The future of Comair? Shut down???

[General Lee]

No, you don't get it. You threw up a bunch of numbers, which I read, but you're still comparing apples to oranges. I want to see numbers for Delta and ASA. See, you're too bent on saying I'm wrong and how I failed to objectively prove your point. Typical Delta egomaniac. You keep making subjective statements, then using numbers with no relation to back them up. You, Fly Delta Jets 2, are a egomanicial moron.

Now, one more time. Put up a cost comparison of a Delta mainline airplane on a long thin route to an RJ. Or give up.

John, I think you are saying he should put the numbers up for an MD88 on a route with 50 pax only, versus the same route with a 50 pax CRJ? Is that right? Why would we have an MD88 on route with only 50 pax per flight? We wouldn't. That is the reason we gave some routes to RJs--like SLC to Great Falls, MT in the Winter. Not many people wanted to go up there in the Winter. (I visited family) But, with high oil prices, you would have to charge a lot more money to make it financially feasable, without taking a loss. Most people going to those small towns can't afford it, thus making it a loss. There will either be fewer flights to those cities, resulting in a funnel effect pushing everyone on to maybe two flights a day, or loss of service totally. We may throw in one or two mainline flights, and make sure those planes are full and profitable. Frequency is what Fred Reid (Greed) thought the businessman wanted when he ordered all of the RJs, and now he is running A320s/19s at Virgin America... Even he knew he got it wrong...

Bye Bye--General Lee

 

[FDJ2]

You're both right. There will be fewer 50 seat RJs in the future and the 50 seat RJ does make more sense than a mainline aircraft on some routes despite being less efficient per seat. Next topic please.

Bingo. There is a market for the 50 seaters, it's just not as big as it once was. There will be more 70/76 seat RJs, but fewer 50s, with a net loss of total aircraft.

 

[FDJ2]

No, you don't get it. You threw up a bunch of numbers, which I read, but you're still comparing apples to oranges. I want to see numbers for Delta and ASA.

I gave you the numbers, both costs and fleet reductions. If you choose to ignore them, that's your choice. Fewer 50s in the future. DAL will cut 35 in 1Q 2008 alone. We can ill afford to continue to subsidize the 50 seat gas guzzler.

Here's just a sampling of things to come. Notice the common denominator.

The high cost of oil
Delta can't afford to fly
Fare hikes were not enough, so several flights from SLC will be cut
By Paul Beebe
The Salt Lake Tribune
Article Last Updated: 01/06/2008 10:00:29 AM MST


With jet fuel prices refusing to retreat from record heights, Delta Air Lines is doing more than just raising fares, and some of the measures will hit Salt Lake City travelers this month.
On Tuesday, Delta will end nonstop service from its Salt Lake City International Airport hub to airports in Birmingham, Ala.; Des Moines, Iowa; Fayetteville, Ark.; Memphis, Tenn.; Milwaukee; and Sioux Falls, S.D. The airline cited high fuel prices, its biggest single expense.

Later in January, Delta will trim one flight a day to another 12 airports, including Washington Dulles in Virginia, Vancouver International in British Columbia, Kansas City, Omaha, as well as destinations in California, the Pacific Northwest and the Midwest. In total, Delta is cutting its Salt Lake capacity - the number of seats available to passengers - by 3 percent this year.

The action is part of Delta's larger goal to trim systemwide domestic capacity this year by 5 percent, cancel or reduce flying some aircraft and cut an unstated number of jobs to offset fuel prices that climbed nearly 60 percent in 2007 and may have wiped out the carrier's operating profit in the final quarter of the year. Also contributing to a lesser extent is a slight softening of demand for domestic travel.

Delta hopes the actions will save $400 million in 2008 and allow it to hang on to the financial recovery that began after huge losses and cutthroat competition from low-cost airlines drove it into bankruptcy in 2005.
"Given this, we are adjusting domestic capacity to reduce flying at off-peak times and to long-haul destinations that are served infrequently and can be better served via [other Delta hubs]," spokesman Anthony Black said in an e-mail.

Capacity will be scaled back "with minimal customer impact," Black said.
Others aren't so sanguine. Many Delta flights are already crowded. Drawing down the supply of available seats could make its aircraft even fuller. And that's likely to push fares higher. Moreover, some destinations that have been a nonstop flight away will be harder to reach.

"One never likes to lose any airline service, but with fuel prices as high as they are, it's not a surprise," said Michael Marnach, executive director of the Sioux Falls airport. The loss means 10,000 annual South Dakota travelers will have to find another way to reach Salt Lake or bypass the city altogether, he said.
If there is a common denominator, it's that all the affected routes are served with a mix of 50-, 70- and 76-seat gas-guzzling Bombardier regional jets that Delta and others say are inefficient to fly on long-haul routes where demand is limited.

