JetBlue defers delivery on 31 A320s

[Andy]

Also announced that they'll be doing a $160M convertible. Wanna bet that it'll be death spiral financing? (Wiki it if you don't understand the term).

http://www.forbes.com/reuters/feeds...406036_RTRIDST_0_JETBLUE-AIRBUS-UPDATE-1.html

NEW YORK (Reuters) - Low-fare carrier JetBlue Airways (nasdaq: JBLU - news - people ) Corp said Tuesday it plans to defer delivery of 21 Airbus A320 aircraft for up to five years, citing current high fuel costs.
JetBlue said the aircraft were originally scheduled for delivery between 2009 and 2011 and it plans to defer delivery until 2014 and 2015.
Record oil prices and a weakening U.S. economy have stalled the airline industry's modest recovery from the 2001-2006 downturn.
JetBlue chief executive Dave Barger said Tuesday the deferrals will help JetBlue further moderate its growth rate in 2009 and beyond, which will enhance liquidity and defer future debt obligations.
Last December, JetBlue announced it would sell a 19 percent stake in itself to Deutsche Lufthansa AG (other-otc: DLAKY.PK - news - people ), Germany's national flag-carrier, in a deal worth about $300 million.
"In the face of escalating fuel costs, we believe it is essential to take a more financially conservative approach to managing our business," said Barger Tuesday.
Oil prices, trading around $129 a barrel Tuesday, have roughly doubled in the past year.
Seven small airlines have filed for bankruptcy or stopped operating in the past five months and, if oil prices stay at current levels or go higher, some major airlines also face the prospect of bankruptcy, experts say.
To survive, major airlines have moved to increase fares and fees, cut jobs, cut costs and reduce capacity and services.
Airbus and rival Boeing (nyse: BA - news - people ) keep a close watch on the capacity plans of airlines as they give the clearest indication of air travel demand and, ultimately, the need for new planes.
JetBlue shares fell about 4.5 percent following the closing bell Tuesday after the company announced it was deferring the deliveries and also said it plans to offer $160 million of convertible debentures.

 

[waterski]

Fix title to read 21

 

[PlaneDrvr]

Also announced that they'll be doing a $160M convertible. Wanna bet that it'll be death spiral financing? (Wiki it if you don't understand the term).

http://www.forbes.com/reuters/feeds...406036_RTRIDST_0_JETBLUE-AIRBUS-UPDATE-1.html

NEW YORK (Reuters) - Low-fare carrier JetBlue Airways (nasdaq: JBLU - news - people ) Corp said Tuesday it plans to defer delivery of 21 Airbus A320 aircraft for up to five years, citing current high fuel costs.
JetBlue said the aircraft were originally scheduled for delivery between 2009 and 2011 and it plans to defer delivery until 2014 and 2015.
Record oil prices and a weakening U.S. economy have stalled the airline industry's modest recovery from the 2001-2006 downturn.
JetBlue chief executive Dave Barger said Tuesday the deferrals will help JetBlue further moderate its growth rate in 2009 and beyond, which will enhance liquidity and defer future debt obligations.
Last December, JetBlue announced it would sell a 19 percent stake in itself to Deutsche Lufthansa AG (other-otc: DLAKY.PK - news - people ), Germany's national flag-carrier, in a deal worth about $300 million.
"In the face of escalating fuel costs, we believe it is essential to take a more financially conservative approach to managing our business," said Barger Tuesday.
Oil prices, trading around $129 a barrel Tuesday, have roughly doubled in the past year.
Seven small airlines have filed for bankruptcy or stopped operating in the past five months and, if oil prices stay at current levels or go higher, some major airlines also face the prospect of bankruptcy, experts say.
To survive, major airlines have moved to increase fares and fees, cut jobs, cut costs and reduce capacity and services.
Airbus and rival Boeing (nyse: BA - news - people ) keep a close watch on the capacity plans of airlines as they give the clearest indication of air travel demand and, ultimately, the need for new planes.
JetBlue shares fell about 4.5 percent following the closing bell Tuesday after the company announced it was deferring the deliveries and also said it plans to offer $160 million of convertible debentures.

In the body of the article it says deferring delivery of (21) A320s, and that is what I have read in all the other press reports; yet you state "31" in your posting title?? Typo??

