ASA's profit margin puts it at head of the regional pack

[Rogue5]

http://www.sltrib.com/business/ci_3827115

ASA's profit margin puts it at head of the regional pack
Fourth-quarter report: Analysts are impressed with the carrier's figures, which some say will grow
By Paul Beebe
The Salt Lake Tribune


SkyWest Inc. may have acquired a cash cow when it bought Atlantic Southeast Airlines from Delta Air Lines last September.

ASA, which like SkyWest Airlines flies as Delta Connection for Delta, generated an operating profit margin of 13.1 percent in the fourth quarter - the best financial performance of the seven biggest regional carriers in the United States, according to a U.S. Transportation Department report released Monday.

"It's very good. It's significantly better than the industry average, which in that [segment] seems to be running about 10 percent," said Helane Becker, an airline analyst with Benchmark Co. in New York.

An airline's operating margin measures how profitable its business is before paying taxes. The margin is calculated by dividing operating profits by sales.

ASA's operating profit was $42 million in the final three months of 2005, according to the transportation report. Revenue totaled $320 million.

By contrast, SkyWest Airlines, the St. George-based cousin of Atlanta-based ASA, earned an operating profit of $43 million - just $1 million more. SkyWest's profit was on revenue of $422 million, producing a still-healthy margin of 10.3 percent.

Whether ASA can continue producing strong financial results is uncertain. The company has a poor on-time record that could alienate travelers. Its operating costs are higher than SkyWest Airlines', something CEO Jerry Atkin has pledged to reduce.

"I assume [ASA's] operating margins will come down to that 10 percent [industry average] level. Delta is trying to lower its costs to return to profitability," Becker said.

SkyWest executives were unavailable for comment Monday.

During a speech in Salt Lake City last month, the company's top financial officer, Bradford Rich, joked that it would take a couple of years to determine whether the ASA acquisition justified the attention it has received on Wall Street lately.

Earlier this month, Calyon Securities analyst Ray Neidl predicted SkyWest shares would reach $34 in the next year. On Monday, shares closed at $23.91, down 35 cents.

Mike Boyd, president of the Boyd Group, an Evergreen, Colo.-based airline consulting company, thinks ASA's performance will weaken in the future.

"ASA is a [provider] of service for Delta," Boyd said. "That 13 percent is based on what Delta agreed to pay them, not on what they did on their own. That's probably going to change going forward."

SkyWest bought ASA for $425 million. The deal closed Sept. 7, a week before Delta filed for Chapter 11 bankruptcy protection, raising cash for the nation's third-biggest airline.

Delta is using the money, as well as millions more, to overhaul itself and, it hopes, to emerge from bankruptcy in 2007.

The Transportation Department report underscored the financial problems major airlines like Delta are having. As a group, big airlines produced a $1.3 billion operating loss in the fourth quarter, resulting in a -8.4 percent operating loss margin.

By contrast, regional carriers, including ASA and SkyWest, earned a total of $211 million, producing an 8.7 percent profit margin.
[email protected]

 

[TOOL CRIB]

Whether ASA can continue producing strong financial results is uncertain. The company has a poor on-time record that could alienate travelers. Its operating costs are higher than SkyWest Airlines', something CEO Jerry Atkin has pledged to reduce.

Haha... if it hasn't alienated them by now, it never will. We've had poor performance since ASA started.

 

[joe_pilot]

Congrats guys (and ladies). I hope the contract issues get resolved ASAP.

Good Luck.

-JP

 

[buscap]

Paycut....yeah paycut...we should definitely take a paycut...yeeeaaahhhh

ten minutes to Wapner.....yeaaaahhhhh

KMART sucks

I'm an excellent driver

Yeeeaaahhhhh

 

[~~~^~~~]

For once, I have to call Bull Effluvia on Boyd. He doesn't know what the rates are in ASA's code share agreement. They could be less than CHQ, or Mesa, for all he knows.

ASA doesn't have to carry the management structure it used to, that is saving a few millions and this company has always been as lean & understaffed. As far as our performance figures, they are improving out of the World's busiest airport and ASA has stunk a lot worse in its 28 year history of above industry average profits. As a long time observer of ASA fron the front line, the company is probably better positioned to make money now than it ever has been in the past.

Further, with the size fleet JA now has under his command, he is THE MAN at Bombardier, nobody gets parts or service for less.

If ASA's profits were used to pay for the airline, the airline could pay for its own purchase in less than two years. Useless statistic, but as SkyWest said, the deal was cash flow positive.

