Author Topic: Cut Price Airlines: How DO they do it?  (Read 1802 times)

Offline Urchin

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Cut Price Airlines: How DO they do it?
« Reply #30 on: December 14, 2002, 10:12:13 PM »
Quote
Problem is they can't control their own GREED and thus they can't control corporate costs.


Hey there Cowboy.... why dontcha stop insulting the #1 Principle of the "American Dream".  Wish there was a tongue in cheek smiley.

Offline GRUNHERZ

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Cut Price Airlines: How DO they do it?
« Reply #31 on: December 14, 2002, 10:34:08 PM »
United was in fact ruined by it's unions. If you remember united was the airline that made news in the 1990s for being owned by the employees and that they had a controllining interest in the company. Well they did and one of the biggest things they did was raise pay, United has (had? :( ) one of highest overpaid workforces in the airline industry - in effect they bled the company dry like vampires. Now 911 did not help but that was only the final blow.  I'm very happy United wend under as it's childish ownership scheme demonstrated the evils of unions and also communism, which is basically what the unions did at United.

Offline Toad

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« Reply #32 on: December 14, 2002, 11:05:49 PM »
Wow, I REALLY hate to do this.. but since Grun insists.

From UAL's own history site:

Under the wings of UAL

Quote

Winds of Change...
In 1970, United posted a $46 million net loss, a massive turnaround from the $45 million profit it reported the previous year. What went wrong?

Airline observers cited various causes, including higher costs, lower fares and a flattened market. In addition, the Civil Aeronautics Board's Transpacific Route Case decision in mid-1969 cost United its bid for international routes and drained profits from the airline's lucrative U.S. Mainland-Hawaii operation. Finally, there was the premature introduction of the jumbo Boeing 747. But there were other causes, too, many of them internal.

Can you say "piss-poor management"?

Between 1970 and 1989, United made six changes in the office of the president, including the arrival of Western International Hotels executives Edward Carlson and Richard Ferris, who played significant roles in the acquisition and [/b]divestiture of United's principal subsidiaries during those two decades. In that period, also, UAL, Inc. changed its name twice -- Allegis Corporation in 1986, then to UAL Corporation in 1988.[/b]

Can you say "piss-poor management"?


With management changes came new directions and a new image. UAL, Corp. reached beyond the airline industry to acquire non-airline enterprises. United, itself, went beyond U.S. borders -- first, via new route authority to serve Tokyo from Seattle in 1983, and, two years later, through the purchase of Pan American Airways' Pacific Division.

To reflect its new direction, United changed its logo and aircraft livery and incorporated the design and color scheme in its employee uniforms, ground equipment and corporate signage. Before the turbulent era passed, United's parent company was forced by a major investor group to divest itself of its non-airline subsidiaries. UAL Corporation once again became involved exclusively in air transport operations.

Money well spent by labor right? :p[/b]

In 1978, the U.S. Congress passed the Airline Deregulation Act and airlines were free to compete for passenger and freight business in an open market. Seven years later, the Civil Aeronautics Board went out of existence and air mail contracts - -the last regulatory domain of the CAB - - also were opened to free-market competition.

New Image for a New Airline...
As United entered the last decade of the 20th century, it took on an exciting, new image -- a growing, global airline. On Jan. 5, 1990, the company received U.S. government approval to serve Paris from Chicago and Washington, D.C., and, soon after, launched Newark-Tokyo service. By year's end, a series of bold moves left no question about United's plans for unparalleled expansion.

Let's see how this incredibly smart managment move turned out.......[/i]

In just nine days in October 1990, the company placed the largest aircraft order in commercial aviation history -- $22 billion dollars -- and announced its purchase of Pan American's U.S. routes to London. At the same time, the U.S. government approved United's long-standing application to serve Tokyo from Chicago and granted an exemption to permit service to Madrid from Washington Dulles.

Bold and aggressive management there, eh?[/i]

By the end of 1991, United was serving Amsterdam, Berlin, Madrid and Munich. In 1992, Caracas, Buenos Aires, Rio de Janeiro, Sao Paolo and other South American cities became United destinations. Stephen Wolf that year relinquished the airline presidency, remaining as chairman and CEO. Executive Vice President John Pope became president and chief operating officer.

