SunValley
Topic Author
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WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:09 am

Perhaps southwest is becoming more reactionary, and thinking a little more long term about their competition.
Interesting article about this.

http://www.dallasnews.com/sharedcontent/dallas/business/stories/102103dnbussouthwest.55876.html

Sounds like they are also going to be looking at smaller markets if they are
interested in aircraft such as this.
 
Sinlock
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:32 am

This sounds likely,
I wouldn't try to guess what aircraft they would pick but this is the kind of thing WN would do.
This way they can work their way into even smaller airports. All they need is an aircraft with an "airstair" so they aren't limited to airports with jetways.


(One Note, Can you put up a summery of the artical as is requiers a membership)
 
Udo
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:39 am

First IFE, now also a smaller aircraft type? WN goes the jetBlue way again. It seems the common success formula for LCCs (one type only) is to change in the future. And all those who say jetBlue's decision to go for smaller aircraft is wrong will have to think again.


Regards
Udo
Me & You & a Plane Named Blue...
 
elwood64151
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:44 am

Udo:

What about AirTran's decision to go with a larger aircraft type, the 73G? And AirTran's decision to operate JetConnect via AirWisconsin? It seems to me that the other two are following AirTran's lead.

Though admittedly, FL does not have IFE. That would be WN following B6. When was this announced?
Those who fail to learn history are doomed to repeat it in summer school.
 
Udo
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:54 am

AirTran offers two class service, plus they have the JetConnect deal with Air Wisconsin. And they have two types in their fleet already, B717 and DC-9 (which are quite different aircraft despite their similarity).
So the question remains if FL is a 'real' low cost carrier?


Regards
Udo
Me & You & a Plane Named Blue...
 
WMUPilot
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:54 am

How about ATA Operating large aircraft (753, 752, L-1011) and smaller aircraft (722, SF340B) Since the beginning? It seems that every other LCC is now seeing the advantages and following ATA's lead...ever think of it that way?
JetBlue - Bringing humanity back to air travel
 
motech722
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 1:01 am

Sinlock,

Here's the article for you...

Southwest may tweak strategy
Smaller planes, in-flight entertainment studied; profit tops forecasts

09:01 AM CDT on Tuesday, October 21, 2003

By ERIC TORBENSON / The Dallas Morning News

Southwest Airlines Co. reported another quarterly profit Monday under its tried-and-true business plan, but the Dallas-based carrier signaled that big strategy changes could be on the horizon.

The company earned $106 million, or 13 cents a share, for July, August and September, its 50th consecutive profitable quarter.

The total was more than double Southwest's third-quarter $50 million profit a year earlier, not counting a government grant, and topped analysts' expectations by a penny a share.

While the profit story remains the same, Southwest executives are considering significant tweaks to the company's longtime business model.

Southwest's often-studied model of using just one family of planes – the Boeing 737 – and offering friendly but rudimentary on-board service has been mimicked but never quite equaled.

The company is now "casually" studying the possibility of adding a smaller plane, said chief financial officer Gary Kelly.

Smaller jet


The chief suspect is Embraer's 190 series. JetBlue Airways Corp., a fast-growing New York-based rival of Southwest, ordered the Brazilian-built, 100-seat planes in bulk this year.
"We have looked at and declined on [flying] regional jets several times over the years," Mr. Kelly told analysts Tuesday in a conference call.

But, he added, Southwest could now use smaller planes in its smaller markets. "We're acknowledging that we're looking at it," he said.

Southwest also is studying whether to add in-flight entertainment, which until now has been limited to witty banter from flight attendants. Mr. Kelly wouldn't specify what was being considered, but said the options would appeal to business travelers.

Southwest is operating more long-haul and transcontinental flights that are well-suited to in-flight entertainment. Another motivating factor is competition from JetBlue, which offers in-seat satellite television.

Mr. Kelly knocked down a rumor – floated during an Oct. 6 aviation forecast conference – that Southwest was planning to start assigning seats. It isn't, he said.

But the carrier will continue to grow, Mr. Kelly said. Southwest will get 47 new planes in 2004, including five announced Monday.

By contrast, Southwest's fleet totaled 46 planes in 1983. The fleet currently totals 385 planes.

