I have been reading the posts and everyone is up in arms about the recent changes - I have a controversial position as both a CP and the owner of an aviation business that operates 6 private jets.
THE AIRLINE BUSINESS IS IN AN UNPRECEDENTED CRISIS AND IN SURVIVAL MODE!!!!!
The major airlines lost 1.3 billion dollars in the first quarter of 2008. US Airways lost aprox 200 million dollars in 2008 Q1. United lost over 400 million!!
US airways in losing 2.2 million dollars a day.
No airline can sustain $140 per barrel fuel prices at current yields and remain viable. If this continues there WILL be liquadations of major US carriers. When you run out of cash - GAME OVER!!
I agree that the changes suck but I applaud Doug Parkers efforts to ride out this crisis before US Airways runs out of cash and/or all loan covenants are violated. He is responsible to the shareholders of US Airways to acheive maximum profitability.
The reality is that we are in a major economic downturn and we are going to see some spectacular events in the airline business in the next 12 to 24 months if oil remains at the current levels.
The scary thing is that some intelligent people are predicting $160/barrel to $200 in the next 18 months. Imagine that? Will any airline survive?
One of my LearJets was in SFO yesterday flying a patient to JAX. We paid $11.58 per gallon for fuel (it took 1,000 gallons to top it off). This was $4.50 per gallon less than a year ago.
At this point I am very happy with an on-time flight, operated safely - one cocktail and the snack basket would be a perk at this point.
Everyone is .....ing about US but watch and see what happens here.
No. Airlines like SQ (let alone WN) would be happy to pick up the slack. When/if US dies, I don't think there would be many complainers (save the employees)
I am just saying that YES - US Airways has problems but there is a much larger systemic problem with the airline industry as it relates to unprecedented fuel prices. SQ is not the solution. WN has an advantage based on fuel hedges entered into 3 years ago that will end soon. The financial numbers tell the story and will dictate what happens.
I just think it is naivie to underestimate how severe this crisis is for the domestic US traveller in the near future.
Companies seeking to survive a protracted economic crisis add value and seek to retain their most valued customers. They don't tell their customers, in a competitive market, that their business is not valued and send them to other competitors.
The whole excuse about "unprecedented problems in the industry" is a cop-out. Continental, Delta, and Southwest are all companies who know how to treat their customers and who are growing and retaining their base of loyal high-spending, high-margin customers.
They know that the "savings" from destroying their customer loyalty programs aren't worth the loss of their most loyal customers. They are delighted that US Airways is solving a large portion of the airline crisis by graciously volunteering to drive itself out of business.
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Originally Posted by jdcece
I have been reading the posts and everyone is up in arms about the recent changes - I have a controversial position as both a CP and the owner of an aviation business that operates 6 private jets.
THE AIRLINE BUSINESS IS IN AN UNPRECEDENTED CRISIS AND IN SURVIVAL MODE!!!!!
And some won't survive. Your point?
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No airline can sustain $140 per barrel fuel prices at current yields and remain viable. If this continues there WILL be liquadations of major US carriers. When you run out of cash - GAME OVER!!
And when you anger the people who fly you often, the end of the game comes somewhat sooner.
Are you familiar with the term "burning the furniture?"
I understand that airlines need to generate more revenue to meet the demands of fuel costs, but US (and others) are going about it the wrong way. You raise fares to a realistic level instead of nickel and diming every little thing and you do NOT spit in the faces of your loyal, high-dollar customers by taking away their frequent flyer benefits.
...At this point I am very happy with an on-time flight, operated safely - one cocktail and the snack basket would be a perk at this point....
I agree, but we appear to be a minority here
When a business is hemorrhaging badly due to emergency circumstances, survival attempts are a first priority. Cuts, cuts, and more cuts on top of higher prices. Nobody likes it. I go "ouch" whenever I think of the better days we had.
Parker & Co are not perfect, but they deserve a break. Yes, I roll my eyes too at some of the announced changes, but I do not have access to the business data they have, and willing to give them the benefit of the doubt. As Parker has mentioned, he'd rescind changes that don't work, but that doesn't mean he ought not to try.
Certainly there'd be an exodus of FFs who have a choice and seek better, short term. With the announced cuts at other legacies in capacity and employees, my hat's off to them if they can maintain the level of service/convenience that their FFs are accustomed to.
Folks like me who still do fly US will do so on factors of cost or convenience, and increasing on-time performance.
I just think there is a better way to enhance the bottom line. If they figure they can generate revenue by charging $15 for a bag and $7 for a beverage, for a total of $22 per person, just add that amount to the base fare and include the bag and drink!
Continental, Delta, and Southwest are all companies who know how to treat their customers and who are growing and retaining their base of loyal high-spending, high-margin customers.
With all due respect, only SWA has the excellent hedging and only SWA is making money. Something will have to give even for CAL and DAL. Perhaps they will smarten up and raise prices, followed by everyone else.
Some of you seem to forget that it was the business as usual technic of both DAL AND UAUA praying the weaker fail that landed them in chapter 11. NOTHING HAS CHANGED for EITHER of those companies. You all love them for giving you the world. When fuel is at $160, let's see if they continue to throw money at you for your support.
