AMR and JetBlue Vie for the Shuttle

[dlredline]

Posted on Wed, Jan. 28, 2004

American, JetBlue Vie for US Airways' East Coast Shuttle Service
By Tom Belden, The Philadelphia Inquirer Knight Ridder/Tribune Business News

Jan. 28 - American Airlines and JetBlue Airways have emerged as contenders to buy the Boston-New York-Washington shuttle service from financially ailing US Airways, industry analysts and banking sources said yesterday.

Delta Air Lines and AirTran Airways also are likely bidders for some of US Airways' assets, the analysts said.

Spurred in part by Southwest Airlines' plan to start flying from Philadelphia International Airport on May 9, US Airways has hired the Morgan Stanley investment-banking firm to seek bidders for the shuttle, airport gates at Boston Logan, New York LaGuardia and Washington Reagan National airports, and landing-and-takeoff slots at New York and Washington.

The airline industry observers do not believe US Airways plans to sell gates, other facilities or international routes at Philadelphia, its primary connecting hub for flights to the Caribbean and Europe.

US Airways has lost $4.5 billion since 2001 and is expected to report a loss for 2003 when it releases its financial results Feb. 6. The company spent eight months in Chapter 11 federal bankruptcy protection, emerging on March 31.

Southwest, the nation's largest discount airline, is expected to offer sharply lower fares than US Airways charges when it starts here. Southwest will offer only 14 flights a day to six cities -- all of them served by US Airways -- but is likely to expand service steadily to other places, the analysts say.

Bids were submitted Thursday to Morgan Stanley, according to the banking sources. US Airways' board is scheduled to meet next week to review the proposals.

Besides selling assets to raise cash, US Airways' management has indicated it may ask its labor unions for work-rule changes and other concessions to help lower costs. Management and the Air Line Pilots Association union are scheduled to meet today to discuss the issue.

Representatives for AirTran, American, Delta, JetBlue and US Airways would not comment for the record yesterday on the asset sale.

An airline industry source, who asked not to be identified, said American had not made a formal bid for the US Airways shuttle but might still make one.

American, the world's largest airline, has wanted to run a shuttle service in the Northeast for years and was among the bidders in 1997 when US Airways bought the operation for $285 million from a consortium of banks.

The service, with flights every hour on the hour throughout the day between Boston, New York and Washington, originally was the Eastern Airlines shuttle.

The shuttle is expected to bring about $100 million to $150 million for US Airways, the banking sources told Reuters.

"That sounds like the right number, and American seems like the likely buyer," said Mo Garfinkle, president of GCW Consulting in Arlington, Va.

Since almost taking refuge in Chapter 11 bankruptcy protection last year, American's parent, AMR Corp., has stabilized its finances. The airline has about $3 billion in cash on hand and recently reported a narrower fourth-quarter loss than it had a year earlier.

JetBlue, a three-year-old low-fare airline, is based at New York's Kennedy Airport but recently has applied to the U.S. Department of Transportation for the rights to operate 10 round-trip flights a day from LaGuardia.

The assets of the shuttle operation are mostly airport facilities and takeoff-and-landing slots at LaGuardia and Reagan National, where air-traffic congestion limits the number of flights.

JetBlue is probably eyeing an expanded operation at LaGuardia because "that's a much better airport in terms of being closer to New York City and Connecticut, and Westchester County [N.Y.]," said John V. Pincavage, an aviation consultant and former Wall Street analyst in Westport, Conn. "Many people from those areas don't like to go to Kennedy."

When US Airways came out of bankruptcy, it received financing backed by a $900 million loan guarantee from the federal Air Transportation Stabilization Board. But now, the airline must meet financial covenants, including keeping $1 billion in cash on hand, that indicate it is on the way to making money.

In related news, United yesterday reported a net loss of $476 million, compared with a loss of $1.5 billion a year ago, when it filed for Chapter 11 protection. Its operating loss was $135 million in the quarter, compared with $994 million a year earlier.

This article includes information from Reuters

 

[Redtails]

Management sent word that we're not "publicly" pursuing anything that USAirways has; the article is purely speculative... The known fact is USAirways has to come up with some $300 million to ensure its survival-- where that comes from remains to be seen. Delta has already earmarked $300 million into JFK to battle JBLU, so I don't think they're in the running. I think AMR is a top bidder and if JBLU is in it, we're only there to ensure AMR doesn't get it for free. JBLU won't have the aircraft to run that kind of thing-- our concentration this year will be building BOS up. AirTran is looking for new gates, they might also be in the running.

