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txagkuwait
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B6 - What Do You Do Now?

Wed Feb 01, 2006 11:53 pm

This topic is not intended to start a flaming war, nor is it my intent to suggest that JetBlue is in dire straits.

But the financials released this mornng do not look good at all for JetBlue.

Here are the problems as I see them:

The Embraer 190 has resulted in a larger CASM increase than expected. CASM is up to 7.51 cents. The more E-190s that come on board and the accompanying reduction in average stage length is going to cause that number to increase even further.

The Embraer 190 has had some significant teething problems which have led to the percentage of flights completed and the on time percentages falling by a significant amount from the same period as last year.

The Airbuses are beginning to require some significant maintenance....and the maintenance is more costly than anticipated. The company did not establish an "airworthiness reserve" (putting a specific amount of money per flight hour into escrow to pay for maintenance down the road).

Fuel prices are not getting any better.

The company is already running outrageously high Load Factors, so you really can't solve the problem by stuffing more people on to the planes.

The fleet utilization is already sky high, so there are no savings to be had by trying to increase the # of hrs flown per aircraft each day.

The employees are already among the lowest paid in the industry while headquartered in one of the highest cost areas in the country.

So, if you are running JetBlue, about all you can do is raise fares. Raising fares is not a balm to cure all ills when you are a low fare carrier, because every time you raise the fares you decrease demand.

I am not suggesting that JetBlue is in serious trouble, but they are faced with some of the biggest challenges they've seen to date.

We know Neeleman was capable of starting an airline and seeing it through to profitability. The bigger question is - can he manage and grow a company over the long haul?

If you were running this outfit - can you think of any action to take other than raise the fare, hoping you didn't put too big a dent in demand....and pray for lower oil prices?
 
charlipr
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:03 am

Anytime you have smaller aircraft doing shorter segments your CASM will increase because you have less paying customers to spread your cost across. Also, anytime you introduce a brand new aircraft, there will be glitches that will crop up; hopefully B6 took that into consideration when they budgeted to order them. IMHO I am not concerned. B6 has a strong management that will push it forward, even when time are tough.
 
lowecur
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:12 am

It's too early to blame CASM on the 190's, it's a non-factor at this point. More realistic is the poor performance of yield mgt. They have started to offer fewer cheap seats and this is a start in the right direction, but they will need to get out of the midset that high LF's are mandatory to success. Having annual average LF's in the middle to high 70's with higher yields is the way to go.

RASM/yield will begin to increase as the 190s make more of an impact. Their proper use is also important. Running these on the glamor shuttle runs is nice, but the money will be on direct flts that by-pass the hubs...ie AUS/JFK. Also, if these 10 new cities are going to focus JFK/BOS, this will only further add to the clutter of poor on-time performance unless they can free up JFK a little by opening ISP plus reducing up-states flts to JFK by offering direct flts to other markets.
 
richierich
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:26 am

This appears to be a very poor quarter and overall a bad year for JetBlue. Anybody who knows anything about financial analyses should not have been surprised by this.

I'm an outsider but I will summarize what I see as the hurdles JetBlue has to overcome. The problems are:
(1) Fuel costs
(2) E190 deployment
(3) Increased fixed costs, i.e. new hangars and JFK terminal
(4) Strategic competition and overcapacity

Fuel costs are something plaguing the whole industry. If fuel costs had remained neutral over the year, I think JetBlue and several other airlines would have made money in 2005. It was too volatile and increased sharply over the year, thanks in part to Hurricane Katrina and Mid-East issues. In fact, I have not seen the data personally, but I believe even Southwest would have lost money in Q4 if they were not significantly hedged. That hedging deal is looking real good for them but unfortunately it will not last forever. I'm not sure that anybody knows for sure what fuel costs will do in the future, but I'm guessing nobody is setting their budgets for fuel costing $40 or even $50 a barrel.

