have it but needs it - and there is evidence that DL and UA are obtaining the intended benefits from their mergers.
.
While AMR and LCC need to continue to find the "sweet spot" for their business models, the same can be said for JBLU and RJET/F9 which are now assuming a much less significant role than it once did. But for carriers like DL, UA, and WN that have negotiated/are negotiating the changes in the industry, they are equally finding success with their respective business models.
.
It is not accurate any longer to talk of any particular segment of the industry being unsuccessful. The focus needs to shift to specific carriers and their strategies.
Reed Richards
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Great analysis World, and don't take it as too much of a compliment because I am not qualified to judge...way above my pay grade!
Who would have thunk it...a day when the industry as a whole might just be teetering on the edge of actually having business models that work? And differing ones at that! Since I am lashed to the keel of this almost sinking and slightly profitable ship, I sure hope the Captain(s) of this thing figure out they might want the crew on their side, at some point.
So far they seem to be able to make at least some moneys without us pulling in the same direction.
RR
BoeingBoy
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Wt,
As I said, we'll just have to disagree. It's certainly obvious that you believe that you alone have a handle on this industry. You pick selective statistics to "prove" your superior intellect and understanding.
Another selective viewpoint. Since deregulation it's been about specific carriers rather than specific segments. PanAm, TWA, Eastern, Braniff, Aloha, Wein, Air Florida, Frontier, MGM Grand, PBA, Skybus, Transamerica, and a couple of hundred others have disappeared and they pretty much covered all the segments of the industry. So what you claim is "no longer" the case hasn't been the case for 40 years.
Jim
As I said, we'll just have to disagree. It's certainly obvious that you believe that you alone have a handle on this industry. You pick selective statistics to "prove" your superior intellect and understanding.
Another selective viewpoint. Since deregulation it's been about specific carriers rather than specific segments. PanAm, TWA, Eastern, Braniff, Aloha, Wein, Air Florida, Frontier, MGM Grand, PBA, Skybus, Transamerica, and a couple of hundred others have disappeared and they pretty much covered all the segments of the industry. So what you claim is "no longer" the case hasn't been the case for 40 years.
Jim
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Reed,
I'll say thanks recognizing that your expertise lies elsewhere.
The simple fact is that the industry is no longer just about "this segment" can't work and "this one can't".
The painful process of deregulation is beginning to produce some of the intended fruit. The architects of deregulation predicted a reduction in carriers but that has only taken place as some have failed - and others have become acquirers.
Some of those architects would say that what DL and UA have accomplished is directly related to the consolidaiton of the industry and the return of pricing power due to fewer players that are necessary to manage capacity in the industry.
DL and UA's success has come in part because they have the mass necessary to compete not only with low cost carriers in the US but also global carriers.
.
Conversely, WN has been successful in pushing or buying out some of its low fare competitors and creating a truly nationwide LFC that now serves most of the major markets.
.
Jim,
you are correct that every operationally related statistic has some flaws... and benefits one business model or another. But profit statistics (operating margin, net profit margin etc) are consistent not only across airlines but also across all types of businesses. For the first time in a very long time (perhaps ever), network carriers as a group are delivering profit related statistics that are at least comparable to if not better than low fare carriers.
Did you notice how gleefully both DL and UA put profit related graphs showing how well they were doing relative to even low fare carriers in their presentations at the recent Deutsch Bank conference?
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I don't have any doubt that WN will figure out to return to its previous level of profitability and it will require a whole lot less pain for them to get there. And of course B6 and a few other LFCs are still doing fairly well.
.
But it does say that the industry is reaching stability and with that stability comes the HOPE that airline employees will no longer be the ones who have to pay the price for "righting" their companies - and that has implications even for airline outsourcing.
You have noticed, I'm sure, that DL and UA are not significantly looking to their employees for wage, scope, or benefit reductions other than in the case where UA and CO were different - and then bringing the unifield airline to the point where the other "was"
.
While US still is outsourcing, it is also insourcing at ATL, which is a reflection that they have the "mass" at ATL to be able to support mainline ramp. That "mass" is exactly what DL and UA achieved thru their mergers.... US just is not large enough to build that mass, esp. in the west which is further from its financial strength on the east coast - which is precisely where ATL is.
.
The industry is evolving, market strength and pricing stability IS translating into pricing power which means that employees are no longer being asked to finance the hypercompetitive business climate that was necessary to allow carriers to survive.
.
Perhaps, perhaps, US is pretty close to thru outsourcing... perhaps the pay cuts that many airline employees have had to take are becoming a nightmare of the past, and benefit changes will now be closer related to the general changes in business instead of much larger and much more brutal for airline employees.
