JBLU's take on Ted

[F9 Driver]

http://www.denverpost.com/Stories/0,1413,36%7E33%7E1874560,00.html

Article Published: Wednesday, January 07, 2004

JetBlue buzzes Ted's tower
Late Boston flight targets new airline

By Louis Aguilar
Denver Post Business Writer

JetBlue chief executive David Neeleman took a swipe Tuesday at United's low-cost carrier Ted as he hyped a new red-eye nonstop flight from Denver to Boston that launches today.

JetBlue's introductory price of $158 round-trip is a "fare to shock people into action," Neeleman said during a phone interview.

The New York-based carrier will fly daily out of Denver International Airport at 11:55 p.m. Mountain time, arriving at 5:35 a.m. Eastern time. Its ticket price is $235 cheaper than its nearest competitor - a walk-up fare on a nondirect America West afternoon flight, which connects through Phoenix.

For 21-day advance purchases, JetBlue's offer was $55 cheaper than an ATA nondirect flight, the lowest advance purchase fare posted on websites Tuesday.

JetBlue said its $158 fare is good for travel through Feb. 10, and tickets must be purchased by Jan. 31.

JetBlue's only other flight from Denver flies to New York City and also is a red-eye.

In a wide-ranging interview Tuesday, Neeleman said he thought Ted's "walk-up" offerings were overpriced. He said efforts by major carriers to launch low-fare units, such as Ted and Delta Air Lines' Song, are not moneymakers.

"They don't structurally change their costs at all," Neeleman said.

"They put a new coat of paint on. And try and smile a little more often. Maybe put a little in-flight entertainment onboard. They haven't really changed anything. It depends, if they want ... to lose money, then they will keep them around. But you have to give United credit for trying something," he said.

"We haven't released information on our structural costs" for Ted, which begins offering service in February and March, said United spokesman Jeff Green. Among its flights, Ted will serve 10 cities from its hub in Denver.

"Our structural costs are very competitive with low-cost carriers," Green said.

Neeleman said JetBlue will announce a plan today to offer satellite radio and pay-per-view movies on its flights.

Through a deal with News Corp's Fox entertainment group, JetBlue will offer passengers two pay-per-view movie channels. One channel will offer classic films and television shows, and another will offer a variety of current movies.

"We signed a deal with XM Satellite Radio to add a hundred audio channels. We will have about 140 channels of audio and video that we can offer," Neeleman said.

"We live in a day and age where we are used to being stimulated on the ground. There is no reason we can't have that while flying," he said.

 

[FDJ2]

RESEARCH ALERT-J.P. Morgan lowers JetBlue estimates
12:00 p.m. 01/08/2004 Provided by


NEW YORK, Jan 8 (Reuters) - J.P. Morgan on Thursday said it reduced its estimate for JetBlue Airways Corp. (JBLU), saying it no longer believes in the low-cost carrier's ability to increase earnings in 2004.

Shares of JetBlue fell $2.12, or 7.33 percent, to $26.80, as the Nasdaq opened on Thursday.

J.P. Morgan analyst Jamie Baker reduced his estimates from 99 cents a share to 84 cents a share for 2004 and from $1.25 a share to $1.10 per share for 2005, and said he expects negative growth over the next nine months.

Baker, who continues to rate the stock "underweight" despite its 38 percent drop since October, said the competitive capacity in JetBlue markets is expected to rise between 12 percent and 16 percent over the next two quarters, excluding the airline's own operations.

The analyst's note comes one day after American Airlines said it will offer a free-trip promotion to passengers it serves in some markets that are also key to the expansion of JetBlue.

AMR Corp. (AMR), parent company of American Airlines, is one of several companies planning a 25 percent capacity growth in Boston, where JetBlue began operating on Wednesday, Baker said.

 

[General Lee]

AA's CEO Arpy is now going to fight---watch out Neeleman.

RPT-JetBlue stock falls after estimate cut, traffic figures
Thursday January 8, 12:31 pm ET


(Recasts, adds details)
NEW YORK, Jan 8 (Reuters) - Shares of JetBlue Airways Corp. (NasdaqNM:JBLU - News) tumbled more than 8 percent on Thursday, as an analyst reduced his earnings estimates and as the low-fare carrier released data showing that it filled a smaller percentage of seats last month.

J.P. Morgan analyst Jamie Baker said he no longer believes in New York-based JetBlue's ability to increase earnings in 2004, as the company faces increasing competition from its rivals at a time when most airlines are struggling to stay afloat.

