easyJet's Andrew McConnell was less than pleased with the outcome. "We are of course very disappointed by this news. It would appear that faceless bureaucrats in windowless offices have scuppered the dreams of many who wished to get married in the air."
But Virgin's reported recent financial success isn't as simple as just an increase in passengers. Virgin Atlantic locked in its fuel prices two years ago, meaning that the airline didn't have to deal with the steep rise in prices that occurred last year. And Virgin Atlantic, unlike most of its competitors, isn't publicly listed, meaning that it doesn't have to disclose detailed financial information. The Times' Ian King notes that Virgin released the numbers two months earlier than they did last year, which "raises the suspicion that their release has been timed not only to embarrass the old enemy but also to emphasize the airline’s strength to the trade at a time when the battle for corporate clients is more ferocious than ever."
While Virgin might be in a comparatively good spot right now, especially when viewed in light of British Airways' abysmal financial performance, they might not be able to keep it up for much longer. The transatlantic price war that Virgin is taking part in has started to take a toll on profits, and the state of the industry as a whole isn't solid (as Virgin's CEO has admitted). Check back in a couple of months - I'm sure that we'll see a much more subdued financial announcement from Virgin Atlantic then.
This is really serious - if the long-haul routes only account for less than 13% of sales but half of the losses, then something needs to be done. A couple of factors are at work here. One is that the planes that they're flying - the A330 and A340 - aren't flying full. SAS might consider upgrading its inflight service product (it really isn't anything special). Right now SAS offers a "low-cost" service for high prices; it should try to do the opposite. In other words, "we need to look at costs," as CEO Jansson said. That's difficult when Denmark, Norway and Sweden have some of the highest average wage rates in the world. Not to mention, SAS has a fleet that could be euphemistically labeled "diverse"; it needs to simplify. After all, how much sense does it make to fly the A321 next to the 737-800? (It should be pointed out that the MD-80 fleet will be gone by 2010.)
Another problem that Scandinavian faces is that there really isn't much originating and departing traffic at its main international hub in Copenhagen, which is similar to other European cities such as Madrid, Dublin, and Lisbon in that they're large enough to support non-stop service to a few international destinations, but not large enough to become a big international hub. London and Paris, on the other hand, have sufficient O&D traffic to ensure that they're successful international hubs. That said, SAS has the potential to transform Copenhagen into a relatively successful international hub. It might not be able to be anything on the scale of Lufthansa's Frankfurt or even KLM's Amsterdam, but it could promote Copenhagen as a less-congested way to connect from, say, North America to Asia. But a handful more of destinations from Copenhagen might be a good idea (right now Chicago, New York, Washington, Tokyo, Beijing, and Bangkok are the only long-haul routes flown from Copenhagen; Seattle is currently flown as well but will be dropped later this year).
And SAS should also consider flying a handful of international routes from Oslo, which it has neglected in terms of long-haul flights, and increase service from Stockholm (at present, only Chicago and Newark are served). They should probably be able to get enough traffic for some of these to justify point-to-point service.
Sound familiar? Well, Toledo is just halfway across the state from Columbus, the home of the infamous Skybus, which went bust less than a year after it started flying. And Skybus' famous limited $10 fares are awfully similar to JetAmerica's $9 fares, although only a certain number of seats (9 to 19) on a flight will be at that price.
So, will JetAmerica (sometimes spelled Jet America) survive? The concept of the ultra-low-fare carrier (where pretty much everything carries its own fee) hasn't really taken off in the US. Sure, carriers like Spirit and Allegiant have managed to make the model work, but these airlines fly mostly vacation travelers to and from Florida and Las Vegas. JetAmerica might suffer because Toledo certainly doesn't have a lot of originating and departing traffic - something that helped contribute to Skybus' demise.
Yet JetAmerica is also being heavily subsidized by some of the airports that it flies to; Melbourne, Florida, Toledo, Lansing and South Bend airports are all giving JetAmerica $1.4 million in grants for a year, not to mention $1.1 million in marketing help and $867,000 in waived fees. These subsidies can help the airline weather any spikes in oil prices, but at the moment, oil prices are relatively low (sky-high oil prices helped to take down Skybus). And CEO John Weikle claims that JetAmerica's goal is to make money along the same lines as Allegiant, by "stay[ing] away from the competition."
photo courtesy S7
0 comments:
Post a Comment