JetBlue in the Contrails

[Traderd]

http://www.thestreet.com/_tscana/newsanalysis/transportation/10303138_3.html

A quote from Mike Boyd:

Aviation consultant Mike Boyd said JetBlue's problems stem primarily from the renewed capabilities of legacy airlines, which have raised ticket prices and seen record load factors, enabling them to overcome higher fuel costs. "It's harder and harder for low-cost carriers to find markets," he said. "The low-cost carrier model is not dead, but it is petering out."

Really? I have thought of SWA as a low cost carrier and they don't seem to be "petering out" so maybe they aren't an LCC.

 

[lowecur]

Meanwhile, Jamie Baker of JPMorgan, which has provided banking services to JetBlue, has an underweight rating.

"There's no less profitable airline available at any higher price that we can find," he wrote in a research report, "leaving us increasingly perplexed as to why others are willing to overpay for long-term margin mediocrity."

That's the paragraph I like. I am hoping Wall St falls off the bandwagon in the next six months to the tune of reducing Jetblue's price down to a more justified $5 to $6 per share. Mediocre 3rd and 4th Q could propel the stock down to those levels. It will depend alot on institutions dumping their shares.

Is David Neeleman's tenure in trouble? The first half of 2007 will be his watermark. If results are not seen turning around, the BOD could vote him out. He is a control freak and sometimes gets in the way of decision making by committee.

They won out against other carriers bidding for the services of Martin St. George. St. George was the highly sought after exec from UAL. His genius will be used on route planning, but he also developed the highly successful "ps" service that has been one of the few generators of high yield at UAL.

I have said it before and I'll say it again, Jetblue needs to cap the deliveries of the 320. At worst they should begin substituting the 319 asap. Taking a page from UAL's "ps" service, they could use the 319s on transcons. Also, UALs economy plus could make it's way on some 190s in the future. These are all ideas that St. George will bring to the table at Jetblue.

imp:

 

[FlyBoeingJets]

During the past six years, JetBlue has followed a variety of strategies. First it planned to use 156-seat Airbus A320s to fly between New York's Kennedy Airport and roughly 40 eastern U.S. cities. Then it began focusing on flying from Kennedy to Florida and the West Coast. Then it decided to renew its focus on the eastern cities, but with 100-seat Embraer E190 aircraft...

Snyder noted that JetBlue expects to achieve an operating margin of 2% to 4% this year, compared with 5.4% in 2005 and 19% in 2003.

I know its been a couple of months, but your tune has changed very quickly lowecur. I don't think the airline biz even changes that quickly.

Snyder thinks JetBlue will be profitable this year. That is much better than NWA or DAL can expect....even with (because of??) breathtaking fleet reductions from NWA and DAL. With fleet growth from JetBlue, SWA, UAL and Airtran the domestic market is still looking at an overall fleet reduction of 1% this year. Hardly bad news for JetBlue.

But I think all airline shares are likely to go down if passenger demand slackens like some believe it will.

Don't you think JetBlue will be able to command a premium over competitors fares?? Or do you think International will give legacies a cushion to dump seats below cost?

Who is going to cause JetBlue the pain you think they will feel? AA?? USAir??

I think UAL is the one likely to cause it.

 

[curtaindriver]

Lowecur, I don't doubt some of the troubles we have ahead. I do however think it is interesting how quickly "tunes" change when the Legacy carriers have 1 good quarter. Why do you think gettng 319's would be some saving grace? Why don't you research the cost difference if we were to bring those on. Just because of the couple of days they wouldn't have to tech-stop is hardly a reason to justify the expenditure. They have a higher CASM, and no up-side revenue potential of a full airplane. One less F/A is not a good enough reason. Also, "economy plus?" Have you flown on the 190, or even 320? We don't have a "regular" economy like the back of a United 737 or Airbus. We don't need it. I am surpised at your recommendations for JetBlue. I was hoping for some insightful route planning, or other revenue generating tactics, not these. Thanks for hoping the stock tanks.

CD

 

[lowecur]

I know its been a couple of months, but your tune has changed very quickly lowecur. I don't think the airline biz even changes that quickly. My tune has changed because of the strength from the legacys in the last Q.

Snyder thinks JetBlue will be profitable this year. That is much better than NWA or DAL can expect....even with (because of??) breathtaking fleet reductions from NWA and DAL. With fleet growth from JetBlue, SWA, UAL and Airtran the domestic market is still looking at an overall fleet reduction of 1% this year. Hardly bad news for JetBlue. All depends on where they put their assets. Martin St. George has a great reputation, but will Neeleman give him the room he needs to operate?.

