Amr Response To Fll Announcement?
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WestCoastGuy
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- Jun 27, 2004
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AA isnt going to standby and let a little nickel and dime operation like ours at FLL put a crimp into their Latin American operations.
jimntx
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Actually, I think it is a combination of seasonal adjustments and beefing up International flying where yields are better. Nice thing about the Caribbean is that you can redeploy domestic a/c--such as the 737s--to Intl without any modification because all the 737s were overwater-equipped from the beginning.
I actually have a different perspective on AA's response. Did you know in January AA is dropping FLL-SDQ ? FLL-BOS ? FLL-CCS ? Did you know also in January AA is reducing LGA-FLL ? and they are looking at dropping LGA-FLL alltogether (currently 4 757's per day). This appears to be a response to new competition from several carriers. US, NK, and B6 !
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BoeingBoy
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Ok, here it is in this Aviation Week article....
JetBlue's Neeleman Sees 'Silver Lining' in Fuel Costs
Aviation Week & Space Technology
11/01/2004, page 27
David Bond
Washington
Don't Blame JetBlue
JetBlue Airways, unhappy but still profitable in the third quarter, sees what CEO David Neeleman calls a "silver lining" in ever-increasing fuel prices: Airlines are becoming more sensitive about pricing and more cautious about capacity.
Concerns about excess capacity might seem odd coming from an airline that intends to take delivery of six new aircraft in the fourth quarter and 22 more in 2005, increasing available seat miles 26-28% in the coming year, but Neeleman insists that JetBlue is reacting to, not causing, the lower-than-low, profitless fares that dogged commercial aviation since summer-travel peaks.
For example, some of JetBlue's biggest capacity increases this winter will be on north-south service to Florida. But year-over-year first-quarter growth of 32% to Fort Lauderdale, 30% to Orlando and 37% to West Palm Beach will be less in each case than overall increases in demand, Neeleman told analysts Oct. 28.
Transcontinental capacity, which ballooned and ruined yields during the past year, is easing off, he added. American Airlines and JetBlue used to operate 14 flights per day between New York and points south of Los Angeles. Now, American has pulled out and JetBlue offers six. United Airlines is cutting back, and America West is down to five from 12. The high price of fuel "is making people get a lot more rational," Neeleman said. Money-losing competitors won't be able to sustain their cheap fares, and "that's the silver lining."
JetBlue reported a $23-million operating profit and $8.4 million in net income for the third quarter. Its operating margin was 7.1%, down from the double-digit days exemplified by the year-earlier quarter's 19.7%. The change is no fluke: JetBlue's A320 fleet is young, but increasing numbers of these aircraft will need heavier maintenance. Third-quarter materials and repair costs were more than double those of the third quarter of 2003.
JetBlue's Neeleman Sees 'Silver Lining' in Fuel Costs
Aviation Week & Space Technology
11/01/2004, page 27
David Bond
Washington
Don't Blame JetBlue
JetBlue Airways, unhappy but still profitable in the third quarter, sees what CEO David Neeleman calls a "silver lining" in ever-increasing fuel prices: Airlines are becoming more sensitive about pricing and more cautious about capacity.
Concerns about excess capacity might seem odd coming from an airline that intends to take delivery of six new aircraft in the fourth quarter and 22 more in 2005, increasing available seat miles 26-28% in the coming year, but Neeleman insists that JetBlue is reacting to, not causing, the lower-than-low, profitless fares that dogged commercial aviation since summer-travel peaks.
For example, some of JetBlue's biggest capacity increases this winter will be on north-south service to Florida. But year-over-year first-quarter growth of 32% to Fort Lauderdale, 30% to Orlando and 37% to West Palm Beach will be less in each case than overall increases in demand, Neeleman told analysts Oct. 28.
Transcontinental capacity, which ballooned and ruined yields during the past year, is easing off, he added. American Airlines and JetBlue used to operate 14 flights per day between New York and points south of Los Angeles. Now, American has pulled out and JetBlue offers six. United Airlines is cutting back, and America West is down to five from 12. The high price of fuel "is making people get a lot more rational," Neeleman said. Money-losing competitors won't be able to sustain their cheap fares, and "that's the silver lining."
