Air Travel

Question:

- Hide quoted text — Show quoted text ->> They don’t charge you $900 unless you want to book today and leave >> tomorrow. >> They price travel as a commodity and WN does not. >But one often hears that for the majors to be able to match WN’s prices, they >must cut meals. Meals are but a tiny fraction of the $900 difference is fares >between the majors and the low costs for a walk-up fare. And yes, I agree, the >way the majors set their prices is the problem. Their fancy yield management >adjusts the advance purchase fares, it doesn’t adjust the walk up fares. > Who says it’s a problem? It’s worked well for the major airlines for > years. And 9/11 socked everybody.

The airline business has historically been one of the least profitable businesses for a long, long time. It was also on the ropes well before 9/11. I don’t think it’s a coincidence that the one airline that doesn’t use the same absurd system is also the only airline that has consistently turned a profit for decades. Is there another business that uses such an absurd, complicated system to set prices? I can’t think of one, but maybe someone else can. — I am agreeing with this poast. http://www.watchingyou.com

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> Is there another business that uses such an absurd, complicated system > to set prices? I can’t think of one, but maybe someone else can.

Didn’t the paint industry use a similar scheme once ? I remember someone comparing the airline industry to the paint industry where one would be charged more to use only half a gallon of paint compared to the full one, and one would be charged more for painting all on the same day instead of painting part before saturday and painting the other part after saturday.  ?

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> In many business centers, there isn’t an option. Yes, Southwest serves > NYC. But who is going to have time to schlep out to Islip from NYC and > then fly across country.

Correct. That is because the likes of Southwest don’t serve all markets. But as time progresses, they may serve more and more markets. Look at JetBlue out of JFK, and Amtrak out of manhattan. Each bite they take off the major’s exhorbitant fares means a lot less profits for the airlines. And each seat that isn’t sold at an exchobitant fare is made available at a discounted fare which may not yield any profits for the airline. > That’s not necessarily true. The entire time you’re operating that 737 > if it’s at a loss, it would be cheaper over time to lease or purchase > an aircraft more suited to that route.

Not if it means that you have to buy all sorts of servicing and maintenance and spare equipment for that one plane. Using a 737 with lower load factors doesn’t automatically mean it is money losing, it means that the flight will generate fewer profits. What happens though is when the airline does decide that it can buy a new smaller plane for that one route with all the infrastructure to support it, it may find that it opens up a whole series of new routes that can be operated profitably and before you know it, that formerly one-aircraft-type airline now has a big fleet of 2 different aircraft.  And later, it may find that it is more cost effective to operate some routes on a larger plane and once it has that largher plane, it also opens up a whole set of new routes. Imagine if Southwest had both the CRJ and 737s. It could serve a whole bunch of cities and have a much bigger national network. Southwest operating CRJs might really kill Greyhound. Heck, use the Dash-8 to kill Greyhound and land on highways next to the convenience store

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> WestJet flies around the Great White North using Southwest’s game plan and I > gather that you get some of the white stuff up there, eh?

But the only airport that is congested in Canada is the mess at Toronto, and westjet doesn’t fly there. They avoided Montreal too after seriously looking into it (probably due to Air Canada holding the airport administrators by the balls and making sure westjet couldn’t come to montreal).

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>They don’t charge you $900 unless you want to book today and leave >tomorrow. And in that case, it has nothing to do with costs. It has to >do with the fact that they have a different business model than WN. >They price travel as a commodity and WN does not.

It has a lot to do with costs. Costs limit how competitive a carrier can be on pricing. And in what way does WN not ‘price travel as a commodity’? Travel is the commodity any aitrline has to sell. Alan Gore               |  is like giving whiskey and car keys Software For PC’s, Inc. |  to teenaged boys" – P. J. O’Rourke http://www.alangore.com

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> Who says it’s a problem? It’s worked well for the major airlines for > years. And 9/11 socked everybody.

Business travellers had begin to stop paying the airline,s outrageous Y fares before 9/11 and gotten smart. Remember that famous priceline bit on 60 minutes with Sheryl ? There were plenty of such reports showing how business travellers was starting to find the ways to avoid paying those high fares and that was why airlines were hurting. > Believe it or not, most customers would rather choose to fly with a > full-service airline if they can swing the ticket price.