PD

 

[Andy]

DOH! Sorry for the typo; it should read 21. I'd edit the title, but it no longer allows me to edit my original post.

IMHO, it's a good move on JBLU's part. This is a bad time to be taking delivery of additional aircraft. We're at the point in the industry where airlines have to raise fares just to break even. And raising those fares is going to result in less travelers. Less demand for seats.
I also think that the financing's a good call. It doesn't matter if they trash their stock price in order to raise $160M in the current credit environment.

Barger's making the right moves to ensure JBLU's long term survivability.

 

[johnsonrod]

Just curious - what are newhires being told about upgrade times on the Airbus fleet nowadays? Anyone care to estimate?

 

[WateryGrave]

Just curious - what are newhires being told about upgrade times on the Airbus fleet nowadays? Anyone care to estimate?

What newhires???

 

[Dizel8]

What upgrades?

 

[WateryGrave]

What upgrades?

What he said.

 

[PlaneDrvr]

DOH! Sorry for the typo; it should read 21. I'd edit the title, but it no longer allows me to edit my original post.

IMHO, it's a good move on JBLU's part. This is a bad time to be taking delivery of additional aircraft. We're at the point in the industry where airlines have to raise fares just to break even. And raising those fares is going to result in less travelers. Less demand for seats.
I also think that the financing's a good call. It doesn't matter if they trash their stock price in order to raise $160M in the current credit environment.

Barger's making the right moves to ensure JBLU's long term survivability.

Andy, just wanted to give you a hard time for the typo, couldn't resist.

I agree, a very smart move for JB. I have been thinking for the last month or so, just when they were going to make this move. For the last six months or so, every month when they reported their monthly 'travel' figures to the DOT; their ASMs where growing (on year over year figures), about 5-6% more than their RASM. They were basically adding more seats quicker than they were adding pax to fill them, resulting in a gradual decrease in their load factor, like I said for at least the last six months.

As I said, very wise move. And, with the uncertain economic environment coming later this year, could possibly see them sell some older a/c, to further reduce capacity. Those airlines who manage capacity and revenue best, keeps load factors high, and conserves cash (and manages debt), will be in the best shape come a year from now.

Have a few friends over at JB, so glad to see they are thinking forward.

For what its worth.

PD

 

[Bavarian Chef]

JB's next steps?

Reduce productivity, spread out available flying, hopefully keep the same numbers on reserve

Offer unpaid LOAs

Offer paid separations (FAs)

Furlough

 

[relief tube]

after years of airtran-like growth when the industry didn't need it, it took $130 oil for reality to hit JB management. Now management is bent on becoming a majority foreign-owned E-190 carrier. lovely.

I know this isn't what the JB pilots sighned on for. best of luck.

 

[clickclickboom]

Why defer any deliveries at all everyone knows we get the planes for free, the mx for free, and free gas

 

[AA717driver]

Bush better sign that executive order allowing foreign ownership--NOW! We've got to save our airline industry, you know. TC

 

[ArmadilloJackal]

Can I get paid in Euros?

 

[Andy]

Can I get paid in Euros?

Probably not a good play anymore. The slowdown's starting to hit the rest of the world. I'm anticipating foreign central banks to start cutting rates in order to keep unemployment from falling off a cliff. That'll strengthen the dollar ... the Fed may have a bit of room to cut some more, but it's nearly out of ability to cut rates.

 

[ArmadilloJackal]

Probably not a good play anymore. The slowdown's starting to hit the rest of the world. I'm anticipating foreign central banks to start cutting rates in order to keep unemployment from falling off a cliff. That'll strengthen the dollar ... the Fed may have a bit of room to cut some more, but it's nearly out of ability to cut rates.

I think (and hope) you're right. I guess I'll hedge against inflation by buying Wii's.

 

[JumpJetter]

Probably not a good play anymore. The slowdown's starting to hit the rest of the world. I'm anticipating foreign central banks to start cutting rates in order to keep unemployment from falling off a cliff. That'll strengthen the dollar ... the Fed may have a bit of room to cut some more, but it's nearly out of ability to cut rates.

Andy

I know it's a complicated answer, but don't you think the low, low, low interest rates are at least GREATLY the cause of the devalued dollar and the housing bubble?

 

[Fubijaakr]

So much for 200 Airbii by 2014. And by asking for another $160m from investors, does that mean B6 has burned through the Lufthansa money already?