 

[hopeful]

JetBlue doesn't have the money to buy the shuttle and continue to operate with a fat wallet like they would like.

The are most likely trying to drive the price of the Shuttle up so it will cost American more money and give U some extra money in its pocket. This is important, because they want AA to bleed some so they can't put too much pressure on JB and they want U to have enough money in their pocket so they can put up a good fight and keep SWA occupied in PHL.

Just an idea.

It would be pretty darn funny if AA called their bluff and JB got stuck with the POS shuttle and a fat bill. Maybe this is what the analysts have in mind and maybe investors are smarter than the average pilot. (Hince: the continual decline in JB stock)

Man, they should pay me more for what I do!

 

[lowecur]

The other day I posted that B6 would have to dip into their cash reserves to buy the Shuttle. With B6's credit strength in the Big Apple, they could very easily finance the purchase of the Shuttle over a ten year period and never touch their cash reserves.

As far as building out Boston and not having the aircraft to run the Shuttle, I disagree. B6 has tremendous flexibility in moving the fleet around. With 14 new a/c this year and over 20 in 05, equiping the Shuttle should be no problem. If they purchase the Shuttle, eventually the routes would be dominated by the 190's (which are more economical on shorter routes).

 

[hopeful]

lowely curd,

Too bad noone reads your posts!

 

[lowecur]

dopeful

Well at least I got you. Oh I forgot, you're noone. Yeah, they should pay you more. What is it you do?

 

[Intruder One]

They can bid all they want but.........Siegal and Orenstein are buddys guess who the sell off parts are going to and nobody can operate it as cheap as J.O.

 

[lowecur]

Noones

Is there anything in the purchase that says the gates and slots must be used for the Shuttle? If these are low yield routes, AA or B6 could use the slots and gates for higher yield routes where they could gain pricing power. In fact, since AA already has a shuttle in place with Eagle, I'm sure that's what they would do.

 

[lowecur]

Intruder One

They can bid all they want but.........Siegal and Orenstein are buddys guess who the sell off parts are going to and nobody can operate it as cheap as J.O.

I think JO will certainly bid on a few items, but I don't think he has the credit to buy the Shuttle. Besides, unless he plans on starting a separate airline (which is very expensive), he still would have sub out his services to UAIR, or United which kind of defeats the purpose.

 

[General Lee]

Lowecur,

I hope your remarks are true:

" Is there anything in the purchase that says the gates and slots must be used for the Shuttle? If these are low yield routes, AA or B6 could use the slots and gates for higher yield routes where they could gain pricing power. In fact, since AA already has a shuttle in place with Eagle, I'm sure that's what they would do."


That would leave Delta the only true mainline Shuttle service between LGA--BOS/DCA. (besides the AA EAgle one) That would give us a boost I am sure. Let's hope that happens!! Then we might make enough profits to buy that 100 seater you are always talking about....was that the A318? Or was that the 717?


Bye Bye--General Lee

 

[G4G5]

AA mgt has announced that they will be taking 28 parked MD80's out of the desert. My guess is that these will be the future Shuttle aircraft IF they purchase it.

It makes the most sence. The MD80 would be an ideal shuttle aircraft for AA. It still has the aft exit like the 727's. AA will take out the middle seats and market it as all Isle or window seating. Minimal ground support equipment required. If they use the D gates at LGA they could power back out of the even gates. The D gates at LGA are also right next to the Taxi stand and the quickest way onto the GCP. The D finger would become the business travelers hot spot. They would then tie the shuttle into their hourly ORD and DFW flights. All in one spot.

IMHO, they will use the USAir space at LGA for their LCC flying. Probably all of the FL market. This will keep the vacation folks from screwing up the TSA lines, allowing the business folks to move through quicker.
This is very similar to what UAL did at JFK. They had a seperate terminal for their trans cons and London/Intl flights. AA would flood it with flights in an effort to try and tie up traffic at the NWA/DAL terminal, leaving their D and C gates free for the high yeild business traffic

Or and here's the big or, DAL would be licking their chops to get their Shuttle located next to their terminal at LGA. IMHO, they would probably try to get AA to switch($$$$). This would allow DAL to tie their shuttle to mainline and add revenue. Folks could walk next door and pick up a flight to ATL or beyond.