I agree entirely. However, my point is that the service differences between WN and a real airline are not worth the $900 difference in one way fares. I get the impression that Southwest operates on a "how much must we charge to make a profit" theory whereas the big guys operate with fancy computers that try to guess how much the market will bear for a certain route. That is why A-B-C often costs less than A-B on the big guys, even though it costs them far more to carry you A-B-C than just A-B. > And it’s not an issue of business fliers getting smart. Often, they > don’t have the luxury of being able to plan out 21 days ahead. If a > customer or client wants a meeting this week, it will be this week.

Then you fly southwest, valuejet, jetblue etc. Yeah, there are still situation where you must dish out the big bucks, but those don’t happen often enough anymore to sustain the big airline’s pricing philosophy. > It has nothing to do with the same route. A mixed fleet means you have > duplicate tools, parts, staff/training, etc. A mixed fleet literally > dupliates many of the required costs of operating a plane.

Once your fleet grows beyond a certain point, you exceed your capacity and need to build new maintenance centres etc etc.  Are those duplicates ? There are intelligent and efficient ways to use a mixed fleet and then there are ways that are not so efficient. If you have only one route where the 737 is too big, then it pays to put the 737 on that route anyways, compared to buying a smaller plane type just for that route. But if you have a whole bunch of routes for which a smaller plane is more efficient, then it pays to have a different plane type for those routes. Look at the concept of regionals. They started off as independants with regional routes that were large enough to warrant their own fleet of turboprops (and in the case of Comair, their big litter of baby flying skidoos). When a regional ins integrated into a mainline airline (as was the case when airlines in canada gobbled up the regionals), does that make their use of a different plane inefficient all of a sudden ? Similarly, when you use a 747 on routes where a 737 wouldn’t do the job, and you have sufficient such routes to warrant the spares/maintenance facilities from a few bases, does that make that plane inefficient ? For instance, when CP had its 4 747s operating only from Vancouver, their presence didn’t make its system inefficient because they didn’t need to spread spares and technicians everywhere in Canada. It all has to do with how you deploy your fleet. > Retraining has nothing to do with the unions. That takes time and > money and unions can’t affect that. If there are people already > trained available to do it, they’ll get the nod.

It has everything to do with unions. They are not allowed to fire a 747 captain. They have to fire a flying skidoo captain, bump a 737 captain down to the skidoo, bump a 320 captain down to the 737, bump a 767 captain down to the 320, bump a 777 captain down to the 767 and then bump that 747 captain down to the 777 each getting new training because they are forced onto a new fleet type. That is where having a single fleet type helps since you just fire the less experienced pilot and need not retrain anyone else. But single fleet type doesn’t allow you to have overseas routes and domestic routes.

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>> What I meant to say was most of their airports aren’t notorious for > delays. LAX is pretty much the only one that might fit into that > category. The others are relatively easy to navigate. >Could Southwest operate "efficiently" to any market in the USA, or are there >markets that it cannot go to because of the lack of a small/nodelay airport >?

Well, they do fly to airports that can get heavy snow: BOI, SLC, GEG, BUF, PVD, MHT, DTW, MDW, CLE, ISP, BWI, STL and MCI. And they fly to airports that can get fog: SEA, BUF, PDX (some), LAX (some) and SAN (some). So I guess Herb and Co. have a plan? WestJet flies around the Great White North using Southwest’s game plan and I gather that you get some of the white stuff up there, eh? -Erik

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> What I meant to say was most of their airports aren’t notorious for > delays. LAX is pretty much the only one that might fit into that > category. The others are relatively easy to navigate.

Could Southwest operate "efficiently" to any market in the USA, or are there markets that it cannot go to because of the lack of a small/nodelay airport ?

Response:

forgetting LAS as well???

– Hide quoted text — Show quoted text ->The >only major airport they serve in their route network is LAX. > And SEA, DTW, IAH, STL, BWI, PDX, PHX, SAN, CLE, and others which one might > consider "major", IMHO. > -Erik

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self answering question.  air-ground-air time is what’s importatnt to WN as well as available market (pax)

> What I meant to say was most of their airports aren’t notorious for > delays. LAX is pretty much the only one that might fit into that > category. The others are relatively easy to navigate. > Could Southwest operate "efficiently" to any market in the USA, or are there > markets that it cannot go to because of the lack of a small/nodelay

airport ?

Response:

Of course, WN just announced that they might lose money this 1/4 since they seem to have a problem filling seats without discounting them.  If THEY have a problem even at their reduced "walk-up fare rates" the majors must be getting killed out there.

