B6 Responds to Loss with Broader Expansion

[coolflyingfool]

I am surprised that it will be 8-10 markets with new service. It is at almost no cost to add existing frequency to a market, but to start new service does cost some cash. There is the hiring of new employees, advertising, additional equipment (ground and gate stuff), additional contracts with suppliers in the new city, and some other incidental expenses. I would have thought with the 4th quarter and 2006 not going Jetblue's way, they would have opted for additional frequency over new routes. I know the E190 were going to require new cities, but the A320 could go to boosting service. just my thoughts.........

 

[Blue Dude]

I would have thought with the 4th quarter and 2006 not going Jetblue's way, they would have opted for additional frequency over new routes.

I think under normal circumstances you'd be right, but adding frequency to existing markets is a primary reason for the loss in the first place. This is because most everyone saw significant increases in RASM this past quarter, except JetBlue. And the reason for not experiencing a RASM bump was overcapacity on many existing markets, i.e. competing with yourself. Most of the likely suspects already have as much capacity as they can stand, and adding more only makes it harder get RASM up to where it needs to be.

JetBlue has traditionally resisted adding stations for its growth, instead adding capacity to existing markets, switching capacity back and forth between markets on a seasonal basis, and sometimes connecting dots. Why? Because it wasn't necessary. Costs were very low and the markets were surprisingly deep. (Remember, the original plan was to open a much broader range of stations much sooner, but it never became necessary to do so, since the existing markets did an admirable job of soaking up new capacity. For all the talk of "massive" JetBlue expansion, they have taken only about 15 aircraft a year for several years.) Only three or four new stations a year (sometimes much fewer) have represented truly new markets. But times have changed (read: fuel costs a lot more and RASM must rise to compensate) and JetBlue will shift this year to operating more stations. This will cost more initially, certainly, but it's better than sitting stagnant and putting the 20th frequency JFK-FLL. I also think this is a one-time surge primarily related to the E-190 startup. Once the initial spurt is over, we'll again see a retrenchment to building on existing markets, much as you saw with the initial 320 expansion.

 

[Globetrotter11]

<<But the bloom is off the rose. JetBlue is no longer au courant...the flavor of the week. It's an airline, nothing more and nothing less.>>

ELP_WN_Psgr,

Compounding the problem is that the soon to become the new hip airline, Virgin America, is going after many of the customers Jet Blue serves. Jet Blue will now be the "legacy" carrier of sorts :blink:

Globetrotter11

 

[SoftLanding]

So would free airplanes or a repeal of all federal taxes and PFCs or free terminal rent or zero landing fees or minimum wages for all employees, but none of those are gonna happen either.

Successful airline operations will require ticket prices to match (or, god forbid, even EXCEED) costs.

Hoping for lower fuel prices ain't gonna do it.

Time for Neeleman to admit defeat and slow down the capacity additions.

It's long past time for airline execs to plan as though fuel is always gonna be $2.25+/gal. Planning for lower prices is the ticket to financial ruin.

Agree with ticket prices, if only the airlines would do what FDX & UPS and other shippers do...instutute a fuel charge, but again, that just is not going to happen.

Oil prices has topped! (Excepting a Iranian "situation").

Expansion must slow down, but according to 4th quarter questions, that is not going to happen. Wonder how long the BOD will wait before they take action?

 

[GroundedBoricua]

What airline decides to take on a new type and then decide they will take 2 per month? An arrogant one. I do not understand why they did not stick with one fleet type. The E-190, may turn out to be a good aircraft, but from I have heard, it is not performing very well, with many parked at a time due to mx. At a time where fuel costs continue to be an issue, I do not see how they can continue to expand to new markets. Epecially with a non-performing aircraft.

The E-170/190 are very very cost efficient. The problem with the plane when it forst starts off is all the tecnical glicthes that come with a brand new aircraft. I'm sure Airbus and boeing had there problem when they launched new aircraft types. But now they work very well. At US the E-170 was a nightmare for the first year or so. I personally worked the E-170 for 8 months without a cancelation nor major mechanical. Of course that was after a year of service. Just give the plane its time.

 

[Phantom Fixer]

Okay, good point... I should have said "ever again"....

I believe the reference in this story line was to the EMB-190 being in DL Colors...Not the A320 series.

Yes...DL did have a very short run with the Airbus...but that was when they aquired a lot of Pan Am assets...and they dumped the Airbus like a bad habit , shortly there after.

 

[MAH4546]

Miami was recently added to the jetBlue Getaways page...hmmm...

 

[kiloromeo]

Will Jet Blue pay out profit sharing checks to all employees for 2005?

 

[Blue Dude]

Will Jet Blue pay out profit sharing checks to all employees for 2005?

No. No profit, no profit sharing.

 

[767jetz]

No. No profit, no profit sharing.

Interesting point I haven't considered. I've had several conversations in the past with B6 folks defending their low pay rates with the "Yeah, but we get profit sharing" statement. I guess those employees are now facing their first pay cuts.

Profit sharing is great in good times since it motivates people. But when business turns for the worse it is an unfair, forced pay cut. In effect labor pays for management mistakes. (ie: over-expansion & underpricing) Only in this case, with the lack of unions, the pay cuts come without debate, negotiations, or objection.

 

[bluetoad]

Usually jetBlue pays the profit sharing in Feb. I guess this year they will be making a deduction from the profit sharing accounts.

 

[Blue Dude]

I guess those employees are now facing their first pay cuts.

Not really. Profit sharing is a company-wide performance bonus, not base pay. Perhaps you'd prefer that only management get those?

I guess this year they will be making a deduction from the profit sharing accounts.

Uh, no. Remember the pretax credit in the 3rd quarter? That was the profit sharing being backed out of its account since they didn't expect to post a profit for the year. Profit sharing doesn't accrue negatives that you have to overcome in subsequent years.

 

[eolesen]

Not really. Profit sharing is a company-wide performance bonus, not base pay.

Very true, but how many B6 employees have considered it a bonus, and how many have been depending on it to make up for the lower pay scale (which isn't just the pilots, but ground and HDQ crewmembers).

If they've been depending on profit sharing to make the ends meet, then for those employess it is essentially a pay cut.

 

[Blue Dude]

Very true, but how many B6 employees have considered it a bonus, and how many have been depending on it to make up for the lower pay scale (which isn't just the pilots, but ground and HDQ crewmembers).

If they've been depending on profit sharing to make the ends meet, then for those employess it is essentially a pay cut.

Considering that the profit sharing distribution is a once a year event, of variable value, deposited into the 401(k) account, I would expect that the number of employees who depended on it to make ends meet is nearly zero.

 

[Busdrvr]

Considering that the profit sharing distribution is a once a year event, of variable value, deposited into the 401(k) account, I would expect that the number of employees who depended on it to make ends meet is nearly zero.

But I know a significant number of Blu guys who used it as an excuse for not having a retirement. "Why do I need an A or B fund, I'm getting filthy rich on these stock options and profit sharing" Of course, no one believed me when I said it wouldn't last.... BTW, How's that stock option thing working for ya?