Discussion:
American Airlines - Last one standing
(too old to reply)
zak
2005-09-14 22:30:07 UTC
Permalink
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.

The major U.S. domestic carriers in 1978:

American
Continental - several trips to bankruptcy court
United - currently in bankruptcy
Delta - filed Ch. 11 today
Northwest - filed Ch. 11 today
US Airways - wasn't a major pre-deregulation, then a regional known as
Allegheny; several trips to Ch. 11

These are gone:

National - gobbled up by Pan Am in 1979
Braniff (original) - shut down 1982
Western - gobbled up by Delta in 1987
Eastern - shut down 1991
Pan Am (original) - shut down 1991
TWA - several trips to Ch. 11, remains gobbled up by AA in 2001

Will American eventually have to file for Chapter 11 just to get their
labor costs down and their debt restructured so they can compete with
the others on a level playing field? They don't just have to compete
with the other U.S. majors that have gone or are going through Ch. 11
reorganization, but also with the much leaner and meaner Southwest,
JetBlue, AirTran, Frontier, etc. If AA doesn't file for Ch. 11, they
will be at a huge disadvantage.

Don't know why AA, CO, DL, NW, UA, and US don't just stop flying
domestically and concentrate on international routes, which is where
they can still make a profit. DL could turn all their domestic flying
over to Song, United to Ted, and the other four could set up their own
low-cost domestic carriers. Or in the case of US, just become the
low-cost domestic feeder for AA, CO, or NW.

Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).

All in all, what a sad day for U.S. aviation, and what a sad state of
affairs for a once-prestigious industry.
Blake S
2005-09-14 22:45:52 UTC
Permalink
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Depends if you consider Alaska Airlines and Southwest to be major carriers
or not.
Post by zak
American
Continental - several trips to bankruptcy court
United - currently in bankruptcy
Delta - filed Ch. 11 today
Northwest - filed Ch. 11 today
US Airways - wasn't a major pre-deregulation, then a regional known as
Allegheny; several trips to Ch. 11
National - gobbled up by Pan Am in 1979
Braniff (original) - shut down 1982
Western - gobbled up by Delta in 1987
Eastern - shut down 1991
Pan Am (original) - shut down 1991
TWA - several trips to Ch. 11, remains gobbled up by AA in 2001
Will American eventually have to file for Chapter 11 just to get their
labor costs down and their debt restructured so they can compete with
the others on a level playing field? They don't just have to compete
with the other U.S. majors that have gone or are going through Ch. 11
reorganization, but also with the much leaner and meaner Southwest,
JetBlue, AirTran, Frontier, etc. If AA doesn't file for Ch. 11, they
will be at a huge disadvantage.
Don't know why AA, CO, DL, NW, UA, and US don't just stop flying
domestically and concentrate on international routes, which is where
they can still make a profit. DL could turn all their domestic flying
over to Song, United to Ted, and the other four could set up their own
low-cost domestic carriers. Or in the case of US, just become the
low-cost domestic feeder for AA, CO, or NW.
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
All in all, what a sad day for U.S. aviation, and what a sad state of
affairs for a once-prestigious industry.
zak
2005-09-15 17:20:31 UTC
Permalink
Post by Blake S
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Depends if you consider Alaska Airlines and Southwest to be major carriers
or not.
Neither Alaska nor Southwest were major U.S. carriers
pre-deregulation.
John Doe
2005-09-14 23:21:37 UTC
Permalink
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
American
Continental - several trips to bankruptcy court
United - currently in bankruptcy
Delta - filed Ch. 11 today
Northwest - filed Ch. 11 today
US Airways - wasn't a major pre-deregulation, then a regional known as
Allegheny; several trips to Ch. 11
National - gobbled up by Pan Am in 1979
Braniff (original) - shut down 1982
Western - gobbled up by Delta in 1987
Eastern - shut down 1991
Pan Am (original) - shut down 1991
TWA - several trips to Ch. 11, remains gobbled up by AA in 2001
Will American eventually have to file for Chapter 11 just to get their
labor costs down and their debt restructured so they can compete with
the others on a level playing field? They don't just have to compete
with the other U.S. majors that have gone or are going through Ch. 11
reorganization, but also with the much leaner and meaner Southwest,
JetBlue, AirTran, Frontier, etc. If AA doesn't file for Ch. 11, they
will be at a huge disadvantage.
Don't know why AA, CO, DL, NW, UA, and US don't just stop flying
domestically and concentrate on international routes, which is where
they can still make a profit. DL could turn all their domestic flying
over to Song, United to Ted, and the other four could set up their own
low-cost domestic carriers. Or in the case of US, just become the
low-cost domestic feeder for AA, CO, or NW.
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
All in all, what a sad day for U.S. aviation, and what a sad state of
affairs for a once-prestigious industry.
I don't see the CEOs of either companies putting up forsale signs on their
nice big houses. The way these companies operated it's a wonder they
survived this long.

