Trouble ahead for Low Cost Carriers???

[T-Bags]

T-Bags,

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

Also...who do you work for??

Dude,
The title of this thread NEVER mentions DAL. I look up the numbers for them because thats where the action was, dillusional AT guys riding Gen Lee. If you'd like, i can make the same case using UAL, AMR, NWA, or CAL. U could be tough...

I chose to keep my employer private. I prefer to argue the merits of my position, not who's boss can beat up your boss. Quite frankly, when folks ask who i work for, it is an indication to me that they've got nothing to add on point and want to go personal. I'm just not interested in that. If, for your own information, and to understand my own personal biases (we all have them), you'd like to know anything about me, first quite calling me a "tool", pm me and promise to respect my privacy and I'll tell you whatever you want to know.

As to you "practical" knowledge, you appear to have plenty by your bio, and apparently she was a cruel mistress. I'd contend however that it is imperative that we as pilots get a better understanding of the business side of the industry, lest we get "played". Our respective unions hire guys to tell us what we want to hear. A case in point for you guys is the implications that the expensing of stock options will have for your bottom line. It's coming, and it's better to negotiate how those changes will affect your contract from a position of knowledge.

 

[Dizel8]

Gen,
those numbers were recently submitted by Selvaggio. I have no clue if they have improved, only that Selvaggio is looking for better. Of course, I have no idea if they did, since DAL does not release numbers for Song, as they did not for DLX.

Yeah, the snow was pretty bad, but your numbers are in error, we really did not cxl a lot of flights, despite the wx. JFK did way better than LGA, which Song serves, not sure how EWR was, but would imagine it was about like JFK. I think we both can agree, that whenever wx hits, it affects LGA worse than either JFK or EWR.

After six months, jetBlue was seeing great load factors, but do not have the numbers in front of me, so that is only my story. FWIW, jetBlue had to stop advertising for a while, LF were getting to high and we were turning people away, something we did not want to see. The store in Soho is obviously to increase visibility of the Song product, I am far from a marketing genius, it may indeed be a great idea.

I never said Song was not a good move, DLX was losing marketshare and something had to be done. Song, emulating jetBlue which emulates SWA, may be wildly succesful.

As far as the stock is concerned, while it was interesting to watch it run up to 70, most think it got way ahead of itself. So we had a correction, followed by a downgrade and revised EPS numbers. The stock took a serious hit, look at the volume, way above normal.

I try to keep things in perspective. I like my company and they do pay me, so I will give them 100% and defend them. I am aware, that the avaiation biz is full of failed carriers and doing my share, to make sure jetBlue does not follow in those footsteps. I am also aware, that the traveller looks for the biggest bang for their buck and that the possibility of Song being willing to lose a billion dollars to run jetBlue out of biz is a possible scenario.

 

[JerkyHerky]

As the economy rebounds (international and domestic) and corporations increase earnings one would expect to see more business butts in the seats of the majors - especially the non LCC ones. Int'l business travelers will not be flying the domestic LCC's and will not put up with the cattle car seating, elbow to elbow, first come first serve seating - particularly on long legs. And I can tell you from experience that it sucks to be eligible for a first class seat only to have only RJs serve a 2.5 hr route (yeah, you do get to board first as a "preferred customer...whoop de doo!)

The point is that the niche for full service carriers will increase as business travelers do, especially if the the carriers avoid that illogical & idiotic fare structure that had the 20% business travelers subsidising the other 80% leisure travelers (i.e. United's pre 9/11 business model)

 

[General Lee]

Flyboeingjets,

You have GOT to be kidding me......Did you or did you NOT fly on Delta to Europe last Summer???? I did 3 times, and I also looked at the loads everytime I went thru terminal E at ATL when my flights parked there. The three times I did go (6 total flights)--I sat in the jump 4 times (longest MXP-ATL 10hrs 45 min), and the other two in steerage (coach). We lost money big time by NOT flying them, and our VP of Marketing admitted that---yes, she did.

Number 2---you don't think that additional LCC flights will affect you at ATA? You don't? Look at Midway---you are now getting more and more competition from SW because their new 73Ns can fly nonstop to the same big cities your 738's and 757s go to. Recently they have added SEA, PHX, LAS, LAX, OAK, SJC, SAN,FLL, TPA, MCO, PBI, and will add PHL eventually. But hey, that won't affect you guys, right??? It sure will when the others start adding more planes and looking for large cities to feast off of.

About our 250 guys that were brought back from an "illegal furlough." Sure, the last 120 or so (brought back Fri---Oct 5th was re-orientation) were told that they would have to wait until the next bid---which would be in JAN---but would be re-integrated back into the fleet (due to reitirements) and should be back in training by March. The others have already been awarded new aircraft (most got what they wanted --ATL MD-88 etc, even a couple SLC 733). Did you expect that they would sit back in an airplane immediately? I didn't. But, you expect them to sit out doing nothing for 6 or more months. Wrong!!! We are short in some categories, and the training pipeline is currently FULL. Maybe we should kick some of your guys out of our training area to make room since it is full.......

