Why is JetBlue forecasting loss for 2006?

[Dizel8]

He has an axe to grind. This is the same guy who was convinced the PBGC would "liquidate" United.

Well, so many on this board are happy that jetblue is having hard times. It is what it is, each man for himself, there is no 'brotherhood'. I used to think, that we were all bound by a common bond, well, this board has shown me otherwise. So, if it comes to a choice between me and some other guy standing in the unemployment line, guess who I prefer?

 

[Mugs]

We just went around with this last month:

Quote:
Originally Posted by skykid
G4G5, when is the PBGC going to liquidate United? That's what you said, isn't it? Let me know if it is going to be next month because WhiteClould's latest prediction for UAL liquidation is still next month.


Are you proud that your pension got dumped on the tax payers?

Forbes places the value for UAL at over $10 billion. I would have much rather seen UAL liquidated and that $10 billion given to the PBGC to distribute to the UAL employees. Here's a thought give the UAL employees the pension that they worked for. This goes beyond UAL, I would rather see that happen to USAir, Delphi, GM, whomever.

It's supply and demand. The folks who fly UAL would still keep flying. The industry would not lose those jobs. The pilots at UAL would be just like those at TWA pilots, who found jobs at AA, Fedex, UPS, Airtran, Jetblue, AmericaWest, SWA. I could go on. The difference is they would have pensions from UAL when they retire and companies would think twice about dumping their pensions.

No instead we now have a trend that companies like IBM, Verizon and soon to be countless others will be following. The dumping of the American pension system.

I am glad you can come on FI and gloat about it.

http://forums.flightinfo.com/showthread.php?t=70899&page=4

I am on record as being wrong:
"My point is moot, the pensions were dumped on the PBGC, the employees got screwed. IBM, Verizon and countless others will dump their defined benefit plans onto the PBGC and in all likelihood you and I will wind up bailing out the PBGC sometime, in our lifetimes. Oh yeah for those who want to here it, I was wrong, I actually thought for once maybe the courts or the government would do the right thing for the average working slob. "
http://forums.flightinfo.com/showthread.php?t=70899&page=10

Thinking that busting up UAL into CH7 would have yielded $10 billion to bail out the pensions is a pipe dream. Let me ask you this. You claim your scenario would have saved the retiree pensions and that current UAL employees would have gotten new jobs in the industry at will. What kind of jobs are you talking about? Jobs with pension plans? Think about it. Liquidating UAL would have put plenty of aircraft and employees "on the market." New start ups would have been inevitable (like Virgin USA) to help the current LCCs put further unsustainable pressure on the remaining legacies with pensions. With or without UAL, pensions in the industry are doomed. There used to be government imposed high barriers to entry in the airline industry. The government decided to remove those barriers, however, they certainly didn't require the new entrants to provide nearly the same level of benefits as the established legacy carriers. Why should they now be surprised at what is happening?

As for the overall dumping of the American pension system. Hmmmm. Are American companies competing globally now with the equivalent of LCCs? It seems to me that they are. If 80% of the goods at Walmart are Chineese made and the American Public is fine with that, then why should we be surprised at what is happening? GM can't compete because its foregin competition does not have anything like the health care and litigation expenses --- let alone pensions for a huge group of reitrees. Whose fault is that?

 

[koko nw]

Are you proud that your pension got dumped on the tax payers?[/quote

http://www.pbgc.gov/
PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of 44.1 million American workers and retirees in 30,330 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

G5, come on your breaking my heart. If your house God forbid burns down, does your insurance company force you to liquidate in order to pay for it or is that why you pay insurance premiums?

Your statement about the 70000 folks put out of a job being able to rebound into another is really easy from the outside looking in don't ya think? Bye the way where's your outrage about USAir's dumping of their pensions?

Anybody reading your post can clearly tell you've got some issues with UAL, and yes you do put up facts, BUT always in a negative light. Has UAL done nothing to your liking or is our liquidation your personal crusade?

Take care

Koko

 

[FDJ2]

I personally would rather be 15 minutes late traveling on JetBlue than 15 minutes early traveling on Delta, United, or American...
My 2 cents...

That's all well and good, but that misses the point. A late arriving aircraft often leads to a late departure, which leads to another late arrival and so on and so on. Eventually, that adds up to more costs as ground employees work overtime, crews time out, etc. There is actually a real cost involved here, and while you might be fat dumb and happy with your $69 air fare showing up in FLL 15 minutes late, the airline is spending much more then that getting you there trying to fly a schedule they can not keep. With such thin margins and low yields JBLU can not afford to operate an airline which has the second worst on time performance in the industry for a major carrier.

 

[G4G5]

Are you proud that your pension got dumped on the tax payers?[/quote

http://www.pbgc.gov/
PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of 44.1 million American workers and retirees in 30,330 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

G5, come on your breaking my heart. If your house God forbid burns down, does your insurance company force you to liquidate in order to pay for it or is that why you pay insurance premiums?