Shares of JetBlue were off $2.33, or 8.06 percent, to $26.59 in midday trading on the Nasdaq. They fell as low as $26.15 at one point.

Baker reduced his earnings estimates from 99 cents a share to 84 cents a share for 2004 and from $1.25 a share to $1.10 per share for 2005 and said he expects earnings to fall over the next nine months.

The research note comes amid a tough streak for the airline, which issued an earnings warning in December, causing its stock to post its largest-ever one-day percentage loss.

New York-based JetBlue said last month that lower air fares and the recent California wildfires would push its fourth-quarter operating margin down to between 13 and 14 percent, compared with the 15 to 17 percent it had previously projected.

In the third quarter, JetBlue's margins hit nearly 20 percent, a level almost unheard of in the struggling U.S. airline industry.

Baker, who continues to rate the stock "underweight" despite its 38 percent drop since October, said the competitive capacity in JetBlue markets is expected to rise between 12 percent and 16 percent over the next two quarters, excluding the airline's own operations.

Capacity additions have been causing lower average fares, particularly in Western markets, JetBlue's chief executive said in a statement last month.

The analyst's note came one day after American Airlines said it would offer a free-trip promotion to passengers it serves in some markets that are also key to the expansion of JetBlue.

AMR Corp. (NYSE:AMR - News), parent company of American Airlines, is one of several companies planning 25 percent capacity growth in Boston, where JetBlue began operating on Wednesday, Baker said.

The airline plans to increase its own capacity by 37 percent in 2004, but it will still be outdone by increased capacity from competitors, Baker said.

Separately, JetBlue said December traffic, measured in revenue passenger miles, rose 43.6 percent over the year before on a 48.2 percent increase in capacity. Its load factor, or the percentage of seats filled on its planes, fell to 82.2 percent from 84.9 percent in the same period a year before.


Bye Bye--General Lee

 

[AKAAB]

J.P. Morgan=AMR

J.P Morgan once again shows its true nature by manipulating the market. They dumped a ton of shares after the IPO and have never been friendly or fair towards JetBlue since. Isn't it amazing how well-timed the downgrade is...immediately on the heels of a successful launch of a new destination and in step with AMR's desparate attempt at retaliation. We take a bold step forward and they try to knock us back two. How much do you think JPM has invested in AMR or UAL?

Remember, also, that the stock price in the short term has virtually nothing to do with performance and profits. The price of stock moves only on what someone will pay for it or what someone wants for it when they sell. Now, in the long term, which is what I'm looking at, financial performance equals increased stock performance.

If you think my life at JetBlue revolves around stock options, then you are making a very bad assumption. I love the company, the culture, and will continue to remind everyone to keep the JetBlue Experience at its highest level. We are making PROFITS! Naysay all you want, backstab, snipe and spew vitriol, but the fact remains that we are doing better than anyone predicted four years ago, and will continue to improve as we move forward.

AKAAB

 

[skykid]

Neeleman's assessment of Ted is both arrogant and inacurate.

 

[enigma]

Re: J.P. Morgan=AMR

Remember, also, that the stock price in the short term has virtually nothing to do with performance and profits. The price of stock moves only on what someone will pay for it or what someone wants for it when they sell.
AKAAB

Dittos.

 

[dgs]

Neeleman's assessment of Ted is both arrogant and inacurate.

That's an easy statement to make, but let's see how you back it up. Please enlighten us as to how Ted will be better than mainline United. The United employees I've spoken with have scoffed at the idea that Ted will do much for their company.

Please don't get me wrong, I don't wish United any ill will. I have friends who work there and I don't want to see them or anybody else lose their jobs. I think doing something (e.g. Ted or Song) is better than doing nothing and hoping for new results. The point is that it will take more drastic measures than repainting aircraft to turn the airline around. Meanwhile, it will be very difficult for them to compete directly with jetBlue. IMHO, they should be more concerned about improving the overall quality of their product while reducing costs for ALL of their operation, not just part of it.

 

[Mr Hat]

Neeleman's assessment of Ted is both arrogant and inacurate.

You've got to be kidding me. How successful was United Shuttle against SWA? What makes this new lame attempt any different. I think Neelemans assesment of Ted was flawless. Painting airplanes and being "zany" doesnt make your airline profitable. Some folk just dont get it I guess.

