xjet
Posts: 405
Joined: Fri Feb 02, 2007 10:09 am

Xjet Posts 2nd Quarter Loss

Wed Aug 08, 2007 11:41 pm

The total loss for the quarter was $26.4 million. Here is the link to the press release on XJET's website.

http://phx.corporate-ir.net/phoenix....-newsArticle&ID=1038042&highlight=


During the conference call Jim Ream talked about the struggles with getting the reservations system robust enough for travel agents. Apparently the system doesn't have a lot of the functionality that travel agents desire to create complicated itineraries. He also discussed some scheduling changes that would make connections possible to increase revenue. He stated that 70% of our locations are performing well and traffic is growing. 30% are not that great. No markets were named individually.

The load factor for the entire quarter on the branded side was 39%. For July, which includes the branded flying plus the 8 aircraft under pro-rate with Delta, the load factor is up to 65%.


There are a lot of interesting figures listed on the release above. Not great news for XE, but I think it is expected with only 90 days in operation. Plus, there was a ton of transition cost associated with aircraft painting, ground equipment, moving employees, etc. The next quarter will probably be a better indicator.
 
cle757
Posts: 797
Joined: Wed Apr 06, 2005 8:28 am

RE: Xjet Posts 2nd Quarter Loss

Wed Aug 08, 2007 11:45 pm

I think Xjet needs to get back only with Continental, and Continental should only use XJEt (except prop cities)
Cleveland the best location in the Nation
 
xjet
Posts: 405
Joined: Fri Feb 02, 2007 10:09 am

RE: Xjet Posts 2nd Quarter Loss

Wed Aug 08, 2007 11:50 pm

Quoting CLE757 (Reply 1):
I think Xjet needs to get back only with Continental, and Continental should only use XJEt (except prop cities)

Ah, the good ole days. Would be nice.
 
RJNUT
Posts: 1182
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RE: Xjet Posts 2nd Quarter Loss

Wed Aug 08, 2007 11:57 pm

what caught my eye was the into plane fuel costs for the branded service...3 times that of the CO service..YIKES...They could still bump their fares up and not lose traffic


I am a real supporter and glad to hear that they recognize the limitations of their res system!!

some connections via ONT or AUS, etc, could be very interesting!
 
LAXintl
Posts: 20183
Joined: Wed May 24, 2000 12:12 pm

RE: Xjet Posts 2nd Quarter Loss

Wed Aug 08, 2007 11:59 pm

To put things more bluntly, while young the ExpressJet branded operation performed terribly.

Looking at their finances, the branded operation produced $28.2 revenues. Considering the airlines CO flying is under a revenue and profit guarantee(+10%) one must assume the resultant $26.4 loss must be near all attributed to new branded flying. In otherwords they probably lost quite a bit more then $26.4 that CO flying helped cover.

While I am sure they will build on the 39% load factor this quarter, I doubt it will approach anywhere close to profitability before heading down again for the fall.

Good thing Xjet they can cross subsidize the branded operation with other revenue streams, otherwise I'd say these guys are Independence Air #2, with such negative margins.
From the desert to the sea, to all of Southern California
 
masseybrown
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 12:04 am

Quoting RJNUT (Reply 3):
what caught my eye was the into plane fuel costs for the branded service...3 times that of the CO service..YIKES..

I believe that under the agreement with CO, XJet's fuel cost is capped at 77 cents - no doubt one of the reasons CO was unhappy with the deal.
 
LAXintl
Posts: 20183
Joined: Wed May 24, 2000 12:12 pm

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 1:46 am

Dug thru the numbers a little more;

They had revenue of $360m on CO flying with about $36 profit (+10% operating margin) while the branded service and DL at risk flying had revenues of $28m with loss of about $62m. (negative 221% margin!)
From the desert to the sea, to all of Southern California
 
atomother
Posts: 389
Joined: Sat May 22, 1999 8:47 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 2:01 am

So any speculation on the new flying?

Looks like they will be expanding with a carrier that they are currently flying for and a new carrier.

Am guessing the CO flying will only decrease if it doesn't stay the same so the DL operation has to be the one that may expand.

As for the other carrier? Maybe replacing Mesa and pick up some of their United flying?
 
RJNUT
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 2:39 am

their at-risk agreement with DL gives them the opportunity to experiement with various P2P routes withouth having to start up an entire operation (i.e Reservations, counters, etc), I would think alot of growth could come there!
 
tcfc424
Posts: 444
Joined: Mon Nov 17, 2003 11:56 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 4:30 am

Some of you guys are pretty harsh! They have only been flying for 90 days! In that time, they have had many one-time costs. I know we have accounts et al here, so perhaps somebody can dig through the one-time charges and find out what they REALLY lost.

XJET does have a variety of income streams (lets not forget their maintenance operation(s)?). It is because of that they are able to try new things out. It takes time to figure out what works, what doesn't, and how to tweak everything. XJET is a strong company, and I would give them a year before seriously evaluating their overall viability as far as branded service. That gives them time to develop a customer base, settle into regular operations, and increase/align flights and times. Until then...

Good luck XJET...perhaps I will be on one of those flights soon...either AUS-TUS or AUS-MSY.

Mike S. in AUS
 
KELPkid
Posts: 5247
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 4:41 am

Quoting XJET (Thread starter):
He stated that 70% of our locations are performing well and traffic is growing. 30% are not that great. No markets were named individually.

