New SONG expansion

[On Your Six]

To address your assertion that SONG has not been profitable, Grinstein will be in very big trouble if SONG is/was not profitable when he publicly made that statement. The SEC would be breathing down his neck if he stated one thing and then "misled" investors. Grinstein is smart and he would not do anything to jeopardize Delta or his position - right? Therefore, if he makes public statements like that, I would assume they are "roughly" correct - if not, he could be prosecuted (in the post-Enron business environment).

Heavy Set
Maybe I missed something but I never saw where Grinstein said Song was "profitable" He only says it is "successful" which by definition could mean many things. Song could be losing gobs of $$ yet as a competetive weapon be viewed as very successful by hurting the competition. I know we are playing with words here but thats what they do on Wall Street and the SEC.

Banger,

I've seen the statement made by Grinstein and I think he said it was profitable - it was part of a press release. I haven't seen it lately but I will look for it. Needlesstosay, executives have to be very careful nowadays with any statements because, if they aren't, they can have SEC problems or even get sued by investors for misleading information. I'll look for that press release.

OYS

 

[MedFlyer]

Grinstein is smart and he would not do anything to jeopardize Delta or his position - right? Therefore, if he makes public statements like that, I would assume they are "roughly" correct - if not, he could be prosecuted (in the post-Enron business environment).

It would be nearly impossible to prosecute Grinstein for his statements about Song. Since Song doesn't really exist in the eyes of the SEC or the DOT, it would be pretty hard to pin Grinstein down. DL can make up whatever numbers they want for Song...they can say it makes money or they say it loses money. DL can manipulate the numbers however they like, since there is no oversight into the accounting for Song.

SONG is a very competitive product and competintg against SONG could lead to lower margins for JetBlue if the price difference is insignificant. Why? Delta/SONG offers a better product, a better frequent flier program and international connections which makes the SONG product very competitive.

Song is abandoning JFK-RSW...the only competition they had was JetBlue. Now, WN is invading RSW....apparently they aren't afraid of Song or Delta either.

As for those international connections, Song is actually hurting DL on many of the JFK routes. Imagine you are an elite customer who purchases a business class ticket ($3,000+) from NCE to LAX connecting via JFK. You get DL's BusinessElite service on the NCE-JFK flight, but then you connect to a Song flight that has no premium cabin. You get sandwiched in with Ma and Pa who fly once a year and bought their tickets for $99 each. In fact, DL agents are required to WARN customers that are purchasing international tickets that connect to Song, that they are connecting to a single class product with no premium cabin.

As SONG expands with its better product and maintains competitive fares, JetBlue will feel the competition in its shared markets. I doubt JetBlue is making big money on the IAD-Florida routes with Flyi charging ridiculously low fares on each and every flight. Meanwhile, SWA will be adding hundreds of low-fare 737-700s, AirTran will be adding more 737-700s (up to 100 I believe), Flyi will be adding Airbuses, Spirit will add more A321s and A319s to the Florida-Northeast Corridor and the newly-energized USairways (if the AWA deal comes to fruition with additional equity) will be engaging JetBlue more directly - JetBlue can look forward to a lot more low-fare competition in the future.

Sure JetBlue will feel pressure from other LCC's, but so will Song/DL. If JetBlue feels pressure from LCC's, imagine how much pressure DL is feeling. Don't forget that DL still derives 79% of its revenue from DOMESTIC flights. International flights won't save DL...btw Airtran was just approved to launch ATL-CUN flights.

Remember that JetBlue has costs that are lower than Southwest, Airtran and FlyI. Most of the new flights that LCC's are launching are aimed at DL...not JetBlue. Southwest just announced RSW service....guess who is the largest carrier at RSW right now? Delta. Airtran has recently launched ATL-IND, ATL-CLT, ATL-SRQ and ATL-RIC. Who do you think those were aimed at? Delta.

Song is certainly a better product than DL mainline, but viewing it as some kind of savior for DL is a joke.

As an aside, DL will be permanently reducing frequencies on the recently launched Song transcons. LAX-JFK loses two flights, SFO-JFK loses two flights and SEA-JFK loses one flight. Maybe too much capacity or maybe poor advanced bookings?