MRTC is probably doomed; Arpey talks about adding rows to more airplanes
Sep 23, 2004, 9:42 am
#1
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MRTC is probably doomed; Arpey talks about adding rows to more airplanes
At a meeting this morning, Arpey talked about capacity for next year. Although AA will probably not add any more mainline airplanes next year, he did indicate that additional capacity might come from LRTC:
http://yahoo.reuters.com/financeQuot...3722704_newsml
As longtime readers can probably guess, this makes me MADDER THAN HELL!
At a time when airlines are increasing capacity and yields are falling, the best they can come up with is to increase capacity further?
Carty was not the best CEO to ever come down the pike, but he was taller than Arpey, and that may have made a difference. From what I heard, he was the one real proponent of MRTC, and shorter finance guys like Arpey may not understand why MRTC makes sense.
B6 removes a row of seats (to accomodate wheelchairs and to alleviate the discomfort of a nonreclining last row). UAL has now installed E+ on all its international fleet. And the MRTC-haters at AA appear to be winning.
On a more subdued and serious note, before anyone asks, yes, I have already composed a letter to AA on this issue. No, it does not read like this post.
"You won't see us materially increasing our mainline domestic capacity next year as it relates to aircraft," Arpey said in comments monitored via webcast.
He said that capacity -- the number of seats up for sale -- may increase next year due to changes previously made to put more seats back onto aircraft. Arpey said the airline is studying a plan to back away more from its policy of having more legroom in the coach class by changing the layout of the aircraft by adding seats.
While most of its planes still have more legroom in coach than the industry average, American has already added seats back on three types of planes in its fleet.
"We are well along in evaluating whether it makes sense to change the seating density on additional aircraft," Arpey said.
He said that capacity -- the number of seats up for sale -- may increase next year due to changes previously made to put more seats back onto aircraft. Arpey said the airline is studying a plan to back away more from its policy of having more legroom in the coach class by changing the layout of the aircraft by adding seats.
While most of its planes still have more legroom in coach than the industry average, American has already added seats back on three types of planes in its fleet.
"We are well along in evaluating whether it makes sense to change the seating density on additional aircraft," Arpey said.
As longtime readers can probably guess, this makes me MADDER THAN HELL!
At a time when airlines are increasing capacity and yields are falling, the best they can come up with is to increase capacity further?
Carty was not the best CEO to ever come down the pike, but he was taller than Arpey, and that may have made a difference. From what I heard, he was the one real proponent of MRTC, and shorter finance guys like Arpey may not understand why MRTC makes sense.
B6 removes a row of seats (to accomodate wheelchairs and to alleviate the discomfort of a nonreclining last row). UAL has now installed E+ on all its international fleet. And the MRTC-haters at AA appear to be winning.
On a more subdued and serious note, before anyone asks, yes, I have already composed a letter to AA on this issue. No, it does not read like this post.
Sep 23, 2004, 10:02 am
#2
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TWA started this MRTC and called it Comfort Class yrs ago. When it didnt produce the extra $$$ as they hoped they returned to DisComfort Class. So AA will go back hey it was nice while it lasted, and CO and others have been LRTC for a very long time.
Sep 23, 2004, 10:26 am
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Well, we may not like the change back to LRTC throughout the fleet but, if it's not making money, can you really blame Arpey for trying a different tack? From a business perspective, this seems to make a lot of sense. Sure I will miss MRTC, but Mr. Arpey isn't, and shouldn't be, concerned about that directly.
Cheers.
Cheers.
Sep 23, 2004, 10:32 am
#4
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Can't AA at least have some MRTC as do B6 and UA for elite flyers?
Rrrr... no MRTC takes away practically any advantage AA economy had over the competition.
Rrrr... no MRTC takes away practically any advantage AA economy had over the competition.
Sep 23, 2004, 10:52 am
#5
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Originally Posted by tismfu
Can't AA at least have some MRTC as do B6 and UA for elite flyers?
Rrrr... no MRTC takes away practically any advantage AA economy had over the competition.
Rrrr... no MRTC takes away practically any advantage AA economy had over the competition.
Cheers.
Sep 23, 2004, 10:55 am
#6
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MRTC is the main reason I fly AA for personal trips. Building up mileage, etc. for personal trips is a big reason I favor AA for business.