 

[SkyNation]

Boyd has always and seemingly will always sell the regionals short. His comments seem to always indicate that he thinks any success at the regional level, and especially the RJ market, is a flash in the pan and doomed in the near future. His song hasn't changed.

 

[atrdriver]

Lets stt here. Our profit margin is the top of all regionals, but they want our pay to be the average of the lowest paid 3. Makes perfect sense to me.

 

[701EV]

Just think if they didn't spend 40 million on lost bags we would make even more money.

701EV

 

[puddlejumper101]

it is humurous...ASA, its service, lost baggage, and delays have been around for ever...yet it still (and has always) made money. old management never cared how this place was run because it made money. Delta started changing things, but did not care cause it was making money. If I was a CEO aka JA, why change what ain't broke? Delta sure didn't...ASA has been last in this baggage mess for years, but always makes $$$, so who cares. I remember the first time Skippy made a deal (not very big) about lost bags was when ASA had to start reporting to the DOT. Before that, no one cared...they still don't...as long as ASA makes money, why change anything? All the problems at ASA could have been fixed eons ago, but as long as this place continues to be a cash cow, nothing will get changed...or at snail's pace (contract?) (scheduling building relief lines and processing open time by hand?) its 2006 and scheduling still does things by hand...but why change them when we are a cash cow? If the leak is not on the CEOs desk, then the roof will not get repaired.

 

[John Pennekamp]

it is humurous...ASA, its service, lost baggage, and delays have been around for ever...yet it still (and has always) made money. old management never cared how this place was run because it made money. Delta started changing things, but did not care cause it was making money. If I was a CEO aka JA, why change what ain't broke? Delta sure didn't...ASA has been last in this baggage mess for years, but always makes $$$, so who cares. I remember the first time Skippy made a deal (not very big) about lost bags was when ASA had to start reporting to the DOT. Before that, no one cared...they still don't...as long as ASA makes money, why change anything? All the problems at ASA could have been fixed eons ago, but as long as this place continues to be a cash cow, nothing will get changed...or at snail's pace (contract?) (scheduling building relief lines and processing open time by hand?) its 2006 and scheduling still does things by hand...but why change them when we are a cash cow? If the leak is not on the CEOs desk, then the roof will not get repaired.

Exactly.

Nothing will change at this company until management is hit where it hurts... in the pocketbook. Then you'll see the reforms fly.

 

[AdamKooper]

This company sucks ********************. Everyone from the Rampers to the COO are nothing more than a bungch subpar workers who are the laziest in the industry. If not for the Pilots and some of the F/As this airline wouldn't be able to function. They need to put the F/A and Pilots on 1 list with skywest and Fire the rest of the scumbags.

 

[~~~^~~~]

Adam:

Where would we find more scumbags to replace the ones we fired? We can't get (illegal) immigrant workers SIDA badges.

ASA pays the same as Wendy's. We have pass benefits, they have free food. Wendy's also has air conditioning & heat in the winter. We have televisions to watch sports on while at work & computers so you can check the peeps at your personal ads.

ASA makes rampers sumbit resume's, go to group hiring sessions, then individual interviews and training. Wendy's gives you a hat and asks if you can start now. All in all, I'm surprised ASA can find people to work out on that hot, dirty, noisy, ramp loading folks overstuffed bags into cramped cargo compartments while getting screamed at by white guys with neck ties. I think the ASA rampies are some of the hardest working people on the planet for what they get paid.

 

[General Lee]

Exactly.

Nothing will change at this company until management is hit where it hurts... in the pocketbook. Then you'll see the reforms fly.

Or you will see Mesa slowly taking over your routes. Is that a threat? No, but a reality. Since ASA is not owned by Delta anymore, after the contract comes up for renewal, DL will decide how much feed they want to give you. You are a feed provider to DL, nothing more. Boyd was correct with this statement:


"ASA is a [provider] of service for Delta," Boyd said. "That 13 percent is based on what Delta agreed to pay them, not on what they did on their own. That's probably going to change going forward."


That stupid fuel "insulation" package that Ronny Reber got for ASA/SkyWest will also probably be gone when the next service contract comes up for renewal. In the meantime, they will try to bring your costs down to offset that in the future. Hey, we also got tagged over here, and eventually it will trickle down.


Bye Bye--General Lee

 

[Rogue5]

That stupid fuel "insulation" package that Ronny Reber got for ASA/SkyWest will also probably be gone when the next service contract comes up for renewal.

When?

In 15 years?

 

[blueridge71]

ASA rampers get free food if you count cheese on wheat, peanuts, and biscoff.