I don't know the details of the E190 program at JetBlue but the problems introducing this type have been well documented. It sounds like they were a tad too aggressive bringing on a new type - a more staggered schedule working up to a tighter schedule might have made more sense. I've flown on a B6 E190 and the plane was excellent from a passenger perspective. Maybe I wouldn't have thought the same if I was stuck in BOS an extra three hours waiting for it to be fixed!

All of these ambitious projects must be taking their toll too. We all know about the new terminal at JFK (although I thought it was PANYNJ money paying for it), but my JetBlue friends also tell me about a new hangar at JFK, and a new hangar and training facility in Orlando. Also, as a company now six years old, has it grown too much too fast in terms of headcount and salaries? I normally wouldn't ask such a question but considering the 2005 results, I think these are appropriate questions.

Finally, its a tough market out there. If I were an airline CEO, I don't know where I want to put my planes in the US. All the lucrative markets have seen a lot of increased traffic in the past few years, and current yields across the US are quite low. It is true the Embraer will open up new markets for JetBlue, ones that are relatively competition-free, but it will take a year to two to see any benefit from these aircraft. In the mean time, where will JetBlue's A320 expansion come from?

The Embraer problems have been highly publicized and for the first time I can recall passengers seem to be critical of JetBlue. As an airline, they have set the bar high, and I believe passengers expect more from them than they do from other airlines. Lets face it, other airlines have caught up or at least come close in terms of what they offer, but nobody has the positive brand image that JetBlue enjoys. To maintain that, JetBlue needs to fix their customer and aircraft issues and look after the customers who get displaced or significantly delayed.
None shall pass!!!!
 
cle757
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:34 am

First thing I would do is get the hell out of EWR and stop messing with CO!..Its a no win situation.
Cleveland the best location in the Nation
 
richierich
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:50 am

Quoting CLE757 (Reply 4):
First thing I would do is get the hell out of EWR and stop messing with CO!..

I really don't think that's the answer. CO needs some good competition from EWR.
None shall pass!!!!
 
incitatus
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:56 am

Quoting TxAgKuwait (Thread starter):
This topic is not intended to start a flaming war,

Though I do smell bait! Big grin Say orange bait...

I fail to understand how JetBlue could post a loss. They have some degree of pricing power and should have had larger fare increases.

If they intentionally held fares lower, they fail to understand how their results will have a very direct impact in employee motivation through stock compensation. Almost all of it is under a thick ocean of Blue water right now. JetBlue has done many right things and a few mistakes. Letting 4Q results go down the toilet is their dumbest mistake ever.
I do not consume Murdoch products including the Wall Street Journal
 
MattMSP767
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:57 am

And according to USAtoday, Jetblue has announced a loss of $42.5 million for the fourth quarter and do not foresee a profit in FY06. Goes to show any airline can lose money.

http://blogs.usatoday.com/sky/
 
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jfklganyc
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 12:58 am

CLE757, I actually have to say I agree.

I think they can compete against CO . . . but the question is why?

In my humble opinion, LGA and EWR were unneccesary operations. Of course someone will say, "they have loyal fliers who want LGA and EWR." To that B6 has to remember that they were still loyal fliers from the JFK operation, and will obviously continue to go to JFK to fly B6.

They are trying to be everything to everyone. This is a stupid move for any airline to make, especially one that is 5 years old. This is how the majors got in trouble to begin with.

BTW, I don't see a crisis coming to B6. They are a smart, strong company. But in the next decade, they will undergo RAPID growth. With that growth will come major headaches. But remember, growth is a good thing!

PJ
 
dtwclipper
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 1:02 am

Quoting MattMSP767 (Reply 7):
Jetblue has announced a loss of $42.5 million for the fourth quarter

I hereby welcome Jetblue to the American Civil Aviation industry!
Compare New York Air, the Airline that works for your Business
 
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lindy field
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 1:26 am

Perhaps they would be wise to try to hold down their growth rate a bit by selling or leasing out some of their older A320s. They have plenty of new ones on the way, don't they?
 
bigdrewfl
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 1:27 am

Quoting CLE757 (Reply 4):
First thing I would do is get the hell out of EWR and stop messing with CO!..Its a no win situation.

