Intelligent comments from Chautauqua CEO

[SkyNation]

looks like Commutair could be doing some of the flying (?)

http://www.commutair.com/announce.html

 

[007]

Why does he care if we go down the same road as Independence?
Just means more business for him!!

He should be giddy as a schoolgirl.

 

[Cadillac]

I thought this letter was a fake when I first saw it. That a CEO other than jo would be that pig-headed and preachy about another company's decisions in a public letter blows my mind.

I think bvt1151 has deciphered the gist of it. B.B.: "Expressjet costs too much. We cost less. Expressjet has chosen to fail. Expressjet was too dumb to learn from the mistakes of ACA. Expressjet should learn from us and pay their employees less in order to secure growth and keep flying. You are not worth as much as an Expressjet employee."


I have friends at chq, it's sad they have to put up with this. Hopefully they get a better contract than us next time around.

 

[FmrFreightDog]

Ah, I see what you are saying. Not a huge issue at the moment for CHQ. Word is quite strong that we will be reducing our 135/145 flying dramatically for US, UAL, and especially DAL to do 1 for 1 trades for 170/175's. We will simply redeploy those A/C to CAL. Embraer rep in CMH the other day said we have 50 170's painted in DAL colors waiting for delivery. I would imagine those would come at the expense of our 135/145 flying which is being given to Freedom by the truck load. Those A/C will most likely be where our CAL planes will come from.

Funny. The way I hear it, Delta is on the verge of ditching CHQ completely. Something along the lines of submitting a bid for flying then coming back and demanding a better fee for departure because you were losing money. As for my information, I wouldn't bet the farm on you guys getting any one for one trades on Delta flying. From what I'm hearing, Delta will be phasing you guys out one ERJ at a time.

 

[BluDevAv8r]

Given the inflated lease back rates, my feeling, without seeing the specific numbers, are that these A/C would need to get deployed into a profitable fractional/corporate/possible non-US market, for those lease rates to be marketable and profitable. Their would be little chance of a succesful bid to place them with another airline unless they are able to absorb the increased cost in another area, still rendering the 69 A/C a cost liability. I sincerely wish the folks at XJET a prosperous road, and do feel that you have a management that has its head screwed on straight. I hope you are able to deploy your A/C in a manner that is low-risk and profitable.

How can you make a comment on the "inflated lease back rates" if you don't know what the starting point is? Furthermore, they aren't "lease back rates." The 200 basis point premium is on the implied interest rate and not on the lease rate itself. Be careful about believing everything your CEO tells you because he isn't giving the full story whatsoever. You speak in absolute terms yet from what you say it appears that you don't fully understand how these different CPA's are structured and what XJT would have to do to successfully redeploy those aircraft to another carrier or operating area.

-Neal

 

[ASH]

How can you make a comment on the "inflated lease back rates" if you don't know what the starting point is? Furthermore, they aren't "lease back rates." The 200 basis point premium is on the implied interest rate and not on the lease rate itself. Be careful about believing everything your CEO tells you because he isn't giving the full story whatsoever. You speak in absolute terms yet from what you say it appears that you don't fully understand how these different CPA's are structured and what XJT would have to do to successfully redeploy those aircraft to another carrier or operating area.

-Neal

OK, my bad.

 

[ASH]

Ah, I see what you are saying. Not a huge issue at the moment for CHQ. Word is quite strong that we will be reducing our 135/145 flying dramatically for US, UAL, and especially DAL to do 1 for 1 trades for 170/175's. We will simply redeploy those A/C to CAL. Embraer rep in CMH the other day said we have 50 170's painted in DAL colors waiting for delivery. I would imagine those would come at the expense of our 135/145 flying which is being given to Freedom by the truck load. Those A/C will most likely be where our CAL planes will come from.

Funny. The way I hear it, Delta is on the verge of ditching CHQ completely. Something along the lines of submitting a bid for flying then coming back and demanding a better fee for departure because you were losing money. As for my information, I wouldn't bet the farm on you guys getting any one for one trades on Delta flying. From what I'm hearing, Delta will be phasing you guys out one ERJ at a time.