Southwest also will add one city to its network by year's end and has enough planes to add a second destination.

The carrier hasn't decided what it will do at St. Louis, where American Airlines Inc. is pulling half its capacity Nov. 1.

The issue there isn't passenger demand, but high airport costs, Mr. Kelly said.

Overall, Southwest operations will grow 7 percent next year and 11 percent in 2005, Mr. Kelly said. That pace – after a couple of years of growth near 4 percent – has some analysts warming to Southwest's shares.

"In our view, investors have paid less attention to Southwest than some of its low-fare peers because of the company's adherence to its basic operating principles and its very conservative nature," Gary Chase of Lehman Bros. said Monday in a note to investors.

"We expect that investors will begin to appreciate the relative stability that Southwest offers," he said.

But others, such as Jim Higgins of Credit Suisse First Boston, say Southwest shares are priced too high.

Investors seemed inclined to adopt Mr. Chase's view Monday, when Southwest shares climbed 59 cents to $18.99.

Labor costs


That's not to say Southwest doesn't have big challenges ahead, namely rising labor costs. Southwest's pilots are due for 13.6 percent wage increases next year.
"Southwest's pilots will emerge as industry wage leaders" if Delta Air Lines Inc. and Northwest Airlines Inc. persuade their pilots to accept lower wages in contract renegotiations, Jamie Baker, an analyst with J.P. Morgan Chase, said in a note to investors.

"Therein lies the problem with costs," he said. "If you can't beat 'em, try and grow out of 'em."

Southwest intends to counter the higher wages with productivity improvements.

"We're not going to run our business based on what the competition pays their people," Mr. Kelly said. "Our goal continues to be the low-cost producer."

Southwest will cut one of its larger costs by ending 5 percent commission payments to travel agents Dec. 15. Southwest is the last major carrier to drop the payments, and it expects the move will save it $40 million next year.

Travel agents once booked 53 percent of Southwest's tickets, but now account for 15 percent of sales. More than half of Southwest's customers now book through the Internet, the cheapest way to sell tickets.

The revenue side of Southwest's ledger looks "pretty good" going forward, Mr. Kelly said. Revenue rose nearly 12 percent year over year, and bookings for the upcoming holiday months are solid, he said.

The percentage of passengers paying Southwest's top fares – mostly business travelers – rose to 36 percent from 31 percent in the third quarter of 2002. That healthy increase helped fuel third-quarter earnings, Mr. Kelly said.

Overall, business travel is coming back, although slowly, he added.

Separately Monday, Standard & Poor's Ratings Services said it changed is long-term outlook on Southwest to "stable" from "negative" on the strength of its results.

http://www.dallasnews.com/sharedcontent/dallas/business/stories/102103dnbussouthwest.55876.html


 
SWAFA30
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 1:05 am

I was listening to the conference call when SWA CFO Gary Kelly released the 3Q financials when this question was asked. His response was that over the years SWA has "looked" at the 50 and 70 seater RJs when they came along and likewise they are doing the same with the 100 seaters. It was not news when this happened in the past because of the lack of the jetBlue factor. In the same breath Mr. Kelly reiterated SWA's dedication to the single model fleet and that this was not likely to change soon. Essentially the point was that it would be irresponsible to not examine every option available to help SWA maintain it's low cost advantage....but examination is a looonnng way from acquistion.
 
WMUPilot
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 1:54 am

Mr. Kelly is right on his point. It would be completly insane not to look at every aircraft out there and see if it may fit into your plan. The single fleet has worked outstandingly well for WN so that's why they are still with it. You always need to keep your options open in this industry. I'm sure in addition the the EMB190's they've looked at the 717, CRJ-700,900, A318...and countless others
JetBlue - Bringing humanity back to air travel
 
LastBaron
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:13 am

JetBlue is looking at the 190 in addition to its Airbus fleet, not as a replacement. This would enable them to provide economical service into many more cities they want to serve, and also to establish a profitable JFK-IAD link, which right now is out of the question using Airbuses. If WN is now considering this option, too, it is a case of copy-catting for sure.


