Delta Air Lines CEO Questions Financial Strategy of Low-Cost Carriers (businessinsider.com) 43
Delta Air Lines CEO Ed Bastian had stark words for competing airlines that depend on selling low-priced tickets to stay alive. From a report: "You cannot, if you are on the lower end of the industry's food chain, continue to post losses, particularly given the health of the demand set we've seen over these last couple of years," Bastian said as Delta reported disappointing second-quarter financials and warned things could get even worse.
Airlines that can't break even "will not be given the opportunity to continue to run business models they have," he added. Bastian's comments came in response to a question about the potential for structural changes within the industry as many airlines struggle to remain profitable. [...] A big contributor to the lower profits was lower airfares and extra capacity, especially in economy class,
Airlines that can't break even "will not be given the opportunity to continue to run business models they have," he added. Bastian's comments came in response to a question about the potential for structural changes within the industry as many airlines struggle to remain profitable. [...] A big contributor to the lower profits was lower airfares and extra capacity, especially in economy class,
No more mergers... (Score:2)
...hey Delta, don't go gobbling up low-cost carriers. Stay in your lane.
Low-Cost Model Makes Perfect Sense (Score:2)
It's the old story - Sell cheap and make your profit by doing a large volume of business
It does not really work but some businesses continue to think it will.
I guess P.T. Barnum, if you believe the legend, was right - "There's a sucker born every minute"
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More like the old joke: "We lose money on every sale, but make it up in volume!"
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It works fine - if it didn't there'd be no gas stations or grocery stores.
The joke old 'joke' is about selling at loss and the other guy chimes in and says "we'll make it up in volume."
There is nothing inherently wrong with low-margin, high volume model so long as
1) the product / service and its inputs are relatively unlikely to experience disruptions. Example it would be a bad fit for a tourism outfit where a few weeks unseasonably hot/cold/wet etc weather could blow out the financial picture for the enti
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It's the old story - Sell cheap and make your profit by doing a large volume of business
It does not really work but some businesses continue to think it will.
I guess P.T. Barnum, if you believe the legend, was right - "There's a sucker born every minute"
Yes, it does work ... sometimes. It even has a name: disruptive innovation. As part of the paradigm, entrenched incumbent companies always claim that it doesn't work.
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Airline tickets, probably *would* be in that category if you could offer genuinely *cheap* tickets to popular overseas locations, but it's hard to do that with traditional aircraft, because there are costs you can't easily control (notably, fuel). There's a certain amount you can do with buying the most fuel-efficient aircraft possible, but that only gets you so far.
If I were looking to be disruptive and get
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It's the old story - Sell cheap and make your profit by doing a large volume of business
It does not really work but some businesses continue to think it will.
I guess P.T. Barnum, if you believe the legend, was right - "There's a sucker born every minute"
Selling for lower margins but higher volumes doesn't work? Does Wal Mart, Costco, Amazon, etc know this? Because they've made, you know, billions from this model.
Of course it works, IF your volume is high enough. What's hurting low cost carriers is the legacy of 9-11: all of the security red tape now makes flying take MUCH longer. Southwest made their bones on $99 fares coupled with busy flight schedules. You make money in part by getting 'em on and off those planes as fast as you can so you can squeeze in
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Airline tickets are something the average person buys *occasionally* and in many cases will simply forego if money is tight; and there are uncontrollable costs (notably, fuel) that make up a very substantia
They are in growth mode (Score:4, Interesting)
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I just booked 3 tickets (one way) from Costa Rica to Pittsburgh.
United: $1350. Includes seat choice and 2 bags, plus carryons.
Spirt: $850. This is the upgraded price to get the same options as I got with United.
$500 difference. I still went with United. More comfortable seating.
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Summary
Well, it took 3 hours of chatting with a United Airlines agent via the text-chat thing on my phone, but I got what I wanted out of it – and a bonus!!
Details – The Problem
During the booking process for plane tickets on Sunday, I accepted an offer to apply for the airline branded credit card. Usually that process is instant and the new booking uses the new card number. However, this time around, it wasn’t instantly approved, so I had to pay with a different card, unless I wanted to ri
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Airlines are notoriously horrific and crappy ...
They're actually not, with one exception. And I bet it applies to you.
