ULCC Model in the U.S.
#11
Funny planes are still running 90% full guess you are off on that point, even during economic downturns.
Spending extra $30-80 on a child (you can easily multiply that by 2 or 3 depending how many you have) that doesn't need carry on or a checked bag doesn't make any financial sense. That's me thought, I don't like to waste money.
Spending extra $30-80 on a child (you can easily multiply that by 2 or 3 depending how many you have) that doesn't need carry on or a checked bag doesn't make any financial sense. That's me thought, I don't like to waste money.
You of course, do you. But you're presumably a professional pilot, so therefore a cheap SOB
If you're a legacy pilot, sleep easy, they're not taking over.
If you're a US ULCC pilot, sleep easy, they're not going away.
If you're a foreign ULCC pilot... yeah you might have something to worry about.
#12
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Joined APC: Nov 2012
Position: 1900D CA
Posts: 3,394
I believe that the ULCCs in the US will survive and become an integral part of the industry. I'm pretty confident of that. What I don't know is how large they can become? Spirit and Frontier both have big growth plans and will have a combined 500 airplanes. What percentage of the market share will ULCCs become is the real question here.
If you listen to Frontier & Spirit management, they will tell you that the ULCC market in Europe is very large and it's very small here, so we have tons of room to grow. The difference though is that Europe doesn't have a SouthWest. Europe is more legacies and ULCCs, where Southwest fills the gap between the 2 here in the US.
I believe that the Legacies and ULCCs can healthily coexist in the US. It's different products for different consumers. There is a huge spectrum of consumers in the US, and I think there's room for both types of airlines to do well.
As a ULCC pilot myself, I hope to see the ULCCs do well, but I understand that it's a second tier airline. The latest round of contracts have pretty well settled that. I currently make about 15% less than my counterpart at United.
There are 2 questions that deserve further discussion.
1) How does Frontier/Spirit do during a recession?
2) Can they break into the transatlantic market? (Frontier has 18 A321XLRs on order)
If you listen to Frontier & Spirit management, they will tell you that the ULCC market in Europe is very large and it's very small here, so we have tons of room to grow. The difference though is that Europe doesn't have a SouthWest. Europe is more legacies and ULCCs, where Southwest fills the gap between the 2 here in the US.
I believe that the Legacies and ULCCs can healthily coexist in the US. It's different products for different consumers. There is a huge spectrum of consumers in the US, and I think there's room for both types of airlines to do well.
As a ULCC pilot myself, I hope to see the ULCCs do well, but I understand that it's a second tier airline. The latest round of contracts have pretty well settled that. I currently make about 15% less than my counterpart at United.
There are 2 questions that deserve further discussion.
1) How does Frontier/Spirit do during a recession?
2) Can they break into the transatlantic market? (Frontier has 18 A321XLRs on order)
#13
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Joined APC: Nov 2012
Position: 1900D CA
Posts: 3,394
#14
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Joined APC: Nov 2015
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Spirit routinely highlights to their investors that they aren't taking market share from other airlines. They create new market share everywhere they go by making travel possible for people who simply wouldn't fly otherwise.
Some of their international flights are great examples. A person in the US with international family might be able to afford to visit once a year flying AA, but they can visit 4-5 times flying spirit. All they have to do is keep some clothes and stuff with their relatives so they don't need to pay a dime for bags, and have the forethought to bring a snack and (empty) water bottle with them instead of buying airport or airplane food and drinks. That $1000 AA seat costs $200 on Spirit.
Or some of the little airports Spirit flies to just a couple of times per week or just once a day. Those passengers would take a bus or drive at least partway to their destination if Spirit wasn't there. Their business model supports these low frequency pairings so they're pretty much printing money just by showing up with a $60 ticket as an alternative to taking the bus.
Last time I looked, Spirit was saying that they had identified over 600 additional pairings that would be profitable, and due to growth constraints they can only pick up a few dozen each year at most. That's 10 years of additional growth they already have lined up ready to go, at whatever profit margin they use as a cutoff.
Sustainable? When the economy burps or crashes again, where do their passengers go? Their fares are low enough that they think they'll actually be positioned better than anyone else since just about anyone will still be able to fly with their low fares. The primary threat in those situations is the 50% or so of their income coming from non-fare revenue. It remains to be seen if passengers will continue to pay $3 for a bottle of water during a recession, and that could cut into non-fare revenue side. They'd have to make up for that somehow, either cutting service on routes that don't keep buying water and snacks or whatever, or raise fares to make up the difference. In either scenario though, the fact is that they've got a dozen more seats in each plane than anyone else and their whole system is structured for low costs so their adjustments will look minor compared to everyone else who is still saddled with higher CASM.