AirTran is a smart outfit; if they are considering larger aircraft, it will certainly also be in addition to their 717 fleet, not as replacement. In some markets, they could certainly use more capacity. Their smarts are proven time and time again - the decision to sell business upgrades at check-in for $25/segment (now $50) was an industry first; the link-up with Air Wisconsin is brilliant. They also continuously have turned a profit since 9/11 (contrary to lore that WN was the only one). The link up with Ryan International to provide West Coast service may also be a reason for considering the bigger aircraft; while I am sure the Ryan link-up is not without its merits, they may want to bring that service in-house and expand/grow it. I wish AirTran served BTV along with JetBlue; it would make BTV a lot more lively.

 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:39 am

I'm selling my stock if this goes beyond the "consideration" stage.
 
gigneil
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:47 am

I'm selling my stock if this goes beyond the "consideration" stage.

Right, because you're intimately in tune with the goings on both of the stock market and at Southwest?

They know what they're doing.

N
 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:52 am

I don't know about that. JetBlue has already said that the EMB190 will increase their operating costs by 14%. A new aircraft type is going to impact the pilots chosen to fly them, and a "secondary" wage scale WILL be implemented. It'd happen at LUV, too. I've held SWA stock for a long time, and in this industry, increasing costs 14% can kill. It all sounds so good on paper, but in reality - it's going to make the adoptees of this "mixed fleet" pretty sorry investments.
 
777236ER
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:53 am

They know what they're doing.

Right, because you're intimately in tune with the goings on both of the stock market and at Southwest?
Your bone's got a little machine
 
planemaker
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 2:58 am

Goingboeing:

Keep your stock broker's number nearby - you just might have to sell sooner than you think. Big grin

In another thread (Emb 170 in STL) Pilotpip - who got an E170 demo flight, states that the E170 departed for Dallas yesterday. Why Dallas? American Eagle? Naw, Scope won't allow it. Hmmmm, maybe WN... Unfortunately, no airport is specified.

It will be interesting to hear from someone in Dallas if they spot the E170!
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 3:17 am

Hmmm...on another message board, there is a lot of heated discussion about AA/AE flying and the need for a 100 passenger jet.

And as I said earlier, there was a time where SWA was "considering" the DC9.

I'll hold my stock for now, but if they deviate from this conrnerstone of their business plan, then my stock is as good as sold.
 
planemaker
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:23 am

I admit that I know absolutely nothing about WN's future plans so what I say is pure speculation. However, having said that, I can understand WN "seriously" examining the possibility of getting 100 pax jets for the reasons that several people have already offered on this thread.

With regards to operating a second type increasing operating costs, that would have to be weighed against increased revenues. Obviously, JetBlue has done its calculations and they seem to think that it will not only work but be a great opportunity.

For the record, here are some out takes from an article that explains Neeleman's thinking on the logic of a two aircraft type fleet:

JetBlue Orders 100 Embraer 190s for Market Expansion
Aviation Week & Space Technology (06/16/2003, page 56)

JetBlue Airways plans an 11-hr. daily utilization rate for its Embraer 190s, which it will use in services to medium-size markets. "Typical regional jets didn't really fit into what we do, from an economic point of view. But the Embraer 190 had enough seats to create the economics possible to enter medium-sized markets."

The airline spent nine months studying the numbers, he said. In the end, the decision was "a no-brainer."

"Draw a 2,000-naut.-mi. circle [the range of the 190] around any city that has more than a half-million people, and the cities in the circle are candidates for JetBlue service," said Neeleman, adding, "They also can connect to each other"--which supports Boeing's 20-year forecast for increased point-to-point service.

The report said JetBlue saw opportunity in underserved markets where it could fill an aircraft with 80-100 passengers, but not necessarily 120--which sounded a positive note for the 70-100 market. It added the airline foresees a big market opportunity with the 190 at a 60-seat break-even point, versus 119 on the A320 at comparable fares and slightly less utilization rate per day. JetBlue's utilization rate for the A320 is 13 hr.

Mike Boyd of The Boyd Group airline consultancy pointed out New York JFK-based JetBlue would be able to use the aircraft in markets that Southwest and other carriers have not already "cherry-picked," for example, New York JFK to Akron, Ohio, or Wichita, Kan., or in markets where carriers such as Southwest would not venture.

