Long Beach = Waterloo

[KCFlyer]

Come on Oly, I don't constantly rant about AMRs biannual penchant for slamming a perfectly good airplane into the ground. AMR has enough troubles for you to be declaring UALs "impending" chapt 11 (which would likely be followed by AMR, the current "loss leader", within 6 months)

Repeat after me busdriver - "There but for the Grace of God go I". What would you have done differently had the tail come off your Airbus?

 

[KCFlyer]

I don't suppose it's occurred to you that there's more potential long term profitable traffic in the LA area than at MCI? David and Dave obviously thought those slots were worth defending, even at the expense of other opportunities. However, we're still only talking about three airplanes here. One tenth of the fleet. If the experiment fails utterly and JBLU is chased from LGB in shame, the planes aren't burned on the ramp, you know? They are employed elsewhere. I personally think they know what they're doing.

From the airline side, if LGB proves to be an utter failure, then no, it won't damage JetBlue. But from the stock side of the house, those three planes can wreak havoc on the stock price...the "analysts" are pretty much expecting everything that JBLU touches to turn to gold. LGB failing wouldn't hurt the airline. Their stock price is a different story though. And while Neeleman has been quoted as saying he could care less about the stock price - now that his company is publicly traded I think he'll learn to care - big time.

 

[Busdrvr]

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Repeat after me busdriver - "There but for the Grace of God go I". What would you have done differently had the tail come off your Airbus?
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That is my point KC, Eole's smugness when refering to UAL's finances is tacky at best (not to mention, uninformed if he thinks AMR is in a significantly better situation). There but for the grace of god go I?, yep true, if you're talking about one here or there, but how many in the last 10 years for AMR, not counting the A300, or the near misses for that matter (A-300 that departed near MIA)? But knowing that many of the current crop of newhires had such great qualifications as "I bagged Cecil's groceries" has to be of some comfort.

 

[Busdrvr]

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On 8/23/2002 411 PM

or moving into IAD where UAL is too distracted with their own lack of direction and impending Chapter 11 to respond...


Come on Oly, I don't constantly rant about AMRs biannual penchant for slamming a perfectly good airplane into the ground. AMR has enough troubles for you to be declaring UALs "impending" chapt 11 (which would likely be followed by AMR, the current "loss leader", within 6 months)

 

[Jeff G]

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On 8/23/2002 6:00:44 PM

IAD is a harder nut than LGB because it's hard to feed unless JBLU starts JFK-IAD service.

WIth all of the O&D traffic in the metro DC area, you shouldn't need to feed it any more than you need to feed LGB. It's only the #4 metro area in the country...
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I wasn't clear enough. I didn't mean passenger feed. I agree there's more than enough O&D there. I meant feed from an operational standpoint. Where will the airplanes, the crews, and the maintenance come from? How do you get them connected to the IAD network without wasting them on daily reposition flights? One is to establish new service, with JFK-IAD being the most logical. I've already explained why this isn't likely. The other way is to set up a new focus city in IAD, and all things considered, I think LGB is a better bet at this point. We'll have to wait for expanded or new service from someplace else before you'll see more of a buildup at IAD, I think.

 

[Jeff G]

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On 8/23/2002 411 PM

Gotta agree that all this attention on filling up LGB is probably going to cause more long term damage than good. As already pointed out, it is diverting attention from what could be greener pastures, such as moving into MCI to replace Vanguard, or moving into IAD where UAL is too distracted with their own lack of direction and impending Chapter 11 to respond...

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I don't suppose it's occurred to you that there's more potential long term profitable traffic in the LA area than at MCI? David and Dave obviously thought those slots were worth defending, even at the expense of other opportunities. However, we're still only talking about three airplanes here. One tenth of the fleet. If the experiment fails utterly and JBLU is chased from LGB in shame, the planes aren't burned on the ramp, you know? They are employed elsewhere. I personally think they know what they're doing.

IAD is a harder nut than LGB because it's hard to feed unless JBLU starts JFK-IAD service. That won't happen anytime soon. The reasons for that include costly operation and lots and lots of more convenient service on LGA-DCA. If more IAD service is added, it'll be through another station. I don't think it was ever intended to be anything other than a target of opportunity. There's more and better low hanging fruit elsewhere. ORD, for example, or maybe DFW. [:bigsmile:] Have a nice day.

 

[Busdrvr]

Sorry Jblu guys, I'll return to JBlu bashing soon[:bigsmile:] , but I can't leave Eole's post alone.
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On 8/23/2002 5:07:13 PM

"Bus, you really need to be a bit less defensive when it comes to UAL's finances... Especially when your company has issued press releases on this to the world... There's no smugness -- it is simply fact. And thank you for your concern over my knowledge of our own balance sheet, but I think I'm a bit more informed as an insider on AMR's finances than you are as an outsider."

And maybe just maybe, I know more about UALs finances? Tell me again why you are cutting back your schedule? Don't want to "seal" UALs death? Or maybe you can't afford it[8)] ? Although I don't know how the votes will go, how do you think AMR will be doing if UAL gets the 2 bill in loan guarentees and enjoys the $1 billion per year in cost advantage the ATSB is demanding.