But I think all airline shares are likely to go down if passenger demand slackens like some believe it will. Could be. Recent terrorist operations will certainly have an affect internationally, but it remains to be seen domestically. If international travel takes a hit of 10%, then the legacys will not have as much cash to go after Jetblue and other LCCs. The next two quarters will be telling for the legacys.

Don't you think JetBlue will be able to command a premium over competitors fares?? Somewhat, but people like to fly Jetblue when prices are the same not more. Or do you think International will give legacies a cushion to dump seats below cost? Jetblue just started N/S service from SYR to MCO. US Airways has undercut them pretty good on last minute travel($126. today vs Jetblue at $229 one-way). AirTran has a few flts from ROC/MCO and does not receive the same competition from US Airways. It remains to be seen if US Airways will be able to continue this with recent international difficulties. US Airways stock is down to around $36 from close to $50 in the last month.

Who is going to cause JetBlue the pain you think they will feel? AA?? USAir?? Everyone of them would like to see JetBlue disappear, so they all will contribute when they can.

I think UAL is the one likely to cause it.

UAL will start merger with CAL in the next 12 months, so Jetblue will have alot on it's plate once that is done.

imp:

 

[lowecur]

Lowecur, I don't doubt some of the troubles we have ahead. I do however think it is interesting how quickly "tunes" change when the Legacy carriers have 1 good quarter. It was an excellent quarter, but I believe RASM was driven by international and had help from probably only a couple of their hubs domestically. Why do you think gettng 319's would be some saving grace? The 319s are being used very successfully by US Airways and United on some transcon routes. They fit a nice niche between 100 and 156 seats(125-134). I even read where they are approved for 180 minute ETOPS, and are being used on some TransAtlantic flts on a limited basis (I think AC). Why don't you research the cost difference if we were to bring those on. Just because of the couple of days they wouldn't have to tech-stop is hardly a reason to justify the expenditure. What expenditure is that? They have options on the 320 to change them to 319s if they give Airbus the agreed to timeframe. They have a higher CASM, and no up-side revenue potential of a full airplane. Martin St. George could turn some of them into ps type a/c with 2X2 FC and BC amenities for transcon. One less F/A is not a good enough reason. Also, "economy plus?" Have you flown on the 190, or even 320? We don't have a "regular" economy like the back of a United 737 or Airbus. We don't need it. I am surpised at your recommendations for JetBlue. True, my mistake. Your regular service is better than anything they offer of economy plus. I was hoping for some insightful route planning, or other revenue generating tactics, not these. Thanks for hoping the stock tanks. It's just business Mike, noth'n personal. When you see AAI and ALK with a marketcap of around $1B and JBLU with $1.72B it makes you wonder. Plus AAI has close to the same amount of cash and none of the debt. ALK has over $1B in cash and little debt. Jetblue's marketshare makes no sense. Of course with SWA's future earnings prospects, neither does $12B!

CD

.....

imp:

 

[curtaindriver]

UAL will start merger with CAL in the next 12 months, so Jetblue will have alot on it's plate once that is done. (Lowecur)

I think this is a distinct possibility. I do believe it would benefit UAL and Continental (not the labor groups, however).

But, I also think this would actually help JetBlue and others trying to make plays for market share. The overlapping routes would be eliminated creating a smaller airline together than two separate airlines. This would help create synergy for both of the carriers, but essentially decrease capacity. Especially capacity domestically, which is what JetBlue would obviously desire.
CD

 

[curtaindriver]

Don't you think JetBlue will be able to command a premium over competitors fares?? Somewhat, but people like to fly Jetblue when prices are the same not more. Or do you think International will give legacies a cushion to dump seats below cost? Jetblue just started N/S service from SYR to MCO. US Airways has undercut them pretty good on last minute travel($126. today vs Jetblue at $229 one-way). AirTran has a few flts from ROC/MCO and does not receive the same competition from US Airways. It remains to be seen if US Airways will be able to continue this with recent international difficulties. US Airways stock is down to around $36 from close to $50 in the last month. (Lowecur)


Lowecur, not to keep picking on you.....but seriously. If you look at the prices for this market say Aug 22. USAirways and JetBlue both have $99 fares. Of course this only represents a few flights, and a few seats. The reason jetBlue's price is higher today is because the plane is full, this is a flight commanding a higher fare. Your comparison means simply our premium fare is being sold because the cheap seats are gone, USAirways either is giving seats away or does not have a full plane with strong fares. I think sometimes you like to use deceptive information, I know you are more intelligent than this.

