Independence Air iClub - Chapter 11 Now rather than Later

For Indy the time to file for bankruptcy should be shortly after Labor Day. Even with the $31 million refund from Airbus that only gives them an extra month of cash to burn through. To avoid liquidation they cannot wait until they are completely depleted of cash and the price of jet fuel is definitely not going down soon. In addition, the new Bankruptcy Law takes effect on October 17. This law will compel a bankrupt airline to reorganize and emerge from Chapter 11 in a stipulated 18 month period. Also, the airline under the new law will have to make faster decisions about whether they want to reject leases of their vendors or partners. Moreover, the new law forbids airlines from offering retention bonuses to executives unless there is a proven job offer. So also expect Delta and Northwest to file next month. I wonder what the management of Jet Blue is making of Indy's situation. Maybe we have an ATA story here with Jet Blue doing what Southwest did for ATA.

But what did Southwest do for ATA?

I wonder what the management of Jet Blue is making of Indy's situation. Maybe we have an ATA story here with Jet Blue doing what Southwest did for ATA.

What did Southwest do for ATA?
1) They took over most of their gates at MDW
2) They started code-sharing with ATA out of MDW and PHX to destinations that Southwest did not served
3) ATA dropped all RJ service
4) ATA dropped all service that competed with Southwest
5) ATA reduced the frequency of flights at other airports
6) Secondary focus cities (like IND, SFO) were reduced to minor spokes
7) Provided financing for ATA (primarily in exchange for gates at MDW)
Southwest got access to major business airports (like LGA, DCA) without having to fly their themselves. They also got access to Hawaii. Of greater importance, they were able to obtain additional gates at MDW and prevent a competitor (AirTran or America West) from building up a hub.

However, at IAD, there does not appear to be an acute shortage of gates. B6 also does not operate a connecting hub there. Instead, they provide primarily O/D service for west coast destinations. The best possibility seems to be for B6 to code-share on the short RJ flights out of IAD. However, they are not likely to want to put up financing to do this. The gate at O'Hare and Newark may also be of value, but probably not much.

L Dude 7, I could not put it better. The purpose of my thread is to explore the options available to Indy. There are options besides liquidation I feel. Without Indy at IAD many of us in Northern Virginia will be forced to drive to BWI for a competitive fare on routes to Boston for example. The travel editor at USA Today brought up Frontier as a possible merger partner.

For Indy the time to file for bankruptcy should be shortly after Labor Day.
Have there been any official announcements (e.g., poor financials, etc) made that show that Chap 7/11 is coming soon ??

I've started flying DH recently, and have been reasonably happy with the service/value. Granted going through IAD adds some time to the commute, but its OK. Hopefully they can hold out long enough for me to cash in on the few "free trips" I've gotten so far.

Pretty much every financial statement from the airline indicates that bankruptcy is around the corner...

3) ATA dropped all RJ service

What RJs?? :confused: Do you mean the Chicago Express Saab 340s?

Have there been any official announcements (e.g., poor financials, etc) made that show that Chap 7/11 is coming soon ??


Yes, in the press release in the thread about Airbus refunding the $31 million, it says

"In a quarterly filing this week, the company offered a dire forecast, saying its cash wouldn't cover obligations for the rest of the year and it might have to file for bankruptcy protection."

That was posted Aug 12.

That was a news article, not a press release.

BIIIIIIG difference.

Well, most business news articles come from either press releases or in-person interviews. Maybe they didn't put it in a press release, but that came from somewhere.

Yes, in the press release in the thread about Airbus refunding the $31 million, it says

"In a quarterly filing this week, the company offered a dire forecast, saying its cash wouldn't cover obligations for the rest of the year and it might have to file for bankruptcy protection."

That was posted Aug 12.

Even if DH has to file Ch. 11, it doesn't mean that they'll stop flying. I tihnk it makes it a lot more likely that they'll me merged with/bought by another airline.

Even so, United has been in CH. 11 for so long now that it's getting hard to remember when they weren't in receivership.

A quarterly filing is a 10-K or 10-Q submitted to the SEC as an official document and is effectively a press release or official statement of the company about their current state as a business. While it might not be a press release called "We're probably filing for bankruptcy" it is still a public statement about the company made by them.

Why would another carrier buy DH? Better to have them liquidate and then pick up the routes.

[QUOTE=L Dude 7]
3) ATA dropped all RJ service
QUOTE]
What RJs?? :confused: Do you mean the Chicago Express Saab 340s?
Yes - I was referring to those... I guess technically they are propeler-jet planes as opposed to CRJ/ERJ 'jets'... Needless to say, they dropped all planes with <100 seats that flew to smaller communities. (and even terminated announced Gary, Ind. service shortly before it was scheduled to start.)

L Dude 7, I could not put it better. The purpose of my thread is to explore the options available to Indy. There are options besides liquidation I feel. Without Indy at IAD many of us in Northern Virginia will be forced to drive to BWI for a competitive fare on routes to Boston for example. The travel editor at USA Today brought up Frontier as a possible merger partner.


Although we all love low fares, $96 roundtrip to BOS isn't even covering the cost of fuel. DH isn't making money and they're just hurting UA and US, both of which have much better chances of survival. It seems that DH is just trying to bring whoever it can down with it. The airline has suceeded in temporarily lowering the region's fares to unsustainable levels, and when it is bought or liquidates, fares will just come back up again in response. There is overcapacity in the market, and DH's presence is just contributing to this problem.

Even if DH has to file Ch. 11, it doesn't mean that they'll stop flying. I tihnk it makes it a lot more likely that they'll me merged with/bought by another airline.

Even so, United has been in CH. 11 for so long now that it's getting hard to remember when they weren't in receivership.

Big airlines tend to reorganize in Ch 11; tiny commuter airlines like DH tend to liquidate.

Merge with/bought by another airline? Hardly. DH owns nothing that's scarce (like valuable route authorities, for instance).

If they can hold on a little bit longer I hope JetBlue picks up some of their routes.

Big airlines tend to reorganize in Ch 11; tiny commuter airlines like DH tend to liquidate.

Merge with/bought by another airline? Hardly. DH owns nothing that's scarce (like valuable route authorities, for instance).

Can you point to some examples of tiny airlines liquidating?

I can point to a few examples of large airlines liquidating: Eastern, TWA, Pan Am.

Can you point to some examples of tiny airlines liquidating?

I can point to a few examples of large airlines liquidating: Eastern, TWA, Pan Am.

Probably because nobody remembers the Tiny airlines. :)

A few that have happened in the past 5 years: Legend, Vanguard, Southeast, Great Plains, Midway (though attempted rebirth as US commuter), Chicago Express (an ATA commuter),

Can you point to some examples of tiny airlines liquidating?

I can point to a few examples of large airlines liquidating: Eastern, TWA, Pan Am.

I said "tend to."

Examples? Southeast, Vanguard, Midway (twice), National (the all-757 LAS version of recent vintage), Legend, MGM Grand, and Jetsgo. I'm certain there are others. Like Presidential, Air Florida, AccessAir, Tower Air, Braniff.

Examples of large airlines that have reorganized? Continental (twice), America West, maybe USAir and UAL (probably), Air Canada. Even TWA successfully reorganized twice before finally liquidating in its third bankruptcy.

Maybe DH can successfully reorganize. But I doubt it. Like I said - it doesn't own anything particularly scarce or hard to get. None of its routes are restricted to open competition right now. There's a glut of 50 seat RJs. Its A319s are readily available. It controls gates at IAD. Not much else.

I said "tend to."

Examples? Southeast, Vanguard, Midway (twice), National (the all-757 LAS version of recent vintage), Legend, MGM Grand, and Jetsgo. I'm certain there are others. Like Presidential, Air Florida, AccessAir, Tower Air, Braniff.

Examples of large airlines that have reorganized? Continental (twice), America West, maybe USAir and UAL (probably), Air Canada. Even TWA successfully reorganized twice before finally liquidating in its third bankruptcy.

Maybe DH can successfully reorganize. But I doubt it. Like I said - it doesn't own anything particularly scarce or hard to get. None of its routes are restricted to open competition right now. There's a glut of 50 seat RJs. Its A319s are readily available. It controls gates at IAD. Not much else.

I dunno. My ability to prognosticate the fate of any airline is about as good as anyone else I've heard so far. As far as DH goes, they've gotten this far and they have a lot of fans. The business model can work. JetBlue has made it work for them and Southwest certainly made it work. They sure do have their work cut out for them but I sincerely hope they make it.

The whole airline industry is in serious need of a restructuring. I'm not about to give the majors a pass on this one. Oh, I like to fly United too, but I'm not willing to get nailed on ticket prices the way I've been in the past.

For my money, DH does a damn good job. Will they make it, who knows? But I'm putting my money where my mouth is: I've got at least 4 flights booked on DH in the next 4 weeks. I hope they survive, if only because they have redefined the fare market out of IAD. Enlightened self-interest is the word of the day and I fly DH because they offer me cheap fares and comparable service to any major carrier.

That's a value equation I can get behind.

Indy is no JetBlue. They're a hub-and-spoke system with far too few customers. No business plan can work without customers.

Although we all love low fares, $96 roundtrip to BOS isn't even covering the cost of fuel.

I just wanted to pick at this one point...

I'm going to make some very rough estimates and guesses here, but chime in if you have better data than I do. The CRJ burns about 2000lbs per fuel an hour. The first hour is a bit higher because of the extra fuel burned in climb. IAD-BOS is a 1.5 hour flight. So, I'm just going to guess and say that the CRJ burns 4000lbs one way on a trip to BOS. That's about 600 gallons. At today's rate of about $2/gal for jet A, that's $1200 in fuel costs. Divide that by 50 seats, and you come out with $24/seat for fuel costs each way. So whether or not DH can pay their fuel bill is a matter of their fuel bill being their first or last bill they pay. My numbers are on the high side, so the cost per seat for fuel will most definitely be less.

It's a matter of when, not if, for FlyI - the airline cannot compete effectively against lower-cost *legacies* that have greater revenue potential.

Indy is no JetBlue. They're a hub-and-spoke system with far too few customers. No business plan can work without customers.

HUH?!? No customers?!?

Have you even been on an Indy flight? Every single flight I've been on has been packed to the gills.

Believe me, FlyI has customers. And it's not the occasional flyers you might think would make up the bulk. It's people like me who have to travel on such a regular basis that even a few bucks saved on airfare makes a BIG difference.

In a lot of ways, FlyI is tailor-made for the frequent flyer. Change fees are low compared to the majors and they are set up to do most of their booking and customer care via the Internet and the phone. The flights they offer are for destinations that are too far to drive but are too expensive to book via the majors.

I make at least one weekly trip to BOS from IAD. When I book online, I get that fare for about $100 RT. If I book via United, it's about $186.

