AviationBanter - View Single Post - CNN article on problems in Air Travel, as seen by FAA

**Marty Shapiro** · September 14th 07, 03:38 AM posted to rec.aviation.piloting,rec.travel.air

(John Kulp) wrote in
:

On Thu, 13 Sep 2007 22:50:33 GMT, Marty Shapiro
wrote:

Fractional jets are here and they are starting to siphon some
business
away from the airlines. The VLJ's aren't here yet. The projections
for the VLJ market, if correct, will put a severe dent in the
airline's premium passenger traffic. Take a trip of say 1,000 miles
or so. You can go to your nearby local airport and get a VLJ to fly
direct to a nearby local airport at your destination. No requirement
to be at the airport 2 hours before departure, no restrictions on
liquids in your carry-on baggage, no TSA, no long drive to/from the
airport served by the major, no dealing with connections at the hub,
and the VLJ air taxi comes/goes on your schedule, not the airline's.
The airlines can't do any of this and that's why they are terrified.
The only way they can compete is to make it prohibatively expensive to
fly on a VLJ.

What you say is true, except I don't know of any majors looking at
serving this market. The closest I know of are regional jets which
only have economy seats. At least the ones I know. So why would it
terrify them? CO, for example, has long de-emphasized this market as
unprofitable and has concentrate on expanding internationally. All
the others are doing the same. They aren't terrified, they are just
looking at different markets where these guys can't compete.

What market are you referring to? Flights of 3 hours or less? There
are a lot of flights on the majors from 1 to 3 hours and they are not using
regional jets on all of them. I've flown DEN to SFO/SJC on everything from
737/A320 up to 777 and 747. My last flight, scheduled for 1:20 was on a
737.

Look at an area like White Plains, NY with all the corporate
HQs
there. How many of the business / first class passengers would rather
go to HPN and fly directly to their destination vs. having to drive to
LGA, JFK, or EWR? Only the top executives get the company jet, the
others need to go via airlines. If they had VLJ service at a cost of
a first class ticket, would they bother to go via the major?

They presumably wouldn't which is why the majors are doing what I
described above. Two different markets entirely.

How many first or business class tickets are really sold?
I've been
on flights where the first class cabin was full but most passengers
were there on a mileage or frequent flyer upgrades. Those passengers
who did pay full fare would be more than happy to fly on a VLJ and
avoid the airline hassle completly, and those are the passengers the
airlines are worried about.

No they're not for the reasons I give above. There are still plenty
of full paying premium passengers which the majors are competing for,
not these guys.

I know one person who always flies first class and he said he
would
gladly pay 20% more for the convenience of a VLJ. And he even
dislikes small airplanes! The airlines can't compete with the VLJ.
They know it. So they need a way to escalate the costs for the VLJ so
high that people will not go to it, and the fee system is their
solution.

Sorry two different markets, as I said.

Even though the majors don't serve these markets directly, indirectly
they do and derive revenue from them. And that revenue, mainly the premium
first/business class revenue, is what they will no longer get. (They will
continued to get the coach revenue.) The key thing is that this revenue is
from a market they don't even serve or want to serve.

Some major corporations have installations in areas the majors no
longer want to serve, never did serve, or only provide service to a hub.
The majors didn't care because prior to fractional jets and the VLJ there
were no real alternatives. They got the business anyway. The top executives
at large corporation got the company jet while everyone else either took a
commuter flight or drove to the nearest airport served by the majors (which
could be a 2+ hour drive) and then flew with a major to the destination,
even when the destination was less than 3 hours away. Or, the only end to
end service the majors offered was via a hub, no other viable choice was
available.

With the advent of the fractional jet, this started to change.
Smaller companies could now afford corporate jets for their executives,
slightly cutting into the majors premium revenue. But this was generally
restricted to the top executives, so the impact, while not trivial, wasn't
too bad on the majors, but they did notice it. Soon the VLJ's will be
providing more alternatives and at a cost which will permit middle level
exeuctives or even lower (basically anyone who is permitted to fly first or
business class) to justify using them. Couple this with the hassle of
flying on a scheduled airline today, especially if a hub is involved, and
this not so insignificant premium traffic will be lost to the majors. And
this lost revenue will not be because the majors decreased or discontinued
service to a small market. The majors never serviced the market yet they
got revenue from it.

--
Marty Shapiro
Silicon Rallye Inc.

(remove SPAMNOT to email me)