DeltaMD11
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America West A318's-What's The Deal?

Mon Apr 28, 2003 4:10 am

Hey guys,
I was talking with a friend of mine today, and the issue of HP A318's was brought up. I was wondering, when are these birds slated for delivery, and also as to why their delivery was pushed back? I just checked the Order Book on Airbus.com and HP still has order in for 15 of the baby buses. I remember reading about the PW 6000's that the A318 is equipped with were posing a bit of a problem so I suspect that this may be the reason as to why all A318 deliveries have been pushed back. Can anyone add some insight?

Bryan
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777guy
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 4:21 am

I wonder if it has something to also do with the fact that they will be flown by mainline pilots as opposed to lower cost regional pilots flying planes similar in size.
 
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 4:28 am

I believe delivery was pushed back to 2006, after sept 11, and when they were granted the loan from the government, it was psuhed back, i belive.
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DeltaMD11
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 4:49 am

2006 seems a little far away. It is conceivable that they would push it back a year or two but 2006?

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mariner
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 5:19 am

Boeing 747-311 is correct.

It was part of America West's deal with the ATSB - that capital expenditure such as new aircraft, be deferred.

HP couldn't afford the planes at the time, and the ATSB felt that HP had enough debt for the foreseeable future. So the A318's were pushed back until 2006.

As part of this delayed delivery, HP decided to stay, for the moment, with the PW engine.

The PW engine has indeed been having problems, and it won't be "fixed' until about 2005.

Frontier was given the same opportunity by Airbus - to delay until the PW was ready, but they chose, like Air France, to go with the CFM engine instead.

So Frontier becomes the launch customer for the A318, with the first one due due in two or three months (July?).

cheers

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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 7:32 am

I really think that the America West A318 order is still in jeoparady though. With the Freedom Air CRJ-900s coming into the system soon it makes the A318s future gloom. If passengers and frequent fliers accept the aircraft on the routes that it will be flying, which are not too different from what the 737-200/A318 (will)fly then it seems somewhat silly to bring a new aircraft into the fleet with poorer economics and labor costs than the big CRJ. I'd be willing to bet that at some point HP will convert those 318s to 319s/320s instead. Especially if PW cannot get the kinks worked out of the 6000.
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 8:37 am

You may be right about the HP order for the A318, but for other reasons.

The economics of the RJ's are a matter of intense debate.

HP has already said that their RJ flights (America West Express) are unprofitable.

Their value is as feeders into the main network, from small cities that can't support a larger plane.

This value starts to go away as the RJ's get bigger - you might as well have a mainline plane with a lower CASM (costs per available seat mile).

For example, MESA's CASM is 14 cents a mile (using only RJ's). Frontier's CASM on the A319 is below 8 cents a mile.

Since the A318 has a similar (if anything a bit lower) CASM than the A319, then there are many routes where the smaller A318 makes more sense than the RJ.

The problem for both the A318 and the B717 is that they came on the market just when RJ's became the flavor of the time for airlines.

But at least one airline analyst on Wall Street published a paper, just this last week, saying that the boom times for RJ's are over.

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sllevin
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 8:54 am

For example, MESA's CASM is 14 cents a mile (using only RJ's). Frontier's CASM on the A319 is below 8 cents a mile.

Is this for Mesa in general, for specifically for Freedom and the CRJ-900's? I think the cost breakdown on the CRJ-900's operated by the non-union Freedom Airlines that will determine the direction HP takes on the smaller aircraft.

Also, an interesting comparison would be the cost differential between the A319 and the A318. If the 318 doesn't have significantly better operating ecomonmics (and thus has virtually the same costs as a 319 but with 20% fewer seats), that's going to pretty much dissuade HP and virtually anyone else from operating the 318 over the 319.

Steve
 
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 9:32 am

MESA:

The 14 cents was taken was taken from MESA's website, and the latest quarterly report. It is not broken down by airline.

However, Horizon, which flies RJ's, has a CASM of 16 cents (taken from their website). This is higher than MESA in part because of the Bombardier Q's in the Horizon fleet.

A318:

The present consensus is that the A318 CASM will be somewhere between 5% and 12% lower than the A319. I said "slightly lower" because I didn't have the figures to hand and I was giving the RJ the benefit of the doubt.

We can't know for sure until it flies paying passengers with a particular airline and that particular airline's cost structure.