"They are more costly on a per-seat basis. A majority of the agreements Delta has with its regional partners [such as SkyWest Airlines] calls for the cost of fuel to be passed from the partners to Delta. The high cost of fuel has reduced the number of markets where a regional jet can make money," said Michael Boyd, an airline consultant in Evergreen, Colo.

The cuts mark a turnaround from past airline practice. When demand for travel flagged, airlines often kindled interest in flying with fare cuts or promotional packages. That's changed. Now, airlines park some of their planes to bring down costs and pack the remaining aircraft with passengers. Delta, for instance, intends to ground 35 of its regional jets in the first quarter.

"We think . . . one of the best ways to manage the fuel crisis is actually not to fly the aircraft," Ed Bastian, Delta's president and chief financial officer, told analysts last month.

While capacity cuts may shore up Delta's finances, consumers will feel the pinch of higher ticket prices. Major airlines, including Delta, successfully raised fares 17 times in 2007, said Rick Seaney, chief executive officer of FareCompare.com, a Dallas-based online travel site.

"With oil slipping over the $100 per barrel mark today and legacy airlines continuing to drastically reduce capacity, consumers should brace themselves for continued airfare hikes in 2008," Seaney said Wednesday.
Whether Salt Lake travelers can expect more capacity trims is unclear. In his remarks to analysts last month, Bastian said Delta would take more steps to reduce the supply of domestic flights if fuel prices don't stabilize.
Black said the airline "will continue to invest in new services and destinations" from Salt Lake.

"It's really hard to know. The wildcard we're dealing with is the cost of fuel. We may see future decreases until oil prices can level out," airport spokeswoman Barbara Gann said.

In June, Delta will begin flying from Salt Lake to Paris. The airline's first transatlantic route between Utah and France is another element of the carrier's capacity plans. While domestic capacity will fall this year, international capacity is expected to increase at least 15 percent. Delta will add more than 20 new international routes this year as it continues to expand its overseas flights, where profits are higher and competition from low-cost carriers is less.

"It's literally a retreat from the domestic market," said George Hamlin, managing director of Airline Capital Associates, a Virginia-based firm that forecasts airline trends.
[email protected]

 

[FDJ2]

Here's some more light reading for you John. Here are some of the highlights from the Boyd Group:

It's Re-Engineer-The-Business Time...

On An Emergency Basis​

Sector One: Small Lift Providers
Say Good-Bye To A Lot of Regional Jets, Real Soon.
Fuel Pass-Throughs Will Pass Them Directly To The Desert
It should be back-to-the-drawing-board time for small lift providers, what some still call "regional airlines." Maybe time for a period of sheer panic, too. The issue: 50-seat and smaller RJs are being economically marginalized by skyrocketing fuel costs.

Major carriers will be looking to quickly cull out dozens of RJs in the coming months. And hundreds more in the next five years, with no replacement for this lift - or many of the markets they operate - in sight.

Most SLP agreements provide for fuel costs to be a pure pass-through to the major carrier, and that means the majors are eating a lot of red ink. A lot of RJ mission applications that once provided adequate revenue generation are now net drains on major airline systems. They cannot but move quickly to restructure (read: reduce) the fleets of RJs they're leasing in.

Faster Retirements Than Predicted. The Boyd Group's Global Fleet Demand Forecasts were the first to predict the decline in demand for new RJs, and also to predict that the number in operation represented a glut. That was as far back as 1999, when otherconsultants were still forecasting just the opposite from the comfort of their rearview mirrors, and the warmth of being within "the consensus.".

As attendees at our Annual Aviation Forecast Conference last October learned, retirements of CRJs and ERJs would result in global RJ fleets declining by over 1,200 units over the next ten years.

Now, with oil hovering at $100 a barrel, that forecast has been revised. The retirement projections are for over 1,700 RJs to come out of fleets for the same ten year period, with the rate front-loaded in the 2008 - 2013 period, representing approximately 835 RJs taken out of service in the US alone.

The net-new figure represents larger CRJs (mostly -900s) coming into SLP fleets to replace 50-seat -200s. But even here, there isn't a whole lot of demand going forward. There are no new-generation <70 seaters on the horizon to replace the current fleet of 50-seat and smaller RJs. That means new fleet mixes.



Late Night Oil Burning In The Planning Department. As we speak, planning departments at comprehensive network carriers are in full metal jacket status, working to moderate the level of financial drain smaller RJs are inflicting on their systems.


Legal departments are working, too, reviewing current service agreements with SLPs. Most contracts are relatively long-term - to 2013 or beyond. The problem is that there is no way that the current number of these RJs can be supported until then with jet-A heading to $3 a gallon and up. Culling the herd in is the cards.




Wholly-Owned SLPs Could Be Going Away? Maybe - just maybe - if the financial hit becomes too onerous, some wholly-owned SLP subsidiaries could be shuttered. This is not a drill - we are talking financial bleeding here. With fuel costs going up, the economy (maybe) softening, and the specter of labor needing and demanding increases, such an action is not out of the question.

