Jetblue sacks John Owen CFO

[lowecur]

Wonder if this had anything to do with his comments at the Bear Sterns Transportation Conference about "backing off of being excessively nice." John was demoted to something in IT mgt, but it is my guess this is only temporary until he finds something else. You may see one of the competitors hire him just to gain insite on future plans for B6.

The new CFO is John Harvey, who is on his second tour of duty at B6. He was part of the original officers when Jetblue got started, but left the company in 03 and returned recently. Obviously, Board Members have been making their presence felt in getting the ship back on track. The only question is, when will the Chinese fire drill end?

http://biz.yahoo.com/pz/060511/98975.html

imp:

 

[Dizel8]

I think you could be wrong, although I was surprised by the move.

Actually, the excessively nice comment has been mentioned before he said it, so it really isn't new.

The company relies heavily on IT for it's infrastructure, so taking on this position in itself is a vast undertaking. Adding supply chain, which is everything from airplane seats to crackberries, would give him an opportunity
to get his hands "dirty" so to speak and for someone who probably has one heck on an analytical mind, could lead to large cost savings.

So am I not sure it is a demotion, maybe quite the opposite and in case he is looking to become CEO someplace in the future, it may be advantageous for him to take on this new position.

Only time will tell!

 

[8vATE]

not being excessively nice...

From my personal perspective AND listening to the earning's calls... I don't believe the "excessively nice" comment would get him canned..

Neeleman himself has said that he is looking at ways of generating revenue..
and some of that is tightening up some of the "freebies" that JetBlue has historically been known for.

Specifically,
Jetblue is now charging for Unaccompanied Minors, they have tightened up the rules for same day standby for revenue customers (and offering a guaranteed seat option for a fee), they have tightened up some of the "refund" rules for customers and are being more judicious with their "comps" they give out.

 

[32LT10]

One thing is apparent, a requirement for the job is you must be named John.

 

[islandpirate]

Neeleman himself has said that he is looking at ways of generating revenue..

What about raising ticket prices? Wouldn't higher fares offset some costs (oil) and increase incoming cashflow thus increasing revenue? I don't have a business degree or anything so I might be wrong.

 

[Dizel8]

One thing is apparent, a requirement for the job is you must be named John.

Not that there is anything wrong with that

 

[AC560]

What about raising ticket prices? Wouldn't higher fares offset some costs (oil) and increase incoming cashflow thus increasing revenue? I don't have a business degree or anything so I might be wrong.

Only if you assume that the number of tickets purchased will be the same.

100 tickets at $100 is better then 90 tickets at $105 because the you are still going to have the same costs to fly that flight with 90 people as you would with 100 on it.

 

[FurloughedTwice]

100 tickets at $100 is better then 90 tickets at $105 because the you are still going to have the same costs to fly that flight with 90 people as you would with 100 on it

That's a good point. CAL, AA and USAir are finally standing up to JetBlue in most of their markets so I don't think JetBlue would be able to raise the ticket prices very much. I think JetBlue has a great product for a coach passenger but people will still look elsewhere if they can save $10.

If the other airlines let JetBlue come into their market and make money they will just continue to expand. Just look at DAL vs AirTran in ATL. I don't see much in improvement in JetBlue in the near future.

Just my opinion.

 

[AC560]

That's a good point. CAL, AA and USAir are finally standing up to JetBlue in most of their markets so I don't think JetBlue would be able to raise the ticket prices very much. I think JetBlue has a great product for a coach passenger but people will still look elsewhere if they can save $10.

I think people will pay more if they know what they get for that money. The problem is that the carriers do a terrible job of differentiating their products to the point where flying on UA/NW/AA/etc. you really can’t tell the difference short of the color of the seats. If anything the LCC’s have done a far superior job of marketing their product and its value including value adds beyond just the seat (JetBlue is a perfect example of this).

Though at the end of the day the problem isn’t really ticket price but capacity and frequencies in my opinion, carriers need to reduce frequency and increase aircraft size to achieve profitability. The problem isn’t pilot salaries the problem is to many pilot’s/mechanic’s/flight attendant’s/etc. (I don’t mean this from an anti-employee stance just from a pure economics stand point).

Cut frequency and put on bigger aircraft and you can rack up a lot of savings very quickly; slicing salaries is just a temporary expedient solution and doesn’t fix the industries core problems. Plus with bigger aircraft you could capture a larger slice of the domestic cargo market which has been largely surrendered to Kitty Hawk, FedEx, etc. and cargo is about the only bright side of the airline industry these days.

 

[Ex737Driver]

put on bigger aircraft and you can rack up a lot of savings very quickly

which is exactly what CAL did to compete against JBLU in EWR. 757-300 vs A320.

 

[curtaindriver]

JetBlue is raising prices, also cutting capacity in certain markets. Using bigger airplanes is not exactly the answer. Albeit, the CASM lowers because of the obvious increased seating, it also raises certain costs that the RASM has to offset. Delta Song is a perfect example. They couldn't fill their seats with a high enough yield per pax.

If using bigger planes was the be-all-end-all, everyond would be flying 747's. SWA is the best example I can think of. People want price, frequency and service.......usually in that order.

CD

 

[AC560]

JetBlue is raising prices, also cutting capacity in certain markets. Using bigger airplanes is not exactly the answer. Albeit, the CASM lowers because of the obvious increased seating, it also raises certain costs that the RASM has to offset. Delta Song is a perfect example. They couldn't fill their seats with a high enough yield per pax.

Song is a bad example because their business model was to drop costs and ticket prices together and on top of it they tried to compete against themselves (the reason for the creation of Song and Ted are still a complete mystery to me).

If using bigger planes was the be-all-end-all, everyond would be flying 747's. SWA is the best example I can think of. People want price, frequency and service.......usually in that order.