What we do know is that Frontier confirmed it's order for the A318 after the prototype had flown, which suggests that the plane was living up to expectations. Because of the PW situation, Frontier had the opportunity to wait for the PW, convert to A319's or change to the CFM's. They chose the latter.

I follow HP's finances some, but not as closely as I follow Frontier.

The advantage for Frontier is that on a lower performing route they can switch from the A319 to the A318. Or they can do it on different days - high load days versus low load days.

For HP it's a different ball game. They are concentrating on getting through a difficult time and they are constrained by the terms of the deal with the ATSB from getting much - if anything - in the way of new aircraft.

This is another reason why they can go to MESA for the RJ's. They "get" aircraft at no capital cost.

Hopefully, by the time they need to make a final decision on the A318 (keep or convert to A319's, whatever), they'll be in much better financial shape and can concentrate on the future shape of their overall fleet.

In such a fleet, I've no idea if the A318 may or may not have a role.

cheers

mariner



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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 9:35 am

AIRBUS.COM? Doesn't work, how can you pull up orders?

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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 9:44 am

airbus.com works for me. There are presently 84 orders for the A318.

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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 11:23 am

Hmmmm... very interesting. I'd still like to see costs of the Freedom Air CRJs vs. the rest of the Mesa CRJ operation. It seems odd, though I will take your word, that even with the dirt cheap labor rates they get for RJ drivers the CASM would be so high.

I suppose HPs final decision would be based heavily on the operational experience of Frontier, seeing as they run similiar operations. If it works well for Frontier, America West would likely follow suit. Without a 737-200 replacement there would be a significant gap between the CRJ-900 and A319.
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 1:06 pm

Expressjet (Continental's regional) reported a CASM of 14.89 cents for their all Embraer fleet for the first quarter of the year. Utilization was about 7.25 hours; improving that not-so-great number should also improve CASM.
 
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 11:28 pm

DesertJets:

I was surprised by the figure myself. It first came up on a Yahoo! stock message board for HP (I don't own any HP stock, but I have a few shares in F9 - FRNT).

I'd always believed that the RJ costs must be way down, which was why airlines are flocking to them. Having been given the clue, I did my own research.

And I'm still surprised. The HP statement - that they are not profitable but feed "beyond" traffic into mainline - seems as good an explanation as I'm gong to get.

cheers

mariner

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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 11:38 pm

While labor costs are important a real key to CASM is stage length and hours of utilization.

Has anyone ever seen CASM by fleet type for a carrier such as NWA?

It would be interesting to compare the CASM of their DC9 fleet with average stage lengths of 400-500 miles and the CASM their A319 fleet with an average stage length of 1000 miles plus.

Anybody ever see a breakdown along these lines?
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RE: America West A318's-What's The Deal?

Mon Apr 28, 2003 11:40 pm

Both Frontier and Air France are probably pleased with the failure of the PW6000 - both already operate an all CFM A320 series fleet, as well as the obvious fleets of 737s.

Air France is a GE nazi thru and thru.

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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 12:51 am

Expressjet (Continental's regional) reported a CASM of 14.89 cents for their all Embraer fleet for the first quarter of the year.

That's why I'm interested in seeing Freedom's numbers -- given that they are flying larger airplanes with reportedly significantly lower salaries.

Steve
 
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 2:30 am

Since the A318 has a similar (if anything a bit lower) CASM than the A319, then there are many routes where the smaller A318 makes more sense than the RJ.

Actually, among the many reasons carriers have been cancelling A318 orders left and right is the fact that its CASM is actually significantly higher than the A319
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 4:13 am

ConcordeBoy:

It is true that a number of orders for the A318 have been converted to other Airbus types, such as the A319, but I suggest there are other factors at work.

"...its CASM is actually signficantly higher than the A319"

Flying for which airline? CASM is more airline specific than aircraft specific.

For example, a 319 flying for UAL has a significantly higher CASM than a 319 flying for Frontier.

CASM also changes all the time. Frontier's CASM has dropped by at least 2 cents since they started taking delivery of new aircraft (this would have been true if the new planes were Boeing or Airbus).

Of course, CASM can be projected. But then other things, such as intended route length come into play.

But my interest is not so much in the plane as the airline. Specifically, Frontier.

Frontier's management are much better at running an airline than I am. They've done the studies and believe that the plane's economics work. That's good enough for me, until and unless circumstances prove they were wrong.

