Neeleman:Jetblue To Cut Capacity 4Q

BigGSFO · Fri Oct 21, 2005 12:10 am

Huh?

http://yahoo.reuters.com/financeQuot...05-10-20_14-22-14_n20525772_newsml

The press release is brief. Can anyone add more insight?

commavia · Fri Oct 21, 2005 12:11 am

JetBlue's fuel bill more than doubled from 3Q04 to 3Q05. Perhaps as more and more low fare airlines are impacted by things like that, fares will begin to rise.

luv2fly · Fri Oct 21, 2005 12:13 am

4th quarter sucks for all airlines as demands goes down for the most part during this time. Makes sense to cut if you can and maximize profits for the bottom line.

commavia · Fri Oct 21, 2005 12:15 am

Quoting Luv2fly (Reply 2):
and maximize profits for the bottom line.

Especially when you expect to make a loss, as JetBlue does.

luv2fly · Fri Oct 21, 2005 12:18 am

Quoting Commavia (Reply 3):
Especially when you expect to make a loss, as JetBlue does.

I am sure it will not be as big as AAmerican's recent announcement!

quickmover · Fri Oct 21, 2005 12:20 am

How can they cut capacity when they have 6 or 7 of those 190s coming before the end of the year plus I don't know how many more 320s?

ikramerica · Fri Oct 21, 2005 12:21 am

Quoting Luv2fly (Reply 4):
I am sure it will not be as big as AAmerican's recent announcement!

B6 may be big in "stock value" but they are medium size in terms of size, so one would hope an LCC of that size doesn't show a loss as big as AA.

SPREE34 · Fri Oct 21, 2005 12:25 am

Quoting Quickmover (Reply 5):
How can they cut capacity when they have 6 or 7 of those 190s coming before the end of the year plus I don't know how many more 320s?

Yeah, I wondering as well. Are some 320 leases up? Good time for some overhaul work? Temporary parking of some 320s?

luv2fly · Fri Oct 21, 2005 12:28 am

Quoting SPREE34 (Reply 7):
Yeah, I wondering as well. Are some 320 leases up? Good time for some overhaul work? Temporary parking of some 320s?

Maybe with the E190's arriving some A320's are going in for heavy checks and such during this slow time.

MAH4546 · Fri Oct 21, 2005 12:47 am

Quoting Luv2fly (Reply 2):
4th quarter sucks for all airlines as demands goes down for the most part during this time.

Not for jetBlue. Their key routes to Fort Lauderdale and West Palm Beach start packing it in early October, while Tampa, Orlando, and Ft. Myers are busy by mid-November.

luv2fly · Fri Oct 21, 2005 12:50 am

Quoting MAH4546 (Reply 9):
Not for jetBlue. Their key routes to Fort Lauderdale and West Palm Beach start packing it in early October, while Tampa, Orlando, and Ft. Myers are busy by mid-November.

I am sure even B6 has down turns in loads, and all airlines 4th quarter is a struggle.

MaverickM11 · Fri Oct 21, 2005 12:55 am

Quoting Quickmover (Reply 5):
How can they cut capacity when they have 6 or 7 of those 190s coming before the end of the year plus I don't know how many more 320s?

Exactly, B6's "cut" in capacity will be like a US government budget "cut"...it won't be a decrease in capacity--it will be a smaller increase in capacity.

MAH4546 · Fri Oct 21, 2005 12:57 am

Quoting Luv2fly (Reply 10):
I am sure even B6 has down turns in loads

The flucuation is very minimal, because of jetBlue's heavy concentration on trans-con routes, which fill up in the summer, and Florida routes, which fill up in the winter. jetBlue's average LF hovers around 85% year-round.

BR715-A1-30 · Fri Oct 21, 2005 12:57 am

Who is Needleman?

Does anyone know which routes they are cutting back on? I am guessing NOLA is one of these...

luv2fly · Fri Oct 21, 2005 12:58 am

Quoting BR715-A1-30 (Reply 13):
Who is Needleman?