To explain, here's a story. Roughly a decade ago, I shared some travel plans I made with my father so he'd know where I was going and when. Basically I had to go from my US city -> Toronto -> Hong Kong and the return trip was Hong Kong -> Vancouver -> Toronto - my US city. I got a good deal on Air Canada. My dad saw the length of the Hong Kong flights and said "That sounds terrible". I told him, it's really no
Comment removed (Score:5, Informative)
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But the reason flying sucks is because you and your friends make it that way by demanding worse service for less cost.
You're not wrong but if you've flown on any EU low cost carriers, it's hardly unique to the US. The difference there is there's less morbidly obese passengers and a lot less entitlement/rage but in terms of seat size, amenities, airline policy, etc., there's not much difference between the two universes.
Just don't fly from the UK to the south of Spain during holiday season with a bunch of lager louts as fellow passengers.
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"I got a good deal on Air Canada"
my problem is the absolute game of roulette to find a price. Set a damned price and sell it, not fluctuate it up and down 15 times in a 2 months. They barely run on margins b/c everybody plays find the lowest price. The cost to travel tomorrow is the same as it was to book the same flight last month. The 'business' geniuses try to play hunger games with demand pricing.
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I will never understand why we let a handful of people profit handsomely from something desired by the entire public. You certainly can't make the excuse that the free market's giving us a better product here. Airlines are notoriously horrific and crappy unless you can afford a private jet in which case your bypassing the free market entirely.
What the hell are you talking about? If any market is broad and competitive, it's the private air travel market.
I'll let you in on a somewhat well-known fact you can feel free to double-check after reading: the air travel industry combined as a whole has LOT money since it's inception up to and including this day for it's investors. As the big picture view, it's essentially a free gift to humanity that desires it. And you let the very rare few to occasionally profit handsomely from something desired by the
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You certainly can't make the excuse that the free market's giving us a better product here.
The price is part of the product, and it has gone down a lot. This page [bts.gov] has an inflation-adjusted average fare dropping from $610 in 1995 to $388 in 2024.
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You certainly can't make the excuse that the free market's giving us a better product here.
Of course they are. The free market has driven down flying to the point of it being the cheapest form of transport by providing a continuously graded service providing you exactly what you are willing to pay for.
Want to pay for nothing? Get nothing. No leg room, no stowage, no lunch, no service.
Want to pay for everything? Get everything. Large seats in fold out beds, three course meals, no queue to board, etc.
You sound like your typical cheapskate who buys the most cost conscious thing and then complains it
Right, Delta would never lose money (Score:5, Insightful)
High price airlines never ever file for bankruptcy [reuters.com].
Sheesh. Low-cost has nothing to do with it. Saying businesses shouldn't lose money is a pretty general statement and even that's not universal. Virtually every startup begins by losing money to buy market share.
How about he say what he really means: "We don't like low-price competitors. They put downward pressure on our prices and profits. You shouldn't invest or buy their tickets because their business model scares us."
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And how many of these start-ups survive using this business model....
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Selling at a loss to gain market share is a basic tried and true business strategy, especially for new entrants.
Certainly doesn't ensure success. But being unknown and selling for the same price as established brand doesn't exactly line the coffers with certainty either.
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And how many of these start-ups survive using this business model....
IIRC, about one in ten. The key word was "start". The surviving one now has enough market recognition and scale they can raise prices and reduce costs to the point where they start making a profit.
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Look at Europe (Score:2)
Our low cost airlines - Ryanair, Easyjet and various others - are growing rapidly. The incumbents are clinging on - sometimes with the help of governments that give them privileges at airports. But this is typical incumbent whining...
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Our low cost airlines - Ryanair, Easyjet and various others - are growing rapidly. The incumbents are clinging on - sometimes with the help of governments that give them privileges at airports. But this is typical incumbent whining...
