Originally Posted by
iaflyer
It's all about making them *think* we're reducing capacity.
Which is a position I do not understand.
Reduced capacity results in mush higher unit costs for the remaining capacity. While over expansion surely means death, so does continual retreat.
According to data released last month from AirFinancials.com, domestic carrying capacity for the nation's legacy carriers declined by 85 billion available seat miles between 2003 and 2009, or by 21% on average. Over the same period, domestic capacity among low-cost carriers Southwest Airlines /quotes/comstock/13*!luv/quotes/nls/luv (
LUV 12.22, +0.37, +3.12%) , JetBlue Airways /quotes/comstock/15*!jblu/quotes/nls/jblu (
JBLU 5.78, +0.15, +2.66%) , AirTran and four other small carriers rose by more than 84 billion available seat miles.
That's not necessarily a bad thing. Most of those domestic routes the legacy carriers gave up had slim profit margins that the budget carriers were able to widen through their lower-cost model. The real money for the legacy carriers is in the international routes, particularly as it relates to premium-paying business travel.
Delta Air Lines, Trippler notes, appears to be concentrating exclusively on international, while airlines such as Southwest and AirTran have become feeders into the major airport hubs.
"So over the next five years the legacies will become more like trunk carriers with smaller airlines feeding people into the hubs," he said.
As we seem to cede the point to point O&D domestic, we become nothing more than a thin network to feed our international operations.
But, that simply exposes us to a greater risk:
Originally Posted by ATW
At the heart of the matter is the rapid growth of the carriers of the Persian Gulf region with their deep-pocket state owners and global ambitions (ATW, 7/10, p. 5). To Assn. of European Airlines Secretary General Ulrich Schulte-Strathaus, Emirates, Etihad and Qatar represent a new type of competitive threat that is incompatible with the existing world aviation order. That’s the message he brought to the International Aviation Club in Washington recently.
The carriers, “two of which have never made a profit” (a reference to Etihad and Qatar), are “operated as an instrument of national strategy and integrated vertically across commerce, tourism and foreign policy,” he declared.
To their owners, Schulte-Strathaus said, they are “just a part—a tool—of this vertically integrated economic chain,” and they are “being driven by a policy which is not compatible with that of the US and Europe,” or “Australia, China, Japan, Canada, Mexico, Brazil, Chile, Korea and so on.” Furthermore, these carriers will take 425 widebodies over the next five years, more than are currently operated by the US major airlines.
IMHO, shrinking is the most risky course we could take. Eventually we will run out of places to consolidate.