Originally Posted by
knope2001
It stands to reason that adjustments in frequency, timing and aircraft would be in segments where they are trying to fix a problem. And where has the repeated tinkering been? Not the RJs, but the Airbus/EJet markets.
As a subsidiary of Republic, MKE will eventually become "just another station" in the F9 system.
Republic's business model is the problem. There is not sufficient demand for Republic's product in MKE to make it profitable. Republic does not have sufficient economies of scale, a business-focused strategy, or a substantial FF program required to be a successful airline. While my contribution is anecdotal, it seems that Republic can't attract high yields because they don't offer what travelers willing to pay high yields want: business class, lots of frequency, and an international FF program. BB can tinker with timing, aircraft, etc., but no matter what he does, his product doesn't demand the revenue required to be profitable.
MKE cannot support two airlines. WN knows who they are in MKE: a leisure airline. With FL disappearing, I suspect most of the higher yield traffic will defect to DL or UA (if they haven't already). YX was successful as long as the economy was good. Combined with the NW partnership, they offered enough value to generate profit. Once the YX product became diluted (Signature/Saver implementation was a disaster), value evaporated, and they failed.
Soon enough, MKE will become what it was in the pre-YX days: a substantial DL (formerly NW) station, with non-stop service limited to high yield business destinations (LGA, DCA, etc.), or hub feed (eg. DL to ATL/DTW/MSP, US to PHL/PHX, etc.). WN will be MKE's leisure airline.
Originally Posted by
knope2001
So in my opinion, the bulk of the losses in Milwaukee have not been from the RJ segment, but from the Airbus/EJet segment. And when one looks at the changes which are *already* in the works for Milwaukee will provide a great deal of improvement. And based on all of this, I am not expecting a great deal of additional Milwaukee cuts at this point.
One final item. The leaked content of Bedford’s presentation to the board the other day include targets for $120m in annual cost savings. The amount of that total expected from route and network changes is relatively small…about 20% of the total at $25m annually. That comes to about $2m/month, and that savings *includes* the benefits from the replacement of E170 / A318 / E135 by more efficient aircraft. Although I don’t know exactly how much of that $2m/month is anticipated to come from those fleet changes, the already-announced changes (which include changes in Milwaukee, as well as Denver and Kansas City) probably account for much or most of that savings. Had they instead proposed a plan where the large majority of savings was targeted to come from route/network changes, that would suggest a lot more changes were on the horizon.
BB will replace Airbuses with E175s/190s. While individual aircraft CASM may be higher than the Airbuses, F9 crew costs are probably the loss-driver. Also, the money losing stations served by the E140 family have got to go. Look for many of the MKE-feeding stations to disappear (ATW, etc.).
I predict that F9 will eventually end up in a JetBlue/Virgin/Frontier 3-way deal. Consolidation is the path to survival.