mke9499
May 6, 10, 9:25 am
As participant at airline CEO panel, regarding business models:
I think the models are converging. What we’ve seen through forced financial restructuring are legacy carriers that have to rethink their business model. The product is moved more toward what the LCCs have been doing and LCCs have been moving more toward the legacy model – business class cabins, TVs, wi-fi. We’ve seen more amenities on the LCCs; less amenities on the legacies. So there’s a product convergence but the networks are so powerful.
Moving away from domestic to more balanced between international and domestic. As these alliances crystalize, some of the LCCs are going to wonder where do we go? How can we move people from small town America to the world? We see Southwest trying to create their own marginal expansion internationally. At the end of the day it’s a network business, and we’re trying to figure out ways to differentiate the product because the customer has decided to show a great amount of loyalty.
Regarding consolidation:
We’re certainly acting as the networks are realigning. The synergy opportunities are just so significant. I think the industry is looking for ways to find stability. Labor wants it, customers want it, and financing teams want it. The struggle if you’re a regional is one of the ways networks drive synergy is they segment the market differently. If 70% of your market is willing to connect, it doesn’t matter where they connect, so those hubs become marginal. Pittsburgh, St Louis, Raleigh/Durham. And if you’re a feeder in those markets, you lose that flying. The best case was that it wasn’t growing and the worst case is that it was shrinking. We want to grow the pie. How do we get a bigger slice of it? We need to figure out ways to incent customers to pay more for the product.
One of the more interesting comments:
It’s amazing how we do as a business moving people around at the highest degree of safety and yet people hate us. I wonder why is that? Maybe it’s all the bickering between management, between labor, between the airlines. For so many smart people, we could do better, maybe better telling our story.
I think the models are converging. What we’ve seen through forced financial restructuring are legacy carriers that have to rethink their business model. The product is moved more toward what the LCCs have been doing and LCCs have been moving more toward the legacy model – business class cabins, TVs, wi-fi. We’ve seen more amenities on the LCCs; less amenities on the legacies. So there’s a product convergence but the networks are so powerful.
Moving away from domestic to more balanced between international and domestic. As these alliances crystalize, some of the LCCs are going to wonder where do we go? How can we move people from small town America to the world? We see Southwest trying to create their own marginal expansion internationally. At the end of the day it’s a network business, and we’re trying to figure out ways to differentiate the product because the customer has decided to show a great amount of loyalty.
Regarding consolidation:
We’re certainly acting as the networks are realigning. The synergy opportunities are just so significant. I think the industry is looking for ways to find stability. Labor wants it, customers want it, and financing teams want it. The struggle if you’re a regional is one of the ways networks drive synergy is they segment the market differently. If 70% of your market is willing to connect, it doesn’t matter where they connect, so those hubs become marginal. Pittsburgh, St Louis, Raleigh/Durham. And if you’re a feeder in those markets, you lose that flying. The best case was that it wasn’t growing and the worst case is that it was shrinking. We want to grow the pie. How do we get a bigger slice of it? We need to figure out ways to incent customers to pay more for the product.
One of the more interesting comments:
It’s amazing how we do as a business moving people around at the highest degree of safety and yet people hate us. I wonder why is that? Maybe it’s all the bickering between management, between labor, between the airlines. For so many smart people, we could do better, maybe better telling our story.