You somehow forget highly succesful LCC's like EasyJet, RyanAir, Air Berlin, and Germanwings.
Quote:
Originally Posted by sxf24
Aren't banks and financiers part of the market?
1, 2 and 4 are absolutely correct. However, I would have to disagree on 3 as well as the statement that LCCs are consistently profitable. For the most part, LCC carriers are focused on increasing market share and have historically failed at a much greater rate than major carriers.
There is one significant exception: WN. The other LCCs with good records of profitability are AirTran and Allegiant. The rest of the significant LCCs - Frontier, Spirit, Virgin America and JetBlue (not to mention SkyBus) have been iffy performers at best.
The difference is the context. At this point, what we have is a wake for a murder victim, and friends of the murderer show up and start telling us that the murderer did the right thing. That accounts for the atmosphere.
Quote:
Originally Posted by GTITAN
Ahh goodness, I remember when we use to have spirited, jovial and almost always humourous debates including without limitation, about the way to maximize EEP, Miles Safari, the fall/winter/valentines day sales in WBC to Europe and/or Asia, now we debate in not always a pleasant way, the whole house of card tumbling in be it NW-DL, the industry, corporate greed, etc. We're just not a fun group anymore (with good reason albeit), but sadly I digress.
Just wanted to add my very minimal two cents to the debate here. First, to those posters who tend to believe that additional government regulation may solve the issue I humbly think that tends not to be consistent with the cultural ethos here in the States, laissez faire, free markets, economic liberty and all that. This is especially true that once you deregulate there is a strong tendency not to want to re-regulate. I appreciate the logic and understand the genesis of the argument as in Western Europe, a more "government influenced" economy has had some success, but with the price of oil and all the rest aforementioned, I don't think that regulation is really going to help. Having said that thanks for the thought provoking and forceful advocacy of the position. It is always good to take a look at things from a point of view somewhat different than your own.
To those that advocate that the problem is one of the "riff raff" passengers who are stealing away on transcons for $75 r/t a/i and that overly generous FFP's have killed the industry, I also understand the point, these folks in the grand scheme of things probably don't add that much value, but I honestly don't think that they're all that deleterious either. Using FT to gage their nos. is really the equivalent to me of using Alcoholics Anonymous to claim that everyone who drinks is an alcoholic, the perspective is simply skewed. There is some revenue from these folks, and they have a place as well. While the airlines make mistakes, they are not always completely incompetent, if a "Cadillac (or insert your favorite "luxury car" of choice) Airline" could be constructed domestically it surely would have been as MikeMpls and AvidFlyer have argued tirelessly and with great persuasion. UA tried it with PS and look at it, it is trying to merge too. As others have noted, businesses crammed down the airlines throats, discounted fares for their employees and if the airlines try to rectify it, as has happened before, road warriors will video conference, telecommute or what have you. The fares out there are a reflection of the market.
As the pro-mergers folks note, consolidation is a way for the pro-merger folks to cut capacity, attempt to increase revenue and bring costs into line. Why has Wall Street not reacted with all much glee to the merger? Simply, the management folks have said there won't be any hub closures, force reductions, etc. That's what the Street wants to hear, and we all know that it will come perhaps not today, perhaps not tomorrow but it will. First, I again appreciate the forceful advocacy of this position to consolidate, build the "luxury airline" and eliminate the riff raff, but it seems both from a market reality standpoint, that mergers well perhaps "well intended" aren't going to solve the problem because I believe as GuWonder (a poster who I have the utmost respect for) so adroitly noted in another forum, failure will come to DL, NW, etc at some point irregardless of merger or no merger sad but true.
So, where does that leave us, let me propose that capacity cuts can be done without mergers. WN tends to be successful why is that? Lots of reasons I guess (not the least of which was the fuel hedge a topic of another day), but a major one is it took on the logic of the hub and spoke system. Maybe the legacies can re-evaluate that. Then perhaps the "luxury airline" can be focused around international clients, CX, BA, SQ etc do what they do because you can still find folks who will pay the exorbitant rates charged for premium F/J class travel that I just don't think that you can command domestically and really turn a profit. As I have said before, I think you can build an airline that caters to leisure travelers, business travelers and those that simply enjoy high volume travel, it just takes thinking outside the box. To all of this forum's passionate advocates of the points in which they believe, I salute you whole heartedly, and I reckon as I often do that the solution to the problem probably lies in the convergence of your collective beliefs.YMMV Safe travels and clear skies friends, it is always an honor.
