RJ's TOO EXPENSIVE????

[General Lee]

Check out this article on CASM: (for you B6busdriver)

From ATWOnline.com

Capacity growth could knock legs out from under US recovery
Dateline: Wednesday November 26, 2003

Wall Street is growing increasingly concerned that US airlines will torpedo their own recovery with new capacity additions that are too aggressive.

In a report released yesterday, Credit Suisse First Boston's James Higgins worried that "an estimated 7%-8% increase in total US industry capacity, including low cost carriers, regional jets and more traditional players, will overwhelm the fragile revenue recovery underway."
Earlier in the week, JP Morgan's Jamie Baker warned that, "2004 ASMs are likely to be within 1.5% of [the] 2000 peak, despite aggregate demand still down 15%-20%. Too many seats chasing few dollars in our opinion."

Higgins sees a possible silver lining in the fact that for legacy carriers, capacity growth is coming "overwhelmingly from improving aircraft utilization," while Baker observed that not all new capacity is the same: "We're alarmed that the fastest growing component of the industry is also the most expensive, that being the 13-cent CASM product associated with regional jets."--PF



And to top that off, there was an article in Aviation Week and Space Technology last week that said that Comair's CASM was near 19 cents! Since that is combined with ASA's and Delta's---our CASM is higher. (near 10 cents combined with the others)


And from the USAToday Business section today:

" Delta is continuing its 10-year-old strategy of shifting service to its regional airlines on routes with low demand. While successful in lowering operating costs — regional airline workers are paid much less than Delta workers — critics say the high prices charged for regional jet service have capped demand in those markets and reduced the number of passengers who flow through the hubs and onto Delta's mainline flights, thereby reducing revenue, too.

Consultant Mike Boyd of the Boyd Group in Evergreen, Colo., says Delta needs to cut labor costs, use hubs better and refocus its fleet plan away from what he considers an over-reliance on regional jets."



I believe we will try to use our own aircraft more to increase utilization. The Song planes are just one example----flying 13.2 hours a day on average, versus 11 hours at mainline. Let's see if we can do that with the other fleet types. There are places that we can add more capacity without hurting ourselves too much, like Europe. Our VP of marketing said it herself---"we left money on the table last Summer." We have already seen the start of that--with new flights in May from CVG to AMS and FCO, and additional flights from ATL to MUC and LGW, and announced today---3 weekly additions from JFK to Athens (for the Olympics). Most of those routes do not have competition from the LCCs--not yet anyway.

Bye Bye--General Lee

 

[surplus1]

"We're alarmed that the fastest growing component of the industry is also the most expensive, that being the 13-cent CASM product associated with regional jets."--PF

And to top that off, there was an article in Aviation Week and Space Technology last week that said that Comair's CASM was near 19 cents! Since that is combined with ASA's and Delta's---our CASM is higher. (near 10 cents combined with the others)

General,

I copied the following (in quotes) from an earlier thread. According to this info, reportedly from the DOT, Comair's CASM are 2.8 cents below what ATW calls "the 13-cent CASM product" and 7.8 cents below the AW&ST claim of 19 cents.

How would you account for these glaring discrepancies? Do you think those pubs are just "uninformed" or could there be some other reason? Comair's CASM are the lowest of the seven largest regionals and no where near 19-cents.

I thought you'd be interested in these stats.

Source: DOT

Cost per ASM 2003 Q2 Domestic (cents per mile):

ACA: 16.3
Air Wisconsin: 15.7
Eagle: 14.7
Express Jet: 13.7
Skywest: 12.2
ASA: 11.9
Comair: 11.2

 

[B6Busdriver]

Thanks for posting the article. I have a friend from college that is in management for one of the LCC's. He showed me some numbers they had crunched for a 50 seat Rj on a 500 mile stage length and it came out to 14.8 per mile. I would think ASA's CASM is lower due to longer stage lengths (i.e. DFW-OAK,etc) and the use of 70 seat airplanes. Maybe the ATR's offset their CASM as well. Anybody have any info on this?
It would almost be funny if RJ's end up being the bain of managements existence. For years we have heard mgmt from the legacy carriers claim RJ's will save the world. Now it might bite them in the you know what. How ironic!

 

[General Lee]

Surplus1,

I was not trying to attack you or your pilot group here, just trying to show how management and others like to twist the numbers. Comair's CASM probably is high becasue your RJs fly a lot of short hops out of CVG---like to LEX, IND, CHM, etc. Flying jets on short hops with 50 seats costs a lot of money. And, since Delta owns Comair and ASA, they seem to add that higher CASM to ours, and that raises ours. Yes, we are probably paid a little on the high side right now, and we will probably take paycuts, which might lower our CASM. It is just interesting how the press and others twist that info.

