Originally Posted by mid
I can't help but notice that in all of the arguments from the other side about why DH doesn't have a shot at making it are chock full of statements like "sustainable" and "legitimate" and "excess" and "duplicate".
Before DH came along, prices from IAD to MANY of those citites were absolutely out-of-this-world. When you can fly to Munich for less than you can to RSW from IAD, there is no point in making arguments about what prices are "logical" and "just".
AirTran flies from DCA-RSW. If you want to fly for less, you can make the hop-skip-and-jump there. During the summer, Munich flights have almost always been much higher than Florida flights. (off-season for Florida, peak season for Europe.) During the winter, however, there is a lot of excess capacity on the Europe flights. Thus fares are cheap. This is the same argument that has been used to support the low fares FlyI has been offering. Rather have a super-cheap seat than an empty seat. A key difference, however, is that the Munich flights tend to be profitable on a year-round basis. Thus the cheap fares in the off-season can be sustained.
And for most of us, that's the point. Living in DC a hop, skip, and a jump from IAD, the effect of DH has been enormous. And that's a GOOD thing.
People who argue that DH is distorting the market are just kidding themselves and wasting everyone else's time. I can't help but feel that they would also expect Burger King to pay $10/hr to the guy working the fry machine because you can't live on $5.75.
Using the food analogy, the major airlines are like Burger King. Present everywhere, and selling hamburgers for a few bucks. DH is the new upstart burger chain. They come in and open up restaurants right next to existing Burger Kings. They serve burgers for a penny each. They get praises for bringing down the price of hamburgers. However, they only sell hamburgers, fries, and coke. And they are not in all the locations of Burger King. Burger King has been forced to match prices on the humburgers. However, they have kept their other menu items at their regular prices, and even raised some to make up for lost revenue on hamburgers.
Hamburger lovers really enjoy the low prices of this new chain. However, chicken sandwhich lovers are a little upset.
When you look as just how inefficient those majors are, how many millions they overpay their executives for losing billions, how many employees they need to do the same job that other companies do with one, it's becomes painfully obvious that THEIR business models are unsustainable. If they were, we would not have 4 of the largest 7 carriers in BK court right now.
United reported an operating profit for last quarter. DH reported an operating loss. If DH is a 'lean' operation and UA still has a lot of fat to trim, then there is significant hope for UA's model - but not much for DH. Enjoy the low fares while you can. They will need to go up. Maybe DH can stay around and raise them to levels that can sustain it. Or maybe they will go away.