Loads picking up for ExpressJet Airlines

[TGT]

They are, PAL. They are called 70-90 seat "RJ's" and 70 seat Turbo Props. All of them designed to provide feed to the Major's hub not to provide stand alone profit. You have to spend money to make money. Funny is'nt it?

So then why are some of the Majors still putting out RFP's for 50-seat flying (Continental, Delta, Midwest) if they lose money?

 

[Britpilot]

So then why are some of the Majors still putting out RFP's for 50-seat flying (Continental, Delta, Midwest) if they lose money?

Because they supply feed to the hub. Lose money on the feed, make money on the connection. The original concept of the RJ was to connect smaller cities to the hub which previously had been flown by turbo props.
Continental has reduced it's total 50 seat fleet and will continue to do so in the future. The 50 seat jet was a product of $28 a barrel oil in the early ninties. Continental ordered 275 (with 100 options, that they have not exercised) of the EMBRAER flavour in the guise of Continental Express. They now operate 239 between XJT and CHQ, that would be a fleet reduction.
Delta needed to replace 10 aircraft operating out of LAX, no net gain.
Midwest, who knows, maybe they cannot afford new mainline aircraft.
Compare the CASM of a 50 seat RJ to a 137 seat 737 over a stage length of 300 miles, you will see that the 737 wins by a large margin. The longer the stage lenth the better the CASM number for the 737. As long as the Majors continue to utilize the hub and spoke system they will need feed. However, on shorter stage lengths the turbo prop will make a comeback now that "The all jet fleet" mantra has worn thin. I see Continental will operate Dash 8 aircraft in CLE, makes sense, cheaper, you see. There is is also a scope issue at Continental that prevents it's feeders from operating larger aircraft and right now there is a wait time for 70-100 seat EMBRAER/Bombardier fleet types. XJT's CPA with CAL guaranteed a profit and included fuel. Horizon operates Q400's on the west coast and Frontier will soon operate a few out of DEN. See a trend here?
As the cost of operating a 50 seat RJ's continues to esculate so will they be parked as contracts come to an end. The turbo prop is poised to make a triumphunt return.

 

[erj-145mech]

CAL doesn't exactly follow that business model though. The CoEx flights from LAX to Mexican distinations, and the seasonal service to MTJ from LAX and DAL contradict that.

 

[Skyward]

What a handle you have on the airline industry. Since a 777 has a lower CASM than a 737 how can airtran make money with them?

How are the hotels at airtran?

 

[Britpilot]

CAL doesn't exactly follow that business model though. The CoEx flights from LAX to Mexican distinations, and the seasonal service to MTJ from LAX and DAL contradict that.

Agreed, however the yeild on Mexico operations is significantly better which offsets the high CASM on the 50 seater. I beleive, though, that a 70/90 seater would be a better equipment in that market if only airframes were available and CAL was'nt tied up with 50 seat leases.

 

[Britpilot]

What a handle you have on the airline industry. Since a 777 has a lower CASM than a 737 how can airtran make money with them?

How are the hotels at airtran?

. Thank you. Just reading the numbers. I take pride in understanding the industry in which I work.
. Purchase cost. The 737's were bought very cheap from Boeing in 2001, less than a 70 seat RJ. A 777 does have a lower CASM than a 737, over a longer stage length. The 777 is a long range aircraft, the 737 is a medium range aircraft. Designed for different markets you see?
. The hotels are fine at AirTran, how are yours? Although we don't spend much time in them as we are fly very productive trips.

 

[cobalt]

Because they supply feed to the hub. Lose money on the feed, make money on the connection. The original concept of the RJ was to connect smaller cities to the hub which previously had been flown by turbo props.

but SO many of CAL connections connect you from one RJ to another, you never even set foot on mainline... so your logic says those are losing money.

