Trouble ahead for Low Cost Carriers???

[T-Bags]

" I was merely responding to "dudes" snide anti-military remark.

OK Bag...i'm calling you out....where is the anti-military remark....

"yeah, it says I graduated from a service academy. you?"

I repeat...that says it all.



To me, there was an implied slam. If That wasn't your intent, then I apologize. But again, I invite you to refute my cost argument point per point.

 

[General Lee]

F9driver,

I really hope you are enjoying that retirement. If you HAD gotten on with Delta back then in 1963 or whenever and now retired, I bet you would have been a lot more comfortable. I know a guy who retired last year with $1.5 million lump sum, and also makes $10,000 a month. I hope your's was like that. (Probably not) Delta does have some problems, but we also have more cash on hand than most, which gives us more time. We also are trying to fix some of these with negotiations, and the economy getting better makes it easier. We aren't intimidated by the LCCs, we are watching them and adjusting--like with Song, which will beat some of them. You don't think that our ALPA people are taking care of us? What are you on old man? I guess you worked for management in your last years with Frontier, right? Follow what they say...right? They won't trick you......And guess what? The loads are improving, economy is getting better, Summer INTL will be great due to the Olympics......Should I go on? We'll be fine. Take care.

Dizel8,

How do you know Song isn't doing that well? The 70% load factor report was 6 months after the new brand started(wasn't that reported in Sep or AUG?? has it changed since then?? Dizel8 says...NO). What was Jetblue's load factor after 6 months? 30%? The Song store is actually quite busy supposedly, and the "Kate Spade" stuff is supposedly sought after. With the recent Noreaster storm, I bet more and more people will want to flock to warm FL---and a lot will fill Song and try it--and they will return. How did Jetblue do during the Noreaster? Ooops, their main base with 95% of their flights was shut down---that must have hurt. (Oh yeah, the single FLL-LGB bus completed the flight, and one or two roundtrips between OAK and LGB----the rest were cx) Overall, the Song brand is getting better known, the loads this chilly Winter will get better, and Song will grow and compete more against Jetblue---it's target. It is a great concept.

And T-bags,

Don't give in to everyone, man. Yes, those statements about the GED and Valuejet were childish, but relax and have a backbone. A lot of your arguments were good.

As far as the Delta CASM going down 30%, I don't think that will happen with a 1st class cabin on most Delta mainline aircraft. Reducing salaries and increaseing productivity will help alittle, but adding more Song flights (and seats--199), on longer flight segments will help more. And, if we continue to add the Comair/ASA CASM (average 14.5) to the Delta number, we will never get to that magic number everyone is looking for. We tried that back in the mid 90's when we tried the "7.5" program. Then, the economy got a lot better and we did great. These are cycles, and now we just have some debt that we need to take care of, and we will.......

Bye Bye--General Lee

 

[General Lee]

Just for you Dizel8 (it's also on the Jetblue stock thread):



JetBlue shares dive as margins are cut
By Caroline Daniel in Chicago
Published: December 6 2003 4:00 | Last Updated: December 6 2003 4:00


Shares in JetBlue, the most highly rated stock in the US airline sector, tumbled more than 17 per cent on Friday after it cut its fourth-quarter operating margins, increasing concerns about intense fare competition.


After the market closed on Thursday, JetBlue said it expected its operating margins to be in the range of 13-14 per cent, against previous guidance of 16-17 per cent.

David Neeleman, the chief executive, said: "We're faced with a challenging revenue environment due to capacity additions resulting in lower average fares, particularly in our western markets."

The warning adds to the concerns of a number of analysts about whether the low-cost carriers, which have enjoyed rapid growth during the downturn, can continue their expansion in the face of tougher competition from the legacy carriers.

The comments from JetBlue knocked the shares of other low-cost carriers. America West's shares fell 13.6 per cent to $11.91, AirTran's shares fell nearly 10 per cent to $12.05, and Frontier Air was down more than 8 per cent at $13.81. JetBlue closed down $5.52 at $25.86.

Susan Donofrio, analyst at Deutsche Bank, said JetBlue's announcement "only solidifies our opinion that now that the major carriers are beginning to regain their financial footing, they are becoming more aggressive with JetBlue.

"For example, Delta's Song, which competes directly with JetBlue, is now 10 per cent of the airline's overall capacity and is expected to continue its growth path."

Last month Sam Buttrick, analyst at UBS Warburg, noted that only twice during the past 20 years had small discount carrier margins exceeded those of the major networks. That was in 1991-93 and 2001-03, when the legacy carriers reduced supply.

Now that capacity is starting to come back, Jamie Baker, analyst at JP Morgan, reduced his fourth-quarter earnings forecasts for JetBlue to 17 cents from 22 cents.

He also warned that in spite of the recent steep fall in JetBlue's shares they could come under further pressure if Delta succeeded in getting "a truly meaningful agreement with its pilots sometime in the first half of next year".

The comments add to other negative airline news this week.

Southwest said it expected its December load factors to slip below last year's levels of 66 per cent.

It added that, in line with its previous forecasts, its overall unit costs in the quarter would rise by 4 per cent compared with last year amid higher fuel costs.




