Boyd's take on the F9/WN/UA showdown

[fifty30retard]

http://www.aviationplanning.com/asrc1.htm

 

[Cardinal]

Good stuff. However this plays out will be fascinating.

Does WN participate in interline agrements? Or do they just rule those out...It kinda matters to our little slice of the DEN market, we get connectors from just about every airline on a regular basis.

 

[firstthird]

The only interline SWA does is with ATA at certain airports (MDW, PHX, LAX, I think). Before a year ago we didn't do any (well, not counting a deal with Iceland Air back in the day). Who knows if we'll be doing any a year from now. As a rule though, I doubt we'll be getting into any kind of codeshare in Denver, then again, I wouldn't have put DEN in my top 10 of our next places to go.

as an aside, is it just me or has Mr. Boyd been pounding on the LCC a bunch lately and SWA in particular? Never really registered his name till about 6 months ago when he started piping up contrary the popular wisdom, saying the legacies are about to break out of the gate and go to town. Doesn't he have some kind of consulting deal with Embraer? Was he one of the "50 seat RJs are the future" guys 10 years ago? Anyone have any historical perspective on him?

 

[SirFlyALot]

I agree with almost everything that Boyd says in the article. I was talking to a SWA pilot friend of mine just today about this very same subject. He is a senior FO at SWA. He is just one example of SWA's high labor costs: he makes more than mid-level captains at many airlines. Basically it comes down to this: SWA's non-fuel costs are higher than just about every airline out there that matters to them in competitive terms. That places SWA in a race to grab enough market share (revenue) in the next three or four years so that when their fuel-cost advantage goes away, they have the market share to overcome their disadvantage in non-fuel costs. It's a race for SWA. If they win it, they're set. If they lose it, they're in for some tougher times.

 

[race#53]

Here is one of Boyd's prev. predictions;

AIRLINES: Billions of dollars in cost-cutting by the U.S. airline industry should produce results in 2005 with a number of major carriers, including Northwest Airlines, generating profits.

The International Air Transport Association says that worldwide airlines probably will make a combined profit of $1.2 billion in 2005, after losing nearly $35 billion during the past four years.

The trump card is jet fuel costs. Profits depend on oil prices continuing to slide instead of moving up into record-breaking territory.

"Going forward, we think oil will fall into the mid-$30 a barrel range that will allow the major carriers to start making money," said Michael Boyd, president of The Boyd Group, aviation consultants in Evergreen, Co. "It should be a strong year for many airlines. But any little glitch in the fuel supply line could create a problem." __________________

 

[G4G5]

This isn't rocket science folks.

According to UAL, they need fuel at $50 a barrel for their survival plan to work. Yesterday's NYMEX listed oil at $61.20. That is just 20%+ higher then what is required.

"In the current environment, Southwest has continued to outmaneuver everyone in the business. When crude-oil prices plowed past $60 a barrel, crushing every airline in its path, Southwest was paying $26 a barrel for 85 percent of its fuel, because of its prescient hedging strategy. And as long as oil prices remain high, this competitive advantage will extend into the next few years. Sixty-five percent of Southwest’s oil in 2006 will come at a cost of $32 a barrel. By 2008, it’ll still be getting 30 percent of its fuel at $33 a barrel."

Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver.

Boyd needs to change the water in his bong if he thinks oils it going to cut in half over the winter. Their is barely enough heating oil to go around.

 

[crashpad]

"Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver."

Pass the spleef, buddy.
Do you really think the government is going to let that happen? Haven't you paid attention to UALs' bankruptcy procedeings over the last 4 years? Yea, Go SWA! But just like New Orleans and FLL, somebodys' got to support those poor unfortunate and innocent survivors thirsting for a mere drink (of malt liquor) to sooth their parched throats.
Sorry, too many jobs at stake and too many politicians.

 

[skykid]

He is a senior FO at SWA. He is just one example of SWA's high labor costs: he makes more than mid-level captains at many airlines.

I have to disagree with the way you word that. I don't think he is an example of high labor costs, I think it points out that EVERYBODY in the pax carrying business but SWA has lousy compensation!

If you are in a position to move to the left seat after only a few years at an airline and make more money than you ever have, I'm sure it seems like you are really making out. Take a look at SWA and what some of the majors used to make (before 30% or greater paycuts to match your pay) and you'll see the level we ought to be getting back to.

 

[FlyBoeingJets]

According to UAL, they need fuel at $50 a barrel for their survival plan to work. Yesterday's NYMEX listed oil at $61.20. That is just 20%+ higher then what is required.

Southwest has quite an advantage, they know it and they are out to destroy UAL at Denver.

