Rservice ?
Airlines throughout the world are attempting to increase sales using a
wide variety of techniques, so I?ve ?bulletpointed? everything
interesting that I?ve found. But the basic techniques rotate around
three strategies:
? using the Internet to increase customer contact and provide new services
? using Frequent Flyer programs to retain the loyalty of those who fly the most
? in the case of profitable carriers such as Ryanair and Southwest,
increasing service or routes. Several of the major American carriers
are pursuing a similar strategy internationally through ?Open Skies?
agreements between governments. For example, just recently
Continental announced that it would initiate service to Beijing by
June ? and India before year-end. The article below summarizes the
international trend for U.S. carriers:
Newark Star-Ledger
?If you can't beat cheap airlines, fly where they don't: Overseas,?
(Todd, April 17, 2005)
http://www.nj.com/business/ledger/index.ssf?/base/business-9/111371357859810.xml
There?s an extensive Search strategy at the end of this answer, as
there are several sources of information like the Wall Street Journal
that are on the Internet but require access to specialized databases.
If you intend to build your knowledge base on this topic in the
future, it may make sense to track as many of the Frequent Flyer
programs as possible for new strategies and tactics.
Virtually all of the American and European airlines already offer a
mix of electronic promotions, including:
? Internet specials
? E-mail newsletters
? ?Last minute? travel specials
? A wide variety of co-promotions with rental car companies, credit
card companies and others. Only a few of the more-interesting ones
are mentioned below.
? Internet check-in and ticketing, invariably with mileage bonuses for
frequent fliers to push transactions to this more efficient delivery
system.
? ?Inter-line? e-tickets, introduced by Air Canada and United Airlines
5 years ago, are becoming common.
And virtually all of the carriers are working on schemes to provide
Internet/cellular/wireless capabilities in the air, with Lufthansa
offering FlyNet Internet services (using Boeing?s Connexion service)
for the past year. A good overview of the offerings from existing
carriers and new entrants like Boeing is in this TechNewsWorld
article, which predicts heavy impact of communications services in the
air during 2006:
TechNewsWorld
?Wireless Services Ready To Take to the Skies,? (Korzienowski, April 3, 2005)
http://www.technewsworld.com/story/wireless/41588.html
ALASKA AIRLINES
================
? Alaska has also made a guarantee to customers that they will find
the lowest fares available at Alaskaair.com. For the next month,
they?re also offering an additional $10 discount for booking via the
web:
http://www.alaskaair.com/as/www2/Promo/10offMyAlaskaAir.asp
American Airlines is making a similar ?low price? offer:
https://www.aa.com/content/utility/041105_Blockbuster_promo.jhtml
And it?s not surprising, as the cost of Internet transactions even
undercuts the traditional online services like Amadeus or Sabre,
according to this Australian newspaper:
Fairfax Digital
?Carrier sales plans set cat among pigeons,? (O'Neill, Oct. 19, 2004)
http://www.smh.com.au/articles/2004/10/18/1097951616995.html?oneclick=true
PhoCusWright, an industry research group, puts U.S. airlines sales of
tickets from their own websites at 61% and increasing slowly. Five
years ago, only Soutwest among the major U.S. carriers had an Internet
sales rate in excess of 35%. Increasingly the low-price guarantees,
cited above, are part of the offerings:
MSNBC
?Online travel giants still rule the roost,? (April 12, 2005)
http://www.msnbc.msn.com/id/7468606/
It?s important to note that Europe trails the U.S. in percentage of
online revenue generation, as indicated in this March analysis by
PhoCusWright. European direct sales are lower; Internet sales are
lower; and consolidation of travel sites is lower:
PhoCusWright
?German, European Online Travel Markets See Strong Growth, According
to New PhoCusWright Report,? (March 11, 2005)
http://www.phocuswright.com/press/releases.php
? The frustration of dealing with security lines with waits as long as
an hour has caused this Seattle-based carrier to set up a special
screening line ? with a $50 guarantee if its Frequent Fliers don?t
make it through in 5 minutes. The airline advertises the program
heavily on radio, including its position as a sponsor of Mariner?s
baseball broadcasts.
? Alaska?s also offering a free Blackberry personal digital assistant (PDA) for
round trip flights in March/April. The promotion is being run
jointly with Cingular Wireless:
http://www.alaskaair.com/www2/Promo/Registration/PromoEntry.asp?pid=AS0505
Alaska Airlines is not the only airline to offer a PDA. United
Airlines has a similar promotion with T-Mobile..