If the A318 economics don't work for other airlines, hey, that's their business. There are plenty of other aircraft out there.

cheers

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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 4:42 am

mariner:

It only makes sense that a smaller airplane (less seats) will cost more per available seat mile than a larger airplane (more seats) with the same engines and close to the same weights. Do the math, there's no way in hell the A318 will have lower CASM than the A319 if all other cost factors remain the same.
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 5:09 am

Brons2:

I can only say that I have studied the A318 fairly intently, and the conclusions listed above about CASM are not mine, but those of people whose opinion I trust.

My only comment on your post would be that you say a "larger airplane" - implying, unless I'm being particularly dense, a plane that weighs more. This weight would, in itself, be an added cost not a reduced one.

Thus - I have also come across many, many comments claiming a perceived "weight problem" weight the A318, so I've put some effort into studying this.

There is a belief that the A318 is designed (perhaps because it is smaller) as a short range plane. This is not so. It has a similar range to the A319.

For short hops, the B717 wins hands down - but the B717 hasn't sold all that well, either.

As the stage length increases, the disparity goes away, until eventually it disappears - given that the B717 doesn't have the range of the A318.

Howsumever, I seem to be turning into an advocate of the A318, which is not my intention (althougn I do think it's a snazzy little thing).

My concern, again as I said above, is purely with Frontier. It ends right there. From past experience with F9's management, I trust them. I have listened to what they have said, and studied the information they've provided, and am satisfied they have made a decision that is right for them.

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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 8:17 am

Bottom line. The A318 is at a too short end of the spectrum with its legacy weight of the original structure and wing of the A320-319 to make a good economical airplane with a decent CASM with such a short fuselage. It may have a decent plane mile number, but the cost per seat is still going to be higher than its larger brethren. This is why the B717, which weighs 20,000 lbs less, is more competitive over the shorter stage lengths. The 717s main problem is the lack of commonality with other Boeing products. But the A318 is really the worst design that Airbus has come up with. This is why a number of airlines have been converting to the A319, which is a much more sensible airframe.
 
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 9:09 am

The things I see working against the A318 as compared to the A319 are the following:

1) requires same number of flight crew. Both a 318 and 319 will require 3 flight attendants as they have more than 100 and less than 150 passengers in virtually any configuration.

2) It weighs a mere 3,000 pounds less than an A319

3) It only has 85% of the seating capacity of a 319.

So how is this going to be CHEAPER to operate per seat mile than a 319? It won't be. It'll have a slightly lower net cost, of course, so for thinner routes it'll still yield a slight advantage, but much like the 737-600, it's going to be a niche aircraft.

Steve
 
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 9:31 am

You guys amaze me. I've seldom come across so many people anxious to kill an airliner.

In ascending order:

Silevin: At what point did I - or anyone - suggest it was going to the airplane for all seasons? So it's a niche aircraft. Some airlines need niche aircraft

Myself, I'd have been happy to see Frontier buy Yak 42's, if that's what they needed.

Kellmark: see my previous post. Yes, I agree, the B717 is better for the shorter routes.

But the A318 isn't designed for short hops. It is designed for long and lean.

Frontier has suggested they may use it it for the quieter days on, say, DEN/LGA - which the B717 cannot do.

And would you really want to do that route in a cigar tube RJ?

cheers

mariner

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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 10:08 am

Myself, I'd have been happy to see Frontier buy Yak 42's, if that's what they needed.

And would you really want to do that route in a cigar tube RJ?

If RJ's did the job, sure. Actually, I think you're the one promoting the 318 regardless of whether it's really the right answer  Smile

Steve
 
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 11:15 am

The problem is, as I see it, it that both America West and Frontier are intending to use the A318 as a 737-200 replacement. On a one-for-one basis it is probably not the best replacement. Shifting 737-300s or A319s or CRJ700/900s might be a better choice. But somehow I believe that the higher up at HP and F9 realize this and will put the premie-Bus on routes that would be appropriate for it. Certainly both have enough hot and high, or just really hot, medium to long haul flights that could justify multiple frequencies, but maybe not with the 319 or 329.

Though it still makes me wonder about the big CRJs. If their economics are so shitty, why is HP placing the CR7 and CR9 are major mainline routes like PHX-LAX.
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 11:17 am

Frontier has suggested they may use it it for the quieter days on, say, DEN/LGA - which the B717 cannot do.


Actually, DEN-LGA is only a tick over 1400nm, which the B717 should be able to do without an issue (assuming the HGW version).

I would agree that the 717 wouldn't make sense for Frontier, in most likelyhood.

