Frontier Done (?)

[Wino]

you might be aproaching southwests costs without fuel, but the problem is that in bankruptcy you are completely unhedged.

Even the majors are partially hedged. You are buying oil at 138 a barrel or whatever it is today.

Right now, its all about cash burn. Figure out how much you got, and devide it by burn per day. Thats your answer, and then ask yourself if you will be out of bankruptcy before the flying slows down seasonally in the fall.

Cheers
Wino

 

[Colonel Savage]

you might be aproaching southwests costs without fuel, but the problem is that in bankruptcy you are completely unhedged.

That will be a big problem for the Legacies when they start lining up in front of the BK judges later on.

 

[Andy]

We're suppossed to receive an update as early as today regarding our BK/DIP situation. I'll post it if it's actual news.

The cost of funds is rising rapidly in the credit markets. The terms that F9 can get today are worse than terms they could have gotten a month ago. And I don't see any improvement.
The credit markets are getting ready to lock up again, which is going to cause the entire economy to roll over hard. Scary times ahead.

 

[Andy]

That will be a big problem for the Legacies when they start lining up in front of the BK judges later on.

That's true as long as oil prices are on the rise.

If oil prices are decreasing, as can be expected once demand destruction kicks into high gear, being unhedged is an advantage.
Several foreign governments have reduced oil subsidies and both India and China are mulling over doing the same.

 

[XR650R]

Any news on yesterdays meeting?

 

[USMC319]

Any news on yesterdays meeting?

Looks like F9 has accepted all the leases on their A-320 fleet and Lynx Q-400 fleet. No DIP financing announced yet, however, they allude to the notion they have financing available but are trying to get the very best deal??

As to the ex-fuel CASMs mentioned earlier, F9's current CASM is supposed to be in the sub $0.058 range now. Last I read SWA was about $0.0625. I believe of the publicly traded companies, only Airtran is lower at about $0.054 CASM. So, yes the fuel hedges that only SWA and Alaska have are the only variables that keep the playing field out of balance at this time. Hedging is a high stakes gamble and they are paying off quite nicely now, but in any type of gambling, the tables could turn in a hurry.

 

[vixin]

I wonder when you are going to get paid swa wages. I love it when companies can go into BK, then people are glad the CASM is lower then SWA's. Nothing against F9 guys, but it gets old. Oh yeah swa hedges are running out soon. Just think of the lean machine when SWA goes into BK.

 

[spitfire1500]

That's because we sold 4 airplanes to Russia. Good try.

Wish someone would have told me, landed in Moscow the other day on vacation. Could have ferried my family over. This place is like an aviation museum....the bad part you get to ride on the museum displays. Flew on a TU 214 the other day...I dont think the lav was cleaned since it was built. You think US flight attendants are grumpy...in the aisle they just push you to get by.

 

[USMC319]

I wonder when you are going to get paid swa wages. I love it when companies can go into BK, then people are glad the CASM is lower then SWA's. Nothing against F9 guys, but it gets old. Oh yeah swa hedges are running out soon. Just think of the lean machine when SWA goes into BK.

Vixen,

I don't think anyone is "glad" about having lower ex-fuel CASMs than SWA. Its the nature of the beast. As long as SWA is charging ultra low fares in an effort to gain market share, everyone else has to try to compete by any means possible. It sucks.

As far as when F9 will be paid SWA wages...probably never, in fact F9 went from the highest paid Airbus pilots in the industry to somewhere below the middle of the pack. My guess is SWA will move lower before anyone else moves higher.

As far as fuel hedges, it is impossible to predict whether they will be beneficial in the future or a liability. Nobody says they run out. We know they have proven to be a windfall over the last couple of years. The $300,000,000 SWA lost last quarter in the airline business was offset by more than that figure in fuel hedging gains. You claim that when the fuel hedges don't offset passenger flying operations, that SWA will simply raise their fares to cover the loss. Well just ask all the other airlines how that little program is going.

 

[D-Bo]

As far as when F9 will be paid SWA wages...probably never, in fact F9 went from the highest paid Airbus pilots in the industry to somewhere below the middle of the pack.

They made you believe you were the highest paid Airbus drivers. Total benefits package wise though, F9 was far from top paid. It's not true. Not for the entire group anyway. I'm sure the folks that timed out by December would qualify. The best way to determine it though would be to multiply the hourly wage times guarantee pay only. Then add in A,B, or C plan and medical.

I'm not trying to say mine was because it was far from the highest. I wouldn't just look at the narrow airbus pilot pay either. There are plenty of other comparable size planes to the Bus that other airlines fly.