? Entertainment on in-flight video on demand services for $10 per
flight (free in first class):
http://www.alaskaair.com/as/www2/Flights/digEplayer.asp
? I?d heard the Alaska Airlines ads making fun of a fictional ?Sky
High Airlines? but didn?t know that they?d set up a website to poke
fun at the travel business until I started this research. It?s funny
(and extensive):
Alaska Airlines Parody
http://www.skyhighairlines.com/
? Though the appearance more than 2 decades ago of American?s
AAdvantage program really kicked off the creation of the customer
relations management (CRM) industry, CRM systems are still being
installed by some, with Alaska recently inking a deal with Seibel
Systems:
http://www.crm2day.com/news/crm/113519.php
? Recognize that cargo marketing is a specialty area of the airline
business. Alaskan businesses with fresh seafood will often charter
aircraft in high season to get fresh catches to marketplace. It
hasn?t escaped the attention of Alaska Airlines, which promotes its
services with the annual wild salmon run on the Copper River. The
arrival of Copper River salmon may not be as big a deal in the East,
but here in the Northwest it?s a bit akin to the arrival of Nouveau
Beaujolais each year, with restaurants featuring this fish widely:
http://www.alaskaair.com/www2/cargo/AS_QX_MarketingNews.asp
CONTINENTAL
============
Redeploy aircraft assets to the Pacific route, as previously noted:
Business Week
?The Tailwind Behind Continental,? (April 12, 2005)
http://www.businessweek.com/investor/content/apr2005/pi20050412_0203_pi008.htm
CSA
====
The Czech Republic?s state-run airline, CSA, plans to drive sales over
the Internet. Current only 5% of CSA?s tickets are sold over the
Internet, according to the Wall Street Journal. E-tickets are used
for 25 destinations.
The company plans to double the number of tickets sold over the
Internet to 1.2 billion koruna ($1 = CZK23). CSA carried 4.34 million
passengers in 2004, a record for it. By contrast, e-tickets are 20%
of China Airlines volume, with American Airlines saying that more than
90% of its travelers are on e-tickets.
DELTA AIRLINES
===============
Though researchers hate Internet ?affiliate? sites for all of the web
pages created with no value of their own (they often exist just to get
affiliate revenues from Amazon.com or pay-per-click schemes), at least
one airline has set up an affiliate program of its own. Affiliate
programs can be successful: there are tens of thousands of affiliates
for Amazon.com, e-Bay and travel companies like Travelnow.com. Here?s
what Delta pays web affiliates:
http://www.delta.com/prog_serv/affiliate_marketing/index.jsp
LUFTHANSA
=============
The company is licensing e-ticket software services to others,
announcing a deal this month to provide the services to Austrian
Airlines. The company actively markets its IT services ? as it does
ground services ? though the company has yet to spin the division off
like AMR did with its Sabre business:
Lufthansa Systems
http://konzern.lufthansa.com/en/html/ueber_uns/balance/zahlen_daten_fakten/systemsgruppe/
MEXICANA
==========
The company is converting its regional carrier, Aerocaribe, into a
low-cost carrier under the Click Mexicana name, starting with service
in July. The service will use 3 of the company?s F-100s for internal
service in Mexico, then expand the fleet to at least 10 aircraft.
NORTHWEST AIRLINES
====================
The use of the Internet has been such a boon to the airlines --
increasing customer contacts while reducing costs ? that it?s no
surprise that several carriers are giving away PDAs. Northwest has a
detailed menu of services available over PDA, WAP phones and even
pagers:
http://www.nwa.com/services/handheld/
RYANAIR
========
The European carrier said on April 13, 2005 that it would be basing 4
new Boeing 737 aircraft at Hamburg?s Luebeck Airport, which would
result in an increase of traffic there by up to 2 million passengers
in the first year. Ryanair is making the investment with Infratil, an
airport infrastructure company. Service will be between Glasgow?s
Prestwick and Germany. Ryanair has 5 aircraft based there, carrying
2.4 million passengers on 17 international routes, according to the
Wall Street Journal.
SOUTHWEST AIRLINES
=====================
* The airline continues to grow, with Aviation Week noting planned Q2
capacity growth of 13%; Q3 at 12% and 9% in Q4. Growth for the year
will be in the 10%-11% range.
* Southwest Airlines is setting up a code-share agreement with ATA
Holdings and estimates that it will generate $30-$50 million per year.
