NWA DC-9's

[~~~^~~~]

As oil and jetfuel continue to go up the CASM metrics actually invert and it's more efficient to fly the gas guzzling 9's over the 50 seat CRJ's.

IOW, it is more revenue positive (or less of a loss) to fly 1 120 seat DC9 over 2 50 seat CRJ frequencies on the same route.

You and a lot of others are dreaming that fuel takes care of our scope problem, it does not. The CRJ200 is borderline more efficient than the DC9-32/50. The 700/900 versions are clearly more efficient than a 9, CASM, Fuel PSM, how ever you want to cut it.

As fuel prices go up the lease costs on the RJ's are more easily justified by the fuel savings and revenue spread (fewer seats=higher prices).

Don't believe me, obtain the data from ALPA's EF&A, or PM me you e-mail address and I'll see if I can find my old copy.

 

[~~~^~~~]

It may be more efficient, but DAL is one of the few carriers that actually owns a regional. For the other majors, even NWA as a stand alone carrier, they've been able to negotiate lower contracts with the regionals (ie. CAL and XJT)--you can thank SKYWEST and MESA. As long as the regionals remain profitable (most are doing better than their major counterpart), it's still cheaper to use them over mainline aircraft. Other than leasing the aircraft to MESABA, PINNICLE, or COMPASS, NWA does not save any money by replacing a DC9 on an RJ route. They are separate busnesses and do not share the same finances. Now, if they merge with DAL, that's another story--it's not a done deal yet.

What? Not sure I follow your logic that "as long as the regionals remain profitable NWA does not save any money by replacing a DC9."

Costs are costs, regardless of if it is a operating lease on a fee for departure basis, or buying fuel for your own jets. It does not matter who you write the check to.

The immediate benefits to outsourcing are:

1. Huge upfront cash payments for long term contracts. SkyWest paid Delta $425,000,000. Republic paid US Air $3X,000,000 (still checking figure) and there are other examples.
2. Off balance sheet purchasing of narrowbody domestic jets
3. Off balance sheet depreciation of obsolete equipment
4. Labor whipsaw - mainline pilots think they have to "buy" their flying. Have you seen Delta's rates on small jets?
5. Destruction of longevity. New hires now fly 767's. Those used to be 10 year pilots who had flown DC9's. Now pilots spend ten years at the regionals and lose the longevity they need to increase their pay & time off.

In Delta's case, Delta was about to enter bankruptcy and almost lost their ability to process credit card transactions due to failing liquidity. Jerry Atkin at SkyWest waited until exactly the right moment to save Delta Airlines by buying ASA when the Delta so desperately needed the cash that they signed a 15 year deal with provisions favorable to SkyWest.

In effect, Delta burned the furniture to remain warm during the winter.

SkyWest's profits do not help Delta - They harm Delta. These are profits that should be Delta's profits and ASA has always been one of the most profitable airlines on the planet Earth, despite their multitude of problems.

ASA contributed to Delta's bottom line at a 15% to as high as 25% margin, that is great money in this business.

I have no doubt that Delta could operate ASA / Comair / SkyWest / Shuttle America / Mesa / Freedom / Express Jet / Republic more profitably in house with Delta new hires. However, Delta management has (and will need) the quick fix of getting cash now for future flying awards, as well as the off balance sheet acquisition of narrowbody domestic jets.

Nothing about this trend makes Delta more profitable over the long term. Delta is still a domestic airline and outsourcing the majority of your narrow body domestic flying at cost plus profit is not a good long term strategy IMHO.

I'm hoping management sees this too and is correcting. However, I do not think the DC9 is the aircraft for the mission. The 737 is an interim jet for now. The tempting short term fix will to put this flying off balance sheet to leased aircraft & crews until a really compelling 100 seat jet is invented, THEN, I PRAY we have the money to buy it.

 

[Speedtape]

As oil and jetfuel continue to go up the CASM metrics actually invert and it's more efficient to fly the gas guzzling 9's over the 50 seat CRJ's.

IOW, it is more revenue positive (or less of a loss) to fly 1 120 seat DC9 over 2 50 seat CRJ frequencies on the same route.

The answer to your argument is not that simple. First, you assume that people are standing in line to board your one DC9 at the time that it is scheduled. Second, you might not know that every seat pays a different fare. Third, usually, the more seats or larger the plane, the more seats that have to be discounted to fill the plane. It is very possible to have 2, 50 seaters with a higher number of undiscounted seats that would still make more money than 1 DC9 that has to discount 40% of the seats to get the load factor up.