I will speculate here that ELP-ONT is not one of XE's stellar perfoming routes...  scratchchin 
Celebrating the birth of KELPkidJR on August 5, 2009 :-)
 
RJNUT
Posts: 1182
Joined: Thu Dec 30, 1999 1:58 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 5:30 am

Quoting KELPkid (Reply 10):
will speculate here that ELP-ONT is not one of XE's stellar perfoming routes...

looks to be sold out on aug 12th


1 XE 106 W. S. Y. H. M. L. T. G. ELPONT 625P 723P ERJ 0E
2*A#US2908 Y9 B9 M9 H9 Q9 N9 V9 W9 ELPPHX 600A 616A *9 CR9 0E
L9 S9 T9 G6 K2 U0 E0 R0
3*A#US 641 F8 A7 P7 Y9 B9 M9 H9 Q9 ONT 747A 905A *9 733 0E
N9 V9 W9 L9 S9 T9 G9 K9 U9 E9 R9
4*A#UA5838 Y9 B9 M9 E9 U9 H9 Q9 V9 ELPDEN 600A 744A * CRJ 0E
W9 S9 T3 K9 L3 G2
5*A#UA1461 Y9 B9 M9 E9 U9 H9 Q9 V9 ONT 928A1038A *8 32S 0E
W9 S9 T3 K9 L3 G2
>
 
whatusaid
Posts: 433
Joined: Mon Feb 05, 2007 1:11 pm

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 6:06 am

Quoting KELPkid (Reply 10):
I will speculate here that ELP-ONT is not one of XE's stellar perfoming routes...   

Having some time to burn at ONT while awaiting my evening flight to FAT on Monday, checking out the loads on both departing and arriving flights, there was no pattern that would allow anyone to draw conclusions as to how well XE is doing. Eastbound flights - MKC and Omaha were very light, which for a Monday night isn't really anything to get too excited about. In-bound loads seemed much better, let's say no less than 40% LF to higher than 70% on some arrivals.

The report in Aviation Week gave at least some insight into the growth in the last month of Q2 that is not fully recongized when looking at the performance for Q2 as a whole: http://www.aviationweek.com/aw/gener...0Shed%20Light%20On%20New%20Service

The XE branded model isn't broken by any means. If, as one report today indicated, three additional aircraft are coming on-line, and if they're to actually use the slots they have at LGB, one can wonder if they're not about to become more focused on the Western region.

It's interesting that in today's announcement, they're specifically referenced the strength in the West. My flight to FAT had about 45 pax, which I never expected. I did notice some connecting traffic into FAT from TUS and XE is not set up to capitalize on connecting traffic at all. They don't need to hub per se, just make it easier to connect to maximize their LF out of ONT.

I'd say what actions they take in the next few months will be far more telling than either the Q2 or Q3 stats.
 
Alias1024
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 6:11 am

Some thoughts I had from the conference call:

How much is it going to cost to upgrade their reservation system? Further, I seem to recall limitations with the reservation system being an issue with Independence Air. If I'm correct on that, then why didn't XE learn that lesson before start-up.

Jim Ream at times sounded a little like Alberto Gonzales in front of Congress. He refused to give CASM guidance, other than to say higher, and that it was ok with them that CASM would go up. I can't recall ever listening to an airline conference call and not being able to get some kind of number for expected CASM in the next quarter, and I'm sure that annoyed analysts and institutional investors. Why would he not give a CASM projection?  scratchchin 

Then he was asked about the blocked seats online, which everyone on this website is aware of, and said he knew nothing about it. Not sure I believe him. He was asked if they were profitable and cash positive without the transition and arbitration costs. He said they were cash positive, but didn't know if they were profitable. I find it hard to believe that he would know they were cash positive, but not know if they would have been profitable without the two huge one time costs they incurred this quarter. That seems like a bit of information the CEO should be fully aware of.

Further, I would have liked to see more numbers offered for the branded operation in the press release, since XE decided to issue their 10-Q after the conference call. Would have been nice to have the numbers to assess the branded operation, instead of having to listen to analysts try to extract the numbers from Jim Ream.

I didn't have any problem with the financial performance. It was in line with what I expected, and I think they are doing fine right now. But that conference call was a head scratcher for me. I kept hearing things that made me wonder what XE is hiding. I hope nothing, but something sounded fishy.
It is a mistake to think you can solve any major problems with just potatoes.
 
LAXintl
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 6:22 am

Quoting Alias1024 (Reply 13):
It was in line with what I expected

Certainly not what Wall Street expected. Xjet loss was 3X what analyst estimates banked on.

As a result stock took a nice 6% tumble on a day the regional airline index as a whole ended up 3%.
From the desert to the sea, to all of Southern California
 
Osprey88
Posts: 268
Joined: Sun Jul 08, 2007 8:13 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 6:41 am

Quoting Tcfc424 (Reply 9):
Some of you guys are pretty harsh! They have only been flying for 90 days! In that time, they have had many one-time costs.

I have to echo this sentiment. XE has been flying for only a few months, and it will take some time before they are able to fine tune their operations. Remember, Rome wasn't built in a day. It will take time for XE to evaluate route profitability, scrub non profitable routes and add frequencies to other profitable routes. I think it will take time, but I believe XE can find the sweet spot for their branded operations.

Listening to the Q2 conference call this morning, one person brought out something that I think is a very real problem for XE. Their online reservation system is less than helpful for those people with complex routings. It does not have a multi-city option, and it does not allow you to make reservations between cities that do not have direct flights between them. If you need to book a flight for example from FAT-ABQ, you have to book two separate flights.