The Embraer 190's operational costs, which Boyd says are 15-20% lower than those of the Boeing 737-600, are a plus. The aircraft has lower fuel burn and higher levels of passenger comfort but can carry essentially the same number of people in a much lighter airframe. It also has a large operating envelope, Boyd said.

However, pilot training costs would likely be higher, said Neeleman. He pointed out that pilots flying the 190 will be making less money than the A320 pilots. "It's airline economics. What we pay those pilots for the first 2-3 years they are working for us before upgrading to being a captain of an A320 will compensate for that training."

Pilots currently flying for JetBlue will stay with the A320 fleet "and will be an A320 captain before these planes even come," he said. "There will be a certain amount of fencing where [future] pilots will go to one aircraft type and stay there." A320 captains will receive the highest pay, followed by Embraer 190 captains. Pilots will have a one-time opportunity to transition permanently from one fleet type to the other. "We're not going to have bouncing back and forth," which adds cost and complexity

Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
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STT757
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:44 am

"Mike Boyd of The Boyd Group airline consultancy pointed out New York JFK-based JetBlue would be able to use the aircraft in markets that Southwest and other carriers have not already "cherry-picked," for example, New York JFK to Akron, Ohio"

Airtran already flies LGA-Akron with 717s 3-4 times daily.
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planemaker
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 5:25 am

According to Pilotpip - EMB 170 in STL:

"I don't know why, but it was going to Addison. It should be there a couple days. The captain thinks they were showing it to Southwest."
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
syncmaster
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 5:35 am

That article says they are looking at things to attract Business Travelers, would Connexion by Boeing be a good idea, maybe?
 
ConcordeBoy
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 5:57 am

I'm selling my stock if this goes beyond the "consideration" stage.

Actually Gigneil, he's in good company. A longstanding caveat for investing in airlines has been "Buy Southwest only, and when they purchase anything other than 737s... SELL!"


They know what they're doing.

One has to wonder... didn't PanAm, TWA, Eastern, Peoplexpress, Braniff, etc think that they knew what they were doing... for the most part?  Big grin

[Edited 2003-10-21 22:57:56]
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
gigneil
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 6:00 am

Nice use of italics ya old queer.


One has to wonder... didn't PanAm, TWA, Eastern, Peoplexpress, Braniff, etc think that they knew what they were doing... for the most part?


Sure they did... as they watched their finances bleed away and their stock valuation plummet to nothingness, I'm sure they had a circle jerk in the executive lounge to congratulate themselves on a job well done.

A longstanding caveat for investing in airlines has been "Buy Southwest only, and when they purchase anything other than 737s... SELL!"

Its not like they announced a purchase of a diverse fleet with capabilities to cover the globe. They'd like to serve some smaller markets. Good for them.

I bet they'll lease a few frames and give it a try, and if it fails return the planes to the lessor in small pieces.

Or they'll just do nothing at all.

N
 
CitationX
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 6:51 am

Not that I'm against SW buying the Embraer 170/190 series, but I am a bit concerned about the "monkey see - monkey do" reaction to JetBlue's latest fleet moves.

I know I am going to get flogged for writing this, but the jury is still out if JetBlue's purchase of the Embraer jets is going to help them, or run their costs out of control. Pioneering brand-new jets in a business plan which requires high daily fleet utilization is a risky deal. It usually takes a year or two for new jet operators to work dispatch reliability above the coveted, 99% goal. The A320 already met those reliability standards when JetBlue first purchased them, contributing much to their early success. But soon, with two types are in the fleet, maintenance and training costs will rise, just about the time JetBlue's first A320s come due for major maintenance overhauls.

Now SW is wanting to follow JetBlue's lead? I thought they already had a pretty good business model. Why change it now? Is JetBlue beating them head-to-head?

 
Okie
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:07 am

You can rest assured that WN has not made to many mistakes. As stated they have looked at many aircraft types and have not ordered another yet. I am sure if WN is truly interested then they will not jump on the 190 without some guarantee on costs. Then they will double pencil whip it for sure. I don't see them jumping on just because B6 made a move.

So the 170 is over at Addison, where are the reports from our DFW area A.netters.
 