Delta's focus is to avoid discounting and/or "fire sales" on the internet to fill seats at the last moment to fill seats. From historical data, they know how many high yield seats are travelling out of a given market and, further refined, the times of day that these passengers travel. They do a great job of matching the right-sized airplane to those markets, at the right time of day--keeping the load factors high, but more importantly capturing a high percentage of the high-yield tickets.

In addition, to improve efficiencies, they adjust the frequencies on different low travel days which is another integral part in capturing high yield traffic and keeping costs down. Unfortunately, this practice affects pairings and impacts the ability to build better schedules for you and me. However, it saves money.

In conclusion, their planning involves using many tools and resources to extract the most efficient money making operation possible. These are things they can control or manipulate. This involves right-sizing airplanes depending on many variables. To make a simple statement that a DC9 is more efficient than 2, 50 seaters that leave at two different times is overly simplistic and not always
true. If it was true, don't you think they would have figured it out by now?

 

[~~~^~~~]

Boyd's interesting observation:

The Boyd Group estimates that if American Airlines could wave a magic wand and replace all its MD-80s with 737-700s, the net to the carrier, including ownership costs, would be over $600 million annually to the plus side.

 

[iaflyer]

Boyd's interesting observation:

The Boyd Group estimates that if American Airlines could wave a magic wand and replace all its MD-80s with 737-700s, the net to the carrier, including ownership costs, would be over $600 million annually to the plus side.

Yeah, but they may not be able to get access to money to make the transition. They should, and they probably know they should but it's easier said than done.

 

[~~~^~~~]

Point being that the replacements for the DC9 will easily pay for their acquisition costs, whether they be RJ's, 737's, or a next gen 100 seater.

 

[Fly4hire]

You and a lot of others are dreaming that fuel takes care of our scope problem, it does not.

Uh.. I wasn't even remotely discussing Scope, or RJDC

The CRAG is borderline more efficient than the DC9-32/50. The 700/900 versions are clearly more efficient than a 9, CAMS, Fuel PSM, how ever you want to cut it.

Is that why everyone is looking to dump 50 seat capacity right now? Indy Air and now Express Jet are glowing examples of the profitability of CRJ's

As fuel prices go up the lease costs on the RJ's are more easily justified by the fuel savings and revenue spread (fewer seats=higher prices).

Hint: You work for a major now - you want more mainline aircraft and less RJ's.

Better hope if you are right that NWA gets flow down to Compass for the DAL pilots as well in a joint contract.

 

[~~~^~~~]

I do want more mainline jets. However, whether they are a "mainline" or "RJ" is an entirely arbitrary term (as it always has been) which is determined by ALPA.

ALPA Reps, at least on the Delta property, have been talking like scope does not matter because of the economics of the RJ. However, ALPA's own data indicates that this is a mistaken conclusion.

Fly4hire - you hit on the reason I look forward to a joint DAL/NWA contract. Because we need Compass on the list and we need this flying defined as "mainline" flying.

You use Express Jet as a example of failure. However, Jerry Atkin working to purchase Express and has demanded the XJT violate their scope clause and merger language in their CBA to do the deal. There is a lot of potential left in XJT and SkyWest's 50 seat operation is expanding with Continental based on the letters that were leaked.

Again, I look forward to NWA pilots' involvement in a joint contract, particularly on Section 1.

 

[Fly4hire]

Hey ~~~^~~~,

http://www.businessweek.com/bwdaily...?chan=top+news_top+news+index_news+++analysis

The soaring cost of fuel is making short-haul flights uneconomical for regional jets. So a new generation of turboprops is selling briskly


Alaska Air Group's (ALK) regional subsidiary, Horizon Air, announced on Apr. 24 that it would convert its entire fleet to Bombardier's 76-seat Q400 prop within two years.....

...The backbone of U.S. regional flying, the 50-seat jet, made a splash in the 1990s as a way for airlines to serve smaller destinations and to bolster frequencies on heavy-traffic routes. The higher fuel-burn rates of jets wasn't much of a factor then, since crude oil traded below $12 per barrel in late 1998 and didn't breach $40 until 2004. On Apr. 29, crude was at $115.61 a barrel, a day after setting a new record of $119.93. This explains why the 50-seat jet has become a financial albatross on many routes....

 

[~~~^~~~]

Fly4hire:

Thanks. The ATR72 burns a lot less than the Q400. But, Delta is phasing those out this fall.

Q400 issues, for Delta are (were as of 24 months ago):
(1) Not as operationally flexible as a large RJ
(2) Has the ramp footprint of a 737-800 (big, straight wings with a long tube)
(3) Doors do not work with the jetway re-re-re-design in Atlanta

Also, some of the ATR's had the equipment for the NVH cancelling cabin. The system broke and was never repaired on any of them.