A related question was asked by James Higgens during the call about connecting traffic across the network. Jim Nides said that their were "minor" of connecting traffic to other XE flights. I personally think this at least partly due to their basic reservations system. Nides also mentioned that the reservation system should be "exactly where we want it to be" by Q3.

James Higgens from Solay Securities also asked about the QX challenge to XE's intrusion into their markets and Nides responded that they were doing fine in those markets.

Mike Lindinburgh from Merril-Lynch asked a good question as to what the break even load factor would be for XE figuring out the one time costs associated with their Q2 losses. Nides said the load would have to be 30 to 35 passengers (probably anticipating selling those seats somewhere in the mid $100 range)

The main thing Nides said they were looking for was whether or not the routes could perform with flights twice daily. Overall, I think we need to wait until XE has accumulated that information and used it to modify their October-November scheduling, and then to see how they do.

I still have a lot of enthusiasm for XE, and I think their branded operations profitable given some time.


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acvitale
Posts: 1911
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RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 2:21 pm

Unfortuately, I am one who believes the Expressjet branded flying is not going to be fixed any tme soon.


The best estimations are that the XJet branded flying lost about $52 M USD for the quarter on revenue of 28.2 M USD for the X Jet branded flying. (These are estimates based on the what information was published. XJet did not publish the branded flying numbers but rather included them only as bundled on into the fee for departure and at risk flying for CO and DL)

I believe the Delta at risk flying costs around 10M USD in losses between start up and operational costs. I think that may turn a breakeven within the next 120 days. Unfortunately, it will not be enough to offset branded flying losses.

While they are trending up load factors the yields are still too low the bad news is we are now going into one of the weakest quarter of the year and they will likely have another significant loss.


I would project that without significant changes branded flying will see a loss of around $65M USD and it could easily be worse if fuel spikes this month or in Sep. (Fuel is again at record high levels).

They will need to raise yields to reach breakeven. As they are operating at a 39% load factor it would be reasonable to expect a maximum of 75% achievable and sustainable load factor with increased per pax costs they need to obtain almost double the yield and increase the load factor to 65% to reach a break even.

The management plan discussed on the conference call of utilizing more connection traffic will not help the situation as the connection traffic will see addl traffic generated but at relatively flat yield and higher costs (2 segments each way instead of 1 so twice the costs) (less revenue per pax per segment). If the management achieves a 33.3% connection traffic goal then the yield will need to increase by approx 104% and the load factor would need to be sustained at 75% to reach break even.

If yields do not increase then they would need to have a load factor of about 112% at current and with connection traffic it would be about 128%. As we are aware that is not possible. In fact any airline that exceeds a sustained 80% load factor is pretty amazing. But we cannot Express Jet to have passengers standing in the aisles when the plane fills up it is against FAA regs amongst other things (My attempt at humor).

Of course this is all approximate and based on outside observation. They could adopt a different model and simply limit the losses on the branded routes to a level that could be supplimented by the fee for departure and at risk flying for DL and CO but eventually shareholders will figure it out and question management competence. Especially considering that X Jet could have returned some of the aircraft to CO and limit the damages they are experiencing now.

Despite what some said about break even on 8 pax on the EMB-145XR that is not real with the yields they have. They would not have lost if it were. Airlines have some control over costs but at the end of the day the costs are largely similar and one can make estimations based on their peers in the industry. Based on that it is likely they need 56 pax on a 50 seater to breakeven on Q3 yields.

Best hope will be Q2 and Q3 in 2008. Revenue picks up and the load factors as well over the summer period.

If they can make it without the losses getting too extreme they may make it on current course. Otherwise the issues outlined above could be a reality.

If the losses are more significant over Q4 2007 and Q1 2008 the cash flow situation could be critical. Most debt structures have clauses ("covenents") that have significant requirements. If the losses continue, cash levels drop between certain levels the covenents will apply. They could force the sale of assets or other significant items that could damage the airline going forward.

They will need to focus on enhancing their distribution systems and probably drop marginal markets. They may need to evaluate some changes to the cities served and build a more traditional model. They may be able to reallocate resources to some of the better proforming markets.

I personnally think they need to hit more of the SE USA markets with larger population cachement areas. Possibly some N/S flying to augment the E/W flying they are focused on. Additional frequencies in stronger markets will bolster their position allow increased yields make them more attractive and allow better use of fixed station assets.

Of course a better solution would be to secure additional fee for departure flying for a major (They have a good reputation). It does appear that their relationship with CO is a little strained and they did lose the arbitration for 14 M USD that will probably show as a special adjustment on the next quarter which will not help the situation. Possibly the relationship with DL could be expanded or explore lift for other carriers like NW or US. (NW and US are not likely viable and UA is probably absolutely out of the question)

All in all the next several months will be critical for ExpressJet. The danger is with current cash burn they will probably need to look at dropping some routes, layoffs and subleasing aircraft to other carriers to avoid self distruction.

Without making difficult choices things could deteriorate. I wish all Expressjet employees the best and hope that they will thrive and survive. Let us hope that the situation improves rapidly. Possibly they obtain addl fee for departure flying that really is the only positive option they can hope for.
 
KAUSpilot
Posts: 1659
Joined: Mon Jan 28, 2002 2:15 pm

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 2:56 pm

I think the writing is more or less on the wall here. As someone who sees it on the front lines the load factors are not good enough. Take a look at the fares on the website and combine it with the costs of outfitting those planes with XM, catering, etc and it's easy to see how the losses occured. I never really gave the xjet flying more than 24 months and I would be awfully surprised if it lasts longer than that, but I hope it does.
 
