Trouble ahead for Low Cost Carriers???

[General Lee]

Reuters
UPDATE - Shares of JetBlue, others drop sharply on warning
Friday December 5, 4:35 pm ET


(Recasts, adds detail, closing stock prices)
NEW YORK, Dec 5 (Reuters) - An uncharacteristic earnings warning from JetBlue Airways Corp. (NasdaqNM:JBLU - News) spooked investors on Friday, driving its stock down 18 percent and pulling share prices in the rest of the low-cost airline sector lower.

JetBlue's stock, a favored but pricey pick on Wall Street, posted its largest-ever one-day percentage loss during the session, and closed down $5.58 to $25.80 in active trade on the Nasdaq, where it was the net loss leader.

Nearly all lower-cost, regional carriers traded sharply lower on Friday, and shares of major U.S. airlines dropped as well, on new fears that fourth-quarter revenue will disappoint.

The low-cost sector losses were led by JetBlue and America West Holdings (NYSE:AWA - News), which was down 14 percent.

New York-based JetBlue said late on Thursday that lower air fares and the recent California wildfires would push its fourth-quarter operating margin down to between 13 percent and 14 percent, compared with the 15 percent to 17 percent it had previously projected.

In the third quarter, JetBlue's margins hit nearly 20 percent, a level almost unheard of in the struggling U.S. airline industry.

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

JP Morgan analyst Jamie Baker said in a research note that JetBlue's outlook could have consequences across the low-cost carrier segment.

Lehman Brothers analyst Gary Chase said the JetBlue announcement and signals of some weakness from low-cost pioneer Southwest Airlines (NYSE:LUV - News) caused him to cut estimates and stock price targets on most of the companies he follows.

"While we had hoped for significant strength in the holiday period, it now appears that the industry is less confident in current revenue trends," Chase said.

Shares of airlines across the board have plunged this week, in reaction to the drop in confidence and news that oil prices are likely to stay high.

Regional airlines America West (NYSE:AWA - News) fell 13.7 percent to close at $11.91, while AirTran Holdings (NYSE:AAI - News) dropped 10 percent to close at $12.05, both on the New York Stock Exchange (News - Websites) . Frontier Airlines (NasdaqNM:FRNT - News) dropped 8.7 percent to close at $13.81.

Southwest also fell, closing down $1.01 at $15.59 on the Big Board.

Lehman's Chase said he now expects JetBlue to earn 16 cents per share in the fourth quarter, down from his earlier forecast of 22 cents.

JP Morgan's Baker also cut his profit estimate for the quarter to 16 cents a share from 23 cents. He is lowering his earnings forecasts to 99 cents a share from $1.10 for 2004 and to $1.25 from $1.33 for 2005.

JetBlue and other airlines were hurt in October when dense smoke shut down San Diego's airport, and Southern California airports were closed for more than 12 hours when a blaze threatened an air traffic control facility near the city. (Additional reporting by Kathy Fieweger)




Now you can also say that the Majors stock prices couldn't fall much lower, and it has been tough on everybody. But, the addition of new LCCs---like Song and TED---will add excess capacity and take away passengers from Jetblue etc because the passengers will get the same price for a ticket, but get other things like better frequent flyer programs, and better IFE. Let's face it---passengers these days want the lower fare and the extras. They get really mad when they look at their onboard meal and say, "What is this?" even though they only paid $59 for the ticket. Airlines have to go out there and offer more for less. But, if your business is only based on low cost domestic travel, you could be stuck. That is where the Majors will do better----there isn't as much competition on INTL routes. For example, Delta can charge whatever they want on some of their INTL routes--like ATL--Munich or ATL--Tokyo because there are businessmen who want convienence and will pay more for saving time. It is good to have more than one side to an airline business, not only a low cost domestic version. But, I don't see Jetblue or Southwest going away anytime soon, but they will have to fight each other, especially when Jetblue gets some of those EMB-190s. Where are they going to put them? On the East or West Coast? Then throw Song 757s in there with 199 seats flying in and out of the NE. How about Spirit? ATA? TED?This is going to get crazy, and the high priced INTL tickets may be the one savior for some of the Majors.....

Bye Bye--General Lee

 

[~~~^~~~]

But General Lee : JetBlue had a "earnings warning." How long has it been since Delta had any "earnings?"