I dont know where you are getting your info from but EWR is doing get and its only going to expand!!!
 
luv2fly
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 1:31 am

Quoting Dtwclipper (Reply 9):
I hereby welcome Jetblue to the American Civil Aviation industry!

Well at least they are not in the "Biggest LOSER and or operating under bankruptcy protection club!"
You can cut the irony with a knife
 
cle757
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 1:51 am

Quoting Bigdrewfl (Reply 11):
I dont know where you are getting your info from but EWR is doing get and its only going to expand!!!

Expand to where?...CO flys just about everywhere from EWR, and they will match any Jet Blue fare..Jetblue needs to learn from WN!..you dont see them flying into EWR or IAH..Even their CLE operation is small.
Cleveland the best location in the Nation
 
etops1
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 2:15 am

Quoting Luv2fly (Reply 12):


you never know. people thought they would never post a loss. never say never. they have already opened the door that leads to well, you know what. i wish them well and good luck.
 
ChiGB1973
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 2:36 am

Quoting Richierich (Reply 3):
I'm not sure that anybody knows for sure what fuel costs will do in the future, but I'm guessing nobody is setting their budgets for fuel costing $40 or even $50 a barrel.

I didn't look up any stats nor are they probably available, but airlines are going to base (publicly displayed) budgets on fuel costs around $50/barrel, otherwise, there will be no/limited investors.

Quoting TxAgKuwait (Thread starter):
We know Neeleman was capable of starting an airline and seeing it through to profitability. The bigger question is - can he manage and grow a company over the long haul?

He'll be pushing to sell off this airline in the next few years. His history is successfully starting an airline, whether or not he can manage it through hard times remains to be seen. It is probably getting close to a upper management change.

Quoting Lindy Field (Reply 10):
Perhaps they would be wise to try to hold down their growth rate a bit by selling or leasing out some of their older A320s. They have plenty of new ones on the way, don't they?

I feel certain the planes had a low front-end cost, therefore a high back-end cost. This is going to make it close to impossible to off-set costs buy sub-leasing them. No one is going to pay the high front-end costs (for the new lessor) along with the higher maintenance costs of an older (not old, older folks) airplane when Airbus will get them new planes for low front-end costs.

Does B6 own any to sell? Doubtful any planes are paid down enough to sell economically. If the planes are paid down , they are the cash cows. This is what you keep!

M
 
Tornado82
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 2:55 am

Quoting TxAgKuwait (Thread starter):
The Embraer 190 has resulted in a larger CASM increase than expected. CASM is up to 7.51 cents.

Running the E90 on JFK-BOS isn't helping, considering the amount of miles flown is very low, but the amount of fuel burned on that kind of route is very high (regardless of it's an E90, ERJ, A320, or 777)

Quoting Lowecur (Reply 2):
this will only further add to the clutter of poor on-time performance

Yeah, so will their "goal" of getting several gates in ORD. Evidentally JetBlue doesn't care about on-time performance as much as others, because their routes definitely seem that way.

Quoting JFKLGANYC (Reply 8):
In my humble opinion, LGA and EWR were unneccesary operations. Of course someone will say, "they have loyal fliers who want LGA and EWR." To that B6 has to remember that they were still loyal fliers from the JFK operation, and will obviously continue to go to JFK to fly B6.

I agree. JFK could cover NYC and Eastward to Long Island, and was relatively untapped for a large-scale domestic operation.

Now people will say I'm blowing my own horn here, but if they wanted to tap the Northern NJ market, ABE may have been a wiser choice. No congestion, and far enough from JFK that it doesn't take away from the hub like EWR is, but yet allows them to tap a new market (NJ) still. Likewise, it could have tapped the PHL market as well. And it's a hell of alot bigger area than some of those other places they fly A320's to, like BTV. Not to mention there is nobody here that would have defended it to the grave.