Alias1024
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Joined: Mon Oct 25, 2004 11:13 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 4:25 pm

Quoting Laxintl (Reply 14):
Certainly not what Wall Street expected. Xjet loss was 3X what analyst estimates banked on.

Load factor was about exactly what I expected. I figured yield would be pretty weak as well, with introductory fares to try and introduce themselves to customers. Guess I should have shorted the stock. As ACVitale pointed out, the revenue side of the equation just isn't there yet. During the conference call, it was stated that they are looking to increase yield 20-30%, but didn't get very specific as to how they would do so. They brought up the reservation system issues for connecting traffic, but as ACViale already mentioned, that won't likely have the opposite effect. It will however raise overall revenue and bolster cash flow, possibly buying them enough time to get the revenue side on track and make it to next summer and hopefully some profits from the branded flying.

I decided to split the difference on XE's target yield increase and played with some numbers assuming a 25% increase (from current average of average fare of $108 to $135). This gives them a breakeven load factor of 90% It would be easier to estimate breakeven L/F going forward if ExpressJet had provided the start-up costs incurred during the quarter. To really figure out what's going on we need ExpressJet to break out a few numbers, but for now wild ass guessing will have to suffice. Just for fun, lets assume that start-up costs were $15 million. Then things look more like this:

Breakeven L/F at Q2 yield with reduced costs: 91%

Breakeven L/F at average fare of $135 and reduced costs: 73%

Of course I don't know what start-up costs for the branded and Delta at-risk flying were, so these numbers are just random neural firings that may or may not be close to reality. Last month was a 65% load factor, but we don't know what the yields were.

Quoting ACVitale (Reply 16):
I personnally think they need to hit more of the SE USA markets with larger population cachement areas. Possibly some N/S flying to augment the E/W flying they are focused on. Additional frequencies in stronger markets will bolster their position allow increased yields make them more attractive and allow better use of fixed station assets.

I agree that additional frequencies in their strongest markets will help, but I'm not sure about expanding in the SE. I seem to recall comments to the effect that the strength was in the West and Southwest.
It is a mistake to think you can solve any major problems with just potatoes.
 
MSYtristar
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Joined: Sat Aug 27, 2005 12:52 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 8:38 pm

Summer figures will always trend higher, so I would expect to see improved results next quarter. The real test will be the quarter after that, when traffic historically falls off some.

As for specific cities, I personally think that cities having a minimum of 45% load factor are doing fairly well for a new startup at this point. It's good to see many cities posting a 5% or more increase in load factor month over month. Hopefully the people trying out XE will have a good enough experience to reccomend the airline to friends and colleagues.
I bet you that XE is looking at the routes with a fine toothed comb.
 
masseybrown
Posts: 4413
Joined: Wed Dec 11, 2002 2:40 pm

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 10:36 pm

Having elected to keep the 69 aircraft, is XJT now stuck with them? Can they return them to CO prior to the next fleet review in 2010? or ever? (My understanding is they are still subleased from CO.)
 
JBLUA320
Posts: 2997
Joined: Mon May 27, 2002 8:51 am

RE: Xjet Posts 2nd Quarter Loss

Thu Aug 09, 2007 10:51 pm

Well, despite the people who have low expectations and hopes for our branded flying, the new schedule changes that are effective in September help to create stronger connection possibilities as well as same-day flying for business travelers. While I am sure the LF will fall in historically weak periods, I do not think we'll see a huge decrease, as a great deal of our traffic (at least out of RDU) is business, a solid half of which is same-day returns.

There were a lot of 1 time costs associated with the start up, and a multitude of additional costs to "fix" the system -- our reservation system changes all the time, getting updated and whatnot- but right now, there are a lot of bugs that need to be fixed, and those fixes are coming.

Also, for anyone saying that we need above a 100% load factor to break even-- again, I will tell you, you are wrong. Most of our routes have a fare structure that is designed (with the right balance of full-fare Y business travelers and then leisure travelers) to facilitate break even at around 50%.

We're not doing badly for only 4 months in operation, and the numbers are increasing because customers like and believe in our product. To go from a nobody to a somebody in 24 cities takes longer than 4 months...

JBLU
 
acvitale
Posts: 1911
Joined: Sat Aug 18, 2001 8:25 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 9:12 am

guys and gals not to dis what you are saying but...

They are not garnering the Y fare pax. It is much harder then you might think. That is clear from the financial results.

They spent a lot of money in Q1 for startup costs so the argument that its largely startup costs does not hold true.

They are flying to the the SE but not to key markets like TPA, MIA or FLL, MCO, ATL, and others.

Florida to MSY, RDU, BNA, CLT are good markets. Many other examples but you need large cachement areas to compete.

And anyone asserting they can break even on 50% LF is crazy. The released numbers clearly dispute that. I suggest you read the above post I made again. The problem is two fold 1. Yield and 2. LF. You can have one but without the other you still lose $$$ and the situation is clear they dont have enough of either but the LF is getting marginally better.

Again the connection traffic will boost the LF numbers but the RASM will plummet.

If you have a choice between flying a major like CO, UA, DL, AA on mainline equipment with frequent flyer miles etc and connecting thru DFW, LAX, ORD, or where ever vs. X Jet and connecting it is gonna be a tough road for X Jet.