* Business Week did a fairly detailed analysis of Southwest?s
aggressive strategy at key hubs in February. The Business Week site
requires registration but articles for the past several months are
available at no charge:
Business Week
?Southwest: Dressed To Kill... Competitors,? (Feb. 21, 2005)
http://www.businessweek.com/@@dDNOYIcQojEXSxoA/magazine/content/05_08/b3921090_mz017.htm
UNITED AIRLINES
===============
United is touting a third class of seating with additional legroom,
calling it ?Economy Plus.? Clearly aimed at business travelers, the
seating is further forward and offers up to 5? (13 cm) more legroom:
http://www.mymileageplus.com/mmp/dynaHelpers.p_displayPromotion?a_offerId=20500&a_isrefVc2=main.newsofferdesc.mmp
OTHER ITEMS WORTH NOTE:
=========================
Interestingly, one of the fastest growing segments of air transport is
the fractional ownership segment, with Berkshire-Hathaway?s NetJet
being the dominant firm. It appears that business travel and
first-class passengers are being taken from the airlines by these
private business services, with Motley Fool claiming that 8% of first
class traffic was lost in 2002. Though airlines have responded with
premium services, such as Swissair?s business-only flights between New
York and Geneva, it is still an area that airlines haven?t countered
well:
Motley Fool
?Berkshire Hathaway
NJ Moat-Your Plane is Ready, Sir,? (July 3, 2003)
http://www.fool.com/community/pod/2003/030703.htm
Google search strategy:
Airlines technology marketing
Airlines marketing
Technology selling airlines
Also:
Airlines marketing Lufthansa (as an example)
For more recent (last 60 days), I also used Google News.
Specific search of the following publications: Wall Street Journal;
Forbes.com; New York Times; McGraw-Hill?s Aviation Week and its
Aviation Daily reports; and CIO.com; Business Week and Fortune
Magazine.
Search of the Thomson Financial Investext database of analysts? reports
Examination of Frequent Flyer programs on websites for AA.com,
United.com, Northwest.com, SWA.com, Lufthansa.com
I want to post this now to meet your deadline. However there's still
one source that's failing me this morning that I'd like to check.
Please let me know if updates posted before 5 p.m. EDT will reach you?
Best regards,
Omnivorous-GA |
Request for Answer Clarification by
rservice-ga
on
17 Apr 2005 11:36 PDT
Hi Omni, thanks for this. It looks excellent so far.
I will review it in more detail later, but yes, additional answers can
still reach me in time this evening, thank you for the extra work.
Are you able to discern any larger trends among this info? i.e. Is it
possible to group these into 3 or 4 simple categories, like "Guerilla
Marketing" and put stuff like the Alaska guarantee in there? It would
be great to present these as examples of a few high-level trends, as
opposed to a long series of unrelated examples.
|
Clarification of Answer by
omnivorous-ga
on
17 Apr 2005 13:11 PDT
Rservice --
The material that I want to take a look at is Investext and details of
what the analysts are saying about airline operations. They usually
have some very cogent comments, though I anticipate they'll be talking
about cost/seat mile and comparisons to Southwest for most carriers.
At any rate, I think the 3 major trends were highlighted at the top:
* exploiting the Internet. Those price guarantees, which as a
customer you think are minor, are instead a keystone in pushing more
revenue directly onto the web.
* using Frequent Flyer programs and CRM to optimize revenues per customer
* redeploying planes to more-profitable routes
You might break the "exploiting the Internet" into two areas --
selling tickets and selling value-added services. I was surprised how
critical the Internet is to doing several things:
1. eliminating the middlemen like travel websites and travel agents
2. increasing the direct customer contact
3. providing a much lower cost of customer support (reservations,
ticketing, check-in and flight tracking)
I was also surprised that I didn't find more on Frequent Flyer
programs, though we know that they're critical. That same population
uses more airline services, including the airline clubs (Admiral's
Club, etc.) It would be nice if I could find a good white paper
explaining CRM and Frequent Flyer programs but you often have to be
lucky (or willing to pay a consultant) to find those levels of
business details..
There's also a whole area of ancillary services that's important to
profitability of the corporation (Lufthansa's ground service and IT
businesses; AMR's Sabre operation; Alaska's freight business). One
item I noted in passing was that the U.S. Congress has so far refused
to allow the U.S. Postal Service to contract with foreign carriers for
U.S. mail. Not a huge chunk of business -- but critical in keeping
the revenues flowing.
