SWA now getting involved with slot (s) possibilities

[eolesen]

Wrong again, skippy.

VX had ample opportunity for over two years to start service at ORD. The fact is they weren't willing to pay the market price for gates.

New entrant access at ORD in the past was definitely an issue, but that was mainly due to slots and runway capacity.

That's no longer an issue, with the new runway configuration coming in use some two or three years ago.

 

[WorldTraveler]

ah, yes, Open Skies at LHR if you are willing to shell out $50M per slot as CO did. Others said that was too rich of a price and waited. Market access is rarely "we'll make it work at any price."

Also doesn't change that when VX came to ORD, they succeeded handedly at bringing down fares to LAX and SFO and in adding a viable new player to the market which is exactly what the DOJ wants to see with these slot divestitures.

Free market access doesn't mean paying prices to get into the market that are well beyond what any company can reasonably pay and make a profit.

That in part is why the bid for slots at DCA and LGA will likely result in prices far lower than what B6 paid to pick up assets from the DL/US slot divestiture. With a smaller pool of bidders, the prices will be lower and profitability for the new flights will be easier to achieve.

 

[swamt]

eolesen, here is an interesting article of JB may put bids in for the DAL Love Field gates. But, I would think they would want to focus on the NY market. I know JB would be a much more warmer welcome than Delta at LF, but just not sure JB would want to go head to head with SWA at LF, but you never know, any thoughts???


Is JetBlue Airways Destined for Greatness?

By Alex Planes | More Articles | Save For Later
November 23, 2013 | Comments (0)


Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does JetBlue Airways (NASDAQ: JBLU ) fit the bill? Let's look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell JetBlue Airways' story, and we'll be grading the quality of that story in several ways:
•Growth: Are profits, margins, and free cash flow all increasing?
•Valuation: Is share price growing in line with earnings per share?
•Opportunities: Is return on equity increasing while debt to equity declines?
•Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's take a look at JetBlue Airways' key statistics:

JBLU Total Return Price Chart

JBLU Total Return Price data by YCharts



Passing Criteria


3-Year* Change


Grade



Revenue growth > 30%

43.5%

Pass


Improving profit margin

(15%)

Fail


Free cash flow growth > Net income growth

(114.7%) vs. 22%

Fail


Improving EPS

19.6%

Pass


Stock growth (+ 15%) < EPS growth

25.1% vs. 19.6%

Pass


Source: YCharts.
*Period begins at end of Q3 2010.

JBLU Return on Equity (TTM) Chart

JBLU Return on Equity (TTM) data by YCharts



Passing Criteria


3-Year* Change


Grade



Improving return on equity

(1.7%)

Fail


Declining debt to equity

(100%)

Pass


Source: YCharts.
*Period begins at end of Q3 2010.

How we got here and where we're going
We first examined JetBlue Airways last year, and it has unfortunately lost two passing grades in its second assessment, scoring only four out of seven passes as compared to last year's six-out-of-seven score. One major source of that weakness is the company's falling profit margin, the result of stiff competition from fellow low-cost carriers Southwest Airlines (NYSE: LUV ) and Spirit Airlines. Can JetBlue overcome a difficult airline environment and become the market's darling again, or are the skies about to get a lot less friendly for this company? Let's dig deeper to see what might lie ahead.

JetBlue recently rallied as much as 11% after the U.S. Department of Justice approved the merger of American Airlines owner AMR and US Airways (NYSE: LCC ) , creating the world's largest airline. However, the merger is subject to the condition that US Airways and American Airlines divest around 52 gates at Washington Reagan National Airport and 12 gates at New York's LaGuardia Airport, as DOJ wants to enhance competition among low-cost carriers at these two key Northeast airports. Fool contributor Adam Levine-Weinberg points out that JetBlue and Southwest have emerged as potential bidders for nearly all the divested gates, which could be worth between $200 million and $300 million. JetBlue is already well-established in New York with a central hub at John F. Kennedy Airport, but it could easily benefit from an expanded DC presence.

