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JBLU and SWA to offer fewer discount seats & JBLU to add 8 cities in 2006

lowecur

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To offset rising fuel prices, JBLU will cut the number of discount seats it offers. Well it sounds like "first come first serve" is the phrase of the day. Jetblue will find out quickly just how loyal customers are if they can buy tickets on competing carriers for less. We'll see how the LF's pan out in the next few months.

They will be adding up to 8 new cities in 06. I'm sure most will be 190 cities, but you could see a couple of 320 cities in the mix. I'm not a big fan of using the 190 on Shuttle routes. These routes are low margin high volume at best. The 190's should be used on longer routes between JFK/BOS/IAD and smaller cities in the Midwest and West. This is what the 190 was designed for, and it's where the high margins are king.

Airlines Hope to Begin Ascent in '06


[SIZE=-1]By Keith L. Alexander
Washington Post Staff Writer
Friday, January 6, 2006; D01
[/SIZE]
Airline executives and industry watchers expect 2006 to be a better year for the nation's carriers thanks largely to drastic cost-cutting, decreases in fuel prices, higher ticket prices and additional service fees.

The airline industry is expected to post losses of $9 billion to $10 billion for 2005, said John Heimlich, economist for the Air Transport Association. This year, the industry believes it will significantly cut those losses to $1 billion to $2 billion. The reduction, Heimlich said, could help transition the industry into the black in 2007, which could be the first profitable year since 2000.

But that projection rides largely on fuel prices, the industry's second-biggest cost after labor (though fuel eclipsed labor as the No. 1 cost for some carriers in 2005). Last year, fuel prices averaged $72.32 per barrel, up from $50.72 in 2004. This year, fuel prices are expected to average about $70 a barrel. A $2 change in fuel prices could mean billions of dollars in losses or savings depending on the direction of the fluctuation.

"There's some clear improvement in the revenue environment, and I haven't seen that for a long time," Heimlich said. "But the revenue is still bad enough, and so much debt has to be repaid, that carriers and workforces see the need to cut non-fuel costs where they can."

Some of those cuts came as a result of major slashes in workers' job, pay and benefits, in and out of Chapter 11 bankruptcy court.

Many industry watchers expect more airline mergers this year in response to the merger of America West and US Airways last fall. The most likely combination, analysts said, is Continental and United. At an investors conference in New York last month, Jeff Misner, Continental's chief financial officer, said that although the airline preferred to remain independent, a deal with United would create a "knock-'em dead combination." Continental spokesman David Messing reiterated yesterday that the airline would "prefer to remain independent." United spokeswoman Jean Medina said United was more focused on "restructuring" and "competing with the strongest carriers."
At least two airlines are expected to face greater financial challenges this year. Southwest Airlines, which has reported an annual profit for the past 32 years, is facing increased pressure this year because of fuel and labor costs.
Last year, Southwest was able to hedge 80 percent of its fuel prices at $26 a barrel, said airline analyst Ray Neidl of Calyon Securities Inc. This year, only 70 percent of Southwest's fuel is hedged at $36 a barrel. Financially stable airlines are able to off set the effect of fuel-price increases by hedging, or locking in low prices for future deliveries.

In addition to its fuel concerns, Southwest's contract with its pilots becomes amendable in September.

JetBlue Airways is also expecting higher fuel bills this year because it has lower hedges compared with last year. "We're certainly not going to have the income statement on the hedges . . . in 2006 that we had in 2005," said John Owen, JetBlue's chief financial officer.

To offset the higher fuel prices, airlines such as JetBlue make fewer discounted seats available on flights.

By limiting the number of cheap seats, the airlines are able to avoid raising fares, especially on highly competitive routes.

Other airlines could follow JetBlue's lead, particularly in the Washington area, which yesterday lost Dulles-based Independence Air and its discounted flights.

The airlines are looking at other ways to reduce costs, attract customers and boost revenue this year that will have a more direct impact on travelers. For example:
American Airlines

This month, American's regional carrier, American Eagle, begins charging $1 for a soda on flights out of Los Angeles as part of its newest revenue enhancement test. American, the nation's No. 1 carrier, is also considering charging for snacks, pillows and blankets. The new traveler charges are related to the vigorous cost-cutting moves by American's parent, AMR Group.
United Air Lines

United, the nation's No. 2 carrier, is focusing on expanding internationally as well as on growing its low-cost U.S. subsidiary, Ted. The airline also plans to spend about $400 million on new airport check-in kiosk machines, updating its computer systems and refurbishing its aircraft interiors. United has begun charging passengers $2 for each checked bag at its major hub airports including Washington's Dulles International, Chicago O'Hare and Denver International.
Delta Air Lines

