New Casm?

[funguy2]

As time goes on, The 737's will be phased out.

If this was true, and in a larger sence, fleet rationalisation was a priority, then I do not understand the following items:

1. Last month, the company agreed to return both Boeing and Airbus equiment to GECAS (although as BoeingBoy points out, CCY may not have had much choice in the matter).

2. Last year (or was it 2003 or 2002), CCY ordered two kinds of 70-seat jets to be operated by various divisions of the company. So far in BK2, by agreeing to financing new examples of both, CCY has indicated it will continue to acquire two types of 70-seat jet (as opposed to using BK to cancel one of the two contracts).

3. We know that aircraft fleets reach most economies of scale at around 25 airframes. Yet the company maintains 2 transatlantic fleets of 10 airframes or less, instead of one fleet of 20-25 aircraft. When you combine this with the goal of being an LCC (and that no LCC flys transatlantic, yet), this seems to be an odd thing. You can use BK to potentially consolidate on one type or the other (by voiding leases, etc), or you could reduce transatlantic service to just primary gateways (like LGW and FRA and CDG) and reduce flying to just one equipment type. Instead, US Airways introduces service to secondary markets.

These are not the activities of an airline focused on reducing fleet types.

 

[BoeingBoy]

funguy,

This may be surprising coming from me, but here goes....

I tend to think that Wolf initially had all intentions of converting to an all-Airbus fleet (much to my chigrin - I do like my Boeings). But then came the non-merger and BK1.

Siegel, believing that half our porblem was a lack or RJ's (the other half was employee costs), wanted lots of RJ's real fast coming out of BK1. The 170, while it looked like a better airplane, wasn't going to be available for a while (fall 03 as the decisions were being made) so going with split orders was the expedient way to get RJ's (plus a single manufacturer couldn't provide delivery positions for a rapid build-up).

Jim

 

[FWAAA]

I tend to think that Wolf initially had all intentions of converting to an all-Airbus fleet (much to my chigrin - I do like my Boeings). But then came the non-merger and BK1.

[post="245141"][/post]​

Good point. And remember that AA had agreed to buy U's F-100s, some 757s and, IIRC, the MD-80s, as a part of the three-way deal with UAL. Fleet simplification has been part of the plan for a long time now.

 

[BoeingBoy]

Once the merger didn't happen, my view is that's it's been pretty much fighting for survival. Fleet simplification became one of the "it'd be nice" things that get put behind the back burner....

Jim

 

[fr8tmastr]

test

 

[whlinder]

(and that no LCC flys transatlantic, yet)

[post="245129"][/post]​

Aer Lingus might disagree with that, though it is still debatable as to whether or not an airline can be both 'LCC' and in one of the major alliances. Still, EI's new fare structure puts Go-fares/Simplifares to shame. It is very simple.

 

[funguy2]

Boeing Boy:

I agree with your assertions regarding Wolf's plans. That was probably a decent plan, and the ball dropped for whatever reason.

I would agree with the thought behind the separate CRJ700 and E-170 orders, except to note the following... There are 22 E-170's and 6 CRJ700s? I thought I read that somewhere on these forums. That suggests that the CRJ700s are not making up too much lost E-170 room. Furthermore, that is a relatively moot point now, when, in BK2, the company would have the ability to reject almost any contract it desires.

 

[BoeingBoy]

You're correct about the number of CRJ-700's as far as I know, but we did get CRJ-200's. That's what provided the "rapid" build-up of RJ's.

If we had just ordered 700's and 170's coming out of BK1, I'd agree with you, but the build up of RJ seemed to be composed of CRJ-200's (I presume delivery availability came into it since we got the first 700's long after the 170 was supposed to be certificated) plus some 700's with the 170's to provide the bulk of the bigger RJ's (they were 1/2 of total orders/options)

In short, I think that the CRJ's were mostly to fill the 50 seat niche (and quick availability), while the 170's were to fill most of the 70 and up seat niche.

Jim

 

[funguy2]

Where we last left off the CASM/RASM conversation... Lets make a few changes here...

