StSebastian

NW is looking head-on into some serious labor issues with the Mechanics (AMFA) and they just irritated the Pilots (ALPA) too.

mid

On my last DH flight to BOS, the flight was delayed because of crew availability issues. Specifically, they didn't have a first officer.

So they managed to get a pilot to come in ON HIS DAY OFF and fly for them. The guy was there ready to fly in 45 minutes. When they announced his name on the flight, everyone gave him a round of applause.

I can't imagine a major carrier getting that kind of dedication from it's pilots.

That's a BIG reason that I like the smaller carriers. They are hungry and they want to succeed. I like the flexibility and service that you can get with a major carrier but I feel that their cost structures and cultures don't lend well to staff going the extra mile to take care of customers.

I also think that a lot of customers remember the treatment they got when prices were high and there were few options. Since they're likely to be treated like dirt anyhow, might as well not pay through the nose.

If you've ever been yelled at by a FA on a transcontinental for asking for more coffee, you'll understand what I mean.

A little side note: I'm sure most people think that Greyhound is synonymous with bus travel in the US but about a year ago or so some small bus lines started offering trips from DC to NYC for about 1/5th of what Greyhound was charging for the same trip. You also got picked up next to a metro stop and close to a coffee shop. Customers flocked to them like droves and eventually they forced Greyhound to reduce their prices. Of course, why would you return to Greyhound when you got a superior product for the same price?

I do believe that the majors will find that they must quickly adapt to the new environment or they will suffer a similar fate. I, for one, find that the simple and efficient service I get from the LCCs is superior to the service I get from the majors for a higher price. That's the REAL problem facing the majors.

gleff

The 'real' problem of the majors is a cost structure than market demand won't support.

The 'real' problem of DH is that they can attract customers and more or less fill planes, but only at price levels below cost. As already mentioned on this thread, in the 2Q they'd have lost money even if fuel was free... break-even load factor 109%.

They wouldn't even still be around today if GE hadn't thrown DH a lifeline, purely in a move to protect some fictional values on their balance sheet.

Hoping DH makes it, somehow, but not optimistic.

DENPremEx

@:-) If you don't like the price then drive! You have other alternative and economics dictates that if economic profits exceed a certain point then competition will be attracted to the market.

The simple fact is FlyI is run by a bunch of complete morons. What other company that's headed for bankruptcy would offer pricing that would prevent them from making a profit unless they fill a plane with more people than they possibly can??? The bankruptcy of FlyI will further validate Darwin.

mid

I'm not so sure they are morons.

They've made it this far and they are doing their best to stay afloat.

If I were to hazard a guess, I'd say that there are market forces that are driving their pricing decisions that are a bit opaque to us here in our armchairs.

Crazier things have happened in the world than a small upstart gaining market share by pricing and profitability by altering their product mix.

vatraveler

You seem to gloss over the precarious financial situation of your beloved airline.

The crazy prices UA (and US, for that matter) charges to small markets will only hurt it in the end. It really turns off the flying public, especially the leisure market. I'm sure GSO is praying for WN or B6 to swoop in after the death of DH.

MFLetou

I sure hope that DH is nothing like those bus carriers, which are operated by Chinese Triads and routinely break safety regulations (ie, drive 80 on the NJ TPK) and skimp on maintenance. Its only a matter of time before one of those things flips over and the whole industry comes crashing down. Then its back to Peter Pan and Greyhound.

mid

I hadn't heard about the Triad connection. What's your source?

The owner of the the bus line I used wasn't one of those "chinese" bus lines:

www.washny.com

If memory serves, the owner is a hassid.

BearX220

And there you have the whole airline industry problem summed up in one simple sentence. People want and expect fares below cost basis. When asked to pay market rates they consider that they're being gouged. Entrants like FlyI pander to the customer's expectation of unreasonably low fares; they can't possibly make money, but while they're alive they destabilize their markets for all comers. And consumers prefer to take advantage of the "FlyI effect" on UA fares to flying FlyI itself.

Someone else here said, "I'm loving those $80 RT fares to Boston." Fares like that are not only killing FlyI, they're killing the whole industry, and the sooner irrational competitors like FlyI that force those fare levels on the market are gone, the better.

