Jetblue To Lga

[jimntx]

10 flights a day by JetBlue wouldn't destroy AA or CO, but it sure would cut into the fares charged.

Keep in mind that B6 fares are not always the lowest. Granted they start fares low but over time they have been raising fares in markets that they dominate. ie JFK-FLL. Fares on the majors at times are lower than B6

If you will read what I wrote, you will see that I never said that B6 always charges the lowest fare. But, they do tend to charge a lower fare than CO or AA in markets where they compete. Beside that, 10 slots a day from/to IAH or DFW or both is not going to "dominate" either market. But they can hurt the yield in those markets for CO and AA who DO dominate those two routes.

 

[skycruiser]

Article from The Street about the JBU expansion

JetBlue Plans New York Expansion

 

[runway4]

The New York Times aritcle yesterday quoted Gareth as saying B6 would be looking for two gates at LGA, meaning they plan on a heck of a lot more than 5 r/t per day! How about at least triple that? Where will the rest of those slots come from? More government exemptions, or a US fire sale?

I think business destinations make the most sense out of LGA, because, yes, with FL and other leisure traffic, price is key and airport is secondary. HOU, DAL, ORD, all good choices it would seem. Would they even go after NW and try DTW and MSP?

 

[FreqFlyr]

Ladies & Gentlmen,

I am a frequent flyer and invest in avaiation also. A lot of the major carriers blame 9-11 for the industries problems. The is a false statement due to the fact they were bleeding cash already. I will admit it helped it speed things up, but was going to happen 9-11 or not.

The facts are the majors have generated such distrust between their employee groups, that everyone is taking and demanding their piece of the pie, even when they should be doing what is neccessary to compete with the likes of SW, JB,& AT.
A house divded will eventually fall apart! The are not building anymore they are reacting.

Their cost structure is so high that they just cant compete without bleeding cash.
Right now some of the majors are matching prices. Lets take a look at this for a moment.

American - costs them 11.4 cents to take you 1nm in their seat.
JetBlue - Cost them 5.8 cents to take you a mile in their seat.

So the majors can fly and match the prices all day long, but the are being crushed.
What they are doing is taking money from the profitable routes, on which they dont have to compete with a LCC and using it to offset the losses in competing with them.

As the LCC's expand the profitable routes they use to compete will continue to be erroded by the LCC's until they end up smothering them. Then its chapter 11 followed by 7 for them.

In regard to JetBlue's entrance into LGA...
Jetblue's product is superior to any of the majors, unless your flying business or first. Then is it really worth the extra cash if your just flying domestic (NOT!).
The live TV is awesome and they just announced they are putting in XM-Satelitte Radio 100 channels. Their employees seem to really care about their passengers also.

So here it is the choice!
I can have Live TV, XM Sat Radio for free! Leather Seats, nice folks that actually help me put my things in the overhead! (hello Delta!) Have as many drinks and snacks for free, all at a great price. I would gladly pay more for it, if another airline was offering a lower fare. The only reason others may continue to do ok once JB goes into LGA is they are not going in with a large capacity at this point.


Then There is Delta SONG.
Lets dress up a Delta jet with LIME green Paint. I went on the Delta airlines website to get a flight from NY-FL and it listed the same flight that was on the SONG website. When I got there people were actually confused. DELTA- SONG they are one in the same. Its got Delta pilots paid the same, Delta Ramp paid the same, Delta gates cost the same. The difference is more time in the air, and their was NO TV in aircraft and cheaper FA's wahoo. They still won't be able to compete with their CASM. (Cost available seat mile). SONG lost 55 million last qtr. got it from an inside Delta source. Ask them to break out the finacials between mainline Delta & SONG they wont do it! Another failed effort looks like to me.
(SMOKE & MIRRORS)



These major carriers just don't get it, they keep dancing around the issue which is their failed or rather outdated business plan! They better wake up and swallow that tough pill and get on with it. Oh and when and if they do good luck keeping employee moral and infighting out of the picture. This has already become aparent to the costomer. Unfortunetly for some it's already too late.

FOLKS WE ARE WITNESSING THE CHANGING OF THE GUARD IN AVIATION.

 

[ELP_WN_Psgr]

Not doubting that some of what you say has some merit, but I hate it when people just appear to make up facts to support their desired outcome.

First of all, American's ASM cost during the most recent quarter was 10.25 cents....not 11-point-something as reported.

