Why Don't The Airlines Just Raise Fares?

[Bob Owens]

So what? So ignore the intangible losses. The real losses are still massive.

And are those losses our fault? Maybe they should approach the government to complain about fuel costs. As workers we should have threatened to shut down the whole industry before we agreed to concessions.

Oh, really? What rules in GAAP would have permitted AA to do either of these?

Once again those rules are written to give the investor transparancy towards things that could make his investment worth less. While I acknowledge that revealing them is the law are you saying that they had to write it all off in 2003 thus bringing its claimed loss up to $3.5 billion?? Are you saying that they could not have written down those liabilities over time?

You clearly don't understand accounting very well.


Ok, go on to show where I am wrong. Dont bother with "these are legal write offs", we already covered that. When the company claims that they "lost" $3.5 billion but a lot of those "losses" were not real in that the company did not really pay out $3.5 billion more than what it took in it is misleading to the workers. And if the workers knew that the"losses" were really mostly made up of legal loopholes that were put in place to reduce the airlines tax burden and not in fact real cash losses where income is compared to operating expenses then their veiw of what position the company was really in would be considerably different. The fact is that our union stated that AA was at risk of immediate liquidation, that was a lie.

Depending on how you looked at the numbers, they did.

So in other words "depending on how you looked at the numbers" could change the fact of whether or not they are profitable?

But it doesn't matter.

Sure it does. Werent you the one who claimed that I disregarded historical data? Now you are saying it doesnt matter, of course it matters.

You're making a much more powerful claim than simple hyperbole. You've claimed that the legacy carriers are deliberately losing more money by artificially lowering fares.

Ok. You still have not made clear how SWA lowers the fares that AA charges to fly from LGA to DCA or BOS, or JFK to LHR.

Don't try to confuse the issue by tossing in accounting issues, particularly ones that you don't understand.

Ok, point out where I was wrong. I never claimed to be an accountant.

The necessity of concessions is for another thread. The topic of this thread is the claim that airlines (AA in particular, since you work there and since this is the AA board) would generate greater profits if they raised fares. I'll be happy to discuss the need for concessions elsewhere.


From the More work, less pay thread:

MWeiss;
Forget it. You've made it very clear that you're unwilling to accept responsibility for your own performance. It's precisely that attitude that results in the bad reputation that unionized employees have. I'm done with you on this issue.

 

[mweiss]

Not exactly, you claimed to have proven your point

You haven't shown any flaws in it. You've done a lot of handwaving, but you seem to be unable to establish a single specific.

and the subject being debated was whether or not an increase in fares could increase profits.

And I'll be happy to debate that subject as soon as the previous point has been resolved.

Another thing that your arguement did not address is predatory pricing which while technically being illegal is hard to enforce.

OK. Hold that thought, and bring it back up when we have the first point resolved.

Ok, then define the market in question.

Picture demand in a market (which, in this industry, is almost singularly what defines the market) in the airline industry as a blurry dot. Then picture the entire industry as a whole series of those blurry dots overlapping. Those are the markets in question. At the center of the dot is a specific airport pair at a specific singularity in time. Toward the edge of the dot is a decrease in utility corresponding to the potential substitutes to that specific market.

Well if you are losing money anyway then why not take full advantage of what losing money can do for you?

Sure, but you don't even have to undercharge in order to accomplish this. You've pointed out just how easily the union leadership can be bamboozled. Who needs to actually lose more money when you can fool the union leadership into thinking you're doing it, and not actually do it?

Well how often do we see these guys bounce from one company to the next?

Not as often as you think.

Are you saying that the airlines do not conspire to lower wages?

No. I am saying that they don't conspire to lower income.

Thats not what the papers said.

Really? Show me the articles that say that GECAS is making more money per aircraft today than they were in 1999.

Nobody wins in a recessionary market.

Hmmm.I'll have to save that little gem. The fuel companys certainly have not done all that bad, especially when you consider that they are largely to blame.

The fuel market isn't recessionary. The airline market for business travel is.

 

[mweiss]

Which handful of players [are losing money]?

The ones that aren't B6, FL, AS, and WN.

I meant the industry -as a whole- for both points

Except to do so means that you lose the signal for the noise of averaging. This is why it doesn't work to look at the concept from a macro perspective.

In other words you were wrong.

No. In other words, I was drawing a relevant distinction by grouping carriers with similar characteristics. To say that grouping into two groups instead of one gains no clarity is to ignore the characteristics that differentiate the two groups.

Yes but SWA does not really serve the markets that the "legacies" serve.

Except for international and sparsely populated regions of the west, what market does WN not serve that the legacies serve?

In what way [is the current group of LCCs more intelligent in design]?

• Use of new, relatively small aircraft. National tried new aircraft, but ones that were too large to fill as a startup. WestPac chose the right aircraft, but...
  
