New report out on Frontier losses in Denver

[shearedshaft]

Just got this via Twitter it's a route analysis on Frontier's routes out of Denver and the comparison with Southwest.

It's very sobering

You can see the post here, but the report is actually a pdf.

 

[tzskipper]

Just got this via Twitter it's a route analysis on Frontier's routes out of Denver and the comparison with Southwest.

It's very sobering

You can see the post here, but the report is actually a pdf.

If FRNT can figure out how to get it's CASM down (how the RJ's are accounted for on the income statement?), the revenue side would seem to support profitability. I think you could see a pretty quick turnaround, should FRNT go back to a all Airbus operation. Of course, that would probably be financially detrimental to the Republic income statement. What a shell game...

Good luck guys.

S

 

[ChinaClipper]

The CASM problem is summed up in a nutshell. REGIONAL JETS! (until oil gets inder $80) The RAH flat out told us that the F9 operation would serve as a "foil" to take RJ losses until they can be gotten rid of. Especially painful are the 70 seat and under class, its is marginally better to fly them at a loss than park them until they go. This was the RAH thinking when oil was $65 dollars per barrel. Over $90 and the pain is brutal. The next qtr. will thev them broken out. BTW F9 has NEVER been unable to get a RASM Premium commensurate with the level of service. Fanatical DEN following cannot make up for that. Frontier proper is paying the cost of training a FFD regional to run Branded Operations. A trade skill that is WIDELY AVAILABLE on the open market for far less than $200 mil RAH has spent. The level of incompetence is nauseating, Good news? F9 is getting spun off! Hope its lasts long enough for THAT to happen.....

 

[GuppyWN]

Why would Bedford run the E-jets in the F9 sandbox if that is the cause for being unprofitable?

Gup

 

[Fubijaakr]

LUV killed F9 in DEN. They just haven't collapsed yet. Look for BB to paint some E190s in F9 paint.

 

[UnstableAviator]

LUV killed F9 in DEN. They just haven't collapsed yet. Look for BB to paint some E190s in F9 paint.

There's already a ton of 190's in F9 paint.

Anyway, I doubt that 12 ERJ's are the sole cause of a 55 milllion dollar quarterly loss. If they are, then park the damn things and be done with it.

LUV is DEN is the real killer, depressing yields in what was formerly F9's strongest market.

 

[StaySeated]

I don't think you can label that report as "new", especialy considering that DOT Form 41 data has not been updated yet and the most recent information available is 2010 4Q. The SWAPA document states that this is the "current cost structure" of Frontier, which is completely false.

With that being said, there are no surprises contained herein. Denver revenue is lagging behind the entire country as a result of SWA. That is their model, it works well for them, and everyone knew this would happen when SWA began operating out of DIA.

There is a chart out there that tracks seats, yields, and margins out of Oakland, BWI, Philly, and two other cities that I can't remember off the top of my head. The chart covers each airport's pre-swa timeframe, swa vs major competitor time frame, and the period after the comptitor exits the market for good. The results are very simliar and very predictable.

As far as Frontier is concerned, the +.$11 CASM has already been fixed.

In 2010 we still had a number of Q400's flying in and out of Denver, especially to the cities that are included on the "highly non-profitable Frontier segments" chart. Those cities were later changed to E170's, another high casm aircraft. (you can see the $.21-$.18 CASMS on the SWAPA document, those are Q's and 170's)

The Q is an Aspen shuttle, the 170's are gone. The 190's remain. To answer Gups question about running unprofitable equipment...

Over the past year, RAH has lost capacity on a number of CPA's with their legacy partners. There were 29 orphaned RJ's (31 if you count spares). 17 were 170's and 14 were 145-135s. It was cheaper to operate each shell at a loss than it would have been to just park them. That was, until oil shot above $110. Thankfully all of the 170's have been placed back on CPA's with DAL and UAL. The 145's are truly orphans that no body wants, so RAH put them on a prorate CPA between Frontier and Chautauqa. The losses are no different on the consolidated financials,but each quarterly breaks out the "brand" vs the "ffd". As of July 1, the "brand" is only Airbus and 190's.