Please gang lets look at things realitistically. This is a mess they need more fee for departure flying - The End.


Anyone want to talk about the cash on hand now vs. burn rate for Q3-4 2007 and Q1-2 2008 and make predictions on a date with destiny?
 
jumbojettim
Posts: 159
Joined: Wed Jan 31, 2001 11:59 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 12:15 pm

Quoting ACVitale (Reply 22):
guys and gals not to dis what you are saying but...

They are not garnering the Y fare pax. It is much harder then you might think. That is clear from the financial results.

They spent a lot of money in Q1 for startup costs so the argument that its largely startup costs does not hold true.

They are flying to the the SE but not to key markets like TPA, MIA or FLL, MCO, ATL, and others.

Florida to MSY, RDU, BNA, CLT are good markets. Many other examples but you need large cachement areas to compete.

And anyone asserting they can break even on 50% LF is crazy. The released numbers clearly dispute that. I suggest you read the above post I made again. The problem is two fold 1. Yield and 2. LF. You can have one but without the other you still lose $$$ and the situation is clear they dont have enough of either but the LF is getting marginally better.

Again the connection traffic will boost the LF numbers but the RASM will plummet.

If you have a choice between flying a major like CO, UA, DL, AA on mainline equipment with frequent flyer miles etc and connecting thru DFW, LAX, ORD, or where ever vs. X Jet and connecting it is gonna be a tough road for X Jet.

Please gang lets look at things realitistically. This is a mess they need more fee for departure flying - The End.


Anyone want to talk about the cash on hand now vs. burn rate for Q3-4 2007 and Q1-2 2008 and make predictions on a date with destiny?

Man! You should become the CEO of an airline someday.
 
KAUSpilot
Posts: 1659
Joined: Mon Jan 28, 2002 2:15 pm

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 12:40 pm

Quoting Jumbojettim (Reply 23):
Man! You should become the CEO of an airline someday.

Maybe ACVitale is Jonathan Ornstein's screen name.
 
jumbojettim
Posts: 159
Joined: Wed Jan 31, 2001 11:59 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 1:23 pm

It's amazing how people automatically assume that Xjet is doomed just like FlyI, just because we lost 26 million in the first 3 months of operation. Now i'm not saying that we are going to be the next Southwest, however, i've been doing the branded ops from day 1. The first 2 months of flights that I have operated from coast to coast, I saw many flights going out with anywhere from 0-30ish (many in the teens). This last week (middle of week) I operated several flights that were in the 40's to 50's. Granted this is the high travel time of the year, but it is amazing how the loads have gone from the teens to the 40's. There are so many people that get off of our a/c saying how wonderful the flight was and how much time they saved not having to layover in some random city.

People so quickly forget that over 3/4 of our operations are earning a guaranteed profit, quite the contrary of FlyI.
 
drewwright
Posts: 530
Joined: Tue May 15, 2001 3:51 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 1:59 pm

Quoting ACVitale (Reply 22):
They are flying to the the SE but not to key markets like TPA, MIA or FLL, MCO, ATL, and others.

Florida to MSY, RDU, BNA, CLT are good markets. Many other examples but you need large cachement areas to compete.


It is a widely known fact that FL is a low-yield market and highly competitive. Why on earth would XJET enter into that mess? High load factors in a low-yield market will not guarantee profits.
XJET is doing the right thing by serving niche markets, especially out west where they can get high load factors on high-yield routes. MCO, TPA, MIA, etc., are definitely not niche markets.
 
MAH4546
Posts: 24522
Joined: Wed Jan 24, 2001 1:44 pm

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 2:10 pm

Quoting Jumbojettim (Reply 25):

People so quickly forget that over 3/4 of our operations are earning a guaranteed profit, quite the contrary of FlyI.

People aren't predicting an end to Xjet, but an end to Xjet's independently branded operations are almost a given. There is just too much money to be made by contracting out those planes to a third party, and when somebody comes along and says "Hey, we need a new regional operator", you can bet Xjet will put serious, serious thought into ending their branded operations and transferring those planes to American Connection, United Express, or whatever other operator wanted to make a deal. Those kind of operations are more profitable and less risky.
a.
 
FlyPNS1
Posts: 5260
Joined: Wed Dec 01, 1999 7:12 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 10:01 pm

Quoting MAH4546 (Reply 27):
There is just too much money to be made by contracting out those planes to a third party, and when somebody comes along and says "Hey, we need a new regional operator", you can bet Xjet will put serious, serious thought into ending their branded operations and transferring those planes to American Connection, United Express, or whatever other operator wanted to make a deal. Those kind of operations are more profitable and less risky.

You're right, but I'm not sure there are many majors left who want to do a fee-for-departure contract using 50 seaters. This is why XJet is doing some of their DL flying at-risk, rather than the more lucrative fee-for-departure. Most of the majors have begun reducing their 50 seat exposure and I expect that trend to continue.

I imagine the near-term goal is just to get the losses of the XJet branded flying to be small enough that they are counter-balanced by the profits of the contract CO/DL flying.
 
RJNUT
Posts: 1182
Joined: Thu Dec 30, 1999 1:58 am

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 10:46 pm

the majors ARE NOT going to continue the gravy train for regionals....if you think they are going to give lucrative contracts to provide 50 seat service to every little city in AMerica , you are wrong.....they are going to make it harder and harder for them to make money, and it will just come down to bottom feeding or race to the bottom until the operational losses become to great to withstand...United Express cannot continue to operate in/out ORD with the operational constraints they have an still make money!