Delta has run up 10.4 billion in debt and continues to finance losses at 10% rates. So it cost Delta $1.00 to reduce Jet Blue's earnings by $0.50 and Delta financed the dollar to begin with.

In 2005 those dollars have to be paid back. I'm hoping for a miracle and building a financial life raft since your MEC appears intent on sinking the ship.

~~~^~~~

 

[General Lee]

Fins,

We can argue how we got to that state (buying a lot of RJs for your use), but I won't. We have already cut a lot of the "fat" out, and we (the pilots) are in negotiations to help with our share. A paycut from us will allow the airline to gain access to more of the financial markets, and help refinance that debt at lower rates. As I have said before, debt is ok as long as you can service it. With the strengthening economy comes higher fares and better times. The pension problem you have elluded to often is shrinking with the higher stockmarket and interest rates. If the economy was still tanking, I would be a lot more worried. As far as when will we have profits again, you probably know that profits are just an opinion. Arthur Anderson had lots of opinions on that subject. Yes, since Enron things have changed a bit, but numerous "one time charges" all bundled up now make things look bad. Last Summer we had a couple months of operating profits, and the bad Fall season that we knew was coming is over, and the holidays have started off well, with a good Spring and Summer ahead of us.

The Dalpa MEC employs an Investment Bank and numerous other specialized people who have looked at the Delta books and made decisions on the amount of money Delta NEEDS, not what they WANT. We also won't give up money to buy you more RJs. Nope. (Your CASM is a lot higher than ours--we need bigger jets flying some of your routes) Any money we give up will hopefully go to helping with the debt, and not lining management's pockets either. It was interesting seeing that statement in the recent Dalpa proposal to the company, "Career protection within Delta/DCI brand." What does that mean???


Anyways, the whole point of this thread was to question "What happens when all of the LCCs start fighting eachother, and will there be any profits to be found with the large discounted tickets." I stated that Delta and other Majors luckily have another outlet which does not have a lot of stiff competition, and that is the INTL arena. I was looking ahead to the future of the LCCs and what might happen.

Bye Bye--General Lee

 

[R985]

ATA- Who?

Once again ATA gets left out of the dialog. ATA went against the trend and their stock closed up today at $9.75 a share. Up 2.02% today. Just out of curiosity I checked the one year performance of the stock. Up approximately 69% since 12/01/02.

 

[DrunkIrishman]

We can argue how we got to that state (buying a lot of RJs for your use

Yeah, its buying rj's that got delta where it is. It has nothing to do with flying empty airplanes.

 

[Ty Webb]

I think you're barking up the wrong tree, General. As someone else pointed out- decreased earnings are just that- decreased. That's a far cry from losing money.

If fares ever get to the point where the LCC's are losing money in the long-term, you can bet that the majors will have been relegated to the LA Brea tar pits of history.

 

[rjcap]

---like Song and TED---will add excess capacity and take away passengers from Jetblue etc because the passengers will get the same price for a ticket

Most likely those passengers flying on Song and Ted are cannibalized from Delta's and United's mainline operations.

Regarding those wonderful mileage programs. Most passengers have already realized the cards are stacked against them when redeeming those mileage points.

Gen Lee.

Leo's got his 16 million and you guys are left holding the bag of debt ( from all those RJ's of course).

Who got screwed ??

One more question. Is mainline going to submit an RFP for those 45 RJ's ??

 

[General Lee]

Ok, I will try to answer all of those:

R985,

If you look at my first response after I put the article up, three lines up from the bottom, I put ATA in there. I know they are a good LCC.


Drunkirishman,

The RJs aren't the "magic answer" either. We lose customers who feel uncomfortable on them on long flights (DFW--OAK or DCA--DFW), and now that jetblue or Airtran will start overlapping them and start charging super low fares, we don't have enough seats to cover the costs. RJs aren't the cure-all. Sure, they gave us market presence when we needed it, but now we need larger airplanes to spread out the costs. A lot of our current debt is due to current RJs we are still getting, but the kicker is that our guys in ATL worked out such a deal---that if we say no to them now, we will actually take more of a hit because we got them in a "quantity" deal. So, we still have to take the ones we bought. Why is Delta asking for 45 more (not from Comair or ASA probably)? Good question.


Ty,

