CNN article on problems in Air Travel, as seen by FAA

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.


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.

(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)

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?


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.


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.

(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)

On Sep 14, 1:10 am, Marty Shapiro
wrote:
[...]
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.

ASDE is an enabler for more efficient use of existing concrete. Then
the long pole most likely becomes the wake constraint (both on and
above the surface).

Regards,
Jon

On Fri, 14 Sep 2007 05:10:30 GMT, Marty Shapiro
wrote:

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.

I see what you mean now, but it's a bit bizarre. By this analysis,
anytime anyone drives from a podunk town to an airport served by a
major they should be counted as indirect revenue. First, there is no
way of measuring this that I can think of. Second, airlines decide
where to fly, what aircraft to use, on what schedule, etc. by what
their marketing studies show. As I said before, they have long since
rejiiggered their routes internationally not because of this but
because they are more profitable due to cutthroat competitions by the
cheapos, becoming more efficient in the process. A number of these
cheapos who can't do that have gotten into a lot of trouble and some
going out of business, killing each other off, so that was the correct
decision. Majors aren't suffering from this. They are profiting with
record loads. Leave the junk to these guys and go after the cream.
It has worked very well.


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.

This is part of the reason, of course, but not all. Other factors are
the government ripping off the trust fund money that was supposed to
go to improving airports, a lousy, inefficient ATC systerm, etc. And,
of course, better loads means better money to a point. But sometimes,
they have lost money on 100% loads because costs were too high. That
why they abandoned a bunch of them.



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.

So would I. No one will stay in business long running unprofitably.

On Fri, 14 Sep 2007 15:02:58 +0000, John Kulp wrote:

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.

I see what you mean now, but it's a bit bizarre. By this analysis,
anytime anyone drives from a podunk town to an airport served by a major
they should be counted as indirect revenue.

I don't see it as "indirect", so in that sense I agree that this label is
odd to me. But it certainly is revenue.

First, there is no way of
measuring this that I can think of.

Does it need to be measured for the airlines to - intelligently, I
believe - be concerned? However, it's pretty easy given the proper data
to at least get a perspective. These flights are partially identifiable,
with some false positives and with no way to do this at the destination
side, by comparing home/work zip codes with the airport's location.
Imperfect, but it does help provide a picture.

[Hmm. If airlines and ground transport firms (car rental, limo, etc.)
share data than an even better picture can be constructed.]

They are profiting with record loads.
Leave the junk to these guys and go after the cream. It has worked very
well.

First: are they "profiting"? High load doesn't necessarily translate to
this (ie. the old "make it up in volume" myth).

Next: Yes, they've optimized. Passengers pay for this optimization. One
such payment is in the ground travel. The "problem" for the future is
that there may be an alternative which is cheaper for the passenger when
the ground travel is considered. This eliminates that as a source of
savings for the airlines.

[...]


This is part of the reason, of course, but not all. Other factors are
the government ripping off the trust fund money that was supposed to go
to improving airports, a lousy, inefficient ATC systerm, etc.

I'm curious how you see these applying. Would the airlines still be
serving smaller markets if the trust fund money were being spent on those
airports? How is an inefficient ATC making it the proper choice to put
more/smaller aircraft in the air at fewer airports?

And, of
course, better loads means better money to a point. But sometimes, they
have lost money on 100% loads because costs were too high. That why
they abandoned a bunch of them.

Higher loads mean more profit iff there's profit on the service.
Competition can make this tough, as margins are shaved.

[...]

So would I. No one will stay in business long running unprofitably.

Nobody disagrees - as far as I can see - that the airlines have not
behaved in their own individual best interests. But, with regard to
airport delays, there's a commons problem. And with regard to the
potential for competition from the VLJs, I think it wise for the airlines
to be worried.

That doesn't mean, though, that actions in their best interests are in
mine (or in the best interests of the pool of potential aviation
passengers).

- Andrew

Marty Shapiro wrote:
(John Kulp) wrote in
:

[snip some of Jon & Marty's comments for length]

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.

That's because 1) Denver is a major hub for United and 2) the 777 and 747 were
either being repositioned or Denver was an interim stop for a longer flight.
For example, I've been on 747 DEN-ORD that was 70% empty. Why? Because it
was the aircraft for ORD-Frankfurt or similar. Or it was used for
JFK-DEN-SFO-Sydney, etc.