00:55:07 · John Collison, Scott Kirby
[00:55:07] S1: Yes. [00:55:08] S0: And American was focused on the Sunbelt and they talked about it public, you know, Phoenix, Dallas, Miami, you know, more demand, leisure demand. That's what they're focused on. So they just didn't add back their schedules. And we didn't do anything special but because they did it, they lost gates to us. You have to have slots for, you know, because it's the only way to manage a limited resource. And they're mostly grandfathered, which it's probably fair, like, you know, if you're British Airways and you've invested billions of dollars in to build facilities and stuff, and then they say, oh, we're gonna say take them away and give them to someone else. [00:55:42] S1: But there's a balance here. You both want people to earn a return, and you want Schumpeterian destruction where British Airways should only be allowed to recoup so much investment, right?
00:55:42 · John Collison, Scott Kirby, Ben Thompson
[00:55:42] S1: But there's a balance here. You both want people to earn a return, and you want Schumpeterian destruction where British Airways should only be allowed to recoup so much investment, right? [00:55:52] S0: Yeah. I think the better answer is to change air traffic control and create more slots. Yeah. That's how you... You can create more slots with better air traffic control. And then you can allocate those in whatever way you see fit. But the other thing that's happened at all these big airports that have slot controls is the government entities that run the airports have made the cost so prohibitive that no low cost carriers can't afford to fly there. The New York airports are now $52 per passenger to fly at the New York airports. Spirit Airlines, before they liquidated, average price, average fare was $58 Like, you don't to be a rocket scientist to figure out if you're paying $52 out of 58 before you buy your fuel, before you buy your airplanes, before you pay your employees, before you do maintenance, that just mathematically doesn't work. The airport authorities and and the big airports in the country are up something like 70% of the expenses since pre COVID to today. Like, they've just priced low cost carriers out of the market. Well, you [00:56:53] S2: price low cost carriers out the market? [00:56:54] S0: We didn't price out like [00:56:55] S2: Well, the you the basic level and you sort of We made that. Of course, we're fine grain cutting We off of the
00:56:55 · Ben Thompson, Scott Kirby, John Collison
[00:56:55] S2: Well, the you the basic level and you sort of We made that. Of course, we're fine grain cutting We off of the [00:57:00] S0: stopped, the low cost carrier business model was predicated on having a price advantage. You know, being able to charge a lower price. We created a basic economy where we could profitable, and we up gauged airplanes so we could profitably be competitive on price most of the time. And, you know, if we're competitive on price, like there's no reason, you know, my joke was people may make the mistake of flying Spirit once, they're not going do it twice. [00:57:28] S1: Why did Spirit go bust? [00:57:30] S0: Because they weren't charging as much as their costs. Were not able [00:57:33] S1: That's to charge a little interesting. [00:57:34] S0: It's pretty simple. I mean, it was simple. Like they weren't able to charge enough. And look, what's happening [00:57:39] S1: Because of cost inflation, basically. [00:57:40] S0: Cost inflation, but there's a whole bunch of things. But fundamentally, what I think has happened to the low cost carriers, there's really one still low cost carrier, successful airline in the world. It's Ryanair. [00:57:52] S1: I was going to ask.
00:57:52 · John Collison, Scott Kirby, Ben Thompson
[00:57:52] S1: I was going to ask. [00:57:53] S0: The fundamental premise of a low cost carrier is fly to low cost airports. You know, Southwest, when they started flying here, they flew to Oakland, not San Francisco. San Francisco's too expensive. In LA, didn't fly to LAX. They flew to Burbankton, Ontario. LAX is too expensive. And Ryanair still does it. Ryanair doesn't fly to Heathrow. They don't fly to Charles And Gull. They fly to secondary airports because they're low cost. [00:58:15] S2: So all these companies have high [00:58:16] S0: speed GPS. In The US, every single one of them like abandoned that. You see the ego. And then they went to fly into, I mean it's, I don't know why. [00:58:26] S2: Well they run out of like customers, right? [00:58:28] S0: And they went into, you know, Chicago and Newark and San Francisco and like, back to the New Yorker, you can't charge $58 when you're paying the airport authority 52. You just can't.
00:58:28 · Scott Kirby, John Collison
[00:58:28] S0: And they went into, you know, Chicago and Newark and San Francisco and like, back to the New Yorker, you can't charge $58 when you're paying the airport authority 52. You just can't. [00:58:39] S1: Is it a chasing growth story? Like, I'm always very impressed by In N Out as a business because they don't chase growth. They famously do everything within a one day's drive to the refrigeration centers, and so, you know, they are refrigeration centers, So, they're only in kind of the California West type area. And they don't feel the desire to go crazy on the menu and like we have the salad this and we have the whatever that. It's because they keep the menu very narrow. And I feel like maybe if they're a public company, they were trying to chase growth and we're going to expand this way. And they just do the same thing exceptionally well with a cost advantage. Is the problem that as public companies maybe or as just like short term oriented companies, they had this good thing flying to Oakland and flying to the secondary airports and for whatever reason they just got distracted from it?
00:59:21 · Scott Kirby, John Collison
[00:59:21] S0: Yeah. I would actually say a little different than just chasing growth. I would say know who you are, know who you... What your strengths are, and stick to your knitting. Companies are not good at trying to be something they're not. And in the past, you know, this predated me, but all the big airlines, you know, American, Delta, Northwest, Continental, tried to go compete with Southwest by creating airlines within an airline that were gonna try to out Southwest Southwest. And in Europe, they still do it. And in Asia, they still do it. They try to out low cost carrier, low cost carrier. And they're terrible at it. And every single one of them is, but nobody does it well because that, and by the way, Southwest has now tried to be like us, and they're not going to be very good at that either. Yeah. Like, you've got to stick to the things that you're good at. We aren't going to ever go try to like Right. Compete with Allegiant Airlines and be a Allegiant Airlines because we'd be terrible. They're better at Allegiant. If they try to compete with us [01:00:13] S1: The low cost model works, you have to understand You [01:00:15] S0: stick to it. And you gotta accept that there's limitations. Like, you know, I'm not gonna be as big as United Airlines. I'm not gonna fly to Chicago O'Hare. Have a great Allegiant is an example. Allegiant Airlines, which you mostly applies to Vegas. They fall from small cities. They've done a great... They're one of the four airlines that's going be profitable this year. [01:00:36] S1: What else have you learned from Rainer?