Sep 23, 2004, 11:03 am
#7
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Originally Posted by craz
TWA started this MRTC and called it Comfort Class yrs ago. When it didnt produce the extra $$$ as they hoped they returned to DisComfort Class. So AA will go back hey it was nice while it lasted, and CO and others have been LRTC for a very long time.
Originally Posted by brp
Well, we may not like the change back to LRTC throughout the fleet but, if it's not making money, can you really blame Arpey for trying a different tack? From a business perspective, this seems to make a lot of sense. Sure I will miss MRTC, but Mr. Arpey isn't, and shouldn't be, concerned about that directly.
But then again, that coincided with the 2001 recession and the subsequent airline industry meltdown following the September 11 attacks, so it's hard to pinpoint the blame that should be assigned to MRTC.
My point all along has been: MRTC was hardly given a chance to prove itself. Not long after it was finished, all legacy airlines began bleeding heavily and that bleeding continues to this day.
One thing nobody really knows is how much worse AA's finances might be today if MRTC had not been tried - perhaps it has helped contribute to the lesser financial pain suffered by AA compared to other airlines. Things could certainly be worse for AA. Who knows?
My primary disappointment is that its abandonment signals AA's desire to compete with cattle-car airlines for leisure passengers instead of defining itself as an airline for business travelers that happens to welcome some leisure pax to help fill the seats in the back.
What next? An hourly shuttle from LGA/JFK to FLL to compete head on with jetBlue? Lots of high yields there. Come on, AA - leave the backpack crowd to B6 and the others and concentrate on those who ARE willing to pay more. Memo to AA: Stop chasing the bottom fares. Make it more tolerable for those who pay more.
Yep, 10 more seats on MD-80s (filled with the lowest fares) is going to be AA's salvation. Just look at the rosy financial picture at the legacy airlines featuring 31 inch coach pitch like CO, DL, NW and USAir. And even UAL, which doesn't think the unwashed masses deserve enough room for their knees. None of these carriers is outpacing AA in financial performance with their LRTC model - so why does anyone at AA think LRTC is the answer to AA's predicament?
I'm willing to (and often do) pay more to fly AA, in part due to MRTC. And although I like to think I'm special (even, perhaps, unique), I'm certain that I am not the only one.
Sep 23, 2004, 11:20 am
#8
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If This Is True, What Is AA's Brand Positioning????
Well AA becomes more rudderless by the day.
Look at the international markets. MRTC seems to be the only feature which AA offers that distinguishes it from its competitors. On every other score, AAs international service is second rate, particularly if one lives on the West Coast. No direct flights to continental Europe (a plane change somewhere required, often with a bad weather and missed connection risk); indifferent food; mediocre cabin crews; bad on time record. MRTC was the single advantage that could be cited for choosing an AA flight. If that is taken away the transformation to a third world carrier will be complete.
AA is not losing money because of MRTC. It is their lack of imagination in brand positioning and continued reliance on a dubious hub spoke model. Oh yeah--they still have not squeezed out all the labor ineffeciencies.
I guess Arpey is the Roger Smith of aviation.
Look at the international markets. MRTC seems to be the only feature which AA offers that distinguishes it from its competitors. On every other score, AAs international service is second rate, particularly if one lives on the West Coast. No direct flights to continental Europe (a plane change somewhere required, often with a bad weather and missed connection risk); indifferent food; mediocre cabin crews; bad on time record. MRTC was the single advantage that could be cited for choosing an AA flight. If that is taken away the transformation to a third world carrier will be complete.
AA is not losing money because of MRTC. It is their lack of imagination in brand positioning and continued reliance on a dubious hub spoke model. Oh yeah--they still have not squeezed out all the labor ineffeciencies.
I guess Arpey is the Roger Smith of aviation.
Sep 23, 2004, 11:27 am
#9
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Here is the relevant text of what Arpey actually said:
"BY ADDING SEATS BACK TO OUR 757, A300 AND 737 FLEETS -- THEREBY CORRECTING A MISMATCH THAT HAD DEVELOPED IN THOSE MARKETS BETWEEN WHAT WE WERE OFFERING, AND WHAT OUR CUSTOMERS WERE WILLING TO PAY FOR -- WE HAVE GENERATED OVER $60 MILLION IN INCREMENTAL REVENUE THIS YEAR.