No. 3 Delta has shuttered its two-year-old, low-fare Song subsidiary and is cutting operations, for instance by closing two-thirds of its gates at Orlando International Airport where it once was the region's largest airline. In September, Delta filed for bankruptcy protection and asked for an additional six months to submit its reorganization plan. Delta's pilots agreed last month to a 14-percent temporary reduction in hourly pay and other cuts equal to 1 percent. The cuts will save the airline about $143 million and will be in place until the pilots vote on a permanent agreement in March.
Northwest Airlines

Northwest, which also filed for bankruptcy protection in September, plans to launch a subsidiary carrier, tentatively called NewCo, in 2007 to operate flights to smaller cities with 70- to 100-seat aircraft by 2010. But travelers may have to wait longer than that: The plan has faced increased opposition from Northwest pilots, who said the subsidiary could lead to the outsourcing of pilot jobs. This week, the airline's pilots and flight attendants both threatened to strike if the carrier is allowed to terminate its existing contracts.
Continental Airlines

The airline is expanding to more profitable international routes, such as to Latin American and Europe, where there is less competition, particularly from low-cost U. S. airlines. Continental Airlines has restructured its operations outside of bankruptcy court. The Houston-based carrier reached a tentative agreement with its flight attendants union that could save the carrier about $72 million per year. The membership will vote on the contract later this month. The airline had targeted $500 million in annual concessions from its workers.
JetBlue Airways

With 100 new Embraer 190 100-seat jets, the airline is planning to expand to as many as eight new destinations this year, JetBlue's Owen said. The airline is also considering adding more longer-haul flights, trips of about 2,000 miles, that could connect the East Coast to many Midwestern destinations. Yesterday, the airline announced $25 one-way fares for flights between Dulles and Boston's Logan International Airport for tickets purchased by Tuesday, for travel to be completed by Feb. 15.
Southwest Airlines

The nation's largest low-cost carrier continues to expand its route network. Southwest began service out of Denver this month, its third new destination in eight months. Analysts also expect Southwest to have more pricing power out of Baltimore-Washington International Thurgood Marshall Airport because of the demise of Independence Air. In an effort to sell more seats, Southwest next month will join the majority of the airline industry by restricting the number of free seats it offers on each flight for redemption by members of its frequent-flier program. But frequent fliers will now have two years -- instead of one year -- to use their flight credits before they expire.
US Airways

After merging with America West last fall, the now-Tempe, Ariz.-based US Airways Group Inc. will spend the year trying to integrate both airlines' operations. The airline is focusing on combining the two reservation systems and Web sites by early 2007. Meanwhile, the airline has lowered its prices in key markets. The airline last month cut its prices on its shuttle between New York and Washington's Reagan National Airport by 44 percent on tickets purchased 21 days in advance. Yesterday, the airline cut fares to nearly 20 destinations by as much as 60 percent primarily on routes out of its three hub airports in Pittsburgh, Philadelphia and Charlotte.
© 2006 The Washington Post Company​
 

Vingus

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Great news for everyone! Let's keep those ticket prices coming up across the board and start making some cash....
 

FlyBoeingJets

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lowecur said:
.

I'm not a big fan of using the 190 on Shuttle routes. These routes are low margin high volume at best. The 190's should be used on longer routes between JFK/BOS/IAD and smaller cities in the Midwest and West. This is what the 190 was designed for, and it's where the high margins are king.

Depends. Who is the competition on said routes? The 190 will work well against smaller RJ's ;) on any length route.

Generally, smaller airplanes do better on shorter routes.
 

8vATE

Cruel, Nice, Whatever
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Vingus said:
Great news for everyone! Let's keep those ticket prices coming up across the board and start making some cash....



WHEN will you guys who chant "raise fares, raise fares" understand that by raising fares you lead to less demand?

Those airlines losing money will have to further reduce capacity...

Raising fares is not a "perfect" solution......
 

DH2WN

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8vATE said:
WHEN will you guys who chant "raise fares, raise fares" understand that by raising fares you lead to less demand?

Those airlines losing money will have to further reduce capacity...

Raising fares is not a "perfect" solution......


Reduction in capacity is exactly what this industry needs. If the govt. hadn't been screwing us taxpayers by proping up failing airlines this would have happened long ago.
 

Vingus

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Give me a break, dude. Stop talking out both sides of your mouth...You just can't make some guys happy no matter what!
 