The picture started to change in 1991 as fuel prices rose to record highs in the aftermath of the Persian Gulf crisis and a number of low-cost, no-frills carriers came on the competitive scene. UAL Corporation reported a record net loss of $332 million in 1991 and set a new, more dismal record in 1992: a net loss of $957 million.


Oops. Mr. Wolf may not have been as brilliant as Wall Street thought. Doubts? Check his "success" at driving US Air into bankruptcy as a follow on to his UAL act.[/b]

United began 1993 by introducing a new gray, navy and red livery for its aircraft and new employee uniforms to project a more global image. But in response to the company's poor financial performance, senior management quickly switched gears to a strategy of stringent cost containment. A hiring freeze, the grounding of older aircraft and the sale of 15 of United's flight kitchens contributed to a $400 million reduction in operating expenses that year, but it was not enough.

Right on top of things, weren't they. This is what they get the big bucks for? New paint when the world is going to sh*t?[/i]

The company proposed a significant change in labor costs and began months of intense negotiations with employee unions. The negotiations produced agreements in mid-December with the Air Line Pilots Association and the International Association of Machinists. On Dec. 22, 1993, the UAL board approved a proposal for 54,000 employees to exchange portions of their salaries and benefits for UAL stock, paving the way for the creation on July 12, 1994, of the largest majority employee-owned company in the world.


The Buyout was a bad idea? Really?

1. It was PAID FOR by employees.. it wasn't given.

2. THE BRILLIANT MANAGING BOARD approved the deal

MANAGEMENT APPROVED.


Can you say "piss-poor management"?
[/i]

Thought you could. Because the history is there if you only take the time to read it.
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!

Offline GRUNHERZ

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Cut Price Airlines: How DO they do it?
« Reply #33 on: December 14, 2002, 11:13:24 PM »
And since 1994 who has had a controling stake in United airlines?  Who selected management since that time? If they didnt like the way the company was going the unions could have changed management since they ha a majority controlling interest in the company. You cant blame this on some Wall-Street evil capitalist pigs as this was the fault of the employees who owned the company and had a controlling interest. It was their fault simple...

Offline -tronski-

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Cut Price Airlines: How DO they do it?
« Reply #34 on: December 14, 2002, 11:16:34 PM »
You want to know about incompetent management and airlines...look up Ansett Australia.

A proud Airline butchered by negligent management, and incompetent buisness structures led by News Corp ,TNT , and then Air New Zealand.

Quote
the evils of unions


The evil unions were the only thing that kept it flying in the end AFTER it's corporate master set it adrift, claiming it had nothing to do with it.

 Tronsky
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Offline Curval

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« Reply #35 on: December 14, 2002, 11:18:17 PM »
Cobra just a few snippets from your previous post:

"I'm in management as well"

"It's the hacks in Management that do 100% of the time"

"again, it's the Management Hacks every damn time."

You seem to have a dim view of management and yet you are a management hack yourself.  

I find it strange that you glorify the unionised worker by saying:

"not INDIRECT Labor like you and me, but DIRECT labor, where rubber meets the road"

and then go on to claim that you are somehow making everything happen here : I'm in management, like I said. I do it on a Global level. I do it in Supply Chain and logistics at that level. I don't just audit someone doing it....I make it happen, bean-counter."

Which is it wonder boy?  You seem to be having some sort of identity crisis at a minimum.  

As I said earlier I do not audit anymore.
Some will fall in love with life and drink it from a fountain that is pouring like an avalanche coming down the mountain

Offline GRUNHERZ

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Cut Price Airlines: How DO they do it?
« Reply #36 on: December 14, 2002, 11:30:52 PM »
Oh yes we should just diminish and degrade  management and leadership and just have the "workers". Gee where did I hear that before... :rolleyes:

Offline Toad

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Cut Price Airlines: How DO they do it?
« Reply #37 on: December 14, 2002, 11:48:52 PM »
Quote
Originally posted by GRUNHERZ
And since 1994 who has had a controling stake in United airlines?  Who selected management since that time? If they didnt like the way the company was going the unions could have changed management since they ha a majority controlling interest in the company. You cant blame this on some Wall-Street evil capitalist pigs as this was the fault of the employees who owned the company and had a controlling interest. It was their fault simple...