CO will continue to do battle to with JetBlue to defend EWR until the end of time, and will not have to stick their tail between their legs like US did either. And guess what... Unlike US @ PHL/BWI vs WN, there's enough high-end demand to EWR from other markets that CO can afford to battle JetBlue all day long while still not committing revenue suicide... because the # of markets B6 will ever reach from EWR pales in comparsion to WN @ PHL... especially considering that CO can run a 753 to Florida and beat B6's CASM all day long, and offer a few 1st class seats as well. EWR is a no-win situation.
 
MAH4546
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 3:03 am

Quoting CLE757 (Reply 4):
First thing I would do is get the hell out of EWR and stop messing with CO!..Its a no win situation.

Considering how well they are perfroming out of Newark, they aren't leaving.

Quoting JFKLGANYC (Reply 8):

In my humble opinion, LGA and EWR were unneccesary operations.

Their FLL-LGA flights are the strongest yielding Florida flights they run and allowed them to tap into the huge FLL-NYC business market that traditionally sticks with LaGuardia. Why exactly then should they end them?
a.
 
cle757
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 3:09 am

Quoting MAH4546 (Reply 17):
Considering how well they are perfroming out of Newark, they aren't leaving.

You probably thought the same thing about Atlanta.
Cleveland the best location in the Nation
 
MAH4546
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 3:13 am

Quoting CLE757 (Reply 18):

You probably thought the same thing about Atlanta.

No I didn't. I thought Atlanta was a stupid idea, especially when they decided to launch it with Long Beach flights. That idea was dead from launch.

Newark is doing very well for them, I don't "think" it is, I know it is. There has been talk about adding EWR-LGB...now that I think is a stupid idea. They should stick to the Florida/SJU routes from Newark and nothing more, because the density and demographics of the markets allows jetBlue to be there with minimal effect to Continental. Can't do that with California.
a.
 
cle757
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 3:27 am

Quoting MAH4546 (Reply 19):
Newark is doing very well for them, I don't "think" it is, I know it is

Full loads doesnt mean the flight always makes money, especially since CO has matched all fares. They need to stick with JFK.
Cleveland the best location in the Nation
 
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jfklganyc
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 4:06 am

"Why exactly then should they end them?"

Because they are cutting off there left arm to feed themselves with the right!

B6 was supposed to be a LCC with a simple operation, low costs, and on-time flights out of a NYC airport that had a lack of traffic during most of the day.

That was the business plan!

You add LGA and you get expanded costs (2 stations within 7 miles of each other), you get an airport with an EDCT every single day, you get one of the worst on time performance records in the industry?

For what?? To supplemant your 20 flights a day from JFK-FLL with 7 more from LGA? For a token presence at good ole' LGA?

Stupid move. Very, very stupid move. And let's not forget, that FLL has become horrible for delays . . . it's LGA with SUN!

So let's add EWR-FLL too. And ISP! HPN too!

Bad move. Bad On-time performance. Bad Loss.

B6 is losing sight of their founding principles.

PJ
 
luv2fly
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 4:13 am

Quoting JFKLGANYC (Reply 21):
That was the business plan!

So with that logic you should never go after opportunity, or tweak, upgrade or change a business plan once you set it up.
You can cut the irony with a knife
 
Type-Rated
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 4:18 am

Quoting TxAgKuwait (Thread starter):
CASM is up to 7.51 cents

There used to be a time where 7.5 CASM was highly desirable. Remember the 7.5 program over at Delta five years ago or so?

Quoting JFKLGANYC (Reply 8):
But in the next decade, they will undergo RAPID growth. With that growth will come major headaches. But remember, growth is a good thing!

Anyone remember Braniff? Controled strategic growth and careful planning is the best way to go. Look at WN and F9.
Fly North Central Airlines..The route of the Northliners!
 
2travel2know
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 4:26 am

Had B6 gotten A318 instead of those E190 could the situation have been different regarding fleet costs?
They already have A320, wouldn't be wiser to keep fleet commonality but with flexible capacity?

As for going head to head with the big ones in ATL and EWR, if it's only on 1-2 premium routes from those cities, it could work, if it's not, then B6 has nothing to do there.

