1985 - NYC Discount Airline Expands Too Quickly

[Big Slick]

At first I was going to post something about how similar Delta and Eastern are, but it was too obvious. There are lots of interesting points in this story if you really look at it.

Here are some interesting points from this excerpt:

NYC Discount Airline Expands Too Quickly – Self Explanatory

“the guys with the Southwest Airlines philosophy but without the brains of Southwest.” – Again, self explanatory.

People Express had all the great ideas of Herb Kelleher and Southwest Airlines, but lacked their discipline. – Does Southwest have the discipline of Southwest anymore?

Don Carty, would one day proudly explain, “We devised the fare structure that put them out of business.” – Don Carty destroyed People Express. Now he is in charge of Virgin America. Will he try to do it again against another LCC/Legacy? I wonder if he has a vendetta against AA.


Worst of all, Burr was dying at the thought that the mystique shrouding Peoples Express was now evaporating. – Sound familiar?

The red ink forced him to withhold profit sharing. The stock price was plunging. – Sound familiar?

Soon there were union organizers at his doorstep. – We’ll see.

Burr imagined his employees turning on him, the pilots in particular. He heard them referring to the precepts as “Kool-Aid,” - In this case, Blue Kool-Aid.

The only difference is that AA is no longer in the position to drop the hammer on anyone. Southwest on the other hand…. How about Southwest and Virgin America both going after Jetblue?

By the way, I don’t have anything against Jetblue - they just have a lot of similarities to People Express.

 

[81Horse]

... Jetblue - they just have a lot of similarities to People Express ...

Not necessarily -- for instance, everybody used to say People's tail logo represented their onboard seating density.

http://www.as-aviation.freeola.net/lgw/peb747.gif

 

[Dizel8]

"How about Southwest going after anyone? Either way you slice it, at this point in time, it would be a bloodbath for whichever unfortunate airline!

 

[starvingredtail]

Hey Big Slick.
Lots of veiled mysticism in your post. I think you should have played some eerie background music and had fog rolling off the keyboard. Why don't we agree that no one knows the future of this indusrty because there really is no historical benchmark to use. Your post reminds me of a fortune teller who uses vauge references that connect with the weak minded "client". Feel free to do that but I'm not buying it. The one thing we know is that we are all trying for some piece of the pie. Who's going to gang up on who? We will soon know.

 

[FlyBoeingJets]

Big Slick has a valid point. I had no idea JetBlue had any "roots" to go back to. I thought we were talking about that new airline in Kew Gardens. That said, I still don't think they are a Peoples express. As B. Slick has said, no one can really put the hammer down on JetBlue on the major level.

But...The initial success with smaller markets may prove costly as time goes on as 76-90 seaters duke it out with JetBlue. But I can't see the future either, just looking into a dirty crystal ball.


JetBlue Revisits Old Blueprint
http://www.thestreet.com/tsc/c.gif
By Ted Reed
TheStreet.com Staff Reporter
3/17/2006 1:54 PM EST
Click here for more stories by Ted Reed

Troubled JetBlue Airways (JBLU:Nasdaq - commentary - research - Cramer's Take), in a major strategic shift, says it's going back to its roots -- or is that routes? -- starting with service to Jacksonville, Fla., and Pittsburgh.
The airline said Friday that it will begin service to both cities in June. JetBlue will serve Jacksonville from its hub at New York's Kennedy International Airport and Pittsburgh from both Boston and Kennedy.
if JetBlue wants to return to its original plan to serve mostly midsized cities from Kennedy, "to go back to the beginnings before we got enamored with all this capacity to Florida and East-West," CEO David Neeleman said this week at a Citibank investment conference in Las Vegas.
When it began flying early in 2000, JetBlue produced a list of 44 target cities, most served from New York by legacy carriers charging high fares for business travel. The list included Akron and Canton, Ohio; Charlotte, N.C.; Greensboro, N.C.; Indianapolis and Nashville.
"We don't serve them all," Neeleman said Tuesday. "There are 10 to 15 cities where we know we will be successful." Neeleman said at the time an announcement would be made Friday regarding the plan.
After 18 consecutive profitable quarters, JetBlue lost money in the fourth quarter of 2005 and said it will lose money again this year. The airline has been plagued recently by high fuel costs, poor on-time performance and problems with the addition of Embraer 190s, its second aircraft type. Previously, JetBlue had been flying only Airbus passenger jets.
Neeleman said that JetBlue's focus on transcontinental flying has made it particularly vulnerable to fuel-cost increases. "Fuel prices kind of caught up to us," he said. "We started flying these long-haul flights, but when you have a run-up in fuel prices, those markets are more affected." While much has changed in the airline industry since 2000, JetBlue spokesman Bryan Baldwin said Friday that the airline believes a majority of the cities on its original list can still be profitable.