B6Busdriver,

I think we need to use our 737s more on some of our routes that are only RJ routes---like Des Moines to ATL. Using the bigger planes with more seats would bring in more people to the hubs, resulting in more connections onto Florida---which cannot be flown to nonstop from some cities. As I said before, the hubs and the seats have higher priced fares because of the 'nonstop" factor and because some cities don't have LCC's. Song and the others will provide nonstop cheaper service from the larger cities, freeing up seats in the hubs for connections that are more expensive. That is how it should work.......of course, what do I know? I am glad that we are bringing planes out of the desert....

Bye Bye--General Lee

 

[Vortilon]

Well most of the original studies of RJs in the early-mid 1990s (when the CRJ was basically the only player) showed they only made sense on routes greater than 300 miles....it seemed there would always be a need for turboprops for those short hops. Even as efficient as the ERJ & CRJ are, that Dash 7 is cheaper to operate.

Later, companies saw the head start Comair had and didn't want to be the only carrier in FWA (for example) flying a Saab or 1900. The RJ became the new "must have". While the cabins pale in comparison to large jets, they are certainly a far better product for the customers than turboprops. I remember when we first pulled into destinations with the ERJ135 that used to only get EMB-120 service...man those folks were happy! (now they've probably forgotten what it used to be like)

The decision to purchase RJs became market driven, plus the bean counters apparently thought itd be a great idea to downsise from 737s in certain routes.

It will be interesting to see how this plays out in another 10 years. The big question: do we really need 1000+ 50 seaters flying around? Anyone remember LGA back in 1999? UGH!

 

[sleepy]

Look at the price of a ticket to fly from CVG to LEX or ATL to AGS. You pay for the convenience of flying on these short legs. Especially if DAL provides the only such service. The yields must also be pretty high on such routes, and of course the CASM will be higher as well.

 

[StaySeated]

CASM...Spasm. General ever heard of margin?? What is the CASM of a 767 that has 20 paying passengers at low fares because of direct low-cost competition? It is not what it costs and it isn't what you make, it is what you get to keep.(Take a look at your fat check and see how much Uncle Sam got)

 

[B6Busdriver]

Actually the CASM is the same regardless of how many folks are on the airplane. Hopefully all 20 paid big bucks to be on the flight.

 

[FDJ2]

From AW&ST

"As a regional operator, Comair's costs and yields are high in comparison with mainline operators. In 2002, Comair's cost per available seat mile was 19.49 cents, down 14.5% from the previous year, according to The Airline Monitor. The carrier has focused intensely on operating cost reductions, including single-engine taxiing and other kinds of efficiencies, especially in areas where surveys have indicated costs are out of line with other regional competitors.

In the cost-reduction push, salaries of management and administrative employees have been frozen for three years. Management has informed the International Assn. of Machinists, which represents mechanics, that their wage levels do not pose a problem. At the same time as it requested cuts from pilots, management also asked the Teamsters to reopen the flight attendant contract. The Teamsters turned down the request.

Comair produced more than $1 billion in annual revenue in 2000 and in 2002, but only managed half that amount in 2001 when terrorism took a toll and the pilots struck for nearly three months to obtain an industry-leading contract. The Monitor estimates Comair's 2002 operating profit at $50 million, based on total revenues of $1.15 billion and expenses of $1.1 billion."

 

[wms]

The last few years RJs were good for sizing markets and retaining market share. Even though CASMs are higher for an RJ, it's still better than flying a 128 seat aircraft into a 50 seat market. With the economy on the rebound, it will be necessary to resize the markets again. This time going to larger aircraft in certain places to properly size the markets. That will be a welcome change.

ATL/CLT used to be MD80s. Now it's mostly over-sold CRJs and 732s. An agent there said it's going back to MD80s again soon.

Hopefully we're beginning to see the shift in the other direction we've all been waiting for, and knew would come. And hopefully the majors will do what they've needed to do all along. Evaluate each market and city pair and equip it accordingly, considering direct service, low-fare, or hub-and-spoke as apprpriate, as well as size of aircraft.

 

[acapoisonpill]

One important fact to remember is that for the last 3 years ACA has had an incentive to increase CASM. UAL has been paying us our cost plus profit. Higher cost, higher profit. As an LCC, management will concentrate on lower cost.

 

[FDJ2]

One important fact to remember is that for the last 3 years ACA has had an incentive to increase CASM. UAL has been paying us our cost plus profit. Higher cost, higher profit. As an LCC, management will concentrate on lower cost.

The numbers have also been manipulated for the WO'ed. When management wants to expand the RJ market they put out a low CASM to justify the decision, but when management wants to extract concessions from the WO'ed, an entirely different CASM is trotted out.