We discussed that my assumption of 3.5% reduction in A319's probably does not reduce to 3.5% reduction in ASM's... So lets reduce ASMs by only 2% to account for the aircraft size and utilization impact of the short-hauls and Shuttle ops... And, heck, just to be conservative...

So $1,090mil total costs on 14,782 ASMs results in CASM ex-fuel at 7.37cents. Still almost 20% greater than Southest ex-fuel CASM (but closer, naturally, because the denominator increased).

Now, if we assume fuel constant at 2.17cents/ASM reported in 4Q04, then total CASM is 9.54cents.

Next, let's assume January's RASM decline of 6% to 7% is indicative of the DAL fare restructure, and thus, the entire 1Q05 RASM... 1Q04 RASM was 9.32cents. A decline of 6% leaves us with RASM at 8.76cents. This is passenger RASM. Total RASM tends to run about 1.36 cents more than passenger RASM... or 10.12cents <I just noticed the separate Passenger RASM, mainline line from Total Mainline RASM line on the spreadsheet.>

Then Profit/ASM = RASM - CASM, or a profit of .58cents/ASM, or assuming our ASM calculation is close, that translates into a Q105 operating profit of $85mil. Now, we know that CASM will probably not be down that much, as we know these cost savings are occuring over time, not fully implemented in the quarter. Plus I am really guessing to generalize the RASM 6% down Year over Year.

So, it looks like profit is possible for US Airways with these reduced costs and the current fare environment. We'll have to see if the company is able to make hay from the cost reductions... The next quarterly results, in my mind, will be as interesting as the last...

I am now kind of interested to see if this is even in the ballpark. My gut tells me it will be another loss... But this analysis says otherwise.

 

[BoeingBoy]

funguy,

Just keep one thought in the back of you mind. All our discussion about cost vis a vis WN has focused on mainline. But then there's express, which they don't have. With DL's fare rationalization (and others following to some degree or another), how does Express affect the picture?

Jim

 

[funguy2]

You are correct. My assumptions are for US Airways, Inc. and excluding Mid Atlantic, or in other words "mainline". Obviously the "Group" results and the impact of "Capacity Purchases" would be included in a full quarters report. Again, that involves numbers difficult to get from the published information (like to mention of Express passenger RASM, for example), and this is why the brokerage houses pay analysts to work 40 hour weeks!

 

[insp89]

It's not me who has to give them the chance. :huh:

Gee, ya think?

But here's the flaw in that logic: the two were not mutually exclusive activities!!! Even if we assume the greatest in nefariousness in negotiation, that they decided to prolong the losses in order to extract the greatest amount of concessions, the logic still falls apart. After all, the concessions have been achieved...the rest of the business should have appeared like magic the day after the judge approved the IAM contract.

But it didn't.

What does that tell you?

[post="245004"][/post]​

....What does that tell me Weiss ?

You ain't got a clue...

The company is just NOW starting to work on the operational side of the equation.

This is why there was no "magic" the day the judge approved the IAM contract. :blink:

I hope it will sink into your impecunious noggin this time.

 

[insp89]

Jim, Turn Times & Utilitization are two items that should of been addressed by management long ago.

Insp:

Reach down and pull those belts tight. The initiative
to roll the PHL hub and reduce turn times is coming
this Saturday. The new schedule will be released
reflecting the new turn times. CLT will also be
adding 1 more bank of flights and begin depeaking.

Looks like CCY is gearing up to take advantage of
the new union contracts.

[post="244926"][/post]​

SpinDoc, Thanks for the information..

It's about time.

 

[mweiss]

The company is just NOW starting to work on the operational side of the equation.

Uh huh...as you said, it's about time. And you know as well as I do that it was only about time...oh, three years ago at least?

But it's happening. Better late than never (though better never late). Hope it works out for all of you.

 

[insp89]

Uh huh...as you said, it's about time. And you know as well as I do that it was only about time...oh, three years ago at least?

But it's happening. Better late than never (though better never late). Hope it works out for all of you.

[post="245246"][/post]​

Thank you