About going to Chicago, well GYY would recive them with open arms... If they offer a good product and make people feel safe when getting to/from GYY they could do well there.

Usually when U.S. airlines are in distress they look into overseas routes. It's widely known that B6 SDQ service didn't work because their A320 couldn't take that much baggage/carryon. But there are other profitable destinations aboard and if operated properly, even SDQ could work for them.
B6 Airbus barely have the range to fly between London and the Northeastern U.S. so I doubt B6 is thinking Europe.

Quoting CLE757 (Reply 13):
Jetblue needs to learn from WN!..you dont see them flying into EWR or IAH

WN still flies DAL-IAH?
I don't work for COPA Airlines!
 
kubus
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 4:49 am

I thought they were running E190's on AUS-BOS and AUS-JFK, that's 3+ hr flights. Isn't BOS-JFK flight middle of the day thing where the A320 capacity is not needed?
 
InTheSky74
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 5:15 am

FLL is nowhere near the type of delayed airport that LGA is.

In fact, FLL is normally very quick for takeoff's.... I don't know where you get the idea that FLL is LGA with sun, it's not!

Rob
 
jetbluefan1
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 5:34 am

Quoting Kubus (Reply 25):
Isn't BOS-JFK flight middle of the day thing where the A320 capacity is not needed?

Currently JetBlue is flying 8 A320s and 2 E190s on BOS-JFK-BOS so that they can get XM and LiveTV working on all E190 flights.

JetBluefan1
 
MAH4546
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 5:47 am

Quoting CLE757 (Reply 20):

Full loads doesnt mean the flight always makes money, especially since CO has matched all fares. They need to stick with JFK.

Did I ever say anything about full loads? The Newark flights have been successful in terms of meeting expectations. That is what I said. They have been. Like it or not, that's the way it is, so stop attempting to counteract what I'm saying with pointless arguments.
a.
 
sllevin
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 5:48 am

It will be interesting to see if jetBlue makes moves to try and defer A320 deliveries during the course of the year. Right now, honestly, I'm not sure that adding another 17 aircraft to the fleet is going to allow them to focus on getting more revenue per seat.

Steve
 
Junction
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 6:03 am

Quoting JFKLGANYC (Reply 21):
B6 was supposed to be a LCC with a simple operation, low costs, and on-time flights out of a NYC airport that had a lack of traffic during most of the day.

That was the business plan!



Quoting JFKLGANYC (Reply 8):
They are trying to be everything to everyone. This is a stupid move for any airline to make, especially one that is 5 years old. This is how the majors got in trouble to begin with.

Seems these could be the main reasons for B6 losing money. Fuel must not be the biggest issue, because AA and CO are proving you can make money by paying U.S. $70 without hedging. B6 really needs to try and stick to their original basic LCC focus rather then concentrating on extremely rapid growth. Overcapacity remains the main problem with the U.S. airline industry.
 
Tango-Bravo
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 6:08 am

Quoting 2travel2know (Reply 24):
WN still flies DAL-IAH?

WN discontinued all service at IAH (at about the same time CO dropped all service at DAL) about one year ago, give or take a few months. By the time WN withdrew completely from IAH, they had little more than a token presence there.
 
Junction
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 6:15 am

Quoting Tango-Bravo (Reply 31):
at about the same time CO dropped all service at DAL

Sorry, off topic, but what do you mean by this? When WN withdrew from IAH-DAL, CO added much more service on the route.
 
Guest

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 7:12 am

Quoting Luv2fly (Reply 12):
Well at least they are not in the "Biggest LOSER and or operating under bankruptcy protection club!"

When you have no argument: Deflect, deflect, deflect...

Personally, I think they should stay the course. Everything is just fine. Maybe even look to expand to Europe, like everyone else. I'm sure Airbus would give them a deal on the A340-600 like they got on the A320's where they don't have to pay for them for 5 years and get all their mx for free for life, or something like that. The stretch 340 sure would look good in that paint scheme!