• Build rolling hubs in cities with good O&D and capacity to expand. Here's where WestPac had fallen down. They used COS, which didn't really work as a secondary to DEN.
  
• Price fairly, not cheaply. The goal is to take advantage of the cost differential relative to the legacies, such that it's profitable for the LCC but a loss for the legacy. That makes attrition really really hard for the legacy to accomplish.
  
• Focus on consistently exceeding customer expectations. Don't promise a lot, but always overdeliver.

Yes but most of the legacies are much larger.

That's actually an Achilles heel. It's even harder to downsize from those larger points. Moreover, the cash balances weren't much larger, especially when viewed as a proportion of operational expense rate.

No different than what we heard in the early 80s and 90s.

[post="249904"][/post]​

The attrition isn't any different. What is different is that more than one LCC is likely to survive this round, and the tipping point will be reached in this cycle.

 

[mweiss]

And are those [intangible] losses our fault?

I haven't said any of the losses are your fault.

...are you saying that they had to write it all off in 2003 thus bringing its claimed loss up to $3.5 billion?? Are you saying that they could not have written down those liabilities over time?

The goodwill most likely did. I haven't examined the others, because the most important issue is operating profit or loss.

Ok, go on to show where I am wrong.

Where you're wrong is that you claim that fares are artificially too low, which would reflect in greater operating losses than otherwise. To delve into the other sections of the 10Q is to get into areas that are irrelevant to your allegation.

So in other words "depending on how you looked at the numbers" could change the fact of whether or not they are profitable?

Over the long haul, one could argue a small degree of profitability for the legacy carriers. In the end, however, that's irrelevant if you actually run out of cash in the short run. An airplane that is porpoising tremendously can still hit the ground, even if the average altitude is rising. The passengers are no less dead.

Werent you the one who claimed that I disregarded historical data?

I claimed that you disregarded it in the context of claiming long-term savings caused by deliberately increasing operating losses.

Ok. You still have not made clear how SWA lowers the fares that AA charges to fly from LGA to DCA or BOS

WN doesn't. That's B6's job, and incidentally why B6 was able to be successful (i.e., WN didn't serve those markets). That's also why the fares didn't drop until B6 entered that market. ISP hasn't really drawn an appreciable number of business passengers from LGA. WN sure did a fine job everywhere they've gone.

...or JFK to LHR.

Only indirect impact here. Some metal has been moved from domestic to international in response to the LCCs' entry. This increased the supply of seats to London, which reduces the market equilibrium price.

Ok, point out where I was wrong. I never claimed to be an accountant.

Where you were wrong is that it's operating P&L that is impacted by changes in yield.

Re: your copy of my quote from More Work Less Pay,
What's your point? I'm not talking about fault in this thread.

 

[Bob Owens]

mweiss,Feb 22 2005, 10:04 PM]

You haven't shown any flaws in it. You've done a lot of handwaving, but you seem to be unable to establish a single specific.

Maybe the hand waving is because you claim to have proven things without specifics.

Picture demand in a market (which, in this industry, is almost singularly what defines the market) in the airline industry as a blurry dot. Then picture the entire industry as a whole series of those blurry dots overlapping. Those are the markets in question. At the center of the dot is a specific airport pair at a specific singularity in time. Toward the edge of the dot is a decrease in utility corresponding to the potential substitutes to that specific market.

Ahh, Rod Sterling Lives!!!

Sure, but you don't even have to undercharge in order to accomplish this. You've pointed out just how easily the union leadership can be bamboozled. Who needs to actually lose more money when you can fool the union leadership into thinking you're doing it, and not actually do it?

Because fooling the leadership isnt enough, you have to fool the membership also.

Not as often as you think.

As often as I've seen.

No. I am saying that they don't conspire to lower income.

Means to an end.

 

[Bob Owens]

mweiss,Feb 22 2005, 10:09 PM]

Except for international and sparsely populated regions of the west, what market does WN not serve that the legacies serve?

JFK to anywhere. Theres a start.

That's actually an Achilles heel. It's even harder to downsize from those larger points. Moreover, the cash balances weren't much larger, especially when viewed as a proportion of operational expense rate.

Then again the losses on any particular route are not as great when viewed as a proportion either.

The attrition isn't any different. What is different is that more than one LCC is likely to survive this round, and the tipping point will be reached in this cycle.

And you know this for sure? While more LCCs may survive, will they remain LCCs?

 

[Oneflyer]

Hey Bob, bitter, ignorant, and stupid is no way to go through life.


