The Brancatelli File at BizTraveLife.com

The Brancatelli File

joe

THEY ARE
THEIR RECORDS

BY JOE BRANCATELLI

February 7, 2002 -- Nestled as we are between last Sunday's Super Bowl and Friday's opening ceremonies of the Winter Olympics, we might as well briefly use the sports mindset to make the same old irrefutable point about the enfeebled airline industry.

It was the acerbic football coach Bill Parcells who once said, "You are your record." His point? That the self-deceptive chimera engulfing bad teams--coulda, shoulda, woulda--meant nothing. That excuses--injuries, tough luck, bad calls--meant nothing. That flukes of the game--the schedules, the bounces of the ball, the quirks of the weather--meant nothing.

A team, Parcells insisted, was its record. Period. All that mattered were the results. Winning teams had winning records and losing teams had losing records. A football team that went, say, 5-11 over a 16-game schedule, was a bad team. It had no right to suggest it coulda, woulda, shoulda been better. A team that won five games and lost eleven was, by definition, a 5-11 team. It was a bad team because the record said it was a bad team. Period.

Which conveniently wheels us right up to this chart of the 2001 earnings of the leading North American airlines. A business is its earnings. That is its record. And the record shows that the only airlines in North America to make money last year were one-class, low-fare, non-traditional carriers.

Can we at least agree on this point? The airlines are their records. In North America, Southwest and JetBlue and Frontier and WestJet made money in 2001. They won. And, for all their bluster and their arrogance and their insufferable insistence that they know better about what the market wants, American and United and Delta and Air Canada and all the "mainline" carriers lost. Period.

Lost spectacularly, in fact. The three largest U.S. carriers--American, United and Delta--lost a combined $5.1 billion last year. Air Canada, which controls 80 percent of the Canadian market, lost the equivalent of US$779 million. That All-Continent basket case, US Airways, lost $1.97 billion. In fact, no U.S. or Canadian "mainline" carrier made a profit last year. Not one.

This, fellow travelers and fellow businesspeople, is not rocket science. The market is speaking. It is screaming at the top of its metaphoric lungs. During the most dreadful year in the history of air travel, the carriers that offered a simple, defensible value proposition--understandable, affordable, walk-up fares and basic, uncomplicated air transportation--made money. The others, the "mainline" carriers with the phalanx of indecipherable fares and the largely inexplicable service proposition, drowned in red ink.

It is worth noting that the most profitable airline in North America, Southwest, earned $511 million last year. That marks 29 consecutive annual profits for Southwest. That covers all manner of economic reality: the last years of regulated air service and the first giddy years of deregulation; the Carter Recession and the Reagan Recovery; the waves of consolidation of the late 1980s; the Gulf War; the runaway economic prosperity of the 1990s; the dot-com/telecom meltdown, and even the horrors of September 11 and beyond.

Twenty-nine years of profit, and a reasonable, defensible, explicable approach to selling air travel to business and leisure travelers alike. During the same 29 years, I'm not sure even one "mainline" carrier generated 29 consecutive quarters of profit. Yet when you ask a smarter-than-thou executive of one of the "mainline" carriers about Southwest, his usual response is: Well, you know, we're not really in the same business as Southwest.

Apparently not, since Southwest is in the business to make a profit from selling air transportation.

And this just in… Despite almost $2 billion in losses last year, American Airlines, the big, predatory silver bird, has decided that JetBlue shall not be allowed to continue its basic, cheap, profitable transcontinental flights. So, as it has done with a host of other start-ups, American has declared economic jihad on JetBlue.

Next month, American launches head-to-head competition with JetBlue's New York/Kennedy-Oakland nonstops. In July, it will compete with JetBlue's Kennedy-Los Angeles/Ontario nonstop. No matter that JetBlue is only two years old and that American has flown transcontinental for two generations, but has never before deigned to fly to Oakland or Ontario. If JetBlue is flying it, American will drag out the bare-knuckles tactics and try to beat it to death.

American is matching JetBlue at every turn, including JetBlue's $299 walk-up, one-way fare between Kennedy and Oakland. But here's a not-so-oddity: Saunter across American's Kennedy terminal and fly American to San Francisco, which is 11.3 miles across the Bay as the jets fly, and you'll have to pay American's one-way, walk-up fare of $1,221.

Like all the "mainline" carriers, American is its record. And American's record right now is annual losses of $1.8 billion and charging customers either $299 or $1,221 for what is essentially the same flight to the same place.

That's why we, as business travelers and businesspeople, hate these preening phonies. The "mainline" airlines are their records--and they aren't even ashamed of it.

THE MARKET SPEAKS
AIRLINE	2001 Profit (Loss)
SOUTHWEST	$ 511,000,000
JETBLUE	$ 28,300,000a
FRONTIER	$ 23,800,000
WESTJET	$ 23,100,000b
AIRTRAN	$ 2,800,000
ALASKA	$ 39,500,000
CONTINENTAL	$ 95,000,000
AMERICA WEST	$ 147,000,000
NORTHWEST	$ 423,000,000
AIR CANADA	$ 779,200,000b
DELTA	$1,200,000,000
AMERICAN	$1,800,000,000
US AIRWAYS	$1,970,000,000
UNITED	$2,100,000,000
NOTES: Figures are for calendar year 2001 and are reported net profits, including all extraordinary items and post-9/11 government grants. (a) Nine months ended Sept. 30, 2001 (b) Converted from Canadian Dollars Source: listed airlines