Yes, I would rather have decreased earnings than losses. Who wouldn't? My question was what will happen when there is such a large amount of LCC's all fighting with eachother, and what will that due to future profits? You have noted many times that our costs will have to come down, and we are doing just that. We have 2500 less pilots than pre-9-11, and 16,000 less total employees, more Kiosks, etc..... Your costs at Airtran will eventually go up, like you pilot pay costs---you said it yourself--you will be making more coming up here. I, as it looks like today, will be making less. The LCCs are not keeping their costs the same, but they are increasing theirs too. Southwest pilots pay is getting really good, and the other employees (like the flight attendants) want more too. Do you see my point? More LCCs and more cheap seats will not help your future profit margins. I just said that the INTL side of the Majors is not really faced with that right now.


RJCAP,

Yeah, the $16 million Leo got stung, but I think we will be better off. As far as Song and TED taking prime mainline routes, I disagree. I still think the prime money out there is at the hubs. We all know that people in the big cities want cheap fares and nonstop service. So, we made Song to take those cheap people nonstop and left seats open for people who have to go through ATL or CVG to get to somewhere that doesn't have LCC service. All those people you fly into ATL on your RJ are paying a little more or a premium to fly through ATL and connect onto that 767-400 to FLL or MCO. Therefore, the seats at the hubs are worth more. We don't want those people who want the cheap fares in BOS, for example, to use that premium seat in ATL to go onto FLL---we want it to be sold to that person you just flew in from Peoria. It will cost that person a little more. So, that cheapo in BOS flies on Song, likes the IFE, and comes back again and again, and stays out of ATL. Also, Song only flies two flights a day out of ATL(to JFK), and then avoids CVG and ATL. TED, on the otherhand, will be fighting Frontier's presence directly at the hub in DEN, and will be cannibalizing some of their own United mainline routes already established from DEN---like to PHX, RNO, and FLL for example. Song keeps those expensive seats at the hubs.

Also, I don't think mainline is doing the RFP for those RJs.

Bye Bye--General Lee

 

[DrinkSweetTea]

Im not certain that the FLASH of the LCC will LAST. It certainly has for Southwest, but Jetblue is yet to be seen. How long will the forced "fun" flying last on Jetblue? Do you see passengers saying "Quit making jokes, and lets go". I can see that happening. I can also see now with projected economic increases that people will once again be flying from high fared airports rather than driving the distance to a lower fare carrier served airport. The song product seems to be a good product thus far, and also allowing passengers to earn miles or use miles while flying to airports not served by that portion. Just some thoughts...

 

[General Lee]

DrinksweetTea,

I don't think low fares will ever become out of style, and there will always be a portion of the flying public that will only fly for the lowest fare. As the economy gets better, the business section will fly more, and they will help with our bottom line. The Internet has also been a huge factor, and one that will probably be there in the future. But, it has helped us cut costs in the reservations department. Those that were very cost concious after 9-11 or when the economy was tanking, may not drive an extra hour to JFK to pick up that cheaper flight. And, now that cheaper flight can be found on other airlines, even ones that are closer to them.

Bye Bye--General Lee

 

[Ty Webb]

General Lee:

Thanks for your articulate, well-reasoned response- and I mean that in all sincerity. I will try to respond:

My question was what will happen when there is such a large amount of LCC's all fighting with each other, and what will that due to future profits?

I don't pretend to be a guru, but from what I have seen in the trenches, we generally avoid going head-to-head with other LCC's. There is too much low-hanging fruit, and most of the LCC's have a different niche to fill.

For example, SWA has generally avoided congested airports, and does not serve ATL. Therefore, most of our routes don't compete with theirs directly. For example, they avoid BOS, EWR, LGA, LAX, SFO, DCA and (and, until now, PHL) and in places where we both have a presence, like TPA, MCO, BWI etc. we generally are going to ATL or are doing direct flights to non SWA-direct cities, so, in that regard, we co-exist just fine.

The JB incursion into ATL was an aberration, and we were largely responsible for discouraging their ATL ambitions, I think. It is one thing to have competition from a major, but another to get it from another LCC, and on their home turf!

You have noted many times that our costs will have to come down, and we are doing just that. We have 2500 less pilots than pre-9-11, and 16,000 less total employees, more Kiosks, etc.....

True. But I doubt you will see anywhere near the 8 cent level you need (especially with RJ's doing 49% ASM) but we will never know, since DAL chooses not to reveal the unit CSM's.