AND I get to use the BH B-gates vs. the UA C-gates OR (heaven forbid) G-gates. I can walk to my plane rather than take those dreaded moon buggies at IAD.

The proof is in the pudding. Every time someone tells me that DH is about to go bust, I think about DL and NW and UA. I get the feeling that a lot of the animosity towards DH comes from people who are in some way affiliated with the legacy carriers and a a bit peeved that this pesky LCC Just Won't Die.

Believe me when I tell you....I flew UA until a friend of mine told me about his DH experience. Think of it this way: It ain't the Ritz but most business travellers will tell you that they are more likely to stay at a Comfort Inn than the Ritz because the Comfort Inn will won't charge you for local phone calls and Internet access while the Ritz will. I'm sure you get my analogy.

It's a matter of when, not if, for FlyI - the airline cannot compete effectively against lower-cost *legacies* that have greater revenue potential.

BAH!

You look into your crystal ball and I'll look into mine.

The difference between you and I (near as I can tell) is that I've actually sampled what they are selling and I like it.

I keep seeing full flights. Can all those customers be SOOO WROOOONG? Guess what....a lot of them carry laptops too. Sound like leisure travellers to you?

If you are trying to convince me that DH has a higher cost structure than UA, I want a puff of whatever you are smoking. Just make sure you take away my keyboard before you pass it over to me because I want to keep myself from saying anything remotely that dumb.

HUH?!? No customers?!?

Have you even been on an Indy flight? Every single flight I've been on has been packed to the gills.

Believe me, FlyI has customers. And it's not the occasional flyers you might think would make up the bulk. It's people like me who have to travel on such a regular basis that even a few bucks saved on airfare makes a BIG difference.

In a lot of ways, FlyI is tailor-made for the frequent flyer. Change fees are low compared to the majors and they are set up to do most of their booking and customer care via the Internet and the phone. The flights they offer are for destinations that are too far to drive but are too expensive to book via the majors.

I make at least one weekly trip to BOS from IAD. When I book online, I get that fare for about $100 RT. If I book via United, it's about $186.

AND I get to use the BH B-gates vs. the UA C-gates OR (heaven forbid) G-gates. I can walk to my plane rather than take those dreaded moon buggies at IAD.

The proof is in the pudding. Every time someone tells me that DH is about to go bust, I think about DL and NW and UA. I get the feeling that a lot of the animosity towards DH comes from people who are in some way affiliated with the legacy carriers and a a bit peeved that this pesky LCC Just Won't Die.

Believe me when I tell you....I flew UA until a friend of mine told me about his DH experience. Think of it this way: It ain't the Ritz but most business travellers will tell you that they are more likely to stay at a Comfort Inn than the Ritz because the Comfort Inn will won't charge you for local phone calls and Internet access while the Ritz will. I'm sure you get my analogy.


Mid,

Yes the planes may be full or almost full, but the prices they are charging are not covering their costs!!! Did you see the memo about closing LAX?

The problem is not that they can't get passengers to fly FlyI....they just can't get enough pax to pay a fare that makes them money. You pay $100 for IAD-BOS RT....and as some one theorized roughly half of that is eaten by fuel costs....toss in aircraft leases, employee costs, landing fees, facility rentals, etc.....not much room for profit.....

And that $24/pax one way for fuel is if the plane is full. At a 73% system wide load factor.....makes for an even more desperate need to raise fares to cover costs.

So would you still be flying FlyI if they charged more than UAL?

DC

And that $24/pax one way for fuel is if the plane is full. At a 73% system wide load factor.....makes for an even more desperate need to raise fares to cover costs.

Worse, a great deal of those 73% of seats filled are by connecting passengers. So they eat up $24 X 2 for fuel when they fly. I believe in another thread I calculated the average fare that a DH passenger pays to be somewhere in the $70 range. Fuel is hastening their demise but the real culprit is the fares that people are paying.

Worse, a great deal of those 73% of seats filled are by connecting passengers. So they eat up $24 X 2 for fuel when they fly. I believe in another thread I calculated the average fare that a DH passenger pays to be somewhere in the $70 range. Fuel is hastening their demise but the real culprit is the fares that people are paying.

I might have missed that other thread, but how in the world were you able to calculate an average fare paid? I have to say that when I saw those $130 west coast-IAD fares, I had to laugh. Out loud. You *can* make money on short hauls with cheap fares -- WN has been doing it for years. I actually calculated that those $29 OW fares between LAX and LAS either broke even or made them money.

If you are trying to convince me that DH has a higher cost structure than UA, I want a puff of whatever you are smoking.


I'm smoking a rock of reality - for the three months ending June 30, 2005, straight from the respective Q2 2005 SEC financial filings:

UA Operating CASM 10.50c
DH Operating CASM 17.20c

The airline with the cost advantage is UNITED, not Independence Air. Fifty-seat RJs are simply too high-CASM to be used effectively as the backbone of a low-cost carrier, especially an airline that is dumping capacity into mature, well-served markets. Even in those instances where UA is competing against DH with RJs of its own, recall that United has a revenue advantage with its ability to funnel Transatlantic/Transpacific/Transcontinental pax into the IAD hub network.

I might have missed that other thread, but how in the world were you able to calculate an average fare paid? I have to say that when I saw those $130 west coast-IAD fares, I had to laugh. Out loud. You *can* make money on short hauls with cheap fares -- WN has been doing it for years. I actually calculated that those $29 OW fares between LAX and LAS either broke even or made them money.
Average passenger yield X average stage length is what I used.


UA Operating CASM 10.50c
DH Operating CASM 17.20c


Be fair now, FlyI had an early retirement charge for some aircraft that pushed the CASM up. Without that, their CASM was 13-something. I'm sure someone could make the argument that when flying the same equipment on the same route, DH can operate with a lower CASM (lets hope so with no F or E+). However, flying CRJs up against anything bigger puts them at a huge cost disadvantage, and they are already obviously at a revenue disadvantage as has been pointed out over and over and over on here.

I'm sure someone could make the argument that when flying the same equipment on the same route, DH can operate with a lower CASM (lets hope so with no F or E+).

To be honest, probably not - remember, United has the ability to spread its fixed costs over a much larger route network and asset base, and can also better leverage economies of scale (not to mention the bankruptcy process) in its dealings with 3rd party vendors/suppliers, which would give the airline some CASM advantage over Independence Air in nearly every instance.

To be honest, probably not - remember, United has the ability to spread its fixed costs over a much larger route network and asset base, and can also better leverage economies of scale (not to mention the bankruptcy process) in its dealings with 3rd party vendors/suppliers, which would give the airline some CASM advantage over Independence Air in nearly every instance.

I could point out the serious disadvantages that UA has: unions, pensions, higher aircraft maintenance cost, etc.

I also don't think you can point to Ch11 as a good long-term strategy for dealing with vendors/suppliers.

For all the jawboning going on in this thread, the thing we're seeing is an airline that was running CRJ's being transitioned to an airline that is running A319's. They ran with CRJ's because that's what they had. I don't think they had a long term vision of using CRJ's across their entire network.

SO....don't you think that DH will be able to bring that CASM down a bit once the A319's figure more prominently into their cost numbers?

1. DH has to contend with unions, including the militant AMFA. Furthermore, the UA pension issues have been effectively resolved.

2. The A319s *won't* figure much more prominently into cost equation anytime soon. Recall that Airbus refunded DH's deposits for addiitonal aircraft, and has deferred the remaining deliveries to H2 2007 and beyond:

""On August 10, 2005, the Company's wholly-owned subsidiary Independence Air, Inc. ("Independence Air") amended its agreement with Airbus' wholly-owned affiliate, AVSA S.A.R.L. ("AVSA") to defer the delivery dates for the six A319s previously scheduled for delivery in 2006, and finalized delivery dates for other aircraft previously deferred. The number of aircraft on order under the agreement remains at sixteen, with six A319s now scheduled for delivery during the second half of 2007, six in 2008, and four in 2009.

In connection with the August 10 agreement, Independence Air will soon receive an additional cash refund of $31.2 million of previously paid predelivery payments. Under this and related agreements entered into with AVSA, since June 30, 2005 Independence Air has also deferred $11.5 million in payments that it otherwise would have been required to make during the remainder of 2005, and has deferred a significant amount of the aircraft purchase commitments that it otherwise would have been required to pay in 2006. In addition, $16.5 million in notes previously issued to finance a portion of predelivery payments has now been extinguished without penalty. The agreement requires Independence Air to make initial deposits and progress payments prior to the delivery of the deferred aircraft, a portion of which are financed by the airframe manufacturer. Independence Air will owe predelivery payments in the future prior to each delivery, and will finance a portion of these obligations."

If anything, DH needed accelerated deliveries of the A319s to reduce its CASM to respectable levels for a low-cost carrier. The fact that the A319s won't be coming in the near-term seals the airline's high-CASM fate, and fuel costs will likely deliver the KO punch (leading to a bankruptcy filing) within the next few weeks.

Question for you?

FlyI says it takes @ 3500 gallons to fly to LAX (7000 roundtrip) in roughly 11 hours of flight time (RT), and with fuel prices can't justify burning that much. So they are reallocating the aircraft to East Coast routes...

Ok sounds good initally until one gets to thinking....so if they now are flying up and down the East Coast for a similar amount of hours...or even more...more flights= more takeoffs, and given that the first hour of flying will burn the most gas/hr, it should follow that FlyI will be burning/spending more on gas!!!!!!

Does this make sense to any one else? The ASM will drop (say for example a 319 will do IAD-JAX (630 miles)-IAD-ORD(589)-IAD-BOS(413)-IAD in one day total miles would be 3264 vs a LAX turn of 4576 miles) causing an increase in CASM.....but the revenue intake should be higher since ideally you have more people paying a fare then just two plane loads to LAX and back...

To me it just proves that that the pulling of West Coast flying is more of a revenue issue than a cost one. Fuel is just the easy scapegoat.

Any thoughts?

DC

You're exactly right - the focus on short-haul flying will *increase* DH's CASM, as fuel consumption and labor costs become problematic for short-haul operations. It is true that short-haul flying can bolster revenues - however, that won't help much in this case because Independence Air is flying almost exclusively to mature, well-served (and often with DH's presence, overserved) markets with little revenue growth potential.

But, wouldn't, say, 2 IAD-BOS-IAD and maybe 2 IAD-CLT-IAD, all with roughly 110 pax each and an average fare of say $75 garner a BIGGER return than just one daily transcon for that same a/c? More likely with the same amount of pax and somewhere around the same ticket price?