"LOOKING FORWARD, WE ARE WELL ALONG IN EVALUATING WHETHER OR NOT IT MAKES SENSE TO CHANGE THE SEATING DENSITY ON ADDITIONAL AIRCRAFT.
"WE ARE OBVIOUSLY TRYING TO FIND THE RIGHT BALANCE BETWEEN WHAT OUR CUSTOMERS WOULD LIKE US TO DO, AND WHAT THEY ARE WILLING TO PAY FOR. WE SHOULD BE REACHING SOME CONCLUSIONS SHORTLY."
Source: AA.com
"BY ADDING SEATS BACK TO OUR 757, A300 AND 737 FLEETS -- THEREBY CORRECTING A MISMATCH THAT HAD DEVELOPED IN THOSE MARKETS BETWEEN WHAT WE WERE OFFERING, AND WHAT OUR CUSTOMERS WERE WILLING TO PAY FOR -- WE HAVE GENERATED OVER $60 MILLION IN INCREMENTAL REVENUE THIS YEAR.
"LOOKING FORWARD, WE ARE WELL ALONG IN EVALUATING WHETHER OR NOT IT MAKES SENSE TO CHANGE THE SEATING DENSITY ON ADDITIONAL AIRCRAFT.
"WE ARE OBVIOUSLY TRYING TO FIND THE RIGHT BALANCE BETWEEN WHAT OUR CUSTOMERS WOULD LIKE US TO DO, AND WHAT THEY ARE WILLING TO PAY FOR. WE SHOULD BE REACHING SOME CONCLUSIONS SHORTLY."
Source: AA.com
Sep 23, 2004, 11:34 am
#10
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Originally Posted by brp
Well, we may not like the change back to LRTC throughout the fleet but, if it's not making money, can you really blame Arpey for trying a different tack? From a business perspective, this seems to make a lot of sense. Sure I will miss MRTC, but Mr. Arpey isn't, and shouldn't be, concerned about that directly.
Cheers.
Cheers.
Without MRTC, I might as well fly other airlines internationally -- sometimes oneworld partners, sometimes not. Quite often, other airlines offer better schedules, connections, and fares. For domestic travel, each new AA re-branding/re-marketing exercise drives me closer and closer to selecting B6 or flyi.
Sep 23, 2004, 11:44 am
#11
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FWAAA, you might be willing to pay more, but I cant help but feel that you are in a very small minority out there. Dont forget theres still the YUP fares. I do feel that even 10 extra seats can make a difference. Being 6'2" i hate to have to look for only Bulkhead or emergency seats once again, but i dont blame AA. Numerous start ups tried doing what you asked for by being a one cabin Biz carrier they All failed. Id love to know how much UA makes on its Premium Coach, I can only imagine that it gets filled by its elites paying low fares. And we know the condition of UA today.
I don't feel that theres enough people out there willing to pay more $$ to justify keeping it, IMHO.
I don't feel that theres enough people out there willing to pay more $$ to justify keeping it, IMHO.
Sep 23, 2004, 12:21 pm
#12
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Originally Posted by ExtrAAordinaire
Here is the relevant text of what Arpey actually said:
"BY ADDING SEATS BACK TO OUR 757, A300 AND 737 FLEETS -- THEREBY CORRECTING A MISMATCH THAT HAD DEVELOPED IN THOSE MARKETS BETWEEN WHAT WE WERE OFFERING, AND WHAT OUR CUSTOMERS WERE WILLING TO PAY FOR -- WE HAVE GENERATED OVER $60 MILLION IN INCREMENTAL REVENUE THIS YEAR.
"LOOKING FORWARD, WE ARE WELL ALONG IN EVALUATING WHETHER OR NOT IT MAKES SENSE TO CHANGE THE SEATING DENSITY ON ADDITIONAL AIRCRAFT.
"WE ARE OBVIOUSLY TRYING TO FIND THE RIGHT BALANCE BETWEEN WHAT OUR CUSTOMERS WOULD LIKE US TO DO, AND WHAT THEY ARE WILLING TO PAY FOR. WE SHOULD BE REACHING SOME CONCLUSIONS SHORTLY."