I don't think it's a sad day if you work for Southwest or AirTran or any
other airline that has continued to grow post 9/11.
Robert J Carpenter
2005-09-15 02:45:37 UTC
Permalink
I recall that at the time of the previous rash of airline failures,
1991???, Mr. Kahn ? - the chief architect of airline deregulation -
said that foreign airlines / owners ought to be let in to show how to
run an aitline. Back then that was particularly silly since most
European airlins still had protected turf and some subsidies (real or
hidden).

Last I heard, Barnson's Virgin organisation still insisted that they
are going to run an American airline through a "US Owned" shell.
Curious.
John Mazor
2005-09-15 04:03:47 UTC
Permalink
Post by Robert J Carpenter
I recall that at the time of the previous rash of airline failures,
1991???, Mr. Kahn ? - the chief architect of airline deregulation -
said that foreign airlines / owners ought to be let in to show how to
run an aitline. Back then that was particularly silly since most
European airlins still had protected turf and some subsidies (real or
hidden).

To compound the idiocy, we still hear proposals to allow foreign airlines to
compete in U.S. domestic markets (cabotage). As if the solution to
overcapacity and the inability of many U.S. carriers to charge the
profitable rates that would allow better service is... bring on subsidized
competition from foreign carriers! Duh.
Post by Robert J Carpenter
Last I heard, Barnson's Virgin organisation still insisted that they
are going to run an American airline through a "US Owned" shell. Curious.
They're going to have to pass some stringent tests on corporate control.
Which prompts the question "Why would a foreign carrier start an airline (or
invest in one) in the crazy U.S. market right now unless they could dictate
its structure, marketing, policies and practices?" Or, to quote an old
airline joke: How do you make a small fortune in the airline business?
Start out with a large fortune.

-- John Mazor
"The search for wisdom is asymptotic."

"Except for Internet newsgroups, where it is divergent..."
-- R J Carpenter

(It's been a while since I used that sig, but it's still my favorite.)
Bertie the Bunyip
2005-09-15 04:09:25 UTC
Permalink
Post by Robert J Carpenter
Post by Robert J Carpenter
I recall that at the time of the previous rash of airline failures,
1991???, Mr. Kahn ? - the chief architect of airline deregulation -
said that foreign airlines / owners ought to be let in to show how to
run an aitline. Back then that was particularly silly since most
European airlins still had protected turf and some subsidies (real or
hidden).
To compound the idiocy, we still hear proposals to allow foreign
airlines to compete in U.S. domestic markets (cabotage).
Hey, US airlines do it in Europe....


Bertie
Jeff Hacker
2005-09-14 23:22:05 UTC
Permalink
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
American
Continental - several trips to bankruptcy court
United - currently in bankruptcy
Delta - filed Ch. 11 today
Northwest - filed Ch. 11 today
US Airways - wasn't a major pre-deregulation, then a regional known as
Allegheny; several trips to Ch. 11
National - gobbled up by Pan Am in 1979
Braniff (original) - shut down 1982
Western - gobbled up by Delta in 1987
Eastern - shut down 1991
Pan Am (original) - shut down 1991
TWA - several trips to Ch. 11, remains gobbled up by AA in 2001
Will American eventually have to file for Chapter 11 just to get their
labor costs down and their debt restructured so they can compete with
the others on a level playing field? They don't just have to compete
with the other U.S. majors that have gone or are going through Ch. 11
reorganization, but also with the much leaner and meaner Southwest,
JetBlue, AirTran, Frontier, etc. If AA doesn't file for Ch. 11, they
will be at a huge disadvantage.
Don't know why AA, CO, DL, NW, UA, and US don't just stop flying
domestically and concentrate on international routes, which is where
they can still make a profit. DL could turn all their domestic flying
over to Song, United to Ted, and the other four could set up their own
low-cost domestic carriers. Or in the case of US, just become the
low-cost domestic feeder for AA, CO, or NW.
Welcome to the world of "AirTrak" - no competition means lousy service.
period.
Post by zak
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
All in all, what a sad day for U.S. aviation, and what a sad state of
affairs for a once-prestigious industry.
beavis
2005-09-15 02:01:58 UTC
Permalink
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes, and $7 Billion in annual revenue. I
think they qualify as a major carrier. They've never gone bankrupt,
and have turned a profit every year for 32 years.
Steven P. McNicoll
2005-09-15 02:53:05 UTC
Permalink
Post by beavis
Southwest has over 420 airplanes, and $7 Billion in annual revenue. I
think they qualify as a major carrier.
He said pre-deregulation U.S. major carrier. Do you think Southwest
qualified as a major carrier before deregulation?
Pooh Bear
2005-09-15 02:56:23 UTC
Permalink
Post by beavis
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes, and $7 Billion in annual revenue. I
think they qualify as a major carrier. They've never gone bankrupt,
and have turned a profit every year for 32 years.
Do they have 'fat cat' management ?