The analysts are predicting oil to come down to $50 or less a barrel. The lower the better for those with no hedges.

Denver has been a glaring hole in SWA's route structure. That was stated by Gary Kelly after the announcement. Newhires would ask about C-springs so much they were told to quit asking about it. Denver was tops on my list of possible new airports after they announced the shutdown of the byzantine baggage system. I didn't buy the press that we would never go to Denver again. I also was hoping for Minneapolis. The Colorado market is one where RJ feed is not very efficient. A perfect market for an airline like SWA.

C-springs has accessibility issues on Powers blvd., so I'm told. I think it may have something to do with the Fort Collins, Greeley, Cheyenne and ski travelers wanting to fly into Denver. C-springs folks can Drive to Denver but Denver travelers are less likely to drive to C-springs. Then there is Castle Rock. They can go to either. Pueblo is just too small a market compared to areas North of Denver.

You be the judge on which airport makes more sense.

Destroy UAL? They have basically completed their transformation and have exit money. UAL is down to fighting weight. Much too healthy to be anything but a tough competitor. SWA has done just fine without Denver and does not need to destroy anyone to be happy. I know I'm happy USAir didn't implode. I know a bunch of people over there. No, UAL will not be destroyed. They and AA are well out of the woods. NWA will be out of the woods by next year too.

I'm not a big fan of Boyd, but his articles are coming across a little better written. He mixes up some obvious data this time and makes some plausible predictions. I don't think Frontier will "beat" SWA but it is possible they will hold their own. Southwest does have the challenge of being a mature LCC with tough LCCs right behind. It is easy to predict a Southwest stumble. Boyd makes his money by predicting changes. But it won't happen on my watch.

 

[G4G5]

This isn't rocket science. SWA is 65% hedged at $32, if oil stays at $60 for the next 6 months. SWA is paying $47 a barrel and UAL is paying $60, with a business plan that requires $50 to survive. Now if UAL's CASM's are in line with SWA's, I would expect all things to be equal and this would be a fair/fare fight but all things are not equal.

It's real simple, because of their hedging SWA can afford a long drawn out fare war in DEN and UAL can't.

Oil will not see $30 for quite sometime, lets remember we are still in Iraq. Even if oil comes down to $40 a barrel, by 2008 SWA is still 33% hedged at $33. Think about it, when will their ever be a better time to attack UAL and F9 at DEN?

How long can UAL sustain a fare war on DEN-LAS, MDW, DAL, BWI, OAK, LAX, MCO flights? The yields on these routes are about to drop through the floor.

It's one thing to compete directly against a single LCC. DAL does it in ATL, AMR does it in JFK but how many legacies have two LCC's to go head to head with? Especially in an airport that they have dominated for so long ?

Let's face it winter is not even here and oil is at $60, it's not going down that quickly. This is the worst season for profits. UAL will not see a descent quater for profits until next summer. This is going to be ugly.

 

[FlyBoeingJets]

I see what you mean. I was thinking UAL's international ops would help subsidize domestic, but that isn't going to make up for much if oil stays high.

 

[BeCareful!]

Boyd isn't always correct, but he does seem to see trends a few steps ahead of the typical "expert" on Wall St.

I recall everyone thinking US Air was history when SWA started in PHL. Now, looking back, it seems like a non-event.

 

[mamba20]

I just think its sad that SWA is going to be tainting a beautiful city. GO AWAY!!!

 

[G4G5]

Boyd isn't always correct, but he does seem to see trends a few steps ahead of the typical "expert" on Wall St.

I recall everyone thinking US Air was history when SWA started in PHL. Now, looking back, it seems like a non-event.

USAir is history, they were purchased by AWA and will be run by Dave Parker. All that will remain in a few years is the paint job.

 

[FlyBoeingJets]

I just think its sad that SWA is going to be tainting a beautiful city. GO AWAY!!!

You sound like some old dude with a long beard on the porch of a shotgun shack yelling at passersby. The straight jacket is on its way.

 

[Damich]

Dave Parker? Try Doug Parker.

 

[Skyrunner]

This is the Boyd Group bios right from their website. This says a lot about their intentions. Who is paying for their EXXXXXPERRRRRRTTT analysis?


Mike Boyd - Mike started his career with American Airlines in 1971. He joined Braniff International in 1977, attaining the position of Regional Director, and was responsible for opening the carrier's Far Eastern operations. In 1982 he moved to Bar Harbor Airlines as Vice President of Marketing and Planning.

