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State of the Industry

Based on a couple of emails I’ve received from people, I thought I’d pass along a couple of thoughts on how I think this whole US Airways thing is going to play out:

First off, I completely disagree with Scott McCartney’s assertion in the WSJ yesterday (see link in yesterday’s post) that the loan stabilization board is so politicized that they would not allow US Airways to fail prior to the election. If anything, the board showed that it will NOT buckle to political pressure when it rebuffed House Speaker Dennis Hastert by denying United its loan application. On a side note, the loan board (ie, the government) will have to decide, essentially, whether to shut down US Airways. This is precisely the type of situation the government should not be in and why I’ve thought the loan process was a giant pile of crap from the time it was announced.

I don’t think Continental will go anywhere near LaGuardia even if they own the option on US Airways’ gates. They price Newark in many cases like it’s not a NY airport, avoiding direct pricing competition with JetBlue where possible. I can’t imagine United opening a hub at Midway and I can’t imagine AA opening a hub at Dallas Love, so I definitely can’t imagine what CO would gain from diverting traffic from Newark. That said, I could see JetBlue salivating over those gates at LaGuardia and Continental being interested in the cash in exchange for the gates.

I think everyone will stay far, far, far away from Philadelphia. Milwaukee was a great move because Midwest was faultering and nobody else was offering any service. SW is unpredictable and could enter any city at any time and is willing to spend money to make it work. Some lowfare carriers will come in and cherrypick routes because the majors need another hub like a hole in the head. That said, someone will come in and take the European routes from Philly because I’ve heard that the cargo alone on the route is worthwhile. I have no guess as to who that would be, though (ATA? it’s been threatening European flights in 2005).

I also have no idea who would buy the shuttle (JetBlue?). Interesting for the new Virgin America to buy that to establish a foothold on the east coast.

Charlotte is actually a hunk of garbage. It looks tempting b/c US has something like 84% of the business there. However, very little of that traffic is O&D—it’s mostly connecting traffic on the way someplace else. Nobody wants another hub. Oddly, I wouldn’t be surprised if ATA comes in there and grabs a couple of routes and if, of all people, Hooters Air takes some of the leisure routes. AirTran is another possibility.

Oh, and Delta will be bankrupt by the end of the year, which will probably be a good thing for them in the long run. Once they get their employee costs down (sucks for employees), they have a great route structure that will allow them to succeed longterm. Just not shortterm.

I’m definitely interested in people’s thoughts…keep the emails coming.

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  1. On CO at La Guardia: back in the go-go 90’s when LGA was unrestricted, CO
    started a lot of non-hub Express flights out of LGA. I think most – if not
    all – went away after the slot restrictions and 9/11. I think, in their
    dream world, CO would like to get all of USAir’s LGA slots and terminal,
    shut down the shuttle (let loyal fliers use the Delta shuttle to get miles),
    and use those slots for all sorts of point-to-point nonstops. EWR is pretty
    much tapped out for flights: the only new stuff they can add are squeezing
    in new international service. Here’s a link that points out CO’s main
    interest in the extended range ERJs was so they could use the short
    cross-runway at EWR (since the mains ones are full): http://www.ainonline.com/issues/12_02/12_02_expressjetpg72.html .
    CO already has a pretty attractive pitch to business
    travelers in Manhattan, but think what it could be with a lot of LGA
    flights: go to convenient LGA for your most common flights (primary business
    destinations), and only have to make the inconvenient trip across the river
    to EWR for more exotic or longer-range destinations. Also, every flight
    they can offer out of LGA could, in theory, open up a new slot at EWR to
    serve some new international or secondary domestic city desperate for NYC
    service. Of course, all connecting traffic would still go thru EWR, but a
    lot of the O&D traffic could get shifted to LGA (no CO LGA connecting hub –
    just O&D).

    I agree that JetBlue would love to get any LGA slots, and probably has the
    money to outbid CO in any straight auction, but I don’t know what kind of
    advantage the CO option on the USAir terminal gives them. If that lets them
    block JetBlue, I think they’ll do it.

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