Look at the entire industry since 1994. UAL has performed as well as or better than the rest of the majors until 9/11.

Seems like the employees, who only had 3 seats on a 12 member board, are either responsible for:

1. Making the company perform as well as any other major

or

2. Having no negative effect on performance when compared to the other majors.

Check this Grun; this is 3 years after the buyout:

1997  Unit cost per Available Seat Mile
 
Southwest Airlines $0.074

United Airlines $0.077

America West Airlines $0.077

Trans World Airlines $0.091

Delta Air Lines $0.091

Northwest Airlines $0.093

Continental Airlines $0.094

Alaska Airlines $0.100

American Airlines $0.101

US Airways $0.134 (With Wolf, the guy that got UAL into such trouble that they had to do the employee buyout as CEO. :D )


So what do you think? UAL second only to Southwest in Seat Mile Cost? That employee buyout... low costs, eh?

Now, for your homework, find UAL's profit/loss since the buyout and compare it to:

1. Industry average for the majors

and

2. The profit/loss for DAL, AA, NWA and CAL over those same years.

Then tell me the employees hurt the operation.

You're going to be surprised.
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!

Offline GRUNHERZ

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Cut Price Airlines: How DO they do it?
« Reply #38 on: December 15, 2002, 12:27:10 AM »
Toad:

The 1997 UAL annual report shows:

Operating expense per ASM 9.53 cents

The 1997 SW annual report shows:

Operating expense per ASM 7.4 cents

The 1997 AMR annual report shows:

Operating espense per ASM 9.27 cents.


These are again from the Annual Reports from 1997.

What source are you using for your UAL and other company data? Why is your figure off by so much compared to the 1997 UAL annual report?

Offline Urchin

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« Reply #39 on: December 15, 2002, 12:55:59 AM »
I don't know if 'unions' ruined the poor airlines or not.  Speaking as a stupid blue collar worker (which I've been my entire life), I'd be more inclined to blame it on management.  

I'm a relatively young man, I've only been working for 10 years now.  In that time, I worked at a variety of 'retail' stores (including some time in a shop, which I'll count as retail since they provide a service).  Of all those jobs, the closest I've come to being a manager was being a '3rd key' at Goodyear.  I've never been in a union.  Now, my impression of 'management' may be slightly skewed since I've never had one I was impressed with, but I'll give it to you anyway.  "Corporate America", right down to the overseers in the lower echelons of management, would enjoy nothing more than to have a labor force made up of slaves.  I'd say probably 75% of their job is thinking up new and improved ways to bring 'labor' closer to bondage.  The other 25% of it is trying to fool the diddlying retards that are the labor into thinking that management has 'their best interests' in mind.  Need evidence?  Well, I'm to lazy to look up exact statistics, but I'm sure someone could dig up some data showing exactly how much of the U.S.A's industry has fled overseas in the past 50 or so years.  Why would they do this?  They do it so they can have a more pliant workforce willing to work for even less than American 'labor' has managed to wring out of them.  The general trend has been going away "Labor" towards "Management" for the past 80 years or longer.  And you'll notice the effects- people make less money now than they did 30 years ago (with wages adjusted for inflation anyway).  Well, not ALL people.  Some people make a million times what they did 30 years ago.  A few thousand of them anyway.  The average worker in the U.S.A. makes less money, works longer hours, and works more days per year than anyone else in the world except for Japan (at least if I remember correctly).  Why?  Well, for starters nobody in the U.S.A. gives a toejam about the average worker.  If the average worker could buy politicians like the corporations do, maybe someone would.  Until then I don't think anything is to terribly likely to happen.  

I'm all ABOUT unions.  I'd laugh until I diddlying cried if the unions suddenly had power to match the 'management'.  And no, to answer your unasked question, I don't give a toejam about how paying the "blue-collar" workers a living wage would tear the diddlying heart right out of the poor corporations 'profit margin'.  I think that money makes people happy.  I think that being paid a wage you can actually LIVE off of might make people give a toejam about their job performance.  And if that happened, you might end up with workers that are more profitable than slaves.