Face it, its much easier for you to believe that management is either stupid or "out to get the union" and they are the reason for the airline loses that forced your pay cut. Its easy to "demand a business plan that works" or say that unions should just shut down the whole industry when you know that its not going to happen. You want to believe these things because it gives you hope that things will return to the way they once were. Let me be your personal Grim Reaper, things are changing for good, either unions will change with them or just like every other aging industry unions will continue to lose influence and power. You, your theories, and your trust in the union is wrong.

 

[Bob Owens]

mweiss,Feb 22 2005, 10:28 PM]

The goodwill most likely did. I haven't examined the others, because the most important issue is operating profit or loss.

Do you mean operating profit/loss or operating profit/loss*? You know the one that includes things that it shouldnt with a little note on the bottom of the page.

Where you're wrong is that you claim that fares are artificially too low, which would reflect in greater operating losses than otherwise.

Well I disagree. You still have not convinced me that Jet Blue, with their 60 airplanes and limited capacity can dictate the price of airfares to AA with over 700 airplanes when load factors for the industry are in the 70 percent or better range.

Over the long haul, one could argue a small degree of profitability for the legacy carriers. In the end, however, that's irrelevant if you actually run out of cash in the short run.

Like USAIR right? Oh and when is an airline now considered to be broke? In 2003 we were told that it was $1 billion in cash, now we are told the figure is $2billion.

Where you were wrong is that it's operating P&L that is impacted by changes in yield.

Care to elaborate on that?

 

[Imagolfer]

Hey Bob, bitter, ignorant, and stupid is no way to go through life.
Face it, its much easier for you to believe that management is either stupid or "out to get the union" and they are the reason for the airline loses that forced your pay cut. Its easy to "demand a business plan that works" or say that unions should just shut down the whole industry when you know that its not going to happen. You want to believe these things because it gives you hope that things will return to the way they once were. Let me be your personal Grim Reaper, things are changing for good, either unions will change with them or just like every other aging industry unions will continue to lose influence and power. You, your theories, and your trust in the union is wrong.

[post="250052"][/post]​

Could not have said it better myself Oneflyer They all think they can run the airline better themselves.

 

[Bob Owens]

Oneflyer,Feb 23 2005, 02:41 AM]
Hey Bob, bitter, ignorant, and stupid is no way to go through life.

You would know.

 

[Oneflyer]

You would know.

I guess 6th grade was just too tough for you.

 

[Bob Owens]

Could not have said it better myself Oneflyer

[post="250054"][/post]​

Thats not very suprising now is it?

 

[Bob Owens]

I guess 6th grade was just too tough for you.

[post="250057"][/post]​

No not at all, by the way I saw Animal House too!

 

[Oneflyer]

No not at all, by the way I saw Animal House too!

Now that we've shared some humor. I'd love to hear your comments on the rest of my post.

 

[Ken MacTiernan]

Hey Bob, bitter, ignorant, and stupid is no way to go through life.
Face it, its much easier for you to believe that management is either stupid or "out to get the union" and they are the reason for the airline loses that forced your pay cut. Its easy to "demand a business plan that works" or say that unions should just shut down the whole industry when you know that its not going to happen. You want to believe these things because it gives you hope that things will return to the way they once were. Let me be your personal Grim Reaper, things are changing for good, either unions will change with them or just like every other aging industry unions will continue to lose influence and power. You, your theories, and your trust in the union is wrong.

[post="250052"][/post]​

oneflyer, is it possible for you to understand that you must be a weak individual? What makes you think/say Bob is bitter, ignorant or even stupid? Come on now. Be intelligent for a few seconds here.

Management is both stupid and smart. an example of stupid would be cAArty getting caught with his hand in the cookie jar and smart would be having the twu as their union representing the bulk of their labor force.

Since you feel it easier to remain behind an alias it is impossible to know if you are management or labor. My guess is that you are management. Let me tell you a fact... management is out to get LABOR. The twu is assisting the company. The company is at fault for the company losing money. labor certainly is not. How can I, as an AMT cause AA to lose money? I offer a product the company NEEDS. A safe airworthy aircraft. I HAD a contract agreed to by the company that gave me certain benefits and pay. But because of the inability of AA, and other airlines, to charge a proper fee for this product I am all of a sudden at fault? Sounds as if you are the ignorant AND stupid.

What is happening in the industry is good? You most certainly are in management... or in the twu international. Sure, it's good for airlines to send sensitive aircraft work to foreign countries while Americans lose jobs. Sure, it's good for airlines to blame labor for their ineptness. Look at USAir for a second. USAir could have a work force that works for free and they would still lose money.

What is good for the airlines is to have industrial unions like the iam, ibt & twu represent skilled craftsman like AMTs and unskilled rampers. These unions care NOTHING about our proud profession. They care ONLY about getting dues from the individuals who do the work. It is the company and union walking hand in hand that is ruining this profession.

Your trust in the company is exactly what your mind controller wants you to believe. Hiding behind an alias is exactly what a company stool would do.