 

[acapoisonpill]

I would imagine a WO can really 'cook' the books. Kinda makes you wonder how Comair has the highest pilot pay and the lowest CASM.

 

[surplus1]

Surplus1,

I was not trying to attack you or your pilot group here, just trying to show how management and others like to twist the numbers. Comair's CASM probably is high becasue your RJs fly a lot of short hops out of CVG---like to LEX, IND, CHM, etc. Flying jets on short hops with 50 seats costs a lot of money. And, since Delta owns Comair and ASA, they seem to add that higher CASM to ours, and that raises ours. Yes, we are probably paid a little on the high side right now, and we will probably take paycuts, which might lower our CASM. It is just interesting how the press and others twist that info.

General,

I never thought you were trying to attack me or my pilot group. There is no chip on my shoulder.

All that you did was point out the CASM of my airline and others from articles you read. All that I did was point out that according to the DOT, the CASM of Comair is 11.2-cents not 19-cents. Obviously, somebody doesn't know what they're talking about.

The numbers that the DOT has don't come from Comair, they come from Delta. Either Delta is cooking the books or the ATW and AW&ST (the sources you quoted) are cooking their numbers. I'll leave it to you to decide which it is.

By the way, it would be against the law for Delta to deliberately provide false numbers to the DOT. I doubt they are doing that. Perhaps the people that write the stories you sourced should do some homework. Numbers can't be that far apart unless someone is deliberately skewing them for whatever reason.

There is no doubt that RJs have higher CASM than larger aircraft. There is also no doubt that if they are operated in the right markets and they don't fly empty, they make a profit. Profits and yields are what matter, not CASM. If and when the RJs become unprofitable they will be parked or sold, just like the 737s have been.

Flying little jets on short hops does cost a lot of money, just like you said. Flying little jets, full of paying passengers, on short hops also makes a lot of money (which is what we do).

Flying big jets, with no passengers, looses a lot of money regardless of what it costs to move a seat one mile. The business is about making money, not losing it. The size of what you make the money in is irrelevant.

When you start making money in the big jets, there will be more big jets. When we start losing money in the small jets there will be fewer small jets. You and me fighting about it will not change that.

Hope you have a nice Thanksgiving.

 

[surplus1]

I would imagine a WO can really 'cook' the books. Kinda makes you wonder how Comair has the highest pilot pay and the lowest CASM.

acapoisonpill,

Comair doesn't have any books to cook. The books belong to Delta. If you think the books are "cooked", the Chef lives in ATL, not CVG. T-h-i-M-k.

 

[StaySeated]

imposter

I am not sure how, but someone is logging on using my account. Sorry to anyone who has been offended.

 

[skiddriver]

Look at the price of a ticket to fly from CVG to LEX or ATL to AGS. You pay for the convenience of flying on these short legs. Especially if DAL provides the only such service. The yields must also be pretty high on such routes, and of course the CASM will be higher as well.

Actually, these short legs into CVG don't make a lot of sense. People drive from Cincinatti to LEX, SDF, and DAY because flights that originate from those locations and connect through CVG often cost a less (customer service tells me up to $200) than if they originated in CVG. So Delta/DCI is getting less money to fly these folks on an extra leg. It's not just Comair and ASA either. Delta mainline has three flights a day between CVG and LEX/SDF. It's a marketing deal that I haven't been able to suss out yet. The yields are in the red on these routes, regardless of CASM.

 

[General Lee]

That is true. I have a friend who lives half way between Cincinatti and Dayton, and it was less expensive to fly to the West Coast from Dayton through Cincinatti, rather than just one leg from CVG. That is ridiculous, and it probably doesn't help the bottom line. Where do the guys in ATL come up with this stuff?

Bye Bye--General Lee

 

[~~~^~~~]

We were both correct

The CASM and limited revenue are what make the RJ self limiting. That is why ALPA's apartied scope made little sense & did nothing to protect the jobs of Delta's junior pilots.

What the block hour limits do achieve is a limit on how many pilots can exist at the lower tier of ALPA's representation structure. A minority has little rights unless the democracy exists under the rule of law. So, the big three's control of ALPA power remains exclusive while the rest of the members get thrown the scraps.

On the other side of the table - Delta needed to get as many revenue seat miles as they could out of "Connection" pilots and RJ's do achieve that goal, at a high cost.

A better solution for Delta is to shift the jet flying to mainline equipment as the loads justify the transfer and get rid of the block hour limits so that more suitable and efficient turboprop equipment can be used on Connection flying.

Like we have been saying all along - scope is needed, but the way scope was done in Contract 2000 is bad for both Delta pilots and the company.

~~~^~~~

 

[Draginass]

It's obvious that costs are too high. Management ought to cut, benefits, and retirement to try and get that CASM down to what the public wants to pay.