Are you at all serious? He is the CEO and founder of Jetblue

FA4B6 · Fri Oct 21, 2005 1:01 am

Quoting Luv2fly (Reply 14):
Are you at all serious? He is the CEO and founder of Jetblue

His last name is NEELEMAN. No "D"

BR715-A1-30 · Fri Oct 21, 2005 1:06 am

FA4B6 proved my point... Smile

BigGSFO · Fri Oct 21, 2005 1:19 am

How embarassed am I!?! Thanks for the correction. Neeleman.

Smile

ripcordd · Fri Oct 21, 2005 1:23 am

OMG The day the earth stood still Jet Blue is going to cut back

crogalski · Fri Oct 21, 2005 1:36 am

Quoting RIPCORDD (Reply 18):
OMG The day the earth stood still Jet Blue is going to cut back

Lono · Fri Oct 21, 2005 3:23 am

Quoting RIPCORDD (Reply 18):
OMG The day the earth stood still Jet Blue is going to cut back

How can they with all those new A/C coming online...?????

sunrisevalley · Fri Oct 21, 2005 4:15 am

Their non-cash items such as depreciation must be going through the roof with all these new A/c coming aboard

iowaman · Fri Oct 21, 2005 4:24 am

Quoting Lono (Reply 20):
Quoting RIPCORDD (Reply 18):
OMG The day the earth stood still Jet Blue is going to cut back

How can they with all those new A/C coming online...?????

The only thing I can figure is:

1. As said above they will do heavy maintnence while the aircraft are sitting around or

2. They will reduce capacity on the lower yield/load factor routes and open up new ones.

mikephotos · Fri Oct 21, 2005 4:28 am

Quoting Luv2fly (Reply 14):
Quoting BR715-A1-30 (Reply 13):
Who is Needleman?

Are you at all serious? He is the CEO and founder of Jetblue

Thanks for the laughs! I saw the "Needleman" topic and was like, okay someone got that wrong. hahaha

Mike

JBLUA320 · Fri Oct 21, 2005 5:48 am

Did nobody read the post a few above me???

They are not actually cutting flights... the increase in flights is just going to be smaller.

-JBLU

Lono · Fri Oct 21, 2005 10:00 am

Quoting JBLUA320 (Reply 24):
Did nobody read the post a few above me???

They are not actually cutting flights... the increase in flights is just going to be smaller.

So their expansion plans are just slowed....??? That means less capacity..??? Help me here I do not quite get it... new math???

mariner · Fri Oct 21, 2005 10:05 am

Quoting Lono (Reply 25):
Help me here I do not quite get it... new math???

No.

They are not cutting capacity - they are cutting capacity growth.

Instead of growing available seats by - say - 30%, they are going to cut the rate so that available seats only grow by - say - 25%.

Capacity still grows, but it grows less.

cheers

mariner

MarshalN · Fri Oct 21, 2005 10:39 am

I also read somewhere today that credit rating agency cut their creditworthiness further, which isn't a good thing since it will make debt servicing more expensive...

jetbluefan1 · Fri Oct 21, 2005 11:05 am

They are NOT cutting capacity. I don't know where all these rumors start.

They are simply lowering frequencies on Tuesdays and Wednesdays in certain November and December troughs. That's it. Simple as that. Instead of flying 10x from JFK to FLL on Tuesdays, it'll be 9x. Instead of 7x from JFK to LGB, it'll be 6x.

This only applies to ten routes and is for certain Tuesdays and Wednesdays in this upcoming November and December. Nothing more, nothing less. The move is to preserve fuel on days with less demand.

Simply listening to the conference call today could have answered all questions.

JetBluefan1

Fleet Service · Fri Oct 21, 2005 2:10 pm

You can reduce capacity by lowering some of the daily utilization of an aircraft as well.

