Now, Air Berlin is a good one to talk about. They went into the US market by buying up LTU, but they’ve had very little if any growth. Here’s what they’re doing:

Ft Myers – Dusseldorf 1 or 2x a week in winter only
LAX – Dusseldorf 3x a week in the summer only
Miami – Berlin 2x a week in the winter only
Miami – Dusseldorf 2 or 3x a week in the winter, 6x a week in the summer
NYC – Dusseldorf daily in summer, less in shoulder periods
San Francisco – Dusseldorf 2x a week in the summer only

They’re trying out SFO this summer and Miami Berlin will be new in the winter, but that is not much growth if there really was opportunity.

A weekend trip from DCA can be feasible where a weekend trip from BWI or IAD is not, or it’s just better to drive in these markets. Many do.

3. Nice that you have faith. I am alleging otherwise – namely that US could rake in bucks if they tried something they haven’t before. I don’t have statistics because US stopped their $99 each way fares years ago. You know where I hear it? When the WN flight attendants make in-flight announcements to try and organize share cab rides into DC proper on morning flights. US used to fly 321s on the morning flight. Best I could see, it was close to full.

I’m not saying this contradicts your statements about the perimeter rule. What I am saying is that Hubert’s comments about many of the negative effects only apply if legacy carriers fail to exploit some of the natural advantages they have. The perimeter rule is (hopefully) an easy place to illustrate this.

Yes it is unfortunate about people perceptions about small planes. But that is the reality. Market based on that. This is new – make the move now.

H2 – is exactly what I’m getting after. The market may be mature, but that doesn’t mean that people don’t compromise what they want for a better fare. My assertion is that legacy drawdown is a cop out, especially when you have low costs.

Ok, so let’s forget Ryanair. What about Air Berlin? The already have ops here and get great reviews. Germany-US should be ripe after CO assimilation into Star.

Thanks –dave

1) That’s not true. There have been several times when Southwest could have gone into National. They just haven’t wanted to pay the price or, previously, it didn’t fit with their strategy. I’m not sure why this would make you in favor of perimeter rules. It just makes airlines fly to markets that are less than optimal. With a finite number of slots, wouldn’t you want them to use them where the biggest benefit lies?

2) Maybe I’m missing something, but I don’t see anything in here that contradicts my thoughts on perimeter rules. In fact, I’m not sure what this has to do with perimeter rules at all.

3) I have faith that US Airways is maximizing their revenue on National-Buffalo. They’re flying 2 50 seat jets and 1 A319 every day. I know that the National operation is profitable. If US Airways could make more profit flying A321s all day, then they would.

BTW, that’s unfortunate if the crash in Buffalo has pushed people away from small planes. It had nothing to do with small planes – it was pilot error.

H1) Sure, it would be fine to see it broken out by class, but it doesn’t change the fact that there was a tremendous change in the dynamic in 2004. Was it due to skyrocketing biz class fares? Maybe. But airlines can command higher fares when there aren’t other options.

H2) The general feeling is that the domestic US market is relatively mature. There may be incremental growth as traffic grows over time, but there are very few places where big growth is possible.

As for Ryanair, I asked him about that. His point was that Ryanair has been talking about it for years, and they still haven’t figured out a way to do it. You haven’t heard them talking about it much lately either, have you? Not really. They’ve been quiet. And other guys who have tried the low cost model over the Atlantic have failed, like flyGlobespan.

Excellent post. There’’s a lot going on here that you could dissect in subsequent posts if you wanted. I’m a little late to the party but wanted to offer a few points. I don’t expect one to agree with all of my positions, but I know I’m not alone and we spend money.

1. AIrline service is not a pure free market. If it were, WN would be all over DCA already. There are many constraints that the airlines cannot do much about, at least not on at a speed to respond to fluctuations in the market: slots (which I favor over ghastly delays trapped in a place), en route capacity, unilateral fee setting by airports, etc. Because it’s not a pure free market, I also favor things like perimeter rules for DCA and LGA.

2. With that in mind, I would be interested how you square your thinking in this post with that in your post of January 12, 2009 – “McCain wants you to to be able to fly from Washington/National and New York/LaGuardia from anywhere in the US.”

3. If USAir is in danger of going out of business due to pressure from a UA/CO merger, isn’t it time for them to change their thinking in order to survive? It’s not enough to just list under LCC. You have to think like one. What I’m on about is that I believe US is ceding traffic to WN without even a struggle. Example: DCA to BUF. SO many of us drive to BWI just to avoid the onerous pricing on this route. I’m not a huge fan of WN and I’d rather get Star miles, but US squanders their 3 slot pairs a day by using small planes and has pricing that drives all but the most dedicated (or affluent) away. BUF has had an epiphany about the smallest planes after CO 3407. It is also an extremely price-sensitive market on the Buffalo end due to local wages levels. Yet there are many of us emigrees in DC who make a good living and would gladly pay a reasonable premium to fly out of DCA over BWI – but not at the levels and restrictions and change fee levels that US charges. If US could get some sensible pricing in place, they could fill 3 A321s a day and put a genuine squeeze on WN. There are other markets which one could make similar arguments: DCA-MHT, PVD, ALB.

4. So what the heck does this have to do with Hubert’s thinking? Everything. I reject much of his argument because it seems to be based on the same old idea that legacy carriers will only do X, and LCCs will only do Y, even though is zing at the end says otherwise. These molds need to be broken. Specifically to his points:

H1 – Wouldn’t it be more convincing if the data was broken out by Y/C/F? The disparities across the Atlantic are much larger than domestically, so there are possible skews underneath that could be supporting a misleading summary. Back to my BUF example, I once flew to AMS for less than the going rate to BUF at the time (before genuine taxes and government fees). This is ridiculous – 4000 miles cheaper than 400?

H2 – OK so it’s against the current shrink-to-profit thinking that is so fashionable, but this argument ignores the possibility of legacies actually growing in markets, especially those with international feeder traffic.

H3 – Yes US thinks it has to merge. But I still contend that they are capable of growing domestically with or without a merger, especially if they can provide competition on more small routes with something larger than 50 seaters and consumers gain confidence about pilots on smaller aircraft thanks to regulatory improvements. For the consumer, some of this is economics, some of it is perception or psychology.

H4 – It seems a little early to make this statement about DL/NW, especially since CVG is still drawing down. I don’t think anyone will miss flying BUF to CLE on a 37 seater, especially when you can drive more quickly (except for maybe some of us geeks.) And if I can get to TXL on a 767 instead of a CO 757, I would gladly go through Newark.

Missing from Hubert’s case is any mention of, say, Ryanair joining the transatlantic set. You won’t see me on board, but if it helps keep costs low, I’m all for it.

Anyway, these are the thoughts of an amateur observer. I look forward to your insight.

1. SW operations in Denver and MDW sure look a lot like a hub, don’t they? It does seem that this becomes a natural evolution for the airlines as they mature.

2. Most LCCs start with young, junior employees. But as time goes on, their costs rise and start to approach the network carriers. The only ones that has bucked that trend, to a degree, is SW. Maybe one reason is that they for years kept their model simple and avoided all frills, but even they seem to be slowly getting more like the others, though they still don’t have first class or lounges. The other reason is their fuel hedges. Wonder if they don’t have the fuel hedges if they are all that different.