jetblue reports small profit, loss for year

[8vATE]

JetBlue CEO says to cut capacity in 4th quarter

JetBlue spokeswoman Jenny Dervin said that even with the cuts relative to its prior plans, the airline would still see capacity growth of 24 to 26 percent in the period. The reduced flights will take the form of "surgical, day-of-week schedule reductions due to low demand/high fuel costs," she said

 

[SpeedBird]

Dizel, I should have explained myself better, but my point at the end of my last post is what's relevant to this discussion. Elastic demand has always been the achilles heal of a service business like ours. If an airline raises prices too high demand drops off because customers have other options to get where they are going. When the prices go up it will surely reduce the number of travelers, therefore capacity has to be reduced to accomodate that reduction in demand and still keep this industry solvent.

This is where my comments about BK come into play. Until very recently, these airlines have largely kept capacity in place to "protect" market share and management's inane "S Curve" theory alive. What United has been able to do for the last three years has been very damaging to this industry, but I understand why they are doing it...they want to survive! They are relieved from making lease payments and other related costs in order to reduce fares that designed to improve short-term cash flow only. Meanwhile airlines that are not in bankruptcy, are now forced to remove capacity because the high cost of fuel is not about to abate anytime soon. The strongest competitors are being squeezed by the weakest ones, because of loopholes in the existing bankruptcy laws, which turns the whole concept of the survival of the fittest on its head, and will be an overall negative to this business. We want the best managed, financially strongest airlines to move ahead and grow...not the other way around, but this is what is happening. I hate to be the bearer of bad news, but the status quo cannot continue and the removal of a couple of regional airlines will not be enough either.

While my explanation is simplistic for reasons of quick reading, it is nevertheless where the crux of the problem lives. Somebody big, who is not among the strongest existing competitors must go away or be significantly reduced in size, in order for the remaining entities to have the ability to survive and eventually prosper again. We have a major structural imbalance in our capacity/demand curve and where ticket prices need to be. Bottomline, where this efffects us most as pilots will be to limit our overal ability to find work or come back from a long-term furlough, while this imbalance works itself out over the next several years.

 

[skykid]

Speedbird, if you go back and look you will see that your example - United - has been as active as any airline in trying to raise prices the last several years. You seem to be a little perturbed that legacies are doing what is necessary to compete, including dropping compensation levels to roughly match the LCCs. What did you think was going to happen?

 

[SpeedBird]

Skykid, I'm not preturbed about United's actions. As I stated, I understand why they are doing it, but IMO its not in the best interest of this industry for an airline the size of United to remain in bankruptcy protection for over three years, while this industry burns through $30 billion in lost revenue over the last fours years. The LCCs are often highlighted as the source of the problem, but the facts just don't bear this out. If JetBlue never existed, United, Delta, NWA would still be bankruptcy today.

 

[G4G5]

The fare raising argument will not work until SWA is paying the same for fuel as JB, AA or UAL. Until then they have the power to set most domestic prices and the others are forced to match

 

[G4G5]

What a difference a week makes, last week everyone jumped down my shorts for even suggesting that Jetblue would cut capacity or cancel flights.

Folks it makes sence, to redepoly the asset to a market where you have a better chance of actually making money. I would expect to see more of this.

Last week I mentioned a loss and everyone was flaming me. It's not jetblues fault that fuel prices are so high. What I want to see is an increased trend in fuel hedging from more majors. SWA has shown he who controls the fuel prices controls the market.

 

[SpeedBird]

SWA is an example of a well managed, financially fit airline that is singularly able to use its financial strength to capitalize on a fuel hedging strategy. If that puts a weaker airline behind the competitive eight-ball so be it. However, when a poorly managed, financially weak carrier sucessfully subverts the process of chp 11 reorganization, then everybody loses. That is bad for the entire industry, not just the weak carriers who can't hedge. I remember when Pan Am was called the chosen instrument, irreplaceable as an a symbol of US superiority and unmatched in its worldwide service reach. Back then Delta was still flying the mail between Mississippi and Georgia. Just like people who are born, grow up and eventually die, this industry evolves and changes in the same way among those who compete within it. What we need to make sure is that the industry's long-term success isn't dorked up by those who can't change and evolve with the times.

 

[Blue Dude]

The fare raising argument will not work until SWA is paying the same for fuel as JB, AA or UAL. Until then they have the power to set most domestic prices and the others are forced to match

But SWA doesn't compete in a large number of markets. Large as they are, they aren't everywhere at once. Even then, they often don't set the bottom price. What they do is set the highest fare in the market lower than it was. This is made possible in part by their fuel hedges, but that's a relatively recent advantage. Why is it they've been the legacy boogeyman for a decade or two if it was just about hedges?

