Skywest losses IAH COEX flying

[Truckdriver]

All CAL needs to do is take those airplanes that they own and lease them to your replacement. CAL owning the aircraft wouldn't give me a warm fuzzy feeling if I was an Xjet pilot. In fact it would be just the opposite. They could go to a small time operator with much lower costs and provide that airline with the equipment they need to grow. I'd feel more secure if Xjet owned the aircraft.

XJT has always been a paper company in which CAL reaps most of the benfits. The dream airline model for any airline is to lease the equipment AND THE LABOR. Bob Crandall said in the 80's that and airline should consist of a company that employs no employees and owns no equipment. XJT is simply a way for CAL to lease crews to do North America flying. XJT is set up very similar to the way CAL Micronesia is except that the crews are on a different seniority list. With CAL still owning over 30% of XJT and with XJT stock keeping the CAL retirement plan alive, I doubt much will change in the near future. The Capacity Purchase Agreement is in effect until at least 2020 and I'm fairly certain that all 275 aircraft will stay at XJT for years to come. (with the exception of the 135 which will probably be replaced with the XR model) Giving those aircraft to someone else would be like UAL corp (the parent of United) giving the aircraft they have to Northwest to do United flying.

When 2007 comes along, CAL has the option to to get other carriers in the HUB cities. They will most likely use this stategy to whipsaw pilot groups and keep labor costs lower. If they do bring in another carrier, I doubt that any of the aircraft that XJT has will be "given" to another carrier. The only thing that would do is lose money for CAL because their ownership stake in XJT and the value of XJT stock in the CAL retirement plan would be lower. From a business person perspective, watch CAL sell most of their stock and use the cash, wait for another significant dip in the airline industry, buy back the stock when it is ridiculously low, then do it all over again. The XJT--CAL relationship will be around for some time.

 

[Mookie]

"Once again to another Skywest guy getting bent out of shape"

It's really going to suck. having to leave houston at the begining of summer. having to fly our own airplanes. no more white birds...noooooooooo. having our own rampers at the hubs....awful... being able to understand everyone on the radio frequency...uhhhggg. don't know what i'm going to do with myself. Can I now call an Rj an Rj, or do I have to still call it an embraer Jet. maybe we'll send a letter to SoCal and NorCal to stop calling us Rj's since it's so demeaning.

seriously though, this was great base. it was junior enough that people had alot of fun, but there were enough senior people who had experience with the SkyWest way, that things were done right. in hindsight, the mighty brA, specially those white birds, were not the right airplane, plain and simple.

Mookie

 

[Nova]

United didn't lose much when they lost FlyI/ACA.

I think we're a bit different that the ACA situation. First, we're a heck of a lot bigger in both size and cities served. Second, we are (perhaps not for long) the single small jet provider for CO. The void left by ACA was quickly replaced by Air Wiskey and Mesa both of whom where already flying for UA. Such an easy replacement with the hopes of no loss of flying wouldn't happen.

I'm also curious to the "ease" of replacement of our Mexico flying. I can't imagine a new carrier could easily transition into those markets due to getting Ops Spec. approval. Those markets are proving lucrative for XJT/CO so I'm sure CO wouldn't be quick to sever that stream of $$.

I can't see CO making any move against XJT until they sell off their remaining shares of stock. Being cash strapped I would assume that they wouldn't do anything to lower the value of the stock. I doubt they would unload the stock until it's somewhere in the ballpark of the orginal IPO value which we are far from now.

 

[rattler]

"don't know what i'm going to do with myself. Can I now call an Rj an Rj, or do I have to still call it an embraer Jet. maybe we'll send a letter to SoCal and NorCal to stop calling us Rj's since it's so demeaning."


And I stand by it. I haven't said "regional jet" on the frequency in 2 years. It's an ALPA thing anyway, not a COEX thing.

 

[vc10]

More like 19% as of one or two weeks ago. CAL sold some more. They're now down to about 10-11million shares (out of 54mm or so).

Your right. I think CAL will want to bring in another carrier to whipsaw us against. But, with that being said, CAL still ownes 30% of X-Jet.

 

[BluDevAv8r]

All CAL needs to do is take those airplanes that they own and lease them to your replacement. CAL owning the aircraft wouldn't give me a warm fuzzy feeling if I was an Xjet pilot. In fact it would be just the opposite. They could go to a small time operator with much lower costs and provide that airline with the equipment they need to grow. I'd feel more secure if Xjet owned the aircraft.

Dave,

CAL cannot just "take those airplanes that they own and lease them to" our replacement. We have sub-leased those aircraft and have first right of refusal on them if CAL does not want them. Should that happen, we pay a slightly higher lease rate on the aircraft over the fairly rate we are paying now.

Remember, the CPA does not terminate in 2007. On January 1, 2007 (with 12 months notice), CAL may use other feeders in the CAL hubs using jet aircraft. However, the CPA remains in full force and effect. There is no "renewal" required.

XJT has, for quite some time, been implementing various initiatives that will allow us to remain competitive with CAL and keep our business with them over time. Costs on an ASM basis have come down, as has the block hour rate. XJT has also lowered its top end margin guarantee from 11.5% to 10%. Other initiatives are in the works as well.