Your costs at Airtran will eventually go up, like you pilot pay costs---you said it yourself--you will be making more coming up here. I, as it looks like today, will be making less.

This is true, but as was noted in a Motley Fool article today, our labor costs only make up 29% of our overall costs. Here is a link to the article (which you have to join, but it is free and painless) http://www.fool.com/news/mft/2003/mft03120501.htm?ref=foolwatch

The LCCs are not keeping their costs the same, but they are increasing theirs too. Southwest pilots pay is getting really good, and the other employees (like the flight attendants) want more too. Do you see my point? More LCCs and more cheap seats will not help your future profit margins.

LCC workers want more money, it's true, but they also work their butts off to control costs. How many strings on the DALPA website are devoted to APU usage, or brake wear, or ways to safely decrease turn time? I don;t know, but from watching some of these DAL skippers taxi, it would seem that the majority must be about "How to taxi more slowly to increase pay"!

Just kidding, but LCC work requires a moitivated work force, and it is very hard to get people to go backwards (ie give up bennies and pay and still be productive).

TW

 

[Bake]

Ty, I am going to get completely off the subject but SWA hardly avoids LAX. OK, you can continue your discussion. Thanks for your time.

 

[Ty Webb]

Sorry, I thought SWA served the outlying airports, but not LAX. I see from their website that I was mistaken.

 

[Bake]

No worries, I make 1 mistake per minute. Just ask my wife.

 

[General Lee]

Ty,

I thought your response was good too. I think you are correct on some points. True, you do not go head to head with many LCCs---it seems that Airtran likes to raid hubs. (Not only ATL, but PHL, and now DFW) That is an interesting practice, and one that has done well for you so far. The only thing that can bite you there is looking for more gate space to increase those endevors. (yes, you are building a new terminal in ATL) I think setting up shop in DFW against AA was great, but I am trying to think of more hubs you can raid next. You will need to go to a hub that doesn't have another LCC there. Your BWI mini-hub has Southwest there, but you don't really fly to the same cities. (except some in FLA--MCO/FLL/TPA) I guess IAH could be next (although you go to Hobby I believe), ORD doesn't really have the space or slots, and DTW and MSP might be prime if you buy enough Type 4 de-ice fluid. The Airtran hub raiding strategy is a good one, but with the ever growing LCCs, there will be some overlap. You mentioned PHL and Southwest. That may not help your cause there, and Song does not serve there at all.


As far as our costs with CASM, you are right again---our CASM is higher becasue we INCLUDE ASA and COMAIR in our average. Our Mainline costs are actually not that high---probably in the 8's, but add on the 14.5 CASM from Comair and ASA, and the average rises. Only the pilots are paid higher than most, partly because we have only one union and one contract. That contract is currently being renegotiated a tad....which will probably lower the CASM a little too.


As far as LCC workers working their butts off, I believe it. But, the Southwest flight attendants don't want to pick up trash between flights now. Hmmm. They must have not worked at a "commuter" (now called a regional). That was standard practice, and even the pilots helped. As far as I know, we do not keep on the APU 1 minute longer than we have to, and we taxi out on one engine unless there is no waiting anticipated.
I don't think we fly around with the gear down wasting gas either. We absolutely have bullitens on our sign in computers giving ways to save the company gas and other helpful hints that most of us follow when we can. We have been shifting airplanes around now to better fit the loads, like sending 737-200s to Montreal in the Winter, and MD-88s to PHX in the Summer. This frees up our 757s to go over to Song and compete vigorously with Jetblue. Delta is trying to get their costs under control, and they really want us to give up the farm in pay, but I doubt that will happen. We will help though.

Bye Bye--General Lee

 

[DrunkIrishman]

General-

Again, empty airplanes got Delta where they are. I never said anything about rj's other than not being the cause of Delta's problems. I agree, rj's are not the magic answer, nor do I think they are being taughted as such.

BTW, I am curious if you would have the same attitude about rj's being too costly if mainline owned and flew all of them.

 

[SWAdude]

General,

You are quite mistaken about the trash issue with our flight attendents.

They don't have a problem with the responsibility. They just want to be paid the same as others in the industry that do not or will never accept the responsibility.

We have unquestionably the finest flight attendants in the industry and they deserve at least their industry average.

