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Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 5:24 pm
by jetbluefan1
AS and B6 both revised RASM guidance significantly lower last week, as discussed at the J.P. Morgan Aviation, Transportation and Industrials Conference in New York, largely due to competitive pricing in the BOS/NYC transcon markets. Fares can be found as low as $109 between JFK and LAX, and I have found walk-ups not much higher than that recently.

In addition to the transcon battle, B6 noted that it's seeing some signs of slower economic growth, which is causing its trough periods to be weaker than anticipated just a couple months ago, and is also seeing competitive pressure in certain FLL to Caribbean markets. Haiti also seems to be a particular point of weakness, which is unfortunately due to the continuing civil strife. As a result B6 will trim some off-peak capacity in under-performing markets and outright cancel some PAP flying.

IMO - Given the timing of the revision just a few weeks after Q4 earnings calls/Q1 outlooks, I bet they saw an abrupt unexpected dip in demand (especially on the leisure side) as taxpayers in SALT-sensitive locales (i.e. CA, NY, MA) didn't withhold enough in taxes during the year and got slammed with a big tax bill, or overestimated their tax refunds/underestimated how much they'd owe. Given how many people use their tax refunds to go on vacation, I wouldn't be surprised if this is at least somewhat related. This could also be a case of forecasting gone wrong (or a combination of both). Otherwise I don't see many other catalysts for how demand could have changed so quickly during such a short period of time.

A Skift article with some interesting tidbits, along with links to the SEC filings, are below.

https://skift.com/2019/03/06/jetblue-an ... -fare-war/

http://investor.alaskaair.com/static-fi ... 2836f72c2d

http://otp.investis.com/clients/us/jetb ... ndex=10000

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 5:47 pm
by tlecam
No surprise; TPHuang has been saying the same here on a.net for quite awhile.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 6:16 pm
by tphuang
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 6:16 pm
by Dieuwer
Not sure if you wanna heap CA and NY with MA. The MA SALT deduction is much less than those of CA and NY. Also, people who have large SALT deductions belong to the top 1%. They easily can afford to fly.
If anything, the reduced demand is because of the lower classes experiencing harder times. Don't forget that the latest jobs report was disastrous.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 6:37 pm
by ShinyAndChrome
tphuang wrote:
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.


Maybe it isn't too surprising in hindsight but it was striking to see that transcon accounts for almost a third of B6/AS's capacity.

I wonder where else they could plausibly grow in NY/BOS on short notice. Florida/Caribbean is hardly underserved. The midsize, Midwest, midhaul markets probably won't be feasible until A220 service ramps up or B6 would be there already. TATL will take a while to start once it's announced, which it hasn't been yet. Canada tilts heavily to Canadian point of sale and the beach markets are largely locked up by Canadian carriers.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 6:52 pm
by tphuang
ShinyAndChrome wrote:
tphuang wrote:
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.


Maybe it isn't too surprising in hindsight but it was striking to see that transcon accounts for almost a third of B6/AS's capacity.

I wonder where else they could plausibly grow in NY/BOS on short notice. Florida/Caribbean is hardly underserved. The midsize, Midwest, midhaul markets probably won't be feasible until A220 service ramps up or B6 would be there already. TATL will take a while to start once it's announced, which it hasn't been yet. Canada tilts heavily to Canadian point of sale and the beach markets are largely locked up by Canadian carriers.


