Letter from Doug Parker

[justaumechanic]

I would be curious about the "huge" hurdles. Name one?

Transition agreements are partially in place but full transition agreements are still in play. Seniority being the big player and the fact that the AWA people do not want to take paycuts to go the former US Airways levels.

So are you going to have two people in the cockpit, one making more money than the other because they came from AWA vs US? I don't think so.

Please name some of the "big" hurdles that have so far been overcome? Operationally you are still running two airlines. I was there for Piedmont and PSA, you have a long way to go.

Remember history, don't constantly re-live it. LCC has existed for all of a quarter and the trend is certainly in the right direction. TODAY, reality is starting to hit Jetblue. The concerns of the financial community are growing, and we will all see if their management is up to the task. LCC on the other hand has shown significant progress with the merger, most indications are that managements plans continue to fall into place. Hurdles remain, but many huge hurdles have been overcome. Revenue is slowly coming back, and the NATIONWIDE (and European)route structure is being integrated. All these are positive trends. 2005 surveys are largely irrelevant. This ain't your fathers Us Air...

 

[tadjr]

For example, the other thread about early outs and the resulting lack of experience and judgement in new hires in Res raises the question: wouldn't more mature flight attendents who know the airline, know the culture and have better judgment be better in those jobs?

Except you'd have to train them to know the computer system before they could teach others how to use it. Many of them cant do more than check a flight to see if it has seats. (Not that this is a bad thing, it isnt part of their job to know it so why should they?) It would take quite a bit of training to get them up to speed to be able to help other newbies in rez.
Also the FA and Rez group are separate unions. Once again got that DOH or entry into the group date going. Unless you made it nonunion for those who want to transfer with some kind of protection clause so they cant be cut after a certain length of time, there would be no reason to do that.

 

[ELP_WN_Psgr]

JetBlue as the subject of the recent and notorious “Parker letter†inspired me to do a little bit of analysis using the most recent DOT / BTS traffic numbers from Q3/2005.

I wanted to look at the numbers in a slightly different way and see if it reflected what was going on in the industry as a whole.

Before I launch into the numbers, though, I’d like to discuss my methodology. We can all agree that it is good (for an airline) to be the largest carrier of passengers in the largest domestic market. However, you are no better off carrying 30% of a 10,000 passenger per day market than you would be carrying 100% of a 3,000 passenger per day market.

An airline’s presence in large markets does not mean they will be profitable, nor does an airline’s absence in large markets mean they will sustain losses. However, there is a correlation. If nothing else, view it as competitive health of a carrier to have carved out the largest market share in markets.

There are 379 markets in the United States where a single carrier generates in excess of 400 passengers per day. I selected 400 passengers per day as the baseline because that represents a 73% load factor on 2 737 round trips.

AIRLINE # of city pairs – market share leader + > 400 psgrs per day

AA 47
AS 21
B6 19
CO 16
DL 54
F9 2
FL 3
HP 4
NK 2
NW 28
UA 30
US 20
WN 131
YX 2

TOTAL 379

I looked also at the average length of haul and the average yield (per RPM).

AIRLINE (# MARKETS) AVG PAX/DAY AVG L.O.H. YIELD

AA(47) 887 1303 16.4 cents
AS (21) 826 789 17.2 cents
B6 (19) 1182 1572 8.94 cents
CO (16) 740 1245 15.3 cents
DL (54) 897 902 16.7 cents
F9 (2) 479 702 23.8 cents
FL (3) 658 359 26.6 cents
HP (4) 680 1287 12.8 cents
NK (2) 441 713 18.3 cents
NW (28) 796 993 17.2 cents
UA (30) 798 1206 17.0 cents
US (20) 660 863 17.3 cents
WN (131) 930 521 18.4 cents
YX (2) 641 1103 13.5 cents

PLEASE NOTE: The above numbers reflect carriers performance only in those markets where they are the leading carrier AND they enplane >400 psgrs per day.