Its all they are asking.

SWAdude

 

[StopNTSing]

Do you see my point? More LCCs and more cheap seats will not help your future profit margins. I just said that the INTL side of the Majors is not really faced with that right now.

Bye Bye--General Lee

General:

Just a guess, but I believe there may be a lot more competition on those international routes than you realize. If your costs get too out of whack with your SkyTeam "alliance partners," who do you think will get a bigger share of those intl routes?

 

[MedFlyer]

The LCC's are going to bump into each other eventually. There are only so many routes out there that can produce a volume that is great enough to fill the 717/737/A320,etc. However, for the time being there is still plenty of traffic out there for the LCC's.

Why should Airtran worry about WN when they've still got plenty of passengers they can poach from DL? Airtran continues growing at DL's expense and DL has done little to fight back. DL's costs are much higher than Airtran and so far they haven't come down. DL's overall product is pretty sad and DL's frequent flyer program isn't that great either. Don't forget, Airtran has a frequent flyer program too. Right now, Airtran is offering to comp any frequent flyer who has elite status at another airline to elite status at Airtran....more poaching.

Sure, DL can dump more capacity on Airtran and drive down yields, but that strategy is doomed to fail. Lower yields may hurt Airtran, but they'll kill DL. Imagine how poorly Song must be doing right now if yields are so bad that even JBLU is seeing its margins get reduced. Song has higher unit costs than JBLU, lower unit revenues than JBLU and lower loadfactors than JBLU....sounds like a recipe for disaster.

Sure, international traffic can offset some of the domestic bloodbath, but remember DL only receives about 20% of its revenues from the international market. That 20% can't possibly offset the remaining 80% where DL is getting hammered.
Even if someday the LCC's really do get into heavy fare wars that drive down yields even more (can they go much lower???), the majors are the ones that will be caught in the middle.

 

[SWAdude]

Whats interesting about the low cost carriers is that they really don't compete with each other except on a few routes maybe. They develop their own niches and stick with them.

Thats one of the problems with the Deltas and uniteds is that they have way too much competitive pressures to weather the storms.

I really don't see the LCC's making the same mistakes that the others have made by ruling the airline world.

You will always get the full sevice guys to try and compete with the LCC's on some levels but when their sector of the business recovers they will see that redeploying those assets to what they do best is what gives them a better bottom line.

In reality the full service carriers doing a low cost business makes about as much sense as SWA going into the full service business to compete with those guys. We plainly just can not do that.

SWAdude

 

[General Lee]

Medflyer,

ATL is where we make the most money, and we believe we will win that battle. We carry more people with bigger airplanes through ATL, and have made it the busiest single airport in the world, in terms of passengers. You have to remember that we only have ONE union, and that the others do not make a lot more than industry standard. The pilots (me), are negotiating to take some sort of cuts, which will lower costs even more. The reason our "CASM" is higher than most is because they add Comair/ASA's CASM (near 14.5) onto ours.

As far as Airtran is concerned, I am sure we know that they are there bringing fares down, but many of our passengers in ATL are connection passengers from cities that Airtran does not fly to. And, I am sure that they have a good frequent flyer program, but they do not offer the choices in cities that ours does with the Skyteam Alliance, nor do they offer the Crown Rooms, or better first class upgrades available.


StopNTSing,


We have a certain percentage in our contract (that we are renegotiating currently) that must be followed when it comes to INTL codeshares. We just filed a grievance concerning that, and two weeks ago they just announced all of that extra INTL flying for us. (CVG--FCO, AMS etc...) I doubt we will give up that. And, a lot of the cities we fly to INTL do not have much viable competition. Try JFK to Moscow. You can fly on us or Aeroflot. You choose. How about JFK to IST. Do you want to fly in the back of a Turk A340 for 11 hours? I didn't think so. How about ATL to Santiago, Chile? In fact, we ran KLM, Varig, Austrian, and Swissair out of ATL.


Drunkirishman,