 

[Avpilot]

50 seaters operate in the red? They lose money? Did you not see any of the filings from Continental Airlines back in about 2003 or 2004? That was back when CAL was losing money, along with almost everyone else. I don't have exact numbers, but many quarters saw something similar to this: CAL Mainline Net Profit: -$225M CAL Express Net Profit (For CAL): $100M Total CAL Net Profit: -$125M. For a long time we were the only part of the business making money, offsetting some of the losses. In fact, we used to say that we were like a healthy tick on a sick dog. That doesn't jive with what you're saying about 50 seaters losing money. They can make money if deployed correctly. So far, XJT is doing just that.
Tim

 

[jtf]

I think it could work if a lot of things go right. The idea of direct to places with no direct competion is huge- people will pay more for that to skip a connection. There are actually quite a few RJs out there making money without just feeding. American Connection out of STL is a big money maker since they mostly don't compete on any direct routes and don't do much connecting. They gouge the customers whenever possible and make some good coin. Delta's various RJs out of CVG is another situation where money can be made since they are able to keep CVG as one of the most costly cities to fly to or through. As long as fuel prices don't have any huge spikes- like Indy got right out of the starting gate (not the only problem with their model)- they have a hope of at least breaking even. It's not like they are going full blast into putting their entire fleet into it. As long as the size of the fleet stays limited and the destinations stay without other direct competion they could make some money. I wish them luck. They are doing their best to be a descent place to work and stand against the whipsaw. I'm not saying they aren't in a tough spot, but at least they have a descent chance of making things work.

 

[Whiskerbizkit]

50 seaters operate in the red? They lose money? Did you not see any of the filings from Continental Airlines back in about 2003 or 2004? That was back when CAL was losing money, along with almost everyone else. I don't have exact numbers, but many quarters saw something similar to this: CAL Mainline Net Profit: -$225M CAL Express Net Profit (For CAL): $100M Total CAL Net Profit: -$125M. For a long time we were the only part of the business making money, offsetting some of the losses. In fact, we used to say that we were like a healthy tick on a sick dog. That doesn't jive with what you're saying about 50 seaters losing money. They can make money if deployed correctly. So far, XJT is doing just that.
Tim

Thats because Express always makes a profit. As long as the flight goes, full or empty, CAL pays Express a 10%. Express in return repays CAL.

 

[Avpilot]

Thats because Express always makes a profit. As long as the flight goes, full or empty, CAL pays Express a 10%. Express in return repays CAL.

No, you missed the point....This is separate from the 10K filings from ExpressJet about our own profits. Back in the day, CAL used to publish the different divisions' profits or losses. It showed that FOR CAL, XJT created profits that offset some of the losses.

Tim

 

[Whydoitry]

Well there is an earnings call in a few weeks. Let's see what Ream says. My guess is that things will be unexpectedly good. But I'm sure that some on here will still say it won't work.

 

[KevinOppelt]

Doesn't need?? We're going after niche markets...how can you say that? The last thing we need is another code share.

The last thing we need is more growth in the regional airline market. not that anyone has any say it what goes on with there company, but it would be nice to see the flying start to shift back to the majors.

 

[Britpilot]

50 seaters operate in the red? They lose money? Did you not see any of the filings from Continental Airlines back in about 2003 or 2004? T

Yes I did see all of the filings.(I worked at XJT for eight years) In 2003/2004 XJT was working under the CAL CPA.(started in 2002 after the IPO) Part of the deal is they will always make a profit. Fee per departure will always pay as long as you depart. Continental made cash from the IPO and subsequent sales of XJT shares. It helped them fund their pension commitments that were a long way in the red. They have continued to sell their shares in XJT and now own ony a small percentage.
CASM for most 50 seaters is around 13-15 cents. CASM for a 737 6-9 cents. So it is easier to generate yeild if you fill the seats.

 

[Britpilot]

I think it could work if a lot of things go right. The idea of direct to places with no direct competion is huge- people will pay more for that to skip a connection. There are actually quite a few RJs out there making money without just feeding. American Connection out of STL is a big money maker since they mostly don't compete on any direct routes and don't do much connecting. They gouge the customers whenever possible and make some good coin. Delta's various RJs out of CVG is another situation where money can be made since they are able to keep CVG as one of the most costly cities to fly to or through. As long as fuel prices don't have any huge spikes- like Indy got right out of the starting gate (not the only problem with their model)- they have a hope of at least breaking even. It's not like they are going full blast into putting their entire fleet into it. As long as the size of the fleet stays limited and the destinations stay without other direct competion they could make some money. I wish them luck. They are doing their best to be a descent place to work and stand against the whipsaw. I'm not saying they aren't in a tough spot, but at least they have a descent chance of making things work.

