Airline consultant Mike Boyd of the Boyd Group in Evergreen, Colo., warns that the legacy carriers are making a mistake if they try to transform into Southwest. That airline focuses on popular routes between large cities and cannot make money flying to small cities.
"You can't operate a global airline like that," Boyd said.
Boyd predicts that the low-fare airlines will face significant troubles in coming years, as their fuel hedges expire and they increasingly begin to compete with one another rather than the legacy airlines.
"In a year or so, we're going to be talking about how Southwest and JetBlue are in so much trouble," he said.
That view suggests that the legacy airlines will be better off maintaining the core of their longtime business model, but with some changes to cut costs and boost revenues. It's a road that American has been on for several years, and it has made more progress than most of the large hub airlines.
Airlines ((like US Airways)) will continue to expand international service, which is generally far more profitable than domestic flying.
Service on less-profitable routes will be reduced and, in many cases, shifted to regional airlines that fly smaller aircraft.
And the legacy airlines will maintain or even upgrade their first-class cabins, admiral's clubs and other perks that entice well-heeled business travelers. These moves will maximize revenues and draw customers away from the discounters.
All of this must be done with reduced costs. And few can predict with certainty that the legacy airlines can cut deeply enough to return to profitability.
"The environment is so volatile right now," Kuhlmann said.
Seth Young, an assistant professor of business at Embry-Riddle Aeronautical University in Daytona Beach, Fla., predicts that the discount and the legacy business models will survive, but in a somewhat modified form.
"You'll have the JetBlues of the world serving the high-demand domestic markets, with a lot of leisure travelers," he said.
Meanwhile, the legacy carriers will focus on being global airlines, concentrating on international routes and contracting with regional carriers to feed passengers from smaller cities to their gateway hubs.
"The problem for the legacy carriers right now is that they're trying to do both," he said.
http://www.dfw.com/mld/dfw/business/12679168.htm
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