FINDINGS:

Southwest is still king of the short haul markets, as the market share leader in 131 of the 379 markets studied. They have the shortest average length of haul which contributes to their healthy (18.4 cents) yield. This yield premium is probably not as large as it could be, considering the length of haul…..but is still plenty to ensure profitability with CASM in the 8 to 9 cent range.

The legacy carriers are poised for some recovery; yields are solid and average length of haul is what one would expect for carriers heavily involved in the transcon markets. Delta would be of the greatest concern with a lower CASM than most other legacies despite a considerable shorter length of haul.\

The USAirways + America West merged carrier “owns†24 markets – with average length of hauls about what one would expect based upon their geographical focus. (USAirways heavy in the East). The lagging yield of HP is of some concern, as is HP’s historic inability to capture any sizeable market share against Southwest in the western U.S. short haul arena.

JetBlue has every reason to worry. They have recently begun to experience losses. A yield of less than 9 cents systemwide will do that to you every time when your costs are above 8 cents. Neeleman’s JetBlue did the exact opposite of how Southwest was built – and the history of his airline closely parallels that of People Express. Short hauls have higher CASMs than long hauls. That’s one of those laws of physics that cannot be overturned. Rather than reach profitability on short hauls, and begin to expand into longer hauls at the same time as maintenance and personnel costs begin to increase (thus keeping CASM flat over time) Neeleman has constructed an airline which has seen the lowest possible CASM during its youth. His challenge will be to get that 8.9 cent yield up, quickly enough to overcome CASMs pressured by: a second fleet type that (by their own admission) will be more costly to operate, an aging fleet of airbuses whose parts tend to be ‘pricier’ than their Boeing counterparts, a maturing work force domiciled in an expensive part of the country who have seen their back-channel (stocks and stock options) wages rendered nearly valueless…lots of issues there.

The hit JetBlue’s stock took coupled with the salary levels imposed on JetBlue employees suggests to me that it will not be long before ALPA, Teamsters, IAM, AMFA, TWU etc etc start hanging around their premises. One of the things a company can do to stave off unionization is to pay pretty good (competitive within the industry) wages without collective bargaining. JetBlue’s pay scales do not meet that test. Thus it is only a matter of time before the employees try to force their hand.

Bottom Line: JetBlue is still a vigorous competitive force but they are not invincible. Their CASM is going up and may go up in a pretty big way. U/HP had best not pat themselves on the back and take them lightly.....the battle is still won in Y and not in the FF club or the F compartment. Battles are still won by giving value - that means junk the GoFares AND the BloFares.

I hope that the length of this post has not bored everyone. Things were slow today, and I had the chance to play with the numbers a bit.

Nobody loves you…or your money….more than Southwest Airlines --- even if Art does view them as the airline for the dispossessed.

Best Regards & Good Luck vs JetBlue

ELP

 

[TechBoy]

If America West could hold their own all these years against Southwest out west I'm quite sure the management running the new US can handle JetBlue or the other half croaked airline Delta that also HATED us with a passion and had it in for us for years. See how far the little TV's get them. It won't last forever.

Did HP really hold their own against Southwest? In PHX, it looks to me like HP has ceded large routes to WN and is making money on the routes that WN does not serve. Not necessarily a bad business plan, but hardly holding their own.

As for B6 in CLT and PIT, neither move will have a huge impact on US. It will certainly depress yields in those particular markets, but US will continue to collect BloFares in the remainder. The larger question is whether US will ever be able to compete when B6 and WN have grown to the size where 90%+ of US's routes face low fare competition. The continued reliance on BloFares tells me that they are not ready yet.

Just because B6 may not make money doing this does not mean that it still won't impact US. So in the longer run, US needs to work on attracting higher paying customers and giving them a better experience than the LCCs and the other majors. UA has chosen this route and it seems to be providing some revenue premium for them, which is significant as UA faces strong LCC competition at all of their hubs.

 

[hp_fa]

Did HP really hold their own against Southwest? In PHX, it looks to me like HP has ceded large routes to WN and is making money on the routes that WN does not serve.

Yes HP did hold their own against WN, especially when you compare how HP did against WN compared to any other carrier that went head-to-head against WN.