DTW320

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The 190's should be used on longer routes between JFK/BOS/IAD and smaller cities in the Midwest and West. This is what the 190 was designed for, and it's where the high margins are king.
JetBlue Offers $25(a, c) Each Way Between Washington, DC and Boston
Friday January 6, 5:00 am ET
Special Fare Introduced to Assist Independence Air Customers
NEW YORK, Jan. 6, 2006 (PRIMEZONE) -- JetBlue Airways (NasdaqNM:JBLU - News) today offers $25(a, c) fares between Washington, DC (Dulles) and Boston, MA, in order to further assist customers affected by the cessation of Independence Air service, which had operated five daily flights. JetBlue begins nonstop service between Washington, DC (Dulles) and Boston on Jan. 17, 2006 with up to six daily flights.
``At JetBlue, reliability is just as important as low fares and so is getting more for less,'' said JetBlue CEO David Neeleman. ``As the only low-fare airline between Washington Dulles and Boston, we're pleased to welcome customers previously booked on Independence with this special fare. Customers on all JetBlue flights, including between Dulles and Boston, will enjoy our award-winning service and great amenities, 36 channels of DIRECTV programming and more than 100 channels of XM Satellite Radio.''
JetBlue's special $25(a, c) fare is available for purchase through Jan. 10, for travel through Feb. 15. A seven-day advance purchase is required. In addition, JetBlue is offering a Winter Clearance sale for travel through April 4 with fares starting as low as $40(b, c) each way.
 

lowecur

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FlyBoeingJets said:
Depends. Who is the competition on said routes? The 190 will work well against smaller RJ's ;) on any length route.

Generally, smaller airplanes do better on shorter routes.
Yes they will, but the shorter routes on the East Coast require lots of frequency and gate space in JFK, BOS, and IAD. JFK will be restricted until the new terminal opens in 3 yrs. My guess is they will try and keep CASM low until that happens and fly the 190 on longer routes. Their options are 6 or 7 cities in TX, OK, NE, and NM with 1 to 2 flts per day to major markets on the East Coast. Their other option is to open up LAS big time with n/s flts from smaller cities within range from the East.
 
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JetBlue's Growing Old Fast
http://www.thestreet.com/tsc/c.gif
By Ted Reed
TheStreet.com Staff Reporter
1/6/2006 7:04 AM EST
Click here for more stories by Ted Reed

For a young, enthusiastic, fast-growing leader of the low-cost carriers that now dominate the airline industry, almost nothing could be worse than maturity.

Yet JetBlue Airways (JBLU:Nasdaq - commentary - research - Cramer's Take), which began flying in February 2000, is growing old before our eyes.

The carrier's stock is trading about 5% below its 2005 close, thanks largely to start-of-the-year downgrades by analysts at Merrill Lynch and Raymond James. Both said the stock price has gotten ahead of where it should be.
A key reason, said Merrill Lynch, which has a banking relationship with JetBlue, is that "the company may be experiencing growing pains (that include) rising costs related to the maturation of the company."

The problems with maturation in the airline industry are multiple. The cost of labor goes up as workers become more senior. Route expansion often progresses from the most desirable routes to less desirable ones, and maintenance costs can increase precipitously as aircraft require their first heavy maintenance checks after operating for several years.

Vivian Lee, an aviation analyst for Alliance Capital, which doesn't hold JetBlue stock, says that all new airlines start out with a "maintenance vacation" from the hefty checks that can cost a few million dollars per aircraft. A vacation's impact can be prolonged by rapid growth, because high maintenance costs would initially affect a relatively small percentage of an evolving airline's fleet. But eventually, all vacations must come to an end.
JetBlue is burdened with all the phenomena of aging at the same time as fuel costs have risen and competition has stiffened. In the third quarter, as operating expenses rose 46.1% from the same quarter a year earlier, operating income declined to $13.8 million, down 38.4%. Net income of $2.7 million came about largely from a tax-accounting benefit of $6.4 million, a result of reduced tax expectations since the company no longer believes it will make a profit this year.

"I would argue that JetBlue actually lost money in the third quarter," said Lee. CEO David Neeleman called the quarter difficult, as a result of high fuel costs, bad weather and tough competition. The airline said it would report a loss for the fourth quarter and the year. Rising maintenance costs are likely to increase the burden on the company, which operates a fleet of 85 Airbus A320 jets. Heavy maintenance requirements begin after several years of operation, with the exact interlude determined by the usage of the airplane.

In fact, in the third quarter JetBlue's maintenance costs rose to $19.8 million, up 72% from the same period a year earlier. That followed a full-year 2004 increase of 94% to $44.9 million. The airline took delivery of 10 jets in 2000, 11 in 2001, and 16 for each of the past four years. In 2005, it also received its first seven Embraer 190s, a second aircraft type that it plans to deploy in markets too small for A320 service.

JetBlue has warned repeatedly that aircraft maintenance outlays will rise. "Our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our operating expenses, as our fleet ages and (our) warranties expire," the company said in its 2004 annual report. But investors may not have been listening.

JetBlue should have been a Wall Street darling for many years after it went public, says analyst Lee. Instead, she said, "it is looking more like a legacy carrier and less like Southwest Airlines far faster than most would have imagined at its IPO only three and a half years ago."
 

A350

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Ted Reed is the Geraldo of the airline reporter world......

A350
 
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