Looks like B6 is the next in line for Bankruptcy Court.

 

[Dogwood]

So much for 200 Airbii by 2014. And by asking for another $160m from investors, does that mean B6 has burned through the Lufthansa money already?

Looks like B6 is the next in line for Bankruptcy Court.

I'll agree with the little chance of 200 Airbi by 2014, but as far as the LH cash, I don't think it's been touched. We've got plenty of cash for the moment, so we're not sure why we've chosen to raise more.

Maybe just doing it while we can for future insurance.

Doubt we're next in line for BK, but who knows.

 

[Andy]

Andy

I know it's a complicated answer, but don't you think the low, low, low interest rates are at least GREATLY the cause of the devalued dollar and the housing bubble?

The short answer to both is yes; however, each event was due to different periods of lowering rates.

For the devalued dollar, a lot of that is due to the most recent rate cuts.

For the housing bubble, the housing market started to get inflated post-911. Greenspan's Fed slashed rates aggressively to keep the economy rolling. As a direct result, mortgage rates fell.
Mortgage rates also fell due to a decrease in the risk premium that investors were demanding for their money. I'll try to not sound too geeky, but a good way to think of risk premium on a loan is the difference between what a treasury bill yields (practically guaranteed) and the interest on the loan in question.
Example: 30 year T-bill pays 6% interest. A 30 year fixed mortgage pays 8% interest. That's a 2% risk premium.
The housing bubble got way out of hand due to a narrowed risk premium because investors made a very poor assumption that real estate prices don't fall.
There are a lot of other tangential problems that exacerbated the housing crisis such as exotic loans and stated/no documentation loans.
Exotic loans, such as neg am (negative amortization) loans were necessary in order to qualify many people for their mortgage. The assumption was that they'd be able to refi prior to the mortgage reset and since the house increased in value, the refi costs would simply be rolled into the new mortgage.
Stated/no documentation loans - SISA (stated income, stated asset), NINA (no income, no assets) loans were aggressively sold by mortgage brokers to people who most likely couldn't qualify on full income and asset documentation. These loans paid the broker a higher commission, so there was a LOT of incentive to push buyers toward these loans.

When you see an 'expert' on the tube tell the public that the housing crisis is nearly over, I would suggest that you never rely on that person for unbiased information ever again. The housing crisis is far from over; it's more in the bottom of the third inning.
A lot of neg am loans are going to reset over the next 36 months. Most of those houses will end up in foreclosure because the market is nowhere near the bottom. I don't expect to see a bottom in the housing market until 2012. And as this drags on, it will have an increasing drag on the economy - it's going to get ugly out there. Prepare for several years of very lean times.
I'm not one to make these statements without putting my money on the line - to date, I've made a lot of coin shorting homebuilders (BZH, SPF, MTH, LEN back in 07; rotated out of them at the end of 07), Countrywide (shorted in the high 30s, covered in the low teens), Downey Savings and Loan (70s down to 20s); currently short FED, C, LEH, MER, COF, WFC. The financials have major issues due to the housing crisis and could implode any time now.

Long winded answer; hope that helps.

 

[Andy]

So much for 200 Airbii by 2014. And by asking for another $160m from investors, does that mean B6 has burned through the Lufthansa money already?

Looks like B6 is the next in line for Bankruptcy Court.

I don't think that they've burned through all of the LH money yet.

Over the last few years, most of JBLU's was short term; they'd roll most of it over as it was due. The reason why they went short term on the debt is that it was at lower interest rates than long term debt.
I haven't looked at JBLU's 10K/Q for a while (I've got more than a few of other companies practically memorized), but I think that they were trying to roll some of that into longer term debt. However, it's very possible that they could have $500M+ in debt due this year. For that reason, it was smart for them to raise additional capital.

I don't think that they're the next to go chap 11; I can think of a couple of others that I'd place higher on the list. Of course, I'd have to check to see JBLU's hedging strategy. With the meteoric rise in oil prices, the airlines that were aggressively hedged in this quarter will be in the best shape.
One airline that I'd be concerned about is CAL; they were very lightly hedged going into Q2 and they used three way collars with a ceiling price that they'd be hedged. It would have been a great strategy had oil prices remained flat/decreased.