William Oliver - [FONT=Tahoma, Verdana, Lucida]Subsequent to service in the Marine Corps., Mr. Oliver had a distinguished career with Braniff International Airways, attaining positions as Director - System Operations, Director - Customer Service Administration, and Vice President - Personnel & Labor Relations. Following his career at Braniff, Bill was Executive Vice President of a low-fare jet airline, and was responsible for the carrier's route planning, marketing, and daily operations. [/FONT]
[FONT=Tahoma, Verdana, Lucida][/FONT]
[FONT=Tahoma, Verdana, Lucida]Brian Streeval - is Director - Project Analysis, and works with client airports around the nation in developing new approaches to air service development and airline recruiting. Mr. Streeval joined The Boyd Group from the planning department of US Airways.[/FONT]
[FONT=Tahoma, Verdana, Lucida][/FONT]
[FONT=Tahoma, Verdana, Lucida]Capt Mike Baiada - A 777 captain at a major US airline, Mike has been a leader in projects to improve the nation's air traffic control system, and in 1994 co-authored the first study that brought Free Flight to the attention of aviation.
[/FONT]

 

[GogglesPisano]

I think I'll start an aviation consulting group. I'll call it The Goggles Group. I can publish sarcastic editorials by pulling un-informed conjecture and opinions out of my arse once a week. Who's with me?

 

[JohnDoe]

quote:
"Who's with me?"


What's the pay and QOL?

 

[Marko Ramius]

I think I'll start a group too

It'll be called the, 'I'm a really smart pilot who really can't stand to hear anything even remotely negative about any company I may work or wish to work for, so I will dig feverishly to find any amount of information to discredit said opinion(s) or simply ignore them-unless they agree with me, than never mind it's obviously true everyone can see it' Group. I think that may not all fit on the groups charter message, and could possibly be a run-on sentence, I'll run it by a publisher whose work I like to be sure though.

 

[PHXFLYR]

USAir is history, they were purchased by AWA and will be run by Dave Parker. All that will remain in a few years is the paint job.

The paint job..??? I think that was the FIRST thing to go!!
And by the way,it's "Doug" Parker to you, mister


PHXFLYR

 

[Skyrunner]

It'll be called the, 'I'm a really smart pilot who really can't stand to hear anything even remotely negative about any company I may work or wish to work for, so I will dig feverishly to find any amount of information to discredit said opinion(s) or simply ignore them-unless they agree with me, than never mind it's obviously true everyone can see it' Group. I think that may not all fit on the groups charter message, and could possibly be a run-on sentence, I'll run it by a publisher whose work I like to be sure though.

Good point. I don't mind criticism as long as it's from one of my own or a neutral party. Boyd Group is not neutral!!!! How do they get away with calling themselves experts and getting press on FOX and CNN. This is far worse than the crusty old ret. Viet Nam Col. getting on CNN and telling the American public how bad things are for us in Iraq when they have never even been deployed for ONE LOUSY DAY in theatre.

C Ya on my commute. Hope I can repay the courtesy on 3 Jan.

SR

 

[Doug Parker]

The paint job..??? I think that was the FIRST thing to go!!
And by the way,it's "Doug" Parker to you, mister


PHXFLYR

Make that MISTER Doug Parker.........what do you want ??

 

[G4G5]

The paint job..??? I think that was the FIRST thing to go!!
And by the way,it's "Doug" Parker to you, mister


PHXFLYR

Oops. My mistake, I was talking to a guy named Dave when I was typing. It just goes to show I can't do two things at once.

 

[PHXFLYR]

Oops. My mistake, I was talking to a guy named Dave when I was typing. It just goes to show I can't do two things at once.

Don't worry.......neither can I !! Maybe that's why we became pilots


PHXFLYR

 

[michael707767]

say what you want about the Boyd group, but I think the bottom line is this......if they were wrong more than they were right, they would be out of business. No one is going to pay them for bad advice/information.

 

[Spudbud]

What gets me is that all of these "experts" seem to think that DEN is the center of the universe and that SWA's success will depend on their ability to sway pax away from UAL and F9. Last time I checked, we've got a gazillion loyal customers in 60+ plus other cities who probably are thrilled they can now get to DEN on SWA so the so called "battle of Denver" is only 1/2 of the story.

 

[canyonblue]

Nothing wrong with DAVE Parker................

http://mlb.imageg.net/graphics/product_images/p1112341dt.jpg

 

[ivauir]

say what you want about the Boyd group, but I think the bottom line is this......if they were wrong more than they were right, they would be out of business. No one is going to pay them for bad advice/information.

Um that is a pretty flawed premise. Lots of people get paid to tell people exactly what they want to hear. When it comes to SWA the Boyd group has been wrong more than they've been right.

 

[whymeworry?]