Airline passengers are basically divided into two category’s the business traveler and the tourist. The tourist really doesn’t care about much other then the price of the ticket, so when the flight leaves/arrives means little to them (which is also why people will fly 28 connections on SWA to save $50). The business traveler looks at things such as departure/arrival times, mileage program, amenities, etc. when making purchasing decisions.

While it is nice to be able to hop a flight every hour on the hour from say Chicago to La Guardia with out a doubt the two most important flights are the first flight of the day and the last flight of the day to the business traveler (the tourist again just cares about the ticket price). Eliminating 12 RJ flights and all the crew, ground staff, ticket agents, finance costs on the plane etc. associated with those flights and replacing them with 3 757’s is a huge savings (especially when you have the same seat capacity so don’t have to give up any revenue). You also gain the ability to target a lot of the cargo market (especially on routes where you can put on wide bodies) which the domestic passenger carriers have surrendered which at $1-$2/lb is more revenue in some cases the passengers are paying. I would even look at putting combi’s (didn’t TWA used to fly 74M’s??) on the transcontinental flights if I were with UA/AA and whoring the cargo market, with a reasonable passenger offset you could steal mountains of business from the integrators/cargo carriers out there and still churn a good buck.

Some of this an oversimplification on my part for sure, but I really think this whole RJ idea was a bad idea for the airlines and the cause of a lot of their problems today. All this did was inflate the cost structure of the carriers by insane amounts which now the carriers are trying to get back in wage concessions instead of doing what really needs to be done which is slash the labor force and park hundreds of planes to ensure the long term viability of the industry.

 

[curtaindriver]

I will definetely agree with the RJ reference. Flooding markets with these airplanes and paying the vendor a guaranteed profit is ludicrous. We'll see if some of those practices disappear, I think some already have.

Oversimplification might be an understatement (slight play on words) forgive me. But, there is no way throwing on bigger airplanes and drastically reducing frequencies will work as a business model. Markets help define the size of the plane. Ex. JetBlue (eventually) using 190's to capitalize where other LCC entrants can't fly because their airplane is too big. Conversely, JetBlue unable to reach markets that require larger airplanes. Why do you think all Legacy carriers have multiple fleet types? (hate using Legacy carriers as an example at this current time, but have to)

We might be agreeing on the same stuff, I apologize if I'm not realizing some of your points.

CD

 

[Lampshade]

The most options to the most people is the legacy's strength. Multiple fleet type (within reason) is an asset along with a strong network.

 

[smellthejeta]

One other mistake was dumping the turboprops. The economics on those things actually made sense for short routes.

 

[7S3W7A]

I think you could be wrong, although I was surprised by the move.

Actually, the excessively nice comment has been mentioned before he said it, so it really isn't new.

The company relies heavily on IT for it's infrastructure, so taking on this position in itself is a vast undertaking. Adding supply chain, which is everything from airplane seats to crackberries, would give him an opportunity
to get his hands "dirty" so to speak and for someone who probably has one heck on an analytical mind, could lead to large cost savings.

So am I not sure it is a demotion, maybe quite the opposite and in case he is looking to become CEO someplace in the future, it may be advantageous for him to take on this new position.

Only time will tell!

If this isn't spinning I don't know what is. It's a demotion. CFO is #3 in any company. DN clearly is unhappy with his man and needs a change to keep JB from sailing into the sunset with the rest.

 

[~~~~O~~~~]

If this isn't spinning I don't know what is. It's a demotion. CFO is #3 in any company. DN clearly is unhappy with his man and needs a change to keep JB from sailing into the sunset with the rest.

And that is the problem with the JB guys on this board.... JB has problems but you still get the spin... You can't get objective analysis for the JB guys themsleves...

It weakens the creditbility issue.....

JB guys on FI want to be so despertly seen as pilots of "one the best" places to work. But when they spin and defend it really only hurts themselves cause the rest wonder what the real deal is... what is really going on....

And the hits just keep on coming....

 

[curtaindriver]

"Credibility issue....." what? What issue, some of the JB guys spin things toward the positive and this creates an "issue". Who freakin cares what our spin on anything is. We have zero clue as to why the CFO was changed, maybe it was a demotion, maybe it wasn't.....what does it have to do with you?
When someone makes a statement trying to imply some sort of JetBlue "way of thinking" it makes you look like an idiot. For what it is worth, we are losing money and I think they simply changed the person in this department to try and stem the problems. A demotion? Sure, why not, maybe, maybe not. What does it matter?!?

CD

 

[regionaltard]

Only if you assume that the number of tickets purchased will be the same.

100 tickets at $100 is better then 90 tickets at $105 because the you are still going to have the same costs to fly that flight with 90 people as you would with 100 on it.

Not necessarily true. There are incremental costs associated with each passenger an airline handles. Your example is probably valid because the costs incurred to handle an additional ten passengers would probably be less than $550, but if the choice were between 50 pax at $200 a pop and 100 at $100 it would be far better to take fewer people willing to pay top dollar.

 

[brainhurts]

And that is the problem with the JB guys on this board.... JB has problems but you still get the spin... You can't get objective analysis for the JB guys themsleves...

It weakens the creditbility issue.....

JB guys on FI want to be so despertly seen as pilots of "one the best" places to work. But when they spin and defend it really only hurts themselves cause the rest wonder what the real deal is... what is really going on....

And the hits just keep on coming....

WTF? Its obvious we have problems. I can't tell you if it is "one of the best" places to work. But I can tell you its the best place I've worked. What do you want to know? Should I call old DN up? Should I make an appointment with John Owen? Remember, its a business like anything else. We lose money and there are changes made. Thats a bad thing? Your punishment for such an idiotic post is to stay at your company. I'll stay here.