CD

 

[Lampshade]

Why don't you guys make predictions (general estimations if you can't say a #) on the next 4 qtrs in respect to earnings and stock price and will see who is smarter? You go first Curtain Driver then lowecur.

 

[GogglesPisano]

I think a merger between the legacies will help all airlines through capacity reduction. Why do you think a UAL-CAL merger would specifically hurt JB, Lowecur?

 

[B6Driver]

Here goes one and I don't feel like I'm going out on a linb on this; JB makes money for the next 2 Qts and most likly the next four as long as long as there's no earth ending (read really big) events in the news over the same time frame.

 

[lowecur]

I think a merger between the legacies will help all airlines through capacity reduction. Why do you think a UAL-CAL merger would specifically hurt JB, Lowecur?

It all depends on how they structure it. Certainly there would be consolidation in many cities that should lead to a reduction in overall domestic capacity. The question is where will they consolidate, and who will it hurt the most.

US Airways has the financial where-with-all to keep the pressure on Jetblue on most of their routes. The big question will be whether International dollars will continue to support an already viable domestic network. The same should hold true with a UAL/CAL merger. It would be a huge force internationally, and if they do a good job consolidating domestically, they will be a mega-power to contend with. Jetblue's network structure could be in their crosshairs. We'll have to see how it plays out, if and when it happens.

imp:

 

[lowecur]

Here goes one and I don't feel like I'm going out on a linb on this; JB makes money for the next 2 Qts and most likly the next four as long as long as there's no earth ending (read really big) events in the news over the same time frame.

I agree. The real question will be their ability to grow RASMs and margins into the first half of 2007. Hoping the other carriers have problems has been at the head of Jetblue's expansion mantra the last 3 or 4 years. They will be refocusing on the original model with a few tweaks in the next 12 months. Hopefully, the debt doesn't weight them down.

imp:

 

[See AK]

JetBlue Returns To Galileo, Sabre GDSs

AUGUST 11, 2006 -- JetBlue Airways today returns to global distribution systems with the announcement of new five-year, full-content agreements with both Sabre and Galileo.

Through the agreements, JetBlue will display published fares and inventory in both GDSs. In light of increasingly favorable economics offered to carriers by distributors, JetBlue CEO David Neeleman last month during the carrier's second-quarter earnings call said it was in the "final stages of negotiations" with several global distribution systems.

JetBlue early last year weaned itself off GDS dependence when it left Sabre in favor of direct channels (BTNonline, Dec. 10, 2004). JetBlue in January 2000 began listing in Sabre, Galileo and Worldspan, one month before launching its first scheduled flight. Since that time, the airline reduced its GDS visibility by exiting Worldspan in November 2001 and Galileo in April 2002.

 

[lowecur]

Virgin America

It's interesting that Virgin America plans to run a Premium Service. First route to be San Francisco/JFK using 320s (they better hope the Jetstream calms down). UAL already does this, so does anyone think Martin St. George won't be lobbying for Jetblue to begin this type of service Coast to Coast? If the 320 will carry around 120 pax in a first class mode, it will probably reduce TOW considerably and very well might give it better transcon capability.

imp:

http://biz.yahoo.com/rb/060815/airlines_virginamerica.html?.v=3

 

[Booster]

lowecur

99% of the time a JB 320 with 140+ load can make it JFK to OAK without stopping and have fuel to go to an alternate. So if VA is going with @120 pax I wager they make it most of the time without a problem.

 

[JetFumes]

Rasm, casm, prasm,orga...Blah, Blah, Blah! I would hate to be Virgin America trying to start service in this environment. United is going to be all over that. If JetBlue keeps their pay rates from escalating, year 2008-2009 should be better for them once they get into the new terminal and all of these expensive projects are completed..

 

[shooter]

UAL will start merger with CAL in the next 12 months, so Jetblue will have alot on it's plate once that is done.

imp:

I see this UAL-CAL merger rumor popping up everywhere. If I remember correctly, prior to 9/11 there was a similar DAL-CAL rumor going around. And part of that rumor was that the structure of CAL has a poison pill to avoid any carrier from merging or acquiring CAL without approval from NWA. So the rumor reversed itself saying that although DAL was the driving force carrier, the transaction would be reversed so that CAL would acquire DAL as the dominant carrier while keeping DAL management.
Is this structure true? And if it still is true, do they (CAL) as the dominant carrier dictate policy over employees, unions (and anything else I am too tired to remember right now) even if it were driven by UAL?