The broken model IS the legacy fortress hub with delays, ATC constraints , misconnects, etc..We have so many people who opt for the nonstops to avoid the problems taking place in the system! XE could really bump their fares considerably and not loose traffic.. I dont know how some on here defend the legacy SNARL as a continued viable model??! there is an article everyday about the massive problems occuring and XE is bypassing most of those issues!
 
masseybrown
Posts: 4413
Joined: Wed Dec 11, 2002 2:40 pm

RE: Xjet Posts 2nd Quarter Loss

Fri Aug 10, 2007 11:59 pm

The loss is daunting; but cash flow from operations stayed strongly positive and the balance sheet is solid. There is no immediate threat to company's survival at the present rate of loss.

There must be internal deadlines for meeting specific financial goals; but, like Bush and Iraq, Ream isn't about to make them public.
 
bnatraveler
Posts: 304
Joined: Tue Dec 02, 2003 10:10 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:03 am

Quoting Osprey88 (Reply 15):
Listening to the Q2 conference call this morning, one person brought out something that I think is a very real problem for XE. Their online reservation system is less than helpful for those people with complex routings. It does not have a multi-city option, and it does not allow you to make reservations between cities that do not have direct flights between them. If you need to book a flight for example from FAT-ABQ, you have to book two separate flights.

A related question was asked by James Higgens during the call about connecting traffic across the network. Jim Nides said that their were "minor" of connecting traffic to other XE flights. I personally think this at least partly due to their basic reservations system. Nides also mentioned that the reservation system should be "exactly where we want it to be" by Q3.

XE is on Amadeus' hosted reservation platform. If this is a true limitation of Amadeus' platform, I'll be surprised; I would imagine the trouble is how XE implemented/licensed the Amadeus platform. The conf call seems like they blamed the system rather than their choice of *how to use the system.*

Perhaps Leskova or JGPH1A can comment...
 
RJNUT
Posts: 1182
Joined: Thu Dec 30, 1999 1:58 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:25 am

Quoting BNAtraveler (Reply 31):
XE is on Amadeus' hosted reservation platform. If this is a true limitation of Amadeus' platform, I'll be surprised; I would imagine the trouble is how XE implemented/licensed the Amadeus platform. The conf call seems like they blamed the system rather than their choice of *how to use the system.*

Or their level of participation..If they go full service, then they can do more, but their res agents ARE their weakest link , because they put a cheap overlay on top of the res system that is "point and click" so as to hire people off the street with no training and these people have NO idea what is happening behind the scenes of their entries, which renders them helpless in most any kind of irregular situations, but at least they are friendly!
 
LAXintl
Posts: 20183
Joined: Wed May 24, 2000 12:12 pm

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:39 am

One thing to keep in mind as we talk about finances is the Xjet CASM is about $0.14.

Exlude some special items which might haved up the Q2 number a little bit, however we are talking about a regional jet. CASM will always remain significantly higher then a mainline jet.

Will Xjet be able to get high loads at a high enough yield to produce a matching RASM is really the million dollar question?
From the desert to the sea, to all of Southern California
 
frontierflyer
Posts: 97
Joined: Fri Aug 10, 2007 4:35 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 3:08 am

Most majors are steering clear of 50 seaters leaving xjet with too many planes. Got to love their effort though.
 
MSYtristar
Posts: 7543
Joined: Sat Aug 27, 2005 12:52 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 3:15 am

Quoting RJNUT (Reply 32):
because they put a cheap overlay on top of the res system that is "point and click" so as to hire people off the street with no training and these people have NO idea what is happening behind the scenes of their entries, which renders them helpless in most any kind of irregular situations, but at least they are friendly!

That's the GUI version, and let me tell you, it is quite popular these days...probably for the reasons you mentioned above. I think it's a lot wiser to train folks how to use the expert mode (ie, "long commands") first so they know what goes on behind the scenes in case the GUI ever fails. But, that requires actual learning, so many people don't like that idea so much.
 
acvitale
Posts: 1911
Joined: Sat Aug 18, 2001 8:25 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 11:00 am

What is the status with the current CO contract. Can CO drop any more Expressjet fl

Quoting MasseyBrown (Reply 30):
The loss is daunting; but cash flow from operations stayed strongly positive and the balance sheet is solid. There is no immediate threat to company's survival at the present rate of loss.

Ok I know I never was good at Voodoo economics. I only studied the regular kind...

How does Expressjet have positive cash flow from operations?

I am keen to learn how this is possible  Smile
 
MAH4546
Posts: 24522
Joined: Wed Jan 24, 2001 1:44 pm

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 11:12 am

Quoting FlyPNS1 (Reply 28):
You're right, but I'm not sure there are many majors left who want to do a fee-for-departure contract using 50 seaters.

No, not right now, however I can foresee possible American Airlines and United Express wanting some for regional jet flying 18-24 months from now.
a.
 
Alias1024
Posts: 2224
Joined: Mon Oct 25, 2004 11:13 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 11:56 am

Quoting JBLUA320 (Reply 21):
Also, for anyone saying that we need above a 100% load factor to break even-- again, I will tell you, you are wrong.

Now that the 10Q is out, we have some numbers to use so we can stop guessing at the expenses for the branded operation. Based on last quarter, with the transiton costs included, break even was 105.9%.

