B6 to Sell FIVE A-320s

[DH2WN]

Might as well have the auction tomorrow.

Tomorrow is Sunday. Wait until Monday.

 

[FlyBoeingJets]

Why is it so hard for some of you to understand that the airline is not down-sizing? The airline is still growing...just at a slower rate. If you fly aircraft for a living surely you can comprehend this. It's like adding, we are just using smaller numbers for a while to eventually get the same sum.

I think what we have here is a cash crunch or the intent to avoid a cash crunch.

Everyone freaks out with airplanes going away.....Without all the facts.

But a fact is this is a time of wonderful growth opportunities. Good economy, rising ticket prices and competitors shrinking. JetBlue SHOULD be able to deploy every aircraft they can get.

That said it may be a great idea to temporarily reduce growth.

 

[jetflier]

5 years of putting money in an aircraft to turn around and sell it to buy a new one increases your long term debt. Doesn't matter what the new rates are. It looks good on paper for the short term but the debt increases. Kinda like buying a car but selling it then buying a new one just before you pay it off. It'll save you on maintenance month over but long term debt increases. I cannot dumb it down any more than that.

If you still don't get it. Ask yourself, why doesn't SWA sell all their planes that are 5 years old and just buy new ones? I wonder why Delta doesn't sell all their aircraft and just buy new ones? Mmmmm....B6 is brilliant and everyone else is wasting money. Doesn't increase their debt, right?

At the end of the next quarter go to google.finance.com and look up the quarterly statements. Assuming the 5 aircraft will be on the books that early. Compare it to the last quarter. You will then understand young grasshopper.

Hey Guys,

It could also be a way for management to keep their costs just high enough so that they can go to their employees for concessions....

We've seen that at 'ol NWA many times....

 

[32LT10]

Hey Guys,

It could also be a way for management to keep their costs just high enough so that they can go to their employees for concessions....

We've seen that at 'ol NWA many times....

I am sure the 190 guys are ready to give a little.

 

[FlyAuburn]

I am sure the 190 guys are ready to give a little.

Just like you've been giving it to your management...
Ouch, was that too low below the waist? :laugh:
Misery loves company.

 

[Sonny Crockett]

I am sure the 190 guys are ready to give a little.

Probably right!

Maybe they can sleep on the airplane during RON's to prevent Hotel costs.

 

[enigma]

No matter how you spin in it, this is not good news. It may not be bad news, but is certainly isn't good news. Selling off revenue producers is an admission that the market does not exist to support them.


The good news is that B6 management is attempting to address their present market. If I were a blue dude, I'd much rather see slowed growth instead of overexpansion leading to failure.

enigma

 

[clickclickboom]

5 years of putting money in an aircraft to turn around and sell it to buy a new one increases your long term debt. Doesn't matter what the new rates are. It looks good on paper for the short term but the debt increases. Kinda like buying a car but selling it then buying a new one just before you pay it off. It'll save you on maintenance month over but long term debt increases. I cannot dumb it down any more than that.

If you still don't get it. Ask yourself, why doesn't SWA sell all their planes that are 5 years old and just buy new ones? I wonder why Delta doesn't sell all their aircraft and just buy new ones? Mmmmm....B6 is brilliant and everyone else is wasting money. Doesn't increase their debt, right?

At the end of the next quarter go to google.finance.com and look up the quarterly statements. Assuming the 5 aircraft will be on the books that early. Compare it to the last quarter. You will then understand young grasshopper.

Sorry i look at it in terms of depreciable assets.. The 5 year planes are depreciated, going in for $$ mx inspections, engine changes etc etc.... It's really no different than when you or I sit back look at the big picture and get rid of unnecessary debt ( motorcycles, boats, planes etc etc ). In my opinion it really does make sense. While I would prefer that every airline out there takes delivery of 100 planes a year and never sells them upgrades everyone to captain working 10 days a month the reality is that the managers have to make decisions each and every day. Fortunately for B6 pilots these decisions do not involve cutting the pilots.

Please feel free to pick apart this reply quote it and apply it to your jb bashfest as necessary

 

[metrodriver]

What JB does is the same as what people do with their cars after a few years just before all the expensive maintenance items come due. Your monthly payments remain largely the same (except for inflation), you still have a car ( a brand new one with all the warranties) and no required maintenance for a while.

Remember: a C-check is a very expensive affair, we're talking several million $$$, and can easily take 6 weeks to accomplish. So now you have to pay for the check, send a check to the bank, have a revenue generator out of service and employees to pay (unless you furlough them, not uncommon at smaller outfits). You can lease an airplane to cover the network but that will cost extra.

So what JB does makes perfect sense: get 12 planes, use 5 for replacement and 7 for expansion. The increase in payments that have to be made for the new ones that replace the older 5 is probably less than it would have cost for doing the C-checks, and now everything has a brand new warranty with no mx to worry about.

Continental just announced orders for new aircraft to replace older (less fuel efficient, higher mx) ones. So did Alaska. SWA is slowly doing away with the -200 for the same reason. Foreign airlines do it consistently and are profitable. Seems like JB isn't the only one. Maybe something for DL? Replace the 737-200, MD 80's?

 

[active_herk]

Remember: a C-check is a very expensive affair, we're talking several million $$$, and can easily take 6 weeks to accomplish. So now you have to pay for the check, send a check to the bank, have a revenue generator out of service and employees to pay (unless you furlough them, not uncommon at smaller outfits). You can lease an airplane to cover the network but that will cost extra.

So what JB does makes perfect sense: get 12 planes, use 5 for replacement and 7 for expansion. The increase in payments that have to be made for the new ones that replace the older 5 is probably less than it would have cost for doing the C-checks, and now everything has a brand new warranty with no mx to worry about.

Bloomberg News


Airbus' 156-seat A320s are valued at about $20 million each when sold used, according to data from the Teal Group, an aerospace consulting firm based in Fairfax, Va. A new A320 has a list price of $62 million to $66.5 million.

Disclaimer: I don't profess to be an expert at airline finance, and this reply is not meant to be part of a Jetblue bashfest.

Unless the C-check costs over $40 million, I would say your logic is faulty; especially over the long term. It seems to me you are taking on over $200 million in long term debt to get rid of the C-checks on five aircraft. Is that an incorrect assumption? Please explain.

As for the example set forth by ClickClickBoom regarding selling debt (i.e. boats, motorcycles, airplanes, etc.). That only works when you don't turn around and buy a new "toy" to replace the old "toy". If you do, you haven't gotten rid of debt but increased it.