Adam Levine-Weinberg also notes that JetBlue had also shown interest in expanding to Dallas Love Field, but it was barred from that airport by a piece of legislation called the Wright Amendment, which forbids long-distance flights. With that legislation vanishing next year, JetBlue could bid for the two gates held there by American Airlines, which will give it a foothold from which to combat Southwest Airlines, a major flight operator in Dallas.

JetBlue should also see benefits from the recent Federal Aviation Administration ruling allowing smartphone and tablet use for the entirety of most flights. Fool contributor Tim Beyers notes that premium services -- such as Wi-Fi access and plug-ins for powering gadgets -- will allow some airlines to raise fares among elite flyers who seek out constant connectivity. Following FAA approval of JetBlue's Wi-Fi system last month, the company intends to set up the new antennas on its Airbus aircrafts by the end of next year. JetBlue's "Ka-band" satellite-based system, which boasts substantially more bandwidth than rival offerings, could be a game-changer for in-flight connectivity and entertainment. The company has long been a leader in in-flight connectivity, so further progress in this field is bound to engender more customer loyalty for this well-loved airline.

 

[WorldTraveler]

Perhaps you missed that B6's falling profit margins are due to increased competition including with WN?

So why would B6 jump into a competitive brawl with WN at DAL where WN clearly has the market advantage?

You also seem to forget that DL already does serve DAL and is the only airline to have proposed a schedule for the use of gates at DAL post current Wright restrictions.
If you think the legal efforts WN has gone to pry open DAL to nationwide service have been big, wait until you see what will transpire if DL is pushed out of an airport it already serves because of a settlement agreement between another airline and the DOJ.

E's comments about common use gates are the most likely outcome and the fact that DL has outlined schedules gives them a leg up in the competition right now.

Besides, you apparently have missed that the Congressional opposition I told you was coming against the settlement agreement is now confirmed. B6 and WN's preferential bidding position and the railroading of small town service for the benefit of increased access by B6 and WN.

BTW, the welcome mat that competitors put out is not the gold standard for success in the marketplace. Being able to actually win there and make money is the way business works in these United States. On that basis, DL has a far stronger track record of competing against who ever shows up on DL's doorstep and succeeding in the most competitive markets.
In contrast, WN's largest markets have very little direct competition. That's why the DAL case is a real challenge to the fundamentals of how WN has run its business for decades.

There are people in Washington who will make sure that actually happens.

 

[swamt]

Yes I have noticed. I have also noticed the increases in maint cost for JB as high as 30%+. Nor have I forgot Delta already serves LF. Delta is not the only airline to put forth a proposed schedule for post W/A. Nope, I did not miss the lawmakers putting out their letter that they think all airlines should be able to participate. They CAN participate all they want to, just like I HAVE TOLD YOU ALL ALONG THEY CAN. Rather they will QUALIFY or not is a whole different story. Wow, all that crap you wrote and the majority of it is you saying I have apparently missed something or another. The rest of your post is just flat out boring.

 

[robbedagain]

wt let us know if the real washington people can help dl win everything including the slots at dca...   as swamt said its down to who qualify to get the slots...  it will all be very interesting

 

[WorldTraveler]

Swamt,

Yes, I am aware of B6’s growing maintenance costs but it doesn’t change that they are the lowest CASM major airline in the US and has the financial strength to move into new markets and compete very effectively with other carriers including WN.

I’m sure what I write that now bores you but the fact is that we agreed for months and months about WN’s prospects to continue to grow and how well WN is managed.


The only thing that has changed over the past several weeks is that I have said that DL isn’t going to sit on the sidelines and allow WN to grow in key markets as a result of the AA/US settlement agreement and as the WA restrictions fall. The only thing that has changed is that I have said that DL will aggressively compete to be a part of both processes and will continue to aggressively compete with WN. Apparently the idea of WN having to compete with WN bothers you because that is the only thing that has changed over the past several weeks. It also highlights perfectly that DL is a very aggressive and effective competitor and is able to play in key markets regardless of the other player.

WN clearly wanted a preferential deal with the DOJ and AA/US and wanted to monopolize DAL post WA to the exclusion of DL.

