Newsstand - The End of the Big Six?

Vaughn Cordle, an airline analyst at Airline Forecasts, believes the industry, weakened by the worst three years in the history of commercial aviation, is locked in a death spiral in which the Big Six -- AMR (AMR:NYSE - news - research) unit American Airlines, UAL (UALAQ.OB:OTC:BB - news - research) unit United Airlines, Continental Airlines (CAL:NYSE - news - research), Delta Air Lines (DAL:NYSE - news - research), Northwest Airlines (NWAC:Nasdaq - news - research) and US Airways (UAIR:Nasdaq - news - research) -- will cease to exist in the coming decade.

Excerpted from:
The Sky Is Falling for Major Airlines
By Eric Gillin
TheStreet.com Staff Reporter
9/8/2004 9:28 AM EDT
http://www.thestreet.com/_tscana/markets/ericgillin/10181689.html

While the author starts off with the tired old "LCC and labor" mantra as to why the Big Six are dieing, at least on the final page he starts to branch out a bit. I do think he has a point with UA and US starting to shrink domestic operations in favor of international. UA already is expanding their international service from their SFO (asia) and IAD (europe) hubs.

I honestly don't know if US is long for the world. I believe a second bite at bankruptcy is a definite probability, if for no other reason then to allow US to start to shed some routes and equipment to try and shrink itself to profitability. Normally this doesn't work (it did not save Eastern, Pan Am, or TWA), but being a member of STAR does allow US to concentrate on their route strengths (the NE, the SE, and the Carribbean).

After a few hours playing Airport Tycoon, it seems US' strength right now is their own regional partners, and it may make sense for US to become a regional, themselves. Close PIT and PHL and concentrate in ORD and IAD, allowing UA and STAR to feed them from cities like SEA, PDX and BOS without needing their own flights. So UA SEA-ORD and US ORD-ITH instead of US SEA-PHL-ITH.

CLT is still important, and UA could operate flights from LAX, SFO, DEN, ORD, and IAD to there to then hook-up with US regional links. And US could concentrate their European ops there. I admit CLT is probably not the most popular place for O&D (like DEN), it would have a large centralized feeder network and they could dump the 767s and just fly their A330s. They could probably eschew most of their Boeing fleet, and concentrate on their newer Airbus planes which would help control maintenance and spare parts costs.

Of course, it's all rampant and unfounded speculation on my part. :)

End of the Big Six? I don't see it that way. I believe that the big six are fighting for the 3-4 spots left. It's not like Southwest of JetBlue could start flying to Asia, South America, Africa or Europe overnight.

There will be some blood shed and only the stronger will survive. Once that happens, the remaining powers can't sit on their asses and gloat. They will need to move quickly and catch up to the international airlines if they want to be around for years to come.

Man, am I tired of the Big Six-are-dead stuff.

From a competitive/alliance standpoint it's already the Big Three anyway, not the Big Six: CO/NW/DL, UA/US, and AA. If US died or became a regional, DL merged into CO and then CO/NW became a more seamless, co-branded enterprise, you'd simply formalize the de facto operating environment.

Say three years from now we have three global networked carriers, a second tier of five to eight domestic/regionals and strong LCCs (HP, WN, B6, F9, AS...), and a third tier of niche supplemental/feeder carriers like Comair... that wouldn't be so bad, would it?

Man, am I tired of the Big Six-are-dead stuff.

From a competitive/alliance standpoint it's already the Big Three anyway, not the Big Six: CO/NW/DL, UA/US, and AA. If US died or became a regional, DL merged into CO and then CO/NW became a more seamless, co-branded enterprise, you'd simply formalize the de facto operating environment.

Say three years from now we have three global networked carriers, a second tier of five to eight domestic/regionals and strong LCCs (HP, WN, B6, F9, AS...), and a third tier of niche supplemental/feeder carriers like Comair... that wouldn't be so bad, would it?

^^

I agree completely.

It's almost as tiring as the BS we constantly hear that "customers only care about price and care about nothing else."

Trouble is, it isn't always true.

AA, UA, DL, NW, CO, US and even some of the smaller carriers (like HP) have some customers who are willing to pay more. All of them have some premium fare customers. Problem is, none of the airlines have enough of those customers. A couple of them go away (like UA and US) and perhaps there would be enough for the remaining airlines to eat for a few years.

If UA and US are bailed out, however, I don't think any of the existing 6 will be able to keep their existing route structure and as many two class planes in the air as they have today.

Man, am I tired of the Big Six-are-dead stuff.

From a competitive/alliance standpoint it's already the Big Three anyway, not the Big Six: CO/NW/DL, UA/US, and AA. If US died or became a regional, DL merged into CO and then CO/NW became a more seamless, co-branded enterprise, you'd simply formalize the de facto operating environment.

Say three years from now we have three global networked carriers, a second tier of five to eight domestic/regionals and strong LCCs (HP, WN, B6, F9, AS...), and a third tier of niche supplemental/feeder carriers like Comair... that wouldn't be so bad, would it?

100% on target.

If the reporter(s) got the news right, they wouldn't have to print more "news" tomorrow. They print, rehash, rehash, rewrite, rehash, etc. the same news for months/years sometimes.

That article is poorly written and will probably be rehashed, rewritten, and rehashed again many times this month.

RC

How about having foreign carriers such as British Airways or Singapore Airlines compete with US carriers on US domestic flights?

That would be a mistake. Such rights should be awarded only if BA and others offer reciprocal rights to US carriers.

How about having foreign carriers such as British Airways or Singapore Airlines compete with US carriers on US domestic flights?

It would probably be a diaster for the Nationals. :D

You know darn well they won't let folks upgrade into First and Business Class from full-fare Y, much less lower fares, and theirEconomy pitch is as terrible as CO and NW. Not to mention their idea of "domestic Business Class" is Economy with the middle seat blocked. :eek:

No, I imagine most domestic UA 1Ks and AA EXPs would happily stay with UA over SQ or LH or AA over CX or BA within North America. ;)