Yes, we had some empty airplanes after 9-11. And a lot of empty airplanes in a 500 airplane fleet can really hurt your bottomline. It took awhile to get people back onboard, and the RJs helped keep market presence. As far as Mainline owning them, it would be nice for our furloughs to be flying instead of sitting right now, but I don't think they are the answer in the future. I think the LCCs are going to be charging less for seats, and the 50 seat RJ will not be able to cover the costs with just those 50 seats. I think we will need larger planes to compete, and the more seats will help spread out the costs. Look at Southwest--they can charge less but still have 100 or more seats to fill and spread out those costs. And, their pilots are getting paid more and more these days, which shows that pilot costs can still be high if you have the right plan.


SWADude,

I didn't know that your flight attendants weren't even paid the average. If that is the case, and your company continualy makes profits, then they should be compensated better. I have jumped on many of your flights, and I always had fun. I know that they often work 6-7 legs a day, and that they do work hard. But, as I have said, the regional flight attendants also clean the plane between flights, fly 6 legs a day, and are paid a lot worse than Southwest. But, Southwest is King, and they should pay your flight attendants more---period.


Bye Bye--General Lee

 

[General Lee]

Here's another article with the same point of view:



Dow Jones Business News
High Costs Prompt JetBlue, Southwest 4Q Warnings
Friday December 5, 4:40 pm ET
By Elizabeth Souder

NEW YORK -- Low-cost airlines JetBlue Airways Corp.
(NasdaqNM:JBLU - News) and Southwest Airlines Co. (NYSE:LUV -
News) issued warnings about the fourth quarter as higher fuel prices
and capacity increases drive up costs.

The announcements are particularly worrying because they come on
the back of a disappointing Thanksgiving travel weekend from two
airlines that have remained profitable through the industry downturn.

The announcements could mark a turn in fortune in the airline
industry: Growth for low-cost airlines is getting more difficult as
major carriers recover enough strength to compete for market share.

New York carrier JetBlue said late Thursday its operating margin in
the fourth quarter would be in the range of 13% to 14%, lower than
the previous range of 15% to 17%, because the airline's extra capacity
is bumping up costs and weighing on air fares.

Also on Thursday, Dallas carrier Southwest said higher fuel prices
will cause the airline's total costs to rise 4% in the fourth quarter.

"As big airlines restore supply, revenue momentum is fading at low-
fare carriers," said Goldman Sachs & Co. analyst Glenn Engel in a
research note. Goldman seeks investment-banking business with
airlines.

Both JetBlue and Southwest, like most U.S. airlines, said they flew
more passengers in November than a year earlier, thanks in part to
the Sunday after Thanksgiving falling in November this year; last year
it was in December. But analysts worry airlines aren't flying those
passengers as profitably as expected.

That's a problem for airlines both large and small. Houston carrier
Continental Airlines Inc. (NYSE:CAL - News) said its revenue per
available seat mile rose by about 4.5% to 5.5%, lower than analysts
had expected. Continental is the only airline that reports monthly
RASM, closely watched by analysts as an indicator of industry
profitability.

Analysts have said the capacity cuts by major airlines contributed to
higher load factors and higher fares. So as major airlines begin adding
capacity next year, which nearly all have said they will do, analysts
worry load factors and fares will fall, cutting into profits.

The effect will be different for low-cost carriers and major airlines.
Goldman analyst Mr. Engel, who doesn't own shares of the companies
he covers, said as hub airlines restore supply, they gain market share
and lower their average unit costs.

Low-cost airlines, on the other hand, by definition already have very
low unit costs. So they must rely on higher fares and more passengers
to lift margins, which is particularly difficult as big airlines beef up
capacity and fuel costs rise.

In the fourth quarter, major airlines have continued cutting capacity.
But next year, American Airlines plans to add between 5% and 6%
more capacity. Delta Air Lines Inc. (NYSE: DAL - News) will add as
much as 10% more capacity -- in part via its low-cost unit Song,
which is designed to compete head-on with JetBlue.

JetBlue will add about 35% to 37% more capacity next year, slowing
its growth. The airline's capacity in November was up 53% compared
with a year earlier, as JetBlue added frequency across its system.

Last year, the airline nearly doubled capacity -- and operating
revenue, showing an operating margin of 16.5%. That's higher than
the projected fourth- quarter operating margin of 13% to 14%.

Lehman Bros. said in a research note the operating margin drop
appears to be driven by competition in the hotly-contested New York
to California routes. America West Holdings Corp. (NYSE:AWA - News)
added service on those routes, prompted fare competition from some
major airlines, Lehman said. Lehman seeks investment- banking
business with airlines.

Take the Los Angeles/New York path. According to Deutsche Bank's
weekly fare review, AMR Corp. (NYSE:AMR - News)'s American