L1011Fan
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:15 am

Boeing still claims that the 717 has the lowest costs in the 100-seat segment. Given the fact that I've read Boeing is practically giving away the 717's right now and that they have (again, according to Boeing) a lower operating cost than the 190, I hope that WN is considering the 717.
 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:17 am

CitationX - you're not alone in that assessment.
 
SWAFA30
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:18 am

Now SW is wanting to follow JetBlue's lead? I thought they already had a pretty good business model. Why change it now? Is JetBlue beating them head-to-head?

Should SWA decide to introduce a new model into the fleet it would be simply be because it made fiscal sense. SWA was has been "evaluating" smaller aircraft for years back when JetBlue was just a gleam in David Neelman's eye. By the end of next year SWA will have 398 737s...that is a serious cany commitment to a single model any deviation from that would have to be about more than just keeping up with the joneses...or in this case the jetblueses.
 
sllevin
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:44 am

A longstanding caveat for investing in airlines has been "Buy Southwest only, and when they purchase anything other than 737s... SELL!"

I do believe it was Warren Buffet who made that statement. And one could do worse than following his financial advice.  Smile

Steve
 
txagkuwait
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:55 am

GoingBoeing: I wouldn't sell just yet....

WN has used more than one aircraft type during their semi-illistrious history. The 727-200s weren't all that bad, although N406BN (better known as 'Salvage One') was an interesting aircraft, to say the least.

Here is my take on it.

The Embraer may be a good aircraft. It is shaped like a 737. It has 4 abreast seating. It holds 100. The original seating configuration on WN's 737-200s was only 112...and they later reduced that to 104 when they offered "Executive Class" service with free drinks on those high-priced $25 flights from Dallas to Houston.

I say "may" be a good aircraft. Aircraft manufacturers are real good at promising you the moon and 50 dollars. If the airplane does everything they say it will, and does it at the costs suggested by the manufacturer, and does it reliably without maintenance headaches...you might be foolish NOT to buy a bunch.

The 100 seat aircraft lets you do something in some markets that a 137 seat aircraft can't do as well---offer frequency. WN's stock in trade has always been to punish competitors not with pricing (although it worked out that way) but to kill them with frequency.

Despite American's AAdvantage program and their ownership of DFW and their much highly sought after (tongue-in-cheek) assigned seat, WN absolutely kills them on intra Texas routes and always has - becuase of sheer frequency. The biggest competitive advantage WN has is the ability for customers to go on out to the airport and expect to see an ugly plan headed towards their destination soon.

What I doubt seriously that you would see is WN be the launch customer for an aircraft like this, or buy some without a pretty good bumper-to-bumper (nose-to-tail?) warrantly. You would be very likely to see WN demand (and get) a bunch of airplanes in the same configuration as another carrier.

Remember, WN came very close to buying MD80s. When the 737-300 came out and USAir and WN were co-launch customers for it, WN found out that Boeing was offering US a better price on them. Needless to say, WN was unamused. They told Boeing to cut the price. Boeing said "no." WN called McDonnell Douglas and said "we might buy some MD80s from you, what sort of deal can you make us?" This was right after CrAAndAAll had ordered 175 of them at a rock-bottom price. McDonnell-Douglas told WN they would sell them the same AAirplane at the same price as American. Heckuva good deal, and WN came very close to taking it.

Until a bunch of Boeing sales folks tripped over each other trying to get to the phone, call WN, and cut the price of the 300s.

So, if WN does buy the Embraer, it would be to open up a smaller tier of potential markets, it would be based upon getting a good price for a good plane (they are going to wait and see how these things do, no Electras, please), and it would not represent a sea change in the business plan. The core business plan is based not on a single aircraft type, although it has paid great dividends over time. The core business plan is to offer air transportation to the mass market at a price which represents a fair value to the consumer.

If a different aircraft model enhances that plan, okay fine.
 
planemaker
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 10:18 am

TxAgKuwait:

A very reasoned, analytical post.

Re:"The Embraer may be a good aircraft. It is shaped like a 737. It has 4 abreast seating. It holds 100. The original seating configuration on WN's 737-200s was only 112...and they later reduced that to 104 when they offered "Executive Class" service with free drinks on those high-priced $25 flights from Dallas to Houston.