"Don't believe me? Look for yourself..."

http://cbs.marketwatch.com/tools/quotes/fi...&freq=1

Uh, 3.1 billion in shareholder equity. better performance than AMR for three Qs running.

"Frankly, trying to draw a parallel between finances and aircraft accidents is one of the more tasteless things I've seen in a while..."

We lost a few investors' (and employees) money, you killed them, and I'm the tasteless one?

"I shouldn't have to remind you about SUX, COS, or HNL, all which took place within a few years of each other...."

SUX, The flight crew saved OVER 100 lives with superior aviation skills and CLR (CRM) (real strong suit at AMR). COS?, an aircraft defect prior to the days of "crossover" speed. The Aircraft had been properly maintained. Now back to you. How many since our COS accident? LIT, pure and simple, pilot error, and gross poor CLR. Cali?, a little Jepp and a whole lot of lack of SA. ORD DC-10? using an unauthorized and made up maint procedure to install the engs. ORD 727? Pilot error. A300? We shall see, but AMRs insistance on emphasising rudder using during recoveries I'm sure had nothing to do with it. Please tell me, how many people are you allowed to kill before it is no longer "tasteless" to call you on it? But if trends are any indication, I'd be worried, you were leading the league in pilot violations last I checked.

 

[Oliver Stone''s Apprentice]

IAD is a harder nut than LGB because it's hard to feed unless JBLU starts JFK-IAD service.

WIth all of the O&D traffic in the metro DC area, you shouldn't need to feed it any more than you need to feed LGB. It's only the #4 metro area in the country...

Speedbird, I don't remember anyone saying U would kick WN's butt. I remember the exact opposite -- how the entry of WN into the Northeast would be the death knell for US's and JI's long term future.

So don't underestimate them. They haven't changed their business plan all that much -- they still fly only one type, they only open one or two cities a year, and they don't normally go into a market unless they know they can offer some decent frequencies to more than one city.

More importantly, I can't think of a single market battle that they've lost against another carrier. And with Neeleman's prior relationship to WN, there's always the potential that WN might be a little more forceful in responding than they are with other carriers.

The question I have over LGB isn't really about what happens in the short term between AA and B6 or WN and B6, but how much WN further decides to escalate things.

Seems to me that if taking on WN is even a potential outcome, they'd be better off picking on UA at IAD...

 

[Speedbird]

Excuse me boys (Eric & busboy), but this little exchange of yours, while mildly entertaining to us "bloonies" is way off the thread. If you want to jab at each other while defending your bloated, ailing airlines go start a new thread on either AA or UAL and carry on the argument there.

As for LGB, the detractors out there would like nothing more than to see B6 stub its toe, or worse over its decsion to move there. All I can say is keeping wishing and hoping for such an unlikely event.

I non-reved out of LGB the other day, and it was amazing how easy it was to check-in and move through the terminal to the airplane. On the flight out and back to IAD I sat next to people who both bypassed LAX to try out B6 for the first time. They gave the airline very positive marks for their operation and good service. They both mentioned how much easier it was to use LGB despite the extra drive time and thought the hassle factor at LAX was a big negative for them.

While this certainly wasn't a scientific sampling, it sure demonstrated to me that B6 is drawing away passengers from neighboring airports.

One other thing, those poor souls who claim that B6 is materially changing its business plan by making LGB a focus city are grasping at straws, and don't understand what jetBlue really does. LGB hasn't changed B6's business model. Neeleman, et al. are taking the same basic formula and tweeking it slightly to seize a plum opportunity in the second biggest travel market in the US.

Besides if your argument was valid, then Southwest didn't bother to heed your advice either. If Southwest had actually been true to its business plan and name (as defined here in this thread), you'd never see them in the Northeast whipping the competition like they have. I can still remember the "experts" telling everyone how WN was gonna get its chops busted taking on U and the venerable cold winters in that part of the country. Somebody please explain that one to me.

AA's reactive response at LGB has certainly not put them in the driver's seat, and if B6 must be diverted away from bigger short-term opportunities, they will be rewarded over the long-term for not abandoning their growth plans at LGB.

As for WN kicking them in the teeth this fall and winter, I have my strong doubts that this will be the case. Right now B6 is significantly more efficient than WN, operationally (I'll give you the metrics for that in a later post), and their customer service beats WN also. Their only tangible advantage is WN's FF program.

Besides the big losers will be the usual suspects and not B6 or WN.

 

[AirplaneFan]

I figured I would just go ahead and get some facts, so I called the Long Beach airport for the latest information.

For July passengers

AA 52,393 passengers, 8 flights daily, 77% load factor
B6 54,537 passengers, 7 flights daily, 90% load factor

So if this is truly Waterloo; than B6 would seem to be led by Wellington and AA commanded by Napoleon.

 

[Busdrvr]

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On 8/23/2002 744 PM

[1) JetBlue BUYS airplanes so the low maintanance costs are more than made up for by the cost to acquire the airplanes.