Source: AA.com
"BY ADDING SEATS BACK TO OUR 757, A300 AND 737 FLEETS -- THEREBY CORRECTING A MISMATCH THAT HAD DEVELOPED IN THOSE MARKETS BETWEEN WHAT WE WERE OFFERING, AND WHAT OUR CUSTOMERS WERE WILLING TO PAY FOR -- WE HAVE GENERATED OVER $60 MILLION IN INCREMENTAL REVENUE THIS YEAR.
"LOOKING FORWARD, WE ARE WELL ALONG IN EVALUATING WHETHER OR NOT IT MAKES SENSE TO CHANGE THE SEATING DENSITY ON ADDITIONAL AIRCRAFT.
"WE ARE OBVIOUSLY TRYING TO FIND THE RIGHT BALANCE BETWEEN WHAT OUR CUSTOMERS WOULD LIKE US TO DO, AND WHAT THEY ARE WILLING TO PAY FOR. WE SHOULD BE REACHING SOME CONCLUSIONS SHORTLY."
Source: AA.com
THESE STRUCTURAL CHANGES ARE CURRENTLY EXACERBATED BY SOME MORE RECENT PHENOMENA. THE MOST OBVIOUS IS INDUSTRY CAPACITY.
THERE ARE SIMPLY TOO FEW PASSENGERS WILLING TO PAY THE FARES WE NEED TO BE PROFITABLE IN THE DOMESTIC MARKET.
<snip>
BUT THE REST OF THE INDUSTRY, UNFORTUNATELY, IS A DIFFERENT STORY. AND I'M NOT JUST TALKING ABOUT THE LOW COST SEGMENT. ALL TOLD, DOMESTIC MAINLINE CAPACITY IS PLANNED TO INCREASE BY MORE THAN SIX PERCENT THIS YEAR. UNFORTUNATELY, DOMESTIC GDP GROWTH HAS AVERAGED ONLY 3.6 PERCENT SO FAR THIS YEAR.
THIS DISCONNECT BETWEEN GDP GROWTH AND CAPACITY GROWTH HAS HASTENED THE SLIDE IN FARES THAT WAS ALREADY UNDERWAY, AND CREATED AN ENVIRONMENT IN WHICH EVEN SOUTHWEST, THE LOWEST COST PROVIDER, WOULD BE HAVING A DIFFICULT YEAR WERE IT NOT FOR THEIR WELL TIMED BET ON FUEL HEDGES.
THERE ARE SIMPLY TOO FEW PASSENGERS WILLING TO PAY THE FARES WE NEED TO BE PROFITABLE IN THE DOMESTIC MARKET.
<snip>
BUT THE REST OF THE INDUSTRY, UNFORTUNATELY, IS A DIFFERENT STORY. AND I'M NOT JUST TALKING ABOUT THE LOW COST SEGMENT. ALL TOLD, DOMESTIC MAINLINE CAPACITY IS PLANNED TO INCREASE BY MORE THAN SIX PERCENT THIS YEAR. UNFORTUNATELY, DOMESTIC GDP GROWTH HAS AVERAGED ONLY 3.6 PERCENT SO FAR THIS YEAR.
THIS DISCONNECT BETWEEN GDP GROWTH AND CAPACITY GROWTH HAS HASTENED THE SLIDE IN FARES THAT WAS ALREADY UNDERWAY, AND CREATED AN ENVIRONMENT IN WHICH EVEN SOUTHWEST, THE LOWEST COST PROVIDER, WOULD BE HAVING A DIFFICULT YEAR WERE IT NOT FOR THEIR WELL TIMED BET ON FUEL HEDGES.
So his answer to overcapacity is, you guessed it - more capacity (LRTC).
Yesterday, AA warned that its Q3 Revenue per Available Seat Mile will be down between 2.5% to 3.5% year over year, despite flying 57 fewer airplanes this summer (F-100s).
No kidding: AA is flying a lot more seats this summer - plenty more on LRTC 757s and A300s. And revenue per ASM is down.
Maybe AA really did see $60 million in incremental revenue resulting from the LRTC reconfiguration. If so, perhaps AA should squeeze two more rows in there. Europeans have long suffered charter carriers with 29 inch pitch, maybe the backpack crowd AA is hoping to attract will not mind.
But is that $60 million figure net of whatever revenue AA missed out on because some passengers chose not to fly AA because of LRTC 757s and A300s? Who knows?