I think there are some obvious markets for B6 to add. JFK-BNA/DFW/MSP are all pretty obvious holes in their domestic network that I think they should fly to instead of RNO/ABQ/PSE. BOS to IND/CMH/SDF/MEM all seem to be markets they should start. But I think they piled on a bunch of capacity into JFK/BOS to secondary Cali markets this past winter as a narrative in moving that away from extremely unprofitable west coast flying out of LGB. Maybe they will do this for a year and then just cut them completely and redeploy the aircraft to BOS/FLL where most of their growth should be.

for AS, I think they are finding that their product is increasingly uncompetitive in this arms race in the transcon market. And they are also going to suffer as WN jumps into HI. Maybe they need to rethink this strategy of focusing on SFO/LAX (which they have already cut back from) and go back to treating PDX as the second most important station.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 6:55 pm
by OzarkD9S
According to the Skift article linked above, 31% of AS's capacity is on transcon. With all the west coast, midcons, Hawaii and Alaska flights I found that number to quite high. Never would have imagined it.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 7:17 pm
by Aliqiout
tphuang wrote:
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.

Maybe you mean AS is not competitive in F? Revenues down is not the same as not being competitive. They are charging a significant premium for Y throug the entire month of April.

Examples at random for LAX-BOS

1st: AA $124, DL $142, UA $149, B6 $167, AS $184
5th: B6 $113, AA $113, UA $113, DL $118, AS $143
11th: UA $149, AA $159, DL $164, B6 $167, AS $184
17th: UA $144, AA $159, B6 $167, AS $181, DL $204
24th: B6 $99, UA $99, AA $124, AS $143, DL $164
29th: AA $159, UA $219, DL $212, AS $219, B6 $221

I think AS still has lower costs than the other four airlines on the route, so unless they are flying empty planes they seem to be doing relatively well.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 7:29 pm
by jumbojet
tphuang wrote:
I

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.


Some economists are predicting another recession. Last one was 2007-ish and before that 2000-ish. The last thing anybody needs now is a recession obviously, but I think it will affect Blue the most.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 8:14 pm
by EA CO AS
tphuang wrote:
for AS, I think they are finding that their product is increasingly uncompetitive in this arms race in the premium transcon market.


There, fixed it for you. And AS doesn't want to compete in the premium transcon market; it's a losing proposition. They're content to make their money on the main cabin and upsells to premium, while selling some F but realizing a lot will just be upgrades to high-value customers.

Saying the product is uncompetitive in this space is like saying Lexus is finding their product uncompetitive in the ultra high-performance supercar market; it's one they've consciously chosen to not be in and will gladly cede to those who want to chase that very finite market segment.

Also, retrenching from LAX and SFO is just not something AS will do. They're absolutely committed to making transcons work, and it's a top priority for the company.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 9:04 pm
by tphuang
Aliqiout wrote:
tphuang wrote:
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.

Maybe you mean AS is not competitive in F? Revenues down is not the same as not being competitive. They are charging a significant premium for Y throug the entire month of April.

Examples at random for LAX-BOS

1st: AA $124, DL $142, UA $149, B6 $167, AS $184
5th: B6 $113, AA $113, UA $113, DL $118, AS $143
11th: UA $149, AA $159, DL $164, B6 $167, AS $184
17th: UA $144, AA $159, B6 $167, AS $181, DL $204
24th: B6 $99, UA $99, AA $124, AS $143, DL $164
29th: AA $159, UA $219, DL $212, AS $219, B6 $221

I think AS still has lower costs than the other four airlines on the route, so unless they are flying empty planes they seem to be doing relatively well.


I'm not sure if that's meaningful, since other carriers with more flights offered will capture more of the higher revenue last minute bookings. And also, J cabin sales overcomes lower y fares.

Here is from Q3 of 2018.
From Q3
CityPair Dist Carrier Board AvgFare NSFare ConnFare% NS PerFlight # Flights LF Yield
BOSLAX 2611 AA 156056 258.26 254.84 373.06 97.11% 172.1 1081 83.86% 213.72
BOSLAX 2611 AS 58292 224.49 223.00 359.47 98.90% 153.3 457 83.23% 185.6
BOSLAX 2611 B6 103427 287.55 287.16 369.04 99.52% 159.0 728 89.35% 256.58
BOSLAX 2611 DL 73457 285.67 279.82 412.21 95.58% 166.4 496 89.00% 249.03
BOSLAX 2611 UA 81639 256.53 254.6 290.7 94.66% 178.5 525 87.11% 221.8
You can see AS is really far behind everyone else and the other carriers have more commitment to LAX or BOS. For example, I don't see AA dropping out on BOS-LAX.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 9:16 pm
by MAH4546
tphuang wrote:
for AS, I think they are finding that their product is increasingly uncompetitive in this arms race in the transcon market. And they are also going to suffer as WN jumps into HI. Maybe they need to rethink this strategy of focusing on SFO/LAX (which they have already cut back from) and go back to treating PDX as the second most important station.