 

[Boeingman]

You've got to be kidding me. How successful was United Shuttle against SWA? What makes this new lame attempt any different. I think Neelemans assesment of Ted was flawless. Painting airplanes and being "zany" doesnt make your airline profitable. Some folk just dont get it I guess.

Quiet down there. Don't shatter the illusion about this brilliant marketing plan. Some of the Brain Surgeons on this board are going to be really upset when told otherwise.

 

[skykid]

From dgs:

they should be more concerned about improving the overall quality of their product while reducing costs for ALL of their operation, not just part of it.

dgs, you are exactly right and that is what UAL has done. That is my point. Ted is such a minor part of the restructuring, and I think it is smart to change the product around. Improving quality - don't take my word to "back it up" - look at the government stats for on time arrivals, complaints, and % of cancellations for the last 2 years and see from a neutral source how the product has improved. Reducing costs -12 million/day is not a bad start. United IS a LCC. The last thing I wanted to see is guys flying Ted - the LCO - making less than the huge pay cuts we already took. Just wasn't necessary. And you can't give away more work rules. The FAA wont let you.

Mr. Hat, you can't compare United Shuttle to anything going on there today. I flew the Shuttle. In Dec of 1999, I know a guy who worked a couple of days for the month and with vacation override got paid about $10000 as a FO. Wasn't me of course. United had to have about 16 pilots/plane vs SWAs approx 11 because of our work rules. I'm only addressing the flight ops stuff here, but I promise the other departments were not exactly lean and mean either. They are now.

Boeingman, see how I used some facts to make arguements w/o calling names and also respecting the other persons point of view?

 

[dgs]

skykid -- I've recently flown United several times and so have members of my family. The experience was horrible. You focused on the latter half of my sentence about reducing costs, when the real point is that the quality of the product needs to improve from a customer service viewpoint. The difference in how customers are treated at United vs. many other airlines is very noticeable. For most people customer satisfaction with product quality is more about customer service than on time performance, cancellation rates, or other metrics. Of course, if you are affected by those things you will have a negative experience. On the other hand, if you were yelled at by gate agents and flight attendants in an attempt to get the flight out on time, you may not be pleased with the overall experience. (I'm not saying that is what happens, I'm simply using that as an illustration.)

United may have cut costs, but if they apply the same costs to Ted, how will it make money if mainline can't make money even at their reduced costs?

 

[skykid]

dgs, how do you know United mainline can't make money even at their reduced costs? Seriously, I'd like to know how you know that. I know that Ch11 is an incredibly expensive endeavor and you can use the same projections that the 2 largest banks in North America used before pledging the exit financing to predict future profits. What you can't do is say - here is the cost structure and balance sheet in CH11 on Jan 9, and it will be exactly the same next Summer with all the same factors. Have you seen the expenses that have been over 100mil/month due to reorganization? Do you think a company in CH11 wants to show a profit?

I'm sorry you had a bad experience on United. Despite that, # of complaints per thousand are going down at United and intent to repurchase is at all time highs. I fly on other carriers too, and alot on discount carriers. I've had bad experiences now and again with everybody, including your agents and flight atendants - very recently in fact. I'd say Airtran has the best service I've seen, but that is just as subjective as your opinion. Take care!

 

[G4G5]

Re: J.P. Morgan=AMR

J.P Morgan once again shows its true nature by manipulating the market. They dumped a ton of shares after the IPO and have never been friendly or fair towards JetBlue since. Isn't it amazing how well-timed the downgrade is...immediately on the heels of a successful launch of a new destination and in step with AMR's desparate attempt at retaliation. We take a bold step forward and they try to knock us back two. How much do you think JPM has invested in AMR or UAL?

AKAAB

I don't believe that JPMorgan Chase has all that much invested in AMR. From what I recall, Lord Abbott is the largest investor in AMR.

But. You are correct in what you say. I found it very funny that JP dummped their B6 stock. Then I get a letter in the mail a few weeks later stating that all my AA 401K money had been transfered to JPMorgan to manage. Coincidence, I think not.

 

[WhiteCloud]

It's all about marketing and appreance. TED is a stupid name and will be gone within the year.

 

[dgs]

skykid -- I was simply using the fact that United is hemmoraging money daily as evidence that they can't make money at reduced costs. That's not to say that they couldn't eventually... like if thousands of business travelers suddenly showed up willing to pay $1,000-2,000 per flight. Anything is possible, but I was remarking about current losses--that's all.