IAD-LAX-IAD (one flight out and back) 110 pax X $125 avg. fare X 2 legs = $27,500
IAD-BOS-IAD (2 flights out and back) 110 pax X $75 avg fare = $33,000
- plus -
IAD-CLT-IAD 110 pax X $75 avg fare = $33,000

Total rev. for the LA turn = $27,500
Total rev for the 2 BOS and 2 CLT turns = $66,000 combined.

Independence is wise not to deploy their a/c resources on transcons. If an a/c needs maint. or a crew member gets ill, they have to CX a flight, thereby stranding pax. On the east coast, a quick flight to the destination with a spare a/c is in order. Not possible on the left coast.

Short-hauls will bring in more revenue, but at the expense of higher fixed costs and decreased operating efficiency, leading to an increase in CASM. Furthermore, the transcon/midcon market was the segment where DH had the greatest chance of overall success, due to the relative dearth of competition for such flying compared to the saturated and ultra-competitive intra-East Coast market.

By staying east, Indy Air will continued to get hammered by the likes of DL/NW/CO/US/AA/FL who have Eastern/Midwestern strongholds to protect, and cost/revenue/resource infrastructures that can compete effectively against any DH encroachment.

Some interesting analysis, but these are all still theories. DH did not make these decisions purely on theory and speculation.

We can throw out possibilities of what will happen to RASM & CASM due to flying routes transcon or in the East. However, what really matters is achieving greater revenue than cost equalling profit. Here there is no speculation. The West Coast routes are not profitable, in fact, they are some of the worst in terms of profitability. Flying the A319s to cities in the East is. So while what some of you are saying about more take offs = higher CASM is not incorrect, the method is already in practice and is still yielding more success than transcons.

Secondly, the high yield East Coast flights are invested very little with the West Coast; connecting pax to/from the West Coast has little to do with their success so pulling out transcons should have a negligible impact on success east of the Mississippi.

I think that's the logic being operated on.


Cheers.

One more thing. I would argue it is the other way around. Yes, the majors, particularly UA, are extremely competitive with DH. However, the competition proves far more dog-eat-dog and unsustainable on the transcons than on some of the East Coast routes where DH is only one of three carriers to regularly service the market.


Cheers.

Secondly, the high yield East Coast flights are invested very little with the West Coast; connecting pax to/from the West Coast has little to do with their success so pulling out transcons should have a negligible impact on success east of the Mississippi.

I think that's the logic being operated on.


Cheers.

What "high-yield" East Coast flights are you referring to? Virtually *every* East Coast/Midwest market DH offers was already well-served (if not overserved), often with considerable competition. DH's presence in these markets functions not as a consumer-friendly influence (ala WN) but rather as a fare-dumping parasitic distortion that ends up hurting the consumer in the long run by adversely impacting the legitimate operators. Furthermore, DH's pricing behaviors negated any chance for "high yields" to develop - the airline hasn't gone a month since its birth without a systemwide firesale of some kind.

One more thing. I would argue it is the other way around. Yes, the majors, particularly UA, are extremely competitive with DH. However, the competition proves far more dog-eat-dog and unsustainable on the transcons than on some of the East Coast routes where DH is only one of three carriers to regularly service the market.

Cheers.

It only appears this way because the volume of transcon flights is far lower than the volume of intra-East Coast/Midwest flying - among other things, DH witnessed cutthroat competition from CO bringing in 737s on EWR-IAD, and NW introducing RJs on IAD-LAN, both of which succeeded in reducing or eliminating the DH presence in those markets.

While data can mean different things to different people, what I have seen and have access to does not support your conclusions.

If people want to continue to believe that there are absolutely no high-yield flights, that's up to them, but I can tell you with certainty that this is not the case.

Again, yes there are examples of severe competition like those cited by HeathrowGuy, but it is not a matter of appearances...the competition is worse for DH to sustain on the West Coast routes, generally speaking, compared to the East.

I guess some of us have to agree to disagree, but one thing I don't understand is the vitrolic attitude some take towards DH. Characterising an air carrier as an illegitimate operator creating a "fare-dumping parasitic distortion" is over the top in my opinion. I guess all the consumers, including those who do not always or even usually pay "low" fares, yet continue to fly Independence have no clue that they are adversely impacting themselves. Maybe I should go back to UA/US and let their employees treat me, my family and my friends poorly. :confused:


Cheers.

Describing DH as a "fare-dumping parasitic distortion" is not vitriol but rather a straightforward assessment of the effects of their pricing/capacity behaviors upon the market.

Like National Airlines a few years back, DH floods already-saturated markets with capacity at unsustainably low fares. Indy Air loses by having negative profit margins that would likely get a legacy airline CEO shot in broad daylight. Competitors that have to deal with DH's incursion into their market segments suffer by having to match the firesale fares and add capacity to now-overserved routes. Customers lose once the competitors redirect capacity away from other markets to compete against the incursion (e.g., CO pulling 735s from other markets to run EWR-IAD flights last year), and by having the legitimate players weakened generally. In the end, nobody will profit from the Independence Air experience except the attorneys.

I guess some of us have to agree to disagree, but one thing I don't understand is the vitrolic attitude some take towards DH. Characterising an air carrier as an illegitimate operator creating a "fare-dumping parasitic distortion" is over the top in my opinion. I guess all the consumers, including those who do not always or even usually pay "low" fares, yet continue to fly Independence have no clue that they are adversely impacting themselves. Maybe I should go back to UA/US and let their employees treat me, my family and my friends poorly. :confused:
Cheers.
1) Indy Air touts its #2 (after jetBlue) customer sat ranking (http://biz.yahoo.com/prnews/050906/dctu044.html?.v=21)
2) Indy has some of the lowest load factors in the industry (72.2% in August) .http://biz.yahoo.com/cbsmb/050906/ca0c5abebdf548dcba121ef7c4f0224a.html?.v=1
3) Indy is noted by many for having extremely low fares - especially at smaller airports on the east coast. (For example: http://biz.yahoo.com/prnews/050823/dctu027.html?.v=19)
4) FlyI is losing gobs of money. (For Example: http://biz.yahoo.com/prnews/050809/dctu035.html?.v=21)

jetblue has a high customer sat, and low fares, but it is profitiable and has insanely high load factors.
Southwest has lower load factors (but higher than FlyI), low fares, high customer sat, and is making money.

The Airbus plan looks like a good idea, very similar to the way jetBlue started out. High quality service, launching on some overpriced, underserved routes.
However, the big problem is that FlyI is trying to launch a small discounter while having a huge RJ airline to serve it. It would be difficult for a discount RJ airline to be profitable if fuel were free, let alone if it is sky high like it is today.

DH's presence in these markets functions not as a consumer-friendly influence (ala WN) but rather as a fare-dumping parasitic distortion that ends up hurting the consumer in the long run by adversely impacting the legitimate operators.

That's cute. :rolleyes:

1) Indy Air touts its #2 (after jetBlue) customer sat ranking (http://biz.yahoo.com/prnews/050906/dctu044.html?.v=21)
2) Indy has some of the lowest load factors in the industry (72.2% in August) .http://biz.yahoo.com/cbsmb/050906/ca0c5abebdf548dcba121ef7c4f0224a.html?.v=1
3) Indy is noted by many for having extremely low fares - especially at smaller airports on the east coast. (For example: http://biz.yahoo.com/prnews/050823/dctu027.html?.v=19)
4) FlyI is losing gobs of money. (For Example: http://biz.yahoo.com/prnews/050809/dctu035.html?.v=21)

jetblue has a high customer sat, and low fares, but it is profitiable and has insanely high load factors.
Southwest has lower load factors (but higher than FlyI), low fares, high customer sat, and is making money.

The Airbus plan looks like a good idea, very similar to the way jetBlue started out. High quality service, launching on some overpriced, underserved routes.
However, the big problem is that FlyI is trying to launch a small discounter while having a huge RJ airline to serve it. It would be difficult for a discount RJ airline to be profitable if fuel were free, let alone if it is sky high like it is today.

All very true. As many have noted, Indy's costs are too high, regardless of fuel. However, I'm glad you are pointing out DH is trying to make a positive impact. It has not been successful to this point and may not be in the end, but at least the airline is making an attempt to correct an unsatisfying status quo.


Cheers.

That's cute. :rolleyes:

Tell me about it. Apparently we should all stop shopping at the newest retailer in our neighbourhoods too. After all, their constant specials and weekly sales force the existing merchants to match their prices and often lose valuable profit that could keep them in business. Personally, I think the market is a good thing.

In one way I'd be mad at the new retailer; if the actions were done out of spite. That is not what DH is doing.


Cheers.

In one way I'd be mad at the new retailer; if the actions were done out of spite. That is not what DH is doing.



Do you know their history? It could be argued that their entire business plan was originally based on spite :D

DH's presence in these markets functions not as a consumer-friendly influence (ala WN) but rather as a fare-dumping parasitic distortion that ends up hurting the consumer in the long run by adversely impacting the legitimate operators. Furthermore, DH's pricing behaviors negated any chance for "high yields" to develop - the airline hasn't gone a month since its birth without a systemwide firesale of some kind.

Parasitic distortion? Legitimate operators?!?! HUH?!?!

Sir, that's got to be about the dumbest thing I've ever heard posted on a public thread.

I'm just not sure what your point is anymore.

Are you suggesting that there should be some minimum price that the fare should be sold at?

Are you suggesting that the legacy carriers are somehow more legitimate because they have been around longer? Because they have crazy cost structures that made more sense in the 70's than in the year 2000?

What would be your solution? All the LCC's go away and the majors can charge what they want?

Not a single thing you have suggested in this thread points to any constructive understanding of just what a positive outcome would look like.

My point is this: the LCC's and particularly DH are free to set whatever price they want for the seats they have available. If they want to offer $0 fares out of IAD, they can do that. It's up to their management and their shareholders to decide what their business strategy should be and how they should arrange their product mix to try and make money.

United, American, Northwest, and all of the other majors deserve NO protection from new market entrants. They have a huge advantage just by being as large as they are and having the customer base they have. To suggest that a little airline is somehow "threatening" a carrier as large as United is simply ludicrous IMHO.

I can fly from IAD to BOS for $100 RT on DH vs $200 on UA. How is that not consumer friendly? Do you even understand the concept? Markets operate on principles of equilibrium. If we aren't there now then we will be there shortly because no company can operate below their cost for any appreciable amount of time.

If DH goes under, you can bet your bottom dollar that someone else will fill their shoes. The LCC is not going to go away. And if any group deserves blame for fueling their success, it's the majors.

Do you know their history? It could be argued that their entire business plan was originally based on spite :D

I'd say that they had two choices:

1. Take the deal that United offered them where they lose money because of United's mismanagement.

2. Strike out on their own where if they lose money and kick the bucket, it's their own fault.

Which one would you choose? Certain death or 50/50 chance to live?

I don't think spite had anything to do with it. They made a business decision that was a "bet the company" move. We have to respect their determination at a minimum.