Next, where are you getting 5.8 for the ASM cost for JetBlue? Last I'd heard it was 6.07 cents...and that was BEFORE they pulled out a row or two of seats to get rid of that wretched 30" pitch they failed to forewarn folks about. IF your cost was 6.07...and you reduce the number of seats by roughly 4 or 8 percent, that is going to result in a corresponding increase in JetBlue's ASM cost.

My gut feeling is the jury is still out on the long term success or lack thereof for Jet Blue. They've done well so far.....but is it or is it not true that the lease costs of the Airbuses increase over time....and we do know for a fact that maintenance costs are on the rise....significantly.....and those parts from Europe are not cheap to ship to the Continental US. (Funny how that works....Airbus offers up a plane at a significant discount....much less than the 737NG....but the costs of keeping the plane in the air eventually make the 737NG look like it might have been a better deal).

The real deal, IMHO, is that Delta and Atlanta demonstrated that JetBlue is not invincible. The purchase of the Embraers and the intent to slide over to LGA in addition to JFK appear to be a pretty significant transformation (rather than evolution) of the original business plan. The majors now understand that you cannot ignore a LCC encroaching on your market in the hopes that it will go away, thus they will defend their turf. Thus the jury is still out. AT this stage of their existence People Express looked like the ultimate victor in the airline industry.

I'm not suggesting that Jet Blue is People Express....I can already hear the catcalls about IFEs, new planes, comfy leather seats, etc etc. What I am saying, though, is that extremely rapid growth (100 of the Embraers PLUS some AIrbusses PLUS options for another 100 Embraers) coupled with a business plan that seems far less fixed and methodical.....could result in some of the same issues People Express ultimately faced.

 

[Diesel8]

Just a couple of corrections:

At no point was jetBlues seat pitch 30, prior to removing seats, it was 32 or 33, about par for coach, discounting AMR MRTC and UAL+ . The balloon payment theory is wrong, if you read the financial releases it is quite plain, the airplanes are paid for in a typical manner for an airline. Yes, as airplanes grow older, cost of maintenance increases, but that is certainly something that has been accounted for, certainly does not comes as a surprise.

 

[v1rotate]

I'm not suggesting that Jet Blue is People Express....I can already hear the catcalls about IFEs, new planes, comfy leather seats, etc etc. What I am saying, though, is that extremely rapid growth (100 of the Embraers PLUS some AIrbusses PLUS options for another 100 Embraers) coupled with a business plan that seems far less fixed and methodical.....could result in some of the same issues People Express ultimately faced.

JB & PE...not even close!...give this one a rest please!...the ONLY thing these two airlines have (or had) in common is low fares. Beyond that...no comparison for many many reasons beyond just the ticket price. Bear in mind that this has nothing whatsoever to do with IFE, new planes, comfy leather seats etc. etc. It's all about attitude and providing a service that the consumer wants (and deserves) at a reasonable price. Combine this with a sound business model that is willing to adjust to the times and to make the necessary adjustments to make it work...and guess what?...you've got a winner.

Methodical does not always work. Might this not be one of the problems that has plagued the "big six"? Maybe...maybe not. With that being said, sometimes you have to take advantage of unforeseen opportunities that might NOT have been in the original plan. Move forward and make it work and do NOT rest on the past. Things change. JB has proved thus far that it is willing to move with the times and take advantage of those changes...so far so good...it's working...keep it up!!!

V1

 

[skycruiser]

The facts are the majors have generated such distrust between their employee groups, that everyone is taking and demanding their piece of the pie, even when they should be doing what is neccessary to compete with the likes of SW, JB,& AT.

SWA flight attendants have been stalled in negotiations for 20 months of pay issues and pension benefits. Doesn't sound like those 7000 employees are "doing what is necessary" as you put it. In fact lets take you for example. Would you jump at the chance and accept a huge salary cut to keep you job alive, Sacrifice your quality of life, and pay higher rates/loose health benefits, for the common good of you company but watch the upper level management and officers maintain theirs while getting bonuses? It is always easy to be the arm-chair-quarterback when the shoe is on the other foot.

JBU only has labor cost up a scale of only four years. If their growth goes as well as projected see how those labor relations are doing when those employees are at year ten. It is a gallant notion that employee groups at LUV/JBU/TRS are in it just for the company but the reality of it is they, just like all the rest, want their piece of the pie as well.

