Bring a knife to a gunfight - ACA future

[tittyjet]

nevermind, it's just not worth it.

 

[Marko Ramius]

Is a MBA really needed?

To look at some of the basic math around this deal? ACA quoted a current CASM figure of 18-19 cents per mile which they say will drop to around 15-16 cents per mile with increased utilization. So they need to make in excess of 15-16 cents per mile to make money. Makes sense up to here, but here's where the train goes off the track IMO. Who the he!! is making that kind of yield today? Especially on domestic routes. Fine they may not put their carrier head to head with other LCC's, but they still in fact trying to become a low COST carrier. There is nothing low about 15-16 cents per mile, most LCC's are in the neighborhood of 6-7.5 cents per mile. The mainline carriers like UA that they are distancing themselves from all have lower CASM's then ACA. They also have lower RASM on ticket prices that are in excess of what ACA claims it will charge. Granted the CASM will fall with the addition of larger A/C, but the system wide CASM will still likely be higher than all of their competitors as long as the RJ's are in the fleet and it's unlikely that ACA will get enough financing to replace them all in short order. The larger A/C will likely have to subsidize losses on the smaller ones just like biz pax did for leisure pax for so many years. ACA was no doubt in a corner, and this is likely the best thing for them to try, but I can see no amount of spin that makes this look like a good idea. All the same best of luck to ACA in making it work and proving us haters wrong!

 

[Marko Ramius]

Another thing that is interesting to me is the blind faith in ACA upper management. Granted they have an outstanding 14 year run, but they do have some culpability in this situation as well. While part of the reason UA took a hardball stance with ACA likely has to do with their UsAir codeshare, this situation has been brewing pre-BK. UA management was extremely unhappy with how ACA pushed for and won fee per departure hikes in early 2002. Interim CEO Jack Creighton admitted to employees that the deal was basically highway robbery but that there was little that could be done about because they couldn't afford to lose the feed at a critical time. There were quite a few aritcles at the time about this if anyone remembers. They applauded ACA for using it's leverage over a UAL that was in a cash conservation/downsizing mode, but cautioned that the move had considerable risks should UA's situation worsen or end up in BK. Well they went BK, the tables turned and now UA management has leverage. Not many people outside of the majors cared when the whipping stick was applied heavily to airports, aircraft lessors, and employees. Those things were all about "economic reality." It was only inevitable that they would do the same to their regional afilliates, and it's not surprising that UA management hasn't forgotten what ACA management did a year ago. I must tip my hat to Fast Eddie in all of this though, be it the blue meatball, palm, or blue ridge he's always out the door long before the flag falls.