If DH goes under, you can bet your bottom dollar that someone else will fill their shoes.

See, that's just it - in most of DH's markets, there were *no shoes to fill* - the market already offered adequate schedules at fare levels customers were willing to bear.

There is a big difference between a LCC moving into underserved markets & implementing a lower-but-still-rational pricing structure and a LCC dumping 10+ daily roundtrip flights into an already-saturated competitive market and charging practically nothing to fill the seats. The first instance is the story of Southwest, jetBlue, and AirTran, all of whom have met with success. The latter is representative of Indy Air, Tower Air, National (LAS), and other failed low-cost-carriers that are remembered for being little more than a costly nuisance to the industry.

Are you suggesting that there should be some minimum price that the fare should be sold at?

Airlines can set their fares at whatever level they like. However, if they want to stick around, they need to set them at a profitable level. The dot-com boom was great. All sorts of companies offered products at fire-sale prices. It was a great time for consumers to get great deals. However, these deals did not last, and many of the companies offering them disappeared.


What would be your solution? All the LCC's go away and the majors can charge what they want?

LCCs like jetBlue, Southwest are turning profits on low fares. DH has a cost structure more akin to a legacy airline than an LCC.


...I can fly from IAD to BOS for $100 RT on DH vs $200 on UA. How is that not consumer friendly? Do you even understand the concept? Markets operate on principles of equilibrium. If we aren't there now then we will be there shortly because no company can operate below their cost for any appreciable amount of time.

Yes - and the numbers from FlyI have shown that their current pricing is below costs. A similar problem is occuring with legacies.


If DH goes under, you can bet your bottom dollar that someone else will fill their shoes. The LCC is not going to go away. And if any group deserves blame for fueling their success, it's the majors.
Who would fill their shoes? FlyI has clearly shown that an airline based on RJs serving small cities from a hub at IAD has failed miserably. Look at Love field. You don't see other airlines chomping at the bit to fill Legend's shoes and fly 50-seaters corss country. FlyI started with a capitalization 3 times larger than jetBlue. jetBlue also turned a profit in its second year of operation (and that year happened to feature September 11, 2001) Unless there is some major miracle, FlyI will not come close to turning a profit in its second year.

I'll agree that the majors can shoulder much of the blame for the success of the low-cost carriers. However, FlyI can hold most of the blame on itself for duplicating many of the high-cost aspects of major airlines (small jets, small airports, hub operation), while charging low fares.

Airlines can set their fares at whatever level they like. However, if they want to stick around, they need to set them at a profitable level. The dot-com boom was great. All sorts of companies offered products at fire-sale prices. It was a great time for consumers to get great deals. However, these deals did not last, and many of the companies offering them disappeared.


LCCs like jetBlue, Southwest are turning profits on low fares. DH has a cost structure more akin to a legacy airline than an LCC.


Yes - and the numbers from FlyI have shown that their current pricing is below costs. A similar problem is occuring with legacies.


Who would fill their shoes? FlyI has clearly shown that an airline based on RJs serving small cities from a hub at IAD has failed miserably. Look at Love field. You don't see other airlines chomping at the bit to fill Legend's shoes and fly 50-seaters corss country. FlyI started with a capitalization 3 times larger than jetBlue. jetBlue also turned a profit in its second year of operation (and that year happened to feature September 11, 2001) Unless there is some major miracle, FlyI will not come close to turning a profit in its second year.

I'll agree that the majors can shoulder much of the blame for the success of the low-cost carriers. However, FlyI can hold most of the blame on itself for duplicating many of the high-cost aspects of major airlines (small jets, small airports, hub operation), while charging low fares.

I would argue that DH is a bit of a different animal. They aren't a pure play LCC because they were operating as a traditional regional carrier with policies and practices that were modeled after their largest customer, United.

In that sense, it was perfectly reasonable for them to use RJ's to service those customers. Now, they need to as quickly as possible move away from those RJ's and get into those 319's.

This is an important point: they had those RJ's for a reason and they needed to keep them going until the could transition to 319's. I don't think their long term plan was to keep the RJ's going. More likely: they had RJ's and RJ mechanics and they saw them as a bridge to the larger aircraft loads.

Look for those RJ's to go away at the earliest possible time.

...those RJs arent going away. DH sold their deposits on the remainig A319s they had on order and gave up their delivery slots for the additional A319s they had on order. that means that they wont be gettin any additional A319s in the near future..



I would argue that DH is a bit of a different animal. They aren't a pure play LCC because they were operating as a traditional regional carrier with policies and practices that were modeled after their largest customer, United.

In that sense, it was perfectly reasonable for them to use RJ's to service those customers. Now, they need to as quickly as possible move away from those RJ's and get into those 319's.

This is an important point: they had those RJ's for a reason and they needed to keep them going until the could transition to 319's. I don't think their long term plan was to keep the RJ's going. More likely: they had RJ's and RJ mechanics and they saw them as a bridge to the larger aircraft loads.

Look for those RJ's to go away at the earliest possible time.

...those RJs arent going away. DH sold their deposits on the remainig A319s they had on order and gave up their delivery slots for the additional A319s they had on order. that means that they wont be gettin any additional A319s in the near future..

That's more likely to be a temporary condition than a permanent one. Those 319's will show up sooner than anyone thinks.

More like to show up at Indy Air's doorstep is the repo man:

"Merrill Lynch estimates that there is a more than 90% chance that Delta Air Lines (nyse: DAL - news - people ) and FLYi (nasdaq: FLYI - news - people ) unit Independence Air will file for bankruptcy within the next few days."

http://www.forbes.com/markets/2005/09/14/airlines-bankruptcy-delta-air-0914markets15.html

With any luck, the madness that is Indy Air will soon come to a long-overdue end...

More like to show up at Indy Air's doorstep is the repo man:

"Merrill Lynch estimates that there is a more than 90% chance that Delta Air Lines (nyse: DAL - news - people ) and FLYi (nasdaq: FLYI - news - people ) unit Independence Air will file for bankruptcy within the next few days."

http://www.forbes.com/markets/2005/09/14/airlines-bankruptcy-delta-air-0914markets15.html

With any luck, the madness that is Indy Air will soon come to a long-overdue end...

You were half-right.

It was Delta and Northwest.

FlyI lives to fight another day!

Maybe when Delta liquidates, DH can get some of their business.

Just hope DH is around for Xmas...

Maybe I should go back to UA/US and let their employees treat me, my family and my friends poorly. :confused:


Cheers.



If US or UA ever treated me or my family poorly, I wouldn't fly them. I'm sorry, but UA and US are much more valuable than DH to the industry. The day DH liquidates, many won't even blink. If UA liquidated, that would be a different story.

Just hope DH is around for Xmas...

Time will tell. Their death has been widely predicted almost since they began operations.

A key difference I think is how the employees at DH act: they are doing everything they can to keep this airline running. That matters a lot. I had a flight to BOS that was going to be delayed because the crew was delayed arriving from another city and had exceeded their FAA allowable flight hours for that day without a rest period.

They got a pilot to volunteer on his day off to come in and fly as the FO.

Try getting that done at UA. The employees at NW basically pushed them into CH11. Remember that an airline isn't just the planes; it's the people that are the heart of the company.

At the end of the day, it will be the people of DH that decide if it's worth the sacrifice.

With any luck, the madness that is Indy Air will soon come to a long-overdue end...

I fail to see how DH could have wronged you so badly that you can't wait to see them drop off the map (unless you work for UAL). Whatever your grievance is with DH, I still think that your comments are over the top. Even though I work in the industry I don't shoot off insensitve statements like "with luck" Delta or Northwest, or even United would go completely under, for a variety of reason, including the significant impact on their passengers and the even greater hardship this would put on their employees. You may be speaking in purely general industry terms, but there is a huge human factor involved, and I was taught not to wish bad on anyone... even your rivals.
Very uncool HeathrowGuy, very uncool! :td: :td: :td: :td:

More like to show up at Indy Air's doorstep is the repo man:

"Merrill Lynch estimates that there is a more than 90% chance that Delta Air Lines (nyse: DAL - news - people ) and FLYi (nasdaq: FLYI - news - people ) unit Independence Air will file for bankruptcy within the next few days."

http://www.forbes.com/markets/2005/09/14/airlines-bankruptcy-delta-air-0914markets15.html

With any luck, the madness that is Indy Air will soon come to a long-overdue end...

The fact of the matter is that these analysts are still engaging in much guess work. The statements from Merrill are case in point. They put NWA's bankruptcy probability at 30% less than DL's, yet the filings were a mere hour apart.


Cheers.

...those RJs arent going away. DH sold their deposits on the remainig A319s they had on order and gave up their delivery slots for the additional A319s they had on order. that means that they wont be gettin any additional A319s in the near future..

Correct, but that is not the end of the discussion, not only regarding the A319s, but also in relation to the RJs.


Cheers.

If US or UA ever treated me or my family poorly, I wouldn't fly them. I'm sorry, but UA and US are much more valuable than DH to the industry. The day DH liquidates, many won't even blink. If UA liquidated, that would be a different story.

No doubt a UA or DL liquidation, which is not likely, would have a more farreaching impact on the industry and on more consumers, employees, etc. Yet, while such a scenario could be significant to many, a DH liquidation would be just as significant to another group of people, even if that group is not as large. Still, I don't think you can put value on something totally by quantity.

Furthermore, there is a converse to this argument. Because UA and DL are so large, their demise could have a much more positive impact on the industry and consumers than the same taking place at DH (I'm wearing another's shoes here as I don't think a DH demise is a good thing, period). Clearly many want DH to fail, but you said it yourself, that won't change the industry-wide capacity much. The US airline sector needs to see a couple majors kicked to the curb.


Cheers.

A key difference I think is how the employees at DH act: they are doing everything they can to keep this airline running. That matters a lot. I had a flight to BOS that was going to be delayed because the crew was delayed arriving from another city and had exceeded their FAA allowable flight hours for that day without a rest period.

They got a pilot to volunteer on his day off to come in and fly as the FO.
Try getting that done at UA.

I was once on a delayed UA flight from CLE where the inbound flight had been delayed causing most of the cabin crew to go 'illegal'. The pilots were still legal, and were planning on ferrying the plane back to Chicago. However, an off-duty FA volunteered to work the flight (in plain clothes), giving them sufficient crew to take off with pax. So there are people on UA that care. (However, I mentioned this story to a friend who was a UA FA, and she became upset that he had gone against some union rule of some sort and shouldn't do something like that - so not everyone puts the company first!)


At the end of the day, it will be the people of DH that decide if it's worth the sacrifice.
Alas, they might not have the choice to make. Again, it seems like the dot-com boom. Many companies had great loyal workforces who went the extra mile for the company. However, the burn rate consumed the cash before the model could bear fruition.