Best regards,
Omnivorous-GA
|
Request for Answer Clarification by
rservice-ga
on
17 Apr 2005 13:21 PDT
Sounds good. I'm especially interested in any electronic "wow-factor"
ways of increasing sales that's relatively new. I.e. Virtual airplane
tours, or new functions at kiosks, or wireless, etc.
|
Clarification of Answer by
omnivorous-ga
on
17 Apr 2005 15:43 PDT
Rservice --
I haven't found a lot on new electronic delivery mechanisms -- at
least beyond the Internet services, which are key. One could
certainly anticipate that it would help the airlines to get those
Blackberry PDAs in the hands of their frequent fliers but there are so
many Internet-connected tools, at least in the U.S. market.
Some very interesting data turns up in analysts reports, though more
on the structure of the business than on marketing & technology.
First, we should note that the European Big 3 carriers -- Lufthansa,
Air France/KLM, and British Airways have been profitable. In the U.S.
only Southwest Airlines has been consistently profitable. Both sides
of the Atlantic are poised for consolidation (Lufthansa absorbing
Swissair in the last month; Alitalia headed for a likely buyout).
Several of these carriers have diversified businesses, particularly
Lufthansa, which has logistics, MRO, the Thomas Cook travel agency and
other businesses. Yet even in Europe, the major carriers are
anticipating increased competition from the LCCs or low-cost carriers,
as evidenced by comments from their CFO during the last earnings call.
In the U.S. there's strong emphasis on being competitive with
Southwest's cost structure. In fact, Smith Barney's September, 2004
survey of corporate travel managers said that 80% of them anticipate
increasing their purchases from the low-cost carriers like Southwest.
According to BB&T Capital Markets, Southwest is running a cost per
seat mile of 6.4 - 6.5 cents ($0.064) and revenues of 8.3 cents per
seat mile. The two are often abbreviated CASM and RASM. By contrast,
Alaska Air lost money last year even with its target cost of 7.25
cents per seat-mile.
---
The extent to which U.S. carriers are trying to push revenue growth
overseas is show by several data points:
* Calyon Securities said that the U.S.-China air revenues grew 36% in
2004, a great deal of it due to freight. They expect U.S.-China
direct flights to go from 50 to 250 per day in the next 5 years with
recent agreements.
* Northwest Airlines is yet another example of international travel
picking up the domestic over-capacity. In the first quarter the
company told analysts that it expected traffic growth of only 2-3% in
the U.S. but twice that growth on trans-Pacific routes and 10-11% on
trans-Atlantic routes.
---
There is some interesting material if developed on marketing
operations with the following Google search:
CRM + "frequent flyer"
Alaska Airlines terms its frequent flyer operation "one of its most
profitable" areas:
CommWeb
"CRM in Action" (Nov. 1, 2004)
http://www.commweb.com/howto/showArticle.jhtml?articleId=52200283&pgno=2
This is a classic McKenzie analysis, which I don't always find helpful
because they set up models that are obvious, but since it covers the
European carriers you may find it very useful:
American Marketing Association
"CRM in the Air"
http://www.marketingpower.com/content17912.php
---
The following is an excellent IATA presentation on Frequent Flyer
programs and the competitive position of Asia carriers in the market:
IATA
"Frequent Flyer Programs/CRM"
www.iata.org/NR/ContentConnector/CS2000/
Siteinterface/sites/whatwedo/tariffs/file/Global_Flight.ppt
---
A final note: technology marketing and market segmentation are
professional specializations of mine. If you come away from the BA
meeting with a specific focus on a technology, I'd be happy to work
with you again.
Best regards,
Omnivorous-GA
|
Request for Answer Clarification by
rservice-ga
on
18 Apr 2005 11:49 PDT
Hi Omni, I've just read through your work and it's excellent. Thank you.
Could you do me one quick favour? Could you repost the work organized
into the five categories you've identified:
1. Exploiting the Internet: Ticket Sales
2. Exploiting the Internet: Value-Added Services
3. Frequent Flyer Programs
4. Using CRM To optimize revenues per customer
5. Redeploying planes to more-profitable routes
|
Clarification of Answer by
omnivorous-ga
on
18 Apr 2005 12:25 PDT
Rservice --
Try the following. A couple of items didn't seem to fit into the five
categories well, so I've put them in a sixth category, "Other."