– Hide quoted text — Show quoted text -> They don’t charge you $900 unless you want to book today and leave > tomorrow. > They price travel as a commodity and WN does not. > But one often hears that for the majors to be able to match WN’s prices, they > must cut meals. Meals are but a tiny fraction of the $900 difference is fares > between the majors and the low costs for a walk-up fare. And yes, I agree, the > way the majors set their prices is the problem. Their fancy yield management > adjusts the advance purchase fares, it doesn’t adjust the walk up fares. > Major airlines were structured to make money on a few high paying customers > who subsidize the cattle car in the back instead of making everyone pay their > own way. When the business flyiers get smart and book ahead, then they travel > in the cattle car, but there is nobody paying the high fares to subsidize them. > It does make a big difference. Training costs for crews are much less, > training and equipment costs for mechanics are much less. The list > goes on. There is a big difference there. > While I agree there may be savings, the costs of having multiple types are not > that great in some instances. > Suppose Southwest has one maintenance base that can handle all of its 100 > 737s. (apply that to the group of pilots needed to fly those puppies) > Now, take an airline like UA. > If they have 100 A320s maintained at one base, that plane type will get the > same economies of scale as Southwest gets from its 737s. Right ? > However, UA needs a bigger plane type for some routes, so it gets 767s. Just > because UA also has 767s in its fleet doesn’t make its 100 320s any more > inefficient than Southwest’s 100 737s. > And the 767 allows UA to capture markets that Southwest cannot since its 737 > cannot efficiently serve such markets. > Where mixed fleet gets ugly however is when you have multiple plane types > operating the same route. That does result in much more duplication of spare > parts, crews etc etc compared to having just a single plane type on a route, > unless both cities are "hubs" that support both types. > For instance, if both montreal and toronto both have dash-8 flights to nearby > communities, then it doesn’t hurt to put a dash-8 between montreal and toronto > during off-peak since both cities already have the faculities for that plane. > But when you look at Air Canada that has both the 737 and A320, it would be > stupid to have both types in montreal. It would be better to put all 737s or > all A320s in montreal so that montreal wouldn’t have to maintain 737 > maintenance/parts/crews. If AC had 737s in western canada and the 320s in > eastern canada, then there wouldn’t be much duplication. > And while the layoffs caused by Sept 11 did outline the problems of retraining > when youhave multiple fleet types, I think that unions could work to fix that, > and a problem of that scale is not seen very often.

Response:

> They don’t charge you $900 unless you want to book today and leave > tomorrow. > They price travel as a commodity and WN does not.

But one often hears that for the majors to be able to match WN’s prices, they must cut meals. Meals are but a tiny fraction of the $900 difference is fares between the majors and the low costs for a walk-up fare. And yes, I agree, the way the majors set their prices is the problem. Their fancy yield management adjusts the advance purchase fares, it doesn’t adjust the walk up fares. Major airlines were structured to make money on a few high paying customers who subsidize the cattle car in the back instead of making everyone pay their own way. When the business flyiers get smart and book ahead, then they travel in the cattle car, but there is nobody paying the high fares to subsidize them. > It does make a big difference. Training costs for crews are much less, > training and equipment costs for mechanics are much less. The list > goes on. There is a big difference there.

While I agree there may be savings, the costs of having multiple types are not that great in some instances. Suppose Southwest has one maintenance base that can handle all of its 100 737s. (apply that to the group of pilots needed to fly those puppies) Now, take an airline like UA. If they have 100 A320s maintained at one base, that plane type will get the same economies of scale as Southwest gets from its 737s. Right ? However, UA needs a bigger plane type for some routes, so it gets 767s.  Just because UA also has 767s in its fleet doesn’t make its 100 320s any more inefficient than Southwest’s 100 737s. And the 767 allows UA to capture markets that Southwest cannot since its 737 cannot efficiently serve such markets. Where mixed fleet gets ugly however is when you have multiple plane types operating the same route. That does result in much more duplication of spare parts, crews etc etc compared to having just a single plane type on a route, unless both cities are "hubs" that support both types. For instance, if both montreal and toronto both have dash-8 flights to nearby communities, then it doesn’t hurt to put a dash-8 between montreal and toronto during off-peak since both cities already have the faculities for that plane. But when you look at Air Canada that has both the 737 and A320, it would be stupid to have both types in montreal. It would be better to put all 737s or all A320s in montreal so that montreal wouldn’t have to maintain 737 maintenance/parts/crews. If AC had 737s in western canada and the 320s in eastern canada, then there wouldn’t be much duplication. And while the layoffs caused by Sept 11 did outline the problems of retraining when youhave multiple fleet types, I think that unions could work to fix that, and a problem of that scale is not seen very often.

