Originally Posted by
spin88
you compare month to month (or quarter to quarter) as you have different business environments each month (June/July is different than September). What really matters though is how an airline stacks up to similar competitors over time. While this can bounce around, the factors should overall effect competitors in a similar way. For example the Japanese tsunami reduced Japan travel, so airline with more Japan exposure (DL and UA) should have better comps the next year. That said, these external factors should balance out over time.
The problem for UAL is that there is really no external factor or sets of factors that can explain why UA is under-performing the reset of its competitors by 3-5% (and with AA this month a midpoint of 7%) since 3/3, and really since the start of this year. UAL first said it had undersold around 3/3 (but them lead in IDBs in March and every subsequent month), then it claimed it was having problems with revenue management, now it is not saying, but implying, that its operational issues are effecting it.
The merger should have (and was sold as) increased PRASM by attracting new corporate/high value traffic for the enhanced network AND capturing more of the business of existing UA and CO customers through the larger network. Something is swamping these effects, and analysts are starting to talk and ask questions about why UAL is under-performing as to revenue.
I happen to think they have an unattractive mix of premium services AND poor policies towards frequent travelers compared to the competition and that people are defecting to AA and DL (or foreign carriers), but the evidence is mostly anecdotal. The poor PRASM numbers though strongly suggest UA is having a problem with premium passengers.
Very good analysis.
Airline mergers are never easy and this one is still relatively recent, so I think, in all fairness, we should give them a little more time to get it right.
But if there is a recent model of how to turn around an airline after a merger, it's DL.
Before the merger, DL was a embarrassingly burned out shell, NW was better, but hardly stellar.
While the merger saved money on overhead and operations, DL management did a very smart thing: They made substantial investments in areas that are obvious to the customer, renovating their J cabins, creating a near-best-in-class transcon service out of JFK, adding WiFi on virtually the entire fleet, substantially increasing the percentage of RJ's with FC cabins, renovating their Sky Clubs.
They also made a very concerted effort to train their people to be polite, friendly, professional. They also empowered them to make common sense decisions, even if the rulebook or computer disagreed.
Sure, there are still problems. DL still flies the DC9-50, an airplane so old it was designed in the Jurassic era. SkyPesos is universally despised, although it is truly not as bad as it is often made out to be (I have often compared awards on UA and DL and found that DL had better availability at a lower cost).
But the point is they made obvious improvements across the board that customers could perceive and they made a huge effort to improve CS.
UA, on the other hand, despite hollow promises of "making changes you will like," has made a number of very obvious blunders, cutting back benefits of their most valuable customers (elites may not be the most valuable, because elite status can be achieved on the cheap, but how could a GS not be a most valuable customer?).
In my opinion, much of the turmoil has come from imposing the CO approach on UA, even if the UA approach had worked well. I think of it as a likely combination of the insular corporate culture of CO, a big part of which was its superiority complex, and a gross miscalculation on the part of the CO senior management team how much harder it would be to run the combined airline than the stand-alone CO.