IMO, if WN would ever order the 190, from a pax comfort perspective the 190 would be preferred over the 737. I have been through the 170 a few times and the interior is really impressive: wider seats with no "dreaded" middle seats. For WN, due to the 4 abreat seating and wide aisle, turn arounds will be very fast (plus they have a rear pax door that could be used.)

Re:"What I doubt seriously that you would see is WN be the launch customer for an aircraft like this, or buy some without a pretty good bumper-to-bumper (nose-to-tail?) warrantly. You would be very likely to see WN demand (and get) a bunch of airplanes in the same configuration as another carrier."

If WN were to order the 190 they obviously wouldn't be the first as JetBlue and an undisclosed airline have already ordered the 190. As well, since the 170 (which will be going into service this year) has 89% commonality with the 190 most snags should be worked out by the time WN would receive any aircraft.

Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
DAL12
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 10:41 am

When B6 made their order, many people were threatening to "sell their stock" and quickly pointed out how JBLU quickly fell after the announcement. They felt this somehow "proved" their conventional wisdom and how the market agreed with them. Well, JBLU was hovering $40 then and is approaching $70/share now.

Clearly, this is not hurting B6, and the only thing most investors care about is earnings, not what Tech/Ops people care about. Can it potentially hurt future earnings? sure, but there are plenty of people betting otherwise. The bottom line is that this is uncharted territory for LCCs and no one really knows if it will work out as planned.

But one thing to keep in mind that if you sold B6 stock immediately after they made that announcement, you would have deeply, deeply regretted it.
 
Midway2AirTran
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 11:12 am

Well, when demand rises, so does the cost of a product. It appears now that orders are already starting to pour into the EMB-170-190 program which would certainly help to raise the price. Will WN want to bother with that when there will be other aircraft at a lower cost with similar efficiency?
"Life is short, but your delay in ATL is not."
 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 11:17 am

When B6 made their order, many people were threatening to "sell their stock" and quickly pointed out how JBLU quickly fell after the announcement. They felt this somehow "proved" their conventional wisdom and how the market agreed with them. Well, JBLU was hovering $40 then and is approaching $70/share now.

Of course, there is the minor technicality that they haven't begun operating any of the new jets yet...just made the decision to buy them. Let's wait and see what impact they have. Not to rain on your JetBlue parade, but they have a breakeven load factor of over 80%. They annouced plans to fly a "regional jet" (please withhold the "it's not an RJ" comments) that they admit will increase their costs by 14%. When these planes come on line, their early 320's will be coming in for C and D checks and out of "warranty". So what say we hold off until these new jets have begun "flying the line" before we start in with the "neener neener" posts.

Clearly, this is not hurting B6, and the only thing most investors care about is earnings, not what Tech/Ops people care about. Can it potentially hurt future earnings? sure, but there are plenty of people betting otherwise. The bottom line is that this is uncharted territory for LCCs and no one really knows if it will work out as planned.

You're quite correct, investors care about earnings, and Wall Street can be brutal. Look at what happens to a company who posts positive earnings, but earnings that miss analysts "estimates"...the stock can get pummelled in a hurry. And don't kid yourself...a lot of the folks buying at $70 a share are buying them from somebody who bought their shares at $35 a share. Indeed those buying are most certainly "gambling".

But one thing to keep in mind that if you sold B6 stock immediately after they made that announcement, you would have deeply, deeply regretted it.

Actually, when they first announced the new jet purchase, the stock price dipped pretty dramatically. Then, it went back up. Wall Street is very, very unpredictable and those concerns died out about the time the earnings reports come out. But again...watch Wall Streets reaction should these new jets come on line and the earnings report for that year are not as rosy as they were the year before. Wall Street shows no mercy.
 
DAL12
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 12:21 pm


Of course, there is the minor technicality that they haven't begun operating any of the new jets yet...just made the decision to buy them. Let's wait and see what impact they have. Not to rain on your JetBlue parade, but they have a breakeven load factor of over 80%. They annouced plans to fly a "regional jet" (please withhold the "it's not an RJ" comments) that they admit will increase their costs by 14%. When these planes come on line, their early 320's will be coming in for C and D checks and out of "warranty". So what say we hold off until these new jets have begun "flying the line" before we start in with the "neener neener" posts.