I have said since before FlyI's launch that it was a stupid, doomed experiment, not materially different from Presidential Airways (which hubbed at IAD in the late '80s and also died quickly). It'd be dead by now if it weren't for GE. Sorry about the jobs and everything, but for God's sake, shut 'er down and stop blowing all this money,

L Dude 7

They usually charge decent prices for the leisure market to connect in their hub - just not to fly non-stop to the hub. For example, a United flight fron SBN-ORD costs more than SBN-ORD-SFO. From downtown Chicago its a 45 minute train ride (or 30-90 minute drive) to O'Hare plus a 50 minute flight to South Bend. Arriving at the airport 30 minutes early means the total travel time will be at least 2 hours. For $10 you can also take a commuter train from downtown to Chicago to South Bend airport in a little over two hours. Or you could drive to South Bend in less than 2 hours (traffic permitting.)
In order to really competitively price these flights, UA would have to sell round trips for $20, a fare that probably wouldn't even cover taxes, let alone cover any of their expenses.
By pricing those short trips at 'crazy prices' they maintain the capacity for connecting flights to other locations, while still allowing people to take the short hops if they really want to. Thus it could actually improve air-travel options.
If the short RJ flights were priced at break-even cost, they would still likely be viewed as expensive by the local passengers. Pricing them below cost may help attract demand, but would lead to great loses.

mid

That was ME lovin those fares.

And sorry...tell me what relationship to cost basis the fares I was paying had WAY BACK WHEN there was little to no competition?

Are you telling me that the fare I should be paying was that jacked up rate from the 80's before deregulation? Or even soon after? What do you think a RT fare to BOS should cost?

You can blame the customer all you want for the sorry state the airlines are in. But I'll never buy it. I think it has MUCH more to do with training customers how to choose. Like the point I made earlier...if I'm going to get treated like dirt ANYHOW, I might as well pay the least I can. And the airlines did that for FAR too long to forestall the emergence of the LCC's.

Customers aren't dumb. They see one airline charging $800 for a flight that another one charges $200 for, and they think, HUH?!? There has LONG been the feeling that the prices charged by the majors had no bearing on reality anyhow. That's why you're not seeing any hankies come out when the majors cry about how they're not covering their costs.

MileageAddict

My sentiment exactly. Unfortunately, I think many average consumers see it this way as well... "Let DH keep the fares low but I'll continue to fly UA".

BearX220

Exactly. People are pleased to have lower UA fares owing to the FlyI Effect, but they prefer not to actually change their behavior and FlyI themselves. Then when FlyI goes under and UA jacks the rates back up, they go back to complaining about the lack of competition.

For mid: thank you for your comments. No, consumers aren't stupid -- to a point. You naturally prefer a low fare, but now irrational carriers like FlyI have taught people to expect fares that don't cover the cost of transporting them. You know it costs more than $40 to fly you IAD-BOS -- your share of landing fees and jet fuel alone come to more than that. So when you opt for the lowest fare you are opting to sustain chaos in the marketplace.

In other economic sectors there are laws against "dumping" -- selling imported goods for less than their cost of manufacture -- for precisely this reason.

I don't support price-gouging by the airlines either. I think the price of a ticket to Boston should consist of the cost of getting you there plus a 10 percent profit. But that would be regulation, and the US chucked regulation 28 years ago in favor of a model that has bankrupted almost everybody and cost hundreds of thousands of jobs -- including, soon enough, those of FlyI workers.

mid

Don't get me started about dumping laws. I believe in strict laissez-faire capitalism. Anti-dumping laws are just political tools designed to get votes. There is no economic justification for them.

Maybe $40 is too little to charge to get to BOS from IAD. What the hell do I care? I paid high fares for years. Now that the pendulum has swung in my direction, I'm supposed to be concerned about the health of the airline industry?!?! When I was paying WAY above cost I should forget that and now forgo paying WAY below cost?

Economics is economics and the marketplace is always chaotic. That is, if it's functioning correctly. Go back and get a copy of anything by Milton Friedman.

I'm grabbing up all of the low fares I can while the getting is good. If we have one plane left in the country and people have to sit on laps to get to business meetings, I won't feel the least bit guilty. I know that these things go in cycles and when there is money to be made, those planes will be in the air.

BearX220

You care because ruinous, destructive pricing activity like that eventually flushes most entrants from the marketplace and results in monopolist rates that fewer people can afford. I understand Milton Friedman perfectly well, but airline economics are uniquely irrational and unstable. Read Thomas Petzinger's "Hard Landing" for good insight.

You're right, though, things do run in cycles, and because of all this lunacy we are cycling back to a period of bankruptcies, consolidations, less capacity and higher fares.
But there isn't, so eventually they won't.