Are they really?

I paid $359 for a VX F seat on my most recent transcon. I suppose the other 7 people in the front cabin probably paid more but just because there are people in the seats doesn't always mean that the airline is making lots of money off them or selling them at the asking price.

And suggesting that anything VX is doing has a demonstratable profitability or survivability associated with it is quite a huge leap at this point considering they haven't shown numbers that at all reflect that.

Unfortunately that's not a fair comparison Comparing gas stations are a better analogy. The consumer has spoken, and the consumer has determined that an airline seat is an airline seat. It's a commodity, like gas. Exxon, Mobile, Shell, I don't care. Whichever is cheapest.

The other factor is price transparency. The web has made pricing distribution impossible to control. When you go to the grocery store, you can't determine equal price comparison between two varieties of Raisin Bran unless it is sitting on the self next to each other. Then I agree human psychology will pick based on perceived value (Kellogg's is better than Safeway's brand). If you knew that the Kroger down the street sold raisin bran for $1 cheaper maybe you'd make a different decision, but you can't know when you're standing in the grocery aisle. Every possible seat on every possible competitor is displayed at the exact same time in front of you ranked by price on a web page. If the consumer has determined that a seat is a seat irrespective of brand, they pick the lowest fare. If they determine that movies, food, first class upgrades, exit row seating, is important to their decision then they'll take that into consideration. However, if you're logging into Orbitz, there's no way to tell the difference between you (the loyal FF) or John Q Public traveling once a year. Access is equal to everyone.

Airlines try to raise fares all the time, and they get killed when their competitors don't match. They run endless math models to determine the perfect revenue maximization, but again mostly dictated on what happens to the market, which they have little control over.

The other suggestions thrown around are very risky bets. E+ is the prime example which is overly trivialized on here. CO would have to make a decision to remove a 6-12 seats on every aircraft for every flight every day irrespective of stage length and seasonal demand. They would then have to determine that that removal would have a positive revenue increase for the network. What if they're wrong? Could be a revenue disaster that is likely very hard to overcome. TW and AA couldn't make it work, with UA the jury is still out since only management has a clear picture of the value.

Other long haul carriers like VS, NZ, JL, NH, etc., cater to different markets, mainly long haul overseas flights. Even for CO to determine to put E+ in international markets is a difficult decision since most of their flights are to Europe where stage length is minimal and the likelihood of passenger paying double the Y fare to sit in a more comfortable seat without destroying your J class traffic is again very risky. Not saying they would never do it, just saying it is very problematic.

Do you not bother to read what is written, or do you simply not understand it? Where did I say anything about "not liking" CO? Didn't I, in fact, lump them into the same boat as all of the other legacies? Heck, I never commented at all on the product or service. More importantly, my opinions about CO have no bearing on my view of their long-term stability - I have absolutely zero use for WN, but I admire their ability to run a business. All I said was that CO is poorly positioned to succeed in the market, something that has been borne out by going-on 10 years of poor financial performance and a very poor financial footing to start the next 10 years. I believe the same of AA, UA, US, and DL, to only slightly varying degrees. Don't try to turn it into some sort of bias thing simply because you are too lazy to bother reading what I wrote.

The problem with trying to monetize it with the base fare is that you have to have a large enough pool of customers willing to pay for what you are offering. And they have to be willing to pay a premium that covers your incremental costs. Heck, for this to work as a strategy to return CO to profitability, it will have to drive a premium that more than covers the incremental costs. I just don't see too many products that can drive that kind of incremental premium, particularly domestically.

And if you want to bundle it into a single service, which premium services do you offer? Are the same people that want a meal also interested in free bags? Are those that want more legroom interested in AVOD? If you can't find a single product or suite of products that have some large following, then you just spend a lot of money offering a bundle of products when your customers are only willing to pay for one of those products.

Is there a potential market for some of these services? Perhaps. But how big is it? For CO (and even more so for the other legacies), the problem is that they are probably bigger than the market willing to pay for premium service. Someone mentioned VX; well their CEO stated that they only see themselves serving maybe 25 markets. If CO wants to be a premium airline, then I think they need to shrink dramatically.

At CO's size, they still have planes to fill and even if you could fill 50% of the seats with people willing to pay a premium, what do you do about the other 50%? Well, if they choose on price, then you have to compete on price. Of course, once you do that, how do you stop the 50% willing to pay a premium from just free-loading? I think this is the trap that they have fallen into and a la carte pricing is probably the only way out of it.