Graham
Joe Delphi
2005-09-15 03:33:36 UTC
Permalink
Post by beavis
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes, and $7 Billion in annual revenue. I
think they qualify as a major carrier. They've never gone bankrupt,
and have turned a profit every year for 32 years.
Plus they have never had a fatal accident in those 32 years.

JD
John Mazor
2005-09-15 04:03:52 UTC
Permalink
Post by Joe Delphi
Post by beavis
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes, and $7 Billion in annual revenue. I
think they qualify as a major carrier. They've never gone bankrupt,
and have turned a profit every year for 32 years.
Plus they have never had a fatal accident in those 32 years.
They came damn close in San Diego. If that gas station had been on the
other side of the road...

I think that Kelleher's enlightened approach to corporate culture spilled
over into the safety arena, which is a good thing.
Joe Feise
2005-09-15 06:46:21 UTC
Permalink
Post by John Mazor
Post by Joe Delphi
Plus they have never had a fatal accident in those 32 years.
They came damn close in San Diego. If that gas station had been on the
other side of the road...
That was in Burbank, in the LA area.

-Joe
zak
2005-09-15 17:23:14 UTC
Permalink
Post by beavis
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes,
Not the subject of this thread.
Post by beavis
and $7 Billion in annual revenue
Not the subject of this thread.
Post by beavis
I think they qualify as a major carrier.
What you think is irrelevant to the subject of this thread.
Post by beavis
They've never gone bankrupt, and have turned a profit every year for 32 years.
None of which matters much to the subject of this thread, which is
about the present state of MAJOR U.S. CARRIERS BEFORE DEREGULATION.
Hatunen
2005-09-15 19:35:17 UTC
Permalink
Post by zak
Post by beavis
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
Southwest has over 420 airplanes,
Not the subject of this thread.
Post by beavis
and $7 Billion in annual revenue
Not the subject of this thread.
Post by beavis
I think they qualify as a major carrier.
What you think is irrelevant to the subject of this thread.
Post by beavis
They've never gone bankrupt, and have turned a profit every year for 32 years.
None of which matters much to the subject of this thread, which is
about the present state of MAJOR U.S. CARRIERS BEFORE DEREGULATION.
Your attempts to keep a Usenet thread strictly to the subject you
want is rather touching.

************* DAVE HATUNEN (***@cox.net) *************
* Tucson Arizona, out where the cacti grow *
* My typos & mispellings are intentional copyright traps *
Casey
2005-09-15 18:35:47 UTC
Permalink
Post by Hatunen
Post by zak
None of which matters much to the subject of this thread, which is
about the present state of MAJOR U.S. CARRIERS BEFORE
DEREGULATION.
Your attempts to keep a Usenet thread strictly to the subject you
want is rather touching.
It is not the subject he wants, but the subject of the post Beavis/JF/
whatever was responding to. Those comments were completely
irrelevant to the previous post. But you are right that Usenet
posters often are completely devoid of logic and/or intelligence.

Casey
Jay Honeck
2005-09-15 02:25:27 UTC
Permalink
Post by zak
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
Absolutely. The reason the airlines are in this mess is because Congress
refuses to let any major airline FAIL.

Unfortunately, that's what capitalism requires for success. In a truly free
market, the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels -- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.

Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"
Reef Fish
2005-09-15 03:05:23 UTC
Permalink
Post by Jay Honeck
The reason the airlines are in this mess is because Congress
refuses to let any major airline FAIL.
In a truly free
market, the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
That's true. That's what the Free Market is all about. But the
airline industry is anything BUT a free market -- in fact, the
opposite.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels -- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.
You are mistaken here. The MAJOR airlines are REQUIRED to continue
operating in unprofitable routes, whereas Regional Carriers can cut
the unprofitable routes.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.
It has already hit bottom. AA is the next to go. :-)

-- Bob.
Jay Honeck
2005-09-15 11:31:19 UTC
Permalink
Post by Reef Fish
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels -- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.
You are mistaken here. The MAJOR airlines are REQUIRED to continue
operating in unprofitable routes, whereas Regional Carriers can cut
the unprofitable routes.
Both are true. Same result.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"
John Mazor
2005-09-15 04:00:23 UTC
Permalink
I'm not disagreeing with your premises here, just amplifying on them.
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
Absolutely. The reason the airlines are in this mess is because Congress
refuses to let any major airline FAIL.
Well, there is the minor matter that until the US Airways/America West
merger, the administration also refused to allow mergers. Mergers provide a
rational, orderly reduction of capacity. Bankruptcy is a weapon of mass
destruction if reducing excess capacity is your goal.
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a truly
free market,