At the moment, there seems to be very little chance for for success. On the other hand, if UA and DL had kept DH on as a commuter a little longer (bringing in more cash), and US liquidated and UA ditched the IAD hub (leaving unfilled demand and reduced price pressure in DC), and fuel prices remained low - then FlyI might be bragging now about their great success story. Alas, that didn't happen, and DH is left with what appears to be a failed business model limited recourses.

No doubt a UA or DL liquidation, which is not likely, would have a more farreaching impact on the industry and on more consumers, employees, etc. Yet, while such a scenario could be significant to many, a DH liquidation would be just as significant to another group of people, even if that group is not as large. Still, I don't think you can put value on something totally by quantity.

Furthermore, there is a converse to this argument. Because UA and DL are so large, their demise could have a much more positive impact on the industry and consumers than the same taking place at DH (I'm wearing another's shoes here as I don't think a DH demise is a good thing, period). Clearly many want DH to fail, but you said it yourself, that won't change the industry-wide capacity much. The US airline sector needs to see a couple majors kicked to the curb.

If DL or UA were to go away, many existing routes would not exist. Some airports would lose their only airline service. If DH were to go away, it would primarily eliminate excess capacity. Of all of DH's routes, only five are not served by other airlines. And of those five, four are served by other airlines via DCA:
IAD-PBI (alternative: US: DCA-PBI)
IAD-RSW (alternative: US: DCA-RSW, AirTran: DCA-RSW, BWI-RSW)
IAD-HSV (alternative: US: DCA-HSV, DL: DCA-HSV)
IAD-SDF (alternative: US: DCA-SDF)
The only airport that is not served by alternative nonstop flights from Washington is SWF. (However, SWF could be considered the outer reaches of the New York Metro area, with HPN just over 30 miles away, and EWR and LGA around 50 miles - all with plentiful service from Washington D.C.)

An interesting statistic shows increases in airport traffic - most of it claimed to be the 'idependence bubble'. FlyI has dumped excess capacity in the market. The market is not ready to pay sustainable prices for the capacity. Eliminating Indy would reduce capacity with very little impact on routes. Eliminating DL would reduce duplicate routes with AirTran out of ATL, though it would would also eliminate many other routes not served by anybody else (especially international routes) Eliminating United would reduce some of the overlap with Indy at IAD and with AA at ORD. However, many small towns in the midwest would lose their service to ORD. At IAD, eliminating United would eliminate more domestic cities than the elimination of FlyI. Furthermore, the international flights would pretty much be gone. Having to drive 45 minutes to get to SWF is not a big deal. Having to swim 4200 miles to get to Munich is.
http://www.airportsusa.com/snapshottemplate.htm

If DL or UA were to go away, many existing routes would not exist. Some airports would lose their only airline service. If DH were to go away, it would primarily eliminate excess capacity. Of all of DH's routes, only five are not served by other airlines. And of those five, four are served by other airlines via DCA:
IAD-PBI (alternative: US: DCA-PBI)
IAD-RSW (alternative: US: DCA-RSW, AirTran: DCA-RSW, BWI-RSW)
IAD-HSV (alternative: US: DCA-HSV, DL: DCA-HSV)
IAD-SDF (alternative: US: DCA-SDF)
The only airport that is not served by alternative nonstop flights from Washington is SWF. (However, SWF could be considered the outer reaches of the New York Metro area, with HPN just over 30 miles away, and EWR and LGA around 50 miles - all with plentiful service from Washington D.C.)

An interesting statistic shows increases in airport traffic - most of it claimed to be the 'idependence bubble'. FlyI has dumped excess capacity in the market. The market is not ready to pay sustainable prices for the capacity. Eliminating Indy would reduce capacity with very little impact on routes. Eliminating DL would reduce duplicate routes with AirTran out of ATL, though it would would also eliminate many other routes not served by anybody else (especially international routes) Eliminating United would reduce some of the overlap with Indy at IAD and with AA at ORD. However, many small towns in the midwest would lose their service to ORD. At IAD, eliminating United would eliminate more domestic cities than the elimination of FlyI. Furthermore, the international flights would pretty much be gone. Having to drive 45 minutes to get to SWF is not a big deal. Having to swim 4200 miles to get to Munich is.
http://www.airportsusa.com/snapshottemplate.htm

I can't help but notice that in all of the arguments from the other side about why DH doesn't have a shot at making it are chock full of statements like "sustainable" and "legitimate" and "excess" and "duplicate".

Before DH came along, prices from IAD to MANY of those citites were absolutely out-of-this-world. When you can fly to Munich for less than you can to RSW from IAD, there is no point in making arguments about what prices are "logical" and "just".

And for most of us, that's the point. Living in DC a hop, skip, and a jump from IAD, the effect of DH has been enormous. And that's a GOOD thing.

People who argue that DH is distorting the market are just kidding themselves and wasting everyone else's time. I can't help but feel that they would also expect Burger King to pay $10/hr to the guy working the fry machine because you can't live on $5.75.

When you look as just how inefficient those majors are, how many millions they overpay their executives for losing billions, how many employees they need to do the same job that other companies do with one, it's becomes painfully obvious that THEIR business models are unsustainable. If they were, we would not have 4 of the largest 7 carriers in BK court right now.

mid,

Please explain how FlyI has a shot at making it. I'd really like to know. I don't want to see them fail, I am pleased they have brought cheaper travel to IAD, they have nice people, etc. However, an airline cannot sell (on average) tickets that do not even cover the cost of transporting the seat indefinitely. The 4 bankrupt carriers don't do that. So please tell me how FlyI can make it.

Airlines do not exist to provide transportation as cheap as possible. They exist to make money for their shareholders. Only Southwest has been successful doing that for an extended period of time and through all economic cycles. FlyI's fares are so cheap that they have no chance at making money at today's fuel prices and can't raise their fares because then even fewer people will fly them. Remember, FlyI would have lost money in Q2 even if they hadn't paid a dime for jet fuel. Do you really think the 4 major carriers operating under Chapter 11 protection would be losing money or be bankrupt if they didn't have to pay for fuel?

Fuel is speeding up FlyI's demise but it is not the cause of it. Perhaps if fuel was cheaper FlyI would be able to turn the airline around with more time.

I can't help but notice that in all of the arguments from the other side about why DH doesn't have a shot at making it are chock full of statements like "sustainable" and "legitimate" and "excess" and "duplicate".

Before DH came along, prices from IAD to MANY of those citites were absolutely out-of-this-world. When you can fly to Munich for less than you can to RSW from IAD, there is no point in making arguments about what prices are "logical" and "just".

AirTran flies from DCA-RSW. If you want to fly for less, you can make the hop-skip-and-jump there. During the summer, Munich flights have almost always been much higher than Florida flights. (off-season for Florida, peak season for Europe.) During the winter, however, there is a lot of excess capacity on the Europe flights. Thus fares are cheap. This is the same argument that has been used to support the low fares FlyI has been offering. Rather have a super-cheap seat than an empty seat. A key difference, however, is that the Munich flights tend to be profitable on a year-round basis. Thus the cheap fares in the off-season can be sustained.


And for most of us, that's the point. Living in DC a hop, skip, and a jump from IAD, the effect of DH has been enormous. And that's a GOOD thing.

People who argue that DH is distorting the market are just kidding themselves and wasting everyone else's time. I can't help but feel that they would also expect Burger King to pay $10/hr to the guy working the fry machine because you can't live on $5.75.

Using the food analogy, the major airlines are like Burger King. Present everywhere, and selling hamburgers for a few bucks. DH is the new upstart burger chain. They come in and open up restaurants right next to existing Burger Kings. They serve burgers for a penny each. They get praises for bringing down the price of hamburgers. However, they only sell hamburgers, fries, and coke. And they are not in all the locations of Burger King. Burger King has been forced to match prices on the humburgers. However, they have kept their other menu items at their regular prices, and even raised some to make up for lost revenue on hamburgers.
Hamburger lovers really enjoy the low prices of this new chain. However, chicken sandwhich lovers are a little upset.

When you look as just how inefficient those majors are, how many millions they overpay their executives for losing billions, how many employees they need to do the same job that other companies do with one, it's becomes painfully obvious that THEIR business models are unsustainable. If they were, we would not have 4 of the largest 7 carriers in BK court right now.

United reported an operating profit for last quarter. DH reported an operating loss. If DH is a 'lean' operation and UA still has a lot of fat to trim, then there is significant hope for UA's model - but not much for DH. Enjoy the low fares while you can. They will need to go up. Maybe DH can stay around and raise them to levels that can sustain it. Or maybe they will go away.

mid,

Please explain how FlyI has a shot at making it. I'd really like to know. I don't want to see them fail, I am pleased they have brought cheaper travel to IAD, they have nice people, etc. However, an airline cannot sell (on average) tickets that do not even cover the cost of transporting the seat indefinitely. The 4 bankrupt carriers don't do that. So please tell me how FlyI can make it.

Airlines do not exist to provide transportation as cheap as possible. They exist to make money for their shareholders. Only Southwest has been successful doing that for an extended period of time and through all economic cycles. FlyI's fares are so cheap that they have no chance at making money at today's fuel prices and can't raise their fares because then even fewer people will fly them. Remember, FlyI would have lost money in Q2 even if they hadn't paid a dime for jet fuel. Do you really think the 4 major carriers operating under Chapter 11 protection would be losing money or be bankrupt if they didn't have to pay for fuel?

Fuel is speeding up FlyI's demise but it is not the cause of it. Perhaps if fuel was cheaper FlyI would be able to turn the airline around with more time.

United:
199.20 USD per person
Leg Flight info Date Depart Arrive Stops
1 United Airlines 804 Sep 15 10:00 pm IAD 11:32 pm BOS Non-stop


Independence Air:
Reg Fare $189.00 USD
Thu, 15 Sep 05
Flight 572
9:15 pm Depart Washington-Dulles, VA (IAD)
10:49 pm Arrive Boston, MA (BOS)

Just a sampling.

You guys always seem to believe that because they are selling some fares at rock bottom prices that means that they do that continuously. In fact, they maintain a price advantage right up until the day of travel against United but they narrow the spread a great deal. They don't sell every last seat at a rock-bottom price.

Also, DH has policies and prices that appeal to last minute travellers as well as leisure travellers. The thing is: a change fee on DH is something like $35. On United, it's about $100. If you travel for business like I do, then which one would you choose if there was even the slightest chance that you might have to change your flight?

A LOT of travellers on DH are finding out that they are more convenient from IAD for last minute travel and they are more flexible when it's necessary to change plans. I'm one of them. A BIG reason why I'm choosing them for travel to BOS is that they have a MUCH lower change penalty. I also get to leave from the B-gates at IAD (which I can walk to) than the G or C-gates. Another plus.