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> > The fact that they have multiple plane types shouldn’t make such a huge > difference either under normal times since a 747 is probably much cheaper to > operate per passenger than a 737 when you fill both.

Keyword there.  Actually, better to replace "when" with "if".

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>I think the thing United Airlines is now dreading the most is the serious >possibility that WN could start flying into Colorado Springs, CO by the end >of this year. And WN could easily pull it off, too–they have the planes and >personnel, not to mention plentiful gate space at COS, to fly from that >airport to potentially Seattle, Portland (Oregon), Oakland, San Jose, the >Los Angeles area, San Diego, Las Vegas, Phoenix, Oklahoma City, Kansas City, >St. Louis and Chicago (Midway).

You forgot Albuquerque…

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> I think the thing United Airlines is now dreading the most is the serious > possibility that WN could start flying into Colorado Springs, CO by the end > of this year. And WN could easily pull it off, too–they have the planes and > personnel, not to mention plentiful gate space at COS, to fly from that > airport to potentially Seattle, Portland (Oregon), Oakland, San Jose, the > Los Angeles area, San Diego, Las Vegas, Phoenix, Oklahoma City, Kansas City, > St. Louis and Chicago (Midway). Given that Colorado Springs is a relatively > short drive for residents of the southern half of Denver, WN could take away > a huge amount of business from United’ "fortress hub" at DEN.

Ouch! That certainly would put the hurt on UAL. I should say a BIGGER hurt. It’ll be great for Colorado travelers, though. That article nicely summarizes what I (and many other people) have realized for years. This one sentence says it all: "…Southwest long ago realized that air travel was not about glamour or power or prestige or status. It was about nationwide, universal, rapid air transit." — I am agreeing with this poast. http://www.watchingyou.com

Response:

>The >only major airport they serve in their route network is LAX.

And SEA, DTW, IAH, STL, BWI, PDX, PHX, SAN, CLE, and others which one might consider "major", IMHO. -Erik

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- Hide quoted text — Show quoted text -> I think the thing United Airlines is now dreading the most is the serious > possibility that WN could start flying into Colorado Springs, CO by the end > of this year. And WN could easily pull it off, too–they have the planes and > personnel, not to mention plentiful gate space at COS, to fly from that > airport to potentially Seattle, Portland (Oregon), Oakland, San Jose, the > Los Angeles area, San Diego, Las Vegas, Phoenix, Oklahoma City, Kansas City, > St. Louis and Chicago (Midway). Given that Colorado Springs is a relatively > short drive for residents of the southern half of Denver, WN could take away > a huge amount of business from United’ "fortress hub" at DEN. > Ouch! That certainly would put the hurt on UAL. I should say a BIGGER > hurt. It’ll be great for Colorado travelers, though.

        Not only that, but would take a huge chunk out of UAL and FFA’s KOMA-KDEN route, which UAL’s Denver hub primarily serves. This may also come to sting FFA a bit more, since they are in transition from an all B737 fleet, to an entire A320 fleet.                                                         BL. — Web + NewsMaster, BOFH.. Smeghead!   |   http://www.wizard.com/~tyketto   PGP: 1024D/E319F0BF 6980 AAD6 7329 E9E6 D569  F620 C819 199A E319 F0BF

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> <snipped> >That article nicely summarizes what I (and many other people) have >realized for years. This one sentence says it all: "…Southwest long >ago realized that air travel was not about glamour or power or prestige >or status. It was about nationwide, universal, rapid air transit." > Paul Tauger might take issue with that statement

I know! — I am agreeing with this poast. http://www.watchingyou.com

Response:

<snipped> >That article nicely summarizes what I (and many other people) have >realized for years. This one sentence says it all: "…Southwest long >ago realized that air travel was not about glamour or power or prestige >or status. It was about nationwide, universal, rapid air transit."

Paul Tauger might take issue with that statement –Tom To email me, remove the obvious.

Response:

> The fact that they have multiple plane types shouldn’t make such a huge > difference either under normal times since a 747 is probably much cheaper to > operate per passenger than a 737 when you fill both.

But you’ll note that United is flying A-320s non-stop from Dulles to LAX and/or SFO. IAD is their main east-coast gateway to Europe.  Yes, some of their transcontinental flights are much larger iron, but UA does fly WN-size planes between major transcontinental hubs.