...the government would have been open to proposals for mergers.
Post by Jay Honeck
the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
That already happens. You don't need bankruptcy for that.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels
That goes all the way back to the Airline Deregulation Act of 1978, where
Congress hedged its bets by providing "Essential Air Service" subsidies.
The problem has been that Congress and consumers want it both ways -
competition resulting in cheaper fares, while maintaining the expectation of
service levels that were possible under regulated pricing.
Post by Jay Honeck
-- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.
True as far as it goes, but there are other factors that have undercut
airlines' ability to set pricing or clear a profit, such as Internet fare
shopping (which the airlines foolishly embraced at first), the rising cost
of oil (even the carriers in bankruptcy would have had operating profits
except for rising fuel prices), the way that the government has treated
airlines as a cash cow (the taxes on a typical airline ticket are higher
than the "sin taxes" on alcohol and tobacco).

The irony here is that allowing airlines to go into bankruptcy allows them a
competitive edge over solvent carriers. The solution is to reduce the
period for management to have exclusionary control over the enterprise, and
not allow a bankrupt carrier to expand operations.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.

That's one solution, but not the only one. There are more rational
approaches to the capacity problem.
Bertie the Bunyip
2005-09-15 04:07:48 UTC
Permalink
Post by John Mazor
I'm not disagreeing with your premises here, just amplifying on them.
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will
be needed in the future. There isn't really a need for more than
three major airlines, probably AA, DL (merged with CO and NW), and
UA (merged with US).
Absolutely. The reason the airlines are in this mess is because
Congress refuses to let any major airline FAIL.
Well, there is the minor matter that until the US Airways/America West
merger, the administration also refused to allow mergers. Mergers
provide a rational, orderly reduction of capacity. Bankruptcy is a
weapon of mass destruction if reducing excess capacity is your goal.
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a truly
free market,
...the government would have been open to proposals for mergers.
Post by Jay Honeck
the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
That already happens. You don't need bankruptcy for that.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress
keeps bailing out failing airlines, allowing them to continue
operating at below-profitable levels
That goes all the way back to the Airline Deregulation Act of 1978,
where Congress hedged its bets by providing "Essential Air Service"
subsidies. The problem has been that Congress and consumers want it
both ways - competition resulting in cheaper fares, while maintaining
the expectation of service levels that were possible under regulated
pricing.
Post by Jay Honeck
-- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that
NONE of the airlines can charge what it actually costs to fly.
True as far as it goes, but there are other factors that have undercut
airlines' ability to set pricing or clear a profit, such as Internet
fare shopping (which the airlines foolishly embraced at first), the
rising cost of oil (even the carriers in bankruptcy would have had
operating profits except for rising fuel prices), the way that the
government has treated airlines as a cash cow (the taxes on a typical
airline ticket are higher than the "sin taxes" on alcohol and
tobacco).
The irony here is that allowing airlines to go into bankruptcy allows
them a competitive edge over solvent carriers. The solution is to
reduce the period for management to have exclusionary control over the
enterprise, and not allow a bankrupt carrier to expand operations.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.
That's one solution, but not the only one. There are more rational
approaches to the capacity problem.
Best solution is to limit it to the types of people that used to fly.
People that needed to. People that could afford to. People with class.
Bring back the DC-7, I say.


Oh wait, wrong problem.



Bertie
sfb
2005-09-15 04:14:01 UTC
Permalink
Airlines and all businesses do not play taxes. They collect them from
passengers and customers who are the government's cash cow. The airlines
problems are revenues vs. costs and taxes are a wash just passing
through the airline bank accounts.
Post by John Mazor
I'm not disagreeing with your premises here, just amplifying on them.
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
Absolutely. The reason the airlines are in this mess is because Congress
refuses to let any major airline FAIL.
Well, there is the minor matter that until the US Airways/America West
merger, the administration also refused to allow mergers. Mergers provide a
rational, orderly reduction of capacity. Bankruptcy is a weapon of mass
destruction if reducing excess capacity is your goal.
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a truly
free market,
...the government would have been open to proposals for mergers.
Post by Jay Honeck
the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
That already happens. You don't need bankruptcy for that.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels
That goes all the way back to the Airline Deregulation Act of 1978, where
Congress hedged its bets by providing "Essential Air Service"
subsidies.
The problem has been that Congress and consumers want it both ways -
competition resulting in cheaper fares, while maintaining the
expectation of
service levels that were possible under regulated pricing.
Post by Jay Honeck
-- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.
True as far as it goes, but there are other factors that have undercut
airlines' ability to set pricing or clear a profit, such as Internet fare
shopping (which the airlines foolishly embraced at first), the rising cost
of oil (even the carriers in bankruptcy would have had operating profits
except for rising fuel prices), the way that the government has treated
airlines as a cash cow (the taxes on a typical airline ticket are higher
than the "sin taxes" on alcohol and tobacco).
The irony here is that allowing airlines to go into bankruptcy allows them a
competitive edge over solvent carriers. The solution is to reduce the
period for management to have exclusionary control over the
enterprise, and
not allow a bankrupt carrier to expand operations.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.
That's one solution, but not the only one. There are more rational
approaches to the capacity problem.
John Mazor
2005-09-15 04:37:47 UTC
Permalink
Post by sfb
Airlines and all businesses do not play taxes. They collect them from
passengers and customers who are the government's cash cow. The airlines
problems are revenues vs. costs and taxes are a wash just passing
through the airline bank accounts.
No. Taxes increase ticket prices. Airlines have to compete with other modes
of transportation and with other options such as corporate teleconferencing,
or for the typical consumer, the option of not making non-essential trips at
all if the price is too high. Do you think that traffic levels would remain
at current levels if the government imposed a $1,000 excise tax on every
ticket and the airlines passed along the cost to passengers?