 

[John Pennekamp]

Or you will see Mesa slowly taking over your routes. Is that a threat? No, but a reality. Since ASA is not owned by Delta anymore, after the contract comes up for renewal, DL will decide how much feed they want to give you. You are a feed provider to DL, nothing more. Boyd was correct with this statement:


"ASA is a [provider] of service for Delta," Boyd said. "That 13 percent is based on what Delta agreed to pay them, not on what they did on their own. That's probably going to change going forward."


That stupid fuel "insulation" package that Ronny Reber got for ASA/SkyWest will also probably be gone when the next service contract comes up for renewal. In the meantime, they will try to bring your costs down to offset that in the future. Hey, we also got tagged over here, and eventually it will trickle down.


Bye Bye--General Lee

General, you almost say that like you would enjoy seeing it.

Not likely that Mesa would take our routes since we OWN the gates in ATL. Also we have a 5 year feed agreement with Delta, that can only be cancelled by missing our target goals. So no, not too likely that Mesa or anyone else will get our routes anytime soon. Sorry, I know that misery loves company, but not this time. Y'all are all alone. Trickle down doesn't always trickle.

 

[Tim47SIP]

Not completely true!

Or you will see Mesa slowly taking over your routes. Is that a threat? No, but a reality. Since ASA is not owned by Delta anymore, after the contract comes up for renewal, DL will decide how much feed they want to give you. You are a feed provider to DL, nothing more. Boyd was correct with this statement:


Don't forget that ASA MUST get 85% of all DCI flying out of ATL. This contract is good for 15 years I believe (not the 5 years as stated above) so regardless of contracts, ASA will still be along for the ride. The fuel insulation package maybe another issue that ASA has to deal with so you are probably correct here.

 

[AdamKooper]

I think ASA rampers are from the Worker Release program from the "Federal Pound me in the Ass prison" down the street.

 

[General Lee]

General, you almost say that like you would enjoy seeing it.

Not likely that Mesa would take our routes since we OWN the gates in ATL. Also we have a 5 year feed agreement with Delta, that can only be cancelled by missing our target goals. So no, not too likely that Mesa or anyone else will get our routes anytime soon. Sorry, I know that misery loves company, but not this time. Y'all are all alone. Trickle down doesn't always trickle.

John,

I am not giddy seeing that at all. I think it is a reality that everyone, except management, will see pay cuts. Unless you fly for Fedex or UPS (who can control fuel costs through fuel surcharges on packages), you eventually will see some sort of cuts. I am glad that you own your C and D gates at ATL (are some of those D gates Delta gates? I remember parking a 757 there a couple of months ago---and what about those E gates you park at? And, Isn't CHQ parking E145s at the B gates now?), but does that mean Delta can't come to you in 5 years and ask for smaller fees? It will eventually happen. Watching your negotiations or lack of them shows me that "we ain't all alone here." I just don't see JA allowing a big difference (or any difference) in CR7 or higher pay----it would cause a riot in SLC and possible unionization, and JA doesn't want that. Is that giddy, or reality? Watch out for trickle down. Let me guess, you will strike otherwise......I have heard that from everyone here, and only the World Airways and Polar pilots have done it. We shall see.......(BTW, before you slam our TA, you may want to look at NW's, and notice that if our's passes, no more pay cuts (rather pay raises of 1.5% for 3 years, with more possibly (up to 13%)), no work rule changes, profit sharing, pension replacement and unsecured creditor status for $2.1 billion (actually will come out to about $420 million, or $70,000 per pilot---on top of the $100,000 or so for each pilot for a possible pension dump) and possibly 30 or maybe more of CR9s for DCI that can only have 76 seats period (no force mejeur allowed to add seats). We will see if it passes.


Bye Bye--General Lee

 

[Rogue5]

BTW, before you slam our TA, you may want to look at NW's, and notice that if our's passes, no more pay cuts (rather pay raises of 1.5% for 3 years, with more possibly (up to 13%)), no work rule changes, profit sharing, pension replacement and unsecured creditor status for $2.1 billion (actually will come out to about $420 million, or $70,000 per pilot---on top of the $100,000 or so for each pilot for a possible pension dump) and possibly 30 or maybe more of CR9s for DCI that can only have 76 seats period (no force mejeur allowed to add seats). We will see if it passes.

Wow.

Jen, you are actually DEFENDING the TA you so adamantly swore you and 50.1% of your DAL buddies would vote down if one airframe larger than 70 seats was involved. Now its okay because its "possibly 30 or maybe more of CR9s for DCI that can only have 76 seats period."

I am amazed that you are still able to amaze me.