 

[Whadayano]

ELP WN Psgr--good homework--are you an airline analyst? One thing to note is that JBLU began taking out the last row during the 3rd Q so some of that is in the ASM cost (as well as the rev). And Diesel8 is right, pitch was 33", and is now 34" for much of the plane.
I think you are right, JBLU looked vulnerable by dropping ATL and that is one reason AMR is being so aggressive. But if what I read is right, JBLU is making it pretty painful for AMR by dropping 7 day fares down to 21 day, and running transcon sale fares of $79 one way. I think AMR's loadfactor to break even on that would be well into triple digits, if they sold all seats there! But JBLU is still making money, even if less than they could without the heat. How long is AMR (or Song) willing to lose money? Not working for an airline, someone correct me if I'm wrong but I think 10 slots means 5 R/T's. That doesn't seem like enough to do much of anything, except maybe keep Song a bit more honest in pricing from LGA. So I don't get it.

 

[ELP_WN_Psgr]

Diesel8 writes in, and I quote:>>"The balloon payment theory is wrong, if you read the financial releases it is quite plain, the airplanes are paid for in a typical manner for an airline."<<

From JBLU's 10Q filed with the SEC:

Commitments. Our contractual obligations for agreements entered into
with an initial term of more than one year at September 30, 2003, include the
following (in millions):

Payments due in
-----------------------------------------
2003 2004 2005 2006 2007 Thereafter Total
----- ----- ----- ------- ------- ------------ -------
Long-term debt $ 17 $ 59 $ 61 $ 61 $ 61 $ 705 $ 964
Operating leases 19 76 80 83 81 593 932
Flight equipment
obligations 230 640 765 1,020 1,040 3,065 6,760
Short-term borrowings 8 19 — — — — 27
Facilities and other 15 45 13 7 6 — 86
----- ----- ----- ------- ------- ------------ -------
Total $ 289 $ 839 $ 919 $ 1,171 $ 1,188 $ 4,363 $ 8,769


Firm Option
---------------------- --------------
End of Year
EMBRAER EMBRAER Cumulative
Year A320 190 Total A320 190 Total Fleet(1)
----------------- ---- ------- ----- ---- ------- --------------
Remainder of
2003 6 — 6 — — 53
2004 15 — 15 — — 69
2005 15 7 22 — — 91
2006 15 18 33 2 — 126
2007 15 18 33 2 — 161
2008

I'm not a Finance guy. I don't play one on TV either. But I am perplexed.

These filings show an increase in fleet of 16 aircraft from 03 to 04. That's roughly a 30% increase (from 53 to 69)

The increase in debt service and lease costs for flight equipment jumps from 249MM to 716MM over the same period.....an increase of 188%.

Then from 04 to 05 you show a 32% increase in equipment (69 to 91 aircraft) and an 18% increase in costs of said equipment.

From 05 to 06 you increase fleet size by 38% (91 to 126) with a corresponding 31% increase in costs. That's not way outside the realm.....some of those aircraft could be purchased by earnings or proceeds of a stock issue or something.

I guess I am just curious as to why the cost of doing business in the big city gets so tough all of a sudden in 2004 - a 30% increase in fleet generates a 188% increase in lease obligations and debt service.

You tell me.....but somehow I don't think this is finance "just like at every other airline."

PS to Whadayano: I'm no airline analyst....just an ol' cowhand from the Rio Grande. I have dined on barbecue and discussed airlines with KCFlyer in a previous lifetime, though.

 

[Whadayano]

"I guess I am just curious as to why the cost of doing business in the big city gets so tough all of a sudden in 2004 - a 30% increase in fleet generates a 188% increase in lease obligations and debt service."

I went to the JBLU web site and looked up their 10-Q. I think the confusion is that you are looking at obligations remaining for 2003 (3 months) against 2004. So you're comparing delivery of probably 3-4 planes, + some progress payments for 2004 deliveries, against 2004 delivery payments on 16 planes and some 2005 progress payments.

 

[ELP_WN_Psgr]

As far as I know, I was comparing fleet-at-year-end to fleet-at-year-end for the sake of consistency.

Sort of like that blurb that Price Waterhouse et al always included in an annual report about generally accepted accounting procedures.

From 53 to 69 aircraft a gain of 16, divided by 53 is an increase of roughly 30%

 

[Whadayano]

I was talking about the $$$--the reason the figures are so much larger for 2004 is their remaining obligation for 2003 is only 3 months worth of spending.

 

[ELP_WN_Psgr]

I gotcha

I need to find out how much they have spent to date for 2003 and roll that in...

 

[JS]

Is no one concerned about the fact that JetBlue was given slot exemptions at JFK?

I say, if you want to play by the rules, fine. If you don't, and you want exemptions, that's fine too. But now you people want BOTH? Pick one!

Also, JetBlue advertised that flying out of JFK was better than LGA (during the day, anyway) because it's not as crowded. Yet now they want to fly out of LGA ... hypocrisy, anyone?