I am somewhat dismayed, but not surprised, at the collectivist attitude displayed by a few adovcates of monopoly/oligopoly which will hurt all air travellers, whether on NW, DL, or any other airline. The airline execs have declareed war on consumers, and consumers need to fight back.
Quote:
Originally Posted by sxf24
I’m somewhat dismayed, but not all surprised, at the provincial attitude so prevalent in this forum. Even more disconcerting is the attempt to position this discussion as DL versus NW. While we each have our preferred carrier, this merger (despite the adoption of the DL name) is not about the elimination of one in favor of the others. The reality is that neither carrier is well positioned to operate independently in the future. NW has few domestic growth opportunities and its international expansion, outside of Asia, is constrained by the lack of high O&D gateway cities. Conversely, DL to build a faces robust LCC competition in most of its hubs and it is impossible for it to build an Asian network of any substance. Combining the two companies is really about the balance of strengths and weaknesses: NW contributes an Asian network, an experience with a TATL JV and a track record of successful operational execution while DL brings growth opportunities in other international regions and a history of innovation/reinvention.
Nevertheless, it seems that logic has been thrown out the window in favor of a myopic viewpoint based on emotion. The selfish focus on historically provided benefits and the general resistance to change draws, in my mind, a striking comparison with the decline of the American auto industry and the Midwest’s historic manufacturing base. Both grasp desperately to tradition, while being driven by a viscous cycle of management’s reactionary and accusatory behavior and employee/customer entitlement demands. Failing to proactively change with the market, or accept the outcome of your actions, will eventually drive any company to failure.
Bob Crandall is right when he said mergers would not fix the fundamental flaws in the industry. Consolidation will not decrease the price of oil, raise the value of the dollar, make the planes run on time or cause strong competitors to disappear. However, a merger between DL and NW can reduce costs and capacity, combine leading Asian and European gateways, allow the more efficient allocation of existing aircraft resources and increase the ability to price tickets at a sustainable level. Clearly, there will be some losses, though it is difficult to argue that they will be greater than the next death of a legacy carrier, which I guarantee will happen sooner, rather than later. Yes, jobs will be eliminated and mid-sized communities with a strong LCC presence will likely loose some service.
At the end of the day, you have to let the market run its course. The EU has shown us that reducing or eliminating government subsidization and increasing competition is ultimately good for both the aviation industry and consumers. It is impossible to argue that the present business model for U.S. legacy carriers is not sustainable. None of the legacy carriers are currently profitable (based on 03/08 actual and projected results) and all will require significant fleet investments in coming years. Expecting that cheap fares and free upgrades will continue is nothing short of stupid. Airlines must adjust to the competitive environment, or die, allowing the remaining carriers to pick up the pieces (and likely screwing employees and customers in the process).
My only recommendation to NW (and DL) passengers is to manage your expectations. Painful changes are coming, especially if the carriers remain independent.
I am somewhat dismayed, but not surprised, at the collectivist attitude displayed by a few adovcates of monopoly/oligopoly which will hurt all air travellers, whether on NW, DL, or any other airline. The airline execs have declareed war on consumers, and consumers need to fight back.
Dismayed emotionally, or dismayed intellectually?
Quote:
Originally Posted by Carolinian
You somehow forget highly succesful LCC's like EasyJet, RyanAir, Air Berlin, and Germanwings.
Good point, why are these LCC's not failing in Europe whereas literally hundreds have come and gone in the US, dead and forgotten since 1978?
These LCC's are now operating in an environment, post-common market, post-deregulation, where unlike in the US aviation market, the government has not intervened to regulate the market by propping up the well-connected, incumbent losers, giving unfair advantage to compete on an uneven playing field (such as in US through Ch. 11 bankruptcy) or by preventing natural, forward-looking, market-based consolidation (such as called for by some in this forum to prevent the smallish, weakened major airlines from consolidating into some feared oligopoly-like structure).
If several obsolete US Majors had been allowed to die while others consolidate today to be able to compete and/or cooperate globally with the mega-carriers, then perhaps more Americans would also be able to enjoy the benefits of the sustainable LCC choices that will come in to fill the void the majors leave behind in the US, just as happened in Europe.
So for NW today with receding market, old planes, un-affordable oil, no power to price tickets to fair levels without winding up in a game of chicken with a kamikaze competitor or being told "you have declared war on consumers", there is a simple three way bet to be played:
1. Can I make it on my own?
2. Are my chances better as a bigger player in a tight, global network?
3. Or will I be one of those to die to make way for those that succeed?
Given that it will not be possible to use the bankruptcy court on a revolving door basis, it would seem that question #1 has already been answered negatively.