 

[AAflyer]

8vATE,

It was merely a point, since you decided to bash the legacies.( I also understand starting a market presence and price). In my original post I merely mentioned and should have said with less humor (maybe then you wouldn't have taken it so personally) that WE have ALL (except SWA) lost pricing control.

To the other poster, I agree. Right now AA is more concerned about the ticket prices that are about to come from DAL and NWA. Infact I am sure JB and Airtran are not relishing the thought of those tickets as well.

As I have said before. This stinks for everyone! I don't wish will upon JB or anyone. WAY TO MANY people nad families have suffered already.

I don't understand why you would wish a paycut upon myself? Does it make you feel better, do you think ALL the LEGACIES with a reduced payrate will help YOU attain a better payscale. Becareful what you wish for as it may have the opposite effect on what you want.

Dizel8, Thanks for the comments. It has been a rough road, and from the sounds of it. more concessions are coming. Most likely in the form of productivity. While I am not a Kool-Aid drinker I like others am proud of company and what we have accomplished. We are the last legacy not in or have filed for bankcruptcy.

8vATE, This concludes my conversation with you. You are not the enemy and neither am I. If you would like to bash my AArogant ways again I will leave you the last word.

AAflyer

Yea..

Thought you would like that.

The $25 fare is a short term introductory fare.
Neeleman said today that its for "shock" value and in fact lessens advertising expenses since it gets so much media exposure.

As far as "you're still well paid and have a pension." typical arrogant comment.

When the legacies were paying top dollar I don't recall you guys ever leading the industry. And I'm so happy you think a 5 year old airline should match AA's mature rates.

You should devote your free time to preparing for more givebacks.

 

[Blue Dude]

It says SO MUCH when the LCCs can not raise prices to cover fuel expenses. Let it be a lesson.

They did raise prices, something like 10% average ticket price. It just wasn't enough to cover a 50%+ increase in the cost of fuel.

 

[Blue Dude]

How can the company cut available seats if they are continuting to take delivery of airplanes???

How many seats a month are going to be added with currently scheduled deliveries?

It's a capacity "cut" in the same way that Congress "cuts" spending. If you plan to increase capacity in a market by 10%, but only increase it by 8%, it's considered a 2% cut. Even though it actually increased by 8%. He's saying the capacity increase in a few markets will be less than forecast, not that overall capacity will go down.

 

[AAflyer]

They did raise prices, something like 10% average ticket price. It just wasn't enough to cover a 50%+ increase in the cost of fuel.

American did as well. I think another poster misunderstood this statement. It was not a bash, merely a point that almost EVRYONE has lost pricing control!

As for the too funny remark, every year we hope for a tailwind, and every year a stronger headwind approaches. You have to laugh or you will cry.

AA

 

[AAflyer]

During the CC David Neeleman stated that "capacity cuts" would most likely occur in markets with higher daily frequencies, like JFK-FLL. This would serve a two-fold benefit allowing B6 to raise tickets prices in those markets and still keep LFs high, while at the same time taking the extra aircraft and deploying them into new markets. So expect to see more new cities announced in 2006 for both A320 & E190.

Perhaps the most distressing thing I heard in the CC was DN's comments about what B6 has paying for fuel since Oct 1st. He said the price has spiked up to an average price of $2.40/gal and now makes fuel the highest cost item for the airline at 31%. This is a universal impact on all airlines over the near term (put your SWA disclaimer here) and will frustrate further the plans for airlines currently in BK.

BTW AA, if you want to find the boogie man in this debate about why fares are "low", you'll be more credible to lay blame at the feet of the usual suspects hiding out in BK protection. Have you ever heard of the economic term called "elastic demand?"

Speedbird,

An important characteristic of demand is the relationship among market price, quantity demand and consumer expenditure. The nature of demand is such that a reduction in market price will usually lead to an increase in quantity demanded. Given that consumer expenditure is the product of these two variables, the effect of a price reduction will have an uncertain impact on this expenditure. In some cases a reduction in price will be more than offset by a large increase in quantity demanded -- a situation where demand is price sensitive or price elastic.

Yes, I do understand the above concept, it just seems MANY (legacies and LCCs) airlines can not find that fine line.

AA

 

[8vATE]

8vATE, As I have said before. This stinks for everyone! I don't wish will upon JB or anyone. WAY TO MANY people nad families have suffered already.