AS has not cut back at LAX nor SFO. Capacity has slightly increased. Somebody posted the figures not too long ago.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 10:06 pm
by Rdh3e
MAH4546 wrote:
AS has not cut back at LAX nor SFO. Capacity has slightly increased. Somebody posted the figures not too long ago.

They are shrinking. Whoever posted otherwise was probably not including VX in the base numbers.

1st Quarter 2019:
LAX -
Flights: (9.1%)
Seats: (10.0%)
ASMs: (10.2%)

SFO -
Flights: (6.6%)
Seats: (12.1%)
ASMs: (16.2%)


2nd Quarter 2019:
LAX -
Flights: (6.6%)
Seats: (8.1%)
ASMs: (9.5%)

SFO -
Flights: (5.4%)
Seats: (12.3%)
ASMs: (15.2%)

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 10:08 pm
by Aliqiout
tphuang wrote:
Aliqiout wrote:
tphuang wrote:
I can personally attest this tax season is very unkind as a new york resident.

Both B6 and AS trimmed their RASM outlook by 2% for Q1. A few weeks ago, WN also trimmed by 1%, but WN's original guidance was much better. That's the problem of having so much capacity tied down to transcon out of NYC/BOS. When that market is hurting, the entire airline suffers. Not going to be pretty Q1 earnings calls for JBLU/ALK.

The legacies are obviously a lot more diversified in their route network, so can deal with lower yielding environment to certain markets a lot better.

What B6 needs to do is cut some of these marginal markets like JFK-RNO/ABQ, FLL-SAN and maybe MCO-LAX/JFK-OAK. JFK slots can be used better. The most obvious move for AS is to cut BOS-LAX. They are not competitive on there.

Would be interesting to see if this gets better later this year. Seems like AS's biggest issue with Q2/3 is WN' entrance into HI.

Maybe you mean AS is not competitive in F? Revenues down is not the same as not being competitive. They are charging a significant premium for Y throug the entire month of April.

Examples at random for LAX-BOS

1st: AA $124, DL $142, UA $149, B6 $167, AS $184
5th: B6 $113, AA $113, UA $113, DL $118, AS $143
11th: UA $149, AA $159, DL $164, B6 $167, AS $184
17th: UA $144, AA $159, B6 $167, AS $181, DL $204
24th: B6 $99, UA $99, AA $124, AS $143, DL $164
29th: AA $159, UA $219, DL $212, AS $219, B6 $221

I think AS still has lower costs than the other four airlines on the route, so unless they are flying empty planes they seem to be doing relatively well.


I'm not sure if that's meaningful, since other carriers with more flights offered will capture more of the higher revenue last minute bookings. And also, J cabin sales overcomes lower y fares.

Here is from Q3 of 2018.
From Q3
CityPair Dist Carrier Board AvgFare NSFare ConnFare% NS PerFlight # Flights LF Yield
BOSLAX 2611 AA 156056 258.26 254.84 373.06 97.11% 172.1 1081 83.86% 213.72
BOSLAX 2611 AS 58292 224.49 223.00 359.47 98.90% 153.3 457 83.23% 185.6
BOSLAX 2611 B6 103427 287.55 287.16 369.04 99.52% 159.0 728 89.35% 256.58
BOSLAX 2611 DL 73457 285.67 279.82 412.21 95.58% 166.4 496 89.00% 249.03
BOSLAX 2611 UA 81639 256.53 254.6 290.7 94.66% 178.5 525 87.11% 221.8
You can see AS is really far behind everyone else and the other carriers have more commitment to LAX or BOS. For example, I don't see AA dropping out on BOS-LAX.

