The Death Of An Industry

[L1011Ret]

The industry is not dead. More passengers fly more miles every year. What is near terminal is a business model!

 

[Whadayano]

Also the LCC's operate under protection from predatory pricing practices (ah, remember when...) which limit how an major airline can respond to a threat to their market. Wait a second, protection doesn't sound very capitalistic to me?

Explain to me the last time anyone even brought up predatory pricing as a way to keep up fares, let alone successfully got the govt to go along.

 

[hobbes]

"as i said in the end you get what you pay for!............oh yea have you ever looked at how dirty those southwest jets look up close? makes you wonder about what you cant see! .......enjoy your cheap flight"

Low blow. Better take a good look at Southwest's safety record and compare it to other carriers, including your own, before you start throwing stones.

 

[luvn737s]

Explain to me the last time anyone even brought up predatory pricing as a way to keep up fares, let alone successfully got the govt to go along.

American attempted to fight off the invasion of Vanguard into it's DFW hub by matching or beating Vanguard's fares and then raising them back to where they were before when Vanguard pulled out. No, the government didn't go along and instead decided to try a little mini-reregualtion by taking American to court over it. The government should have stayed out of it and let the market act freely. When a sufficiently well-financed competitor came along it could beat American on price and establish itself without needing protection provided by the government. What we have now is an entire industry that is engaging in predatory pricing only now the prey is itself. The naivete of the airline executives who think once they are the last line standing they can raise fares to a sustainable level is laughable, though pitiful also.

 

[Segue]

Pricing transperancy? Where did you come up with that one? On of the basic tenants of macroeconomic theory is imperfect knowledge on the part of the consumer. I can't go on a website and see every price and sku for every grocery store in my area. There are very few crawlers that search every retailer for the price on an item because companies do not want to get into the battle to erode their margins. Let the consumer do the legwork. Airlines aren't selling tickets on a ferris wheel, they're providing a service which in many cases cannot be replaced by any other viable alternative. They aren't the Salvation Army either. Their purpose should be to provide safe air transportation at the highest price the market will bear. Unfortunately the oligopoly doesn't want to find out what the highest fare is, and instead opts for a suicidal game of exchanging profits for market share. Please show me another industry that has engaged in such bizarre behavior and was able to recover. I wouldn't second guess the public's acceptance of a re-regulated industry. The government may have to step in and remind the airlines that the air transportation system is vital to the nations economy (hence the RLA in the airline biz) and that if they are unable to operate it properly, then the government will give it a go at the public peril via re-regulation.

Airlines are a bit different than grocery retailing - the value of a ticket is high relative to a can of tomato sauce, there are a limited number of options, and no actual "product" is distributed - with e-ticket, its pure information until you show up at the airport.

On Expedia, Travelocity, Orbitz and Sidestep (my favorite) it takes about 5 minutes to get the best price on nearly any domestic route. I can shop the LCCs right along side the majors and make my own decision. When an major is within $25 of an LCC, good chance that I might choose the major for the mileage program, otherwise its the LCC.

Before the internet, the customer had to go through a travel agent. The travel agent was motivated by incentives paid by airlines to shift share in their direction. They were agents of the airline, not the consumer. Because of the high costs of this channel (nearly 25% of total costs) many of the LCCs either did not participate in the agency channel, refused to pay commssions or chose to sell direct only, so it was very difficult and time consuming for the consumer to side by side comparisons of schedule and pricing.

Its a different game now and the consumer has nearly perfect information at their fingertips. Its no longer a game of majors trying to milk the public by tying up the market with exclusive distribution deals.

Microeconomics? Check a college Econ 101 textbook. Perfect information drives competition, and its a basic rule that in a mature, highly competitive industry, that prices march downward to meet costs, and in the end, a mature industry will make near zero over the cost of capital.

Yes, its a radical shift in wealth, with the wealth going to the consumer pockets and the strength of the economy. Study after study has show that there is a very high elasticity of demand for air travel, and lower fares stimulate travel and commerce. More and more people will be traveling because of the newer fare structures and this will help drive our economy.