I don't understand why you would wish a paycut upon myself? 8vATE, This concludes my conversation with you. You are not the enemy and neither am I. If you would like to bash my AArogant ways again I will leave you the last word.

AAflyer

Fair enough...

I don't wish ill will on anyone.
But your original post had a tint of JB bashing.

Truth of the matter.
The industry is in disarray and the "good ole days" are long gone.

I missed the boat by a good 25 years the way I figure it.

 

[G4G5]

But SWA doesn't compete in a large number of markets. Large as they are, they aren't everywhere at once. Even then, they often don't set the bottom price. What they do is set the highest fare in the market lower than it was. This is made possible in part by their fuel hedges, but that's a relatively recent advantage. Why is it they've been the legacy boogeyman for a decade or two if it was just about hedges?

It's because of the post 9-11 aviation economy. Their are only 2 choices for aircraft A320 or 737 and for the most part ch11 has allowed everyone to renegotiate leases to the point where everyone is basicly paying the same amount for their aircraft.

Internet pricing no longer gives anyone the advantage that it did just a few years ago.

CH11 has also allowed everyone to renegotate pilot pay rates to the point where generally speaking everyone is making the same pay rates. Ex a 5 year A320 pilot at JB($121) is making the same amount as a 5 year UAL pilot($120). Other then SWA, their are no large salery differences.

As NWA and JetBlue have shown the future of aircraft maintenance is abroad.

So if you can't gain a competitive advantage with labor costs, technology, maintenance or aircraft leases. Fuel is the next big hurdle. The problem once again lies in the fact that just about everyone is paying the same price for fuel, except SWA.

That's what has changed. Just 5 years ago the price of aircraft leases, maint and labor where no where near as close as they are today.

 

[BlueBusDriver]

Jfk-bos-jfk-bos-jfk.......

(Quote)
"JetBlue
from
$25*
each way
BETWEEN AND
New York City, NY (JFK) Boston, MA
7-day advance purchase is required.
Sale fare must be booked by Oct 21, 2005.
Travel must be completed between Oct 22, 2005 and Dec 21, 2005.
Blackout dates for travel are Nov 22, 2005 to Nov 28, 2005.
Other restrictions apply.*

Service to Boston begins Nov 8, 2005."



AAFlower....

Did you type this information or copy and paste? I'm pretty sure that you typed it in yourself. Look closely at the "Travel must be completed by" dates versus the "Service begins date".
Now...I've never claimed to be genius material, but how can you travel on these routes on October 22nd when the service doesn't begin until Nov 8th?
Just an observation.

 

[AAflyer]

(Quote)
"JetBlue
from
$25*
each way
BETWEEN AND
New York City, NY (JFK) Boston, MA
7-day advance purchase is required.
Sale fare must be booked by Oct 21, 2005.
Travel must be completed between Oct 22, 2005 and Dec 21, 2005.
Blackout dates for travel are Nov 22, 2005 to Nov 28, 2005.
Other restrictions apply.*

Service to Boston begins Nov 8, 2005."



AAFlower....

Did you type this information or copy and paste? I'm pretty sure that you typed it in yourself. Look closely at the "Travel must be completed by" dates versus the "Service begins date".
Now...I've never claimed to be genius material, but how can you travel on these routes on October 22nd when the service doesn't begin until Nov 8th?
Just an observation.

Actually I cut and pasted. Will go back and see what the website says. I have a Macintosh so the font always comes out as regular 12 type. However I did not alter what was cut and pasted.

AAflower? Is that meant to be funny, or are you showing the public that an A320 Captain gets his kicks off of name calling? I notice this board gets into name calling when debates get heated. Do you really think it does any good? I think it brings out the worst in us. For example I wanted to type something just as stupid back, but didn't. Hoping you will retract the name calling and stick with the subject.

Sincerely,

AAflyer

 

[AAflyer]

Blue BusDriver,

I think your company has made a mistake. Glad you caught it, I didn't. If you go to the JetBlue.com website then click. Latest Deals and News you will notice the marketing error.
Hopefully you will call and get this changed.

Regards,

AAflyer

 

[klhoard]

. . .<snip>. . You can only raise prices so fast without creating too much of a shock to consumers.

.
.
.
That hasn't seemed to stop the oil companies.. . .
.
.
.

 

[Dizel8]

..
That hasn't seemed to stop the oil companies.. . .

People NEED oil, but hey don't need a trip to Disney World and if you ask GM and Ford, apparently they no longer feel the need for a gasguzzling SUV either.