Our operational reliability and performance is second to none and CAL recognizes that. While we might be a tad more expensive than some other operators out there, we shall soon see if that incremental expense is worth it to CAL for the product that we provide.

-Neal

 

[BluDevAv8r]

With CAL still owning over 30% of XJT and with XJT stock keeping the CAL retirement plan alive, I doubt much will change in the near future.

....

If they do bring in another carrier, I doubt that any of the aircraft that XJT has will be "given" to another carrier. The only thing that would do is lose money for CAL because their ownership stake in XJT and the value of XJT stock in the CAL retirement plan would be lower. From a business person perspective, watch CAL sell most of their stock and use the cash, wait for another significant dip in the airline industry, buy back the stock when it is ridiculously low, then do it all over again. The XJT--CAL relationship will be around for some time.

Truckdriver,

CAL has recently (2 weeks ago or so) transferred a chunk of XJT stock to the CARP. This action has lowered CAL's ownership of XJT from 30.9% to 19.7%. I fully expect more of this type of action in the future, given CAL's current cash crisis.

Also, we will have 274 aircraft once the deliveries stop, not 275, unless you count FTD #1 due to the BPT crash.

-Neal

 

[mmmdonut]

Look for Co to Renegotiate the CPA to lower the block hour rate for an extension beyond 2007...xjt has THE BEST RJ PRODUCT IN THE BUSINESS....period...

Correct.

 

[Nova]

XJT has, for quite some time, been implementing various initiatives that will allow us to remain competitive with CAL and keep our business with them over time. Costs on an ASM basis have come down, as has the block hour rate. XJT has also lowered its top end margin guarantee from 11.5% to 10%. Other initiatives are in the works as well.

Where does our block hour cost stand now?

How much of our cost savings stem from the leaving of the flowbacks? (ie loss of high longevity pilots)

 

[Ben Dover]

Dave,

Remember, the CPA does not terminate in 2007. On January 1, 2007 (with 12 months notice), CAL may use other feeders in the CAL hubs using jet aircraft. However, the CPA remains in full force and effect. There is no "renewal" required.
-Neal

Neal,
Two words, BANKRUPTCY JUDGE.

While Expressjet is a quality organization with as bright a future as any regional, I wouldn't put too much faith in your CPA being in "full force and effect."

 

[Dave Benjamin]

Dave,

CAL cannot just "take those airplanes that they own and lease them to" our replacement. We have sub-leased those aircraft and have first right of refusal on them if CAL does not want them. Should that happen, we pay a slightly higher lease rate on the aircraft over the fairly rate we are paying now.
<snip>
Our operational reliability and performance is second to none and CAL recognizes that. While we might be a tad more expensive than some other operators out there, we shall soon see if that incremental expense is worth it to CAL for the product that we provide.

-Neal

Do you think your managment would retain aircraft if they lost flying? Just sit there and pay a higher lease rate to park them in a boneyard? Unless they had another contract to fulfill I suspect they would not pay leases on equipment that isn't being utilized.

SkyWest operational performance and reliability is excellent also. In fact the DOT rated them as the #1 ontime airline. But look at how much flying is going to Mesa, Chataqua, Colgan, and other carriers. For Continental to remain comptetive do you think they can afford much exclusivity with Xjet? As many others have said, it's truly a race to the bottom. UAL clearly doesn't care much about whether or not pax make it to their destination. Just take a look at the amount of cancelled and delayed Mesa flights on the monitors at any airport they serve. Unless oil drops and yields increase it's just a matter of time before Xjet faces new and dirt cheap competition. Mainline Co is already hitting their pilots for concessions.

I wish the Xjet the guys the best and hope they can hold on to their recent gains. You guys have a great commuter policy, decent work rules, and pretty decent retirement. I'd not only like to see you keep it all but I'd like to see some other carriers play catchup instead of lowering the bar.

The best hope is to get a job outside of 121 pax service and find a segment of the industry where the business plan does not consist of losing money on every ticket and trying to make it up in volume. Maybe freight, charter, or some overseas opportunity. I doubt that companies like Emirates and Cathay make it a point to lose money.

 

[Nova]

SkyWest operational performance and reliability is excellent also. In fact the DOT rated them as the #1 ontime airline.

How much of that ontime is ACARS reported vs. pilot reported? Do you think that Skywest would fair any better than XJet in the CO hubs regarding ontime?

 

[Mookie]

How much of that ontime is ACARS reported vs. pilot reported? Do you think that Skywest would fair any better than XJet in the CO hubs regarding ontime?

with a skywest run ramp....NO QUESTION!!!!!! acars or non acars, we'd do better.

Mookie

 

[hotwing]

How much of that ontime is ACARS reported vs. pilot reported? Do you think that Skywest would fair any better than XJet in the CO hubs regarding ontime?

with a skywest run ramp....NO QUESTION!!!!!! acars or non acars, we'd do better.

Mookie

Is this even necassary? It is hard to bend times with acars... You can not say that you would do better HONESTLY.