The statement was that AS was not competitive. As I said before, AS may not be competitive in J, but to extend that to their service as a whole is a bit of stretch. If they are able to maintain higher Y fares and are flying denser aircraft at lower cost they appear to be competitive. Since they have lower frequency their competition may not be detrimental to the other carriers, but that is not the point when looking at a single route.

This board is full of claims that AS is not competitive on various transcon and midcon routes because their frequency is too low, but metrics that apply to the big 4 dont necessarily apply to AS (and B6). Low frequency west to east flights have been a major part of AS's playbook for many years through which they were only eclipsed by WN in profitability.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 10:19 pm
by ScottB
tphuang wrote:
I think there are some obvious markets for B6 to add. JFK-BNA/DFW/MSP are all pretty obvious holes in their domestic network that I think they should fly to instead of RNO/ABQ/PSE. BOS to IND/CMH/SDF/MEM all seem to be markets they should start.


IMO JFK-BNA/DFW/MSP would all fail against far more frequent service to LGA, which is also generally preferred by business travelers. BOS-IND/CMH/SDF/MEM will be a challenge to serve profitably with nothing smaller than 100 seats in the fleet -- the markets are thin and require frequency to be competitive with connecting at a hub. Given that JFK-ATL (another well-served within-perimeter market) is under $100 each way a week out, I really doubt they're making any money there.

Dieuwer wrote:
Not sure if you wanna heap CA and NY with MA. The MA SALT deduction is much less than those of CA and NY. Also, people who have large SALT deductions belong to the top 1%. They easily can afford to fly.


MA was still in the top five for percentage of residents using the SALT deduction so there's an impact.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 10:22 pm
by jetbluefan1
Dieuwer wrote:
Not sure if you wanna heap CA and NY with MA. The MA SALT deduction is much less than those of CA and NY. Also, people who have large SALT deductions belong to the top 1%. They easily can afford to fly.
If anything, the reduced demand is because of the lower classes experiencing harder times. Don't forget that the latest jobs report was disastrous.


Unfortunately the cap on the SALT deduction impacted a lot more than those in the top 1%. Don't forget that many middle class people living in CA/NY/MA, especially homeowners in the suburbs, pay more than $10k/yr in state and local taxes - which used to be deductible. If you're a NY resident, you're already paying 8%+ in income tax, and if you're a homeowner of even a modest 3-bedroom home on Long Island or in Westchester you can easily be paying $10k-$20k/yr in property taxes. So that's a big hit to a lot of people in New York who are by no means anywhere near the 1% - myself included. Probably a majority of New Yorkers making $125k-$300k a year - which is not a lot for New York - probably ended up paying more in taxes due to the new tax law.

The reason the cap on the SALT deduction likely didn't impact the 1% in particular is because they were already subject to AMT, which disallows SALT deductions anyway.

For sure the lower classes are still experiencing hard times, but those people don't have a high propensity to travel to begin with, so I don't foresee their struggles being linked to airfares from NY to SF.

tphuang wrote:
I'm not sure if that's meaningful, since other carriers with more flights offered will capture more of the higher revenue last minute bookings. And also, J cabin sales overcomes lower y fares.

