Ignorance, what the XJT deal really means

[B777]

I got a call from my buddy yesterday. He is an FO at XJT and has been with them for little over a year. He was telling me how XJT will loose 69 jets and 500 pilots will be furloughed, blah, blah, blah . . . Then he adds that they will continue on hiring which he does not understand why since they will be loosing 69 jets. The first thing that came to my mind is, does this guy actually pays attention to internal communication? All he has to do is pick up the phone and listen the recorded message by the XJT CEO and he will realize that those planes are not going anywhere, at least for now.

XJT has first rights over these planes. That means that XJT has the right to find someone else to operate these planes for before they have to hand control over to CO. That means by December 28, 2006, if XJT finds another airline they can operate these planes for, they can tell CO to take a hike. Just like AWAC told United to take a hike and now they operate as U.S. Airways.

So it's not doom for XJT and I don't think it will be either in the future. This company has a brilliant management team. Even before this, they have already statrted to look for ways to be less dependent on CO. They own an a/c paint company in Mexico, they do ERJ maintaince for other airlines, and they own a ground hanlding company called FSS. CO is going to be the one who is going to loose on this.

It blows my mind how pilots can work for XJT, and still not know this information.

 

[SluffPuppy]

It blows my mind how pilots can work for XJT, and still not know this information.

It's because far too many people won't do what it takes to stay informed... sad, but true. These are the same guys that take what the crew room lawyers say for gospel and then bad-mouth anything they hear that doesn't line up with their "perceptions". Man, you should hear the baloney some of these folks spout off when there's an LOA up for consideration.

 

[wheelsup]

ExpressJet has up to nine months to decide whether it wants to sublease any of the 69 aircraft, on which it would pay higher rates, Continental said. ExpressJet would be barred from operating them in any Continental hub without the Houston-based carrier's permission.

Just reading the press release, I don't think they have till Dec. of 2006 to decide. Also, I can't see how paying higher rates on the lease will help finding a new codeshare. I'm not being an @ss, just a realist. Unless we work for mesa, all of us won't be going anywhere for awhile...

~wheelsup

 

[acbarney]

I got a call from my buddy yesterday. He is an FO at XJT and has been with them for little over a year. He was telling me how XJT will loose 69 jets and 500 pilots will be furloughed, blah, blah, blah . . . Then he adds that they will continue on hiring which he does not understand why since they will be loosing 69 jets. The first thing that came to my mind is, does this guy actually pays attention to internal communication? All he has to do is pick up the phone and listen the recorded message by the XJT CEO and he will realize that those planes are not going anywhere, at least for now.

XJT has first rights over these planes. That means that XJT has the right to find someone else to operate these planes for before they have to hand control over to CO. That means by December 28, 2006, if XJT finds another airline they can operate these planes for, they can tell CO to take a hike. Just like AWAC told United to take a hike and now they operate as U.S. Airways.

So it's not doom for XJT and I don't think it will be either in the future. This company has a brilliant management team. Even before this, they have already statrted to look for ways to be less dependent on CO. They own an a/c paint company in Mexico, they do ERJ maintaince for other airlines, and they own a ground hanlding company called FSS. CO is going to be the one who is going to loose on this.

It blows my mind how pilots can work for XJT, and still not know this information.

All of this is true, however, there are a few other details.

All of XJT's airplanes are owned by or leased directly to CAL. CAL then sub-leases the airplanes to XJT at rate "A".

In the deal, XJT is free to find someone else to fly the airplanes for, however the lease rates XJT pays for these 69 airplanes will increase "significantly" to rate "C"

CAL will put out a RFP to several other Small Jet Providers, who will either
A. provide the lift using their own airplanes, or
B. in the event XJT decides the "significant" increase in the lease rates are too significant i.e. rate "C", then the new SJP will have the ability to lease the aircraft at some other rate "B".

Where A<B<C

 

[SluffPuppy]

CAL will put out a RFP to several other Small Jet Providers, who will either
A. provide the lift using their own airplanes, or
B. in the event XJT decides the "significant" increase in the lease rates are too significant i.e. rate "C", then the new SJP will have the ability to lease the aircraft at some other rate "B".