Offline beet1e

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« Reply #40 on: December 15, 2002, 05:33:25 AM »
Mr. Toad!  A very interesting post, and I read every word. I can’t help wondering that the bigger an organisation becomes, the more susceptible it becomes to being used as a cash cow, whether by unions, management, or the taxman.

In 1982, British Airways posted a £545m loss, but was able to turn that around and became for a while the world’s most profitable airline under Tom (later Lord) King. He was a Thatcher protégé, but later turned out to be a bit of a ***t. The airline became profitable by axing less popular routes, and by a dramatic slimming down of the workforce. At about that time, Richard Branson made a phone call to Britain’s CAA (Civil Aviation Authority, but known amongst private pilots as the Campaign Against Aviation) and said ”Hello, I’d like to start my own airline, please!” They were probably taken aback, but Branson went ahead anyway, and so was born Virgin Atlantic Airways. Of nine airlines that have flown me across the Atlantic, Virgin has been my favourite. Sorry, Toad. :D British Airways got into hot water with their infamous “dirty tricks” campaign. Virgin was not big enough to run their own mainframe computer, so they rented capacity on BA’s IBM mainframe.  Their business was run in a LPAR (logical partition) which is supposed to make it look like you have your own machine. But BA was able to spy on Virgin business, and formed the untidy habit of telephoning Virgin customers to offer a free upgrade onto a BA flight. Branson didn’t like that when he found out. He took BA to court in England and got about £600,000 in damages, but he didn’t stop there. Took ‘em to court in the US over other matters and I believe he got £15m. Cheapest crossing I got out of Virgin was £145 inc tax from London to New York (Newark) One good thing about BA was that they used Rolls Royce engines, and not those General Electric American pisspots. A baggage handler I knew that worked at O'Hare said he could HEAR the difference when a BA plane taxied up to the stand - the engines sounded much sweeter. Sorry, guys - couldn't resist!)

As for easyJet, Stelios decided to give the flying public what they wanted. They used to fly me every week from Luton to Nice – at a very reasonable price – sometimes as low as £49 one way (all taxes included), but more usually £69 or £79. So far as I know, they haven’t got into any silly price war with RyanAir – I don’t think they compete on routes. But BA got up to their dirty tricks again by forming the GO airline. I steadfastly refused to fly on GO, as it was designed as part of a cartel to put easyJet out of business by operating similar routes under similar terms, at prices below cost. That’s illegal, and I don’t know how they were able to get away with it. Besides, I have neither forgotten nor forgiven BA for making me sit for 12 hours with my body twisted with my knees pressed against the seat in front, and have avoided them at all costs ever since. Stelios ran a competition to estimate how much GO would lose in its first year. The figure was £22m.

As a passenger on easyJet, it seems that their formula for success is to cut out business and first, and to have their own reservations system – a non-ticketing airline. I book on the web. They operate only out of low cost airports like Luton, and never places like Heathrow. By operating only B737s it means that all their pilots can fly all their aircraft. And they need only one simulator, so there’s money saved there as well as money saved on space to accommodate it. (Mr. Toad – can you comment on the licence/rating issue for different variants of the same plane? Is a 737-300 rated pilot also rated to fly 737-800? Still only one sim needed? I ask because the –800 has entered service with the no-frills airlines.) The downside of a no-frills deal is that there is no refund if you don’t show up, and you can’t just “catch a later flight” if you miss your designated flight. But what the hey – you pays your money, and takes your choice.  I got a bit fed up with the tardiness of some EJ flights. The Friday evening Nice to Luton was often late. The aircraft in service would fly the route first thing in the morning, then do an afternooner to Amsterdam, then do the Nice flight again. Well they started operating that plane to Barcelona instead of AMS for the afternooner – a much longer distance – so the Nice flight at the end of the day was often late. The problem was that Boeing couldn’t seem to crank out enough B737s to keep up with the airline’s demands! But they’re OK now.