I guess the question is, who's going to get their 190's?

 biggrin 

B
 
luv2fly
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 7:16 am

Quoting NonRevKing (Reply 33):
I'm sure Airbus would give them a deal on the A340-600 like they got on the A320's where they don't have to pay for them for 5 years and get all their mx for free for life, or something like that.

No matter how many time I hear this fable it never gets old!

Quoting NonRevKing (Reply 33):
Quoting Luv2fly (Reply 12):
Well at least they are not in the "Biggest LOSER and or operating under bankruptcy protection club!"

When you have no argument: Deflect, deflect, deflect...

When you know its true try to deflect, deflect, deflect!
You can cut the irony with a knife
 
spartanmjf
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:04 am

>>DING! You are now free to join the ranks of the legacy carrier!<<

Southwest Airlines' net income for the fourth quarter of 2005 was $86 million. I guess all the IFE in the world didn't help the B6 results, even with their comparatively low labor costs.

 duck 
"Nuts to the man in 21D!"
 
richierich
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:09 am

Quoting NonRevKing (Reply 33):
like they got on the A320's where they don't have to pay for them for 5 years

Let me guess: another one of your "facts"?
LOL
None shall pass!!!!
 
Tornado82
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:10 am

Quoting Spartanmjf (Reply 35):

Southwest Airlines' net income for the fourth quarter of 2005 was $86 million. I guess all the IFE in the world didn't help the B6 results, even with their comparatively low labor costs.

Ding, you are now free to make profits only because of fuel hedges. Fuel hedges saved WN upwards of $100 million. Do the math, 100 > 86.
 
spartanmjf
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:13 am

Quoting Tornado82 (Reply 37):

Ding, you are now free to make profits only because of fuel hedges. Fuel hedges saved WN upwards of $100 million. Do the math, 100 > 86.

One person's fuel hedge is another person's sound management.

B6 departed from the script - simple fleet, a workable NYC presence at an airport with open capacity at key times, and sound, measured growth.

Now can we talk about future D check costs on A32X aircraft?
"Nuts to the man in 21D!"
 
PassBureauMgr
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:18 am

...And, later this summer B6 will have another competitor entering some of their markets, as Virgin America starts up.
 
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mariner
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RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:20 am

Quoting Junction (Reply 30):
Fuel must not be the biggest issue, because AA and CO are proving you can make money by paying U.S. $70 without hedging.

Um - American just reported a loss of $604 million for the quarter.

http://biz.yahoo.com/bizj/060118/1216564.html?.v=2

Continental just reported a loss of $43 million for the quarter, and expects a "significant" loss next quarter:

http://www.marketwatch.com/news/yhoo...B7%2D4DCD%2D95F6%2D4BBCCA06BD0E%7D

cheers

mariner
aeternum nauta
 
luv2fly
Posts: 11056
Joined: Tue May 13, 2003 2:57 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:26 am

Quoting PassBureauMgr (Reply 39):
...And, later this summer B6 will have another competitor entering some of their markets, as Virgin America starts up

Yeah I believe it when I see the plane pull up to the jetway. Talk is cheap and so far I have seen no progress in taking to the air.
You can cut the irony with a knife
 
travatl
Posts: 1946
Joined: Sat Mar 03, 2001 4:57 pm

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:30 am

Hmmmmm....

The big three LCCs.. Southwest, jetBlue, and AirTran....

- Southwest posts yet another profit, much of which relies on phenomenal hedges, comes in just shy of analysts' expectations, and predicts possible reduction in revenues moving forward due to envirionment.

- jetBlue TANKS in the fourth quarter.

- and AirTran breaks even, shows improved load factors, beats all analysts' expectations, and predicts bullish improvement moving forward citing "we've been building the airline to a specific point to really move ahead, and we think we're there NOW".