The ceding of markets issue is valid, but one of the reasons it happened is that WN does high frequency in the markets it penetrates. If it sees an opening it hits the market hard and fast with a high frequency of flights. HP (right or wrong) did not fly with the same frequency and was not a true point-to-point airline such as WN. So, it evolved differently and some markets were lost because of some decisions that had been made.

My understanding is that most executives of large airlines were both surprised and pleased that HP at least partially held WN in check. It kept WN from their doorsteps for a long time.

 

[FCYTravis]

America West "holds their own" by focusing on connecting traffic through Phoenix. There are only a couple non-stop WN markets that HP doesn't also serve, and of course HP serves many more markets that WN doesn't serve.

WN, for better or for worse, now owns short-haul O&D traffic in the West Coast. Thank old US management for destroying PSA, because that allowed it to happen. WN walked right in the door left wide open by PSA's departure from the West.

 

[US AIRWAYS FAN]

Travis,

You are exactly right. And not only took the old PSA routes. Took the gates along with it in T-1.

I heard that US was trying to get all its gates on the same side of the terminal. Is that still being worked out?

 

[PITbull]

I'm married to a former F/A. The kids at JetBlue more resemble the original intent of that job, than the people who have turned it into a lifetime profession, and in the process, created a wage structure that has burdened the industry for years. I was only kidding with the "battle axe" remark (you'd have to have a death wish to say stuff like that on a website with so many employees participating). That said, a debate like this could go on forever. Like, is a 55 year woman as fit as a 26 year old, in the event of a true emergency? Who knows? I was underscoring the foolish remark by your CEO.
As for the complaining, when I rode US, I was always in First, whether purchased, or upgraded, so it was pretty hard not to hear them. I know it was tough, but if it was that bad, try something else. One thing I can tell you. When those morons who try to manage commerical aviation, tried to take the heat off themselves, by blaming pax who don't pay enough. for all their woes, and by extension, layoffs, there was a perceptible chill in the front cabin, coming from the F/A group. We frequent flyers weren't doing anything those dolts in management didn't allow. They set the fares, and the upgrade policies..not us. Yet, gone was hello Mr. And Mrs. Whatever, even though printed manifests were available. How many times I sat there as F/A's walked by, ignoring there was a coat on my lap. Sorry guys, it's not servitude...that's the gig. If you can't quit it because you like the disconnect of living two lives, there's nothing wrong with a little escapism. But I can tell you, those kids on JetBlue, and other newer carriers, provide a competent, and pleasant environment. It is quite a bit different on the established carriers.

Who gives a crap if you flew in First class? What's that make you, "special"? From your post, you make the ass-umption that it must be a senior f/as ingnoring your needs.

Your almost too funny, if what you say wasn't the most insensitive I have read from any pax. You being married to an ex f/a...what did you do, tell her she's too old and force her to quit because her increase in pay would ruin your cheap fares and besides, she looked like a "battle ax"? Still married? Servitude, indeed, poor thing...guess that's her gig, huh?

Since when is it ok for the outsiders to sit and post that senior, experienced employees have ruined the industry for staying too long and trying to make this job a profession???? What are you a pervert? Looking for some young thing to lust about? Try Playboy and some Viagra. Flight attendants are there for your safety first and comfort; not your entertainment.

Pathetic, indeed.

Here's a thought. Hope you get fired from your job for staying too long. Hope you have to start from the bottom every few years. Cause that's what we have done in the airlines, my friend...every few years in wages and benefits. :angry: Empathy is a good thing!

God forbid you should have an increase in fare in exchange for well experienced flight crews who fly airplanes in the most in climate weather, mechanics, agents. Crazy piece of crap...calling employees in new carriers...kids...for crying out loud...big baby.

 

[longing4piedmont]

Crazy piece of crap...

Rut Row. Deel, you have now pissed her off. My God have mercy on your soul......

 

[etops1]

big mistake buddy , big mistake.

 

[ClueByFour]

Flight attendants are there for your safety; not your entertainment.