Correct. As long as their yeild is good they could make money on those routes. At the moment the rest of their operation will support the branded flying in the hope that they can sustain a good ticket price.

 

[Avpilot]

Yes I did see all of the filings.(I worked at XJT for eight years) In 2003/2004 XJT was working under the CAL CPA.(started in 2002 after the IPO) Part of the deal is they will always make a profit. Fee per departure will always pay as long as you depart. Continental made cash from the IPO and subsequent sales of XJT shares. It helped them fund their pension commitments that were a long way in the red. They have continued to sell their shares in XJT and now own ony a small percentage.
CASM for most 50 seaters is around 13-15 cents. CASM for a 737 6-9 cents. So it is easier to generate yeild if you fill the seats.

Again...you are missing the point completely. Go back and read my posts. I am saying absolutely nothing about the profits that ExpressJet airlines has made for its shareholders. I am talking about the profits that CAL has made off of selling tickets on expressjet airlines. It's substantial. We were the only division making money for CAL's bottom line...it wasn't through stock trades, IPO's, or anything else. When CAL was in the red, the ONLY division of its business that was profitable every quarter for CAL's bottom line was the Continental Express operations.


The 50 seater can turn a profit and does turn a profit. It isn't just to get passengers to the hub for mainline flights. Maybe it isn't as efficient as a 737, but there a lots of markets that can not support a 737 and those are the ones that the Jims are going after it seems. Markets that SWA is not going to want to compete in, but that will fill a 50 seater.

Tim

 

[Britpilot]

Again...you are missing the point completely. I am talking about the profits that CAL has made off of selling tickets on expressjet airlines.

Tim,
I'm not trying to knock XJT, quite the reverse. However, those profits indicated on the filings did not iclude several items that Continental picks up the tab for. i.e. Aircraft leases, all of which are Continental's sub-leased at a lower rate to XJT. Fuel was also paid for by Continental. These costs are rolled into Continentals filings so the "profit" generated by XJT is somewhat shallow. CAL sells tickets on CAL, when I talked to Mr. Ream in 2003, Continental did not even have the numbers for XJT revenue.
Yes you can make money from a 50 seat jet, but the ticket price is going to reflect the higher costs involved of operating the aircraft. The branded flying would be a lot more tangible with 70-100 seat equipment with much lower CASM.
I spent eight years at XJT and had a blast but I was concerned about the loss of CAL flying ,both current and future, and felt the time was right to move on.
Once again, I wish you all the best of luck.

 

[Master Shake]

The last thing we need is more growth in the regional airline market. not that anyone has any say it what goes on with there company, but it would be nice to see the flying start to shift back to the majors.

I've got some news for you: We Are A Major Airline.

 

[Skyward]

Tim,
I'm not trying to knock XJT, quite the reverse. However, those profits indicated on the filings did not iclude several items that Continental picks up the tab for. i.e. Aircraft leases, all of which are Continental's sub-leased at a lower rate to XJT. Fuel was also paid for by Continental. These costs are rolled into Continentals filings so the "profit" generated by XJT is somewhat shallow. CAL sells tickets on CAL, when I talked to Mr. Ream in 2003, Continental did not even have the numbers for XJT revenue.
Yes you can make money from a 50 seat jet, but the ticket price is going to reflect the higher costs involved of operating the aircraft. The branded flying would be a lot more tangible with 70-100 seat equipment with much lower CASM.
I spent eight years at XJT and had a blast but I was concerned about the loss of CAL flying ,both current and future, and felt the time was right to move on.
Once again, I wish you all the best of luck.

