Is XOJet killing your business?

[X-rated]

XO's website shows all city pairs at a flat $19K, in either direction. It includes the lesser traveled destinations, like San Diego, Boston, and Phoenix. Whether they are really honoring these prices on every request is another question. At face value though, it appears their web site would indicate they are.

OCR,

That's not what it says at all. Next time post the whole sentence, try to slow down, be less emotional, and read! There is a very big difference between 4000 and 9.

"Fly the market share leader in transcontinental charter. Choose from over 4,000 airport pairs serving nine major metro areas and fly for as little as $19K one-way."
Preferred airports at which the $19,000 rate is available include: Teterboro (New York), Northeast Philadelphia (Philadelphia), Bedford (Boston), Manassas (Washington, D.C.), Van Nuys (Los Angeles), Henderson (Las Vegas), Oakland (San Francisco), Carlsbad (San Diego), and Deer Valley (Phoenix/Scottsdale).
Subject to availability. Other restrictions apply.

I understand the charter market is extremely poor and business is hard to come by for many operators. However, blaming a single operator who is currently crewing a grand total of 17 airframes domestically for killing your business is simply ridiculous. If your company is not competing well in the marketplace, you might consider a closer examination as to why. I'm sure you don't like this marketing campaign. It makes it hard on the competition, and that is precisely what it was intended to do.

As for your comments regarding XOJETs effect on pilots salaries, I'll just say our pilot pay package has been posted on this website several times. I believe it is very respectable, and would be shocked to learn if your charter outfit is even in our ballpark. Please correct me if I'm wrong.

I wish you and your company good luck in these difficult times.

X

 

[t-bone]

Did the furloughed XO guys get called back yet T-Bone?

Unfortunately, they were not furloughed. And no, there have not been any new-hires lately.

 

[brokeflyer]

terminated?.....that sucks

 

[TransMach]

NO - But XO may be killing their own business ...

When you deeply discount your product in a down time, just to keep cash flow alive, it is VERY DARN DIFFICULT to raise your pricing back to normally supportative levels when conditions improve.

Your customers (particularly new customers who were lured in by an unrealistically low price) will really have a hard time accepting steeply increasing pricing. They (the customers) will believe they are being gauged. I've seen it happen in several industries.

Good luck to all!

TransMach

 

[OCR]

X-Rated,

I have re-read my post several times now, and I'm quite confident that nothing I stated was based on emotion or anything of the sort. I even disclosed that while the city pairs on the XO web site indicate the $19K pricing is available for those pairs, that whether clients are actually receiving those prices is unknown to me.

Yes, this is a pricing war, and XO has taken a bold lead in the war. However, I do not believe that this is a sign of strength on their part. I think it is a desperation move based on the fact that they committed to so many airplanes when the market was strong that they now have to do something with them while they try and figure out how to get out of the mess they are in. If you really think they are not losing substantial amounts of money on this venture, why not ask Dave and Paul directly and see how they respond?

There are many companies that are not responding to the price wars that companies like XO are fighting. These would include EJM and Jet Aviation, who have simply accepted that their charter fleet will be flying less. This does not make them weaker competitors in my opinion, just smarter ones. Because both of them have plenty of cash to wait this out and don't need to resort to acts of desperation just to keep their planes flying.

And no, XO is not the only company fighting this price war. There are a number of companies now flying point to point at hourly rates that are below what we all used to charge for round trips. One of them is rumored to have just had several planes repossessed by the bank. These stories will just go down in the history books of more companies that thought they could make money by buying airplanes to charter out. It's not the first time we have seen this business model fail, and I'm sure it will not be the last.

Finally, without a doubt, pilot salaries have been falling. Gulfstream pilots who used to make over $120K a year are now fighting over jobs that pay $75K, and for every one that gets hired, there are five more still looking and not finding anything. XO is certainly not single handedly responsible for this, but the industry in general is being forced to reconsider how much they pay pilots based on the reduced profit margins they are being forced to accept in the current market.

 

[say again]

Not an XOJet fan OCR?!?!?!

 

[OCR]

It is not my intent for any of these comments to be of a personal nature, nor to in any way suggest that the fine people who work hard at XO are in any way doing something wrong. I'm glad to see that they are employing as many pilots as they are. The last thing we need are any more pink slips in this industry.

Our industry is going through some difficult times. XO is certainly not the only nor the main reason for this. Our industry has been hard hit by many issues, including bad press from Washington, a really tough economy, and a perception that our service is unnecessarily luxurious at a time when people are scaling back and spending less.

Our industry is reacting by lowering prices - a very natural thing to expect to happen as demand softens. The problem is when the prices drop so low that they are being offered at below their true, fully burdened cost, which forces other operators to operate at a loss to compete, or to drastically reduce their flying. While this may serve as a short term strategy, I believe in the long term it hurts all of us.

