Originally Posted by
stimpy
You guys are looking at a very tiny portion of the business. There is a lot more to running an airline than fares and checked bag fees. You asked for universal? How about aircraft fleet management? Maintenance? There is a lot, lot more. And over the last 6 months DL's share price has gone up, partly due to better management of the NW merger. The KL merger isn't the same of course, but there too you can find universal methods to improve financial performance.
And BTW Southwest recently added some baggage fees and other extra fees.
http://www.latimes.com/business/mone...,6077354.story
So we agree then. It is more that slashing the cost of free catering, free baggage, etc. respectively make passengers pay for them.
Fuel is of course a big item, and so is financing (AFKL Is heavily indebted), and last but certainly not the least labour cost. To take just the example that you mention above plus all other mergers in the US: why do you think agreements with pilots and FA unions were always central to all of these mergers, and remains the critical point in all ongoing merger discussions (eg US-AA). Given that despite recent changes AFKL still is in a high labor cost situation, has an overbloated administration and management, inefficient processes and high cost of debt its starting situation to be a successful LCC is is not the strongest in my mind.
Given this, the LH way of running a separate carrier with truly lower costs - albeit with the risk of losing revenues from passengers who dislike not having a separate business cabin - seems smarter than the AF way which puts the LCC offer under the high cost umbrella of the main brand, and whilst there is no risk of alienating people with the use of a new brand there still is a risk of losing people by the overall degradation even of the non-LCC parts of the offer.
Or is there a flaw in my reasoning?
EDIT: I just realized that orbitmic picked up that same point, but he was typing faster. Thus: +1 to orbitmic