No doubt. And I never said that JetBlue proved anything with their order yet. The point is that if you are so trigger happy that you will want to sell a stock immediately after they buy another type, you would have lost out on over 70% gains in one example.

And of course there is no proof that adding a smaller type will hurt or help a LCC. Perhaps Southwest is being so casual about their process because they want to see how JetBlue does with it. There is no question that fleet commonality is a big part of the winning LCC formula, but so is frequency. A smaller type can hurt in one aspect and help in the other. Furthermore, the 190 has the unique feature of not really compromising in comfort.

And for another example, WN will be looking at Airtran, which is also adding another type. Frankly, I don't see Airtran or JetBlue being anything but extremely successful for the forseable future. Both will be major LCC breathren that will be flying 100 seaters with an additional type. I think there is definitely room for these planes in the 100 seat range for low-cost carriers.
 
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RayChuang
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 1:33 pm

I really think what WN is pushing Boeing to do is to build a lower-MTOW version of the 737-600 tailored to WN's needs. And I think the prospect of Boeing selling 80 to 100 low-MTOW 736's to WN may just get Boeing to do it.
 
sccutler
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 1:41 pm

I believe I shall head out to ADS tomorrow and check out this mythical bird for myself.

Film at 11.
...three miles from BRONS, clear for the ILS one five approach...
 
planemaker
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:06 pm

Goingboeing:

Re:"Not to rain on your JetBlue parade, but they have a breakeven load factor of over 80%."

According to an AW&ST article the break-even point is 60%:

"The report said JetBlue saw opportunity in underserved markets where it could fill an aircraft with 80-100 passengers, but not necessarily 120. It added the airline foresees a big market opportunity with the 190 at a 60-seat break-even point, versus 119 on the A320 at comparable fares and slightly less utilization rate per day."

Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
cloudy
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:27 pm

This almost certainly will not happen until WN expansion opportunities in new markets and in new, long-haul routes dries up. If it becomes impossible to expand profitably at more than than 5-6 or so a year on the average, they may get a smaller aircraft o enter international markets,

WN can profitably grow at its historical rate or a bit less for least 6-7 years and probably more. They would want to plan ahead, so if they were to do something this radical(for them) the orders wouldn't start for at least 4-5 years.

An analogy -

Your car can go as fast on a two lane country road as on a freeway. But it is not as safe, you have to slow down more often, and other people are in your way more often. Country roads are more interesting and they get you there. But if you have a choice, you take the freeway. Southwest's current business model is the freeway. They will take it as far as they can before they are forced to go beyond it.
 
717fan
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:37 pm

According to some news reports WN is also looking at the 717....
 
pilotpip
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 4:56 pm

Something else to think about...

While there are some people that have reservations about using this aircraft, it would still be cheaper to operate with 50 people on board than a 737 with 50 people on board. It has range and can operate out of smaller runways. Southwest is trying to take some business away from AA and has added flights to city pairs that AA has dropped. This would be a good chance for them(or Jet Blue) to add smaller cities that would be profitable but less practical for the bigger aircraft to fly to. This aircraft would also fit a market like STL like a glove. A regional 'hub' that had reach to any city in the continent.

Southwest will do their math before making any decisions. The fact is that Boeing and Airbus have been too busy squabbling over big jets to realize that the shift to smaller aircraft for the domestic market has happened. When they finally realized that there was a market for a 100 seater, they slapped together overweight versions of what they already had. Look at how well the A318 and 736 are doing. Embraer is the only company to really tap this potential niche between the current RJs, and the mainline carriers and I think it's going to work out in their favor. Smaller planes that cost less, can fly farther more often carrying more people. Perfect for the hub and spoke enviornment.
DMI
 
goingboeing
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 7:44 pm

According to an AW&ST article the break-even point is 60%:

Those are "estimates". I remember the term "fuzzy math" - that's what I think they've got going here. NOthing against the plane or the airline, but it appears that they are looking at one thing and not the whole picture. What impact will the increased maintenance costs, the 14% increase in operating costs, and the other "unknowns" facing JetBlue (or SWA for that matter - a second fleet type would kill the esprit in the pilot groups, IMHO). And that 60% was for that "unproven" plane only...they still have an 80+% break even load factor on the 320's.