Where A<B<C

I agree with most of what you said, but not that rate "B" would necessarily be less than rate "C". A lease is a lease, whether it's to XJT or somebody else. I'm sure that rate would have to be negotiated (i.e., not a flat rate) along with everything else that goes into a CPA.

The key to remember is that XJT makes the call as to whether CAL gets those airplanes back or not. And I'd bet CAL and their RFP bidders won't know the answer to that piece of the puzzle until about 8 months, 29 days, 23 hours, and 59 minutes after this past December 28th.

 

[Heavy Set]

In the end, XJT will likely still operate the 69 ERJs for CO - but at a lower rate. This may result in more contract negotiations with its pilots - and that makes sense because XJT wants to preserve its profit levels - less revenue in requires more costs out... Sad but true.

With regard to other feed opportunities, do you really think XJT wants to bid on other feed opportunitites against bottom-dwellers like Mesa and Transtates? Nope. Sure, XJT wants to diversify its flying (not put all of its eggs in one basket), but the other carriers are operating at very low margins and that diversification will be difficult unless XJT can bring its own costs down considerably (i.e., Mesa cost levels - not pilot friendly).

That's not to say that CO won't seek some limited feed from Mesa (or maybe more from Colgan) so that it can play one feeder off another in future negotiations... Classic!

 

[wheelsup]

I agree with most of what you said, but not that rate "B" would necessarily be less than rate "C". A lease is a lease, whether it's to XJT or somebody else.

Even if the lease rates are the same for all the companies bidding, Mesa will still get the flying over ExpressJet.

Here are two posts from the mesalounge from two of their pilots...

Depending on how you view it, Mesa may very well today have a industry-leading contract. At least we do in the scope department.

Another one...different person...

Our contract was not concessionary in pay or anything that would have brought this industry down. Look around you....PAY CUT after pay cut...........we didn't even take a pay cut.

It's hard to compete against that mentality. My pay is based on industry standard +X% (pretty sure atleast), and mesa certainly brings down the average...

How's that saying go? If you can't beat 'em, join 'em? Maybe I should've gone to mesa....

~wheelsup

 

[surplus1]

They own an a/c paint company in Mexico, they do ERJ maintaince for other airlines, and they own a ground hanlding company called FSS. CO is going to be the one who is going to loose on this.

That sounds good, assuming you live in Mexico and own a paint brush, you have an A&P certificate or you're good at tossing bags.

Reality is that as long as your company is totally dependent on some other company, and right now XJT is, you will march to whatever drum that other company chooses to beat.

It is not all gloom and doom but it undoubtedly will result in a request for contractual concessions. Either you get pretty close to MESA's prices or you will lose flying to them.

MESA is not the only "vulture" (witness how SKYW was able to steal ASA) but they are there waiting and circling (along with a couple others) for the first sign of trouble. The potential loss of 69 airframes is trouble.

 

[BluDevAv8r]

All of this is true, however, there are a few other details.

All of XJT's airplanes are owned by or leased directly to CAL. CAL then sub-leases the airplanes to XJT at rate "A".

In the deal, XJT is free to find someone else to fly the airplanes for, however the lease rates XJT pays for these 69 airplanes will increase "significantly" to rate "C"

CAL will put out a RFP to several other Small Jet Providers, who will either
A. provide the lift using their own airplanes, or
B. in the event XJT decides the "significant" increase in the lease rates are too significant i.e. rate "C", then the new SJP will have the ability to lease the aircraft at some other rate "B".

Where A<B<C

What most don't understand is that our current least rates are predicated off of our very favorable launch customer pricing. The "significant increase" in our lease payments, should we choose to keep these airplanes, isn't really all that "significant," when one factors in how low our initial lease rates were to begin with. This "significant" penalty is 200 basis points, or 2%, of the current lease rate. Without getting into details, these airplanes are still marketable even using this new higher rate...and these are the best airplanes to try to "sell" to someone else, given that 44 of them are our best performers (XR's).