Using the food analogy, the major airlines are like Burger King. Present everywhere, and selling hamburgers for a few bucks. DH is the new upstart burger chain. They come in and open up restaurants right next to existing Burger Kings. They serve burgers for a penny each. They get praises for bringing down the price of hamburgers. However, they only sell hamburgers, fries, and coke. And they are not in all the locations of Burger King. Burger King has been forced to match prices on the humburgers. However, they have kept their other menu items at their regular prices, and even raised some to make up for lost revenue on hamburgers.
Hamburger lovers really enjoy the low prices of this new chain. However, chicken sandwhich lovers are a little upset.


No. UA is Chili's and DH is Burger King. Practically the same thing but for more money.


United reported an operating profit for last quarter. DH reported an operating loss. If DH is a 'lean' operation and UA still has a lot of fat to trim, then there is significant hope for UA's model - but not much for DH. Enjoy the low fares while you can. They will need to go up. Maybe DH can stay around and raise them to levels that can sustain it. Or maybe they will go away.

How much money did UA lose in the preceeding 4 qtrs? How does that compare to DH? How much were they losing before they filed? Keep in mind that they are operating in Ch11, which isn't a fair comparison since they got to stick it to a good number of their suppliers and of course, the employees.

I don't think you can compare an airline operating under BK protection for the last 37 months with one that (essentially) just got started 12 months ago. DH is still paying their bills.

United:
199.20 USD per person
Leg Flight info Date Depart Arrive Stops
1 United Airlines 804 Sep 15 10:00 pm IAD 11:32 pm BOS Non-stop


Independence Air:
Reg Fare $189.00 USD
Thu, 15 Sep 05
Flight 572
9:15 pm Depart Washington-Dulles, VA (IAD)
10:49 pm Arrive Boston, MA (BOS)

Just a sampling.

Seriously????

Quoted fares do not include the September 11th Security fee of up to $5 each way and any applicable Passenger Facility Charges (PFC’s) of up to $9 each way. Fares are also subject to the Federal Segment Tax of up to $3.20 per segment. A segment is defined as a takeoff and landing.


United displays fares inclusive of all those charges. Fare is exactly the same. Interesting, Southwest only wants $100.20 for a flight tonight BWI-BDL and $101.20 for BWI-PVD. Interesting.



You guys always seem to believe that because they are selling some fares at rock bottom prices that means that they do that continuously. In fact, they maintain a price advantage right up until the day of travel against United but they narrow the spread a great deal. They don't sell every last seat at a rock-bottom price.
As I pointed out, it is the same fare. UA matches most of their fares, they just allocate a lot less inventory to them. Additionally, FlyI's reported Q2 yield pretty much proves that they aren't selling many of those higher fares because their average passenger's fare doesn't even cover the cost of the seat.


Also, DH has policies and prices that appeal to last minute travellers as well as leisure travellers. The thing is: a change fee on DH is something like $35. On United, it's about $100. If you travel for business like I do, then which one would you choose if there was even the slightest chance that you might have to change your flight?
That is all well and good but is it making people fly DH? Are those people profitable? Obviously not!


A LOT of travellers on DH are finding out that they are more convenient from IAD for last minute travel and they are more flexible when it's necessary to change plans. I'm one of them. A BIG reason why I'm choosing them for travel to BOS is that they have a MUCH lower change penalty. I also get to leave from the B-gates at IAD (which I can walk to) than the G or C-gates. Another plus.
Again, that is all well and good, but why aren't they printing money then? Back to my original question: Please explain how FlyI has a shot at making it. You have stated that when UA and DH charge the same fare you will fly DH. There are other people like you. Apparantly, there are not enough for DH to even be CLOSE to breaking even. Are people going to wake up tomorrow and realize that UA sucks and they should fly DH? Please explain how FlyI has a shot at making it.

How much money did UA lose in the preceeding 4 qtrs? How does that compare to DH? How much were they losing before they filed? Keep in mind that they are operating in Ch11, which isn't a fair comparison since they got to stick it to a good number of their suppliers and of course, the employees.

I don't think you can compare an airline operating under BK protection for the last 37 months with one that (essentially) just got started 12 months ago. DH is still paying their bills.
You have to compare how much they lost relative to their sizes. Relative to their sizes, UA is doing a hell of a lot better. UA also has a few assets, like landing slots at LHR & traffic rights at NRT.

Is it fair that UA had pensions that date to a regulated industry? Is it fair that the entire industry pay scale is based on seniority from unions in a regulated environment?

Life isn't fair. Neither is business.

Also, DH has policies and prices that appeal to last minute travellers as well as leisure travellers. The thing is: a change fee on DH is something like $35. On United, it's about $100. If you travel for business like I do, then which one would you choose if there was even the slightest chance that you might have to change your flight?

A LOT of travellers on DH are finding out that they are more convenient from IAD for last minute travel and they are more flexible when it's necessary to change plans. I'm one of them. A BIG reason why I'm choosing them for travel to BOS is that they have a MUCH lower change penalty. I also get to leave from the B-gates at IAD (which I can walk to) than the G or C-gates. Another plus.
In the short run, FlyI is very pro-consumer. I do not think that you will find much argument there. The dot-coms were also very pro-consumer. You could get $10 off a 50 pound bag of dog food and have it shipped for free. However, these pro-consumer models don't earn enough money for the company to stay around. FlyI is not a philanthropy. It's a business.

Again, that is all well and good, but why aren't they printing money then? Back to my original question: Please explain how FlyI has a shot at making it. You have stated that when UA and DH charge the same fare you will fly DH. There are other people like you. Apparantly, there are not enough for DH to even be CLOSE to breaking even. Are people going to wake up tomorrow and realize that UA sucks and they should fly DH? Please explain how FlyI has a shot at making it.

<sigh>

I'll tell you what: We've been going on round-and-round on this issue. You folks seems to believe that DH is doing BAD BAD things and mucking it up for the whole industry. They're charging less for flights and in general making it hard for the majors to cover their costs. That they are charging less than even THEY need to cover their costs.

I believe that there is more to this than meets the eye. That DH is in reality an old airline that's transitioning to a LCC and that they have the management in place to know what they can charge for a flight and still make money. That they are doing everything they can to mirror the policies and practices that other LCCs do and that they are being innovative in how they interact with their customers to serve them and make their life easier. Because they know their very survival is at stake and they saw they had a shot to survive by radically transforming their business.

Since neither of us will really know the answer until this whole story ends (or does not), then I'm done.

I'll believe what I believe and fly who I fly and you guys do the same.

But you'll never convince me that they don't have the right to do what they are doing and that they are having a positive impact on the industry. I saw a piece just today on CNBC where the former head of the Civil Aeronautics Board basically came out and said that they fully expected that there would be failures of at least some of the major airlines after deregulation. What everyone didn't expect was how long it would take.

So you guys wait for DH to fail and I'll wait and see what happens with UA, US, DL, and NW.

CNN Article: Blame Airline Management (http://money.cnn.com/2005/09/15/news/fortune500/airline_woes/index.htm)

<sigh>

I'll tell you what: We've been going on round-and-round on this issue. You folks seems to believe that DH is doing BAD BAD things and mucking it up for the whole industry. They're charging less for flights and in general making it hard for the majors to cover their costs. That they are charging less than even THEY need to cover their costs.

I believe that there is more to this than meets the eye. That DH is in reality an old airline that's transitioning to a LCC and that they have the management in place to know what they can charge for a flight and still make money. That they are doing everything they can to mirror the policies and practices that other LCCs do and that they are being innovative in how they interact with their customers to serve them and make their life easier. Because they know their very survival is at stake and they saw they had a shot to survive by radically transforming their business.

Since neither of us will really know the answer until this whole story ends (or does not), then I'm done.

I'll believe what I believe and fly who I fly and you guys do the same.

But you'll never convince me that they don't have the right to do what they are doing and that they are having a positive impact on the industry. I saw a piece just today on CNBC where the former head of the Civil Aeronautics Board basically came out and said that they fully expected that there would be failures of at least some of the major airlines after deregulation. What everyone didn't expect was how long it would take.

So you guys wait for DH to fail and I'll wait and see what happens with UA, US, DL, and NW.

CNN Article: Blame Airline Management (http://money.cnn.com/2005/09/15/news/fortune500/airline_woes/index.htm)


mid,

I understand your frustration. It is just like whenever DH posts a sale and most folks here act as if they are having sales too frequently. In actuality, Independence's sales are usually no more often than other carriers. Glad to see you are a big supporter.


Cheers.

mid,

Please explain how FlyI has a shot at making it. I'd really like to know. I don't want to see them fail, I am pleased they have brought cheaper travel to IAD, they have nice people, etc. However, an airline cannot sell (on average) tickets that do not even cover the cost of transporting the seat indefinitely. The 4 bankrupt carriers don't do that. So please tell me how FlyI can make it.

Airlines do not exist to provide transportation as cheap as possible. They exist to make money for their shareholders. Only Southwest has been successful doing that for an extended period of time and through all economic cycles. FlyI's fares are so cheap that they have no chance at making money at today's fuel prices and can't raise their fares because then even fewer people will fly them. Remember, FlyI would have lost money in Q2 even if they hadn't paid a dime for jet fuel. Do you really think the 4 major carriers operating under Chapter 11 protection would be losing money or be bankrupt if they didn't have to pay for fuel?

Fuel is speeding up FlyI's demise but it is not the cause of it. Perhaps if fuel was cheaper FlyI would be able to turn the airline around with more time.

In my opinion, it would be very difficult for DH to be successful with its current cost structure, which is what you are pointing to. However, while DH does not have the assets that UA, US, DL and NW possess, its ability to restructure is not as impossible as all the journalists & analysts think. I'm not saying it is going to work, but on the other hand, liquidation is not inevitable either.


Cheers.

Is it fair that UA had pensions that date to a regulated industry? Is it fair that the entire industry pay scale is based on seniority from unions in a regulated environment?

Life isn't fair. Neither is business.

I'm glad you wrote your last line, because my first question was what fairness had to do with anything. Those pensions that predated regulation were also renewed during contract negotiations every time they came up. UA had the choice to keep them or reject them.

It *may* be fair to say that the entire industry pay scale (except for mangement, IT, and other various white collar 9-5 type jobs) is based on seniority from unions in a regulated environment.

But I challenge you to come up with a better pay system that is objective and not subjective. For the last five years I've worked in aviation, I have never had union representation. Yet, all of my jobs have pretty much mirrored or closely mirrored a "union" seniority system. When it comes right down to it, pay scales WILL be tied to years of service and nothing more. These people perform assembly line type jobs, and as such, have the same worker output. There is nothing to differentiate one person's performance from another person's performance. (That WOULD be the basis for a merit evaluation, right?). The only enhancement I could see would have recognition for total experience, but it would still be strictly tied to years served.

