Originally Posted by
spin88
I would actually say that (as Oscar, and before him Jeff said) United with its gateways and big presence in the big markets was best positioned c2011 to do well. That competition to it has grown (ex-SFO, SW expanding at Hobby, Delta building out ex-LAX/JFK) is more the result of United driving away passengers than some flaw in UA's route structure. To give an example, I know lots of people in Houston who 5 years ago would drive up to IAH for longer domestic flights (rather than taking SW from Hobby). But as UA got unreliable and as upgrades went away, many of them have just given up, and fly SW from Hobby, which is closer to the wealthy areas of Houston. As a lawyer who I work with a lot told me, if she was going to not get upgraded by UA, and UA was not reliable, she might as well just go with the closer airport and cheaper fares on SW and just sit in the exit row.
Looked at another way, when CO took over UA the combined airline should have outperformed (and Jeff projected $800M/year in revenue synergies, quantifying that gain). That it has under-performed badly does not say that the merger was a bad idea, or the assets were bad, it just shows that the management did worse (another 3-4% under-performance of DAL) than the numbers I ran above show.
I continue to be troubled by the logic that poor product and poor performance drove customers away and is the sole (or primary) driver of revenue performance.
While there is some truth to this statement, you can't take such a binary approach and ignore the most significant driver of domestic yields: competition. Hubs in large gateway cities provide access to huge amounts of domestic and international O&D, which has the
potential to be quite lucrative (see: EWR). The downside is that these large markets with their low hanging fruit attract a lot of competition. Head-to-head or cross town competition from low cost carriers who are trying to grow their market share will pressure yields. It doesn't matter if you have a competitive product and good reliability: your PRASM will suffer. Of course, running a great operation and providing superior value will help you compete and withstand the initial onslaught of competition, but it won't isolate you from yield pressure.
Delta has benefited over the past few years from a decline in competitive capacity. As noted, Southwest reduced its presence in ATL and SLC and Delta reduced its concentration in Florida. Delta also benefits from concentrating a huge amount of its domestic ASMs in relatively uncompetitive, high-yielding markets: ATL, DTW, MSP and SLC. Delta's competitive markets in LAX and SEA are a relatively small portion of its domestic ASMs.
AA and United faced a different dynamic over the past five years with ULCCs and Southwest growing capacity, and pressuring fares, in their largest markets: DEN, DFW, IAH and ORD. Unlike Delta, AA and United have the majority of their domestic ASMs in highly competitive markets. Unlike Delta, these markets do provide larger pools of premium domestic and international traffic; however, a lot of that traffic is in industries, like energy, that are facing cost and demand pressures.
Bottom line: you can't assume one airline can, and should, perform equally to another unless their networks are identical.