Guess you will just have to wait and see! Yes, they are on the "verge of ditching CHQ" .....in favor of the 170's. Which are operated by Shuttle America. So, technically...your correct!

 

[Soverytired]

Never thought I'd say it . . . glad Mesa ain't a part of this . .

I think the CHQ CEO raises some interesting points, particularly about the emotional response that a business group (COEX) must have had when told they're losing 1/3 of their revenue stream . . . .

Remember, ACA had a great management team, lots of money in the bank, a highly motivated pilot group, Airbus' coming on line . .. and it didn't mean jack S!!t in the end.

50 seater CRJ's are a dying aircraft type . . .it's hard to imagine anyone running a successful charter out of this thing, when better, cheaper, more fuel efficient aircraft are available.

So far, this is totally reminicent of the ACA thing. All mangement types said it would fail, except the one running with the "visionary plan", and all employee's were sure they'd come out fine. BELIEVE ME WHEN I SAY:

"Let's hope history dosen't repeat itself."

 

[Superpilot92]

Ah, I see what you are saying. Not a huge issue at the moment for CHQ. Word is quite strong that we will be reducing our 135/145 flying dramatically for US, UAL, and especially DAL to do 1 for 1 trades for 170/175's. We will simply redeploy those A/C to CAL. Embraer rep in CMH the other day said we have 50 170's painted in DAL colors waiting for delivery. I would imagine those would come at the expense of our 135/145 flying which is being given to Freedom by the truck load. Those A/C will most likely be where our CAL planes will come from.

Opinion.

Thats funny I heard that delta was going to award the 170 flying to XJT.

 

[nimtz]

I'm very disappointed there was no praise of the almightly in this message. BB must of woke-up on the wrong side of the bed. I thank the almighty that he's not my boss.

 

[PGTB]

Its funny to see the two companies fight. All you XJTers are pissed off at Chataqua because you make a buck more an hour, and they are whores! And all the chanaquies think they are actually going to be flying 69 airplanes for Coex...Please continue!

 

[kngarthur]

I think that BB is absolutely right!! I think the reason XJT is keeping the 69 RJ's is so CO won't take more of them (because it's more expensive to replace). I think that XJET has burned a bridge and that any new flying will go to CHQ/RP/S5. Hopefully XJET already has work for those planes.

 

[BluDevAv8r]

I think that BB is absolutely right!! I think the reason XJT is keeping the 69 RJ's is so CO won't take more of them (because it's more expensive to replace).

Continental cannot withdraw from service any more airplanes until 2009 (unless they reject the CPA in its entirety which isn't happening) so I have no idea what you are talking about. Can you elaborate more fully?

I think that XJET has burned a bridge and that any new flying will go to CHQ/RP/S5. Hopefully XJET already has work for those planes.

I'm sure XJT has a plan. Why would they agree to continue paying almost $80mm in aircraft rent per year unless they had a way to pay for it? How has XJT burned a bridge when they are still going to be doing 205 airplanes' worth of flying for CAL? What new work will CHQ get for CAL now? It won't be 70/90 seaters. And CAL might not want any more 50 seaters now that XJT has chosen to retain all 69 airplanes. Or maybe they want just a few 50 seaters and perhaps they are CRJ's? None of us know. But I think BB is probably a little nervous right now and is wondering what is really going to happen on 1/1/07. Have you seen what has happened to the RJET stock in the past week?

-Neal

 

[boxjockey]

KngArthur,

You and EMB skillz are the two biggest morons on this board, and I wouldn't be surprised if you were the same person. I suppose that would be giving you too much credit. Our management team did not keep those aircraft on an "emotional whim" just so CHQ couldn't have them. I don't think the "I'll keep my toys and go home" approach would be tried by any airline CEO, including your own. Our management has plans for these aircraft, or they wouldn't have made an announcement like this, especially this early. We haven't burned any bridges with CAL, we have bent in every direction to accomadate them, and this is just one more example of that. As far as comparing us to ACA, that is apples and oranges. They had to take a leap of faith, with no other revenue stream to support their endeavor. We still retain 75% of our GUARANTEED operating profit in order to get these other projects off the ground. We have a quarter BILLION in the bank and a very strong balance sheet. We have multiple outside revenue streams, and will probably continue to diversify further. I have confidence in our management, that was one of my chief motivators for coming to ExpressJet. Perhaps I'm the eternal optimist, and am looking through rose colored glasses, but I have a feeling we have good things ahead of us. I officially relinquish the soap box.....

