Posted on 09/15/2004 5:57:33 AM PDT by OESY
...Bloody-minded optimists say... the climactic shake-out is finally upon us. Once the cleansing is done, the airlines will go back to being profitable and sustainable like "normal" industries.
Don't bet on it. Airlines have shown an ability to mint short-term profits in an economic bounceback when demand grows faster than they can lay on more jets and gates. But that's not the same thing as being able to make profits consistently enough to pay back the capital invested in the industry. The airlines have never been able to do this, at least not since deregulation....
Airports, meanwhile, are local monopolies and, ahem, seldom leave money on the table for their airline customers. Ground services and catering also enjoy sufficient local market leverage to make money off the airlines even as the airlines can't make money off their own customers. And the industry's biggest suppliers of all, its own employees, demonstrably have the upper hand when it comes to divvying up the revenues of the business. Notice that workers at United and US Airways (both in bankruptcy) as well as at American, Northwest, Delta and Continental (each losing money and flirting with Chapter 11) still manage to hang on to wages substantially higher than those paid by the industry's few profitmakers, such as JetBlue and Southwest....
One good reason for caring, though, is politics. Instability in the airline industry produces an irresistible urge for activity in politicians, who've already dumped $7 billion in taxpayer money on the airlines since 9/11.
Airlines are not incompatible with capitalism so much as incompatible with modern antitrust policy, which assumes that "more competitors" is the same thing as "more efficiency."...
...The most notable outcome would be less financial chaos and less pressure on politicians to "fix" the airline problem in ways that make it worse.
(Excerpt) Read more at online.wsj.com ...
On the day that they is nobody for the TSA perverts to do the anal probe on is the day things will start to change for the better.
Airlines, airports, TSA can all go to hell.
Compensation to the pilots is part of the story; overservice in the air is another part of the story. But the principal problem of the current enterprises is business plan.
The route structure mandates that any trip requires at least two takeoffs and landings; often more. Takeoff; landing; departure and climb out; and approach and descent; are the most costly part of the transportation (maybe over half the trip cost in many cases); hub and spoke routing requires that you double the most costly part of the operation.
What is required is simple--get rid of all these huge airplanes (757; 767; 777; 747) except on long haul routes with large traffic volumes; replace with smaller airplanes with two pilot cockpits on point to point routes.
Another reason for the airline industry's failings is government meddling. Thanks to Senators Tom Daschle and Tim Johnson, the US taxpayers are subsiding commercial scheduled airline flights to Brookings, SD which is less than 40 miles from the major airport in the state, Joe Foss Field in Sioux Falls. The number of passingers flying into and out of Brookings on a single day could be counted on one hand. Even with government subsidies this makes no economic sense for the airline.
Ten years ago, the company I worked for made a bet that three airlines would survive...Delta, United and American.
Gee. This might have something to do with the fact that the mismanagers of the two airlines about to tank (US Air and Delta) both took those handouts from the US Government and skimmed them into humongous bonuses (I think Delta shared around $42 million among the top execs?) and bankruptcy-proofing their private executive pension systems.
If you look at Delta's stock, it has gone from $60 to $3 in three years. $20 of that is due to 9/11 -- the other $40 is Leo Mullin's line-my-personal-pockets-and-screw-you management. No doubt someone will blame this on the unions, but while the money was good, the unions and Mullin both grabbed for the cash, but Mullin was smart enough to get his in bankruptcy-proof form and the bozos at the union are going to watch their jobs and pensions evaporate when Delta goes Chapter 7 as its multibillion dollar debt load says it must.
The mechanism of United and US Air's failures is exactly the same as Delta's: managerial looting.
The airlines as organisations deserve to fail, but the managers that destroyed them will land softly while the lower on the totem pole a worker is, and the longer he or she has been with the company, the more shafted that particular worker is.
d.o.l.
Criminal Number 18F
If you were playing a fixed game where you could not escape the Railroad Act and the Mob-run ramper's union, would you proceed differently? If you can't succeed WITH the shareholders, any rational manager would figure out a way to succeed WITHOUT them.
Yep. 737s and CRJ200s. I love/hate the CRJs. They're fast and economical, but I always get off with a crick in my neck.
Most of the lines are running 73s on most domestic routes. I don't think anybody's flying 3-seat cockpits any more. Those things are lined up by the dozen in Mojave, some of them being converted for freight.
And so they fall. Eastern. Pan Am. TWA. Now US Airways. Next Delta. Then United. But they don't all fall.
We are seeing the difference between management and leadership. The current managers are the World War One generals, ordering their men, "Over the top!" from their armchairs in distant chateaux, and mystified as to why the battle is not going well. It must be the men, of course, lazy sods. Shoot a few pour encourager les aûtres.
d.o.l.
Criminal Number 18F
This is already being done to some extent. Several airline pilots I know that aren't furloughed have been retrained to fly RJ's.
There are a number of systemic problems with the way airlines operate, but the real problem as I see it is there are just too many seats flying and not enough butts in them. Another problem for airlines like Delta is the number of aging pilots and flight attendants. Then, there's the unions.
All that being said, Southwest seems to be doing fine, though.
Answer is no that's not the way it works. Most of the current equipment is three or four pilots. And the cost structure issue is how much pilot labor (in hours) does it take to get the passenger from point O to point D. Labor cost on the same hourly rates goes down per seat mile on my business plan.
So do fuel costs, even assuming you have to use 737's and CRJ's (and others). The objection is that there are not enough passengers who want to fly from Sioux Falls SD to Seattle to fill a 37 to break even more than twice a week--answer is you fly twice a week and passengers can choose between your two days or driving to Bismark some other day.
And for most locations in the country, there are airports within forty miles which would have at least one flight a day or every other day.
A secondary problem is the equipment issue. The 37 is an old technology airplane which is not particularly fuel efficient. That is the reason for the 7E7 for which Boeing still does not have a launch customer. However that is not a complete answer either--the E7 is too big (190-200 seats). Or Boeing needs to have an option scheme to reduce the engines and operating cost to build the fuel efficient structure to haul 100 seats in one version of the airplane.
All these other points are also correct--government interference; lousy management; and poor labor management communication. But the fundamental business plan would not work even without the government, with good managment and a decent labor price structure. The airlines that do make money, Southwest and Jet Blue, are operating on a version of my scheme at this point. With better equipment and a larger route structure, they will make more money.
Only way to save Northwest, United, Delta, Continental, or American, or any one of them is to implement my business plan virtually overnight. It could be done through a bankruptcy reorganization if some short term solution to the equipment issue could be implemented. And the long term equipment solution is also a win proposition because someone, hopefully a US manufacturer, will build the next generation of smaller more efficient airplanes.
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