Is the media wrong? I tend to think so a lot---especially when it comes to Delta. (Of course!!) But, you have to read it and think about the motives. We shall see.....You might be seeing a lot more of those Thong green 757s flying around next to you---and we have an advantage: we can get the planes faster than you (we already own them)---you are waiting for Airbus and Embraer (which is having big problems with the EMB-170 and -190 certification). We should get 15 more for Song atleast next year alone.

Bye Bye--General Lee

 

[Ty Webb]

Saying Delta Express was a "success, but with the wrong aircraft type" is an oxymoron. That sounds to me like management's excuse, and you sound pretty silly repeating it.

As for fending off SWA, yeah, I can see how that worked every time I am in JAX, MCO, TPA, FLL and PBI!

 

[SWAdude]

T-bags,

The only thing I know is that no legacy carrier can lower their cost and remain a full service competitor. Their infrastructure makes it impossible to reduce their costs that low and remain competitive with other legacy carriers. That is their core business.

As for going point to point your way, I really have no interest in speaking that kind of language. I understand enough of it, but really have no interest. My point of view is more practical instead of theoritical.

 

[T-Bags]

Gen Lee,
I think "F9" comes not from FRNT, but from his experience as an F9F fighter pilot.

"And T-bags,

Don't give in to everyone, man. Yes, those statements about the GED and Valuejet were childish, but relax and have a backbone. A lot of your arguments were good.

As far as the Delta CASM going down 30%, I don't think that will happen with a 1st class cabin on most Delta mainline aircraft."

First you say I'm childish then tell me to stand behind it and grow a backbone?! Jeez, i can't win!!! . My intent is not to spin folks up, but to give them a perspective they aren't getting from chatting around the Koolaid jug. So if a little humbleness appeases, fine. you'd thought I slapped somebodies mom with the reactions... I may have shaved her back, but I never slapped her TY!!! As to DAL CASM, be careful or I'll accuse you of that TY GED program... The lower CASMs are ONLY for ADDITIONAL flights. Again look at the methodology and run it by the numbers guys the next time you have one of those ATL pow wows. The trick is making sure you add flights that will also add SOME level of revenue, and I think that is EXACTLY what is starting to transpire.

 

[General Lee]

T-bags,

I was only joking with you. I think you have great arguments. And, on this board---F9 means Frontier (that is their two letter/number identifier), and this is an airline section of Flightinfo.


Ty,

A lot of the Southwest flights in FLA do not compete directly with DL. They mainly competed with us out of ISP (Long Island), and we dropped that service when we went to Song because we didn't have gate space for the 757. I flew Delta Express when you were still in the right seat of your Westwind 1, and we were always full. The reason we didn't make more money is because we had the wrong aircraft. We were flying 737-200s with no IFE between huge cities on the East Coast. The flights were full, but the pax weren't that happy. The reason we shut a lot of it down after 9-11 is because our most junior pilots were FOs there, and when DL decided to furlough pilots in NOV of 2001 after 9-11 (400 the first month), about 350 of them were DL Express FOs, and they couldn't furlough out of seniority. Song has better planes, a better attitude (with IFE), and better efficencies (better fuel burns, quieter...etc)---and will do better. (It even has a store...yippee)

Bye Bye--General Lee

 

[SWAdude]

T-Bags,

If you don't work for Delta, why all the interest in them.

Also...who do you work for??

 

[Ty Webb]

Talk about denial. If the airplanes were full and you weren't making money, it means it didn't work! Andd even more foolish- it lost money and probably cannibalized your own passengers.

 

[FlyBoeingJets]

---our VP of Marketing said that last Summer "We left money on the table..." since we parked most of our MD-11s that could have been running full to Europe and atleast bringing in some extra revenue that could have made the losses smaller perhaps.

.... the point of these articles was that it would be more expensive for the LCC operators to add new cities and planes rather than the Majors--because the Majors already have the planes (in the desert), have the gates (unused now), have the people waiting to come back to work.(for less)

Bye Bye--General Lee

General,

The title of your thread should read "'Trouble ahead for the STOCK of LCCs". Don't confuse a pullback in stock for other investment opportunities for a weakness in the business model. What we are looking at is the beginning of lower margins and a more fierce pricing environment. At best the legacy carriers are just now BETTER prepared for it, not in a superior position.

You've got to be kidding when you claim your MD-11's would have been full to Europe. To take them out in that case would have been insane. Are you buying management's Jedi mind-trick??

Also, tell me how its cheaper to bring pilots off furlough that are already on 2nd or 3rd year pay instead of bringing on new hires at the LCCs?? I know when Delta brought back the 250 that some are sitting around waiting for training and drawing a paycheck. Don't refute it, I know its true.

Read aloud two or three times until commited to memory...

"It is more expensive to bring back pilots from furlough than to bring on new hires."

Sure its cheaper to bring 737-200s out of the desert, but they waste gas and will wear out sooner than a brand spanking new -700 or -800. That will lead to higher costs in the medium term. Yes the international routes will save Delta and other hub carriers, but until your wage concessions, retraining costs, and refurbishing costs are accounted for you will continue to hemmorage cash. I'm not buying the story that Song is a "real" success yet. It is a framework for the restructuring of Delta's domestic operations. When you go into contract talks that will be the kicker. Pilots are going to be paid less at Song if you want it to be successful. Otherwise, you doom Song to only limited success. Until then you will give up routes to LCCs with new planes.

Delta's short term savings on Desert planes will come to haunt you in the long run. What's the average age of planes at Delta??

Wake up and smell the coffee General.