 

[skykid]

dgs, understood. It may be more complicated than you think. Ual hemmoraged itself from 1.2 billion in cash to 2.6 billion in cash last year.

 

[T-Bags]

skykid -- I was simply using the fact that United is hemmoraging money daily as evidence that they can't make money at reduced costs. That's not to say that they couldn't eventually... like if thousands of business travelers suddenly showed up willing to pay $1,000-2,000 per flight. Anything is possible, but I was remarking about current losses--that's all.

Do you guys ever bother to check a fact or two?

October 2003

“Operating profit for the month was $60 million. This is an improvement of about $300 million compared to October one year ago. Positive cash flow during the month was $7 million per day,”



November 2003

"United's turnaround remains on track. Even with the seasonal downturn in November, cash flow was positive and remained strong at more than $2 million per day," said Jake Brace, United's executive vice president and chief financial officer. "Systemwide passenger unit revenue improvement continued to outpace the industry, and the company increased its cash balance to $2.6 billion.

December numbers coming soon…..

 

[FlyBoeingJets]

Neeleman's assessment of Ted is both arrogant and inacurate.

Boy I love this forum, much good info and opinion on this subject (no sarcasm)

Neeleman's efforts are an attempt to short circuit the success that Ted may soon have. Neeleman is very bright and can see around corners. Otherwise he would ignore the threat, IMHO. He also wants to keep the focus on JetBlue at all times. Doesn't he have attention deficit? "Look at me, Look at me!!"

Ted's financials will be slow correct to savings coming on line so current losses may not be indicative of future performance.

I seriously worry about the pay and benefit spiral down at UAL and AA. It will hurt everyone else.

Don't let me sound like Lowcur, though. I think '04 will still belong to the LCCs.

 

[Astra Guy]

Fly,

I agree with you about the LCCs continuing to thrive in 04. There are a number of reasons for this. The legacy carriers, as they are called, have stepped on their lanyard, to coin an old military phrase. They were arrogant when economic times were good by charging some of the business passengers 10X what another pax might pay for the same leg, just because they booked a day before a flight. This whole multi-tier thing can lead to gouging and that is the way business passengers viewed it and they have not forgotten.

Some of the legacy types have lousy customer service, primarily because the employees are under pressure to accept wage cuts. Excelling in the customer service area is what builds brand loyalty. The LCCs have figured that out and they tend to excel in this area. The legacy types need to get a handle on this so they can regain traveler loyalty, once again.

Having an in-house travel agency helps our folks out. The agency is paid incentives to shop the market to get the best possible rate for a given itinerary. Gone are the days when a VP will be able to justify paying twice the min rate just because he is enrolled in a frequent flyer program.

Supply and demand drives the train. Let's face it, what the carriers are selling is a commodity. Travel from point a to point b. That is it. What seperates your carrier from others?

As the economy improves in 04, barring another terrible event like 9/11, the business traveler will not come back in droves. Most businesses have figured out ways to do more with less. Part of that "less" is travel. Travel budgets are one of the first things to downsize during tough bottom line times. They are also one of the last things to upsize during blossoming economic times.

Bottom line is that each and every carrier needs to intensely focus on what it will take to build brand loyalty. Great customer service is something that each traveler will remember. Whether a pilot rolls the tires on or lands firmly probably would not be retained in the memory bank. Being given a full can of coke vs 1/3 can be retained in one's memory bank, as well.

You all figure it out. Once you do times might be much better for your company, your career and your pay rates.

 

[dgs]

The facts

T-Bags -- "Do you guys ever bother to check a fact or two?"

A few months ago I had heard the number was losses of about $7M per day, but I could not confirm the number until today. Here is a qoute from a report on the EOY results:

"United Airlines (OTC BB: UALAQ) reported a 2003 fourth-quarter net loss of $476 million putting the total loss for all of 2003 at $2.8 billion."

http://denver.bizjournals.com/denver/stories/2004/01/26/daily29.html

I don't know where you come up with "Positive cash flow during the month was $7 million per day.” Please give us your source because it seems to be backwards from what the Denver Business Journal is reporting. How did they increase their cash on hand to $2.6B while losing $2.8B for the year? I'd like to understand and resolve the discrepancy.

As I understand the "turnaround," it means they are only losing $5.3M per day in the fourth quarter, vs. losing $7.7M per day average for the year. An improvement? Sure. But I still stand by my statement that "United is hemmoraging money daily."