---
Airlines throughout the world are attempting to increase sales using a
wide variety of techniques, so I?ve ?bulletpointed? everything
interesting that I?ve found. But the basic techniques rotate around
three strategies:
? using the Internet to increase customer contact and provide new services
? using Frequent Flyer programs to retain the loyalty of those who fly the most
? in the case of profitable carriers such as Ryanair and Southwest,
increasing service or routes.
1. Exploiting the Internet: Ticket Sales
Virtually all of the American and European airlines already offer a
mix of electronic promotions, including:
? Internet specials
? E-mail newsletters
? ?Last minute? travel specials
? A wide variety of co-promotions with rental car companies, credit
card companies and others. Only a few of the more-interesting ones
are mentioned below.
? Internet check-in and ticketing, invariably with mileage bonuses for
frequent fliers to push transactions to this more efficient delivery
system.
? ?Inter-line? e-tickets, introduced by Air Canada and United Airlines
5 years ago, are becoming common.
Alaska has also made a guarantee to customers that they will find
the lowest fares available at Alaskaair.com. For the next month,
they?re also offering an additional $10 discount for booking via the
web:
http://www.alaskaair.com/as/www2/Promo/10offMyAlaskaAir.asp
American Airlines is making a similar ?low price? offer:
https://www.aa.com/content/utility/041105_Blockbuster_promo.jhtml
And it?s not surprising, as the cost of Internet transactions even
undercuts the traditional online services like Amadeus or Sabre,
according to this Australian newspaper:
Fairfax Digital
?Carrier sales plans set cat among pigeons,? (O'Neill, Oct. 19, 2004)
http://www.smh.com.au/articles/2004/10/18/1097951616995.html?oneclick=true
PhoCusWright, an industry research group, puts U.S. airlines sales of
tickets from their own websites at 61% and increasing slowly. Five
years ago, only Soutwest among the major U.S. carriers had an Internet
sales rate in excess of 35%. Increasingly the low-price guarantees,
cited above, are part of the offerings:
MSNBC
?Online travel giants still rule the roost,? (April 12, 2005)
http://www.msnbc.msn.com/id/7468606/
It?s important to note that Europe trails the U.S. in percentage of
online revenue generation, as indicated in this March analysis by
PhoCusWright. European direct sales are lower; Internet sales are
lower; and consolidation of travel sites is lower:
PhoCusWright
?German, European Online Travel Markets See Strong Growth, According
to New PhoCusWright Report,? (March 11, 2005)
http://www.phocuswright.com/press/releases.php
A case-in-point regarding the differences between the U.S. and
European markets is the Czech Republic?s state-run airline, CSA, plans
to drive sales over
the Internet. Current only 5% of CSA?s tickets are sold over the
Internet, according to the Wall Street Journal. E-tickets are used
for 25 destinations.
The company plans to double the number of tickets sold over the
Internet to 1.2 billion koruna ($1 = CZK23). CSA carried 4.34 million
passengers in 2004, a record for it. By contrast, e-tickets are 20%
of China Airlines volume, with American Airlines saying that more than
90% of its travelers are on e-tickets.
