No wonder UA is dying

Oct 20th, 2002, 02:01 AM
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No wonder UA is dying

We purchased tickets from LA to NYC during the Christman break for $250 round trip on AA. Before 911 the major airlines had to charge over $400 to make a profit on this route. Costs are greater with all the new expenses associated with 911. So are they crazy? Well JetBlue flys from Long Beach to NY for $250, so the majors are matching. It's sad that AA and UA which can trace their lineage back to almost the Wright brothers don't seem to have an ounce of goodwill. Apparently, they can't charge any more than an airline that's been in business for a couple of years. The fact that AA has flown safely for three quarters of a century, has a lot more legroom and gives frequent flyer miles doesn't seem to make any difference.

JetBlue is making money so probably they can continue to charge $250 forever. What that means is the Southwests and JetBlues of this world can cheery pick routes with very low fares and force the majors to be losers indefinitely. And you can't condemn companies for exploiting their cost advantage.

No wonder UA is about to file for bankruptcy.
Oct 21st, 2002, 08:18 AM
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Yes, United is filing for bankruptcy because they are not giving you the best price. Your line of thinking is scary.
Oct 21st, 2002, 08:22 AM
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Hellllooooo! Phil, UAL flies hundreds and thousands of different flights every day. Do you really think they can have the same rates that an upstart has that only flies into 15 airports? UAL MUST service small out of the way airports which are expensive in order to appeal to the masses. Also, Jet Blue flies in and out of the cheapest airports they can. Have you been under a rock or what?
Oct 21st, 2002, 08:27 AM
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Goodwill doesnt pay the bills.
Oct 21st, 2002, 08:50 AM
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UA is losing money matching the low cost carriers because of poor management and high labor costs. They lose their shirt everytime they fly coast to coast for 250.00. Do you care? Of course not.
Oct 21st, 2002, 08:53 AM
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Just as technology is changing the distribution system, new small planes are thretening the strength of the majors. The 737 can fly across the US and even over water, witness Aloha flying 737's to Hawaii. And smaller jets have become viable players. The majors developed their systems on a spoke and hub basis. They would bring people from outlying areas to their hubs to redistribute their passengers and shoot them out to their final destinations. Now small, low cost airlines are going direct from one small community to another bypassing the hubs. It's all made possible by economic small planes.

The new kids on the block can pick whatever routes they want and charge low sustainable fares that are not viable for the majors.
Oct 21st, 2002, 09:06 AM
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Why aren't people afraid to fly new airlines. Air Trans is a successor to Value Jet that knowingly carried ignitable canisters in their cargo hold. It caused a plane to crash and a number of people went to jail.

But the years of experience safely carrying millions of people seem to be worth nothing extra to the public,
Oct 21st, 2002, 09:30 AM
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It is not the consumer's responsibility to subsidize a business that is failing. People will almost ALWAYS buy the cheaper item unless they can see the extra value they are getting for the higher price. That's how the free marketplace works.

Unfortunately for the major airlines, getting from point A to B is what most people care about, no matter how much they whine on this forum about the lousy meals or poor service.

This scenario has been played out many times before in other industries. Some smart upstart figures out a market niche that isn't being filled and has great success. The established companies have to figure out how to compete with that upstart or lose business.

In other words, the major airlines have to figure out how to compete with Southwest and Jet Blue. SW and JB would not be successful if they were not filling a need for the public.
Oct 23rd, 2002, 06:52 AM
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A) has been around for 30 years. Hardly and upstart.
B) Is the only airline to consistently post a profit.
C) Has the best safety record in the industry
D) has the least amount of delayed flight and baggae issues
E) is the only airline able to pull off a 20 minute turn around.

Why? Because of their management style. They get more out of their employees than any other airline and their employees happily give it. It's not uncommon to see a pilot helping to load bags because the common goal is to get the plane off the ground on time. Pilots for the other airlines would sit there and say, "The union says it's not my job". There is a book written about the business model at Southwest, I think it's called "Completely Nuts". Give you new perspective.

The major airlines are in a situation in which they placed themselves. It wasn't you, it wasn't me, or Southwest that put them there.

Think about hear about United laying of 1200 people.....reservationists that make about $10/hour and the maintenance crews for you hear that the CEO is taking a pay cut from his multi-million dollar salary?
Oct 23rd, 2002, 09:38 AM
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I think several of you posters missed Phil's point. He is bemoaning the fact that AA and UA, which bring decades of service and several other intangibles to the table feel they need to match JB and SW's prices on a market/flight, rather than charging more (and covering more of their expenses) and leveraging their diferentiation to justify charging more. He even cites AA's extra leg room and both UA and AA frequent flyer programs as diferentiation points.
Phil, I understand exactly what you mean.
But there is more to it than that, as some of the posters point out. There is inferior management, and arcane and obstructive union rules that result in overstaffing and high expenses.
You know, I grew up in a union family, my father was president of a steelworkers local during the 116-day strike in 1959. I firmly believe in the need for unions in industries where employees can be disadvantaged by management. But there's no way I can understand the need for unions for $250,000 a year pilots.
Business rewards the lean-running nimble companies which can react quickly, recognize a market and take advantage of it.
Will there be a day when 70% of the airline traffic will be handled by low cost providers? It might happen. There is no guarantee that every town with an airstrip must have regular scheduled service. It may mean that some people will have to drive hours to reach a city that does have service. Or, it may mean city fathers do like some cities have done with AirTran -- guarantee a certain number of paid seats in and out of the city for a fixed time in return for the airline providing regular service.
Everything ends up costing something, and somebody has to pay.
Marilyn hit the nail on the head with her comment about people paying the cheapest UNLESS they see the value in paying more.
The guy who buys the Toyota Echo at $11,000 is the same as the guy buying the Lexus at $55,000 in one respect - they both want to know they got the best deal possible.
Oct 23rd, 2002, 02:01 PM
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What we are seeing now in this industry is what many of the airlines argued against in the late 70's-deregulation.Competition is too intense and taxes on an airline ticket of say,$200,are now about $30.What is killing the six majors-AA,UA,NW,DL,CO,US is that the pilot costs are way way out of line,and little can be done to cut excessive pilot costs.ALPA and the other pilot unions will strike,and no airline can survive a pilot strike.The big six are in a bit of a trap! Jet Blue,Southwest,Air Tran pilots make fare less than the big 6.But go ask on eof their pilots(esp Air Tran or Jet Blue) If they would rather be captain with 20 years senority with one of the big 6!
Oct 27th, 2002, 03:08 AM
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Sometimes threatening bankruptcy is used as a business management tool to get out from under onerous problems or debts or agreements.


Union contracts.
Expensive airport gates.
Zillions of not yet used frequent flyer miles.

Also who said that major airlines are legally obligated to serve (smaller?) cities at a loss?

Travel tips:
Oct 27th, 2002, 05:25 AM
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Just heard that the new CEO of United got a $3 million signing bonus - while the airline is trying to cut its expenses! Why would the employees then want to accept a paycut?
Oct 30th, 2002, 01:20 AM
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Why would they want to accept paycuts? To keep their jobs?

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