ARROGANT AND TRUE...

I have all but written off the regional sector. My honest concern now is that the ULCC sector will get “crowded out” of any growth plans they may have. This is a VERY serious policy issue. These are INTENDED consequences by the Big 3, or at least 2. USG policies continuing to add costs to the ULCCs will result in fewer low fares, less competition and UNINTENDED consumer consequences.

In UA's 3rd quarter earnings call, #ScottKirby, UA CEO, spoke about the ULCCs and their operating model as “doomed” in the face of rising fuel and labor expenses that will make it impossible to offer the rock-bottom fares their customers expect. “Kirby calls the business model a Ponzi scheme, because it is predicated on growing 15-20% a year”.

#BenGoldstein for #AviationWeek asked for comment on Kirby's statement after listening to the #AirlinesConfidential podcast last week. Kirby concluded his thoughts on the prospects for the ULCCs: “There’s just no airline, including us, that’s going to be able to grow at 15-20% a year anymore.”

Goldstein asked THEE question in his article that appears this week and in Monday's #AviationDaily: Were those the words of an objective observer, or was it just an example of a legacy airline CEO taunting his low-cost competitors? My response: “Kirby’s quote is both arrogant and true.”

For me, the most arrogant and egregious action was taken by AA and then patterned at UA and DL - the decision to pay regional pilots ULCC rates of pay. RIGHT IN OUR FACE.

Never has a more perfect backdrop been present where management and pilot labor have been more aligned: one wants outsized pay rates and the other wants to concentrate labor in the hands of a few that could alter the competitive composition/balance of the industry. I hinted at a word a few posts ago, but I will stop at using it - collusion.

#ALPA has openly criticized management for abusing the use of CARES Act monies. Has anyone noticed that the volume on that subject has gone from 10 to 1? Those CARES Act monies protected balance sheets from reaching levels that could have had detrimental impacts on any number of carriers.

Now cash allows for "labor hoarding". With balance sheets intact, a new revenue generating era is present that I will refer to as "Capacity Discipline On Steroids". Remember how well the strategy of capacity discipline was understood/received last decade regarding consumers?

While I have been out there talking about the pilot shortage, never - this time around - have I suggested changing the 1500 number. There are better ways.

I am urging the USG to begin training skilled workers necessary to allow ALL sectors of the industry to grow, or face the prospect of diminished competition and continued higher fares. This game of skilled labor concentration could make consolidation look tame.

Just who is the prisoner in this iteration of the Prisoner's Dilemma?

More to come. Maybe time to write a book.

My views only.

#swelbar