Airtran and Frontier, running on fumes?

[Andy]

I can't post a direct link to the 10K. Here's a link to the SEC filings: http://investor.airtran.com/phoenix.zhtml?c=64267&p=irol-sec
The latest 10K is on the second page.

AAI owns 8 and leases 79 717s. See page 21.

AAI may be looking at early lease turnbacks along with selling airframes. Right now, the name of the game in the airline business is to hunker down. That means reducing capacity and selling aircraft. Those that sell aircraft first will get the best prices. Shedding aircraft would be a wise and proactive move by management.

 

[PCL_128]

I wouldn't be completely surprised if we sold some 717s. The 737s on order are more versatile airframes, and if they want to slow growth, it probably makes more sense to sell 717s than sell 737 deliveries. I doubt they can find a buyer for more than a handful of them, though. Hawaiian might want a few, and maybe TPG would like MidEx to get a few more, but that's about the extent of the 717 market.

 

[Andy]

PCL, you're still not getting it. Passenger traffic's going to fall off this year. It's not about growth; it's about shrinking in order to survive. Easy credit is impossible to find, so companies have to concentrate on preservation of capital.

People talk about anger toward airlines not raising fares. There are other ways to increase revenues than raise fares. Adjusting the size of buckets is a more subtle, but very effective, way of increasing PRASM. That's what those yield management guys get paid to do.
I don't have any inside info on what future bookings look like, but I suspect that they're way light and airlines are finding themselves having to expand the lowest fare buckets in order to fill the planes. In layman's terms, I think that they're selling more $49 tickets and less $249 tickets. Yes, the planes are still full, but they're full of cheap tickets.

 

[PCL_128]

PCL, you're still not getting it. Passenger traffic's going to fall off this year.

No, I get what you're saying, I simply disagree. I don't think there's a chance that passenger traffic is going to fall off this year. I think growth will probably shrink to virtually nothing, but we wont' see negative growth.

I don't have any inside info on what future bookings look like, but I suspect that they're way light

Latest word from our management is that advanced bookings are similar to last year's numbers.

 

[Andy]

Latest word from our management is that advanced bookings are similar to last year's numbers.

I should have stated that differently. Have they changed bucket sizes to keep advance bookings stable?
For example (EXAMPLE PURPOSES ONLY, NOT ACTUAL FARE BUCKETS), if last year's buckets on a flight were:
$49 - 4
$59 - 6
$79 - 12
$99 - 10
$149 - 12
$199 - 20
$249 - 20

And that same flight now has:
$49 - 8
$59 - 8
$79 - 16
$99 - 12
$149 - 16
$199 - 16
$249 - 8

the flight still has the same number of passengers, but the revenue is much lower.

 

[Dude]

A close friend of mine works for Boeing Capital Corp and has previously stated that Boeing has a home for all of the 717's in the lower 48 and could easily move every airbus traded in any foreseeable deal. However, I don't see a likely merger of SWA and AirTran. If SWA does anything, it seems prudent to wait and let some consolidation materialize and figure out what markets are affected before anyone knee-jerks a decision. Sadly, there are numerous airlines that are experiencing catastrophic losses and dwindling bargaining power; and it doesn't seem that AAI is one of them. Everyone has serious issues at this point. The question isn't who is going to lose; the question is who is going to lose the least.

The only solution is very high ticket prices. If you can still fly the trip cheaper than driving, then tickets are too cheap. That goes for every carrier, even my beloved SouthWal-MartAirlines. I fear for those that have to look for jobs in this environment. There will be a ton of qualified applicants looking for anything to pay the bills.

 

[j41driver]

Do we own 10 717s? I think most all are leased.

We have 87 717's. 8 of them are owned...so, yes, most of them are leased.

 

[PCL_128]

I should have stated that differently. Have they changed bucket sizes to keep advance bookings stable?
For example (EXAMPLE PURPOSES ONLY, NOT ACTUAL FARE BUCKETS), if last year's buckets on a flight were:
$49 - 4
$59 - 6
$79 - 12
$99 - 10
$149 - 12
$199 - 20
$249 - 20

And that same flight now has:
$49 - 8
$59 - 8
$79 - 16
$99 - 12
$149 - 16
$199 - 16
$249 - 8

the flight still has the same number of passengers, but the revenue is much lower.

I'm honestly not sure. Yield management is too "nuts-and-bolts" for management to usually mention even when talking to investors. Based on the last report, though, our average fare has actually increased over the previous 12 months (by about $50 if I remember right). Not sure if that's continuing for advanced booking, however.

 

[Andy]

Everyone has serious issues at this point. The question isn't who is going to lose; the question is who is going to lose the least.

I fear for those that have to look for jobs in this environment. There will be a ton of qualified applicants looking for anything to pay the bills.

I don't know how much longer Boeing will be able to find homes for used aircraft. At some point, the market gets saturated and they go for dirt cheap.

So you've got the potential for a lot of cheap aircraft leases and a lot of unemployed pilots. That creates an environment where you can see new startups lowering the bar well beyond Skybus.

 

[Dude]

True.

 

[Andy]

I'm honestly not sure. Yield management is too "nuts-and-bolts" for management to usually mention even when talking to investors. Based on the last report, though, our average fare has actually increased over the previous 12 months (by about $50 if I remember right). Not sure if that's continuing for advanced booking, however.

Yields for all airlines increased by a good bit in 2007 vs 2006. I think that we're starting to see that turn around.
When UAL was having major financial problems, they dumped a ton of unsold seats on priceline for cheap. That same thing can happen with any airline that's starving for cash.

 

[jetdawg]

as of last week. if and i think it will be when we get rid of the 10 717's they will be replaced with the 737. how soon that happens is everyones guess. at the end of their leases and some are coming quick (i remember when we had 5 of those things) it is hard to go to boening and say we do not want the 717 anymore here take them back. oh, those 8, we are just going to hang on to those old peices of crap. I think it is a hell of allot smarter to sell some of the oldest 717's that we have in our fleet and eventually replace them with new 737's especially if we have someone to buy them.

 

[BSkin]

There's little-to-no market for the 71. Money will be made, if needed ($hit hits the fan/no merger) by selling the rights to 73s!

That's what I heard at the schoolhouse last week and it makes sense.

Of course, they're probably predicting something else this week!

 

[Citrus531]

I agree...no market for the 717 beyond AirTran...with Hawaiian and Midwest being the only real alternatives I think selling more 73's is the best bet money wise....

We actually got a couple from Hawaiian a couple of years back...with our oldest 71 being 9 years old I know they have a lot of life left in them

I remember hearing MCO say about 6-8 months ago that we're about 2 years from another fleet decision...wonder if that's been moved up with these crazy oil prices?!?

 

[Tanker Clown]

What's the story with F9's stock today? It's down almost 17%. Most other carriers are up.