Earnings

[Dog Wonder]

maybe it revenue management.

My sister purchased a ticket to PHX for the superbowl @260.00 RT plus fees.

dp PVD sat AM to DCA - PHX

Dp PHX Wed AM to CLT to PVD.

Why would they sell a ticket below break-even to P{HX for the superbowl. MY brother in law purchased 3 tickets two weeks ago (with antisipation of NE winning) for less than $200.00 each.

Just plain stupid.

Don't gouge but at least Break-even for the super bowl.

Look at a map.

The Patriots play in Foxboro.

Flip a coin as to whether Foxboro is closer to PVD or BOS.

In PHX the rest of the route system is 2500 miles away.

How would the Kids in the Sandbox know?

 

[700UW]

Pats usually fly out of PVD and not BOS.

 

[gaucho99]

I let the international excuse slide, but this one was too much.....

You do know that CO paid nearly 33 cents per gallon more for fuel than US in the 4th quarter, don't you? If they'd had US' fuel cost their 4th quarter profit would have been nearly $130 million higher. Conversely, if US' fuel costs had been the same as CO, US' loss would have been about $95 million greater.

Jim

Yes, I agree but the point I was trying to make was mentioned in the 4th quarter earnings webcast. It was mentioned US Airways suffers more than other carriers when fuel prices are high. This is because fuel makes up a higher percentage of our overall expenses than other airlines. Conversely, when fuel prices are low, US benefits more than others. This is not in reference to the exact amount each carrier is paying for fuel, rather the effect the price has on the airline.

For example, assume airlines have only two costs, fuel and aircraft lease. Say Airline A spends 50 percent of their total expenses on aircraft leasing and 50 percent on fuel. Airline B pays 80 percent of their total expenses on fuel and 20 percent on aircraft leases. When fuel prices rise, even if both airlines pay the same amount on fuel, airline B suffers more because 80 percent of all their expenses have skyrocketed while Airline A only has 50 percent of their expenses rising. This is an exaggerated example and I don't know to what extent it plays out in the real world but apparently it does.

 

[legacy-to-LCC]

Yes, I agree but the point I was trying to make was mentioned in the 4th quarter earnings webcast.

your first problem...of many...

your second problem. your analogy is pathetic. and representative of nothing real.
much like the "leadership" team you so emphatically endorse. wrongfully.

 

[BoeingBoy]

Yes, I agree but the point I was trying to make was mentioned in the 4th quarter earnings webcast.

In theory, your repeat of management's statement has some merit - if the airlines all pay the same price for fuel or nearly so. But they don't, at least in part because of different amounts and successfulness of hedging. Unless the difference in price paid for fuel is less than the difference in percentage of expenses that fuel represents, it's just another "It's not our fault" excuse.

CO's fuel cost is 32.17% of expenses while US' is 33.51% - a difference of 1.34 percentage points or about 4%. CO's fuel cost/gallon was about 9% higher than US. CO's higher fuel cost had about double the effect of their smaller fuel share of expenses had.

A correction to a previous post is in order, however. I said that CO paid almost 33 cents/gal more for fuel and that was wrong - apparently I looked at UA's figure when I wrote that. CO actually paid about 21 cents/gal more than US.

Fuel price and share of operating expenses for 4Q
AA $2.3970 32.56% of expenses
CO $2.5089 32.17% of expenses
DL $2.6100 28.94% of expenses
NW Hasn't reported
UA $2.5300 33.08% of expenses
US $2.3000 33.51% of expenses

If you look at DL, their higher fuel price is almost exactly offset by their lower fuel share of expenses. Yet they did much better than US financially in operating terms - almost break even ($2M loss) - and better net.

When you get right down to the bottom line, US performed worse than any other legacy carrier financially while being less affected by the sharp rise in fuel prices. And that's before factoring in size - as the smallest, US would have outperformed the others financially if they'd just had the same profit (loss) margin. Throw in the fuel cost advantage and US should have been the king of the legacies for the quarter. Instead, US was on the bottom financially (pending NW's report). The "money" experts running the show did great in financial transactions - hedging - but their lack of operational expertise shows in the numbers.