Again, most airline people just "don't get it" because they don't buy tickets.

 

[767jetz]

The consumer is now your boss and they set your wages. Better get used to it - its called capitalism and last time I checked its here to stay.

This may be somewhat true, but it doesn't work in an industry like the airlines.

The problem is that the consumer does not fully understand the complexities of this industry. They do not fully understand the differences between low cost operations and full service airlines. They do not fully understand the difference between a point-to-point airline and a hub and spoke airline. They do not fully understand the evolution of safety pioneered by the legacy airlines and now enjoyed by every Tom, Dick, and Harry who wants to buy an Airbus and call themselves an Airline. They do not fully understand that a start-up airline can easily undercut and mature airline for a period of time. And they don't really care.

All they understand is that "Jet blue does it for less" without really understanding why or for how long it can last. We have many armchair-analysts and very few real experts. Even many who have been in the industry for 30 years still don't get it.

So how can a consumer who knows very little about an industry as complex and safety oriented as the airlines, have any idea what a fair wage is?

I bet that anyone who spent a week at a mature international US airline touring reservations, flight operations, flight training, customer service, in-flight training (flight attendants), dispatch, weather services, cargo, ramp, maintenance, security, scheduling, and catering, (just to name a few) and saw what it takes to move just one pressurized aluminum tube full of fuel, people, and cargo at 500 MPH from point A to point B half way around the world, would have a different opinion.


Some points to remember for the “I just want the cheapest ticket†folks:
- Airlines like Jet Blue and AirTran have cost structures that can only go one way… Up.

- LCC’s have smaller, less complex operations, and therefore can not provide the type of necessary air service this country relies on, that is supplied by the major airlines. LCC’s serve a niche.

- LCC’s have high moral because many of their employees came from mediocre jobs and saw very quick advancement due to rapid initial expansion. It’s simple… What they have now is better than what they once had. As they mature, employees will want more.

- Ever ask a new Jet Blue Pilot why they would work for peanuts? I have. Almost everyone responds “Because I’ll make captain in 2 years.†Do you think that will be true forever?

- What happens when a rapidly expanding LCC starts to mature and it’s growth slows or stops? Well, with young employees who won’t retire for 30 years you get
job stagnation. Just ask any American Airline’s pilot 5-10 years ago. Guess what happens to moral when a person who thought they’d make captain in 2 years is still sitting in the right seat making peanuts after 5, 6, 7 years or more? They will organize to negotiate better benefits.

- What will happen when LCC’s brand new airplanes start to age and become less reliable. Will the inexperienced crews be able to deal with events safely? Will less experienced maintenance crews fix them properly? When that happens, would you prefer pilots and mechanics trained to the max extent possible, or those trained to the bare minimum required by law to keep costs down?

- Do want your life in the hands of those who pioneer and forge ever increasing
standards in safety, or would you prefer those who just follow the pack and even lobby to bend established safety criteria for the sake of saving a buck or two? (Like Jet Blue’s attempt to waive duty time requirements so they can fly transcon turns.)

- If LCC’s took over the domestic transportation system, do you really think that your beloved low fares won’t go up? Think again. The sole purpose of those low fares you are getting used to is to grab market share. The instant an airline (LCC or not) has the pricing power to raise a fair, it will. Example: if SWA runs USAirways out of town prices will go up. You would also see service to many small communities lose air service completely and international fares skyrocket with no hub-and-spoke networks.

 

[767jetz]

Low blow. Better take a good look at Southwest's safety record and compare it to other carriers, including your own, before you start throwing stones.

Hmmm...

Who was it that parked a 737 about 50 feet from the gas pump at a Chevron station in Burbank CA after crashing through the airport fence?

Oh yeah, Southwest. Then again, no one died, so that must make them safe, right?

 

[767jetz]

I'm certainly curious because I fly Southwest, AirTran, America West and JetBlue on a regular basis.

I would like to see the facts to support your safety claims.

Remember Value Jet? Remember the smoking hole in the ground in the Florida Everglades? Here's a news flash: That airline's name is now AirTran.