Richard Branson is a man of vision. I wish he would form his own political Party (Virgin Democrats?) and run for Prime Ministerial office, as I would vote for him. He has an interesting past – smoked a bit of naughty stuff, very nearly went down for selling records designated for export in British record shops, and was expelled from school – for shagging the headmaster’s daughter!  ROFL!!! As British politicians go with sleaze, Branson would fit right in – lol.

I’ll leave you with a pic I took on that Dublin trip – the statue of Molly Malone who sold cockles and muscles alive alive-O from her barrow, down streets broad and narrow. Although she appears to be doing her day job, she’s already dressed for her evening job – can you guess what THAT was?  ;)
« Last Edit: December 15, 2002, 05:41:47 AM by beet1e »

Offline Toad

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« Reply #41 on: December 15, 2002, 07:53:26 AM »
Beetle, Molly's dress is merely "marketing", showing that she indeed understood how to sell. I'll wager when she bent over to get your cockles and mussels "alive, alive-o" a few things did indeed spring to life. ;)
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!

Offline Toad

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« Reply #42 on: December 15, 2002, 08:03:54 AM »
Grun, the comparison is from a disreputable little outfit called the Massachusetts Institute of Technology Global Airline Industry Program. They cite as their " Source: Airline Business Magazine Top 100 Survey 1997)".

The site is here (knew I should have just linked it. And folks get on me for linking too much... saves time in the end):

THE AIRLINE INDUSTRY

If UAL cites a differing number I wouldn't be suprised. Statistics have a funny way of changing depending on who you ask. Still, if you want to take annual report numbers, I 'm sure we could look them all up for 1997. After all, Airline Business Magazine sounds like a Union rag, doesn't it?
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!

Offline Toad

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Cut Price Airlines: How DO they do it?
« Reply #43 on: December 15, 2002, 08:27:29 AM »
Quote
BEETLE:
(Mr. Toad – can you comment on the licence/rating issue for different variants of the same plane? Is a 737-300 rated pilot also rated to fly 737-800? Still only one sim needed? I ask because the –800 has entered service with the no-frills airlines.)



Beetle, I can only speak to FAA practices here in the US. Each country has it's own "aviation authority" that can decide "common category" domestically, although all seem to generally follow the FAA lead and certainly they abide by ICAO rules. (International Civil Aviation Organization).

Having one "type" of aircraft in your fleet saves an INCREDIBLE amount of money. You might call it "smart management". Pilot training and upgrade expense is minimized, it greatly simplifies scheduling planes and crews because any crew can fly any plane, it simplifies maintenance, it simplifies overhaul and parts inventory, it simplifies reservations and marketing.. I could go on, but you get the point.

Anyway, the "next generation" 737's like the 800 are a different "category" than the older ones. Bascially, the FAA drew the line at having "round dial" and EFIS aircraft as a "common category". Thus, the old 737's and the "new" 737's require different training and checkrides. No airline that I know of mixes pilots and categories although in the "old days" we could be "dual pool" at my airline and be qualified on two different categories at once. For example, one could be a DC-9 Captain and an L-1011 F/O at the same time. It was decided that this was a truly "bad idea" after not too long a time.

Everyone flies the domestic B757 and B767 as common category AFAIK. When introduced in our configuration, there were only 3 switches in the cockpit that were different or just in a different location. Procedures are nearly identical. So, mixing a wide body and a narrow body in the same category seems to work quite well.

As an interesting note, I understand Southwest got around the "round dial/EFIS" problem by having their EFIS computer display "round dials" that matched the old 737 fleet. Thus, they CAN fly newer 737's in the same category. Can you say "smart managment?"

They are limiting their operation a tiny bit by doing that, however. I understand they cannot fly Cat III approaches in that configuration. Still, it saves TONS of money for them and how often do you make a CAT III? I might have gotten 3 in the last year and two of those in Salt Lake. So if your system generally stays away from places like SLC you may happily give up CAT III for the common category savings.
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!

Offline Toad

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Cut Price Airlines: How DO they do it?
« Reply #44 on: December 15, 2002, 08:28:25 AM »
Grun, how you coming with that profit/loss comparison between traditional and "employee owned" airlines vis-a-vis each other and the industry average?
If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!