Airlines cut leisure fares on the route by 29% last week, and nearly
halved business fares. That price drop comes amid an overall 6% rise
in leisure fares, and a 5% decrease in business fares, Deutsche Bank
said. The bank seeks business with airlines.

Capacity increases may be more expensive for low-cost airlines than
major carriers, because many low-cost airlines are currently flying all
their planes as frequently as they can. Adding capacity for many of
the low-cost players means adding more planes.

But for major carriers, after cutting capacity for the last couple of
years, adding it back means simply flying the same planes on the
same routes more often each day. Bringing back parked planes to the
fleet would be the next step before the airlines must take the more
expensive step of buying fresh jets.

American Airlines, the world's largest airline, plans to add capacity
next year while reducing its fleet by increasing frequency on existing
routes.

In addition to the looming capacity increases, airlines across the
board face higher fuel prices. Southwest Airlines' fuel-hedging
program is considering the best in the industry by some oil experts.
In an interview with Dow Jones Newswires last week, Southwest Chief
Financial Officer Gary Kelly blamed terrorism fears and turmoil in the
Middle East for the high oil prices, imposing "a significant premium."

Southwest has hedged 87% of its fuel purchases for the second half
of 2003, compared with 100% for the first half. For 2004, the
company has hedged 85% of its fuel needs, Mr. Kelly said.

Airline shares dropped nearly across the board Friday, lead by a
decline in JetBlue shares. In 4 p.m. EST trading on the Nasdaq Stock
Market (News - Websites) , JetBlue was down $5.52, or 18%, at
$25.86. Low-cost airlines with big growth plans fell more strongly
than most major carriers, with America West down $1.88, or 14%, at $
11.91 on the New York Stock Exchange (News - Websites) . AirTran
Holdings Inc. (NYSE:AAI - News) was down $ 1.32, or 9.9%, at
$12.05, also on the NYSE. Southwest, with a more modest capacity
growth plan, was down $1.01, or 6.1%, at $15.59 on the NYSE.

-By Elizabeth Souder, Dow Jones Newswires; 201-938-4148;
[email protected]




Bye Bye--General Lee

 

[SWAdude]

General,

If I were you I would also be apprehensive of the LCC's. But you come off as trying to get us to feel the same apprehension. The sad part about this is we all support your recovery and success and hope things stabilize for you and your co-workers ASAP. We all have good friends on the street and want them and their families to recover from their employment challenges soon.

Why do you want our failure so badly. Will our demise make you feel better.

I truly hope not. That would be really sick.

Respectfully,

SWAdude

 

[Skank]

Apparently there is a lot of enjoyment out there about our "failure" (13-14 % margin versus 20%-now that's failure). As SWA dude states, you've gotta be real lame to enjoy other peoples troubles. So, go on and have a good laugh now...
I, for one wish everyone success. We're all just trying to earn a living for the family, right?

 

[AA717driver]

Right now, any airline with a positive margin should be happy!TC

P.S.--For the DAL people--everyone is hoping you hold the line!

 

[General Lee]

Where have I said that I enjoy other airlines'problems etc??? What? I am pointing out that problems exist for everyone. Do you see me jumping up and down because Jetblue's profit margin is a little less? Nope. Don't attack the messenger. I thought these articles were interesting, and I didn't write them. The title I chose for this thread came right from the articles. The articles pretty much say that no one carrier is invincible, and I know I have been taught that lesson in the last 2 years with Delta. I never stated that I wished anyone to fail, or anyone to get furloughed, etc. All I want is some good competition, and that is what I have stated----Song was made to combat Jetblue. I then brought up a question, "What will happen to the profit margins for the LCC's when they all start to expand?" Then I get blasted. It was a good question. I try to explain, in my own way and my own opinion, how I think Delta/Song will do. I get blasted. This is an open forum and we are allowed to ask questions, and I even posted actual articles that also asked the same thing. I will consider any opinion and give my own, and I am not trying to upset anyone.

Bye Bye--General Lee

PS--SWADude and Skank, Just because you don't like what both articles state, doesn't mean you should take it out on me. I didn't write them. I just posted them and asked for opinions. I don't think it says both of your airlines will be Chap 7 soon. I also am not laughing. Lighten up please.

 

[SWAdude]

General,

" Just because you don't like what both articles state, doesn't mean you should take it out on me."

My comment is on your slant on these issues. Not the articles. The article didn't make me feel one way or another. My airline is expanding at historical levels next year. Were making a bunch of money.

