United Airlines President: Leaving New York’s JFK ‘Was the Wrong Decision’ {2017}
#241
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And those JFK slots will become even less valuable if the LGA perimeter rule gets lifted. Which you'd hope happens when the infrastructure upgrades are complete in 5 years. And what Delta definitely wants for ponying up its share for improvements.
And the real premium transcon service will be out of LGA, making the JFK whining look trivial.
And the real premium transcon service will be out of LGA, making the JFK whining look trivial.
#242
Join Date: Apr 2017
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I would have never guessed they think that leaving JFK was a mistake. I fly in / out of NYC a lot, and I never care if it's JFK or EWR. If I am on the West side, EWR is often easier; LGA would be my preference, but it's not always available, of course. I think there is a train that makes for a fairly easy trip to EWR from Manhattan as well (vs. JFK, which entails a painful transfer, as far as I remember), and no real options to LGA.
#243
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Plus, it would be stupid to bother trying. The genie is out of the bottle. It is not going back in.
#244
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https://newsroom.alaskaair.com/2017-...minal-7-at-JFK
#245
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plus a simple return to T7 is now likely out of the question, as AS/VX will be consolidating JFK ops there. it's also a signal that AS is doubling down on JFK.
https://newsroom.alaskaair.com/2017-...minal-7-at-JFK
https://newsroom.alaskaair.com/2017-...minal-7-at-JFK
#246
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I fly SFO-JFK several times a year. UA left JFK, but I did not. I switched to Delta One.
If UA came back to JFK and competed with Delta on price and service, they could get my business.
If UA came back to JFK and competed with Delta on price and service, they could get my business.
#247
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More likely a signal that AS/VX wants to co-locate somewhere at JFK. On one hand, AA would rather get its OW partners under one roof at JFK (where the AA operation provides bi-directional feed) and doesn't need to lease space to a company which is more of a competitor on the East Coast than a partner. On the other, T4 is space-constrained with uncompetitive peak-time remote operations. T7 makes sense and the combined AS+VX operation approximates that of UA before it exited JFK. It also may provide some basis for the reports that BA was unwilling to renew UA's long-term lease at T7.
#248
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#249
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So either BA just wanted UA out, or perhaps it was looking to consolidate non-T8 oneworld and other partners in the space rather than renew a long-term lease with UA (which served no strategic function to IAG, OW or the TATL JV)?
Of course, missing in my understanding could be a crucial caveat... BA was unwilling to renew United's least at T7 with terms acceptable to UA.
#250
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This is the small-minded mindset that got them into this mess in the first place. The customers are gone. Restarting service is not going to bring back customers who have fled and settled in in their new home. It's not going to get corporate customers to violate their corporate contracts they've now signed with DL and AA.
This is a competitive environment, and customers have altered their behaviors. UA would have to offer lucrative incentives and discounts to return to the customer levels they had previously. And it would take years to do so. In the meantime, UA would lack the pricing power to charge what others are able to on the same routes.
That's why it was both a bad decision to leave, and it also makes sense not to return now that the damage is done.
If you read Kirby's example, he specifically talked about behavior change by the customer. While UA expected the previously loyal customers to go to EWR instead, many instead migrated to other airlines for this route. Then, since they became engaged with the other airline programs (or disengaged from United), they started shopping around on unrelated flights -- business that would have previously gone to United.
So when you factor the total cost of the impact of the JFK closure, it makes sense this was an error on UA's part. Similarly, if we are going to calculate the restart of business, we cannot look at the routes or airport in isolation, we have to look at what it would take to get UA's business back to pre-closure levels, and how long it would take to get it. And that includes not just JFK customers who bolted, but LAX and SFO customers who did as well.
#251
Join Date: Feb 2002
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I witnessed how DL played winning transcon business at a very high value corp account that was entrenched with AA to the point everyone had an AAirpass.
They had no first class for about 5 years.
Then in the fall of 2009 they came onboard with a small 16 seat J cabin with service a little better than AA / UA.
Within a year they got a contract and offered last seat flights in J for about $2 less than the AA discounted rate. The internal flight portal displayed the DL results at the top because of the $2 lower fare. Most of these entrenched contracts aren't fully exclusive - they just have volume thresholds.
By 2011 I was told by a DL mgr who had called me to discuss done feedback that it was their most profitable route and Anderson got weekly updates just on that route.
So it can be done relatively quickly with some tactical moves and starting with a small cabin footprint.
They had no first class for about 5 years.
Then in the fall of 2009 they came onboard with a small 16 seat J cabin with service a little better than AA / UA.
Within a year they got a contract and offered last seat flights in J for about $2 less than the AA discounted rate. The internal flight portal displayed the DL results at the top because of the $2 lower fare. Most of these entrenched contracts aren't fully exclusive - they just have volume thresholds.
By 2011 I was told by a DL mgr who had called me to discuss done feedback that it was their most profitable route and Anderson got weekly updates just on that route.
So it can be done relatively quickly with some tactical moves and starting with a small cabin footprint.
You're trivializing the re-acquisition costs for the customers. You're only counting the operational costs for slots/space/etc. Build it and they will come?