Stock Closings Today (Feb 1, 2006)

Southwest (LUV) $16.23 (-.23)
jetBlue (JBLUE) $11.18 (-1.18)
AirTran (AAI) $16.98 (+.04)

So why does AirTran always get the "also ran" news story.....is it time to rethink the senior managements' abilities - and put flair aside? They may not be the most charismatic in the industry...but the 'tran guys have definitely shown their true abilities...

- Travis

P.S. I noticed several news sources today were stating "former Wall Street darling" with regards to jetBlue....of which both carriers in the above comparison have held the title.
1 Interview. 24 years. 3 Airlines.
 
Rottamo
Posts: 135
Joined: Tue Dec 06, 2005 1:45 pm

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:33 am

Quoting Junction (Reply 30):
Seems these could be the main reasons for B6 losing money. Fuel must not be the biggest issue, because AA and CO are proving you can make money by paying U.S. $70 without hedging. B6 really needs to try and stick to their original basic LCC focus rather then concentrating on extremely rapid growth. Overcapacity remains the main problem with the U.S. airline industry.

??

2005:

From ARM press release:
http://www.aa.com/content/amrcorp/pressReleases/2006_01/18_4Q2.jhtml

AMR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)

Total operating revenues 20,712
Operating Loss (93)
Loss Before Income Taxes (861)

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

FINANCIAL SUMMARY
(In millions, except per
share data) (Unaudited)

Operating Revenue: $10,235
Operating Loss (39)
Loss before Income Taxes (68)



And jetblue:
Operating revenue $1,621
Operating income 48

Income before income taxes (24)


No one is doing well.

Rottamo
 
User avatar
airzim
Posts: 1490
Joined: Wed Jun 20, 2001 7:40 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:38 am

Quoting MAH4546 (Reply 28):
Did I ever say anything about full loads? The Newark flights have been successful in terms of meeting expectations.

Wow. Now that's a loaded statement. "Expectations" being the key word. You seem to imply they were making money.

Quoting MAH4546 (Reply 19):
Newark is doing very well for them, I don't "think" it is, I know it is.

So you challenge someone assertion that B6 is doing well out of EWR and your rebuttal statement is "meeting expectations." Could very well mean they are losing money hand over fist, as long as that's what was expected.

JetBlue's problem is they have no strategy. Their model is predicated on keeping costs down primarily through growth. However every recent manuever demonstrates the opposite. New fleet type, new illogical markets, high cost airports, delay prone stations. They pay their staff crap wages and little in the way of lucrative stock options, so wage pressure is coming.
 
luv2fly
Posts: 11056
Joined: Tue May 13, 2003 2:57 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:47 am

Quoting Airzim (Reply 44):
JetBlue's problem is they have no strategy

Thanks for the laugh! This is the FIRST loss since they went public in 2002! Now suudenly the sky is falling. Did you happen to see the loss that both AA and CO posted for the same time period?
You can cut the irony with a knife
 
User avatar
airzim
Posts: 1490
Joined: Wed Jun 20, 2001 7:40 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 8:59 am

Quoting Luv2fly (Reply 45):
Thanks for the laugh! This is the FIRST loss since they went public in 2002! Now suudenly the sky is falling. Did you happen to see the loss that both AA and CO posted for the same time period?

"Trees throught the forest"

Why don't you tell me their strategy beside, "being everyone's favorite airline for giving them free CNN." One word. COST. They are only successful if they have a cost advantage over their competitors. All I am saying is their current decisions fly in the face of keeping to that model.
 
letsgetwet
Posts: 490
Joined: Tue Jul 26, 2005 12:08 pm

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 9:04 am

Quoting Luv2fly (Reply 45):
Thanks for the laugh! This is the FIRST loss since they went public in 2002! Now suudenly the sky is falling. Did you happen to see the loss that both AA and CO posted for the same time period?

This is not a fair comparison. B6 had a bigger loss than CO, and their system is but a fraction of CO's.
But I agree, none of them are doing well. Like Gordon Bethune once said."We are winning the one-legged race"
 
crash65
Posts: 55
Joined: Tue Dec 16, 2003 3:36 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 9:15 am

Quoting Luv2fly (Reply 45):
Thanks for the laugh! This is the FIRST loss since they went public in 2002! Now suddenly the sky is falling. Did you happen to see the loss that both AA and CO posted for the same time period?