Of course, to monetize, you have to charge more money. But instead of charging it for a basic commodity or service such as checking bags, you charge it for slightly more legroom. That's going back to the Bethunian notion of adding revenue through adding value.

It's nothing new, sbm. It's the same thing as selling M and B Ups, except that you can sell a heck of a lot more E+ ups if you're building in a much lower upsell, since the market elasticity for a lower upsell is lesser.

The whole issue is finding the sweet spot where demand for a certain premium is monetizable.

We both know that you won't be doing it any time soon with $4,000 FC transcons.

But that doesn't mean you can't add a $25-$100 premiums (built into the fare bases, just like M and B ups) for an E+ up scheme.

Since E+ should cover a fare greater inventory of seats per plane (if we use UA as a model for inventory, not for marketing) and since the costs for providing E+ vs ordinary economy are so much lower than the cost for FC, making a substantial net revenue from this category would be much easier in a slow economy.

Yeah...I get that part. ;)

My point is that you've identified as your target market the folks who implicitly shop on price, not those who shop on value. That's why I do not see it working out very well.

That is not my target demographic. My target is what I am calling the sub-premium traveler, typically a frequent flyer elite, who is able and willing to pay a little more than the minimum in order to receive a slightly more premium product.

This is monetized E+.

E+ would be reserved for elites, just as in UA, but access to window and aisle seats would be based on fare basis and elite status. Kettles would be allow to buy up, as well, one fee for E+, plus an additional fee for a window or aisle seat.

Both categories, therefore, would monetize access to this section.

The beauty of E+, at the same time, is that it is not literally business class, so as the Y cabin fills up, kettles could be assigned to seats in E+, providing the carrier with flexibility to keep selling ordinary Y tickets, but only after OLCI. Since these would, by definition, be last-minute purchases, the premium would already be built into their higher fare bases.

Going back to your point, none of this applies to folks who shop purely on price, but I would argue that many elites would be willing to spend a few additional dollars to secure a window or aisle seat in E+.

It has often been argued on this forum that CO has too many elites. I dont think that's the case at all. The issue is CO doesnt have a way to reward its elites.

E+ would be a tremendous way to do so and since its best seats would require a premium from all customers (save perhaps the highest tier elites who are already monetized for intents and purposes) this would not only act as a huge incentive for these customers to keep flying CO, but would also act as a revenue generator.

I'm certainly not against spending x to earn x+. That's the very basis of investing in one's business after all.

All I meant, is that the sound bite, or the formula, more exaclty, is virtually meaningless, because of the complexity and arcane nature of the airline business.

One simple example: When the same (horrendous) coach seat can be sold for fares ranging between $150 to over $1,000 how do you possibly measure the $1.10 ROI?

My issue, though, with Larry Kellner's tenure is how little he did to raise revenue by adding value.

He raised revenue through reducing value, both through adding charges for services that were previously at no additional cost, and by reducing the quality of the services and products provided.

Don't get me wrong, it is very likely that was necessary.

But certainly there were ways of also adding revenue by adding value.

It's CBS vs NBC. CBS has spent lavishly on its primetime line-up, is solidly in first place and makes gobs of money on it. NBC, has taken the race-to-the-bottom approach with sickening reality TV and talk shows.

And where has this race to the bottom gotten them?

To the bottom, what else?

I am not so sure that market exists as you see it. Most of those folks are flying on someone else's dime and given rules they have to adhere to. Chances of them spending out of their own pockets for incremental benefits are pretty slim, especially since they have experienced elite status before and expect that it comes with free perks.

Why would they pay more to do so on your carrier when they can do it for free on UA?

I'm not sure if E+ is net positive or negative for UA or if it would be the same for CO. But expecting the elites to pay more for E+ seems rather far-fetched to me.

How do you explain the M, B and Y-ups? And here we're talking far smaller premiums. You're also a big B6 flyer, which is generally not a business traveler's airline: Haven't you noticed how EML is almost always full? The key is just finding the right price point for the target market.

First, CO is not UA, there are many other differences between these two carriers, although certainly such a policy could be integrated, just as has been done so far with FC upgrades and access to E+ and the, er, "premium" section.

Remember, UA already claims it earns $300 million from its fairly haphazard E+ upsell campaign to kettles, while B6 claims annual revenues from EML at $40 million.

With these kinds of numbers, these upsells alone would have brought CO virtually back up to profitability in 2008. And I think CO (and UA) can do a much better job of monetizing the product than has been done so far at UA.