This is the small-minded mindset that got them into this mess in the first place. The customers are gone. Restarting service is not going to bring back customers who have fled and settled in in their new home. It's not going to get corporate customers to violate their corporate contracts they've now signed with DL and AA.
This is a competitive environment, and customers have altered their behaviors. UA would have to offer lucrative incentives and discounts to return to the customer levels they had previously. And it would take years to do so. In the meantime, UA would lack the pricing power to charge what others are able to on the same routes.
That's why it was both a bad decision to leave, and it also makes sense not to return now that the damage is done.
If you read Kirby's example, he specifically talked about behavior change by the customer. While UA expected the previously loyal customers to go to EWR instead, many instead migrated to other airlines for this route. Then, since they became engaged with the other airline programs (or disengaged from United), they started shopping around on unrelated flights -- business that would have previously gone to United.
So when you factor the total cost of the impact of the JFK closure, it makes sense this was an error on UA's part. Similarly, if we are going to calculate the restart of business, we cannot look at the routes or airport in isolation, we have to look at what it would take to get UA's business back to pre-closure levels, and how long it would take to get it. And that includes not just JFK customers who bolted, but LAX and SFO customers who did as well.
This is the small-minded mindset that got them into this mess in the first place. The customers are gone. Restarting service is not going to bring back customers who have fled and settled in in their new home. It's not going to get corporate customers to violate their corporate contracts they've now signed with DL and AA.
This is a competitive environment, and customers have altered their behaviors. UA would have to offer lucrative incentives and discounts to return to the customer levels they had previously. And it would take years to do so. In the meantime, UA would lack the pricing power to charge what others are able to on the same routes.
That's why it was both a bad decision to leave, and it also makes sense not to return now that the damage is done.
If you read Kirby's example, he specifically talked about behavior change by the customer. While UA expected the previously loyal customers to go to EWR instead, many instead migrated to other airlines for this route. Then, since they became engaged with the other airline programs (or disengaged from United), they started shopping around on unrelated flights -- business that would have previously gone to United.
So when you factor the total cost of the impact of the JFK closure, it makes sense this was an error on UA's part. Similarly, if we are going to calculate the restart of business, we cannot look at the routes or airport in isolation, we have to look at what it would take to get UA's business back to pre-closure levels, and how long it would take to get it. And that includes not just JFK customers who bolted, but LAX and SFO customers who did as well.
#252
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I witnessed how DL played winning transcon business at a very high value corp account that was entrenched with AA to the point everyone had an AAirpass.
They had no first class for about 5 years.
Then in the fall of 2009 they came onboard with a small 16 seat J cabin with service a little better than AA / UA.
Within a year they got a contract and offered last seat flights in J for about $2 less than the AA discounted rate. The internal flight portal displayed the DL results at the top because of the $2 lower fare. Most of these entrenched contracts aren't fully exclusive - they just have volume thresholds.
By 2011 I was told by a DL mgr who had called me to discuss done feedback that it was their most profitable route and Anderson got weekly updates just on that route.
So it can be done relatively quickly with some tactical moves and starting with a small cabin footprint.
They had no first class for about 5 years.
Then in the fall of 2009 they came onboard with a small 16 seat J cabin with service a little better than AA / UA.
Within a year they got a contract and offered last seat flights in J for about $2 less than the AA discounted rate. The internal flight portal displayed the DL results at the top because of the $2 lower fare. Most of these entrenched contracts aren't fully exclusive - they just have volume thresholds.
By 2011 I was told by a DL mgr who had called me to discuss done feedback that it was their most profitable route and Anderson got weekly updates just on that route.
So it can be done relatively quickly with some tactical moves and starting with a small cabin footprint.
At this point, United does NOT have better product, at best their product is "a little worse" than B6/DL/AA. They (unlike Delta) have no FF base ex-JFK, and a diminished, not growing share ex-LAX, and until when Delta bailed on Song and started running a premium service, there are not 4 competing carriers in the market, not two.
The barriers to entry are much higher, and much more expensive for United, with its bad brand reputation than it was for Delta when they entered the market.
#253
Join Date: May 2013
Posts: 3,361
What is missing in the context that in the same period that Delta did this, they committed major resources to expanding at JFK and also LAX. They then increased frequency as demand ramped up on JFK-LAX/SFO, build a new wonderful DeltaOne lounge at JFK, and then started to upgage to using international configuration 763s on many flights.
At this point, United does NOT have better product, at best their product is "a little worse" than B6/DL/AA. They (unlike Delta) have no FF base ex-JFK, and a diminished, not growing share ex-LAX, and until when Delta bailed on Song and started running a premium service, there are not 4 competing carriers in the market, not two.
The barriers to entry are much higher, and much more expensive for United, with its bad brand reputation than it was for Delta when they entered the market.
At this point, United does NOT have better product, at best their product is "a little worse" than B6/DL/AA. They (unlike Delta) have no FF base ex-JFK, and a diminished, not growing share ex-LAX, and until when Delta bailed on Song and started running a premium service, there are not 4 competing carriers in the market, not two.