Small Lift Providers To Watch. Clearly, 50-seaters are in the economic cross-hairs. And any jet airliner smaller than that is just marking time 'til the grim-reaper comes to take it to the Budweiser plant. So the question arises regarding how the SLP sector will survive.

The hard reality is that the SLP sector will be shrinking markedly over the next three years. Hard fact: there are more 50-seat jets than can be economically flown. Hard fact: that means cutbacks in the number of operators.




Effect on Air Service. CNCs will be doing some serious triage on their RJ operations. The objective will be to maximize revenue. Any market that was on the margin in the past is likely not going to be there on the next schedule change, or by the end of 2008. Here's a general template for RJ markets that may be victims of the reduction in 50-seat fleets.
· RJ markets whose traffic flows involve high amounts of low-yield (read: Florida) connecting traffic, are prime candidates for the chopping block.
· Any RJ market over 1,000 SM that has load factors under 70%, and/or has high concentrations of low-fare traffic.
· RJ markets that are inflicted with chronic ATC delays. That means service to/from some NYC area airports. To a lesser degree, ORD, SFO, and LAX. Remember, the SLPs are paid largely on a cost-plus basis, and 30-minute to 45-minute out-to-off times burn a lot of fuel the CNC gets billed for.
· Use of RJs for fill-in frequencies in high-density markets may also be given a jaundiced eye.
· Another target for cuts: RJs used by CNCs for competitive-harassment hub missions, i.e., flown head to head against larger jets operated by competitors, intending to bleed some traffic away and possibly put the competitor's flights below the profit line. A strategy that may have made sense with $50 oil. Less so with $100 oil.


As for new market entry using RJs - it's still possible, particularly if the new traffic flows represent better revenue streams than existing markets. In particular, the emerging industrial centers in the Deep South are prime candidates.
But for those communities where traffic is already weak, or have no service now, the price of RJ entry is now a whole lot higher.

 

[John Pennekamp]

I think, as Caveman pointed out, we're both right and the truth is in the middle. Some 50 seaters will be going away, but not all of them. At least not for quite some time.

 

[John Pennekamp]

John, I think you are saying he should put the numbers up for an MD88 on a route with 50 pax only, versus the same route with a 50 pax CRJ? Is that right? Why would we have an MD88 on route with only 50 pax per flight? We wouldn't. That is the reason we gave some routes to RJs--like SLC to Great Falls, MT in the Winter. Not many people wanted to go up there in the Winter. (I visited family) But, with high oil prices, you would have to charge a lot more money to make it financially feasable, without taking a loss. Most people going to those small towns can't afford it, thus making it a loss. There will either be fewer flights to those cities, resulting in a funnel effect pushing everyone on to maybe two flights a day, or loss of service totally. We may throw in one or two mainline flights, and make sure those planes are full and profitable. Frequency is what Fred Reid (Greed) thought the businessman wanted when he ordered all of the RJs, and now he is running A320s/19s at Virgin America... Even he knew he got it wrong...

Bye Bye--General Lee

You make good points.

 

[FDJ2]

I think, as Caveman pointed out, we're both right and the truth is in the middle. Some 50 seaters will be going away, but not all of them. At least not for quite some time.

We are for the most part in agreement John, we are just talking past each other. I never said that a larger mainline aircraft would necessarily be a better fit for many of the RJ50 routes.

When you asked,

"What's better, 50 people on a CRJ or 50 people on a Mad dog. Because you can't reduce frequency."

I said:

"Neither if it's losing money."

It just so happens that the CRJ 50s economics are impacted more by the price of fuel than a larger aircraft. While the segment cost may still be less, the CASM is still higher and there are fewer seats to spread the increased fuel cost across.

Is that the end of the CRJ50?

No, but it will have an impact on which and how many markets the RJ50 is profitable in.

The future for regionals will see far fewer 50s and more 70/76 seat aircraft. Unfortunately for many, it wont be a one for one swap.

To summarize, there is still a market for 50 seat RJs, it's just not as big as it use to be.

 

[John Pennekamp]

We are for the most part in agreement John, we are just talking past each other. I never said that a larger mainline aircraft would necessarily be a better fit for many of the RJ50 routes.

When you asked,

"What's better, 50 people on a CRJ or 50 people on a Mad dog. Because you can't reduce frequency."

I said:

"Neither if it's losing money."

It just so happens that the CRJ 50s economics are impacted more by the price of fuel than a larger aircraft. While the segment cost may still be less, the CASM is still higher and there are fewer seats to spread the increased fuel cost across.

Is that the end of the CRJ50?

No, but it will have an impact on which and how many markets the RJ50 is profitable in.

The future for regionals will see far fewer 50s and more 70/76 seat aircraft. Unfortunately for many, it wont be a one for one swap.

To summarize, there is still a market for 50 seat RJs, it's just not as big as it use to be.

Agreed!