Though researchers hate Internet ?affiliate? sites for all of the web
pages created with no value of their own (they often exist just to get
affiliate revenues from Amazon.com or pay-per-click schemes), at least
one airline has set up an affiliate program of its own. Affiliate
programs can be successful: there are tens of thousands of affiliates
for Amazon.com, e-Bay and travel companies like Travelnow.com. Here?s
what Delta Airlines pays its web affiliates:
http://www.delta.com/prog_serv/affiliate_marketing/index.jsp
2. Exploiting the Internet: Value-Added Services
And virtually all of the carriers are working on schemes to provide
Internet/cellular/wireless capabilities in the air, with Lufthansa
offering FlyNet Internet services (using Boeing?s Connexion service)
for the past year. A good overview of the offerings from existing
carriers and new entrants like Boeing is in this TechNewsWorld
article, which predicts heavy impact of communications services in the
air during 2006:
TechNewsWorld
?Wireless Services Ready To Take to the Skies,? (Korzienowski, April 3, 2005)
http://www.technewsworld.com/story/wireless/41588.html
There are several examples of current in-flight premium services, including:
* Entertainment on in-flight video on demand services for $10 per
flight (free in first class) at Alaska Air Group:
http://www.alaskaair.com/as/www2/Flights/digEplayer.asp
*
And humor has its place in using the Internet: I?d heard the Alaska
Airlines ads making fun of a fictional ?Sky High Airlines? but didn?t
know that they?d set up a website to poke fun at the travel business
until I started this research. It?s funny
(and extensive):
Alaska Airlines Parody
http://www.skyhighairlines.com/
Lufthansa is taking the ?infrastructure? approach by licensing
e-ticket software services to others, announcing a deal this month to
provide the services to Austrian Airlines. The company actively
markets its IT services ? as it does
ground services ? though the company has yet to spin the division off
like AMR did with its Sabre business:
Lufthansa Systems
http://konzern.lufthansa.com/en/html/ueber_uns/balance/zahlen_daten_fakten/systemsgruppe/
The use of the Internet has been such a boon to the airlines --
increasing customer contacts while reducing costs ? that it?s no
surprise that several carriers are giving away PDAs, as noted in the
next section. Northwest has a detailed menu of services available
over PDA, WAP phones and even pagers:
http://www.nwa.com/services/handheld/
3. Frequent Flyer Programs
The frustration of dealing with security lines with waits as long as
an hour has caused Seattle-based Alaska Airlines to set up a special
screening line at its hubs ? with a $50 guarantee if its Frequent Fliers don?t
make it through in 5 minutes. The airline advertises the program
heavily on radio, including its position as a sponsor of Mariner?s
baseball broadcasts.
United is touting a third class of seating with additional legroom,
calling it ?Economy Plus.? Clearly aimed at business travelers, the
seating is further forward and offers up to 5? (13 cm) more legroom
but without the expense of 1st class:
http://www.mymileageplus.com/mmp/dynaHelpers.p_displayPromotion?a_offerId=20500&a_isrefVc2=main.newsofferdesc.mmp
Another program for frequent fliers is Alaska?s also offering a free
Blackberry personal digital assistant (PDA) for round trip flights in
March/April. The promotion is being run jointly with Cingular
Wireless:
http://www.alaskaair.com/www2/Promo/Registration/PromoEntry.asp?pid=AS0505
Alaska Airlines is not the only airline to offer a PDA. United
Airlines has a similar promotion with T-Mobile. These are just a step
away from being able to deliver services to customers in the terminal.
4. Using CRM To optimize revenues per customer
Though the appearance more than 2 decades ago of American?s
AAdvantage program really kicked off the creation of the customer
relations management (CRM) industry, CRM systems are still being
installed by some, with Alaska recently inking a deal with Seibel
Systems:
http://www.crm2day.com/news/crm/113519.php
Alaska Airlines terms its frequent flyer operation "one of its most
profitable" areas:
CommWeb
"CRM in Action" (Nov. 1, 2004)
http://www.commweb.com/howto/showArticle.jhtml?articleId=52200283&pgno=2
This is a classic McKenzie analysis, which I don't always find helpful
because they set up models that are obvious, but since it covers the
European carriers you may find it very useful:
American Marketing Association
"CRM in the Air"
http://www.marketingpower.com/content17912.php
The following is an excellent IATA presentation on Frequent Flyer
programs and the competitive position of Asia carriers in the market:
IATA
"Frequent Flyer Programs/CRM"
www.iata.org/NR/ContentConnector/CS2000/
Siteinterface/sites/whatwedo/tariffs/file/Global_Flight.ppt
5. Redeploying planes to more-profitable routes
Several of the major American carriers are pursuing a similar strategy
internationally through ?Open Skies? agreements between governments.
For example, just recently Continental announced that it would
initiate service to Beijing by June ? and India before year-end. The
article below summarizes the
international trend for U.S. carriers:
Newark Star-Ledger
?If you can't beat cheap airlines, fly where they don't: Overseas,?
(Todd, April 17, 2005)
http://www.nj.com/business/ledger/index.ssf?/base/business-9/111371357859810.xml
The extent to which U.S. carriers are trying to push revenue growth
overseas is show by several data points:
* Calyon Securities said that the U.S.-China air revenues grew 36% in
2004, a great deal of it due to freight. They expect U.S.-China
direct flights to go from 50 to 250 per day in the next 5 years with
recent agreements.
* Northwest Airlines is yet another example of international travel
picking up the domestic over-capacity. In the first quarter the
company told analysts that it expected traffic growth of only 2-3% in
the U.S. but twice that growth on trans-Pacific routes and 10-11% on
trans-Atlantic routes.