Instead of sending a 'bus on a red eye after a day of Florida turns, it may overnight at Kennedy.

N200WN · Fri Oct 21, 2005 2:21 pm

Quoting BR715-A1-30 (Reply 13):
Who is Needleman?

He's one of my favorite airline CEO's, wright up there with Herv Kellerman.

Azul320 · Fri Oct 21, 2005 3:09 pm

Quoting JetBluefan1 (Reply 28):
They are simply lowering frequencies on Tuesdays and Wednesdays in certain November and December troughs. That's it. Simple as that. Instead of flying 10x from JFK to FLL on Tuesdays, it'll be 9x. Instead of 7x from JFK to LGB, it'll be 6x.

I always thought it would have been smart for us to do this years ago. Reduce/add flights and now aircraft types to effieciently accomodate the demand throughout the days of the week, makes $ense.

lightsaber · Fri Oct 21, 2005 4:35 pm

Quoting JetBluefan1 (Reply 28):
This only applies to ten routes and is for certain Tuesdays and Wednesdays in this upcoming November and December. Nothing more, nothing less. The move is to preserve fuel on days with less demand.

Thanks. I was wondering what was going on.

From the press release:
http://www.jetblue.com/learnmore/pressDetail.asp?newsId=358

I was surprised to see:

Quote:
Looking ahead, for the fourth quarter 2005 JetBlue expects to report a negative operating margin between 5.0% and 7.0%, resulting in an expected net loss for the quarter and the full year.

Yikes, that is a brutal quarterly prediction.

Did B6 have hedges expire? Ok, I'm confused. B6 had a profitable quarter in Q3. Not a huge profit, but certainly a profit. They're run very efficiently, more so than most other airlines. Does anyone know why they're predicting such a brutal 4th quarter when they normally making green going NYC-Florida?
A bad enough 4th quarter to expect a loss for the year... What does this bode for the other airlines? (Excluding WN with their hedges through December.)

Lightsaber

jetbluefan1 · Fri Oct 21, 2005 7:35 pm

The fourth quarter 5-7% loss will be due to a $9m one-time expense with the stocks. I think it has to do with the 3-for-2 stock split but I'm not positive. Basically, they have decided to pay the expense this quarter because if they put it off then the price would go higher (up to 90m). If they were not to pay it off, then their profit margin would be between -4 an -6% instead.

Another reason why they'll be in such negative territory is because of fuel. This projection is on an estimated $2/gallon of fuel net of hedges. As of today fuel cost a little bit below that, so if fuel can stay at $60 or less, then that profit margin could go up.

Another reason for the loss is because of the integration of the E190s. Those planes are flying around - burning fuel and paying pilots - without taking in revenue.

I think they'll be profitable in 1Q06 if fuel stays at around the price it is now.

JetBluefan1

laca773 · Fri Oct 21, 2005 9:34 pm

Eitherway, B6 is a smart airline and is doing an outstanding job considering the "harsh" environment they have to work with now [fuel prices, competition form the so called Legacies.] and they still shine through, even if they do have a mild to moderate loss during the most difficult quarter of the year.

LACA773

CFIjames · Fri Oct 21, 2005 10:58 pm

Quoting N200WN (Reply 30):
He's one of my favorite airline CEO's, wright up there with Herv Kellerman.

LOL!
They fly those 757's out of Newark right?

quickmover · Fri Oct 21, 2005 11:09 pm

"This only applies to ten routes and is for certain Tuesdays and Wednesdays in this upcoming November and December. Nothing more, nothing less. The move is to preserve fuel on days with less demand."

So on those days, the jets normally flying those routes will just be parked?

notbluejet · Fri Oct 21, 2005 11:44 pm

What everyone is forgetting is the e190 introduction. it cost big time $$$$. 3rd quarter margins were slim and 4th will be negative because..