Steve
 
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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 12:53 pm

silevin:

(i) I think you miss my point.Someone asked a question about he status of HP's A318 order, to which I gave a response.

It has developed into something more, during which I have said what I know about the A318 because Frontier, in which I have a small financial interest, has bought it.

The first one - N801FR - is to be delivered shortly. or, as Airbus calls it on their website, "the forthcoming delivery."

But my interest is only for Frontier. I really don't care what other airlines order, other than as a casual observer.

It is of minimal concern to me if, say, Virgin Atlantic buys any variant of the A340 as opposed to any variant of the 747. I shall continue to fly Virgin Atlantic. I would only raise an eyebrow if they bought the 777, because I prefer - my choice - a four engined plane on trans-ocean flights.

(ii) I do have a very, very tiny financial interest in Airtran as well. At the time that they launched their serive ATL/DEN, there was considerable speculation - not by me, on this board and others - as to whether or not the B717 would have the range especially during the summer, Denver's "hot and high" months.

Obviously, it does, or they wouldn't be flying it. But this does raise the issue that it might then have some bigger problems for DEN/LGA.

Going back to Frontier:

There is the matter of commonality (I hate that word) between the A318 and the A319, which would not exist between the A319 and the B717. Or any RJ.

To have the two types in the fleet would involve financial considerations which would not exist with the two Airbus aircraft, and these costs would have to be incorporated into the CASM. This is a big thing for a tiny airline like Frontier.

Again, as I said before, because of the problems with the PW engine, Frontier was given the opportunity to change or even cancel the order after the A318 had flown.

Because the aircraft had flown, Frontier then had access to the new data regarding the aircraft's performance.

Since I know that Frontier's management are not num-nuts, that they have considered all the well voiced provisos about the plane and still went ahead with the order speaks volumes to me.

As I have said before, if other airlines don't want the A318 - hey, that's grand.

If Frontier were to end up being the only airline in the world with the A318, that's fine by me, too.

As long as it makes sense for Frontier.

mariner



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RE: America West A318's-What's The Deal?

Tue Apr 29, 2003 1:25 pm

For those interested, as some appear to be, in weight, I just checked the GECAS website.

Gross taxi weight: A319 = 170,000lb. A318 =131,000lb.

Gross take off weight: A319 = 154,000lb. A318 = 130,000lb.

Maximum landing weight: A319 = 142,000lb. A318 = 123,000lb.

Operational empty weight: A319 = 92,000lb. A318 = 84,000lb.

Note: GECAS does not list the operational empty weight for the A318. This figure was taken from the aerospace-technology.com website.

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RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 4:58 am

Mariner-

I don't think you're comparing apples to apples, though. Your A319 numbers are for a longer-range version than for the shorter-range version. Airbus' own numbers give an operating empty weight of 84,600 lbs for the A318 vs. 88,400 lbs for the A319. By comparison, the operating empty weight of the high gross weight version of the 717-200 is only 68,500 lbs, and it carries a comparable number of passengers. And the OEW of the 737-600 is 80,200 lbs (83,000 lbs for the -700).

The problems with the A318 are just as Sllevin said. Pilot equivalence with the A319 means the same per-trip pilot cost for the A318, and the need for three flight attendants means the same per-trip cabin crew cost. And you'll still need the same number of gate agents and rampers. So for a very marginal decrease in fuel cost and depreciation/lease expense, you end up flying 15-20 fewer seats. CASM is substantially higher for the A318 than for the A319, likely on the order of 10-15% given near-equivalent direct operating costs.

I sort of wonder if Frontier received some sort of incentive to be the launch customer for the A318; after all, the America West order is questionable and the only other airline customer is Air France. It would look very bad for the project to have it be abandoned by another customer, and Airbus may have made it worth Frontier's while to take the A318's. And while F9's management isn't dumb, I don't believe their recent rapid expansion was well-advised, either, especially if a restructured United decides to go toe-to-toe with them at DEN.
 
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RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 6:03 am

I highly doubt that America West will take any A318's. I don't see the A318 as a good selling plane either.

Stephen
 
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RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 6:06 am

Scottb:

It's so odd that there is always an "out."

Even if I accept your figures (which I will do for the sake of the argument - my life is too short for this relentless war) then Silevin's 3000lb differential is short by at least 1000lbs.

And if Frontier did receive/has received a financial incentive to be the launch customer, I, with a financial interest in F9, can only cheer.

Ammortizing such a lower cost over the life of the plane is good, good news for Frontier - which, I have said until I am blue in the face, is my only concern.