Ryanair, the European carrier, said on April 13, 2005 that it would be basing 4
new Boeing 737 aircraft at Hamburg?s Luebeck Airport, which would
result in an increase of traffic there by up to 2 million passengers
in the first year. Ryanair is making the investment with Infratil, an
airport infrastructure company. Service will be between Glasgow?s
Prestwick and Germany. Ryanair has 5 aircraft based there, carrying
2.4 million passengers on 17 international routes, according to the
Wall Street Journal.
Southwest Airlines continues to grow, with Aviation Week noting planned Q2
capacity growth of 13%; Q3 at 12% and 9% in Q4. Growth for the year
will be in the 10%-11% range.
* Southwest Airlines is setting up a code-share agreement with ATA
Holdings after purchasing the other carrier and estimates that it will
generate $30-$50 million per year.
* Business Week did a fairly detailed analysis of Southwest?s
aggressive strategy at key hubs in February. The Business Week site
requires registration but articles for the past several months are
available at no charge:
Business Week
?Southwest: Dressed To Kill... Competitors,? (Feb. 21, 2005)
http://www.businessweek.com/@@dDNOYIcQojEXSxoA/magazine/content/05_08/b3921090_mz017.htm
First, we should note that the European Big 3 carriers -- Lufthansa,
Air France/KLM, and British Airways have been profitable. In the U.S.
only Southwest Airlines has been consistently profitable. Both sides
of the Atlantic are poised for consolidation (Lufthansa absorbing
Swissair in the last month; Alitalia headed for a likely buyout).
Several of these carriers have diversified businesses, particularly
Lufthansa, which has logistics, MRO, the Thomas Cook travel agency and
other businesses. Yet even in Europe, the major carriers are
anticipating increased competition from the LCCs or low-cost carriers,
as evidenced by comments from their CFO during the last earnings call.
In the U.S. there's strong emphasis on being competitive with
Southwest's cost structure. In fact, Smith Barney's September, 2004
survey of corporate travel managers said that 80% of them anticipate
increasing their purchases from the low-cost carriers like Southwest.
According to BB&T Capital Markets, Southwest is running a cost per
seat mile of 6.4 - 6.5 cents ($0.064) and revenues of 8.3 cents per
seat mile. The two are often abbreviated CASM and RASM. By contrast,
Alaska Air lost money last year even with its target cost of 7.25
cents per seat-mile.
Continental is redeploying aircraft assets to the Pacific route, as
previously noted:
Business Week
?The Tailwind Behind Continental,? (April 12, 2005)
http://www.businessweek.com/investor/content/apr2005/pi20050412_0203_pi008.htm
At Mexicana the company is converting its regional carrier, Aerocaribe, into a
low-cost carrier under the Click Mexicana name, starting with service
in July. The service will use 3 of the company?s F-100s for internal
service in Mexico, then expand the fleet to at least 10 aircraft.
6. OTHER
? Recognize that cargo marketing is a specialty area of the airline
business. Alaskan businesses with fresh seafood will often charter
aircraft in high season to get fresh catches to marketplace. It
hasn?t escaped the attention of Alaska Airlines, which promotes its
services with the annual wild salmon run on the Copper River. The
arrival of Copper River salmon may not be as big a deal in the East,
but here in the Northwest it?s a bit akin to the arrival of Nouveau
Beaujolais each year, with restaurants featuring this fish widely:
http://www.alaskaair.com/www2/cargo/AS_QX_MarketingNews.asp
Interestingly, one of the fastest growing segments of air transport is
the fractional ownership segment, with Berkshire-Hathaway?s NetJet
being the dominant firm. It appears that business travel and
first-class passengers are being taken from the airlines by these
private business services, with Motley Fool claiming that 8% of first
class traffic was lost in 2002. Though airlines have responded with
premium services, such as Swissair?s business-only flights between New
York and Geneva, it is still an area that airlines haven?t countered
well:
Motley Fool
?Berkshire Hathaway
NJ Moat-Your Plane is Ready, Sir,? (July 3, 2003)
http://www.fool.com/community/pod/2003/030703.htm
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Request for Answer Clarification by
rservice-ga
on
18 Apr 2005 12:37 PDT
Great, thanks again!!!!!! :-)
|
Clarification of Answer by
omnivorous-ga
on
18 Apr 2005 13:08 PDT
Rservice --
Not a problem! And thanks so much for the extra sum.
Best regards,
Omnivorous-GA
|
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