Overcapacity is causing the cut-throat pricing of airline tickets, so
carriers often cannot pass along cost increases. Look how long it took them
to dare to impose modest price increases to partially offset rising fuel
costs.
nobody
2005-09-15 08:17:55 UTC
Permalink
Post by John Mazor
Overcapacity is causing the cut-throat pricing of airline tickets, so
carriers often cannot pass along cost increases. Look how long it took them
to dare to impose modest price increases to partially offset rising fuel
costs.
They have to wait until the healthy carriers's fuel hedges run out and
these carriers are then forced to increase their prices.

I believe that Delta had been hoping very much to last until Southwest's
$25/barrel hedges ran out in early 2006 if I remember correctly, at
which point, airlines in the USA would be able to raise fares systemwide
and stop profusely bleeding money.

Southwest is in for a very rude awakening when its fuel hedges run out
and it needs to start paying going rates for fuel. Being a real
business, they will not hesitate to raise ticket prices, unlike legacy
careriers who have traditionally set fares without considering actual
operating costs at all.
khobar
2005-09-15 16:14:28 UTC
Permalink
Post by nobody
Post by John Mazor
Overcapacity is causing the cut-throat pricing of airline tickets, so
carriers often cannot pass along cost increases. Look how long it took them
to dare to impose modest price increases to partially offset rising fuel
costs.
They have to wait until the healthy carriers's fuel hedges run out and
these carriers are then forced to increase their prices.
I believe that Delta had been hoping very much to last until Southwest's
$25/barrel hedges ran out in early 2006 if I remember correctly, at
which point, airlines in the USA would be able to raise fares systemwide
and stop profusely bleeding money.
Southwest is in for a very rude awakening when its fuel hedges run out
and it needs to start paying going rates for fuel. Being a real
business, they will not hesitate to raise ticket prices, unlike legacy
careriers who have traditionally set fares without considering actual
operating costs at all.
Southwest is locked in at $32/barrel for 65% of their fuel needs in 2006,
$31/barrel for 45% of their fuel needs in 2007, $33/barrel for 30% of their
fuel needs in 2008, and $35/barrel for 25% of their fuel needs in 2009. So
they have a little breathing room.

Paul Nixon
Earl Grieda
2005-09-15 19:04:21 UTC
Permalink
Post by khobar
Post by nobody
Post by John Mazor
Overcapacity is causing the cut-throat pricing of airline tickets, so
carriers often cannot pass along cost increases. Look how long it
took
Post by khobar
them
Post by nobody
Post by John Mazor
to dare to impose modest price increases to partially offset rising fuel
costs.
They have to wait until the healthy carriers's fuel hedges run out and
these carriers are then forced to increase their prices.
I believe that Delta had been hoping very much to last until Southwest's
$25/barrel hedges ran out in early 2006 if I remember correctly, at
which point, airlines in the USA would be able to raise fares systemwide
and stop profusely bleeding money.
Southwest is in for a very rude awakening when its fuel hedges run out
and it needs to start paying going rates for fuel. Being a real
business, they will not hesitate to raise ticket prices, unlike legacy
careriers who have traditionally set fares without considering actual
operating costs at all.
Southwest is locked in at $32/barrel for 65% of their fuel needs in 2006,
$31/barrel for 45% of their fuel needs in 2007, $33/barrel for 30% of their
fuel needs in 2008, and $35/barrel for 25% of their fuel needs in 2009. So
they have a little breathing room.
That's interesting. I would expect business expenses to be a competitive
secret. I wonder what sort of prices the other airlines negotiated.
nobody
2005-09-15 08:03:41 UTC
Permalink
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a truly free
market, the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels
Congress isn't the one constantly bailing out airlines. The banks are
the ones doing that. Why ? because when a bank as so much capital
invested in a company, it doesn't want to see that company fail. (unlike
actions banks have towards citizens where banks love to pull the rug
from under retail customers 2 seconds after their missed a payment).