<sigh>
You don't want to know how many times I've done that... :D


I'll tell you what: We've been going on round-and-round on this issue. You folks seems to believe that DH is doing BAD BAD things and mucking it up for the whole industry. They're charging less for flights and in general making it hard for the majors to cover their costs. That they are charging less than even THEY need to cover their costs.
It isn't a belief, it is a fact as shown in their financial statements that DH is not covering costs with every ticket sold. While they are certainly hurting their competitors, that is business and I don't have a problem with it.



I believe that there is more to this than meets the eye. That DH is in reality an old airline that's transitioning to a LCC and that they have the management in place to know what they can charge for a flight and still make money. That they are doing everything they can to mirror the policies and practices that other LCCs do and that they are being innovative in how they interact with their customers to serve them and make their life easier. Because they know their very survival is at stake and they saw they had a shot to survive by radically transforming their business.

I disagree that they have the 'management in place to know what they can charge for a flight and still make money.' They've changed their revenue management strategy several times already. While there is nothing wrong with adapting to change, I think it is more of a sign that they weren't particularly well versed in revenue management. When DH was flying for UA, who set the fares? UA. DH just got paid as long as the flight took off, no matter if the plane was full or not.


I'll believe what I believe and fly who I fly and you guys do the same.

Thats fine, and I have no problem flying FlyI. I like them. I just don't see how they will exist much longer at the rate they are going.


But you'll never convince me that they don't have the right to do what they are doing and that they are having a positive impact on the industry. I saw a piece just today on CNBC where the former head of the Civil Aeronautics Board basically came out and said that they fully expected that there would be failures of at least some of the major airlines after deregulation. What everyone didn't expect was how long it would take.

They certainly have the right to lose as much money as they want (unless the stockholders sue them, I have no idea about the legalities WRT that, but if I were a stockholder I'd be ticked to lose 95% of the value of my stock in a little over a year) but I don't think you can claim they have had a positive effect on the industry, at least not yet. It depends how we define 'posititve effect on the industry'. If a positive effect is the health of all the carriers, innovations and advancements, then they have not had a positive effect. Perhaps once they shut down, the removal of all their CRJ capacity will be a positive effect. They have had a positive effect on the communities they serve who can now fly to all kinds of places cheaper than before.


So you guys wait for DH to fail and I'll wait and see what happens with UA, US, DL, and NW.

Anyone wanna bet which one of those 5 fails first?

I don't think liquidation is inevitable, but FlyI has their back against the wall. Perhaps they could file Ch11 and reject the leases on all their CRJs and emerge very quickly flying only A319s. But I don't think they want to admit that their 'LCC plan with RJs' has failed.

DHAST- you're right, there is probably not a better way than seniority, though in an industry without unions workers would be able to move between carriers much more easily. IMHO the current system rewards experience more than it should, as there are diminishing returns by earning more and more 'experience' in the same position but the pay scales seem to reward that experience that doesn't really add much value to the worker. This is another thread. Someone said 'it isn't fair that UA can be in Ch11 for decades' so I was trying to convey how the world is not fair.

But, wouldn't, say, 2 IAD-BOS-IAD and maybe 2 IAD-CLT-IAD, all with roughly 110 pax each and an average fare of say $75 garner a BIGGER return than just one daily transcon for that same a/c? More likely with the same amount of pax and somewhere around the same ticket price?

IAD-LAX-IAD (one flight out and back) 110 pax X $125 avg. fare X 2 legs = $27,500
IAD-BOS-IAD (2 flights out and back) 110 pax X $75 avg fare = $33,000
- plus -
IAD-CLT-IAD 110 pax X $75 avg fare = $33,000

Total rev. for the LA turn = $27,500
Total rev for the 2 BOS and 2 CLT turns = $66,000 combined.

Independence is wise not to deploy their a/c resources on transcons. If an a/c needs maint. or a crew member gets ill, they have to CX a flight, thereby stranding pax. On the east coast, a quick flight to the destination with a spare a/c is in order. Not possible on the left coast.

Sorry been away working for a few days....

Thats exactly my point.....its a revenue issue with the west coast not so much as a cost one!

And yes east coast routes are higher yielding..but also higher cost too.

DC

I believe that there is more to this than meets the eye. That DH is in reality an old airline that's transitioning to a LCC and that they have the management in place to know what they can charge for a flight and still make money. That they are doing everything they can to mirror the policies and practices that other LCCs do and that they are being innovative in how they interact with their customers to serve them and make their life easier. Because they know their very survival is at stake and they saw they had a shot to survive by radically transforming their business.

DH has 15 years experience operating airplanes. Few would deny that they have been doing a good job at operating flights now. In fact, I'd bet most would agree that on the operations side they are doing a whole lot better job than they were doing as ACA.
Their problem is in the areas where it has no experiene - scheduling, selling, etc. You can almost see what they were thinking: "well, people like flexibility, so we'll have lots of flights each day... And selling through agents is expensive, so we'll have everyone book online... Oops, people haven't heard of the new airline, and don't see them anywhere - maybe they should be listed in a GDS.


But you'll never convince me that they don't have the right to do what they are doing and that they are having a positive impact on the industry. I saw a piece just today on CNBC where the former head of the Civil Aeronautics Board basically came out and said that they fully expected that there would be failures of at least some of the major airlines after deregulation. What everyone didn't expect was how long it would take.

Now wait - haven't there already been a number of failures? TWA, PanAm, Eastern, etc. All big names that have bit the bucket.

It's too bad to see DH about to go bankrupt because they are excellent.

DH has 15 years experience operating airplanes. Few would deny that they have been doing a good job at operating flights now. In fact, I'd bet most would agree that on the operations side they are doing a whole lot better job than they were doing as ACA.
Their problem is in the areas where it has no experiene - scheduling, selling, etc. You can almost see what they were thinking: "well, people like flexibility, so we'll have lots of flights each day... And selling through agents is expensive, so we'll have everyone book online... Oops, people haven't heard of the new airline, and don't see them anywhere - maybe they should be listed in a GDS.


You can see that happening, but actually in terms of selling tickets, they have met the goals set forth in the initial plan for Independence Air for revenue. You might argue that that goal was set too low, but I still think things have gone awry on the cost side.

Also, I don't think you can blame the scheduling people. They worked with the hand they were dealt. When you start out with 87 CRJs you need to try and get some revenue for them instead of paying the leases on planes that are sitting in the hangar. That situation has been vastly improved over time.


Cheers.

You can see that happening, but actually in terms of selling tickets, they have met the goals set forth in the initial plan for Independence Air for revenue. You might argue that that goal was set too low, but I still think things have gone awry on the cost side.

Also, I don't think you can blame the scheduling people. They worked with the hand they were dealt. When you start out with 87 CRJs you need to try and get some revenue for them instead of paying the leases on planes that are sitting in the hangar. That situation has been vastly improved over time.

Didn't the original plan predict a profit by 3Q 05? Based on previous figures that show revenue wasn't covering costs - even without fuel, I place the odds pretty slim on that happening.

As for scheduling, they were definately dealt a crummy hand. I'm sure there was a lot of thinking to the tune of 'lets hope Delta hangs on for a while, before dumping the planes back on us.'

DHAST- you're right, there is probably not a better way than seniority, though in an industry without unions workers would be able to move between carriers much more easily. IMHO the current system rewards experience more than it should, as there are diminishing returns by earning more and more 'experience' in the same position but the pay scales seem to reward that experience that doesn't really add much value to the worker. This is another thread. Someone said 'it isn't fair that UA can be in Ch11 for decades' so I was trying to convey how the world is not fair.

Whlinder, without using those words, I guess I was trying to imply what you said... airline workers would be able to move between airlines much more easily. Everybody blames "unions" for the pay scales that are in place. Would you believe that the airlines actually SUPPORT the current system? The reason being is that they enjoy a cost ADVANTAGE with the current system. If you were to move between airlines and keep your seniority so to speak, after 5 years at Airline A, transfer to Airline B, and receive year 5 pay at Airline B, the Airline A would be forced to match the pay scales at Airline B, creating UPWARD demand on salaries. With the current system, the airline can jam paycuts and what not down their employees' throats, because the paycut is still better off than the MASSIVE paycut they would receive by starting over somewhere else. This actually creates a downward pressure on payscales, keeping the airline management HAPPY.

Looks like those closest to the situation (http://www.washingtonpost.com/wp-dyn/content/article/2005/09/13/AR2005091302046.html) aren't so optimistic about DH's prospects.

I think their business plan was predicated on $40 barrels of oil, too. That looks crazy now, but wasn't unreasonable then. They probably expected to get better yields on transcons, not seeing the length the majors could go to cut costs and hold prices down so much. They saw WN and B6 selling without GDS and making money, so at first glance you just need to replicate them. What's missing from WN is the large metro point-to-point network, and from B6 is an airport easily accessed through mass transit. (IAD generally sucks to get to if you're not driving, whereas JFK has pretty easy access from the NYC subway ssytem and the AirTrain and its predecessor.)

My point is this: the LCC's and particularly DH are free to set whatever price they want for the seats they have available. If they want to offer $0 fares out of IAD, they can do that. It's up to their management and their shareholders to decide what their business strategy should be and how they should arrange their product mix to try and make money.

RyanAir sells $0 (or technically GBP0.01 probably because of some legal issue) fares all the time and somehow manages to do fine with that, so it's not all that insane a business model. (I don't know enough about RyanAir to say anything more than that except it doesn't look like an airline I want to fly on since I prefer major metro airports.) They've got at least 100 routes right now that are for sale with a zero fare -- just pay taxes. They probably make some money with other optional charges like selling drinks and food, but it's still a zero fare to start with.

I think their business plan was predicated on $40 barrels of oil, too. That looks crazy now, but wasn't unreasonable then. They probably expected to get better yields on transcons, not seeing the length the majors could go to cut costs and hold prices down so much. They saw WN and B6 selling without GDS and making money, so at first glance you just need to replicate them. What's missing from WN is the large metro point-to-point network, and from B6 is an airport easily accessed through mass transit. (IAD generally sucks to get to if you're not driving, whereas JFK has pretty easy access from the NYC subway ssytem and the AirTrain and its predecessor.)

I think a bigger factor missing was pace of startup. WN does list (to a limited extent) in GDS. They actually had a greater GDS presence early on. Both B6 and WN started out with just a few flights, and gradually expanded. WN flew to Dallas, Houston, and San Antonio, and could fill planes both ways advertizing in those cities. B6 was something like JFK, upstate New York and Florida. Now, when B6 or WN goes to a new city, there is oftena great deal of free publicity and instant awareness. FlyI launched with an entire network in a few short months. If it were not for Flyertalk, I would have had no idea that they even existed in Chicago. (though I do recall seeing a good amount of advertizing in D.C.) The needed advertizing to sufficiently reach every city in the large network would probably cost more than the cost of simply listing in a GDS. (Which helps to explain the eventual decision to add distribution channels.)