While we're at it, remember Alaska's MD80 that crashed into the ocean off the coast of California? And the cause? A failed jackscrew in the tail, due to a tool the company fabricated itself to save money, and lack of maintenance oversight.

China Air lost a 747 because a faulty repair to the pressure bulkhead SEVERAL YEARS PRIOR! With not enough rivits in the repair, the tail eventually fatigued and literally exploded off due to the normal pressurization of the airplane. You get what you pay for.

Oh yeah, and then there was SwissAir MD11 that went down near Nova Scotia. With a fire on board, the flight crew decided to circle around while dumping fuel instead of getting it on the ground ASAP. Just enough time for the fire to burn through the flight controls and take the jet down. Do you think pilot training and experience had anything to do with that?

Air France and British Airways both flew the Concorde. There was a known problem with high speed tire failures damaging a part on the gear that could puncture the fuel tank on the underside of the wing. BA had just such a problem in IAD, but successfully returned to the airport uneventfully. The recommended fix was to tether the vulnerable pice to the gear structure. BA modified all their Concordes. Air France did not because it wasn't "required" by law. I guess abiding by minimum regulated requirements is always safe, right? Wrong! I'm sure you remember what happened to the Air France Conorde. I wonder if those families would have prefered that Air France had made the recommended fix even though it wasn't required.

You do get what you pay for. It may take many years, but eventually getting by with the bare minimum will catch up with you.

 

[The Ronin]

A failed jackscrew in the tail, due to a tool the company fabricated itself to save money, and lack of maintenance oversight.

Oversite my ass....that stab trim mechanism was called out for being out of spec....but maintenance management over ruled and put it back in service. BTW, the public might ooh and ahh IF they could see behind the scenes but in the end, they'll still pay the lowest fair they can find. It will take LIVES before you change that mentality, and even then, I'm not sure it will change it much.

 

[46Driver]

I thought ValuJet crashed because somebody mislabeled oxygen generators and illegally put them on the airplane causing a fire that spread so rapidly the crew didn't have much a chance.

I do know that another major airline crashed an airliner into the swamps because the pilot, copilot, and flight engineer were all trying to figure out whether a gear light was correct or not and flew the airplane into the water.

As for JetBlue, they may be low cost but are high service: new, clean airplanes, leather seats, individual TV's, friendly service - all at a lower fare. Explain to me again why I should fly legacy airlines coach section and get none of the above for a higher price?

 

[Dizel8]

Then there was a nice 747, that almost drilled a mountain in SFO. A 737 that rolled over into the mountains, a 737 that crashed at MDW, a DC8 that ran out of fuel in portland.

These things gets ugly real fast!

 

[SVQLBA]

Hmmm...

Who was it that parked a 737 about 50 feet from the gas pump at a Chevron station in Burbank CA after crashing through the airport fence?

Oh yeah, Southwest. Then again, no one died, so that must make them safe, right?

Bzzz try again. That was clearly a pilot-error / flight ops related accident. I don't recall there being any maintenance-related issues on that one, which was the discussion point. You can't argue Southwest's safety record to date ... I hope I haven't just gone and jinxed it

 

[SVQLBA]

OK, 767, now you're just ranting ...

Remember Value Jet?

Mx related, almost killed the airline too in addition to the unfortunate souls. I would bet that the AirTran execs are not about to make the same mistake again. And I'm sure better-run LCCs such as JB are equally aware that a one accident could close the airline.

remember Alaska's MD80 that crashed into the ocean off the coast of California?

Hold on - Alaska's a full-service legacy carrier, isn't it? How does this support your rant about LCC maintenance practices? It was in-house too, not an error by some 3rd party shop, in Central America, Alabama, or otherwise

China Air lost a 747 because a faulty repair to the pressure bulkhead SEVERAL YEARS PRIOR!

Ok -- so your point is Mx errors, whether in house or outsourced, first world or third, can cause problems

MD11 that went down near Nova Scotia.