Response:

> 1. Relied on only one jetliner type, the 737.

Could WN become a true national airline with a single airplane type ? WN seems to limit itself only to markets where the 737 is the right plane, and where the airport is cheap and efficient. > 2. Developed a single-class Economy interior with reasonably roomy seating > (32" pitch). Deleted the idea of serving meals in flight, which cut catering > costs WAY down.

I think that meals are a very small part of the ability to offer profitable lower fares, especially if the catering truck still needs to pull up to the plane to load it with drinks and pretzels. Where I think the lack of meals helps is in the fast turn around time. (less cleaning, less rubish to get out etc). > 3. Trained airline personnel to turn around a plane as fast as possible.

But woudln’t choosing an airport where there are no takeoff/landing delays have a greater thing to do ? That 10 minutes they save on the ground with quicker turn around is defeated if they us an airport where 20-30 minute delays taking off are common. Another thing is the attitude of the staff. They are much more motivated to make the airline succeed and are not as quick to use their union to claim that such and such is not part of their job.

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> If you "burned down the house", I would assume salaries would have to come > into line with the Southwest model?

Major Airlines would have to do the real homework and find out exactly what is costing them so much more than Southwest. It isn’t the provision of a meal that results in then charging $900 more for a flight. The fact that they have multiple plane types shouldn’t make such a huge difference either under normal times since a 747 is probably much cheaper to operate per passenger than a 737 when you fill both. Major airlines have been hiding behind their fancy yield management software for far too long stating that was the best way to be the most efficient. And airlines MUST stop depending on a few business travellers subsidizing all of the airline. Unions might make it impossible for the airlines to make the many not-so-dramatic changes, so perhaps "burning down the house" might be the only way to get rid of all sorts of union acquired rights that prevent the majors from being more cost effective. Pilots have made themselves slaves of an airline. They need to review their seniority rules so that they can switch airlines easily.  Right now, because once you start to work for one airline, you are essentially prevented from leaving that airline, pilots feel emprisoned and fight like hell to get what they want. But if pilots were allowed to change airlines, if you work for an airline with lower salary/benefits and there is a job offer at another better paying airline, you’d take it and just leave the "el cheapo" airline instead of calling for strikes against the el-cheapo airline to force it to match the other airline,s salaries etc.

Response:

> Interesting article.  As part of the model, how does Southwest and the other > similar airlines salaries compare to the majors?

I think WN has salaries that are competitive with the majors. But what made WN so successful is the very fact they’ve taken the concept of economies of scale to an unprecedented level. Look at what they’ve done: 1. Relied on only one jetliner type, the 737. It was WN orders that encouraged Boeing to build the original CFM56-powered 737-300/500 models in the 1980’s and the Next-Generation 737’s in the 1990’s. By relying on one jetliner type, it keeps maintainance and flight crew/cabin crew training costs low. 2. Developed a single-class Economy interior with reasonably roomy seating (32" pitch). Deleted the idea of serving meals in flight, which cut catering costs WAY down. 3. Trained airline personnel to turn around a plane as fast as possible. WN achieved the ability to have the plane’s turnaround time from the time the plane stops at the gate to the time the plane is pushed back from the gate down to an amazing 20 minutes or less. This means less time wasted on the ground and more time in the air earning revenue for the airline. As a sum result, WN has just about the lower costs per passenger-mile of any major airline in the USA. The results were pretty amazing: before WN entered the California market an unlimited ticket between northern and southern California cost as much as US$200! WN drastically cut that down to size: US$65. And still made a handsome profit at that price, too. No wonder why WN flights are nowadays full of business travellers. I think the thing United Airlines is now dreading the most is the serious possibility that WN could start flying into Colorado Springs, CO by the end of this year. And WN could easily pull it off, too–they have the planes and personnel, not to mention plentiful gate space at COS, to fly from that airport to potentially Seattle, Portland (Oregon), Oakland, San Jose, the Los Angeles area, San Diego, Las Vegas, Phoenix, Oklahoma City, Kansas City, St. Louis and Chicago (Midway). Given that Colorado Springs is a relatively short drive for residents of the southern half of Denver, WN could take away a huge amount of business from United’ "fortress hub" at DEN. — Raymond Chuang Mountain View, California USA

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Burning Down the House BY JOE BRANCATELLI December 6, 2001 — Let me be as clear and unequivocal as humanly possible: America