The market is another good point. While DC may be one of the top 5 metro areas, the IAD market is much smaller, especially for a short haul flights. Driving from Columbia, Maryland to IAD for a flight Sao Paulo might make sense. Driving to IAD for a flight to Newark doesn't - especially when flights are available at BWI. And if cost is a concern, the drive to EWR is viable.

Transportation is another key factor. Metro goes to National. From the District it's under $2 each way, with fast, frequent service. To Dulles, transit is a hassle and more expensive. Taxi or driving and parking at the airport are even more expensive, but allow for more schedule flexibility. A fare from IAD may be $15 cheaper, but the ground transport costs eat this up and then some.

There potential market looks something like:
1) Origin market - primarily Northern Virginia (Loudon County, etc.) People that would need to drive to the airport, and find Dulles closer.
2) Destination market - this includes people traveling to Northern Viriginia, as well as people traveling to elsewhere in metro DC who are willing to sacrafice convenience for price.
3) Connecting traffic

United has an advantage in that they offer long haul and overseas service from IAD that cannot be offered from DCA. Thus, they have a larger potential market area for O/D traffic, as well as additional feeder traffic for their short haul service. United also has built in loyalty from years of service. And, they potentially have lower costs on the short haul flights. (DH did leave UAX due to the low rates that UA wanted to charge.) DH is thus left with competing primarily on price to attract new customers, while trying to retain them on service.

I'm not surprised the business plan was built on $40 barrel oil; however they would have still lost money in Q2 had they not paid anything for oil. Had oil stayed $40, they would certainly have more time to rectify their problems. That is a common theme with FlyI's problems- taking too long to fix problems. Not being in the GDS' at startup was a bad decision, one that many people on here scratched their heads at. Both B6 & WN used to be in the GDS' and they still are to a very limited extent.

FR (RyanAir) crams their planes with seats, their pitch is something like 28 inches or something obscene, just packing their plane with seats. And it is really no-frills. DH has much more onboard service plus they started flying with 50 seat planes, not 150 seaters.

I could go on and on, about their marketing failures, their poor revenue management, creating an inefficient route system, etc, but we can do that later.

Low-fare Independence taxis toward bankruptcy (http://www.detnews.com/2005/business/0509/20/A01-320682.htm)

When they first announced that they were going to go independent, I wanted to root for them to succeed. And then I saw their business plan...

My chief regret is that I didn't have the cojones to short their stock immediately. There were so many flaws in the plan, that I figured that they would come to their senses and either rejoin the UAX fold or would be open to a quiet takeover.

I wish that I had saved the Powerpoint presentatations that they used to have posted on their website. They did make for entertaining reading.

Every iteration of their plan seemed to feature higher aircraft utilization (10-14 hrs/day), quicker turns, more markets, etc. In looking at their initial route map, it appeared that they were making a conscious effort to pick a fight with every carrier in the US simultaneously. Whatever happened to "choose your battles."

Fuel prices may apply the coup de grace, but all of the other wounds were self-inflicted.

I wish that I had saved the Powerpoint presentatations that they used to have posted on their website. They did make for entertaining reading.

I've got a copy of one of them; PM me your email and I'll send it to you.

It was entertaining back then and even more so now.

I think they really thought all these DC metro people would drive all the way out to fly from IAD. Connecting traffic wasn't a huge element in at least one of the plans I saw -- it was all these people in DC that would fly on DH everywhere because they didn't currently have cheap options, and that's why they didn't advertise as much at the other stations in the network. The failure is that there aren't enough people in northern VA to support that type of airline, and the business travelers to DC would much rather go to DCA.

If there had been some way to do this at DCA, I'd give them a much better chance just because of the subway connection, but it's just too difficult to get to IAD from metro DC. Even to go to New York, it's faster to take the slow Amtrak to Penn Station than drive out to IAD and take the RJ to JFK and then subway into the city.

If there had been some way to do this at DCA, I'd give them a much better chance just because of the subway connection, but it's just too difficult to get to IAD from metro DC. Even to go to New York, it's faster to take the slow Amtrak to Penn Station than drive out to IAD and take the RJ to JFK and then subway into the city.

Being curious, I looked at in detail. Two options for traveling from Union Station to Penn Station, walk up fares.
Union Station-IAD 42 mins (google maps)
IAD-JFK 1:10 [up to 1:24 scheduled] - $219.20
JFK-Airtrain to Jamaica- 14 mins - $5
LIRR - Jamaica to Penn Station - 21 minutes - $7
Total time: 2:41
+ arrive 30 minutes early at airport :30
+ exit plane at travel to airtrain :15
+ wait for LIRR :05
Grand total: 3:31 (most optimal transfers)
Total cost: $231.20 (assuming free drop off at IAD)

Regional Train - 3:15 [range from 3:10-3:20] - cost $80
+ arrive 10 minutes early at Union Station
Total : 3:25

+ arrive 30 minutes early at airport :30

You've got to be kidding. At IAD? Between the security lines and the moon buggies, you need to allocate at least an hour.

WN does list (to a limited extent) in GDS.

What GDS is WN in? I know they publish their Gov't fares in ATP but I don't think they are in a GDS.

I agree with you that DH should have been in all GDS's from the get go. For an airline of their size with no (public) service history not to be in a GDS is downright stupid.

What GDS is WN in? I know they publish their Gov't fares in ATP but I don't think they are in a GDS.

I agree with you that DH should have been in all GDS's from the get go. For an airline of their size with no (public) service history not to be in a GDS is downright stupid.
Sabre. I just had our travel agent book some WN flights for us. The WN flight was the first one that came up when looking in the GDS. (It probably helped that they were the only nonstop on the route.) However, as I recall, it only shows availability - the flights still need to be booked with WN. (though I may be wrong on this.)

You used to be able to get WN flights on itn.net before itn changed formats.

Being curious, I looked at in detail. Two options for traveling from Union Station to Penn Station, walk up fares.
Union Station-IAD 42 mins (google maps)
IAD-JFK 1:10 [up to 1:24 scheduled] - $219.20
JFK-Airtrain to Jamaica- 14 mins - $5
LIRR - Jamaica to Penn Station - 21 minutes - $7
Total time: 2:41
+ arrive 30 minutes early at airport :30
+ exit plane at travel to airtrain :15
+ wait for LIRR :05
Grand total: 3:31 (most optimal transfers)
Total cost: $231.20 (assuming free drop off at IAD)

Regional Train - 3:15 [range from 3:10-3:20] - cost $80
+ arrive 10 minutes early at Union Station
Total : 3:25

I'd go with EWR. Always seems much eaiser and faster for getting to Manhattan.


Cheers.

I'd go with EWR. Always seems much eaiser and faster for getting to Manhattan.

Isn't EWR-Airtrain-NJTransit about the same time (and cost) as JFK-Airtrain-LIRR?

Of course EWR-NJTransit Bus-PATH train is a lot faster than NYTransit Bus to Subway - especially if you are going downtown. (Though with a Metrocard NYTransit ends up a little cheaper.)

However, unless you are right next to Dulles, its not that great to fly.

Isn't EWR-Airtrain-NJTransit about the same time (and cost) as JFK-Airtrain-LIRR?

Of course EWR-NJTransit Bus-PATH train is a lot faster than NYTransit Bus to Subway - especially if you are going downtown. (Though with a Metrocard NYTransit ends up a little cheaper.)

However, unless you are right next to Dulles, its not that great to fly.

Agreed, flying can be a pain and on this route rail makes much sense. However, there are a couple issues. Head over to the Amtrak forum and you'll see I've been a big supporter in the past. Yet, the inconsistency of service is troublesome. ATC delays can be horrible in the NE, but not as bad as some of the delays I've experienced on the NEC. Also, for those buying well in advance flying is usually cheaper. For those buying close in, I think the airlines flying WAS-NYC are competing more against the Acela/Metroliner. This takes the rail fare to $157. Still less, but at least more in range.


Cheers.

Agreed, flying can be a pain and on this route rail makes much sense. However, there are a couple issues. Head over to the Amtrak forum and you'll see I've been a big supporter in the past. Yet, the inconsistency of service is troublesome. ATC delays can be horrible in the NE, but not as bad as some of the delays I've experienced on the NEC. Also, for those buying well in advance flying is usually cheaper. For those buying close in, I think the airlines flying WAS-NYC are competing more against the Acela/Metroliner. This takes the rail fare to $157. Still less, but at least more in range.

Service also becomes an issue. A first class Acela walk up is less than a FlyI walk up - and a whole lot more productive and comfortable. (You can actually get work done easily on those long Amtrak delays. It is much more difficult when on the plane, or waiting at the airport.)

I don't think IAD could ever succeed as a large domestic hub airport. Sure, it is in booming northern viriginia. However, it lacks good transit options, and really has a small area to draw passengers from. The main advantage it has are flight restrictions at DCA. United can support the short haul service from IAD because it is used to fill long haul flights that can't go to DCA. However, without the long haul's there doesn't seem to be much hope. FlyI appeared to be following this model. However, they still have not been able to build up the long-haul service to justify the short hauls.

Service also becomes an issue. A first class Acela walk up is less than a FlyI walk up - and a whole lot more productive and comfortable. (You can actually get work done easily on those long Amtrak delays. It is much more difficult when on the plane, or waiting at the airport.)

I don't disagree. I've spent plenty of time working through those delays, but they are still frustrating. BTW, Acela walk up for FC is more than FLYi. DH with taxes to EWR or JFK is $219.20. The Acela peak First fare is $236. It is amazing to see what people will pay for that short flight to the NYC area and they do pay it.


Cheers.

I'd looked at this because I originally suggested to some people that DH would see an increase in travel with the Acela system down, and that was disputed by a few people. When I looked into it in more detail, I found what was noted before -- the timing was basically the same and the cost much cheaper for the train, especially for people in metro DC instead of the northern VA population.

I'd looked specifically about JFK as a Acela replacement when that came up, but EWR should be just as valid for the pricing/timing comparison noted earlier. Basically, I realized there wouldn't be that many people switching from Amtrak to DH because they had to take the regular train instead of Acela (which is only a few minutes faster on DC -> NYC).

http://www.marketwatch.com/tvradio/playerFull.asp?media=0&band=0&remPref=1&guid=%7BDF3A2AD9-82DB-4339-AADF-C76ADB0A644E%7D&siteid=yhoo

The second half discusses the possibility of Independence in bankruptcy.