Airbus CASM ex-fuel today is $.0723 (not adjusted for stage length).

Q2 numbers will be good. Q3 numbers will be good. The question is will they be good enough to get another investor. I think the better question is "Who will invest", not "Will they invest".

Frontier is not going anywhere soon. Bedford already has a solid plan for revenue enhancment/diversification away from Denver during the normally quiet winter months. This time next year will be our first full year of operating a "clean" Frontier. No 145's, no q's, no 170's. The business plan provides positive margins at $130 oil. Frontier will be a LCC with 60 Airbus and 21 190's in 12 months. There are 6 additional 190's on the way, as well as the Neo order which is going through its final approval from MOU to order. Frontier has the first delivery position of any NEO and the purchase price point is rather amazing.

I guess I should not be surprised that SWAPA put together this little document. The hard-on that you have against Frontier is almost grotesque in its preverse/anti-pilot nature. You simply can't wait for all of us to lose our jobs, can you? The "detailed analysis" changed the axis on the "cost" chart by 13% when compared to the revenue chart. Evidently the numbers by themselves were not convincing enough so the author had to skew the visual by shortening the chart. Did SWAPA do a similar "analysis" in BWI? How about Philly? Any other city? Will SWAPA put out a new analysis, using "current" numbers, when the Form 41 data is updated?

I used to expect a lot more from SWAPA, now nothing they do surprises me.

 

[shearedshaft]

I posted that because I thought you guys would be interested in the analysis, it's odd to see it turned into an attack on SWAPA.

I have never read a derogatory word about Frontier or FAPA from SWAPA. I did hear (but didn't see it written, but maybe I "heard" it here" so take that for what it's worth) that they were very disappointed that FAPA had already come to an agreement with Bedford prior to the auction, which they didn't find out until much later, after FAPA stopped negotiating with them.

LOA thirty? I think I read that here, I've never seen the actual document. Regardless, it was some agreement hashed out prior to the bankruptcy auction where Bedford promised everything but a daily fruit plate.

But it all makes sense, you guys made a deal with the devil, then accused Southwest of being the devil. You then celebrated staying "independent", conveniently ignoring the Teamsters scope clauses and that irritating bit of federal law passed by Kit Bond.

However, I can state with confidence that the rank-and-file SWAPA member (not SWAPA itself, I think they have bigger things to deal with) gave up any empathy for FAPA the day we saw the news about your airplane being greeted with a water-cannon salute after "beating" Southwest. I found that insulting, as I'm sure did many of my fellow pilots.

You haven't helped yourselves either as I read posts here about your attitude toward negotiating with the Republic Teamsters, Midwest, or Lynx.

I'm glad SWAPA is following your SLI and business as close as they are, I hope they're doing it with a microscope. We're in the SLI of our careers and, sorry, but like the NTSB, if going over the wreckage seems ghoulish, it isn't. It may help us in the future.

You guys have it all...an interesting SLI, which seems to have included failed arbitration arguments, a lawsuit against binding arbitration and a lost representation vote. Not to mention the request that they divest 51% and the appeal to reverse the single airline thing that the government did.

Back to the document, I just saw it posted on SWAPALUV and posted the link.

I didn't see anything egregious in it, it just showed what your CEO has been telling the world. I didn't read it that carefully, but I don' think it discussed what was going to happen in a year, just where the current cost structure was.

They did say that you're almost all of the way to making the CEO cost-saving goal.

You're the guys that gave your raises back, I assume this isn't big news to you, otherwise, why do that?

You're in two hubs, competing directly with LUV, who seems to be making money, but you guys aren't. That's sustainable from their end, but not sustainable from yours. Did you see some of the negative net margins on some of those routes?

 

[tico]

There is not any chance of positive margins at 130.00 oil....that alone should keep you up at night.....don't drink that jim jones juice....I think Gary Kelly will move in for the kill when he is through with the airtran merger.... He will drive republic back under the ffd log....