Some of their international flights are great examples. A person in the US with international family might be able to afford to visit once a year flying AA, but they can visit 4-5 times flying spirit. All they have to do is keep some clothes and stuff with their relatives so they don't need to pay a dime for bags, and have the forethought to bring a snack and (empty) water bottle with them instead of buying airport or airplane food and drinks. That $1000 AA seat costs $200 on Spirit.
Or some of the little airports Spirit flies to just a couple of times per week or just once a day. Those passengers would take a bus or drive at least partway to their destination if Spirit wasn't there. Their business model supports these low frequency pairings so they're pretty much printing money just by showing up with a $60 ticket as an alternative to taking the bus.
Last time I looked, Spirit was saying that they had identified over 600 additional pairings that would be profitable, and due to growth constraints they can only pick up a few dozen each year at most. That's 10 years of additional growth they already have lined up ready to go, at whatever profit margin they use as a cutoff.
Sustainable? When the economy burps or crashes again, where do their passengers go? Their fares are low enough that they think they'll actually be positioned better than anyone else since just about anyone will still be able to fly with their low fares. The primary threat in those situations is the 50% or so of their income coming from non-fare revenue. It remains to be seen if passengers will continue to pay $3 for a bottle of water during a recession, and that could cut into non-fare revenue side. They'd have to make up for that somehow, either cutting service on routes that don't keep buying water and snacks or whatever, or raise fares to make up the difference. In either scenario though, the fact is that they've got a dozen more seats in each plane than anyone else and their whole system is structured for low costs so their adjustments will look minor compared to everyone else who is still saddled with higher CASM.
#15
Agree, plenty of room for everyone here in the states. Personally I don't think frontier name will be around in 5-10 years.
#16
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Joined APC: Sep 2014
Posts: 824
I’ll just add that I jumpseated on spirit for the first time the other day. Seat was fine, didn’t feel cramped, FAs were super nice, offered me free food/drink, plane was clean and early. Everyone I spoke to was friendly and accommodating. Certainly wasn’t the bedlam that is described in some of the stuff I’ve read.
#17
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Joined APC: Oct 2010
Posts: 4,603
The problem with this comparison is that AA, for example, isn’t Ruth’s Chris.
McDonald’s and Steak and Shake is probably a better comparison.
Walmart and Target.
This notion that coach at a Legacy is such a better experience is as outdated as some of the very aircraft these Legacy airlines fly.
McDonald’s and Steak and Shake is probably a better comparison.
Walmart and Target.
This notion that coach at a Legacy is such a better experience is as outdated as some of the very aircraft these Legacy airlines fly.
#18
It’s not so much the product is so much different. It is the clientele. Every time I deadhead on a legacy carrier I do not notice much difference in the product from a comfort standpoint but the in seat entertainment is nice. Mostly it’s the people. You don’t have to make an announcement on delta even in coach that you need to wear headphones and cannot just blast sound from your device for the entire plane to hear. Most folks are civil, generally well groomed, and not carrying a 3ft tall plastic cup they plan to take home and put on top of their fridge to collect dust for the next decade. That’s the difference and sometimes that experience is worth the extra money.
#19
It is a byproduct of the frequent flier points systems. Legacies are mostly flown by those who fly frequently and/or are interested in collecting points for future travel. Corporate travel accounts are main drivers for this type of thing. Beat the FF programs and you will beat the legacies.
"I only fly XXX Airline because im "paper level elite and am working on becoming foil level. That will allow me a window seat, if available, on any west bound flight that is north of the 15 degree latitude line"
#20
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Joined APC: Dec 2008
Position: B737 CA
Posts: 307
It’s not so much the product is so much different. It is the clientele. Every time I deadhead on a legacy carrier I do not notice much difference in the product from a comfort standpoint but the in seat entertainment is nice. Mostly it’s the people. You don’t have to make an announcement on delta even in coach that you need to wear headphones and cannot just blast sound from your device for the entire plane to hear. Most folks are civil, generally well groomed, and not carrying a 3ft tall plastic cup they plan to take home and put on top of their fridge to collect dust for the next decade. That’s the difference and sometimes that experience is worth the extra money.
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