This is all conjecture because I think that AA doesn't really need the Shuttle. If AA wanted to add more flights they could have just applied for the same slots that B6 got. They want the gates. Carty was on record (I believe it was winter of 2001) as trying to purchase the BOS operation from USAir.

 

[General Lee]

G4G5,

I think Delta likes the MAT--Marine Air Terminal, because businessmen can take a ferry to Manhattan from the terminal. (I believe, right?---the Marine part) (I haven't been there in awhile) Also, I don't think they really think about offering connecting flights for the Shuttle.

As far as your MD80s go, I think they are about as old as our 737G's that we use on it today. Maybe we will put the 738's back on it eventually, but the loads would have to improve. (actually, we do have some of the BOS flights on 738's right now) The MAT is quicker to and from Manahattan, and from what I remember, it is easy to get through. With a better economy, more and more business travellers will fly the Shuttles.

Bye Bye--General Lee

 

[G4G5]

I don't think that JetBlue wants the Shuttle either. They want the gates at LGA and BOS. DCA does little for their vacation traffic if they are committed to IAD. LGA & BOS can support the O&D traffic.

Can Airbus supply him with the aircraft and can he train the pilots quickly enough? Time becomes the issue. USAir is bleeding over a mill a day. The Alabama pension folks are going to want the cash quickly in order to avoid default on the ATSB loan. B6 could wind up in a situtation of having to pay for it in advance. This would not be good for a variety of reasons.

The problem is the aircraft. Neeleman, like everyone else is not interested in the aircraft (different engines). If he/anyone takes the aircraft they will be adding the employees.

 

[G4G5]

Hi General,

I think Delta likes the MAT--Marine Air Terminal, because businessmen can take a ferry to Manhattan from the terminal. (I believe, right?---the Marine part) (I haven't been there in awhile) Also, I don't think they really think about offering connecting flights for the Shuttle.

G4G5,
It's been shut down since 9/11 due to lack of interest. The barge has been taken over by a PA police boat. The MAT is all by itself. You can't tell me that they would not prefer to have it located right next to their LGA facility.
----------------------------------------------------------------------------------

As far as your MD80s go, I think they are about as old as our 737G's that we use on it today. Maybe we will put the 738's back on it eventually, but the loads would have to improve. (actually, we do have some of the BOS flights on 738's right now) The MAT is quicker to and from Manahattan, and from what I remember, it is easy to get through. With a better economy, more and more business travellers will fly the Shuttles.

G4G5,
I don't think they care about the age of the MD80's. If NWA is any example AA will have them for quite sometime. They would re rag them to all first class anyway. The MD80 allows AA to staff it with the same category pilot (more efficient then 737G vs 737-800). They have MD80 pilot baes in LGA, BOS and DCA. AA has the parts and maintenance facilities at LGA. I believe they even keep a spare aircraft in the barn.

The Taxi stands at the D gates that are the quickest access to the Grand Central parkway. Their is only one traffic light and you are on the parkway. The MAT is not far behind but trying to go East on the parkway out of the MAT is quite a project. West to the city is two lights.

 

[Skank]

I'll defer to the General on this, but I believe that the ferry has been gone for a couple of years.

 

[B6Busdriver]

I don't think it would take 28 airplanes to operate the shuttle. Does anyone have more info?

 

[General Lee]

Skank,

I remember a ferry service, but you are probably right. Still, the MAT is a little closer to the freeway (name? L.I.E?) and onto Manhattan, and it is pretty much hassle free.


As far as how many planes it takes to run the Shuttle, we have 9 737-300G's, and a couple 737-800s doing only LGA--BOS flights, with some RJs in there for walkups when it is full. I would say having atleast 11 planes on it to be safe--but maybe a couple more to gaurantee seats during peak times.

Bye Bye--General Lee

 

[climbhappy]

for jetbluers

i've always heard the company was at some point going to have to start making plane payments....that there was a deal and it's now or about to be over.... what's the story?

 

[dlredline]

Re: for jetbluers

i've always heard the company was at some point going to have to start making plane payments....that there was a deal and it's now or about to be over.... what's the story?

INCOMING, INCOMING!!!!!!!!


(climbhappy, do a thread search on this. This dead horse has been beaten and turned to glue by now)

 

[Flying Freddie]

Nope. The aircraft are free. As long as jetBlue takes two planes a month we don't have to pay for them. Once we stop taking aircraft we have to start paying. Hence, the agressive growth. The Blue chips are free as well.