As a loyal customer of Northwest (Orient) for more than three decades, I too lament the loss. Why did it have to turn out this way? I can't help thinking, perhaps if they had been a bit more business-like, professional and a bit less generous with us and a bit less easy to game, they would be the one buying Delta instead of the other way around. Every action has a reaction.
Good point, why are these LCC's not failing in Europe whereas literally hundreds have come and gone in the US, dead and forgotten since 1978?
These LCC's are now operating in an environment, post-common market, post-deregulation, where unlike in the US aviation market, the government has not intervened to regulate the market by propping up the well-connected, incumbent losers, giving unfair advantage to compete on an uneven playing field (such as in US through Ch. 11 bankruptcy) or by preventing natural, forward-looking, market-based consolidation (such as called for by some in this forum to prevent the smallish, weakened major airlines from consolidating into some feared oligopoly-like structure).
If several obsolete US Majors had been allowed to die while others consolidate today to be able to compete and/or cooperate globally with the mega-carriers, then perhaps more Americans would also be able to enjoy the benefits of the sustainable LCC choices that will come in to fill the void the majors leave behind in the US, just as happened in Europe.
So for NW today with receding market, old planes, un-affordable oil, no power to price tickets to fair levels without winding up in a game of chicken with a kamikaze competitor or being told "you have declared war on consumers", there is a simple three way bet to be played:
1. Can I make it on my own?
2. Are my chances better as a bigger player in a tight, global network?
3. Or will I be one of those to die to make way for those that succeed?
Given that it will not be possible to use the bankruptcy court on a revolving door basis, it would seem that question #1 has already been answered negatively.
As a loyal customer of Northwest (Orient) for more than three decades, I too lament the loss. Why did it have to turn out this way? I can't help thinking, perhaps if they had been a bit more business-like, professional and a bit less generous with us and a bit less easy to game, they would be the one buying Delta instead of the other way around. Every action has a reaction.
The LCC's cited are charging fares substantially less than NW for comparable flights, and are still growing and making money in spite of the price of oil. That shows that oil is no justification for merger.
The LCC's cited are charging fares substantially less than NW for comparable flights, and are still growing and making money in spite of the price of oil. That shows that oil is no justification for merger.
With logic like that I can see why you tend to just stick to the emotional arguments.
With logic like that I can see why you tend to just stick to the emotional arguments.
There is logic endemic to Carolinian's statement such that characterizing the point as an emotional argument doesn't hold much rational sway.
If low cost carriers cited by Carolinian are charging the same kind of intra-continental fares in dollar terms as NW and operating in an environment with the same kind of high oil prices in dollar terms as NW, then there are other factors in play -- besides just oil -- that explain why those cited LCCs are performing better financially than DL and NW, jointly or separately, in an economic downshifting market.
__________________
This game is not as much fun as it used to be: 2008/2009 Frequent Flyer Program Fleecing Award goes to Delta Airlines
Klm is Dead - Long Live KLM, you keep comparing the EU and US markets and I think they are two different animals. You point out government intervention in the US, and as you put it is indeed unfair, but I don't think that's responsible for the difference in which airlines conduct business in EU versus the US.
Some points:
(1) Many LCC's in Europe operate from alternative airports. Operating costs are thus cheaper. Most US cities don't have small, cheap airports that are sometimes more convenient, and other times not.
(2) Europe has flagship carriers. I know a good amount of people who only fly their flagship carrier. Maybe it's patriotism, culture, the language... whatever. I have never encountered someone in the US flying the airline that represents their state, the culture and language of that state, etc. No such loyalty exists here.
(3) Airport taxes are many, many times higher which greatly discourages connecting flights. (I try my best to stick with KL when flying in EU, but in most cases connecting means shelling out almost 100 euros extra). A vast majority of intra-EU traffic is O&D, which is not at all the case in the US.
Quote:
Originally Posted by Klm is Dead - Long Live KLM
Dismayed emotionally, or dismayed intellectually?
Moving past the smug remarks...
Quote:
Originally Posted by Klm is Dead - Long Live KLM
If several obsolete US Majors had been allowed to die while others consolidate today to be able to compete and/or cooperate globally with the mega-carriers, then perhaps more Americans would also be able to enjoy the benefits of the sustainable LCC choices that will come in to fill the void the majors leave behind in the US, just as happened in Europe.
Yeah, right! How many major airlines in Europe have been allowed to die? I can only think of SwissAir. Besides, most major EU carriers have been state-owned until not long ago. (I know, it's been a few years, but they haven't been private for as long as the US majors have.) And don't even get me started on AZ....