I was not a big fan of JetDirect either. The concept of one company gobbling up so many management contracts seemed to be generally bad for the industry, and for the many regional operators that work hard to do a good job servicing local clients. As we watch JetDirect crater, we should all learn a lesson on what happens when a lot of money is thrown at a business plan that is not sound.

I just hope that the economy turns around before it gets to the point where the industry sustains so much damage that it can not fully recover.

 

[X-rated]

There are many companies that are not responding to the price wars that companies like XO are fighting. These would include EJM and Jet Aviation, who have simply accepted that their charter fleet will be flying less. This does not make them weaker competitors in my opinion, just smarter ones. Because both of them have plenty of cash to wait this out and don't need to resort to acts of desperation just to keep their planes flying.

OCR,

I don't understand your "logic." How in the world is it "smarter" to keep the airplanes in the hangar and loose money by the truckload?

I'll use your numbers from your earlier post to illustrate a point since I have no idea what the real numbers are. You say an average transcon in the X is about 5 hours, and the DOC is about $2000 per hour. So according to your numbers, the direct cost to fly the airplane is about 10,000 dollars for a typical transcon. That leaves $9000 per leg to offset other fixed costs including that 83,000 dollar aircraft payment you mentioned. If we do 10 roundtrips (which is realistic since we will average very near 100 hours per crewed aircraft this month) at this bargain "loss leader" fare, we will have not only covered direct operating cost, but also generated an additional $180,000 to cover fixed costs. Your numbers say those are about $200K. Since this is our very lowest fare, according to your numbers, we have a legitimate shot of breaking even or making a small profit in a terrible economy.

You say EJM and Jet Aviation is smarter to leave their aircraft sitting in the hangar, but they have the same fixed costs we do. So, if we're breaking even or almost breaking even, and they're loosing two hundred thousand dollars per month per airplane, I think I would prefer to remain as dumb as rock in your estimation.

Finally, without a doubt, pilot salaries have been falling. Gulfstream pilots who used to make over $120K a year are now fighting over jobs that pay $75K, and for every one that gets hired, there are five more still looking and not finding anything. XO is certainly not single handedly responsible for this, but the industry in general is being forced to reconsider how much they pay pilots based on the reduced profit margins they are being forced to accept in the current market.

Again back to the above example, who has the better profit margin if XO is breaking even, and EJM and Jet Aviation loosing 200K per month per airplane?

You're right, XOJET is not responsible for the recession, or the current state of business aviation. We're just doing better than some at surviving it. Again, our pilots are among the best paid in the industry, so stop putting that falling salary crap on us. It has nothing to do with us! The industry is in free fall and we are holding our own. I hope your company can do the same.

X.

 

[rice]

OCR,

I don't understand your "logic." How in the world is it "smarter" to keep the airplanes in the hangar and loose money by the truckload?

I'll use your numbers from your earlier post to illustrate a point since I have no idea what the real numbers are. You say an average transcon in the X is about 5 hours, and the DOC is about $2000 per hour. So according to your numbers, the direct cost to fly the airplane is about 10,000 dollars for a typical transcon. That leaves $9000 per leg to offset other fixed costs including that 83,000 dollar aircraft payment you mentioned. If we do 10 roundtrips (which is realistic since we will average very near 100 hours per crewed aircraft this month) at this bargain "loss leader" fare, we will have not only covered direct operating cost, but also generated an additional $180,000 to cover fixed costs. Your numbers say those are about $200K. Since this is our very lowest fare, according to your numbers, we have a legitimate shot of breaking even or making a small profit in a terrible economy.

You say EJM and Jet Aviation is smarter to leave their aircraft sitting in the hangar, but they have the same fixed costs we do. So, if we're breaking even or almost breaking even, and they're loosing two hundred thousand dollars per month per airplane, I think I would prefer to remain as dumb as rock in your estimation.




Again back to the above example, who has the better profit margin if XO is breaking even, and EJM and Jet Aviation loosing 200K per month per airplane?
You're right, XOJET is not responsible for the recession, or the current state of business aviation. We're just doing better than some at surviving it. Again, our pilots are among the best paid in the industry, so stop putting that falling salary crap on us. It has nothing to do with us! The industry is in free fall and we are holding our own. I hope your company can do the same.

X.

Uh, neither EJM or Jet Aviation own the aircraft they utilize for charter revenue. The planes are owned by other entities. Therefore your argument about losing $200k per plane are moot. Very few charter companies actually own/lease (in the traditional sense) the aircraft they fly in revenue service. It has been proven time and again that charter demand does not produce enough revenue on an annual basis to support the debt load on a typical business aircraft. Just thought I'd point that out.

 

[TheSulaco]

I do know for a fact that EJM is chartering similar flights for quite a bit less than what XO is advertising.