I wonder how the "Basic Economy" stuff is working out for the big guys? Sure doesn't seem like it's hurt us, our planes are still full, but I wonder how the big airlines see it so far? I'm sure it's at least going better than Ted and Song

 

Load factor is a tiny measure of success. You can fill planes without making money

 

Right, no doubt. But Frontier & Spirit are making money.

My point was more so that United starting their basic economy hasn't seemed to pull customers off of our planes. I was just pointing out that the the ULCC load factor hasn't decreased with the legacies trying to play the cheapo fare game. I am more curious how it's working for the big airlines

And to your point, when Frontier went bankrupt the planes were full.

 

There has been margin compression throughout the industry. Prior to AA and UAL dabbling in the basic economy market, Spirit’s margins were in the high teens/low twenties. The one airline deciding not to go full bore into basic economy, Delta......Air......Lines (did I get it right? ), has the highest margins in the legacy market. Who’d of thunk that filling your planes with low yielding passengers when your costs are double that of the ULCCs would result in lower margins.

It has become kind of a MAD between the ULCCs and the legacies with basic economy. The difference is that the ULCCs are designed around low cost whereas the legacies can afford to subsidize the loss is revenue so long as their one BIG cost (fuel) is cheap. If fuel goes up, I wouldn’t be surprised to see AA and UAL dump basic economy for higher yielding fares to offset the increase in cost.

 

Delta does have a basic economy type of product, right? Are you saying that Delta just sells fewer of those type of fares than UAL & AA?

 

That is my understanding.

 

Why are the planes and fuel the same costs for a ULCC but labor costs so cheap?

Why does a ULCC pilot discount their labor then boast about company profitability?

 

I realize that you are trying to make a point, and a fair one at that. However, the ULCCs have found ways to reduce aircraft and fuel costs. Aircraft costs are reduced by higher utilization rates and by bulk orders (Indigos 430 aircraft order). Fuel costs are reduced by higher seating counts, lower cost index and high percentage of fuel efficient aircraft.

Obviously ULCC pilots goal is to achieve pay parity with our legacy counterparts. We have made major strides in that direction. Both Frontier and Spirit have dramatically better contracts than we did a few years ago.

Why boast about profitability? Its job security. Its upgrades. Its seniority.

 

I suspect AA is most at risk to the ULCC model. It seems like Spirit and Frontier are gaining ground in many AA hubs; 2020+ is going to be interesting as more planes are added, more routes are added to the network, and more bases are opened.

 

Will there come a point where ULCCs struggle to attract enough new pilots and that rapid growth can't be sustained? Legacies offer job security, upgrades, and seniority in spades. Why go to a ULCC instead of a legacy?