In a hypothetical example of Citibank having 2 billion dolars worth of
aircraft leased to Delta, as long as Delta pays a certain amount in
monthly payments (even if not full amounts), Citibank can report to
their shareholders that this investment is still productive.

Should Delta be liquidated, Citibank would recover the aircraft, and
would have to pay parking fees in the desert. It would then have to
report to shareholders that 2 billion dollars worth of capital is not
productive and is in fact costing Citibank money. And if there is no
hope of ever leasingf those aircrtaft, the banks would sell the
aircrtaft for parts/scrap and have to write off huge amounts of money,
something which shareholders wouldn't appreciate since reported profits
woudl go way down.


And with an airline the size of Delta failing, it would put some 400
planes on the used aircraft market, a market already a buyer's market.
Not only would the odds of leasing many of those aircraft low, but it
would further depress the used aircraft market due to ample supply of
used aircraft.

Not only does a ample supply of used aircraft lower revenu potential
should a customer be found, but when the time comes for other airlines
to renew leases for their own aircraft, they will point to the lower
market value of used aircraft and negotiate lower leasing rates, thus
lowering investment yield for the lessors.


The solution would be to make it illegal for airlines to lease aircraft.
If you can't afford to buy aircraft, don't buy new aircraft. And instead
of buying round number of aircraft like "100", airlines would really
calculate exactly how many aircraft they really need to operate their
route network.


Now, lets say GE is the biggest stakeholder for Delta and Citibank is
the biggest stakeholder for United. Both know there is overcapacity and
that a large number of aircraft need to be taken out of circulation. GE
will take every possible action to ensure that it is Citibank that is
stuck with aircraft in teh desert while GE's aircraft are still flying
and generating leasing revenus. Citibank will do the same on its side,
wanting to see GE's planes in the desert.

As a result, both will prop up the airlines and make sure they survive.
And in the end, the overcapacity doesn't get resolved.
zak
2005-09-15 17:36:48 UTC
Permalink
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will be
needed in the future. There isn't really a need for more than three
major airlines, probably AA, DL (merged with CO and NW), and UA
(merged with US).
Absolutely. The reason the airlines are in this mess is because Congress
refuses to let any major airline FAIL.
Unfortunately, that's what capitalism requires for success. In a truly free
market, the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood behind.
In our current dream-world of "protected deregulation", Congress keeps
bailing out failing airlines, allowing them to continue operating at
below-profitable levels -- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that NONE of
the airlines can charge what it actually costs to fly.
Until the Feds let Northworst and Delta fail, this situation will continue
to get worse.
Problem is, the damage is already done. They should have never bailed
the airlines out after 9/11. They let Eastern and Pan Am go under and
never bailed them out back in the late 1980s/early 1990s even though
there were huge cries back then with many people saying "oh, the U.S.
will never let Eastern/Pan Am go under, they're too big, too
important, they have too much history, etc."
John Mazor
2005-09-15 04:52:39 UTC
Permalink
<Dunno what's happening, but ada got cut>
Post by Bertie the Bunyip
Post by John Mazor
I'm not disagreeing with your premises here, just amplifying on them.
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will
be needed in the future. There isn't really a need for more than
three major airlines, probably AA, DL (merged with CO and NW), and
UA (merged with US).
Absolutely. The reason the airlines are in this mess is because
Congress refuses to let any major airline FAIL.
Well, there is the minor matter that until the US Airways/America West
merger, the administration also refused to allow mergers. Mergers
provide a rational, orderly reduction of capacity. Bankruptcy is a
weapon of mass destruction if reducing excess capacity is your goal.
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a
truly
free market,
...the government would have been open to proposals for mergers.
Post by Jay Honeck
the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood
behind.
That already happens. You don't need bankruptcy for that.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress
keeps bailing out failing airlines, allowing them to continue
operating at below-profitable levels
That goes all the way back to the Airline Deregulation Act of 1978,
where Congress hedged its bets by providing "Essential Air Service"
subsidies. The problem has been that Congress and consumers want it
both ways - competition resulting in cheaper fares, while maintaining
the expectation of service levels that were possible under regulated
pricing.
Post by Jay Honeck
-- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that
NONE of the airlines can charge what it actually costs to fly.
True as far as it goes, but there are other factors that have undercut
airlines' ability to set pricing or clear a profit, such as Internet
fare shopping (which the airlines foolishly embraced at first), the
rising cost of oil (even the carriers in bankruptcy would have had
operating profits except for rising fuel prices), the way that the
government has treated airlines as a cash cow (the taxes on a typical
airline ticket are higher than the "sin taxes" on alcohol and
tobacco).
The irony here is that allowing airlines to go into bankruptcy allows
them a competitive edge over solvent carriers. The solution is to
reduce the period for management to have exclusionary control over the
enterprise, and not allow a bankrupt carrier to expand operations.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will
continue
to get worse.
That's one solution, but not the only one. There are more rational
approaches to the capacity problem.
Best solution is to limit it to the types of people that used to fly.
People that needed to. People that could afford to. People with class.
Bring back the DC-7, I say.
Oh wait, wrong problem.
Bring back the Connie. Now THERE was an airplane to fly in.