Quote:
Originally Posted by Klm is Dead - Long Live KLM
I can't help thinking, perhaps if they had been a bit more business-like, professional and a bit less generous with us and a bit less easy to game, they would be the one buying Delta instead of the other way around.
You mean... a bit more like the European airlines in the European environment? Apples and oranges.
__________________
I'm in the vicinity of an area adjacent to a location.
The LCC's cited are charging fares substantially less than NW for comparable flights, and are still growing and making money in spite of the price of oil. That shows that oil is no justification for merger.
Quote:
Originally Posted by GUWonder
There is logic endemic to Carolinian's statement such that characterizing the point as an emotional argument doesn't hold much rational sway.
If low cost carriers cited by Carolinian are charging the same kind of intra-continental fares in dollar terms as NW and operating in an environment with the same kind of high oil prices in dollar terms as NW, then there are other factors in play -- besides just oil -- that explain why those cited LCCs are performing better financially than DL and NW, jointly or separately, in an economic downshifting market.
Other than WN (which, we've been told is fundamentally different and not comparable to NW in any way) and Allegiant, no LCC is performing better financially, by any definition, than DL or NW.
Programs: Delta Gold Medallion,AA,USairways,Midwest Airlines, National Emerald Club
Posts: 1,438
Quote:
Originally Posted by sxf24
Other than WN (which, we've been told is fundamentally different and not comparable to NW in any way) and Allegiant, no LCC is performing better financially, by any definition, than DL or NW.
How can you say this? From 2002-2007 Air Tran was consistently profitable. Granted in some years the profit was lackluster but a profit nonetheless.
This is opposed to NW and Delta that pretty consistently lost money during this time and had their merry little trip through Chapter 11.
AAI has not been a poor financial performer, but the Company reported a loss for Q4 and is not generally estimated to be profitable going forward. I guess that shows that AirTran, like the restructured legacy carriers, is not immune from the price of oil.
I think it is obvious to every that almost any carrier operating today has a better financial position than the pre-CH11 DL and NW.
Programs: Delta Gold Medallion,AA,USairways,Midwest Airlines, National Emerald Club
Posts: 1,438
Quote:
Originally Posted by sxf24
AAI has not been a poor financial performer, but the Company reported a loss for Q4 and is not generally estimated to be profitable going forward. I guess that shows that AirTran, like the restructured legacy carriers, is not immune from the price of oil.
It's just silly to do a comparison based on a single quarter's earning. Yes, FL's forward earnings are projecting a loss for 2008. Yes all the carriers are struggling w/ oil with the exception of WN which benefits from good hedging.
Quote:
Originally Posted by sxf24
I think it is obvious to every that almost any carrier operating today has a better financial position than the pre-CH11 DL and NW.
So I think I heard that Delta's earning are due out when, Thursday? Care to speculate how bad they'll be?
It's just silly to do a comparison based on a single quarter's earning. Yes, FL's forward earnings are projecting a loss for 2008. Yes all the carriers are struggling w/ oil with the exception of WN which benefits from good hedging.
It does illustrate that, despite the assertions above, that LCCs are not profitable, growing or necessarily performing better at the current price of oil than DL or NW.
Quote:
Originally Posted by hazelrah
So I think I heard that Delta's earning are due out when, Thursday? Care to speculate how bad they'll be?
Estimates range from (.09) to (.79) a share, which is slightly worse than JetBlue but significantly better than Frontier (or Virgin America's performance based on DOT data).
Edited to add:AirTran has since announced Q1 results, which on a per share basis, are expected to be better than DL's. The benefits of having a very new and fuel efficient fleet!
Programs: UA 2MM, DL 500k, SW CP, GP 1M, HH Gold, Miracle Fruit-su Club
Posts: 3,918
Duty
Quote:
Originally Posted by florin
Klm is Dead - Long Live KLM
(2) Europe has flagship carriers. I know a good amount of people who only fly their flagship carrier. Maybe it's patriotism, culture, the language... whatever. I have never encountered someone in the US flying the airline that represents their state, the culture and language of that state, etc. No such loyalty exists here.
Just to this specific point, the loyalty is not (necessarily) at the individual level. It's at the corporate level. The large interests in Europe are persuaded by their national airlines that it's patriotic or some other form of duty, and in many cases there are other domestic incentives. But mainly, it's top management, and there's no other point of view tolerated. Much like - if not entirely like: "You ARE going to give to the United Way, right? Right."