Jim

 

[gaucho99]

In theory, your repeat of management's statement is correct - if the airlines all pay the same price for fuel. But they don't because of different amounts and successfulness of hedging. Unless the difference in price paid for fuel is less than the difference in percentage of expenses that fuel represents, it's just another "It's not our fault" excuse.

CO's fuel cost is 32.17% of expenses while US' is 33.51% - a difference of 1.34 percentage points or about 4%. CO's fuel cost/gallon was about 9% higher than US. CO's higher fuel cost had about double the effect of their smaller fuel share of expenses had.

A correction to a previous post is in order, however. I said that CO paid almost 33 cents/gal more for fuel and that was wrong - apparently I looked at UA's figure when I wrote that. CO actually paid about 21 cents/gal more than US.

Fuel price 4Q
AA $2.3970 32.56% of expenses
CO $2.5089 32.17% of expenses
DL $2.6100 28.94% of expenses
NW Hasn't reported
UA $2.5300 33.08% of expenses
US $2.3000 33.51% of expenses

Jim

Looks like the percentrage difference between airlines is so small that it is not much of a factor at all, so I will concede defeat on this issue.

 

[vantheman63]

Yes, I agree but the point I was trying to make was mentioned in the 4th quarter earnings webcast.

Look, Gaucho99....frankly, you are looking way, way too deep into the numbers, trying to get them to say something they aren't. Numbers do not lie.

But lets forget, just for a moment, the numbers. Lets suppose the numbers say what you want them to say...and they don't...but lets suppose for a second they do.

The fact that the kids in the Sand Castle KNOW they have problems and issues is apparent in their actions.

ONE, they hire Mr. Isom as COO. WHY hire a COO if you don't need one? The COO says, "we have issues" and then takes to the skies and airports with this crazy "get the airplanes there on time with luggage and everyone's happy" message.

TWO, like, EVERY publication that ever tracked aviation names US Airways everything from "worst to avoid at all costs" for air travel. That doesn't happen by accident. One publication? Sure, two? Maybe, but doubtful. EVERY publication? Houston, we have an issue.

THREE, the kids in the Sand Castle announce a real winner..."Reliability, Convenience & Appearance." That alone should be ALL one needs to see and hear to know they know they have issues. If you are already reliable with neat and tidy airplanes, do you start that campaign? I'm at EWR in the CO Presidents Club as I type this....I don't see filth, soiled furniture, torn upholstery....didn't see scuff marks and filth in the airplane. Let me ask this, WHY have this "Reliability, Convenience & Appearance" campaign if everything's hankey dorey???

FOUR, in the address to the US Airways team, they continue to say, "running a bad airline is expensive and we'll lose customers if we continue to do so." Is it possible the kids in the Sand Castle understand they are running a bad airline? In that they continue to admit this???

FINALLY, the numbers speak for themselves....you and some of your compadres can be in denial...my hunch is they recognize in Tempe "they have issues to deal with."

BOTTOM LINE, the lifeblood of an airline is business travelers. Maybe Skybus and Spirit can get by with liesure travelers...but not the "Big 6." Even WN realizes they have "issues" and they are working to solve them.

Where I feel bad for US and the employees is the MAJOR handicap you have because of the Mr. Parker/Mr. Kirby combo at the top of the pyramid. In listening to the likes of Larry Kelner, Smizer and some of the other jockeys out there, I don't see the art of finger pointing perfected the way Mr. Parker has perfected it.

Ultimately, the lack of accountability is the #1 handicap a leader has when he/she has none. Already, reason number 1 for the US team to lose money and have no profit sharing has been laid out..."the economy."

Meanwhile, in Houston, the leaders there continue to set themselves up to maange through a tough economy without blaming anyone, burning cash and pissing off their lifeblood...their frequent fliers.

Feel free to insist "everything's okay." You and Baghdad Bob might consider working somewhere together...

 

[TechBoy]

Fuel price and share of operating expenses for 4Q
AA $2.3970 32.56% of expenses
CO $2.5089 32.17% of expenses
DL $2.6100 28.94% of expenses
NW Hasn't reported
UA $2.5300 33.08% of expenses
US $2.3000 33.51% of expenses

I think that you all have dug in too deep on your respective opinions to see that this data cuts both ways. One could argue that US is poorly run because they had a similar loss as CO despite having lower fuel costs. But one could also argue that CO is poorly run because they did not hedge their fuel costs as effectively as US. I'm not sure that US is being run well, but you have to give them some credit for good hedging.