CAL, on the other hand, has always been consistent in it's product and understands pricing. Here is a great commercial video that reminds me of CAL and SWA and what US is doing wrong today.
One of my LearJets was in SFO yesterday flying a patient to JAX. We paid $11.58 per gallon for fuel (it took 1,000 gallons to top it off). This was $4.50 per gallon less than a year ago.
Sounds like you were ripped off; your company paid $11.58/gal? The spot price is only $4/gal.
Now I'm really confused. Last year, your firm paid more than $16/gal?
Last year, the spot price for fuel averaged about $2/gal. I realize that FBOs often sell fuel for more than the airlines pay, but nearly triple the spot price? And last year, eight times the spot price?
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Actually, I'm not inclined to give Parker a break. I maintained that they would not be able to run the airline without bankruptcy driven improvements, and that's been spot on--the desperation that's evident here is example "A".
This comes back around to the ATSB being a huge mistake--if HP and the original US were allowed to fail, the other airlines are a lot healthier at this point. In a way, the latest cuts are ironic--those who were saved by the government cheese are the first to cut service to third world levels.
The irony is amusing.
To the OP: if you are running Lears around at less than your actual cost--particularly if it's a medivac outfit where the sky is the limit as to what you can actually charge, your mistake. If Parker is doing it, the mistake is his--we all know that the nickel and dime crap won't close the revenue gap--it just drives off droves of really loyal revenue. Good move.
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Quote:
Originally Posted by jdcece
One of my LearJets was in SFO yesterday flying a patient to JAX. We paid $11.58 per gallon for fuel (it took 1,000 gallons to top it off). This was $4.50 per gallon less than a year ago.
That's funny - Signature at SFO is quiting ~$8 for Jet A.
Yes, airlines are in a very challenging situation. But whether you're dead last in a group of companies doing very well or dead last in a group of companies struggling to survive, you're still dead last. Every other airline is facing the same fuel prices, yet US is last in customer satisfaction, and is leading the charge in stupid customer relations moves.
US has been at the bottom of just about every customer-centric measure for quite a while now, even though all of the competition face the same industry challenges (actually, they don't have the advantage of two CH11's which allowed them to get rid of quite a bit of debt/liabilities). In my business, the person who performs dead last doesn't "get a break".
With all due respect, only SWA has the excellent hedging and only SWA is making money. Something will have to give even for CAL and DAL. Perhaps they will smarten up and raise prices, followed by everyone else.
That's not quite true.
CO and DL have hedging deals, and US had hedging deals that, had they had the foresight to preserve them like SWA did, would result in big-time profitability today.
You cannot hold SWA and others responsible for US's poor business decisions. Parker et al decided to take a bet that hedging wasn't a good idea and that fuel prices would sink below $70 a barrel -- they lost that bet and probably cost US Airways its future as a result.
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Some of you seem to forget that it was the business as usual technic of both DAL AND UAUA praying the weaker fail that landed them in chapter 11.
UA is weaker than US, DL is stronger. DL has hedged fuel, UA hasn't. Do the math -- hedging is just good business, and those airlines that stuck with it are doing much better than those airlines who decided to drop it.
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NOTHING HAS CHANGED for EITHER of those companies. You all love them for giving you the world. When fuel is at $160, let's see if they continue to throw money at you for your support.
Here's the thing -- they're not "throwing money" at anybody. They're providing a product in exchange for travelers' money.
Travelers generally have some discretion as to who they fly with and spend with -- especially for expensive last minute fares. When a competitor offers a higher quality product for the same price (or even slightly more), it's a better value.
The problem you've got here is that you're viewing amenities as "throwing money" at customers, when in reality it's the CUSTOMERS who throw money at the airlines, in exchange for service.
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CAL, on the other hand, has always been consistent in it's product and understands pricing. Here is a great commercial video that reminds me of CAL and SWA and what US is doing wrong today.
The problem is an attitudinal one.
US management feels contempt for its customers. It constantly protests, in its external and internal communications, about how "unfair" frequent flyer expectations are and how it costs US money.
CO and WN understand that it's part of being competitive, and invest accordingly. While US is complaining about "unfair" services, while flying filthy, sticky-floored airplanes that smell of sweat and urine, and charging prices that are often higher than the competition, it indicates a lack of understanding of customers.
It's the CUSTOMERS "throwing money" at the airlines. What is the airline doing to catch that money? Is it providing a pleasant, consistent and reliable operation like WN? Providing a decent FF program like CO? Or counting on a hub monopoly, plus habit, to keep customers flying its filthy old uncomfortable airplanes like US?
The only thing I would disagree with you on is hedging. Nobody can compare the hedging od DAL to SWA. BECAUSE of smart decisions (BTW, I don't blame SWA for US problems), SW credit rating was strong enough to be provided with the wonderful hedging they have.
Yes, CAL and DAL are stronger, but I dare to differ with the notion that either of those companies can continue biz as usual while bleeding money.
Also, I do not defend this management team in Tempe, The jury is still out as to if US decisions are an act of desperation or a trend. We will all find out soon enough. I don't need to be preached to about the filthiness and lack of services from US. I LIVE IT EVERY TRIP! Save it for the true kool aid drinkers.
Give Doug Parker and US a break