 

[EMB170Pilot]

Blows my mind but if I had to choose a Frontier airbus with TV to watch or southwest with nothing, I choose Frontier.

Everytime I jumpseat on yall to get home, I have been very impressed! I hope your airline survives!

Good Luck Frontier

 

[Old School]

Are you sure that SWA lost 300M in 3 months? That seems a bit high?

 

[bravodude]

Vixen,

I don't think anyone is "glad" about having lower ex-fuel CASMs than SWA. Its the nature of the beast. As long as SWA is charging ultra low fares in an effort to gain market share, everyone else has to try to compete by any means possible. It sucks.

As far as when F9 will be paid SWA wages...probably never, in fact F9 went from the highest paid Airbus pilots in the industry to somewhere below the middle of the pack. My guess is SWA will move lower before anyone else moves higher.

As far as fuel hedges, it is impossible to predict whether they will be beneficial in the future or a liability. Nobody says they run out. We know they have proven to be a windfall over the last couple of years. The $300,000,000 SWA lost last quarter in the airline business was offset by more than that figure in fuel hedging gains. You claim that when the fuel hedges don't offset passenger flying operations, that SWA will simply raise their fares to cover the loss. Well just ask all the other airlines how that little program is going.

The reason that other airlines can't seem to raise fares is because of SWA every iincrease that we have put through have been matched by the majors and they have stuck! So yes if the hedges don't work we will just raise fares.

 

[bravodude]

That's true as long as oil prices are on the rise.

If oil prices are decreasing, as can be expected once demand destruction kicks into high gear, being unhedged is an advantage.
Several foreign governments have reduced oil subsidies and both India and China are mulling over doing the same.

Not if you are protected against the downside risk. It may cost us a little more for the contracts but if oil goes down (I don't think we will ever see 50-70 again) we will still come out ahead.

 

[monkeybrains01]

As far as when F9 will be paid SWA wages...probably never, in fact F9 went from the highest paid Airbus pilots in the industry to somewhere below the middle of the pack. My guess is SWA will move lower before anyone else moves higer.

My a$$. Maybe for you in the left seat, but f/o pay was pretty weak b4 the paycut and now it downright sucks. The days of 2-3 year upgrades is long gone and after 4th year the f/o scale is flat.

 

[BJK]

Are you sure that SWA lost 300M in 3 months? That seems a bit high?

From LUV's most recent quarterly report:

"The Company's first quarter 2008 net income was $34 million......this, however, did not compare favorably to the Company's first quarter 2007 profit of $93 million"

and

"The Company's hedging program resulted in the realization of approximately $302 million in cash settlements for first quarter 2008 compared to $65 million in cash settlements for first quarter 2007."

Looks like the loss without hedges would have been roughly $268 million.

For what it is worth.

 

[DOVPILOT]

uke:

 

[Skyboy722]

From LUV's most recent quarterly report:

"The Company's first quarter 2008 net income was $34 million......this, however, did not compare favorably to the Company's first quarter 2007 profit of $93 million"

and

"The Company's hedging program resulted in the realization of approximately $302 million in cash settlements for first quarter 2008 compared to $65 million in cash settlements for first quarter 2007."

Looks like the loss without hedges would have been roughly $268 million.

For what it is worth.

I don't know how many times it has been said over and over that this is not a conclusion you can draw this simply. In the face of a different hedging position, the ticket pricing would have been different. SWA can easily do this because they control the pricing in most markets they serve. So 302 millon minus 34 million is just not math that you can realistically apply here.

 

[airlinepilot]

Amen!

 

[Full of LUV]

What?????

I don't know how many times it has been said over and over that this is not a conclusion you can draw this simply. In the face of a different hedging position, the ticket pricing would have been different. SWA can easily do this because they control the pricing in most markets they serve. So 302 millon minus 34 million is just not math that you can realistically apply here.

So you claim that SW can just raise the price of their tickets $50 and everyone will still show up and pay?? If so, then why not squeak out a profit over 2007, or did mgt just mess up and make too much that year? Airline tickets, like everything else is an elastic commodity, as the price goes up, less people show up, so it is a losing proposition above a certain price point for any given segment. I agree that subtracting the revenue from hedging is not an accurate representation, but I'm not sure that even SW can raise it's prices nearly $1Billion a year and have the same overall pax count show up.

They may control the BOTTOM level of pricing in any given market, but they do not have a magic wand to do away with price vs demand economics.
LUV

 

[BJK]

I don't know how many times it has been said over and over that this is not a conclusion you can draw this simply. In the face of a different hedging position, the ticket pricing would have been different. SWA can easily do this because they control the pricing in most markets they serve. So 302 millon minus 34 million is just not math that you can realistically apply here.

