Originally Posted by
Seat2C
Well, it seems that you've been blaming the evil legacies for VX's failure.
Honestly, the plan was doomed from the time that Sir Richard dreamed it up - a hip airline with superior service at a lower cost.
First, you've already mentioned the target group - young people. Those that have good jobs are still establishing their lives ... paying off student loans, paying off their car, saving for a house and retirement. Most don't have high paying jobs so when they travel, it will be on the lowest cost airline.
Second, VX's Y product is good enough to satisfy most people. Unless they purchase a $299 upgrade in the 24 hour window, almost everyone buying a ticket on VX is not booking in F. The airline should have been only Y service, but I'm sure that Sir Richard foolishly insisted on F seating.
Right, so you expect VX to raise fares when you acknowledge the airline is primarily targeting young people, most of which want to spend as little as possible on airline tickets?
You do raise an excellent point about Branson, perhaps he has allowed his ego to get the best of him... as if if he didn't have enough trying to deal with the severe deterioration that VS has had for many years now he wanted to launch VX and make it essentially a domestic version of VS.
I think VX could make more money by utilizing more buckets and what I mean is, if F is not selling, open the lowest F bucket and make it $150-$200 more than the upgrade fee and see how the inventory moves, but the current F fares are just too high.
If VX would have started as a one class airline, I'm not sure that it would have been more successful because B6 would have been on its tail constantly, especially when you take into account that B6 has been very aggressive lately even towards NK up to a point of undercutting NK's fares.
Originally Posted by
Seat2C
For the most part, they're getting mediocre senior personnel, most of whom have had a shelf life at previous companies of 24 months or less.
Very true, the former Director of RM at VX, for instance, came from an airline that had previously gone under. Not exactly the best person to hire for a start-up company.
Originally Posted by
Seat2C
Recent studies have shown that air travel isn't very elastic anymore; that was true when airlines had average load factors below 75% but air travel has become increasingly inelastic.
Can you enlighten us specifically about these studies and who conducted them?
Originally Posted by
Seat2C
As stated above, VX is the fare setter on this route, not other airlines. VX could raise their prices incrementally over three weeks and become wildly profitable. For VX last quarter, third quarter 2012, if they had raised their fares an average of $10 and would have had a $4 million NET profit, assuming that loads remained stable.
But we don't know that the load factors would have indeed remained stable, do we?
Originally Posted by
Seat2C
I don't know how he thought a hipster ultra low cost carrier offering premium service at prices below breakeven. VX has merely delayed further stabilization and rationalization in the airline industry. The best thing for the US airline industry is for Sir Richard to stop pouring money into VX so that they go out of business and the industry can further stabilize. It's reckless companies like VX that exacerbate the airline industry's boom/bust cycles.
Hmmmm, VX has never functioned as an ultra low-cost airline; NK is really the only ultra low-cost carrier we have in the U.S.