yoke jerker

the upcharge alone for this oil level is 50 at least as far as united is concerned...how can SX mgt stick to this plan under these circumstances? or do they stay the course ( i get the reasons...branding, marketing) but reality can hit you hard... this might be good time to change gears...good luck..bear sterns isn't apart of this project? ... or was it goldman sachs?

JetPiedmont

Morgan Stanley...JP

bbtp

i doubt they'll throw out the $10 tix. these $10 tix get sx more exposure than they could ever afford to pay for thru advertising. they're a great marketing tool. the question is this: what's the opportunity cost of a $10 ticket? in the case of sx, the opportunity cost may even be negative - if the holder of a $10 ticket wouldn't have otherwise travelled at all, then if nothing else, he/she is a generator of ancillary revenue. in the case of a full flight, the $10 ticket may have a more significant opportunity cost - but, for the most part, i doubt sx loads are above the 70-80% range (many flights to FL may be an exception, but i imagine these flights are cash positive, $10 tix or not).

therein lies the fundamental problem w/ the airline industry as a whole (less of a problem for sx, but a major problem for all other airlines): the marginal cost of flying another passenger is 0. at the end of the day, if an airline still has empty seats, there's a nearly irresistable temptation to sell those seats at almost any price, however low (as long as the price covers the transaction cost of selling the ticket).

In the case of sx, that transaction cost is the lowest in the industry (well under $1) due to 100% internet distribution for tix sales. more importantly, every seat occupant has the potential to generate ancillary revenue (the breakfast bagel sandwich isn't bad (really!) and you need a ginger ale to wash it down). thus, if the $10 tix holder would have likely not otherwise travelled for a higher price, and there are open seats anyway, it's worth carrying him along for both ancillary revenue and major PR exposure.

unless the entire business model changes (i doubt it will), i think $10 tix are here to stay, in one form or another. btw, one of the most successful carriers in the world, ryanair, still does it.

FlyHappy

My understanding is that there are not that many $10 tickets available for any given flight. It's always been just a marketing gimmick, so I don't think it's going to make much of a difference. They can always just further limit the number of $10 tickets available, but I doubt they'd end it completely. They can always make up the difference by having the FAs hawk more stuff during the flight and installing pay toilets. :-)

CE750

VERY astute observation my friend.. there is the elephant in the living room of airline capacity and pricing. This is why every flight is almost full, yet they're unable to make money. Priceline.com, et al have created a system wherein the airlines compete with themselves. This is part of the "re-regulation" I subscribe to, which is to say, get rid of the brokering of seats and have each airline, and only that airline sell it's own capacity.

yoke jerker

that is exactly why authur blanc of the atlanta falcons changed tickets to 10 bucs to fill up the stadium. a stadium full of half drunk fans on 7dollar beers is much better than a third full. they clean up on beer sales.

i speculated as to the urgency right now to increase the yield per RPM versus a branding cliche that could have run its course.

many marketing campaigns have a lifespan. initial great deal , then an emphasis on other product attributes. could be the same here.

since there are only 10 of these cheap tickets, i weigh that against the cost of purchasing ad space in another media form.. iguess ii'd let it stay,
but if the numbers for Q4 aren't that good as in halving the loss from before, expect this years numbers to be just as bad with these gas prices.
can they grow revenue and yield to the degree that the 100 oil doesn't impact 5 year plan?

bbtp

thanks, but you're not going to get me to agree w/ re-regulation for the following reasons:

1. it's not right (morally, in a free country)
2. it's not more safe. air travel has been far more safe in the de-regulated environment than it ever was under regulation - mostly because the industry is still HEAVILY regulated (too much so). there's an even stronger incentive to cut COSTS under regulation than under de-regulation - any business will (or at least should) be a profit maximizer. under regulation, the only way to maximize profit is to cut costs. this is due to the fact that the only way to grow or increase revenue under regulation is with the "regulator's" permission - which leads to all kinds of political perversions, etc.
3. several airlines have made plenty of money in the de-regulated environment. the airlines that have suffered are the very ones that existed in the regulated environment. they grew fat, dumb and happy under regulation - thus suceptible to lean, mean entrants.
4. this WILL BE NO UPSTARTS under a regulated environment - if a regulating authority sets higher than market fares to "ensure a profit," the only way they can do so is to either:
a. provide a cash subsidy (courtesy of the taxpayers) to the "chosen" carrier
and/or
b. give that carrier a monopoly on a given route
5. you better bet LOTS of pilots will lose their job under regulation where airlines are granted monopoly power along routes so that they can cut capacity. regulation would be GREAT for those lucky pilots who get to keep their jobs, but would basically suck for your unemployed "brothers" (not to mention the american consumer).

the fundamental problem i pointed out (that the marginal cost of carrying another passenger is nearly 0) is not insurmountable - but it does require business discipline. i think that's the reason you see less last-minute internet/email fare sales than you did in the 90s. as far as re-selling goes, it's entirely by choice. for instance, sx seems to have completely avoided it (and will continue to do so, i would bet).

if anything, the industry is too regulated. i think landing slot allocation is a perfect example of what results from regulation.

SmoothOnTop

Aren't start-ups supposed to lose money (it's planned for) ?

Don't they need to reach a perfect mixture of number airplanes - seats sold to offset the capital/overhead start-up costs ?

And then once they exceed the 1:1 ratio- that's when the profits roll in ?

Just thinking about the model. To be blunt, I'm most upset about the APC noted 18-24 month upgrade.

CE750

Totally disagree, free doesn't meat free for all.. freedom without restraint is tyranny. I for one subscribe to a more Roman Catholic view of freedom than the protestant view.. which is to say, morally I take the view that the free market, untempered by government oversight is as evil as the centrally controlled Godless communist system of the Soviet bloc.


The reason it's so safe today is the advancement in technology both in the air and on the ground, and has absolutely nothing to do with the business environment. I would argue that it would be yet even safer with stricter government oversight. The 11M fine WN is about to pay is a classic example of what used to never happen pre-1978.

The FAA is far too cosy with airline executives and the ATA. Pilot duty work rules are a prime example of this.

Lean and mean isn't what I admired about the airlines when I wanted to work for them. Great service, great product and happy employees that smiled at me is what attracted me.

In a totally regulated system, I would agree.. but I'm not talking about that. I'm talking about protection of pricing, not routes.. Startups more than anyone else have the hardest time with pricing, as we are. This makes the airline have to run a smarter operation internally and makes it so we're not stuck unable to increase prices to cover the added cost of oil as is the case now, especially at the start ups like Skybus.

Tax payer support of pricing is not a problem since travel and infrastructure is critical to our national economy and security. This is after all what the roads and bridges are. Would you have us pay a fee to use them?


Sad to say, but that might need to happen.. There are too many mediocre ones out there anyway!



bbtb... nice to see you on here btw. How is the new job?

CE750

The whole thing sucks now, but it's the environment we're in.. the lack of pricing power, the sky rocketing oil prices, and to make matters worse, the housing/credit/economy crunch.

We will make it, but it will take that much longer to get there..