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

**Marty Shapiro** · September 14th 07, 06:10 AM posted to rec.aviation.piloting,rec.travel.air

(John Kulp) wrote in
:

On Fri, 14 Sep 2007 02:38:56 GMT, Marty Shapiro
wrote:

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.

Mainly the international ones. The domestic ones have been marginally
profitable for years, which is why CO expanded over 25% after 9/11
while others contracted some 10+ %.

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.

I don't know what you mean. How does an airline derive revenue for
indirect markets?

No airline flies from say POU to ATL (ie. there is no airline service
at POU), but several airlines fly from LGA to ATL. Anyone going from POU
to ATL needs to drive 90 miles to LGA to then fly to ATL. The airline
derives revenue from that person for the LGA to ATL flight. That's how the
airline derives revenue from a maket (POU) that it doesn't 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.

This is all domestic, as I said, which the majors have been cutting
for some time to reposition internationally.

The lack of runway capacity at major airports has been caused by the
majors eliminating 767's and replacing them with multiple smaller jets,
737's and A320's mainly, to provide increased flight frequency. It wasn't
that long ago that the smaller aircraft did not have transcon capability.
They do now. The airlines would rather run 3 737's at 100% load factor
each rather than 2 767's at 60% load factor. More capacity (seats)on the
2 767 but lower load factor. Better profit margin at 100% load factor.
And, of course, to hell with the passenger if we have to cancel a flight,
as there is no spare capacity to book on another flight.

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.

Well, since they haven't been interested in these marginal markets for
some time, and, at best serve them with regional jets or not at all, I
don't understand what you think they are losing. It's just another
market being served by these others you mentioned. Major airlines
bookings are at all time records.

They haven't had to take an interest in these marginal markets as they
got the business regardless. Again, if you needed to go from East Podunk
to Midwest Podunk you drove to the nearest major carrier airport even if it
took 2+ hours. You then flew on the major to the nearest aiport they
served to Midwest Podunk and then drove to Midwest Podunk. Why would the
airlines care to serve East Podunk or Midwest Podunk if the passenger had
no choice but to drive to an airport they already served? I would do
exactly as the airlines did.

--
Marty Shapiro
Silicon Rallye Inc.

(remove SPAMNOT to email me)