As far as the stock price - I can only say "A bird in the hand is worth 2 in the bush". That increase in stock price was over a period of a few months. I remember when Lexmark announced earnings that didn't meet analysts expectations, and the stock price plummeted almost 70% before the closing bell...less than a day. IMHO, that's a risk of JetBlue reporting earnings that fail to meet "expectations" holds.
 
Jeff G
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 9:18 pm

Those are "estimates". I remember the term "fuzzy math" - that's what I think they've got going here. NOthing against the plane or the airline, but it appears that they are looking at one thing and not the whole picture. What impact will the increased maintenance costs, the 14% increase in operating costs, and the other "unknowns" facing JetBlue (or SWA for that matter - a second fleet type would kill the esprit in the pilot groups, IMHO). And that 60% was for that "unproven" plane only...they still have an 80+% break even load factor on the 320's.

Just a couple of quick comments. The 14% increase in operating costs isn't a 14% overall increase, but a 14% unit cost increase of the EMB-190 over the A320. It doesn't mean that the company's cost will increase by 14% or even that the average unit cost will go up by that much. It will just cost more to operate the EMB-190 on a per seat basis, which is what you'd expect.

Also, I'm not sure where you got that 80% breakeven load factor figure, but it's incorrect. You might be confusing it with another figure. JB's system load factor is in the low to mid 80's, so if breakeven load was 80%, that's like saying JB makes little or no money. Looking back over the operating history of the company, BELF varies from a high in the high 80's in early 2000 (the startup period when JB wasn't yet making a profit) to a low of 68.8% in 1Q 2002, with the rest uniformly in the low to mid 70's depending on season and 9/11. This is consistent with the double digit operating margins you've been seeing.
 
SunValley
Topic Author
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RE: WN Considering Another A/C Type-the EMB190

Wed Oct 22, 2003 9:31 pm

In reading into the article, the choice of the EMB190 is purley speculative, as the writer simply put that it was the chief suspect/
I don't think that Boeing would sit by with hands in pockets and not offer WN a very very attractive package on 717's if they actually are looking at a 100
seater. Believe me WN, will weigh all options, and I'm certain that if they are
truly considering a smaller aircraft they have poured over the operating statistics of AirTrans 717's. (Many times a companies best marketing tool is to place mis-information in the market place for reactionary action on behlaf of their competition & WN may be doing this) Additionally, the EMB190
has no operating stats, and as we all know whenever a new aircraft is introduced, the first carrier opeating it is the "guinea pig" so to speak, and
the dispatch reliability is scrutinized the world over.
 
CitationX
Posts: 122
Joined: Wed Sep 17, 2003 10:18 am

RE: WN Considering Another A/C Type-the EMB190

Thu Oct 23, 2003 12:22 am

Here is a story on Aviation Daily's website concerning WN's near-term plans:

http://www.aviationnow.com/avnow/news/channel_aviationdaily_story.jsp?id=news/pos10213.xml
 
cloudy
Posts: 1613
Joined: Sat Apr 06, 2002 3:23 pm

RE: WN Considering Another A/C Type-the EMB190

Thu Oct 23, 2003 6:02 pm

Additionally, the EMB190
has no operating stats, and as we all know whenever a new aircraft is introduced, the first carrier opeating it is the "guinea pig" so to speak, and
the dispatch reliability is scrutinized the world over
----

Yes, however, Southwest likes to be a launch customer. The risks of this have been mitigated in the past by its preference for the 737 series (it was launch for -300, -700 and also -500 I think). My guess is that if they pick an RJ it would not be Embraer since by the time they would be seriously interested launch customer opportunities would be gone.

If I were told that Southwest was going to get a 70 or 100 seater for sure and told to place a bet, by bet would be on the RRJ. They know Boeing well and are comfortable dealing with them - and Boieng is a chief partner in this program. The RRJ should come arround late enough to be of use and also present a launch customer opportunity. WN could almost dictate the design if they were launch customer of this bird. They wouldn't even have to say "Do what we want and our orders and prestige wil all but insure your successful entry into the western market". It would be just obvious.

The Embraer and Fairchild birds have already been designed without WN's input. I doubt they are contenders unless they show some surprising operating results. The ARJ could be a possibility, though I would put even the 717 ahead of this one.......

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