As to the pax, a simple literacy test would filter out the worst of the
riff-raff.
Bertie the Bunyip
2005-09-15 05:03:16 UTC
Permalink
Post by John Mazor
<Dunno what's happening, but ada got cut>
Post by Bertie the Bunyip
Post by John Mazor
I'm not disagreeing with your premises here, just amplifying on them.
Post by Jay Honeck
Post by zak
Anyway, it seems like some more consolidation among the majors will
be needed in the future. There isn't really a need for more than
three major airlines, probably AA, DL (merged with CO and NW), and
UA (merged with US).
Absolutely. The reason the airlines are in this mess is because
Congress refuses to let any major airline FAIL.
Well, there is the minor matter that until the US Airways/America West
merger, the administration also refused to allow mergers. Mergers
provide a rational, orderly reduction of capacity. Bankruptcy is a
weapon of mass destruction if reducing excess capacity is your goal.
Post by Jay Honeck
Unfortunately, that's what capitalism requires for success. In a
truly
free market,
...the government would have been open to proposals for mergers.
Post by Jay Honeck
the surviving airlines would feed on the carcass of a truly bankrupt
airline, plucking the profitable routes and leaving the deadwood
behind.
That already happens. You don't need bankruptcy for that.
Post by Jay Honeck
In our current dream-world of "protected deregulation", Congress
keeps bailing out failing airlines, allowing them to continue
operating at below-profitable levels
That goes all the way back to the Airline Deregulation Act of 1978,
where Congress hedged its bets by providing "Essential Air Service"
subsidies. The problem has been that Congress and consumers want it
both ways - competition resulting in cheaper fares, while maintaining
the expectation of service levels that were possible under regulated
pricing.
Post by Jay Honeck
-- which means they can continue to charge less than
what it really costs to fly the routes, which, in turn, means that
NONE of the airlines can charge what it actually costs to fly.
True as far as it goes, but there are other factors that have undercut
airlines' ability to set pricing or clear a profit, such as Internet
fare shopping (which the airlines foolishly embraced at first), the
rising cost of oil (even the carriers in bankruptcy would have had
operating profits except for rising fuel prices), the way that the
government has treated airlines as a cash cow (the taxes on a typical
airline ticket are higher than the "sin taxes" on alcohol and
tobacco).
The irony here is that allowing airlines to go into bankruptcy allows
them a competitive edge over solvent carriers. The solution is to
reduce the period for management to have exclusionary control over the
enterprise, and not allow a bankrupt carrier to expand operations.
Post by Jay Honeck
Until the Feds let Northworst and Delta fail, this situation will
continue
to get worse.
That's one solution, but not the only one. There are more rational
approaches to the capacity problem.
Best solution is to limit it to the types of people that used to fly.
People that needed to. People that could afford to. People with class.
Bring back the DC-7, I say.
Oh wait, wrong problem.
Bring back the Connie. Now THERE was an airplane to fly in.
You're too old now. Noone over thirty five can hanle three tails at the
same time.
Post by John Mazor
As to the pax, a simple literacy test would filter out the worst of the
riff-raff.
Sigh. I know of a guy who cant read who's in possesion of a private. He has
to bring his wife to his medicals so she can fill out the paperwork. One
can only wonder how he got past the written..
John Mazor
2005-09-15 05:31:42 UTC
Permalink
Post by Bertie the Bunyip
Post by John Mazor
Bring back the Connie. Now THERE was an airplane to fly in.
You're too old now. Noone over thirty five can hanle three tails at the
same time.
Groan...
Post by Bertie the Bunyip
Post by John Mazor
As to the pax, a simple literacy test would filter out the worst of the
riff-raff.
Post by Bertie the Bunyip
Sigh. I know of a guy who cant read who's in possesion of a private. He has
to bring his wife to his medicals so she can fill out the paperwork. One
can only wonder how he got past the written..
WTF? I hope you're talking about Ralphie!
John Mazor
2005-09-15 04:53:28 UTC
Permalink
<Another repost to cover ada, which got cut>
Post by Bertie the Bunyip
Post by Robert J Carpenter
Post by Robert J Carpenter
I recall that at the time of the previous rash of airline failures,
1991???, Mr. Kahn ? - the chief architect of airline deregulation -
said that foreign airlines / owners ought to be let in to show how to
run an aitline. Back then that was particularly silly since most
European airlins still had protected turf and some subsidies (real or
hidden).
To compound the idiocy, we still hear proposals to allow foreign
airlines to compete in U.S. domestic markets (cabotage).
Hey, US airlines do it in Europe....
*Originate* a flight that *starts out* in, say, Paris, and drops them at the
final destination of, say, Bordeaux, with the flight not stopping or
continuing elsewhere? That's cabotage. Many countries allow lesser
freedoms, such as if a United flight originating as JFK-Bordeaux makes a
stop in Paris - the next leg could pick up Paris-Bordeaux riders. You just
can't have a United flight that starts and ends as Paris-Bordeaux, which
would be cabotage. I may be wrong, but I can't recall any nation that
allows that, except maybe for some minor countries where they're glad to
have any service at all.
Jonathan Goodish
2005-09-15 14:32:11 UTC
Permalink
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
What about Southwest? They are certainly a major carrier, and were
flying for several years before deregulation.