There is no doubt about it, the profit environment in the entire airline industry is pretty much nonexistent. With the exception of SWA, thanks to brilliant fuel hedges, and Airtran (as Travatl pointed out), the year was a bust and looking forward things don't look much better. I'm in the industry and for years I have heard all of the ney-sayer rumors about the zero upfront "balloon payment" Airbus leases Jet Blue has enjoyed, and the deferred mx/ warranties, and the fly out of Logan for one year free deals. I have not seen any confirmation of any of these but I have heard a lot about them for years. What I do know is that until recently Jet Blue was enjoying the benefits of flying new equipment of a time tested design, in to under utilized airports and under served markets. They did all of this with a work force that was at the bottom of a very stingy payscale and they were/are for the most part, newcomers to the industry. What I see now is an Airline that is maturing from being a "fresh new" startup into an established operation that has to stand on it's ability to profit more from the operation of the company, and less on the cost advantages of a startup. Original equipment is starting to go in to the heavy mx schedule, some employees are hitting the 6 or 7 year portion of the payscale, the under utilized airports and underserved markets are becoming much fewer and farther between, the E190 while a great design (possibly I have no personal experience) is not time tested and it will not be cheap until the operational bugs are worked out. Jet Blue has a monumental task in front of it and there are no easy answers, yet the planes keep coming and they have to find markets to fill them. One thing I did notice is that while revenues have grown, costs are rising at a greater pace, but I have not had time to factor out the fuel costs. Tough times are ahead for all the airlines, Jet Blue has just joined the party.
 
ScottB
Posts: 7275
Joined: Fri Jul 28, 2000 1:25 am

RE: B6 - What Do You Do Now?

Thu Feb 02, 2006 9:24 am

Quoting Travatl (Reply 42):
- Southwest posts yet another profit, much of which relies on phenomenal hedges, comes in just shy of analysts' expectations, and predicts possible reduction in revenues moving forward due to envirionment.

I guess you weren't paying attention when Southwest reported earnings; quoting Reuters:

Quote:
Analysts said Southwest had missed the consensus forecast by a penny mainly because of an unexpected $24 million in additional airport security expenses assessed by the Transportation Security Administration. The airline called the assessment "completely unexpected" and said it planned to protest it.

...

"It's disappointing that (Southwest) reported the (quarterly) number being lower than what people were expecting but the guidance was more favorable than people were expecting," said Helane Becker, an analyst with the Benchmark Cos.

Southwest still hasn't backed off their target of 15% earnings growth year-over-year, but they did state that they would need to grow revenue to reach that target. I don't exactly see how that is a prediction of reduced revenues. They did state that the timing of Easter would make it challenging to meet the year-over-year comparison for the first quarter, but I wasn't aware that Southwest controlled the timing of that holiday.

As far as I can tell, AirTran did get credit for beating the analysts' predictions, so I'm not exactly sure what your issue is.

To return to the issue at hand, which is where jetBlue goes in 2006 and beyond, the key issues as I see them are the following:

* Working on yield management to improve RASM and get break-even load factors significantly below 80%.
* Dealing with the fact that congestion is probably going to continue to worsen at JFK, FLL, and BOS.
* An increasing level of balance sheet leverage, with the ratio of debt to assets up to 0.73 at the end of Q3 as compared to 0.56 at the end of 2004. (LUV is at about 0.37)
* Increases in most non-fuel costs which outpaced revenue growth in percentage terms.
* Escalating levels of maintenance costs as older aircraft leave the warranty period, as well as higher leasing costs due to some of the leases being back-loaded.
* Applying the company's business model, which has relied on high load factors on long stage lengths, to shorter haul markets which generally have lower load factors and higher CASM -- especially with the E190.
* Long term pressure to improve wages given that pay rates at JBLU are near the bottom of the industry.

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