Here is from Q3 of 2018.
From Q3
CityPair Dist Carrier Board AvgFare NSFare ConnFare% NS PerFlight # Flights LF Yield
BOSLAX 2611 AA 156056 258.26 254.84 373.06 97.11% 172.1 1081 83.86% 213.72
BOSLAX 2611 AS 58292 224.49 223.00 359.47 98.90% 153.3 457 83.23% 185.6
BOSLAX 2611 B6 103427 287.55 287.16 369.04 99.52% 159.0 728 89.35% 256.58
BOSLAX 2611 DL 73457 285.67 279.82 412.21 95.58% 166.4 496 89.00% 249.03
BOSLAX 2611 UA 81639 256.53 254.6 290.7 94.66% 178.5 525 87.11% 221.8
You can see AS is really far behind everyone else and the other carriers have more commitment to LAX or BOS. For example, I don't see AA dropping out on BOS-LAX.


:checkmark:

To me this smells like softness in demand from those who book within a few weeks of travel. This tends to be leisure travelers with discretionary income (i.e. the top 30% of New Yorkers/Californians/Bostonians), and corporate travelers. That first group is getting hit pretty hard with the GOP tax bill, which punished voters in states and metropolitan areas which tend to trend Democratic.

(I'll leave my personal opinions on this outside of this forum.)

OzarkD9S wrote:
According to the Skift article linked above, 31% of AS's capacity is on transcon. With all the west coast, midcons, Hawaii and Alaska flights I found that number to quite high. Never would have imagined it.


I agree it seems high, but on a pure RASM basis this is probably accurate given that a flight from, say, SFO to BOS is ~2x capacity than a flight from SFO to DAL.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 10:33 pm
by Bobloblaw
Dieuwer wrote:
Not sure if you wanna heap CA and NY with MA. The MA SALT deduction is much less than those of CA and NY. Also, people who have large SALT deductions belong to the top 1%. They easily can afford to fly.
If anything, the reduced demand is because of the lower classes experiencing harder times. Don't forget that the latest jobs report was disastrous.

While the NFP report was weak it wasnt disastrous. That would be job losses. Wage growth was up 3.4% Year over year, which is higher than inflation. The question is are corporations paring business flying?

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Mon Mar 11, 2019 11:38 pm
by Dieuwer
Actually, those that have incomes $166,000 and up belong to the top 5%.

https://en.wikipedia.org/wiki/Affluence ... ted_States

Sorry, but I don't feel sorry for 1/20 of the USA population.

You made my point about MA vs. NY. Income tax in MA is less than that in NY, so people in NY are probably feeling more "pain" than those in MA. And the reason people pay lots in property taxes is because home values are in Cook-coo land again.

Anyhow, I agree with the suggestion that corporations could be paring down business travel. But would that not be reflected mostly at the front of the bus?

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:30 am
by jfklganyc
Just a few notes

1. You never want too much Transcon capacity… Which was a mistake I thought B6 was making last year when they upped it. Transcons are the first to feel the pinch with higher fuel or lower economics.

2. JFK ATL Seems to be doing very well… Better than Boston.

3. JFK BNA MSP are onthe radar.

4. “Middle class” NY guy here. House, kids, etc. I did much better this year. Even with Salt going away...I am in a lower bracket, the kid deductions are worth more, and AMT went away. Most people in New York are going to be just fine

5. I would think the Boston trans cons are the problem with all the extra capacity

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:31 am
by MIflyer12
People don't spend all of their after-tax income on air travel. The idea that a few point rise in tax payments is responsible for a measurable decrease in air travel out of NY and MA is utterly risible. Keep looking at corporate demand - and drain to other carriers.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:37 am
by seabosdca
SALT did hurt for a lot of people with a high propensity to travel (self included--the "tax cut" actually ended up as a tax increase for me entirely because of SALT), but I doubt its impact is responsible for this. We are just starting to watch the economy soften a bit in the places that have been booming the most for the past few years. Honestly, if we want to blame public policy, knee-jerk protectionism is responsible for a lot more of the carnage than tax policy.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:39 am
by AirFiero
Dieuwer wrote:
Not sure if you wanna heap CA and NY with MA. The MA SALT deduction is much less than those of CA and NY. Also, people who have large SALT deductions belong to the top 1%. They easily can afford to fly.
If anything, the reduced demand is because of the lower classes experiencing harder times. Don't forget that the latest jobs report was disastrous.