But I thought this was about the A318. I'm not sure how F9's expansion, rapid or otherwise, fits into that picture. But if you want to discuss that, I will.

The expansion is not "recent". it was devised pre-April last year. And it was only in April '02 that the bottom fell out of the market. Prior to that, everyone (especially the majors) thoght the recovery was under way.

Since then, given the disaster for everyone that was the summer of 2002, F9 has pulled back somewhat on the expansion, as a good airline should.

Moreover, F9 and United have been toe-to-toe at DEN since F9's inception. How many times in past eight years have we been told that UAL will crush F9 like a gnat?

There is a strong argument to be made that UAL prefers FRNT at DEN than anyone else. If nothing else, "allowing" FRNT to continue at DEN keeps the DOJ off UAL's back. It's also true to say that during UAL's "summer of hell", UAL would have been in deep doo-doo without F9.

By 2004 F9 plans to have 45 planes in their fleet. This is great news for F9 shareholders, but compared to UAL's still massive fleet one can only say "big woo"!

UAL is thus absolutely aware of what F9's expansion plans are, and they can be figured into the equation. UAL has no idea what anyone else (a major) might do if they made a push into.

So in the end it may be a case of better the devil you know.

But we're wasting bandwidth. I will never convice the anti-A318's, and they will never convince me.

The first A318 - N801FR - will be here in a couple of months. I'm standing by, credit card in hand, to be on the first passenger flight.

cheers

mariner
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RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 7:05 am

Mariner-

If you're going to nitpick, the number is 800 lbs, not "at least" 1000 lbs. They're not my figures, they're Airbus', you may view them at:
A318: http://www.airbus.com/product/a318_specifications.asp
A319: http://www.airbus.com/product/a319_specifications.asp
(I really wish they would be explicit as to what the numbers in parentheses are.)

They may be able to amortize a lower acquisition cost over the life of the plane, but it's small consolation if the direct operating costs end up being relatively unattractive.

F9's expansion fits into the picture because you imply that surely their management wouldn't make an ill-advised decision regarding the A318. My point is that I don't think they're making great decisions. Their expansion increased capacity by 23% year-over-year in August 2002 (to make a pre-9/11 comparison) and yields are dramatically lower even compared to 4Q01 and 1Q02. Even with United's very public troubles, I think a more moderate expansion would have been a better choice; "recent" to me is having occurred within the last 12 months.

I agree that United would much rather have F9 in DEN than most of the other low-cost carriers -- simply because F9 still prices higher than most of the other low-cost carriers. F9's unrestricted DEN-BWI fare is $500; WN's unrestricted ABQ-BWI fare is $300.
 
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RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 9:53 am

Scottb:

(i) I don't think I'm the one who's nitpicking. I have made my point again and again, and people refuse to concede that point. Since that point is based on "my money, my choice", it's difficult to see where the argument is.

(ii) I am aware of the links you provided. For fairly obvious reasons I am a fairly frequent visitor to the Airbus site.

(iii) Even IF I acepted that the CASM will be higher (which I don't, but this thread is so far away from its original intent, whay the hey?), that CASM is still not going to be anywhere near, say, MESA's 14 cents for the RJ.

(iv) I do not say that Frontier is immune from making bad decisions about anything. I think they have made several decisions that are, in my opinion, ill-considered, including, but not limited to, the original agreement with MESA.

But, for the record, I tend to give them more credence than a lot of other people.

(v) Summer and post-summer of 2002, every airline (including SWA, but not, perhaps JetBlue because of a limited past) experienced declining yields.

(vi) The major expansion did not occur within the last twelve months. Yes, citites were added, notably but not limited to, the Mexican destiations, but some were dropped, including Boston and Saint Louis. Oakland goes next Sunday.

(vi) Hindsight is 20-20. If the airlines had known how bad the summer of 2002 was going to be, I think a number of them would have changed their plans.

(vii) Frontier has never been a true LCC, like, say SWA, but rather "always affordable". That is, cheaper than UAL out of Denver. This has been their strength - they have able to fly just under UAL's "threshold of pain".

Will they continue to do so? That's the future, who knows? The UAL "survival plan" seems to be fluid (other than the protection at all costs of the route network, but nothing else is written in granite).

IF UAL does start the LCC Starfish, then it's a different ballgame. It's the future, I cannot guess. We cannot know if UAL will be able to persuade their unions to fly at a cost which makes Starfish a genuine LCC. So far, the omens are not good.

