Whatever Happened to Common Sense?
Is it just me, or is the whole airline situation just plain crazy? For years, we have been hearing of airline losses in the millions (and sometimes billions) of dollars each time a financial report comes out. Southwest and JetBlue were the only airlines that had seemed to have the right solution, but even JetBlue is now in the red with an expected loss for the year.
American Airlines reported Wednesday that it had a loss of $92 million in the first quarter. The positive spin the company put forth was that it was less than the $162 million loss posted a year ago. As part of cost-cutting efforts, it announced it would mothball 27 planes by July 1.
Ironically in a P.R. move the same day, American announced that it was giving away 20,000 tickets to attendees of a Dallas Mavericks basketball game. If each ticket were valued at $200.00, that would equate to a $4 million P.R. move!
What makes this move even more crazy in my mind is that these tickets are valid for any flight from Dallas Love Field, the airfield American has been operating at a loss (with self-admittedly little hope for profit) in order to compete with Southwest Airlines’ new routes. In a February 21 USA Today story, American’s General Sales Manager C. David Cush said that the airline would have a difficult time making a profit at Love Field and that the airline was not necessarily there to make a profit.
What is wrong with this picture? How did that decision come about? “We aren’t making any money at Love. Heck, I know — let’s give away 20,000 round trip tickets. That’ll sure show Southwest!”
Whatever the reason, it has to be difficult for American Airlines employees to see this kind of financial irresponsibility when they are being asked to sacrifice so much.
How difficult would it be to recuperate that kind of loss? Well, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS), American flew 6.071 million passengers in the month of January alone. If it would have charged each one of those customers an additional $15.00, that would have just about made up for the loss for the whole quarter.
Sounds simple, huh? Maybe I should be an airline executive? Not a chance! You see, consumers today are much more sensitive to price than they were just a few years ago. They make purchasing decisions based on a few dollars savings. Gone are the days of brand loyalty. Instead of a known customer base, the airlines are trying to attract a general pool of travelers who are hyper-sensitive to price. Because of this, the airlines are hesitant to make any large incremental fare increases because of feared market share loss. And so the insanity continues.
By the way, the BTS reported on Tuesday April 18 that the U.S. scheduled passenger airlines employed 5.8 percent fewer workers in February 2006 than in February 2005, the 14th consecutive month that full-time equivalent employee (FTE) levels for the scheduled passenger carriers declined compared to the same month of the previous year.
I guess we see where the airlines are targeting cost savings.
Thanks for reading. As always, your feedback is appreciated.
Joe Escobar
20k free tickets
Never has it made sense to me the reasoning of senior management regarding ticket prices or practices. It was just after Ronnie fired the controllers that I found myself flying home to ORD from SFO on weekends (laid off at ORD). When the company managed to over sell the plane (which was darn near every Friday morning) they would announce that anyone wanting X number of dollars and a guaranteed seat on the next flight come on down. They would then actually let the plane go with empty seats. That was good because I could get home, as I traveled stand-by. The company also started to give free tickets instead of money also not filling all of the seats. I asked management about this brain-dead policy and was told that I just did not understand. They said that they have done studies and the more tickets that they gave away the more money they made. It was then that I suggested that they fill planes with free tickets and prosper. Needless to say I was thrown out of the meeting.
I guess they wanted my idea for themselves………….
Frank Bonthron
Whatever Happened to Common Sense?
The answer is… How to make money while selling at a loss. Customers pay in advance, as much as three or more months, and the airline pays their bills after 90 days. The billions in cash flow work the funds markets. The airline pays less tax, while making money with money. Your house payment could be going to one of the funds with American Airlines?? money. What a deal!
Rodger L Holmstrom
Emigrant, MT
Common Sense
Dumping the Civil Aeronautics Board was one of the worst things that happened to aviation. You cannot fly for less that it costs to operate, no matter how good you cash flow is. To qoute a genius friend ” If your out flow is more than your income then your upkeep is going to be your downfall.” Simple Huh?
George Fredlund
Fort Lauderdale, Fl.
insanity
Hi Joe!,
You should try understanding this amazing company as an AMT on the inside! If a person was a Vulcan from Paramount’s Star Trek series, and was placed in this company, they would go catatonic almost immediatly.
We are trying our best to fix the problems in the productivity
department from within with continuous improvement.
We have begun a Pulse line for our fleet of 300 + super-80
aircraft. Antacids and stress are at an all time high as
we attempt to show a profit no matter how much the VIP’s
spend. For a person, this is like taking a second job to
cover the spouse’s spending, so the spouse spends more.
How does our Union feel? Ask the company!
Greg K.
Tulsa, Oklahoma
Trustmark National Bank Receives OCC Approval for Merger with Republic National Bank, Houston, Texas
JACKSON, Miss.—-Aug. 10, 2006–Trustmark Corporation announced that the Office of the Comptroller of the Currency has approved the proposed merger of out of debt subsidiary, Trustmark National Bank with Republic National Bank, the subsidiary of Republic Bancshares of Texas, Inc.