-Neal

 

[acbarney]

I agree with most of what you said, but not that rate "B" would necessarily be less than rate "C". A lease is a lease, whether it's to XJT or somebody else. I'm sure that rate would have to be negotiated (i.e., not a flat rate) along with everything else that goes into a CPA.

The key to remember is that XJT makes the call as to whether CAL gets those airplanes back or not. And I'd bet CAL and their RFP bidders won't know the answer to that piece of the puzzle until about 8 months, 29 days, 23 hours, and 59 minutes after this past December 28th.

I agree, "B" may not necessarily be less than C, the determining factor should be what lease rate CAL Pays to ILFC, or whoever actually owns the aircraft, i.e. rate X.

I would bet, by past experience with stellar legacy management teams,
that A<X. I assume that C>X, and I would guess B=X CAL will try to get at least X for the new lease rates from whoever flys the 69 aircraft, and in due time the other 200.

 

[Superpilot92]

Lets face it none of us really know whats going to happen next year. I have high hopes and feel our MGMT is a great group and has some tricks up their sleeves. If you listen to the company news you would hear our CEO saying they are working on it and are going to do everything possible to keep the aircraft at XJET even if we have to do something else with those aircraft. I dont see us giving those aircraft up 44 XRs 25LRs. The XR is our bread and butter planes so i dont see us just giving those up unless we are planning on getting bigger planes. Who knows. The CEO flat out said we are still profitable without those 69 planes. Time will tell. Continental is big on their image i dont really see them bringing in Mesa. I cant believe all the other carriers just let mesa fly multicolored aircraft, that looks so tacky to me.

 

[sgu]

SuperPilot,

I disagree about the "image" problem, ie. Colgan in IAH instead of SKYW. It's all about the bottom line.

 

[Truckdriver]

these airplanes are still marketable even using this new higher rate...and these are the best airplanes to try to "sell" to someone else, given that 44 of them are our best performers (XR's).

-Neal

\

The airplanes that XJT has the option to keep are dispatchable up to 1400 miles out of almost any US airport with 50 pax. Anyone out there operating 50 seat ER or CRJ aircraft need to be worried about XJT taking some of their flying when mainline carriers see what we can do with XR's for the price we charge. Comparing XJT block hour rates in an XR to any other 50 seat ER or CRJ aircraft is not an apples to apples comparison. XJT management is fairly certain CAL will either keep us around after a little hard ball negotiating, or we can sell lift in these airplanes to another operator. Most XJT guys are not too worried about this whole deal. It may actually be good because we may have a choice to be based somewhere other than CLE, EWR, or IAH after this whole deal plays out.

 

[Truckdriver]

SuperPilot,

I disagree about the "image" problem, ie. Colgan in IAH instead of SKYW. It's all about the bottom line.

I deadheaded on SKYW a number of times when they were in IAH and I've now deadheaded on Colgan a number of times since they have been around. I never thought this would be the case, but I think Colgan does a better job from what I have experienced. The SAAB is a little nicer inside than the 120 was and they all look sharp in CAL colors. On time performance is about the same. Colgan crews look more professional than the un-shaven SKYW backpack crowd ever did. I really don't think CAL took a quality hit when they gave SKYW the boot out of IAH.

 

[WWEfan]

ASA's system chief pilot told a Recurrent Ground Training class that ASA is aggressively pursuing this flying in an attempt to diversify its revenue stream. Don't think MESA is the only one that could swoop in. The vultures are circling XJT and there are alot of them.

 

[Illinois]

MESA is not the only "vulture" (witness how SKYW was able to steal ASA) but they are there waiting and circling (along with a couple others) for the first sign of trouble. The potential loss of 69 airframes is trouble.

Steal ASA? I think it remains to be seen if ASA will be better or worse off after the SKYW acquisition. We all hope better, and bankruptcy sounds worse than where they are now.

Skywest Inc. has wanted to get a jet codeshare with CO for a while, and will probably pursue this agressively with both ASA and Skywest.

P.S. No excuse for the unshaven backpack crowd at Skywest!