" I didn't write them. I just posted them and asked for opinions."

Who exactly are you trying to fool. Yourself??? Where are the articles about your imminent pay cuts to compete??? Are you not interested about THOSE opinions that are much closer to your interests???

" I don't think it says both of your airlines will be Chap 7 soon."

I suspect only because none of those type of articles exist."

" I also am not laughing."

I didn't say you were. Just wondering if you were getting some pleasure out of this."

" Lighten up please."

You need to look in the mirror.

SWAdude

 

[f9driver]

LCC Profits

General Lee,

A 9% pay give up isn't going to do it...wages do sometimes matter. A good argument could be made that Delta may eventually be worse off than American or UAL as the bleeding will probably continue until you do give up those scheduled contract raises and the full 22% the company is asking for.
A lot of the best economic forecasters are calling for a real bad 2005-2006 economy and financial market. Economic forecasting is not a pure science but, nevertheless we all know a lot of seeds have been cast that could precipitate this scenario. What will this do to Delta if that happens with their high pension and wage costs? Enjoy it while it lasts.

 

[General Lee]

F9driver,

Welcome to this thread. Ok, now WHAT? What are you talking about? Do you really think we were only going to give up 9%?(there was also a 4.5% raise we were going to get next year that was erased too=13.5%) That was just our starting position, and I think it will go to 15%. But, that 15% is really A lot of money per year that Delta will get back. 15% of your pilot group salary might not equate to much, but a 15% cut on ours will give the company a lot more. Also, we would be giving up many other things, like some productivity, and some other beanies--like per-diem cuts, night pay, and INTL pay, etc. It won't be only the straight salary cut. Also, you probably don't know much about the other employee groups at Delta, that actually make industry standard wages, and they have no union or contracts. And the Song employees (except the pilots) actually make less than mainline.

Ok, now where is the proof about your best economic forcasters are calling for a bad 2005 and 2006 economy? Who said that? Lou Dobbs on CNN? Who? I haven't seen anything about that. How long did our last upswing last? We started doing really well in 1996 and continued until the tech bubble burst in early 2001. That would be 5 years. The economy is now getting good, so I would guess that (without another 9-11) 2008 will be the next downturn, and hopefully we will be ready. And you say that a good "argument" could be made that Delta may eventually be worse off than AA or UA if we continue to not give up pay until the next contract talks. The only difference is---the economy is actually getting BETTER. AA and UA had a double whamy---a bad economy and 9-11. Now things are turning around, and loads and fares are getting better. But, I still feel we will help out and help that debt problem now before it gets out of hand. And, as I have said many times before, that pesky pension problem evaporates as the stockmarket and interest rates rise, and we just had our union and advisors complete a new study on that porblem and should know how it is going soon. Our wage costs at Delta, as you can see now, are only higher on the pilot side, and even that is coming down a bit. Thanks for joining this thread, and watch out for TED--they are aimed right at you.



SWADude,

Maybe you are new on this board, but I respond all of the time to our pay issues. The airline blaming all of the problems on the pilots is wrong, and I express my views constantly. How do you know that I get "pleasure" out of these articles? Should I not post them because you might think that? What? It is great that you fly for a stable airline that never has a problem----but when something arises that shows a possible flaw in the whole LCC side, should I not post it? I guess no one on this interview board should ever see anything like that? There sure is enough about the Majors doing poorly, that's all I see. Pointing out something that isn't necessarily flattering might sting, but overall it is good to get out there. Then I asked a good question about what will happen when there are LCCs overlapping, and I get "gang banged" by a SW and Jetblue guy. Nice. I welcome your opinion, but not your message. Enjoy that growth.

Bye Bye---General Lee

 

[SWAdude]

General,

I my be rather new on this board and I don't want to take the time to find a like article in your part of the industry but I doubt I could find one.

I asked you a question that I am sure with little doubt many here understood.

You may not be aware of how you may come off and if I misunderstood your intentions it would have been nice to say that those were not your intentions. Instead you just defend yourself with an obvious underlying aggression.

You have answered my question loud and clear.

Good luck!!

SWAdude