About the 737-200s. Yes, they are older, but paid for. We have many spare parts, and they actually fit into the "100 seater" market. That's right, there are some routes that cannot support a 738----and we know that. Like this Winter, we are using them on two daily ATL-YUL (Montreal--Dorval) runs---because the 737-800 might over do it---and that is fiscally smart. Got it? (You are losing this argument!!!)

So, you don't think Song is doing well? Hmmmm. How is ATA doing? You guys are really "bonding" together. I think Song is doing well for being around 8 months. This cold Noreaster can only help. Will we make Song the domestic feed? I don't think so, because it primarily targets the customers who only want cheap fares. A lot of our product has first class, and as the economy grows, more people want that. You are making fun of us as the economy gets BETTER. More and more of the rich will fly on us to Europe, the Carribean, etc. this Spring and Summer than ever before----and our loads over Thanksgiving were the BEST WE HAVE EVER HAD---and the fares probably weren't discounted much on that last Sunday. If the economy were still tanking, I'd be more worried....

You think Song pilots need to be paid less for it to be successful. Hmmmm. So, you think an extra $30 an hour for the Capt and an extra $15 for the FO per hour really makes or breaks an airline....Hmmmmm. Hey Leo, you've got a new cronie named "Fly Boeing jets." Essentially each passenger pays the Capt about $1.20 cents an hour (199 seats), and the FO makes .70 cents per hour per passenger on Song. Is that too much on a fare ranging from $99-299 each way? A buck 20 an hour? Too much. Hmmm.


We do have some older planes, but overall our 120 757s, 70 or so 767, 8 777s (2 more on the way), 20 or so 767-400s, and many MD-88s/90s, and 33 737-800s are a lot nicer than your super stuffed 757-300s. Talk about sardines. Your 757-300s are so stuffed they carry more than our 767-400s. (our first class section full pays more than your whole 753, and then we carry cargo)

So, again tell me how ATA is not going to be affected from future LCC expansion? We are adapting and will win the "cheapo" crowd with Song, but still carry 1st class passengers on mainline flights. We have cut back on the fat, and now we are bringing back capacity next year to compete more with Jetblue.



Bye Bye--General Lee



PS---this is getting really old. If anyone wants to read the real intent of this thread, read the first article. Adios....

 

[Dizel8]

"We are adapting and will win the "cheapo" crowd with Song."

Such arrogance is unbecoming a gentleman, I think I know you better than that.

Keep the stick on the ice

 

[General Lee]

Dizel8,

You may be right. That was a little arrogant. I should change it to "I think we will do well with the "cheapo" crowd."

Sorry.

Now really, I won't be looking at this again.....

Bye Bye--General Lee

 

[SWAdude]

T-Bag

" A case in point for you guys is the implications that the expensing of stock options will have for your bottom line. It's coming, and it's better to negotiate how those changes will affect your contract from a position of knowledge."

Be rest assured I know my situatiion with our stock options a whole lot better than you do. And I can tell with that statement alone you don't work for SWA...you really do think your an expert on everything. So be it.

 

[SWAdude]

T-bag,

Maybe this will heip you understand what our position is on the expensing of our options.

The expensing of options on the Income Statement is more about political correctness than it is about good accounting.

Lets look at what happens when expenses are booked. Lets assume the pilots get a 10% raise, which increases the compensation expenses by 45 million dollars.

Compensation expense would be debited 45 million
Cash would be credited 45 million.

The net effect is a reduction in cash flow by 45 million.

This happens with most all expenses, except options.

Lets say the company is required to expense 45 million worth of options as compensation expense. Here is the booked entry:

Compensation expense would be debited 45 million
Capital in excess of Par would be credited 45 million.

Capital in excess of Par is only shown on the Balance sheet, while the compensation expense would be reflected on the income statement.

Note that cash is not touched in the option expensing. As a result, even if options are expensed -- the cash flow would remain the same! Or would it?

The funny thing about this is cash flow would not remain the same. Cash flow would increase if options are expensed.

Why?

The expensing of options will artificially lower the reported earnings and we pay taxes on the earnings. So if earnings are lower, then less tax is paid, and since the cash account is not affect with the option expensing, the cash flow would increase becaue the taxes would be lower.

The bottom line: no on is quite sure how the options would be required to be expensed, and it is entirely possible that if they are required to be expensed, that the market will simply find a new way to value companies -- it would probably be more cash flow related.

I hope this helps.

 

[T-Bags]

Yep you got me!!! I haven't a clue about the effects on shareholder equity of moving stock options to "paid in capital" or the implications to net margins when stock options are amortized over the vesting period as "pre-paid employee expenses". Boy do i feel silly. Please enlighten me. You seem to think you've got it figured out. I could use your help in clearing it all up. if you are bored, here's a little recreational reading (might be a waste of time since you contend you have a full understanding of all the implications of the various accounting schemes...) The summery is at the bottom. The full text will cost you, but it would appear from your statement to be money well spent....



http://harvardbusinessonline.hbsp.h...;jsessionid=CFKSD0TUJVU5YCTEQENSELQ?id=R0312J

 

[SWAdude]

I've grown tired of you...good luck to you...go ahead...you get the last word....which must be what you need.