Buying only affects cash flow. In other words, if you buy a 50 million dollar airplane in the first Q, there is not a 50 million dollar expense on the 1st Q balance sheet, although you just went through 50 mill in cash. On the same topic, I think JBlu recently sold 2 A320s to a japanese firm and leased them back to get some positive cash flow.

"But this is also made up for by the high start-up costs of starting service in so many different airports. There breakeven load factor right now is 78%. Fortunately they are running a load factor of 86%. So, in a few years B6's maintenance cost will go up, but will be more than offset by lower start-up costs."

What? You lease services at many of your new services (FRNT in DEN). Do you think they are expensing 12% of cost to "startup cost"? Maybe, but I doubt it.

"BTW, JetBlue is profitable."

Believe it or not, it is quite possible to go bankrupt while posting a profit.

 

[AirplaneFan]

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On 8/23/2002 6:59:57 PM

I have a couple of comments:

1) INCONSISTENT MAINTENANCE ACCOUNTING COMPARED TO OTHER AIIRLINES: The whole deal that Jet Blue is SO profitable compared to the other airlines is somewhat false since every airline accrues for maintenance EXCEPT JB. If you look what maintenance usually runs, its about 12% of revenue. At JB it is almost ZERO. That means that JB is overstating margins by 12 points relative to all its competitors.

**Now, this isn't illegal or even shady; but it means you can't compare their results with the other airlines.**

Eventually this strategy will catch up with them. When their average fleet age gets older, this will work against them unless they take a one-time charge and convert to maintenance accrual. The only other two carrers to ever handle maintenance this way are Western Pacific and America West (although they have since changed methods). All three did it for the same reason: to make the company look initially profitable compared to their peers while trying to raise money through stock or debt deals.

2) INTENTIONALLY LOSING MONEY IS NO BETTER THAN DOING IT BY MISTAKE: When other airlines are losing money, the people on this board say: "That idiot management can't make money", but when JB does it, the same people say: "It's a brilliant strategic move to lose money purposely to build market share (in LGB)". Every stupid airline move can be traced back to an irrational need to increase market share at the expense of profits. This drove every stupid merger that didn't work and other stupid things like MetroJet and United Shuttle. The fact that JB is willing to do this in LGB shows that they suffer from the same delusional thinking that most airline managements suffer from.
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Dizzying points.

1) JetBlue BUYS airplanes so the low maintanance costs are more than made up for by the cost to acquire the airplanes. But this is also made up for by the high start-up costs of starting service in so many different airports. There breakeven load factor right now is 78%. Fortunately they are running a load factor of 86%. So, in a few years B6's maintenance cost will go up, but will be more than offset by lower start-up costs.

2) You speak of "airlines irrational need to increase market share at the expense of profits." So you think the airlines are totally rational by decreasing marketshare in the hopes of decreaseing losses. BTW, JetBlue is profitable.

 

[enilria]

I have a couple of comments:

1) INCONSISTENT MAINTENANCE ACCOUNTING COMPARED TO OTHER AIIRLINES: The whole deal that Jet Blue is SO profitable compared to the other airlines is somewhat false since every airline accrues for maintenance EXCEPT JB. If you look what maintenance usually runs, its about 12% of revenue. At JB it is almost ZERO. That means that JB is overstating margins by 12 points relative to all its competitors.

**Now, this isn't illegal or even shady; but it means you can't compare their results with the other airlines.**

Eventually this strategy will catch up with them. When their average fleet age gets older, this will work against them unless they take a one-time charge and convert to maintenance accrual. The only other two carrers to ever handle maintenance this way are Western Pacific and America West (although they have since changed methods). All three did it for the same reason: to make the company look initially profitable compared to their peers while trying to raise money through stock or debt deals.

2) INTENTIONALLY LOSING MONEY IS NO BETTER THAN DOING IT BY MISTAKE: When other airlines are losing money, the people on this board say: "That idiot management can't make money", but when JB does it, the same people say: "It's a brilliant strategic move to lose money purposely to build market share (in LGB)". Every stupid airline move can be traced back to an irrational need to increase market share at the expense of profits. This drove every stupid merger that didn't work and other stupid things like MetroJet and United Shuttle. The fact that JB is willing to do this in LGB shows that they suffer from the same delusional thinking that most airline managements suffer from.

 

[Busdrvr]

On the same topic, I think JBlu recently sold 2 A320s to a japanese firm and leased them back to get some positive cash flow.

My apologies, from the SEC

"ii) the sale and leaseback over 18 years of one aircraft for $38.5 million financed by a Japanese institution,"

"We operated a fleet of 26 Airbus A320 aircraft, of which 13 are owned and 13 are leased under operating leases as of June 30, 2002. We had also taken delivery of one owned aircraft in June that began scheduled service in July 2002. The average age of the fleet was 15 months"

It's interesting to note that Jet Blue ownes the same number of jets it leases, but depreciation equals only one half as much on the balance sheet as leases. Hmmm.... Maint cost were about 1%. Hmmm.... Without stock issuance, cash flow would have been negative. Hmmm...

 

[JFK Fleet Service]

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We lost a few investors' (and employees) money, you killed them, and I'm the tasteless one?

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You forgot classless as well.