As for the VFFs and Piney's relentless assault on US, as a UA 1K, I would not really consider US if I needed to switch carriers. Poor service, bad hubs, too many small planes. But CO is no bowl of cherries either. Try getting an upgrade on a transcon -- very difficult at times when VFFs tend to fly. Try using your miles on standard awards in BF -- also next to impossible. I do agree that they have the best service among the US carriers and have good inflight amenities, particularly in BF. But as a former CO Plat, don't be so sure that they are the best choice for the VFF. I'll stick with UA which gives me average service, great planes, regular upgrades (including international ones), and the ability to actual cash in my miles for C and F tix to great destinations.

 

[gaucho99]

The fact that the kids in the Sand Castle KNOW they have problems and issues is apparent in their actions.

I don't dispute we've had problems. Neither do I dispute we are losing vff's. What I find interesting is in spite of all these problems, we finish the year just a notch below the best performing airlines. I beleive if we had run a half way decent airline in 07 we would have burried our competition. So, as much as there is wrong with this airline, there is also something very good.

It's also impotant to recognize we're running a much better airline now. This reminds me of the stigma CO had back in the 90's. They had been a horrible airline but turned everything around (Worst to First) Yet, even after they became a very good airline, people were still ragging on them and saying how horrible they were. People are slow to see reality and base their opinions on old, outdated facts. US is not there yet, but we are well on the way but people just don't see it yet.

 

[wench1]

BUds at CO are getting 30-40% Profit Sharing...

 

[US1YFARE]

But CO is no bowl of cherries either. Try getting an upgrade on a transcon -- very difficult at times when VFFs tend to fly.

hey don't knock them because people PAY for their FC product which is light years ahead of US. You can get an upgrade on US because they suck. They way I look at it, I buy lots of Y and A tickets (CO uses some different codes, like H and R), so i pay to get in FC. The planes are clean, the services is great, CO appreciates my business, my bags arrive, and the Presidents Clubs are phenomenal compared to US. So, maybe US caters to the lowest common denominator FF.

 

[BoeingBoy]

If I understand BB correctly.......

Actually, Bob, that was the extremely simplified version because looking at total fuel cost as a percentage of expenses automatically factors in the price paid (net of hedges) per gallon. So if you took two identical carriers - identical in every way with precisely the same costs except for fuel - the carrier paying more per gallon for fuel would have the higher percentage of their costs going to fuel and it wouldn't matter if the "official" price of fuel was 25 cents a gallon or $25 a gallon.

A more accurate ratio would probably be fuel quantity used per million available seat miles. US, having a smaller average plane size and shorter average stage length, is at a disadvantage relative to the other legacies when it comes to the fuel quantity required to produce those million ASM's. It's simple physics - smaller planes and short flights both burn more fuel for the seat miles produced than bigger planes and longer flights.

With that ratio, a fuel inefficient carrier like US is more impacted by high fuel prices than a more fuel efficient carrier (larger percentage of big airplanes and longer flights) - if they pay the same for fuel. So US has to try to overcome the inefficiency disadvantage somewhere else - like hedging better, lower wages, etc.

What it boils down to isn't size but fuel efficiency. A small carrier can be fuel efficient - think of the all business class carriers operating only 767's on long TA routes. A large carrier can be fuel inefficient - think WN with nothing bigger than the 737 and very short average stage length. At the end of the day, it all goes into the hopper to be managed by the executives and they're either successful or not.

Frankly, I found two remarks in the conference call interesting. They said the Thanksgiving/Christmas bookings were lighter than expected and that the new TA routes didn't perform as well as expected. The result of running an inferior operation during the spring and summer perhaps.....

Jim

 

[vantheman63]

It's also impotant to recognize we're running a much better airline now.

Perhaps. In fact, I'll give that to you. BUT, two issues, and I say this as someone who's been and "Elite Level" customer going back to 1990...

ONE, the airline's product is not at the level of the competition. Actually, it's not close. The excellent emloyees don't have tools, etc. The "feel" of the product is different.

TWO, the pricing and positioning of the product is way, way out of whack, still. The pricing makes no sense...and is a HUGE deterent for me. Because of the pricing and the quality of the product itself, I'll only fly US when it's dirt cheap and when I have to. From my vantage point, that's not good.