I'll say thanks recognizing that your expertise lies elsewhere.
The simple fact is that the industry is no longer just about "this segment" can't work and "this one can't".
The painful process of deregulation is beginning to produce some of the intended fruit. The architects of deregulation predicted a reduction in carriers but that has only taken place as some have failed - and others have become acquirers.
Some of those architects would say that what DL and UA have accomplished is directly related to the consolidaiton of the industry and the return of pricing power due to fewer players that are necessary to manage capacity in the industry.
DL and UA's success has come in part because they have the mass necessary to compete not only with low cost carriers in the US but also global carriers.
.
Conversely, WN has been successful in pushing or buying out some of its low fare competitors and creating a truly nationwide LFC that now serves most of the major markets.
.
Jim,
you are correct that every operationally related statistic has some flaws... and benefits one business model or another. But profit statistics (operating margin, net profit margin etc) are consistent not only across airlines but also across all types of businesses. For the first time in a very long time (perhaps ever), network carriers as a group are delivering profit related statistics that are at least comparable to if not better than low fare carriers.
Did you notice how gleefully both DL and UA put profit related graphs showing how well they were doing relative to even low fare carriers in their presentations at the recent Deutsch Bank conference?
.
I don't have any doubt that WN will figure out to return to its previous level of profitability and it will require a whole lot less pain for them to get there. And of course B6 and a few other LFCs are still doing fairly well.
.
But it does say that the industry is reaching stability and with that stability comes the HOPE that airline employees will no longer be the ones who have to pay the price for "righting" their companies - and that has implications even for airline outsourcing.
You have noticed, I'm sure, that DL and UA are not significantly looking to their employees for wage, scope, or benefit reductions other than in the case where UA and CO were different - and then bringing the unifield airline to the point where the other "was"
.
While US still is outsourcing, it is also insourcing at ATL, which is a reflection that they have the "mass" at ATL to be able to support mainline ramp. That "mass" is exactly what DL and UA achieved thru their mergers.... US just is not large enough to build that mass, esp. in the west which is further from its financial strength on the east coast - which is precisely where ATL is.
.
The industry is evolving, market strength and pricing stability IS translating into pricing power which means that employees are no longer being asked to finance the hypercompetitive business climate that was necessary to allow carriers to survive.
.
Perhaps, perhaps, US is pretty close to thru outsourcing... perhaps the pay cuts that many airline employees have had to take are becoming a nightmare of the past, and benefit changes will now be closer related to the general changes in business instead of much larger and much more brutal for airline employees.
Think about this for a moment Tom, if it is true that the company would lay you off without a union (which I don't necessarily believe), what is that saying about you and the job you have? That it is not necessary, that you are not a benefit to your employer? You are basically saying you have a job only because of a union and your somehow think that is a good thing?
And how much experience do you have with the rank and file jobs?
Go ask the Fleet and CSA what happened to them in 92 without a union.
Guess you dont remember what happened to HP's A&Ps without a union.
US has proven that with the amount of express carriers flying for it and the amount of outsourcing it does.
Don;t let the facts get in your way!
BoeingBoy
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Yet you take the one's you want and read what you want into them. If one is only looking for evidence that "proves" what one has already concluded, one naturally finds it and ignores everything else.
I previously pointed out the truth and you refuse to accept it so do this - for the last 20-30 years figure out the average profit margin of the legacies for the years they were profitable. Then do the same for WN (the only true lcc that's been around that long). You'll see, but probably not admit, that what you cite as evidence of something "new" is really not new at all.
Jim
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You must really hate the fact that all of us UNION employees keep getting that $50 for you. Maybe you should give it back, you don't want to look like a union sympathizer.
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ah, but Jim, we find the problem.
I've never been talking about the past 20 years. Never once said the legacies ALWAYS had it together. Never said let's look at 20 year averages. or 20 or 30...
I'm talking about NOW.
On that basis, there is no selective picking of stats - the most current will work just fine.
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maybe it's you who selectively wants to pick data and define a time frame for looking at the industry to espouse your theory that the network carriers are broken... problem is it doesn't reflect PRESENT REALITY.
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bottom line is that the network segment of the industry AS A GROUP has stabilized enough that further layoffs and outsourcing are not the norm for the MAJORITY of the segment, even it that was the norm 10 years ago.
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those who want to focus on US' outsourcing decision should see it as an anomoly.
Without outing yourself, could you tell me what you do for this organization?