 

[Truckdriver]

with a skywest run ramp....NO QUESTION!!!!!! acars or non acars, we'd do better.

Mookie

Mookie is right on that one. The rampers in IAH usually aren't the most motivated group of ganstas. XJT may do a great job, but if you get a hardstand parking spot in IAH, your screwed. I would go postal if I had to park there every turn like SKYW does. It isn't uncommon to wait 15 minutes for rampers on the hardstand. When they do start making there way over to help you out, they move slower than molasses. If you get one of the 35 or so jetways however, things work out very very nicely.

 

[JetLinkin Park]

Mookie is right on that one. The rampers in IAH usually aren't the most motivated group of ganstas. XJT may do a great job, but if you get a hardstand parking spot in IAH, your screwed. I would go postal if I had to park there every turn like SKYW does. It isn't uncommon to wait 15 minutes for rampers on the hardstand. When they do start making there way over to help you out, they move slower than molasses. If you get one of the 35 or so jetways however, things work out very very nicely.

Where's my violin?

 

[DoinTime]

Where's my violin?

I don't know but I have some cheese that might go well with his whine.

 

[BluDevAv8r]

Where does our block hour cost stand now?

Looking at the 3rd quarter 10Q filing for 2004, when one divides our expense line by our block hours flown, our block hour operating cost is $1790.70. Over that three month period, our daily utilization was 8:33 per aircraft. Granted, this is the actual block hour cost yielded by the 10Q and not necessarily the quoted block hour rate paid by CAL to XJT. That number is confidential. However, this gives us a fairly good idea of where we stand.

Just for comparison purposes, when one does the same analysis on Republic Airways (CHQ), the block hour cost for their airplanes is $1354.53 showing a daily utilization for that period of 10:21 per aircraft. Just as above, this is the absolute block hour expense and not necessarily the contractual rate paid by Republic's partners to Republic as that number is not public either.

How much of our cost savings stem from the leaving of the flowbacks? (ie loss of high longevity pilots)

There is a cost savings from the flowbacks leaving but that is only a small piece to the pie. Remember that our expenses per ASM has gone down ratably on a year over year basis since the IPO itself. Why? Maintenance initiatives, longer average stage length, higher daily utilization numbers, more airplanes and block hours (expansion) to spread amortize the fixed costs over, etc. Also don't forget things like reducing management/clierical headcount several months ago by 85, which yielded $3.8 million per year in cost savings. Just this past summer, the 2005 block hour rate was renegotiated and in doing so, CAL and XJT pared down the top end operating margin guarantee from 11.5% to 10%. They also eliminated several performance incentives/bonuses (these were scheduled to go away by 2006 anyways).

I could run a quick back of the napkin analysis on the benefit of the flowbacks leaving (about 400 in total + another 100 or so from the 113) but not at this hour. My guess is that it won't show much more than a million or two decrease annually. This was built into XJT's costing model anyways because XJT had a pretty good idea when they were going to leave generally.

-Neal

 

[BluDevAv8r]

How much of that ontime is ACARS reported vs. pilot reported? Do you think that Skywest would fair any better than XJet in the CO hubs regarding ontime?

with a skywest run ramp....NO QUESTION!!!!!! acars or non acars, we'd do better.

Mookie

Frankly, I think this is a moot argument but because its late, I'll bite. Have you ever parked at a station run by XJT employees? I'm not talking about the IAH rampers, which are CO rampers but an outstation run by XJT employees, who operates a large number of our out-stations. For a true apples to apples comparison, one would have to let us choose who operates our gates if you guys want to choose yours. Only then could the analysis be fair and equitable.

But nonetheless, as I said above, I think this argument is kind of pointless. By in large, it isn't the pilots who are going to be the issue in running an on-time operation. Most of the other moving pieces are what causes delays. I'm sure the Skywest pilots do an excellent job generally, just as the XJT guys and gals do. But all we do is fly the plane - none of us make these decisions about who flies for who and for what, etc. Arguing on here about who has the better high school football team just doesn't make sense. Just my 2 cents however and now I, too, am guilty of stepping into this argument.

-Neal

 

[BluDevAv8r]

Neal,
Two words, BANKRUPTCY JUDGE.

While Expressjet is a quality organization with as bright a future as any regional, I wouldn't put too much faith in your CPA being in "full force and effect."

We aren't talking about a situation where CAL is involved in an 1113 or BK proceeding. I'm well aware of what occurs (or could occur) inside BK. But for now, just as I said above, our CPA is in full force and effect...now...and in 2007.

My intelligence and best guestimate is that CAL will do whatever it can to evade the BK process - even more so than its peers in the industry. They have very few vendors through which they can extract significant cost savings from in BK. For example, the large majority of their aircraft are leased at market rate. Where as AA saved hundreds of millions in refinancings (just outside of BK) due to the relatively old age of their aircraft which caused a lot of their monthly rents on their aircraft to be out of wack with market rate levels.

But furthermore, knowing what I know, I am pretty confident in XJT's ability to leverage its assets and its positives to ensure that we can continue to provide all of CAL's non-mainline jet flying. Time will tell. Nobody will know the real answer until a few years from now.

-Neal