One of Europe's incumbents issue is just about every country has it's own national airline and wants to protect it and they typically well paid and organized employees. As a result, they don't let them fail and try to keep prices high; giving low cost airlines a way in. Couple that with the relative was of getting from a second tier airport to a nearby city and yo have a good environment for low cost carriers. In the US, the handful of majors can cut prices to match and grab customers if a low cost airline
Re:Look at Europe (Score:5, Informative)
Not quite for two reasons. Firstly: The European airline industry is much like the global car industry. They may have fancy unique names per country, but they aren't actually run by countries and in many case protectionism is narrowly targeted not to flag carriers, but rather to whomever makes financial sense. E.g. KLM didn't get a benefit from the Netherlands because the government has pride in the royal national airline, it got a bailout because it's a big employer and the leading hub of Europe's second largest airport and the failure of it would cause a financial crisis in the country. Not everyone gets bailouts like this. Where it doesn't make sense several flag carriers have gone under, e.g. Alitalia was left to die, the corpse of which is now 50/50 owned by Lufthansa and the Italian government under ITA.
Secondly: It's not a case of keeping costs high allowing low cost airlines to creep in. Quite the opposite, low cost carriers are *owned by* the major flag carriers, and flag carriers are themselves part of larger groups from other countries. Low cost airlines provide one thing, flag carriers provide another. I can fly via Transavia to London cheaper than I can via KLM. But if I'm going to America it'll be a KLM/British Airways codeshare, the low cost airlines do not work with majors in this way. There's still a space for full service airlines along side low cost airlines.
Also Easyjet and Ryanair are the odd ones out in the Europe. They are about the only two independent ones. Most low cost airlines are owned by an incumbent flag carrier.
KLM is owned by Air France, and they own a low cost airline subsidiary Transavia.
Austrian Airlines is owned by the Lufthansa Group, who also feature a low cost airline subsidiary Eurowings.
Some are not so nebulous in names. Spain's flag carrier Iberia owns a low cost airline called Iberia Express. TAP Air Portugal is similar owning a low cost subsidiary TAP Express. Incidentally Iberia is owned by IAG along with British Airways which leads to a very interesting situation in Spain because IAG also own budget airline Vueling - so it's competing against itself.
Turkish Airlines owns Pegasus.
It goes on.
Wizz is also independent (Score:2)
And a player in the Eastern European market. But thank you for pointing out the development of incumbent owned low cost airlines; it is an interesting response to the problem!
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Also Easyjet and Ryanair are the odd ones out in the Europe. They are about the only two independent ones. Most low cost airlines are owned by an incumbent flag carrier.
KLM is owned by Air France, and they own a low cost airline subsidiary Transavia.
Austrian Airlines is owned by the Lufthansa Group, who also feature a low cost airline subsidiary Eurowings.
Some are not so nebulous in names. Spain's flag carrier Iberia owns a low cost airline called Iberia Express. TAP Air Portugal is similar owning a low cost subsidiary TAP Express. Incidentally Iberia is owned by IAG along with British Airways which leads to a very interesting situation in Spain because IAG also own budget airline Vueling - so it's competing against itself.
Turkish Airlines owns Pegasus.
It goes on.
Its worse than that,
Apart from a few like EasyJet, RyanAir and TUI, Most airlines are part of a few large companies.
Lufthansa group (protip: never fly Lufthansa), Lufthansa, Austrian, Brussels, Swiss with low cost airline Eurowings.
AirFrance/KLM, Air France, KLM, Transavia.
IAG, British Airways, Iberia, Aer Lingus, low cost carriers Level and Vueling.
ITA is now part of Lufthansa group (never fly Lufthansa). It's a lot like the car industry where a small number of companies own a large number of b
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That is not the reason. There are multiple reasons why ULCC airlines work better in Europe:
1) Shorter flights: Europe is more densely populated and doesn't really have flyover country - there is something to see almost everywhere.
2) More vacation days: makes Europeans travel more often. This, by the way, makes Europeans more accepting for the ULCC unpleasantness - the vacation is nothing special and bearing with some discomfort to be able to afford more vacation trips is considered a good trade off.
3) Bette
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Great link (Score:2)
Thank you!
tl;dr (Score:2)
Why charge less when you can charge more.
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Depends on the consumer. If someone is cost conscious you want to race to the bottom to charge less. If someone isn't then you don't. If I fly for an hour it'll be a low cost budget airline. If I fly for 5+ hours it will be a full service airline because my comfort is worth the money to me.
It's About Southwest (Score:4, Informative)
If he's complaining about low-cost carriers (Score:2)
They must be causing him grief.
"Will not be given"? (Score:2)