JetBlue reported a $23-million operating profit and $8.4 million in net income for the third quarter. Its operating margin was 7.1%, down from the double-digit days exemplified by the year-earlier quarter's 19.7%. The change is no fluke: JetBlue's A320 fleet is young, but increasing numbers of these aircraft will need heavier maintenance. Third-quarter materials and repair costs were more than double those of the third quarter of 2003.
B6 had better watch out, look at this memo sent to employees from Dave Barger that I obtained. Scary, if B6 is going to lose money, can anyone make money?
"As a result of anticipated weak yields combined with record-high fuel prices, we are now forecasting a breakeven operating margin and a net loss for the fourth quarter. Obviously, this is a significant departure from our ‘normal’ business trend, as this third quarter report marked our fifteenth consecutive quarter of profitability. But the revenue environment continues to look challenging – October was still showing sluggishness in our North-South markets due to reduced customer demand as a result of the hurricanes’ impact, which has caused other airlines to keep fall sale fares out longer than usual. While we are seeing an improvement in bookings for November and December, yields are expected to be weak. On the fuel side, we are now forecasting our per gallon fuel costs to be around $1.30 in the fourth quarter – a figure which includes the benefits of our fuel hedge protection. This would be the highest price we’ve ever paid for aircraft fuel. The combination of these two factors regrettably leads us to forecast a loss."
"As a result of anticipated weak yields combined with record-high fuel prices, we are now forecasting a breakeven operating margin and a net loss for the fourth quarter. Obviously, this is a significant departure from our ‘normal’ business trend, as this third quarter report marked our fifteenth consecutive quarter of profitability. But the revenue environment continues to look challenging – October was still showing sluggishness in our North-South markets due to reduced customer demand as a result of the hurricanes’ impact, which has caused other airlines to keep fall sale fares out longer than usual. While we are seeing an improvement in bookings for November and December, yields are expected to be weak. On the fuel side, we are now forecasting our per gallon fuel costs to be around $1.30 in the fourth quarter – a figure which includes the benefits of our fuel hedge protection. This would be the highest price we’ve ever paid for aircraft fuel. The combination of these two factors regrettably leads us to forecast a loss."
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BoeingBoy
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ISP said:
ISP (NOT the Art!!)
I had seen some analysts predicting the possibility of a loss but this seems to confirm it unless fuel drops far and fast.
Let's see - AWA losing money, AirTran losing money, ATA losing money and in BK, I-Air losing money, Jetblue talking about loses. Seems like WN is the only LCC not talking about losses - thanks to their hedging.
You're right. With current fuel prices it doesn't look like anybody can make money unless they hedge as well as WN (and nobody does). Or unless some capacity disappears from the industry so fares can come up (and it wouldn't have to be much - 1 cent per RPM = over $100 million per quarter to US).
Jim
jimntx
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LGA777 said:
Or, it could be that AA just decided that 3 non-stops/day from MIA-SDQ (one 757 and two A300s) plus multiple combinations of MIA-SJU-SDQ was quite enough service from South Florida to SDQ. It's funny that it's always canny marketing and good management when Southwest or JetBlue drops a route, but it's always "running scared" when AA does it.
Light Years
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I thought AA just pulled out of some FLL routes? They probably figure MIA is ours, and we'll bite your head off if you come there, but they aren't going to keep the token FLL flights and try to fight an onslaught from not only US Airways (who may be suffering but is FAR from a joke in the Carribbean market) as well as LCCs.
It's like having a sleepy night watchman guard your garden shed when he could be guarding the front door of your house. AA has better things to do than to fight fare wars in the "neighbor airport" to a hub. Like all the legacies, they need to use thier resources wisely to strengthen themselves, not fight needless fare wars.
It's like having a sleepy night watchman guard your garden shed when he could be guarding the front door of your house. AA has better things to do than to fight fare wars in the "neighbor airport" to a hub. Like all the legacies, they need to use thier resources wisely to strengthen themselves, not fight needless fare wars.