Not that I necessary agree with Deel in all respect, but if you truly believe that--it explains exactly why people have the view they might of senior employees.

At the end of the day, the travelling public does not sit around wondering if their crew on any given flight can evac the entire plane in the FAA mandated times. They do, however, retain their impressions of the inflight service for a long time.

Or, to look at this another way--let's think of F/As like pilots--my personal expectation is that every F/A can perform the safety related tasks if they are allowed to work inflight. The differentiator in most people's minds (mine included) is the service experience on board.

 

[PITbull]

Sorry Clue. I did edit my post to reflect that f/as are there for safety first, and COMFORT; not for entertainment.

My point is that he IMPLIES that older looking f/as are senior (Battle axes) and that his needs are not being addressed because they are "tired" of the job, overpaid, and ruined the industry for staying too long.

His post is slanted, unfair, and cannot go unchallenged.

There is a few, and even amount of "tired" f/as, senior as well as junior f/as in both legacy and new carriers.

At a meeting last year with Jerry Glass, he too, started in on me with that bull s%^& with over utilization of medical benefits and employee contributions. I told him, "don't start that crap with me, leave...there's the door"! And, he got up and left in front of his team and mine. That was wise, as I was in no mood for the guy and his same run-down, over used rethorhic regarding seniors. We were not going to get anywhere that day. And he knew instiinctively that he would read about it in the paper the next day if he didn't exit.

I don't understand where folks get off saying things like this about our senior workforce. Or, any senior work force in any company for thier loyalty in staying with one company and perfecting what they do. I believe U's employees have proven their loyalty..three concession in 3 years later. Huge loyalty.

 

[hp_fa]

I almost posted a response to the inane post and it would have been before Pitbull's response. It would have said the same things.

Maybe you should think of it another way. If the FA's failed to get your sorry deal-making butt out of the plane in an accident in less then 90 seconds then the airplae could be possibly be successfully sued for that failure if personal injury damages occurred. The airline will not be successfully sued for service issues. Does that give any indication of which duties are **really** more important?

BTW, before you send anyone a nasty letter about my attitude, I don't work there anymore. I just respect those who do the job day in, day out. Especially the battleaxes who have forgotten more then the sweet young eye candy yet knows about being a FA.

Pitbull was dead on right.

 

[deelmakur]

Well PitBull, that last post of yours really nailed it. In truth, the founding fathers of airlines never envisaged being a stewardess as a retirement gig. Hell, they even toss pilots out after 60, and they have a sitting job. I didn't realize you are a lady (I assume that from other's posts). Anyway, while you may see me as a class enemy, I apologize for sitting in first class. I just find it more comfortable (I also suffer from a movement disorder, which makes it tough to sit in tight places). Twenty years ago I lost my job. I was a college drop out, with a mortgage, 3 kids, and less than 15 grand in the bank. Today, I drive a Bentley GT and travel between 3 homes. Nobody did anything for me. I got up off my ass, and made it work. This is a great country. You couldn't do that anywhere else. I really have no time for unhappy employees. The situation may have been caused by others, but if you don't like it, go someplace else. I'm tired of sitting on planes, hearing how everybody got screwed.I got the T-shirt. Next.

 

[PITbull]

Founding fathers of airlines?????

I'm sure you've complained in your day plenty, and in between jobs. Glad god gifted you with intelligence and ambition, and perhpas a healthy support system. Perfection is great attribute, huh?

The airline jobs have been careers for many for quite some years now. Our CEOs use to stick around for 25 years in the past, and built the franchise with their vast experience. We've HAD a defined pension for around 50 years. So did just about every industry. Many industries still do. The 401K concept just came about in the early 90s; not in the 60s or 70s. The pension attracted employees and fostered loyalty. The yippie,yuppie Execs in Havad and Yell were educated to change all that and go for the quick fix, quick buck, and move on to the next company to rape and pillage. In fact, they have retirement contracts that give them 30 years service vestership in about 3-5 years.

Its..."Flight Attendant", BTW. Does your wife put up with that? Really.