The fact that I accurately said that DL would succeed at putting pressure on the DOJ and the settlement agreement in order to correct fundamental errors in the settlement agreement bothers you and a lot of people and those errors include:
- The DOJ created a settlement agreement that does not protect direct service to small and medium-sized cities from DCA, allowing new AA to dump whatever cities it feels it needs to dump in order to use a far number of flights to serve small/medium sized cities than what US currently serves.
- There is no fix in the settlement agreement to the problems the DOJ voiced concern about regarding service to small cities that do not have nonstop service to DCA but are both served by AA and US in other parts of the country but by few if any other airlines.
- The settlement agreement allows AA/US to increase its percent of the market in LGA to a much higher level as a result of the merger but does not allow any legacy competitor to bid for slot at DCA even though no legacy/network competitor is as large at DCA as AA is at LGA today.
- The settlement agreement does not fully address the issue that DL could be forced to terminate service at DAL as a result of the settlement agreement that involves AA/US.
- The DOJ is giving preference to WN and B6 in obtaining slots at DCA and LGA even though it is a given that other carriers, legacy/network and low fare carriers, are interested in acquiring those slots.
- There is no mechanism to ensure that the bidding process is fair and transparent via outside audits.

You can say “they can bid but they have to qualify” all you want but is the fact that DOJ has developed qualifications that are contrary to basic laws and principles of competition that is precisely the program.
The Congressional leaders noted that the settlement agreement has preferential elements for one carrier over another and allows the DOJ and AA/US to carve up the industry.

Since robbed wants to bet, I will gladly say that I will bet that the settlement agreement as originally signed by AA/US and the DOJ will be amended due to Congressional pressure and/or lawsuits.

A few months ago there were people all abuzz that the DOJ would be forced to settle or face a court case over the THX holidays. Now, it is AA/US and the DOJ who are under pressure to fix the settlement agreement to meet basic standards of competitiveness and open market access or have the AA/US merger delayed.

 

[eolesen]

Congressional "leaders" can try to intervene by writing letters, but what exactly is their standing?  
 
It has already been approved by the bankruptcy court, and the settlement has also been approved by the anti-trust court.  The states have already agreed to the settlement, and so has the DOJ.  
 
If they can't enact legislation to address basic issues facing the country, what makes you think they can come together to make something happen before now and when the financial transactions closes *** AND *** be able to get the support for making it retroactive?
 
You're betting on a hail-Mary right now, and that only ever seems to work out in fiction...

 

[WorldTraveler]

So, are you willing to bet that the settlement agreement will be implemented as it was announced by AA/US and the DOJ several weeks ago?

I'm betting it will be changed.

 

[swamt]

WT, nothing bothers me that you have posted above, NOTHING. What does bother me is the fact that you wanna bet, or you claim that you said it first when you haven't. You are trying to make browny points for yourself for whatever reasons. WE ALL already knew about Delta's whining about not being able to bid, when in fact they can bid all they want, this has been stated from the get go---that is why nobody will bet you.
Everybody also knows that Delta and maybe even other airlines (but have not heard of any as of yet) will be protesting the DOJ's comments about only LCC's need apply.
Once again (always repeating myself like with a 3 year old) Delta will be allowed to submit bids all they want to, rather or not the DOJ accepts them or if they qualify is another story all together. Quit trying to be the claimer of all the actions of Delta when everything has been out in the media for several weeks.

 

[WorldTraveler]

you can't seem to comprehend (maybe has to do with 3 year olds) that saying you can bid all you want but there are qualifications that will prevent from actually achieving something is not much different from saying "don't bother to bid at all."

If you and WN have nothing to fear about the process then open all of it to any airline.. and let's be clear that the process is not open to any LCC. It is open to B6 and WN.

I don't care whether you think I am after brownie points or not. The minute the settlement agreement was announced, it was a given that it would be challenged but yet DL is the only one who publicly has.

There were hundreds of post by others saying that DL would get nothing out of the process and yet it is becoming more and more doubtful that DL will be shut out, esp. regarding DAL gates.

If you and WN are as confident in your ability to win in the marketplace, then you shouldn't be threatened by what DL does.

The reason why you don't want DL in the process - and have only wanted them included if they were put in a box where they would ask for whatever they wanted but with no chance of receiving it - is because DL has a very long track record of keeping WN itself in a box and preventing WN from steamrolling DL in markets that matter to DL.

