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American Airlines President on the Problem of the Infrequent Flyer


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Dennis Schaal, Skift - Oct 23, 2015 12:12 pm

 

 

Here’s a dirty little secret about American Airlines: President Scott Kirby says about 87 percent of its passengers fly once or less per year and that represents more than half of the airline’s revenue.

Kirby presented this statistic during American Airlines Group’s third quarter earnings call today in explaining why the airline matches the fares of what he called ultra low-cost carriers such as Spirit Airlines.

“If 50 percent of our customers [in terms of revenue] are up for grabs we can’t walk away from that side of the business,” Kirby said.

That’s why American will continue to match fares from Spirit, Frontier, Norwegian Air Shuttle, and Volaris and others, Kirby said, adding that Spirit is American’s number two competitor (behind Southwest) in Dallas, for example.

For these 87 percent of American’s “unique customers” who fly once or less per year, “travel is clearly a commodity,” Kirby said.

American, Kirby said, has new fare initiatives in the works for 2016 now that it completed its reservation system migration this week. American states that the migration had “no operational impact.”

The airline plans to “further disaggregate the [fare] product” in 2016 with low fares that have attributes that would enable American to directly compete with the low-cost carriers, Kirby said.

On the other hand, other new fare offerings in 2016 will target higher-end flyers “with a greater suite of attributes to give customers choice,” Kirby said.

Competition from low-cost carriers even impacts fares in drive markets where they don’t fly, such as in Greensboro, North Carolina, which is affected by discounting in Raleigh Durham, North Carolina, he said.

This fare competition “does affect a bigger piece of the pie,” Kirby said.

American will continue to match fares and be competitive while it is developing the new fares for cost-conscious and higher-end flyers, Kirby said.

In the interim, Kirby said, American will not walk away from competition with the likes of Delta, United, Frontier, and WestJet. “We are going to repeat and match their prices.”

http://skift.com/2015/10/23/american-airlines-president-on-the-problem-of-the-infrequent-flyer/

American to launch bare-bones airfare in 2016 to rival Spirit

Business | Fri Oct 23, 2015 3:37pm EDT
American Airlines Group Inc (AAL.O), the world's largest airline, on Friday said it will roll out bare-bones fares in 2016 to battle U.S. budget carriers, overshadowing a surge in its third-quarter profit.

American's stock fell nearly 1 percent.

American will match competitors' prices on any nonstop route, its president, Scott Kirby, said on an investor call.

The airline's move to sell cheap fares with more restrictions highlights how competition is intensifying between the largest U.S. airlines and low-cost rivals, such as Spirit Airlines Inc (SAVE.O) and Southwest Airlines Co (LUV.N).

Shares of Spirit, which has made its mark with ultra-low fares with heavy restrictions, fell more than 8 percent.

Some 87 percent of American's customers flew the airline just once last year, comprising more than 50 percent of revenue, according to Kirby. He said these are customers "for whom air travel is largely a commodity," meaning they will switch to a competitor if American charges more per ticket.

Sterne Agee CRT analyst Adam Hackel said American's vow to compete may have made investors jittery. He added that American may restrict the number of the cheapest fares it will roll out in 2016 so that some customers will buy higher-priced tickets.

Starting in 2014, Southwest and Spirit have ramped up service from two of American's hubs, Dallas and Chicago, at times exceeding demand and pushing down fares.

The budget phenomenon has mimicked competition in Europe, where low-cost airlines such as Ryanair Holdings PLC (RYA.I) now carry the most passengers.

Next year American will sell a larger array of tickets that are priced according to certain restrictions, Kirby said.

The company waited to make the change until retiring the brand and bookings site of subsidiary US Airways, which it did on Oct. 17.

For the third quarter, American reported earnings jumped 80 percent to $1.7 billion, on lower fuel prices. The results topped analyst estimates.

American said passenger revenue, as a percentage of capacity, will fall between 5 and 7 percent in the current quarter from a year ago. The measure fell 6.8 percent third quarter.

The company said it expects pre-tax profit margin between 12 and 14 percent in the fourth quarter, up from 10.6 percent a year earlier.

For 2016, American plans to grow service 2 to 3 percent.