You are correct that next quarter it should be below 100%. Based on the costs and revenue from last quarter, break even excluding shared costs and transition costs would be 82.6%. Still too high, and management expects CASM to increase next quarter. It is worth mentioning that maintenance was included in shared costs, the break even of 82.6% does not include maintenance costs for the branded operation. If you take the maintenance costs and divide it up evenly between the fleet (I'm to lazy to do it by block hour), then the branded operation share was $7,891,861. If you calculate the breakeven with maintenance costs included, it is 93.64%.  Wow!
It is a mistake to think you can solve any major problems with just potatoes.
 
Cubsrule
Posts: 11376
Joined: Sat May 15, 2004 12:13 pm

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 12:27 pm

Quoting MAH4546 (Reply 37):
No, not right now, however I can foresee possible American Airlines and United Express wanting some for regional jet flying 18-24 months from now.

Is AA obligated to use MQ for RJ flying outside of STL?
I can't decide whether I miss the tulip or the bowling shoe more
 
jumbojettim
Posts: 159
Joined: Wed Jan 31, 2001 11:59 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:07 pm

Quoting Frontierflyer (Reply 34):
Most majors are steering clear of 50 seaters leaving xjet with too many planes. Got to love their effort though.

Granted you are saying most majors, however Delta origanally taking 10 a/c, then taking an additonal 8, and supposedly wanting more. Xjet is in talks with another carrier for a pro-rate deal.

Quoting Alias1024 (Reply 38):
Now that the 10Q is out, we have some numbers to use so we can stop guessing at the expenses for the branded operation. Based on last quarter, with the transiton costs included, break even was 105.9%.

You are correct that next quarter it should be below 100%. Based on the costs and revenue from last quarter, break even excluding shared costs and transition costs would be 82.6%. Still too high, and management expects CASM to increase next quarter. It is worth mentioning that maintenance was included in shared costs, the break even of 82.6% does not include maintenance costs for the branded operation. If you take the maintenance costs and divide it up evenly between the fleet (I'm to lazy to do it by block hour), then the branded operation share was $7,891,861. If you calculate the breakeven with maintenance costs included, it is 93.64%.

Good try. Straight from management, the break-even for Xjet ranges from 60-70% depending upon the route.
 
masseybrown
Posts: 4413
Joined: Wed Dec 11, 2002 2:40 pm

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:30 pm

Quoting ACVitale (Reply 36):
Ok I know I never was good at Voodoo economics. I only studied the regular kind...

How does Expressjet have positive cash flow from operations?

Their cash flow statement shows +$20 million from operations and is on page 5 of:

http://edgar.sec.gov/Archives/edgar/...00114433107000054/xjt10q063007.htm

How they did it isn't obvious, but there are a few usual reasons. I've included the actual numbers for XJet when I could find them.

Some common reasons for positive cash and negative income are 1) non-cash expenses ($6 million of depreciation and amortization in XJet's case), which are charged against income but not against cash, 2) accrued expenses which have not been paid at the time of the statement (for example, building rent for June which may not be due until July 10th - so the expense is shown on the June 30 statement but the cash-reducing payment isn't made until some time in July), 3) growth in air traffic liabilities (tickets booked as a liability but not an expense when they are sold, increasing cash at no immediate cost to the company - $20 million, in XJet's case), and 4) simply not paying bills when they are due.

They also had a negative $32 million for capital expenses, a large portion of which is probably non-recurring. So, netting the $20 million gain and the $32 million loss, their cash dropped only $12 million for the quarter. Since they have just under $280 million in cash, a $12 million negative cash flow (called the burn rate) could be sustained for a number of quarters before any cash crunch would occur.
 
jetdeltamsy
Posts: 2688
Joined: Tue Nov 14, 2000 11:51 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 1:46 pm

Quoting CLE757 (Reply 1):
I think Xjet needs to get back only with Continental

They (XJ) would have to get their costs down before Continental wouldl even consider it.

This was something everyone saw coming.
Tired of airline bankruptcies....EA/PA/TW and finally DL.
 
Alias1024
Posts: 2224
Joined: Mon Oct 25, 2004 11:13 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 2:00 pm

Quoting Jumbojettim (Reply 40):
Good try. Straight from management, the break-even for Xjet ranges from 60-70% depending upon the route.

They could achieve a 60-70% breakeven with the 20-30% yield improvements they are targeting, but not at the average fare of $108 from last quarter. If you don't believe me, go through the 10Q yourself and do the math.
It is a mistake to think you can solve any major problems with just potatoes.
 
drewwright
Posts: 530
Joined: Tue May 15, 2001 3:51 am

RE: Xjet Posts 2nd Quarter Loss

Sat Aug 11, 2007 2:11 pm

Quoting Jetdeltamsy (Reply 42):
They (XJ) would have to get their costs down before Continental wouldl even consider it.

This was something everyone saw coming.

You must have missed the ten million other threads that discuss this topic.
ExpressJet is cost competitive. XJT could have even underbid everone else and the outcome would have been the same. Continental was the only remaining legacy with express flying being operated by one carrier (CO Connection not included). They wanted to diversify their express system and brought Chautauqua on board. I'm sure it is only a matter of time before another carrier is brought on board to further diversify the express system. It seems that this diversification strategy has cost them a lot of money in the short term, but it will offer Continental some protection from effects of a strike, should one ever occur.
So that's the story....tell all your friends, because this topic is getting old.
 
xjet
Posts: 405
Joined: Fri Feb 02, 2007 10:09 am

RE: Xjet Posts 2nd Quarter Loss

Sun Aug 12, 2007 5:11 am

Quoting Drewwright (Reply 44):
So that's the story....tell all your friends, because this topic is getting old.