Times change, almost daily these days. A week ago, most people put UAL's chances of survival as slim to none, with slim on his way out of the building.

Now, this week, according to several analysts, slim has come back into the building.

Times change. For two quarters post 9/11, Frontier was one of the few airlines to continue posting profits. The summer of 2002 hit them, and for three quarters they have posted fairly minor losses. Last month, part of the loss was due, in part, to the blizzard at DEN, which effectively shut the airline down for some three days. You can't make money if you ain't flying.

Times change. Bookings are on their way back up.

Times change. Frontier was able to persuade the ATSB that they would be able to repay the loan. UAL was not.

Under the terms of the ATSB backed loan, the first $10 million of any future government help would go to repay the capital of the guaranteed loan. Frontier is expected to receive about 15 million (it's been estimated at between $12 and $18 million, so I took the average). The first $10 million of this will go to the providing bank.

The end result is that Frontier will then owe the bank less than the ATSB has guaranteed. Would I rather FRNT had less debt? For sure. But they will have less debt than they did.

Times change. 18 months ago, Frontier's average fare was about $130. After summer 2002, this average dropped, hitting a low of $106 from memory, September 2002). That average fare is now, happily, on it's way back up. Within two months (assuming nothing else changes) the average fare will be similar to a year ago.

Are there some things I wish Frontier had done differently? For sure. I wish they would drop the $5 charge for the LiveTV. But they have done some things differently that I applaud. Such as installing the LiveTV.

On balance, and this is only my opinion, the "right" decisions far outweigh the "wrong" decisions.

You think Frontier's getting it wrong? Be my guest. I wish you nothing but joy of it.

cheers

mariner



aeternum nauta
 
ScottB
Posts: 5413
Joined: Fri Jul 28, 2000 1:25 am

RE: America West A318's-What's The Deal?

Wed Apr 30, 2003 2:12 pm

Mariner-

(i) Of course it is your choice as to where your money is spent. I don't think that was ever in dispute.

(iii) Even Airbus acknowledges that the CASM of the A318 is higher than that of the A319; the chart at http://www.airbus.com/product/a320_economics.asp shows this. The A318 has higher direct operating cost per seat (vertical axis) than the A319. The point relevant to the thread-starter is that down the road, even if America West were to have the financial wherewithal to accept the A318's it has on order, they may well choose to convert them to A319's due to the relatively unfavorable economics of the A318.

(v) It is NOT true that Southwest "experienced declining yields" post-summer of 2002. Check out their financials for 4Q02; their RPM yield *increased* 10.2% and average fare paid *increased* 9.1%. In the most recent quarter (1Q03), their yield increased 2.6% and average fare increased 3.2% year over year.

(vi) I'd call a capacity increase in August '02 of 20% over August '01 a major expansion. In the last 12 months, service was added to BOI, TPA, IND, RSW, OKC, TUS, ICT, OAK, CUN, and MZT (yes, I know they have discontinued STL, BOS, and OAK). That's still an increase of roughly 25% over the number of destinations 12 months ago, and there were six other cities added since February '02 (MSY, SMF, SJC, FLL, STL, ONT). F9 served 23 cities in September '01; they now serve 39 cities. Is that a minor expansion?

(vi-2) While many airlines increased capacity for summer of 2002, few increased ASM's at 20% or more (only AirTran, jetBlue, and Frontier as far as I am aware). Both AirTran and jetBlue had significantly higher load factors before expanding though. Southwest has been quite conservative in adding capacity over the last 19 months.

(vii) Agreed regarding Frontier's business strategy. The essential problem is that it doesn't work as well now that UAL's threshold of pain is much, much lower AND with UAL getting its costs down to a more competitive level. I'm not convinced that UAL needs Starfish to be competitive in Denver, given that F9's fare structure isn't as hard to compete with as Southwest's was for United Shuttle.

I actually believe that F9 posted profits for the two full quarters post 9/11 precisely because they were aggressive about reducing costs initially. My opinion is that all the capacity added has really pressured their yields -- and that's why they've reported losses for the last three quarters (and why they will for this one as well; that was anticipated even absent the blizzard). They actually did relatively well for average fares in September 2002 with an average fare of $111, the low of the last year was $104 in July 2002, though they came close to it in February 2003 at $105.

Less debt at FRNT is a good thing, especially given that the guaranteed loan does have to be paid back in a bit over four years. With new aircraft continuing to be delivered (with associated costs) they need to maintain liquidity.