 

[QCappy]

It's pretty hard not to have a good profit margin when you're paid by someone else at a basically guaranteed profit.....but hey, I guess I'm biased since my company actually flies a majority of it's own at risk flying.

 

[atlcrashpad]

Aint nuffin rong wif my Homies on da ASA ramp. Jus sum bruthas tryin' ta make a dolla... of course, most are work release and a good portion are from da islands mon... Bouyyyyyyy

 

[John Pennekamp]

John,

I am not giddy seeing that at all. I think it is a reality that everyone, except management, will see pay cuts. Unless you fly for Fedex or UPS (who can control fuel costs through fuel surcharges on packages), you eventually will see some sort of cuts. I am glad that you own your C and D gates at ATL (are some of those D gates Delta gates? I remember parking a 757 there a couple of months ago---and what about those E gates you park at? And, Isn't CHQ parking E145s at the B gates now?), but does that mean Delta can't come to you in 5 years and ask for smaller fees? It will eventually happen. Watching your negotiations or lack of them shows me that "we ain't all alone here." I just don't see JA allowing a big difference (or any difference) in CR7 or higher pay----it would cause a riot in SLC and possible unionization, and JA doesn't want that. Is that giddy, or reality? Watch out for trickle down. Let me guess, you will strike otherwise......I have heard that from everyone here, and only the World Airways and Polar pilots have done it. We shall see.......(BTW, before you slam our TA, you may want to look at NW's, and notice that if our's passes, no more pay cuts (rather pay raises of 1.5% for 3 years, with more possibly (up to 13%)), no work rule changes, profit sharing, pension replacement and unsecured creditor status for $2.1 billion (actually will come out to about $420 million, or $70,000 per pilot---on top of the $100,000 or so for each pilot for a possible pension dump) and possibly 30 or maybe more of CR9s for DCI that can only have 76 seats period (no force mejeur allowed to add seats). We will see if it passes.


Bye Bye--General Lee

Yes ASA got the north C and D gates.
Why do you keep saying that Delta can/will come in 5 years for smaller fees? Have you see the actual code share agreement? If so, I'm shocked, because our MEC asked to see it and was told they would first have to sign an agreement that contained language stating it would be highlr redacted and not guaranteed to be truthful or accurate. In other words, they didn't even let the union see it. So how do you know what's actually in there?

In 5 years, I'll bet that the industry, and even Delta (if you're still in business by then) is doing much better. How will they justify a pay cut then?

Regarding our negotiations and JA's fear of unionization, the read I've picked up is that JA isn't as fearful of it as we thought. It seems that he/they view it as inevitable and just want to prolong it long enough to prepare themselves. Our negotiations have been going very well lately, almost as though someone threw a switch. We are down to scope and compensation and the endgame is withingthe next few weeks. I know you've heard "we'll strike, blah,blah,blah" but consider that our pilots have much less to lose than y'all do. It may actually happen here if they insist on 70 seat pay cuts. We will see.

 

[Ganja60Heavy]

Unless you fly for Fedex or UPS (who can control fuel costs through fuel surcharges on packages),

WRONG

That's controlling REVENUE, not "controlling fuel cost"

Controlling revenue is management's job. Delta management sucks.

Jeez, you'll say anything to sound authoritative, huh?!

You're WRONG AGAIN

 

[General Lee]

WRONG

That's controlling REVENUE, not "controlling fuel cost"

Controlling revenue is management's job. Delta management sucks.

Jeez, you'll say anything to sound authoritative, huh?!

You're WRONG AGAIN

]

Huh? Are you denying there is an extra fuel surcharge for packages? Some of that may add to revenue (if the price of gas fluctuates), but mostly that helps defray the cost of higher gas. I think you are wrong, again.

You bring nothing to the table in any debate.


Bye Bye--General Lee

 

[John Pennekamp]

]

Huh? Are you denying there is an extra fuel surcharge for packages? Some of that may add to revenue (if the price of gas fluctuates), but mostly that helps defray the cost of higher gas. I think you are wrong, again.

You bring nothing to the table in any debate.


Bye Bye--General Lee

No, he's right. That's controlling revenue... to OFFSET fuel costs.

Controlling fuel costs would be like using a fuel hedge.

 

[DrunkIrishman]

GL-

Isn't it possible that CHQ is parking at B because there is no more room left anywhere else? I believe ASA is subleasing the spaces to CHQ as well as the ground support. Furthermore, Mesa is no high quality product themselves.

BTW, I thought the agreement was for ASA to have 80% not 85%. Anyone??