So true. I am growing tired of the "ExpressJet was too expensive" argument.
 
jetdeltamsy
Posts: 2688
Joined: Tue Nov 14, 2000 11:51 am

RE: Xjet Posts 2nd Quarter Loss

Sun Aug 12, 2007 10:13 am

Quoting Drewwright (Reply 44):
You must have missed the ten million other threads that discuss this topic.
ExpressJet is cost competitive.

I didn't "miss" anything.

Express Jet was asked years ago by Continental to contain or lower their cost for flying services.

EJ went to their unioins and the unions failed to lower costs. Continental shortly after divested itself of a significant portion of its XJ equity...e.g...they sold part of the company.

Continental then put out for bid some of the capacity agreement it has always signed exclusively with it's once wholly owned subsidiary.

American is likely going to do the same thing with Eagle. Eagle's costs are very high and their service is among the worst rated in the industry. Until Mesaba was acquired by NWA just a couple of months ago, Eagle was the only express carrier remaining that was wholly owned by its only (siginicant) customer...American Airlines (Eagle does some code-sharing out of LAX).

Your theory that Continental management wanted to fragment their express services by contracting out bits and pieces makes no sense. They lose direct control over any operation they farm out. It was a decision based strictly on cost. Nothing else.
Tired of airline bankruptcies....EA/PA/TW and finally DL.
 
xjet
Posts: 405
Joined: Fri Feb 02, 2007 10:09 am

RE: Xjet Posts 2nd Quarter Loss

Sun Aug 12, 2007 10:31 am

Quoting Jetdeltamsy (Reply 46):
I didn't "miss" anything.

Express Jet was asked years ago by Continental to contain or lower their cost for flying services.

EJ went to their unioins and the unions failed to lower costs. Continental shortly after divested itself of a significant portion of its XJ equity...e.g...they sold part of the company.

Continental then put out for bid some of the capacity agreement it has always signed exclusively with it's once wholly owned subsidiary.

American is likely going to do the same thing with Eagle. Eagle's costs are very high and their service is among the worst rated in the industry. Until Mesaba was acquired by NWA just a couple of months ago, Eagle was the only express carrier remaining that was wholly owned by its only (siginicant) customer...American Airlines (Eagle does some code-sharing out of LAX).

Your theory that Continental management wanted to fragment their express services by contracting out bits and pieces makes no sense. They lose direct control over any operation they farm out. It was a decision based strictly on cost. Nothing else.

Well, pardon me for saying so.....BUT, you don't know what you are talking about. Everyone was asked to cut costs. XE lowered costs. What you are saying is that the employees didn't take pay cuts. If that is what you are saying, then you are correct. We didn't. The company didn't ask. They didn't need to.

Since when is it the unions job to lower costs? I thought that was a function of management. Our management did make those cuts. We initiated sweeping fuel savings measures that saved CO millions. Single engine taxi procedures, huge APU usage cuts, steep decent profiles, standardized climb profiles. All of this worked. Middle management was cut. Outstations that didn't have many flights were subcontracted. i.e. DSM. XE furloughed after 9-11 to cut costs. XE has its own training department to lower our bottom line. Since CO pays us in a percentage over cost, the cost reduction endeavors saved CO tons of money.

You seem to be of the line of thought that cost reductions = employee pay and benefit cuts. Well my friend, there are other ways. XE found them. I applaud them! CO wanted to diversify its regional feed. Period. There was no winning that battle.
 
B737900ER
Posts: 574
Joined: Thu Aug 31, 2006 10:26 am

RE: Xjet Posts 2nd Quarter Loss

Sun Aug 12, 2007 10:39 am

Quoting Drewwright (Reply 44):
XJT could have even underbid everone else and the outcome would have been the same. Continental was the only remaining legacy with express flying being operated by one carrier (CO Connection not included). They wanted to diversify their express system and brought Chautauqua on board.

CO had nothing to do with XJT going independent. Expressjet airlines is seven years in the making. It took alot longer than one year to put that system together. Most of the routes were picked prior to 2004. Taking a cut at CO would be better than the position they are in now, but at the time (2002-2004) the numbers looked different. So CO did not get rid of XJT to "diversify", XJT left because they thought they could make more money

Quoting Jumbojettim (Reply 40):
Good try. Straight from management, the break-even for Xjet ranges from 60-70% depending upon the route.

Great source of accurate honest information, XJT management  Yeah sure
 
RJNUT
Posts: 1182
Joined: Thu Dec 30, 1999 1:58 am

RE: Xjet Posts 2nd Quarter Loss

Sun Aug 12, 2007 10:41 am

Quoting Jetdeltamsy (Reply 46):

American is likely going to do the same thing with Eagle. Eagle's costs are very high and their service is among the worst rated in the industry. Until Mesaba was acquired by NWA just a couple of months ago, Eagle was the only express carrier remaining that was wholly owned by its only (siginicant) customer...American Airlines (Eagle does some code-sharing out of LAX).

I am calling BS on this one!! They run very well !!!,Its the flimsy Mesa's and Trans States' that get that poor rating..MQ runs quite well in ORD with EXCELLENT boarding facilites...You MUST have gotten confused by the cluster F$#!K a few concourses down known as United Express...now there is some operational and service nightmares!!!!!

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