ONE month out of the last, what, 16 or so? Get back to us after a bad quarterly jobs report or two before declaring the job market dead.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:44 am
by tphuang
Aliqiout wrote:
The statement was that AS was not competitive. As I said before, AS may not be competitive in J, but to extend that to their service as a whole is a bit of stretch. If they are able to maintain higher Y fares and are flying denser aircraft at lower cost they appear to be competitive. Since they have lower frequency their competition may not be detrimental to the other carriers, but that is not the point when looking at a single route.

This board is full of claims that AS is not competitive on various transcon and midcon routes because their frequency is too low, but metrics that apply to the big 4 dont necessarily apply to AS (and B6). Low frequency west to east flights have been a major part of AS's playbook for many years through which they were only eclipsed by WN in profitability.


We don't know they maintain higher y fares. When airlines have more seats to fill with more flights. They will have more seats available at lower price bucket, so have to do more price matching and heavy discounting, but also they will capture more of the close-in purchases which are higher priced. Just looking at random day fares is not useful. We have fare data provided by BTS, which shows they are clearly struggling on this route. Things have changed a lot in the recent years in transcon market. It's no longer just JFK-SFO/LAX with premium cabin. Without hometown point of sales at SEA, AS really struggles on a lot of markets without any lie flat product like JFK-SJC, EWR-SAN and such. This is the new reality.

ScottB wrote:
IMO JFK-BNA/DFW/MSP would all fail against far more frequent service to LGA, which is also generally preferred by business travelers. BOS-IND/CMH/SDF/MEM will be a challenge to serve profitably with nothing smaller than 100 seats in the fleet -- the markets are thin and require frequency to be competitive with connecting at a hub. Given that JFK-ATL (another well-served within-perimeter market) is under $100 each way a week out, I really doubt they're making any money there.

Then, I guess you will be shocked to find out that JFK-ATL is not only profitable but above system average in margin from day 1. All my cut suggestions are based on data from 2017/2018. All my add ideas are based on comparable routes.

btw, I also agree that they added too much transcon capacity in non-premium market in the LGB cut. I think they were trying to cut LGB capacity without admitting they are giving up on west coast. So this was their medium solution. Before long, they will admit that was too much and redeploy aircraft to east coast.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 12:51 am
by EA CO AS
tphuang wrote:
AS really struggles on a lot of markets without any lie flat product like JFK-SJC, EWR-SAN and such.


You're nothing if not consistent, I'll give you that! I'm sorry, but lie-flats are not the solution to everything. Can you please tell me how AS "struggles" without a lie-flat product while B6 - according to the aforementioned article - appears to have the same struggles, yet offers one?

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Tue Mar 12, 2019 2:55 pm
by Aliqiout
Again, no one is arguing that AS is making as much revenue as the the others. But that's not how most people measure whether an airline is competitive or not. If AS can fill their flights without undercutting their competitors, I think it's a stretch to call them uncompetitive.

There may be numbers to show that they are uncompetitive in J, but that is separate issue. I am not sure they even intend to be competitive in that market. Although not applicable in LAX-BOS, it would be hard to claim WN is not competitive, and they dont even offer a premium class.

Re: Alaska, JetBlue Lower Q1 RASM Outlook on Transcon Fare War

Posted: Wed Mar 27, 2019 1:47 pm
by tphuang
sort of related, but WN also had unit revenue revision this morning.
https://www.marketwatch.com/story/south ... 2019-03-27
Another 1% down in addition to 10% growth in CASM (due to fuel cost growth). So 2% down from their original guidance. Seems like fare environment has been worsening as the quarter goes on. Not sure if this is related to their HI launch.

I think it's going to be a tough Q1 earnings call for a few airlines.