box :beer:

 

[~~~^~~~]

Yawn -

This simplistic approach that ACA's pilot costs were responsible for their demise is untrue. United, US Air, Northwest, Delta and even Jet Blue competed on the routes and were perfectly willing to fly for less than their variable costs to shut ACA out of the market. When I Air was started, the business plan made sense over some of the highest revenue per seat mile routes in teh Nation. After the competition went for broke (and went broke in the process) those routes became loosers. I Air simply did not adjust to the market fast enough.

Now CHQ management is complaining that COEX's airplane will be competing with them in the marketplace - well isn't that ironic.

CHQ has never had a realistic cost structure and when the growth stops, CHQ will either have to adjust its business model or will implode. CHQ banks on new pilots and new airplanes to reduce average costs.... growth that can not continue forever.


By the way, perhaps the most significant factor in US Air's return to profitability is the fact that ACA / I Air is gone.

~~~^~~~

 

[BluDevAv8r]

Yawn -

This simplistic approach that ACA's pilot costs were responsible for their demise is untrue. United, US Air, Northwest, Delta and even Jet Blue competed on the routes and were perfectly willing to fly for less than their variable costs to shut ACA out of the market. When I Air was started, the business plan made sense over some of the highest revenue per seat mile routes in teh Nation. After the competition went for broke (and went broke in the process) those routes became loosers. I Air simply did not adjust to the market fast enough.

Now CHQ management is complaining that COEX's airplane will be competing with them in the marketplace - well isn't that ironic.

CHQ has never had a realistic cost structure and when the growth stops, CHQ will either have to adjust its business model or will implode. CHQ banks on new pilots and new airplanes to reduce average costs.... growth that can not continue forever.


By the way, perhaps the most significant factor in US Air's return to profitability is the fact that ACA / I Air is gone.

~~~^~~~

And for once...we agree.

 

[blueridge71]

Ditto.

It sounds like Bedford is basically saying that victim had it coming.

Mesa and CHQ both depend on growth and turnover to maintain low labor costs. At some point, it has to end when there is either no more flying to be taken or their employees decide to insist on an industry standard contract and QOL.

 

[007]

Why does he care if we go down the same road as Independence?
Just means more business for him!!

He should be giddy as a schoolgirl.

I still don't understand why all you CHQ guys are so piised off!!!!

 

[Yudso]

I don't see why all of the XJT guys are creaming their pants over this. If you disreguard anything happening at CHQ, xjt is still losing 69 planes' worth of flying. I have yet to read any press release announcing a definitive plan for these aircraft. If I were at xjt, I would be very concerned with the lack of information that xjt senior leadership is providing. Stop patting yourselves on the back and ask management the serious questions. You won't be so happy in a year when xjt is bankrupt, and management has asked the court to reject your current contract.

 

[bvt1151]

Yawn -


CHQ has never had a realistic cost structure and when the growth stops, CHQ will either have to adjust its business model or will implode. CHQ banks on new pilots and new airplanes to reduce average costs.... growth that can not continue forever.

~~~^~~~

Fins,

I agree with your entire post, but this was the paragraph I thought worth quoting. In terms of employee cost structure, Chautauqua is just like Mesa who's just like JetBlue who's just like People's Express. The low labor cost structure is ONLY due to new employees. It will not last, and I do not think Chautauqua's margins are high enough to overcome it. I'm not saying CHQ will implode, but I do think they will be the high cost carrier within a handful of years, and the snowball will start rolling over them, instead of under them.

Its dangerous to base your business on being able to underbid everyone else. Inevitibly somebody is going to underbid you, and you'll have no way to counter it.