You keep refering to CASM as if that is the only indicator of profit/loss, if it where that simple anyone could run an airline. If we were running bigger airplanes on our branded routes we would most likely be competing against SW's 737, which we all know would be a losing battle. The whole idea is to go in to markets that cannot suport a 737 size aircraft but can support a 50 seat aircraft at a profit. Therefore your idea of flying a 70-100 seat aircraft becasue the CASM is lower makes no sence. That is why there are NO plans for bigger aircraft on branded routes. Sounds simple to me but I geuss thats a hard concept for people to get throught there heads on this forum.

 

[Britpilot]

You keep refering to CASM as if that is the only indicator of profit/loss, if it where that simple anyone could run an airline. If we were running bigger airplanes on our branded routes we would most likely be competing against SW's 737, which we all know would be a losing battle. The whole idea is to go in to markets that cannot suport a 737 size aircraft but can support a 50 seat aircraft at a profit. Therefore your idea of flying a 70-100 seat aircraft becasue the CASM is lower makes no sence. That is why there are NO plans for bigger aircraft on branded routes. Sounds simple to me but I geuss thats a hard concept for people to get throught there heads on this forum.

No where did I state that CASM is "the only" indicator of profit /loss, so don't go putting words in my mouth please. It seems that you're a little defensive about your operation with the 50 seaters and so you should be. If it becomes a good thing then more pax will want to fly, your loads will go up and an LCC will come in with bigger equipment and lower fares and take your pax. that's why,at some point, XJT will need larger equipment. Makes sense (or is it "sence"?) to me but I guess (or is that "geuss"?) I don't want to burst your bubble, it's too hard a concept for me.

 

[Skyward]

You're right, no one is safe form LCC's, they will eventally fly every route in the US and put all other airlines out of business. Thier CASM is lower than everyone else, and can offer lower fairs. Good thing you got on with that LCC, you will be safe.

The world I live in isn't as simplistic and absolute as yours.

Thanks for proofreading my post, I always hated that part.

 

[N4niner206]

"Always"?

ALWAYS. That is HILARIOUS. "Continental Express" used to be the worst of the worst... don't you guys forget it. Two years from now, TSA, Pinnacle or Mesa could easily be the best operation out there with a change in management. Think Im wrong? Who used to be the president of Continental Express????

 

[N4niner206]

I've got some news for you: We Are A Major Airline.

And that makes you special. And if that makes you feel good so you can say "Im an airline pilot at a major airline"... a good portion of the regionals out there are majors now. Airbuses are right around the corner for you... Im so excited!

 

[pgcfii2002]

where the women instinctively flock like the salmon of Capistrano...

 

[imacdog]

I've got some news for you: We Are A Major Airline.

Too funny! :laugh:

 

[ATRCA]

Your Boss (and my former boss) is doing alright. Time will tell if the Branded operation will make some cash for you. The addition of the Delta LAX flying will certainly help support the bottom line for a while. I wish you all good luck.

Hotels suck when we switched to this new company Lodgex! Can you do something about that??

 

[ATRCA]

One of the big shots came in the other day and said that the branded op. worst case was set up to LOSE money for 3 yrs. They apparently feel they can carry it for that long and then...................who knows.

 

[Britpilot]

Hotels suck when we switched to this new company Lodgex! Can you do something about that??

Wish I could. We have the same thing here. How's it going?

 

[Britpilot]

You're right, no one is safe form LCC's, they will eventally fly every route in the US and put all other airlines out of business. Thier CASM is lower than everyone else, and can offer lower fairs. Good thing you got on with that LCC, you will be safe.

The world I live in isn't as simplistic and absolute as yours.

Thanks for proofreading my post, I always hated that part.

You're welcome, but so much anger.
What can I tell you? They offered me a job. Happy to be here.
Peace.

 

[Britpilot]

You're right, no one is safe form LCC's, they will eventally fly every route in the US and put all other airlines out of business. Thier CASM is lower than everyone else, and can offer lower fairs. Good thing you got on with that LCC, you will be safe.

The world I live in isn't as simplistic and absolute as yours.

Thanks for proofreading my post, I always hated that part.

Would that be fares?
I hope so, that was my gamble.