I'm just a simpleton who flys airplanes. I do, however, recall the last quarterly conference call where Kelly made it pretty clear that hedges are what held it all together for the quarter. No matter how you crunch the numbers, it is pretty obvious that, atleast for the most recent quarter, LUV was in the business of making money with fuel hedging vs. carrying people. Good for them! A smart and well run company with a fantastic advantage over the competition. No need to debate it, hedges are HUGE for LUV:

2007 Q1 Net Income: $93M
2007 Q1 Cash f/ Hedges: $65M

2008 Q1 Net Income $34M
2008 Q1 Cash f/ Hedges: $302M

I don't work for LUV, but I can certainly appreciate the advantage they have consistently given themselves with a smart fuel hedging program over that last x number of years.

 

[ArmadilloJackal]

So you claim that SW can just raise the price of their tickets $50 and everyone will still show up and pay?? If so, then why not squeak out a profit over 2007, or did mgt just mess up and make too much that year? Airline tickets, like everything else is an elastic commodity, as the price goes up, less people show up, so it is a losing proposition above a certain price point for any given segment. I agree that subtracting the revenue from hedging is not an accurate representation, but I'm not sure that even SW can raise it's prices nearly $1Billion a year and have the same overall pax count show up.

They may control the BOTTOM level of pricing in any given market, but they do not have a magic wand to do away with price vs demand economics.
LUV

This is exactly right. SWA has incredible pricing power but they cannot just raise prices in every seat and keep the same LF's, it doesn't work that way. I hear this argument constantly about their hedging and business plan and it just isn't true. People will stop flying, they're already driving less. It doesn't take away the fact that they're an incredibly well managed and run company. I'm a fan, the argument just doesn't make sense to me.

 

[Skybus]

Ahhhh nothing like a bunch of pilots that think that they are now economists.....

I think it is safe to say NONE of us have any idea what the landscape would have looked like if not for the fuel hedges. 2 things are a certainty. Costs WOULD have been higher, ticket prices WOULD have been more, capacity would have been different, and NOBODY on this board has a clue as to what WOULD have been the end result.

Class over.

 

[ArmadilloJackal]

I am no economist but here are some of my personal economics. Was thinking about a family trip (4 tickets) for a week long trip. For $350 each I was going to buy, it's a short trip. Tickets went up a $100 each, so now I'm driving to a closer vacation. I know I'm not the only one who thinks this way.

 

[BJK]

Ahhhh nothing like a bunch of pilots that think that they are now economists.....

Economists...why not? Most message board pilots seem to be well educated in all aspects of managing an airline!.

Later.

 

[jmreii]

you do not have to be a economist, just have simple common sense which is why nobody outside this industry understands or could care less either way.
if you make you own bed, and the airlines have; you cannot expect anyone else to sleep in it.

 

[Networ-King]

So whats the cash on hand for Frontier? My buddy over there says that he is good for 6 more paychecks. However.... they are not telling them how much cash they have for fuel. Anyone know?

 

[momalley81]

The only thing worse than airline executives talking about airline economics is airline pilots talking about airline economics.

 

[StaySeated]

So whats the cash on hand for Frontier? My buddy over there says that he is good for 6 more paychecks. However.... they are not telling them how much cash they have for fuel. Anyone know?

They won't say, so you know it is bad.

The last public numbers showed around $100 million on May 1. During the last 3 weeks of April they were losing $300-700k a day, depending on the source. The 1110 cure was enormous but not publicly released. Try and wrap your head around 60 airbus payments and 10 q400's for two months.

If you take the low end of the cash burn, $300k a day, we are down to around $90 million by June 9th. Then factor in whatever the 1110 payment was. If it was $10 million we are at $80 million. If it was $25 we are down to $65 million.

Lets be optimistic and say we have $80 million. Divide that by $300k a day and you get roughly 8 months of cash. If we are down to $65 then we have 6 months. If the burn rate is actually $700k a day the lifespan changes to less than 4 months of cash to as short as two months. The courts will not let you run down to zero, so we have basically two options.

1. Oil drops rapidly and we all still have jobs.

2. We start burning the furniture "extending the runway" (I just threw up a little typing that).

I have heard the "6 paychecks" rumor as well. I think with the sale of 4 more aircraft we may live to see the leaves turn color.

 

[Flying the Line]

Keeping all the leases would allow you to sell a few (3-5) more airplanes and wait out the drop in oil and/or drop in service by competitors. I wish everyone at F9 a prosperous future.