Sep 23, 2004, 12:23 pm
#13
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As a largely UA flyer and now an occasional AA customer, the complete elimination of MRTC completely is a poor idea. I think that AA should have left a few rows at the front of the Y cabin MRTC in the 757s and A300s for their elites. They would be wise to do that if they decided to further eliminate MRTC from their fleet.
I think MRTC is a great idea that is recognized by elites and frequent fliers; however, I agree that it doesn't influence the average occasional flyer. I think the average flyer looks for the best price and chooses accordingly. They are not really congnizant of the detailed advantages and disdvantages of each carrier.
That said, I think business frequent fliers and elites do realize the characteristics of each airline. Although I am a leisure traveler, I see many business travelers on my UA flights with their laptops out in United's Economy Plus (E+) and I'm sure they appreciate the extra inches. Most corporations today will only pay for Y tickets for their employees traveling domestically, but I don't think these are often the cheapest most restricted fares. I think a lot of these Y fares are higher class economy tickets.
If AA completely guts MRTC, that leaves UA with the sole competitive advantage of being the only carrier of the top five with a section with extra space for preferred travelers. I'm sure UA would be ecstatic over that.
I think MRTC is a great idea that is recognized by elites and frequent fliers; however, I agree that it doesn't influence the average occasional flyer. I think the average flyer looks for the best price and chooses accordingly. They are not really congnizant of the detailed advantages and disdvantages of each carrier.
That said, I think business frequent fliers and elites do realize the characteristics of each airline. Although I am a leisure traveler, I see many business travelers on my UA flights with their laptops out in United's Economy Plus (E+) and I'm sure they appreciate the extra inches. Most corporations today will only pay for Y tickets for their employees traveling domestically, but I don't think these are often the cheapest most restricted fares. I think a lot of these Y fares are higher class economy tickets.
If AA completely guts MRTC, that leaves UA with the sole competitive advantage of being the only carrier of the top five with a section with extra space for preferred travelers. I'm sure UA would be ecstatic over that.
Sep 23, 2004, 12:34 pm
#14
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I think MRTC is hocus pocus seating. When you remove two rows or 10 seats all you do is fill up more center seats. I would rather as a Platinum have less legroom but be successful in having a center seat blocked. I then have all the room of that seat and room to read a newspaper and spread out. Granted if the flight is totally full then MRTC is of great value.
Sep 23, 2004, 12:37 pm
#15
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Originally Posted by CApreppie
As a largely UA flyer and now an occasional AA customer, the complete elimination of MRTC completely is a poor idea. I think that AA should have left a few rows at the front of the Y cabin MRTC in the 757s and A300s for their elites. They would be wise to do that if they decided to further eliminate MRTC from their fleet.
I think MRTC is a great idea that is recognized by elites and frequent fliers; however, I agree that it doesn't influence the average occasional flyer. I think the average flyer looks for the best price and chooses accordingly. They are not really congnizant of the detailed advantages and disdvantages of each carrier.
That said, I think business frequent fliers and elites do realize the characteristics of each airline. Although I am a leisure traveler, I see many business travelers on my UA flights with their laptops out in United's Economy Plus (E+) and I'm sure they appreciate the extra inches. Most corporations today will only pay for Y tickets for their employees traveling domestically, but I don't think these are often the cheapest most restricted fares. I think a lot of these Y fares are higher class economy tickets.
If AA completely guts MRTC, that leaves UA with the sole competitive advantage of being the only carrier of the top five with a section with extra space for preferred travelers. I'm sure UA would be ecstatic over that.
I think MRTC is a great idea that is recognized by elites and frequent fliers; however, I agree that it doesn't influence the average occasional flyer. I think the average flyer looks for the best price and chooses accordingly. They are not really congnizant of the detailed advantages and disdvantages of each carrier.
That said, I think business frequent fliers and elites do realize the characteristics of each airline. Although I am a leisure traveler, I see many business travelers on my UA flights with their laptops out in United's Economy Plus (E+) and I'm sure they appreciate the extra inches. Most corporations today will only pay for Y tickets for their employees traveling domestically, but I don't think these are often the cheapest most restricted fares. I think a lot of these Y fares are higher class economy tickets.
If AA completely guts MRTC, that leaves UA with the sole competitive advantage of being the only carrier of the top five with a section with extra space for preferred travelers. I'm sure UA would be ecstatic over that.
Last edited by bennytma; Sep 23, 2004 at 12:47 pm