767 -- you need a long, cold drink. Swissair may have had its business model flaws, but no-one ever accused it of being low-cost, fly-by-night or anything less than utterly professional, whether related to Mx or flight ops. I think a lot of airlines revised their emergency procedures manuals after than one. IIRC, the crew followed what was called for in the SOP for troubleshooting a fire, which will have been based on MD's recommendations.

Air France and British Airways both flew the Concorde

Ok -- you've gone surreal now. Two complete opposites of LCCs with major in-house repair operations ...

You do get what you pay for. It may take many years, but eventually getting by with the bare minimum will catch up with you.

OK, you're making a _little_ more sense, but it certainly isn't a case of more expensive = better.

All your examples really show are 2 things: first, maintenance errors can cause accidents (as can pilot errors, poor flight ops etc) and second, this can happen to any provider: in-house or 3rd party, first world or third world.

There's nothing intrinsically more unsafe about 3rd party outsourced maintence. It all depends how well the outsourcing is managed by the airline. CO and SW are not afraid to pull aircraft and send the work elsewhere if they are unsatisfied with the work. (Cascade Aerospace in Canada has grown their 737 work because airlines such as these were unhappy with their incumbenet providers.) I believe both CO and SW have brought some work back in house. Spirit brough work back in house because they were unhappy with the MRO service they could get for their MD-80s. I believe HAECO in Hong Kong has a first rate reputation as a Mx provider.

In many industries, companies have gotten into trouble choosing suppliers based purely on sticker price. First rate companies (such as Toyota) understand "total cost" of ownership, and the need to be "inside their supplier's shorts" every day. In aviation, MRO is in a state of flux, but airlines are in the process of learning the same lesson. In-house MRO orgs have really woken up (LH Technik, UA services) so I can see there being both in-house and out-sourced heavy Mx at the carriers that survive the current storm.

I'm sure everybody on this board hopes and prays that it won't take a repeat of ValuJet in the Everglades or Air Midwest/USX at Charlotte on a larger scale for the lessons to be learnt and taken to heart by everyone. But that lesson learned is NOT that outsourcing is always wrong, and in-house is always right.

 

[767jetz]

Bzzz try again. That was clearly a pilot-error / flight ops related accident. I don't recall there being any maintenance-related issues on that one, which was the discussion point. You can't argue Southwest's safety record to date ... I hope I haven't just gone and jinxed it

Bzzzzz. I think you should try reading this thread again. I never said anything about that accident being maintenance related.

My point is that when someone says we should look at SWA's safety record, my response is that just because nobody died doesn;t exactly make them safe. With UA's strictly trained stabilized approach criteria and safety culture, that accident is far, far less likely at UA. the LCC's focus on costs often pushes the envelope of safety. Just last week I had a SWA driver, who was impatient because during our pushback we were blocking his gate, sneak into his gate at unsafe speed and came unsafely close to our nose with his wingtip, compromising our safety as well as his own.

Is saving 2 or three minutes and burning a little extra gas worth putting people at risk? Apparently when your company pushes fast turns and costs to the exclusion of all else, safety most sertainly gets compromised. Do you think that SWA's corporate culture may have played a role in the Burbank accident. You bet your a$$ it did.

 

[767jetz]

Then there was a nice 747, that almost drilled a mountain in SFO. A 737 that rolled over into the mountains, a 737 that crashed at MDW, a DC8 that ran out of fuel in portland.

These things gets ugly real fast!

Each one of the incidents you refer to lead to changes in the way we do things, and in some cases lead to industry wide changes. The COS accident was probably a windshear event, that is trained extensively at UAL. It also contributed to "cross over speeds" which became indutry standard on 737's.

The 747 close-call lead to additional required training for every UA pilot in CLR. So did the DC8.

My point again is that these things all add to cost, and UA never balked from a safety issue because it might cost a little more money. When cost is your main focus (as is the case with the LCC's) corners are cut and training/resources/support/ and yes pay, for those charged with the safe operation of the aircraft are kept to a bare minimum to satisfy the legal requirements. Not a penny more. Until someone gets hurt.

You get what you pay for, and eventually those that focus on costs to the exclusion of all else pay the unltimate price.