lowecur
Well-known member
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- Sep 14, 2003
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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.
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