(Reporting by Jeffrey Dastin in New York; Editing by Leslie Adler)

http://www.reuters.com/article/2015/10/23/us-american-airline-results-idUSKCN0SH16K20151023

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O pior não é isso , o pior para a AA é que boa parte do lucro dela vem do Doméstico ou do internacional "curto" (short hall)

 

Dificilmente você vai a Grand Cayman por menos de US$ 500 partindo de Miami. Mas você consegue ir a Bogota ou ao Brasil (!)

Mesma coisa por um voo LGA-DFW... raro pagar menos de US$ 700 por uma viagem de ida e volta.

 

DFW é onde a AA mais tem perdido receitas preciosas, e é de onde ela mais quer atacar as demais.

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50% do faturamento = 87% dos pax 50/87 = 0,57 (Y/non Freq. Flyer?)

50% do faturamento = 13% dos pax 50/13 = 3,85 (Premium/Freq. Flyer)

 

3,85/0,57 = 6,75 vezes o faturamento.

 

Será que não temos mercado premium no doméstico, ou as empresas não têm interesse em investir? B6, DL, etc tiveram aumento de faturamento após melhorarem seus produtos premium.

 

http://intransit.blogs.nytimes.com/2015/03/15/jetblue-mint-to-travel-to-caribbean-in-high-flying-style/?_r=0

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50% do faturamento = 87% dos pax 50/87 = 0,57 (Y/non Freq. Flyer?)

50% do faturamento = 13% dos pax 50/13 = 3,85 (Premium/Freq. Flyer)

 

3,85/0,57 = 6,75 vezes o faturamento.

 

Será que não temos mercado premium no doméstico, ou as empresas não têm interesse em investir? B6, DL, etc tiveram aumento de faturamento após melhorarem seus produtos premium.

 

http://intransit.blogs.nytimes.com/2015/03/15/jetblue-mint-to-travel-to-caribbean-in-high-flying-style/?_r=0

Caro AF085;

 

Concordo plenamente! Ainda mais se levarmos em conta estudos de comportamento do Brasileiro, chegaremos a conclusão do óbvio... Há mercado sim! Basta um pouco de ousadia e querer investir.

Brasileiro é um povo que prima pelo preço? Sim! Mas é, também, um povo que prima por "status". Estou convicto que há passageiros que pagariam mais por um assento/serviço de executiva num vôo nacional. Afinal é status!

 

Não precisa ser em rotas específicas. Façam a frota A32F com 8 assentos de business, e poderemos ver, logo logo, estudo para expandir a business de 8 para 12.

 

Não querem reduzir a oferta?! Uma maneira mais inteligente do que simplesmente cortar vôos. Invista na crise, e colha depois.

 

Abraço e bons vôos

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Caro AF085;

 

Concordo plenamente! Ainda mais se levarmos em conta estudos de comportamento do Brasileiro, chegaremos a conclusão do óbvio... Há mercado sim! Basta um pouco de ousadia e querer investir.

Brasileiro é um povo que prima pelo preço? Sim! Mas é, também, um povo que prima por "status". Estou convicto que há passageiros que pagariam mais por um assento/serviço de executiva num vôo nacional. Afinal é status!

 

Não precisa ser em rotas específicas. Façam a frota A32F com 8 assentos de business, e poderemos ver, logo logo, estudo para expandir a business de 8 para 12.

 

Não querem reduzir a oferta?! Uma maneira mais inteligente do que simplesmente cortar vôos. Invista na crise, e colha depois.

 

Abraço e bons vôos

 

Todo mundo sabe que é na crise que surgem as melhores oportunidades, porém no Brasil as empresas sempre tiveram medo de arriscar.

 

Uma business no doméstico certamente traria uma receita extra ao mesmo tempo que reduziria a oferta. Em suma tudo o que as empresas precisam nesse momento.

 

E realmente, conheço muita gente que daria um rim para viajar na business só pelo status.

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Não precisa nem ser uma Business no sentido geral, mas algo como Premium Economy.

 

Assentos 2+3, maior pitch, algumas amenidades como drink de boas vindas, desembarque prioritário, etc.

 

Para quem é Smiles Diamante não tem muitas vantagens, principalmente no desembarque e tem que enfrentar a muvuca de sair do vôo.

 

Com êxito, poderiam evoluir para 2+2.

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