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?
01:00:36 · John Collison, Scott Kirby, Ben Thompson
[01:00:36] S1: What else have you learned from Rainer? [01:00:38] S0: The guy's entertaining. Michael Allegiant's We [01:00:42] S2: would like [01:00:42] S1: to get him in the pub here. [01:00:44] S0: You got him here? [01:00:45] S1: No, no, I would like to. Yeah. You'll get a few more swear words when you get out of Michigan. Knows his business exceptionally well. He's very impressive CEO. But they're also like In N Out. They have avoided distraction where they're... [01:00:56] S0: He's disciplined. [01:00:57] S1: Always They get asked about transatlantic Disciplined's probably a better way. It doesn't work because you don't get the low cost advantage when you can't let the number of turns be high enough. You know, they get asked about WiFi in the planes, and it's like, guys, the flights are short. Just look at your phone for an hour or something. You don't need it on an hour long flight. He's disciplined. [01:01:12] S0: That's a better way of saying it. So getting outside, you have to be disciplined to be successful. And companies, you know, get stars in their eyes and they're not disciplined. [01:01:19] S1: What's the version of discipline for you? Because it's easy, like, United, guys are a huge global airline. Airline. You fly big aircraft. You fly small aircraft. You fly internationally. You fly domestically. And so it would be easy to want to do everything where it's like we're cost competitive, but we have great wine list. And so what is your version of
01:01:19 · John Collison, Scott Kirby, Ben Thompson
[01:01:19] S1: What's the version of discipline for you? Because it's easy, like, United, guys are a huge global airline. Airline. You fly big aircraft. You fly small aircraft. You fly internationally. You fly domestically. And so it would be easy to want to do everything where it's like we're cost competitive, but we have great wine list. And so what is your version of [01:01:34] S0: staying For an airline business, discipline is really about where you fly. The foundation, our product starts with You fly to make money. And fly places that make money. Like, every Like, time I go where [01:01:45] S2: are you less point to point in the domestic [01:01:48] S0: So we don't fly point to points. And like, I hear it all the time. In LA yesterday, when I do stuff at San Francisco tomorrow with employees, they're always asking, to fly, you know, new routes and point to point routes. Like, it won't work for us. [01:02:00] S1: We're airline that flies to our [01:02:01] S0: hubs. We fly to our hubs. That's our strength and a whole bunch of reasons that works. And we're not going to go try to fly point to point routes. [01:02:08] S1: But if you're not first, you're last. [01:02:09] S0: But if you're not first, you're last. And that's true in the airline business. And it's by market, like it's not overall. [01:02:15] S1: Yeah, yeah.
01:02:15 · John Collison, Scott Kirby, Ben Thompson
[01:02:15] S1: Yeah, yeah. [01:02:15] S0: But like, you know, people in Dallas ask me like, when are you not a player? Because we'd lose. You know, American has too much network depth. And if, you know, when they fly from Dallas to Los Angeles, 75% of the people on the airplane are connecting from other destinations. And if we're just flying to Dallas, we can't compete, like, because we don't have any connections. You know, we're competing for 25% of the market. It [01:02:34] S1: doesn't Does that then mean, like, the little decisions you make are, okay, should we fly from, is it Newark to Greenland? Like, that's a little decision. The big decision is, are we going to launch a beachhead and take a new hub? And how frequently do you make those decisions? [01:02:53] S2: Rarely. It was the last big hub up like Denver when you grew it hugely like [01:02:57] S0: We've But those were an existing hub that we chose to grow. [01:02:59] S1: JFK. [01:03:00] S0: In my thirty year career, I've closed three hubs and never opened a new one. It's a hard decision to do. It's very rare that that's... Lots of examples in the airline industry of that not working and almost none of that working in the post deregulation era. [01:03:22] S1: And so do you think it's basically impossible to launch a new hub these days? Is it like building a new airport? It just hasn't happened in the last fifty years?