Why Change Now?

frntvngd

Member
Aug 24, 2002
25
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www.usaviation.com
This doesnt necessarily apply to US...
All the majors have announced drastic changes in the way they do business. Reducing flight schedules, returning aircraft, changing pricing policies, etc.
My question is, Why have they waited so long to change? The industry has been hurting for a good 2-3 years, so why change everything NOW, and not 2-3 years ago???
Can someone shed some light on this?
THx [:)]
 

AOG-N-IT

Veteran
Aug 19, 2002
1,132
1
www.usaviation.com
Why you ask??....Simple , It's not a crisis until "The Haves" stop showing a profit. When that takes place..."The Have-Nots" are asked to concede everything , to insure a minimal of disruption. Basically ...a crisis is only a crisis when it effects the upper end.....as long as they are able to wheel and deal...and feather thier nests, All is well. When that ends...then it's a crisis. Airline CEO's are the classic example of "Hindsight" being 20/20. The proof of the industries overall climate proves this. We know of the examples that are exceptions to this...but they have always planned ahead. I would have to say...that market growth and continued investor value of say LUV for example ....spells out clearly whom was ready for the worst of times....and whom wasn't. It's called having a "Business Plan"....and sticking to it!!
 

AirplaneFan

Advanced
Aug 20, 2002
174
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No one knew in 2000 that the "funk" was going to last as long as it has. We didn't even know officially that we were in a recession in 2001 until early this year. Obviously no one knew the effects of the Sep. 11the disaster and U did cut service by 20% in its aftermath. All airlines had expected companies to loosen purse strings for business travel, but they never did. So this is a high stakes gamble to try to pressure companies to pay the higher fares by cutting capacity. If it doesn't work the majors will have virtually cut their own throats by ceding enough market shares to the low-fare carriers where they will be able to determine pricing.
 

airlineorphan

Senior
Aug 20, 2002
380
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www.usaviation.com
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On 9/3/2002 12:28:28 AM

My question is, Why have they waited so long to change? The industry has been hurting for a good 2-3 years, so why change everything NOW, and not 2-3 years ago???

Can someone shed some light on this?

THx [:)]
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Here is my take, at least on why the majors have waited the last few months and are now suddenly making major restructuring moves. The question of the last 2-3 years is an important, but bigger question.

The entire industry (with, perhaps the exception of SWA) has been whining about a crisis of overcapacity. Of course, the seats are pretty full on most flights I've been on lately, but the real overcapacity issue here is that the demand/supply ratio has been too low to bring in high enough ticket prices to support ridiculous levels of airline debt + dividends and profits for shareholders and executive management.

It has seemed to me that the majors like AMR and DAL, in particular, have harbored hopes that this overcapacity crisis would be solved for them if US Airwys went Chapter 7. In that event, AMR and DAL could actually increase capacity without increasing industry-wide capacity, thus gaining market share in an environment of higher ticket prices.

Well, the bummer for AMR and DAL (and others) has been that the odds of US Airways survival appear to have risen with the Chapter 11 filing (I realize there are lots of pitfalls, and perhaps pratfalls to surmount before US Airways can emerge on the other end). At least that's what Wall Street analysts seem to think.

With US Airways not about to solve their problem for them, the big dawgs have to go back to solving their overcapacity crisis more directly:
by downsizing themselves.

The crux of the sudden frenzy of industry restructuring in the last month has been that trigger effect of the US Airways Ch. 11 filing. Before that, all the big dawgs were licking their lips as they hoped and prayed (preyed) for the demise of US Airways as a carrier.

Ultimately, the industry will probably recover somewhat, restuctured, downsized and with lower wage structures. Any recover, of course, will likely be balanced upon the backs of airline workers and customers.




"The economy is doing great. The people in it, however, are not."
(quote reputedly by a Latin American general)