$359 in F on a transcon??? Where/when? I never see anything under $1,000 to/from FLL.

Here are some sample one-way fares looking 21 days out...

FLL-LAX
Main cabin - $338
Main cabin 'select' (product upsell example) - $572
First Class - $1,193

SEA-LAX
Main cabin - $210
Main cabin 'select' (product upsell example) - $240
First Class - $320

SFO-IAD
Main cabin - $298
Main cabin 'select' (product upsell example) - $598
First Class - $878

Main Cabin Select includes:
1 Free Checked Bag
Free food, beverages and entertainment
Dedicated overhead space
38" pitch
Priority Check-in and boarding
Free headset

Interestingly, they left off the free pillow and blanket from Select...at the very least they should offer it on the transcons for such a HUGE increase in fare price.

If we could gain insight into the number of 'Select' seats they sell, we'd have a pretty good idea if the concept is sellable regardless of VX's profitability as a carrier.

No I've read everything you've written. Don't attempt to cover up your historical legacy with the contents of this thread. And you've made you opinion perfectly clear over the year's your distaste for CO.

But since you're such an "expert" on how to run an airline, and since all the legacies who have "10 years of poor financial performance" which you imply they could have done something differently, please enlighten us how CO and all the other legacies could have done better. I'm sure they'd love to hear what pbarnette has to say about how to run their business.

Along with TWA and other who seem to have insights into the airline business that the MBA's on Smith St, seem incapable of analyzing and determining on their own. How about the folks at MIT who've written dissertations on these subjects. Gosh what a waste of an education, they could have just ask the "experts" trolling the internet.

Some of us do have more than just 'insights' or 'opinions' - some have work experience or academic backgrounds in the industry. I think it's a little insulting to insinuate that everyone with an opinion on our forum is unworthy of that opinion accepted as valid or legitimate.

MBAs and 'dissertations' are all fine and good - but not the end-all or even the most accurate source of good strategic thinking.

If MBA and dissertations were always correct, we would never need to ask the customer anything, right? The product would always be perfect and the customer would always buy it.

Not sure what that has to do with anything.

What could they have done better? Been more serious, sooner, about cost containment. Not fought for market share at the expense of profitability. Focused on a market, be it the price conscious or the premium customer and actually serve it, rather than being far too big to be premium and too expensive to appeal to the price conscious. Dramatically scaled back in the domestic market or eliminate domestic F.

Frankly, I seriously question your reading comprehension skills (or else you are intentionally misrepresenting what I am saying). I'm actually not really saying anything that different from you. You talk about the inability to raise fares, just as I do. You talk about the lack of a sizable market for premium products, just like I do. What, exactly, is your issue? If I'm wrong, then aren't you also wrong? About the only difference is that you seem to think the best solution is a pity party, while I think they should seriously considering doing something aggressive to become profitable, rather than simply scrambling to stay afloat another year at a time.

Then again, since you spent 10 years "in the industry", and if you were in any sort of decision-making role, then I probably should assume that I am wrong, right? After all, if you were making such important decisions, they clearly turned out largely wrong, so agreeing with you would seem sort of foolish.

The Y/B/M fares are quite likely not being purchased by the folks who are cannot purchase F due to policy but are free to spend as much money as they want otherwise. I doubt that such a policy exists in many companies. I think that it is folks who have policies permitting/requiring refundable tickets, folks who don't have 3-night minimums, fokls buying without much advance purchase or one of the other things that make those fares pop up.

And I'm not that big a B6 flier. Other than this year's AYCJ promo I had one flight with them in the past 12 months. I like their product better than CO's in many cases but still choose to fly CO as their route network anf loyalty programs better meet my needs.

I do not think that you can simply say that CO would have maid $NN by having the E+. And there are other factors that have to be considered as well, notably the decreased revenue from not being able to sell those seats. That is a very real consideration when load factors are as high as they are these days.

We're quickly circling back to the age-old debate on the merits of E+ and whether it makes sense or not. Apparently if LK had added E+ you'd be raving about his tenure, regardless of anything else. At least that's how it seems your posts trend over time.

I never said that I confirmed it at the time of booking. ;)

I paid $109 for a one-way LAX-JFK seat and another $250 at T-24h for upgrading to F.

the ONLY DL flight I've been on (as a NW Gold) with free tv is a 757...and then out of all my DL/NW flights this year it was just 2 flights total (out of 60 some)