Whether you want to bid or not, I still stand by my assertion that the settlement agreement will be altered and that DL will end up with assets that matter to it, including the ability to serve DAL on an even greater scale than they today. DL will also either succeed at forcing AA/US to fly a schedule to small/medium sized cities comparable to what they serve today in the number of cities they serve and the frequency of those flights - or DL will succeed in getting some of the slots set aside for service to small/medium sized cities.

The clause prohibiting DL and UA from bidding on slots overall will be changed, I am betting, since AA/US are being allowed to hold a higher percentage of slots at LGA than AA currently holds yet DL and UA aren't being allowed to bid on slots at DCA where both are far smaller than AA/US.

 

[robbedagain]

If thats the case wt then it shld also be clear that the new aa should not be required to have given up those slots in the first place but the argument can be made that if dl and ua should be allowed to bid then so should the new aa me thinks ur all pro delta for every thing and to hell with all the others. There is no clause that dl and ua cannot bid... multiple officials all said dl and ua can bid all they want but they most likely will not win anymof the slots at lga and dca me dont think that is too hard to read or comprehend

 

[WorldTraveler]

You can parrot swamt's comments all you want, but there is nothing just about a system in which you are told to go ahead and apply but we're telling you in advance that you aren't going to get anything.

The bigger issue is that the subject of divestitures have been discussed for months on here... there was a chorus of people who argued that AA/US wouldn't have to give up anything. Of all places, no divestitures would be required at LGA.

Two weeks ago, that all changed and those of us who said all along that there would be massive divestitures were vindicated.

Further more, I said that DL would be attempting to pick up slots for small and medium sized cities - and that too has also happened.

I also have said that the DOJ was tasked with balancing the need to inject service to small towns with increased access by low fare carriers. The DOJ bowed completely to the interests of AA/US and low fare carriers in doing all possible to shut out network carriers from the process - because AA/US couldn't stand to see DL end up with anything from the divestitures, in large part because US was so badly hoodwinked by the DCA/LGA slot deal despite the fact that DL laid out to the DOJ and DOT multiple times what it intended to do.

WN is peaved because they thought they could monopolize the divestiture process and now it is becoming more and more apparent that won't be the case at all.

I'm not looking for brownie points. I am saying that a little logic and a little understanding of the industry would bring anyone to this same point.

AA, US, and WN are all breaking their neck to get the deal closed as quickly as possible but there are legal processes that do allow antitrust cases to be overturned for 60 days even after court approval.

It's not over yet.... and this is just one chapter in a far more heightened competitive environment in the airline industry than has been seen in many years.

The DOJ is dead wrong that the legacy airlines can't and won't compete with each other. And we can use E's definition of WN as a legacy carrier for the purposes of dragging them into the fray that will exist in the industry for many months to come.

 

[eolesen]

Again, WT, you're failing to acknowledge the fact that all the parties with standing have agreed to the settlement. 
 
The settlement was approved by an anti-trust judge, the bankruptcy judge, the Attorney General of the US and the individual State's Attorneys General.
 
That's a lot of legal minds agreeing to something.
 
What makes you think that they're going to suddenly realize they overlooked something in the process, something so serious that they're going to risk having one side or the other reject the settlement, ahd have it fall back to Square One and a trial?
 
Perhaps that's probably what DL and you're holding out hope for -- one side or the other will reject any proposed changes.  I personally don't think it will happen, but there have been enough twists & turns in this case that nothing would surprise me now...
 
 
You're also failing to see that this was an anti-trust case.  Exactly how does transferring even more power or assets to the largest airline in the country help competition?...

 

[WorldTraveler]

go talk to your law buddies... there are legal provisions to challenge the suit....

again, you are so anxious to get the deal out the door and shut DL out... DL has as many if not more political connections and most importantly DL knows that what is good for the country is good for DL. AÁ/US and WN are interested in ramrodding a deal thru so they singularly benefit. There are more than enough people smart enough to see thru that and to ensure that the country isn't shortchanged.

I continue to stand by my statement that the settlement agreement as it stands now won't be implemented.

Glad you acknowledge the possibility that things will change.