JKG
sfb
2005-09-15 14:40:45 UTC
Permalink
Southwest, which starting flying in 1971, didn't fly outside Texas
until after deregulation in 1978 when they started service to New
Orleans in 1979.

http://www.southwest.com/about_swa/airborne.html
Post by Jonathan Goodish
Post by zak
Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court.
What about Southwest? They are certainly a major carrier, and were
flying for several years before deregulation.
JKG
Jonathan Goodish
2005-09-15 15:39:45 UTC
Permalink
Post by sfb
Southwest, which starting flying in 1971, didn't fly outside Texas
until after deregulation in 1978 when they started service to New
Orleans in 1979.
I believe that Southwest did fly outside of Texas prior to 1979, but
they didn't have scheduled service outside of Texas prior to that time.
In any case, how is that relevant? They are still a major carrier that
existed prior to deregulation that has never landed in bankruptcy court.



JKG
sfb
2005-09-15 15:50:15 UTC
Permalink
Maybe charters outside Texas, but their history page is specific about
schedule service to New Orleans in 1979. By staying inside Texas as an
intrastate airline regulated by the state, they escaped the "help" the
US Government was giving to regulated interstate airlines.
Post by Jonathan Goodish
Post by sfb
Southwest, which starting flying in 1971, didn't fly outside Texas
until after deregulation in 1978 when they started service to New
Orleans in 1979.
I believe that Southwest did fly outside of Texas prior to 1979, but
they didn't have scheduled service outside of Texas prior to that time.
In any case, how is that relevant? They are still a major carrier that
existed prior to deregulation that has never landed in bankruptcy court.
JKG
Jonathan Goodish
2005-09-15 17:00:45 UTC
Permalink
Post by sfb
Maybe charters outside Texas, but their history page is specific about
schedule service to New Orleans in 1979. By staying inside Texas as an
intrastate airline regulated by the state, they escaped the "help" the
US Government was giving to regulated interstate airlines.
According to the limited research I've done on Southwest, your last
statement is simply not true. But regardless, it's still irrelevant
because there's no proof that Southwest would have done any worse had
they flown interstate from day one. The fact is that they are a major
carrier that existed prior to deregulation that has never been to
bankruptcy court, and I believe that was the subject of the thread.


JKG
zak
2005-09-15 17:17:55 UTC
Permalink
Post by Jonathan Goodish
The fact is that they are a major
carrier that existed prior to deregulation that has never been to
bankruptcy court, and I believe that was the subject of the thread.
JKG
Nope.

I realize many Southwest fanatics' obsession with their airline
reaches religious fundamentalism proportions, but I spelled out the
topic of this thread very clearly in the first paragraph, and many
people understood (except the Southwest fundies):

"Well, after today's Chapter 11 filing by Delta and Northwest, it
appears that American Airlines is now the only pre-deregulation U.S.
major carrier left that hasn't seen a trip to Bankruptcy Court."

pre-deregulation U.S. major carrier = LEGACY carriers

Southwest is not, was never, and will never be a U.S. legacy carrier.
Even many Southwest fundies understand that. Others, apparently, do
not.

If you want to discuss your religious fanaticism and obsession with
Southwest, start your own thread. Don't hijack someone else's.
Bob Moore
2005-09-15 15:40:58 UTC
Permalink
Post by sfb
Southwest, which starting flying in 1971, didn't fly outside Texas
until after deregulation in 1978 when they started service to New
Orleans in 1979.
That's right. Both Southwest and Air Florida (where I served as Director
of Operations) started as INTRASTATE air carriers, not INTERSTATE.
They were both regulated by state authority instead of the CAB/Dept of
Transportation.
We had quite a rush to certificate Air Florida prior to October 1972 at
which time the Florida Public Service Commission intended to implement
route and fare regulations similar to those in effect by the CAB for
Interstate Air Carriers. We grandfathered a lot of stuff on Sep 29, just
before the Oct 1 cutoff date. :-)
Many in the airline industry do not remember that Air Florida was started
with an ex-PanAm B-707-331, N705PA, and after one year, exchanged it for
three ex-Eastern L-188 Electras.

Bob Moore
Air Florida 1972-73
Chief Pilot, Director of Operations
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