The barriers to entry are much higher, and much more expensive for United, with its bad brand reputation than it was for Delta when they entered the market.
The ability to offer a competitive schedule will prohibit United from re-entering JFK for the foreseeable future. As a result, there may be some corporate business that prefers JFK where United won't be competitive.
#254
Join Date: Apr 2011
Programs: WN, AA, UA, DL
Posts: 1,313
Those were slots that were allocated in 2010; the payment process changed. And it involved DCA slots, not a straight up move at JFK. Getting 15 slot pairs at JFK (the absolute minimum UA would need to restart service in a meaningful manner) is not trivial and it is not a particularly active market in those volumes.
The only way for it to be a bad idea to leave and a bad idea to return is if the short-term costs associated with returning (one-time capital costs and short-term business loss) is too great to make a return worth it. This is something we can estimate, and I have done so. Even extreme examples say that Kirby's implication can only be true if JFK was minutely marginal to the entire network--meaning it was worthy of high consideration to be cut. Kirby got caught with his pants down. Not the first time he's been caught blowing smoke.
This is the small-minded mindset that got them into this mess in the first place. The customers are gone. Restarting service is not going to bring back customers who have fled and settled in in their new home. It's not going to get corporate customers to violate their corporate contracts they've now signed with DL and AA.
This is a competitive environment, and customers have altered their behaviors. UA would have to offer lucrative incentives and discounts to return to the customer levels they had previously. And it would take years to do so. In the meantime, UA would lack the pricing power to charge what others are able to on the same routes.
This is a competitive environment, and customers have altered their behaviors. UA would have to offer lucrative incentives and discounts to return to the customer levels they had previously. And it would take years to do so. In the meantime, UA would lack the pricing power to charge what others are able to on the same routes.
A competitive environment requires that demand is fluid. An airline always has to compete with product/price. The cost of retaining customers in a competitive environment is high as well. If you take your excuse for Kirby's wrong statement further, it makes no sense to "win them back" at EWR either, like Kirby said. Or anywhere else for that matter. The customers are "gone" and not worth fighting for.
Last edited by minnyfly; Apr 25, 2017 at 5:58 pm
#255
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{T}he greater the "lost business" aspect becomes, the more reason it is to return to JFK and make Kirby's entire statement/implication incongruent?
The only way for it to be a bad idea to leave and a bad idea to return is if the short-term costs associated with returning (one-time capital costs and short-term business loss) is too great to make a return worth it. This is something we can estimate, and I have done so. Even extreme examples say that Kirby's implication can only be true if JFK was minutely marginal to the entire network--meaning it was worthy of high consideration to be cut. Kirby got caught with his pants down. Not the first time he's been caught blowing smoke.
Now you're contradicting yourself. You've just stated that "the customers are gone", but then you turn around and say that they can be won back at the right product/price. That's precisely the measure I'm calculating for.
A competitive environment requires that demand is fluid. An airline always has to compete with product/price. The cost of retaining customers in a competitive environment is high as well. If you take your excuse for Kirby's wrong statement further, it makes no sense to "win them back" at EWR either, like Kirby said. Or anywhere else for that matter. The customers are "gone" and not worth fighting for.
The only way for it to be a bad idea to leave and a bad idea to return is if the short-term costs associated with returning (one-time capital costs and short-term business loss) is too great to make a return worth it. This is something we can estimate, and I have done so. Even extreme examples say that Kirby's implication can only be true if JFK was minutely marginal to the entire network--meaning it was worthy of high consideration to be cut. Kirby got caught with his pants down. Not the first time he's been caught blowing smoke.
Now you're contradicting yourself. You've just stated that "the customers are gone", but then you turn around and say that they can be won back at the right product/price. That's precisely the measure I'm calculating for.
A competitive environment requires that demand is fluid. An airline always has to compete with product/price. The cost of retaining customers in a competitive environment is high as well. If you take your excuse for Kirby's wrong statement further, it makes no sense to "win them back" at EWR either, like Kirby said. Or anywhere else for that matter. The customers are "gone" and not worth fighting for.
There are no contradictions. You're missing the time element of the picture. The customers are gone. They can be won back, but at a price. The price today is much higher than it would have cost to simply retain them in the past. We're talking about the JFK customers. The customers willing to stick wtih UA and use EWR have remained (or some of them have).
At the time, they should have stayed at JFK. Now that they've pulled out, the ramped up costs to return back to the previous "normal" are too great, it may make little sense, or the return would be marginal. In other words, the damage is done. Your examples above didn't talk about the customer re-acquisition costs, or how long they would have to bleed money to get to a state where they're happy with the performance of the station.
A parallel example in a person's life may be someone regretting selling their house in California and moving to Texas. Can it be undone? Sure, but depending on how much time has elapsed, the cost to replace the original home may now be prohibitive. By the time you replace the original home at current rates, search for a job, relocate again, etc., it's entirely possible selling the California house and moving to Texas was a mistake. It's also possible that moving back doesn't make sense either now that you're in that new situation.
Last edited by WineCountryUA; Apr 25, 2017 at 3:12 pm Reason: Quote updated to reflect Moderator edit