You SWA guys are classic. Someone draws attention to flaws in your profit model and you immediately attack his credibility. Kind of like the ATA CEO whining about the Budweiser commercial (discount airline guy). Sure that song was a bit harsh but it was a joke and his crying just furthers the cause of political correctness in this country... which I think we can all agree has gone too far. LCCs have had no problem taking pot-shots at the antics of Legacy carriers over the years. Someone takes a shot at them and everyone starts crying. If you're gonna dish it, ya' gotta' take it to.

Now, about Boyd. I have been followng this guy since 1997. I don't really think of him as an analyst, rather he is more of a strategist. BIG difference. Wall Street analysts have an agenda. Their firm with makes a market in the stock they are promoting or demoting AND their firm usually has an investment banking relationship with that company that is worth hundreds of milions of dollars. No doubt there is pressure from their own firm to be tactful about their opinions. By contrast, Boyd sells his strategic advice to based on the facts. Whether Boyd has deals with Embraer or legacy carriers is not nearly as relevant as is his phenomenal record of using trend analysis to suggest strategies for the future of our industry. You better believe Embraer listened up to Boyd when they decided to ditch the 50-seat RJ in favor of a 70-100 seater. When EMB made this decision, many analysts were predicting their demise since they spent some many billions of dollars producing a plane for which there was not yet any demand. That investment paid off for them big time.

Having followed Boyd for as long as I have, I would say, in general, Boyd is always way ahead of competition. In the 1990s Boyd called the coming of the Age of the RJ. Major Airline pilot groups ignored this observation thereby ignoring the threat to their flying. Even ALPA national missed it. Only when 2500+ RJs were on the scene did Major pilots start to get a clue that their 73/DC9 flying was being replaced. By that point it was too late. Then, in 2002, Boyd reminded the industry that RJ operators are now "vendors of lift", so-called virtual airlines. He began to predict changes to the RJ industry as we know it. He went on to say the heyday of the 50 RJ is coming to an end and that 2003 and 2004 would be "the year of the 70-seater". At that time, Embraer had NO ORDERS on the books for the 70 seater except for a small order from LOT Polish Airlines and Jet Airways of India (Jet eventually cancelled their order). By the end of 2004 Embraer's order book for 70-100 seaters was completely backlogged.

As economics change, Boyd regularly adjusts his forecasts based on fundamental analysis and trend analysis. If your on the wrong side of his prediction, of course your going to call him the village idiot. But if you're on the right side of the equation, you think he is the best thing since... blah, blah blah. I've been on both sides of his firm's predictions and I can honestly say he is right most of the time. That said, he is right nearly all of the time when you factor in the change in analysis that occurs as a result of a change in economics and the overall business environment. You can ignore this guy if you want but he didn't build a highly reputable firm by dishing out bad advice ansd nonsence. And he didn't just pop up yesterday, hes been around for years.

Don't bury your head in the sand like ALPA/ APA did. ALPA's ignorance on this subject cost tens of thousands of major pilot jobs. If the major pilots made sure they got the new RJ flying, the blood bath over the past few years wouldn't have been so bad. When I say ALPA, I mean the pilots of ALPA. THEY are the ones that ignored the onslaught of the RJ... until it was too late to stop. They were warned in the 1990s. They (we) weren't proactive enough to protect our flying.

Incidentially, I posted the Oct 10th Boyd report, about the end of 50-seat operators as we know it, on a regional airline pilots forum and the post was deluged with comments about what an idiot Boyd is. So over the past 10 years, they loved his predictions as he proclaimed the sheer momentum of the RJ, now that economics have changed and he has had to modify his analysis, they poo-poo his ideas and comments. It appears the RJ pilots are now starting to bury their heads in the sand much the way Major pilots did in the late 1990s.

When I was at the "Regionals" I made six figures as an RJ capt and I had amassed a decent-sized retirement through my compay's 401K match as well. I was senior, holding 17-18 days off a month, home nearly every night if I wanted to be, and and I had nearly 3 months a year of vacation on top of al that. I had a great life and with all the days off an envious lifestyle. Yet I took the pay cut to move on to the majors (first year starting pay) because I listened up to Boyd's advice. Back in 2002, he began to call the end days of the 50 seat RJ as economics began to change. A lot of my friends chose to stay behind at my company because of the schedule, the "senior" lifestyle and hopes of bigger equipment under the belief that "regional" airlines will continue to build critical mass. The jury's still out on what the outcome will be. Whatever it is, Boyd's prediction of dark clouds on the horizon for SJPs confirms even more my belief that I made the right decision to bite-the-bullet and move on. Regardless on the plight of the RJ, I am glad I moved on but I do not wish any ill-fate on my RJ brothers and sisters. I never forget my roots.