 

[waveflyer]

This slowdown is why the FO position shouldn't be sold out for a quick upgrade. Not everyone can be a captain real quick- but now you're stuck trying to figure out how to negotiate higher FO wages when you're in a downturn....

Waiting patiently for the day when anyone in the airlines thinks long term. . .

(But if it's too much for mgmt, maybe i could expect pilots to...??) (That's a hint for VA and LCC, btw)

 

[B6Busdriver]

So much for 200 Airbii by 2014. And by asking for another $160m from investors, does that mean B6 has burned through the Lufthansa money already?

Looks like B6 is the next in line for Bankruptcy Court.

Looks like Fubi needs to go back to rehab. Live and let live Fubi.

 

[Fubijaakr]

Is that all you got? A personal attack?

Better:

1. Get your facts straight.
2. Dust off your resume.

I guess you could go over to another non-Union wage cutter...VA's hiring.

 

[tzskipper]

I guess you could go over to another non-Union wage cutter...VA's hiring.

Why the cheap-shot at another pilot group? Because they are hiring?

VA has only been flying since August. It would seem a little premature to expect a successful organizing drive to have occured.

 

[Jonny Sacko]

Fellas

It took over 17 posts to get to the bashing. I believe you've made it. Nice. Good luck with all that other stuff.

I do have one question though, how do they furlough? Does anybody know the facts? Is it the guy who's contract is due, or the most junior guy, or the loudest troublemaker, or that ugly chick that wears the "Women Fly" hat that used to be in the safety department and got booted to go on line or what? Hypothetical of course. I hope it's not "understood" it will be in seniority. That won't fly if times get bad enough and a senior guy comes up for renewal. Did all of the contracts just get renewed?

Either way, I wish the best for all.

 

[Joblu]

Is that all you got? A personal attack?

Better:

1. Get your facts straight.
2. Dust off your resume.

I guess you could go over to another non-Union wage cutter...VA's hiring.

Well at least I don't pay dues to get my wages cut. Given the impressive track record of unions it is certainly the way to go..

Dogwood that avatar is all too familiar. hehe.

 

[clickclickboom]

Fellas

It took over 17 posts to get to the bashing. I believe you've made it. Nice. Good luck with all that other stuff.

I do have one question though, how do they furlough? Does anybody know the facts? Is it the guy who's contract is due, or the most junior guy, or the loudest troublemaker, or that ugly chick that wears the "Women Fly" hat that used to be in the safety department and got booted to go on line or what? Hypothetical of course. I hope it's not "understood" it will be in seniority. That won't fly if times get bad enough and a senior guy comes up for renewal. Did all of the contracts just get renewed?

Either way, I wish the best for all.

There is a no furlough clause in the contract.. With less flying the monthly bid divisior gets lowered for example 2015 or so pilots y number of hours equals 80 hr bid divisior..

For June I got 78 hours and 19 days off with all trip commutable.. Last june I bid max sked got 92 hours and 15 days off

 

[737 Pylt]

Well at least I don't pay dues to get my wages cut.

No you just get whatever management throws down your throat, like those impressive 190 payrates!

Given the impressive track record of unions it is certainly the way to go..

While I'm no alpa fan, it certainly is better than taking my chances without some kind of protection on the property!
And if that's so, then why are you guys talking JBPA?

737

 

[Fubijaakr]

Why the cheap-shot at another pilot group? Because they are hiring?.

No, its because of the fact that the pilots are willing to work at a non-Union shop that is undercutting the rest of us.

Need some examples?

Airbus Capts. getting $95 an hour. And when they all go to year 2 in October they'll be getting $100 an hour. 5 years from NOW they'll be making an impressive $120 an hour.

In the meantime all our airlines will be attempting to drive our wages down to their level, just like they used the bankruptcy court to drive wages down to jetBlue levels.

Need another one? When F/Os at VA upgrade, they go to first year Captain pay...$95 an hour. Wanna bet our airlines will try to get that language in our contracts? It gives them an additional six years of Captain flying for substandard wages for every one of these guys who upgrades.

How about this gem...merit promotion. That's what ALPA was founded on back in the '20s to fight...preferential treatment. So, what's the metric that gets you promoted at VA? Fewest maintenance writeups? On time arrivals? Or simply ass-kissing the Chief Pilot.

Is this the way you really want the piloting profession to go?

You tell me.