"Many of the original 44 possible destinations were close to New York -- in the Northeast, along the East Coast and in the Midwest," Baldwin said. "With the high cost of fuel, longer [transcontinental] flights are very expensive, so these kinds of routes are looking more attractive."
Neeleman insisted that JetBlue remains committed to its high-growth strategy, and he said the number of Kennedy departures will double by the end of 2008. He said JetBlue will gain access to seven new gates at Kennedy this June, and that new gates will become available at the end of 2008 when the airline opens a new terminal.
if "They don't give up, do they? For now, they are continuing their expansion program," airline analyst Ray Neidl of Calyon Securities said Friday. "But at some point, they will have to get back to profitability if they want to sustain this rapid growth."
Staring June 30, JetBlue will serve Pittsburgh with four daily flights to its Kennedy hub and two daily flights to Boston, using new Embraer 190s seating 100 passengers. A ticket from Pittsburgh to New York will range between $64 and $129 each way, while the Pittsburgh to Boston fare range is $74 to $139.
The airline will offer three daily flights between Kennedy and Jacksonville, starting June 15 with Airbus A-320 jets and fares between $89 and $299 each way. Also, earlier this week, JetBlue said it will begin service June 30 between Boston and Buffalo using the Embraer 190s. JetBlue's original list of 44 cities included, among others: Atlanta; Boston; Buffalo, N.Y.; Burlington, Vt.; Charleston, S.C.; Chicago; Cincinnati; Cleveland; Flint, Mich.; Louisville, Ky.; Norfolk, Va.; and Portland, Maine.

 

[Don Carty]

Hard Landing Excerpt:

Either way, People Express had to die. As Crandall’s planning chief, Don Carty, would one day proudly explain, “We devised the fare structure that put them out of business.”

I'm so glad you brought this up, Mr. Slick. I well remember that period of time leading up to our financial execution of PE. Bob and I were watching a "Three Stooges" episode (Curly makes me laugh), drinking a brew, and complaining about pilot pay. I'll never forget what Bob said, and I'll paraphrase - "If we can get out own unions to swallow the threat that PE poses, then we'll get them to reconsider their own outrageous pay scales. At the same time, we'll devise a price structure that will crush PE." Thus began a glorious, predatory time. Bob and I lined our pockets, our unions lived in a world of fear for their own livelihood, and PE flew into their own grave, never to return.

In a sense, I'll be doing my buddies a favor with VA. By setting the pay scales low, and having tens of thousands of pilots lining up to join our elite organization at food-stamp wages, we'll be the People's Express of the 21'st century, except we'll have the brains to get our labor to swallow it. PE was ahead of it's time. If it was resurrected today, it would flourish.

 

[Don Carty]

Don Carty, would one day proudly explain, “We devised the fare structure that put them out of business.” – Don Carty destroyed People Express. Now he is in charge of Virgin America. Will he try to do it again against another LCC/Legacy? I wonder if he has a vendetta against AA.

Now Mr. Slick, you've got to understand. Despite rumours, AA is the 800 lb gorilla and is in decent financial shape. I am sorely disappointed in my protege, Mr. Arpey. I thought he was "one of us", but he seems to genuinely care about labor. I was shocked when he dropped his own bonus... real airline managers don't ignore personal little windfalls like that. The board of directors at AA is responsible for the bonuses, not Gerard, and I'd advise irate AA labor to target the board, not Gerard.

Not that I have any desire to help Arpey; he's setting a bad example for all airline managers.

JetBlue is squarely in the sights of VA. After we mercilessly crush our direct LCC competition, our low fares, which will come about due to cheap labor, will destroy the legacies, then SouthWest. With Herb only advising these days, their business model is not what it once was. Richard promised me an extra balloon ride after JB goes bankrupt! I can't wait!

 

[Frank Lorenzo]

Don, you've got it all wrong. Gerard is actually playing the employees like a harpsichord. I have to admit, I became aroused when I saw one of the AA planes with "working together" painted on the side. I mean, what a bunch of SUCKERS!

I've been consulting with Gerard and the AMR BOD now for some time. We're about to pass a $100 million dollar bonus for management. My sources also tell me that a few of the "working together" types just got elected into leadership positions in the pilot's union.

God I love it when employees keep voting themselves pay cuts!

Blue skies ahead baby!

Cha-ching!

 

[IB6 UB9]

Amusing little discussion you are having with yourself. What are you up to...four, five different screen names? It might have been slightly amusing a few weeks ago, but now it seems like the only one you can get to respond to yourself is...yourself.

 

[Big Slick]

I'm so happy, there have been numerous thoughtful posts on this thread. So much better than the previous "Big Slick Sucks!!" replies. I guess I have to post thought provoking items instead of pure flamebait. I like talking about airline trends, not insulting each others intellect.

I even got a response from Don and Frank. I feel special.