And it's sad....3 or 4 years ago, I would NEVER have strayed from US unless it was totally necessary. Times when I did fly other carriers, I felt like I was cheating on US. Now, I groan at the thought of flying US...and living in the Northeast, its necessary.

This reminds me of the stigma CO had back in the 90's. They had been a horrible airline but turned everything around (Worst to First) Yet, even after they became a very good airline, people were still ragging on them and saying how horrible they were. People are slow to see reality and base their opinions on old, outdated facts. US is not there yet, but we are well on the way but people just don't see it yet.

I don't disagree with this either. That's the collateral damage the kids in the sand box have created. It will be YEARS before I'm ever convinced to buy a premium product from US.

The CO product is so, so much different now.

I want US to be "back." I have loved ones that work for US. As I've said 10,000 times, flying out of PVD, they are the most convenient. But US has a long, long, long way to go. The stretch to medicrity, "Reliability, Convenience & Appearance" is at least a move in the right direction.

But, the Chief Finger Pointing Officer sets the tone...and I question his ability to set a good one.

For example, The CFPO says, "an uncertain economy will create havoc for us, but never fear, we've got $3Billion in reserves."

In the CO magazine, their CEO, Larry Kellner says, "the decisions we've made over the past 5 years will make us successful and profitable, even during a tough economy."

WN made money during 9/11 even....my hunch is that CO would now as well.

US? Well, the CFPO says, "probably not."

I hope you're right Gaucho99...but from my vantage point, the collateral damage caused by this management team...they've dug a HUGE hole. Huge.

 

[vantheman63]

I think that you all have dug in too deep on your respective opinions to see that this data cuts both ways. One could argue that US is poorly run because they had a similar loss as CO despite having lower fuel costs. But one could also argue that CO is poorly run because they did not hedge their fuel costs as effectively as US. I'm not sure that US is being run well, but you have to give them some credit for good hedging.

How about this...and I'd love to hear from the pilots out there....CO pilots almost NEVER use reverse thrusters any more....all stopping is done with brakes. Not sure how many cycles they get before needing to replace pads, but they are probably saving LOADS of fuel by landing and not using the jets to stop.

Where does that leave CO in terms of intelligence and teamwork?

As for the VFFs and Piney's relentless assault on US, as a UA 1K, I would not really consider US if I needed to switch carriers. Poor service, bad hubs, too many small planes. But CO is no bowl of cherries either. Try getting an upgrade on a transcon -- very difficult at times when VFFs tend to fly. Try using your miles on standard awards in BF -- also next to impossible. I do agree that they have the best service among the US carriers and have good inflight amenities, particularly in BF. But as a former CO Plat, don't be so sure that they are the best choice for the VFF. I'll stick with UA which gives me average service, great planes, regular upgrades (including international ones), and the ability to actual cash in my miles for C and F tix to great destinations.

Yeah, okay, if a "great airline" is defined by upgrades and awards, then CO is clearly not your first choice. As a current PE, I agree...upgrdes? Don't count on them. Why? BECAUSE THEY ACTUALLY HAVE A PRODUCT WORTH BUYING! What a novel concept! An airline creates enough value in a product and prices it so that people want to actually PAY for it.

HOW one could penalize CO for that confounds me. I for one don't have a problem paying CO for F class service....I did it yesterday in fact...PVD-ABQ via EWR and IAH.

 

[TechBoy]

hey don't knock them because people PAY for their FC product which is light years ahead of US. You can get an upgrade on US because they suck. They way I look at it, I buy lots of Y and A tickets (CO uses some different codes, like H and R), so i pay to get in FC. The planes are clean, the services is great, CO appreciates my business, my bags arrive, and the Presidents Clubs are phenomenal compared to US. So, maybe US caters to the lowest common denominator FF.

If I could buy A fares, I probably would fly CO too. But that isn't the point. Piney and others have whined for years about any changes that impacted the ability of VFFs to upgrade (including on low fares) on US and that US has substandard service. There is no doubt that they are right about the substandard service. But my point was merely that they will not be any happier with CO where they will often be sitting in cramped coach seats (no E+ on CO) and will have great difficulty using their miles for premium seats to premium destinations.