For one... Nose gear incident. THere after there has been a fleetwide check, extra equipment and parts needed to be purchasing, mechanics paid overtime. Not to mention it costs alot to have your planes stuck out in other non-jetblue cities. And the engine fire which took an aircraft out for a good 3 months and the repair costs on it.

Second and most impacting i think is the E190. In one quarter your going from Zero embraer parts to millions of dollars of parts. Proving runs, maintenance on the aircraft, new publications and alot of manpower put into an aicraft which is currently not generating any profit. Not to mention 4 aircraft by the time it starts flying that were not generating money.

Althought fuel is a concern and so is the market itself i dont think these are really what is negatively impacting the company. IMO it is the extra internal costs of the E190 and the bad luck of the A320 this quarter. Once E190 service and maintenance is routine and parts are circulating i forsee better numbers.

ikramerica · Sat Oct 22, 2005 1:47 am

What about the long-term failure of the LCC model? It's not as if the LCCs, even WN, are showing any immunity to the current conditions. WN is only making money as an "investment" company, not really as an airline right now. The other LCCs, well, they aren't doing to well, likely because they don't have International routes to keep them afloat (thus the race by B6 and F9 to add them ASAP...)

For an airline that is still supposed to be in the growth stage (B6), cutting back is a bad sign. Wonder how going head to head with CO at EWR is going to work out for them...

jetbluefan1 · Sat Oct 22, 2005 4:06 am

Quoting Ikramerica (Reply 38):
What about the long-term failure of the LCC model? It's not as if the LCCs, even WN, are showing any immunity to the current conditions. WN is only making money as an "investment" company, not really as an airline right now.

In case you didn't realize it, WN doubled its profit over last year's profit. And if they're not an airline, what are they? A monkey outfitters chain?

Quoting Ikramerica (Reply 38):
For an airline that is still supposed to be in the growth stage (B6), cutting back is a bad sign. Wonder how going head to head with CO at EWR is going to work out for them...

Read my first reply (#28) and you will see that JetBlue is NOT cutting capacity.

JetBlue's start-up at EWR has been very successful, even for a slow part of the year such as October.

JetBluefan1

Iloveboeing · Mon Oct 31, 2005 7:12 pm

I think that sometimes these airlines think that raising fares will solve all of their problems.....

To quote Southwest CEO Gary Kelly in the 2nd Quarter 2005 Conference Call: "I don't think that raising fares is the way to prosperity: you look around the industry and see what high fares have done.....they don't work. We want to be more like the Wal-Marts and the Targets and live off of the low fares."

And I also do not believe there is overcapacity in the industry. If there was overcapacity, why are airlines flying with record load factors? An airline's first service should be for the customer......low fares! It has been proven again and again that low fares can be profitable. And, in my opinion, an airline should be working to make fares lower, not higher.....

Shenzhen · Mon Oct 31, 2005 7:23 pm

Quoting JetBluefan1 (Reply 39):
Read my first reply (#28) and you will see that JetBlue is NOT cutting capacity.

If Jetblue are reducing the number of seats in a given market, then they are cutting capacity. Cutting capacity to meet market demands isn't bad.

supa7E7 · Tue Nov 01, 2005 12:57 am

Quoting Ikramerica (Reply 38):
WN is only making money as an "investment" company, not really as an airline right now.

FINALLY people are wising up to this fact! Big grin

RR+1

supa7E7 · Tue Nov 01, 2005 1:00 am

Quoting Iloveboeing (Reply 40):
you look around the industry and see what high fares have done.....they don't work

Is that why WN's RASM is lower than legacies? Pricing is a science, and legacy airlines (with WN) are some of the world's top practitioners of that science. There are books on the subject and it's taught in research universities. Not that WN's CEO has any idea about that.

HunUtazo · Tue Nov 01, 2005 1:01 am

Quoting JetBluefan1 (Reply 39):
JetBlue's start-up at EWR has been very successful, even for a slow part of the year such as October.

jblu, walking dead...

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