I have one question for all of you. It's very, very simple.

The PBGC is underfunded by over $25 billion.
Where do you think Congress is going to get the money from to bail out the PBGC?

Let me give you one guess, where did they go to for the money to bail aout the Saving and Loan scandal?

Still think that the tax payer doesn't have to pay for your bail out? Or that the PBGC can somehow survive with companies like UAL dumping billions of dollars worth of debt ont it? The shortage of funds has to come from somewhere, please tell us where you think it will come from?


Your statement about the 70000 folks put out of a job being able to rebound into another is really easy from the outside looking in don't ya think? Bye the way where's your outrage about USAir's dumping of their pensions?

Yes, I fell the same way about USAir, this isn't a Socialist welfare system. Or is that what you are suggesting?
USAir is a bit different. First off your pension dump was 5x the size. No other major comanies started dumping pensions until UAL got away with it. USAir wound up getting taken over anyway, without cactus where would they be today?
How many folks TWA, Pan Am, Eastern, Braniff, yada yada were put out on the street? Do the you somehow feel that you are entitled to something special? That you are better then all of those folks?
How does dumping your pension on the American public, while your CEO takes million in stock options make it OK?

Anybody reading your post can clearly tell you've got some issues with UAL, and yes you do put up facts, BUT always in a negative light. Has UAL done nothing to your liking or is our liquidation your personal crusade?

It's not a personal crusade, it pure common sense. I believe that if you spend an entire career showing up and doing a good job, the pension that you were promised at age 25 should be their when you retire? Plain and simple. It's not the UAL employees I have the beef with. It's your mgt.

Can you stand here and tell me if USAir and UAL had been forced to liquidate instead of being allowed to dump their pensions, would companies like IBM and Verizon even though of dumping their pensions? Companies like Verizon just announced that they will no longer offer retirement health care to those who retire after 6/2006. IMHO, other companies would have thought twice about dumping their pensions. Or are you of the philosophy that it had absolutely nothing to do with the recent trend of pension dumping?

FYI UAL has 61,000 employees IBM has 329,000 and Verizon has 210,000 That's over 500,000 people without pensions or retirement health care when they turn 65.

Take care

 

[G4G5]

I know we went over it last month, I just like to keep pointing it out because your idea that the PBGC COULD and WOULD liquidate United was so ridiculous it bears repeating. Yet you kept posting it over and over and over, just like your current broken record.

And it turned out so well for you. You lost your pensions anyway. UAL started a pension dumping trend and the rest of us wind up paying for your $10 billion dollar shortfall, with the eventual bail out of the PBGC.

Stll feeling so smug? Still fell the need to keep bringing it up?

Yep, you are right, this is much much better.

 

[Mugs]

G4G5. I think for one thing you need to differentiate between dumping and freezing pensions in the case of IBM since you claim IBM is "dumping" their plans. It is a different situation than UAL. I am amazed that, in light of the problems that have gone on long before UAL's troubles in the steel industry for example, you are blaming the pressure on pension plans in the U.S. on UAL. These forces have been gaining momentum for years. Market forces (i.e.--low interest rates, global competition) have finally pushed it into crisis mode. You choose to ignore the economic and competitve forces of the marketplace. Then again, maybe that is easy for you to do flying a money is no object, high end corporate jet around. In your view, boardrooms across America only want to get out of the defined benefit plan business for no other reason except that UAL did. I hope that given your opinions, there isn't a single item you own that isn't made anywhere but the U.S.A by union labor.
http://www.cbsnews.com/stories/2006/01/06/business/main1182707.shtml

 

[G4G5]

Thinking that busting up UAL into CH7 would have yielded $10 billion to bail out the pensions is a pipe dream.

No it's not and that's my point. Forbes is on record stating UAL's value to be around $10 billion. Take a look at the below link.
http://app.quotemedia.com/quotetools/showFiling.go?name=UAL%20CORP%20/DE/:%208-K,%20Sub-Doc%202,%20Page%2037&link=http%3A//quotemedia.10kwizard.com/filing.xml%3Frepo%3Dtenk%26ipage%3D3895033%26doc%3D2%26num%3D37

UAL had to provide $8.752 billion in assets to secure their $3 billion dollar loan. So JPMorgan Chase seems to think that UAL is worth at least $8.7 billion. That's my point. UAL's assets were worth at least the equivalent of what they dumped onto the PBGC.

The PBGC was not designed to have companies dump their pensions on it only so they can keep operating. The intent was to protect the pensions of the workers who lost their pensions when their company went out of business. UAL mgt abused the system. What happened to all the steel companies that you refer to?

When Congress determines that PBGC's $25 billion dollar and climbing deficit is too large. Who are they going to turn to for the money? One clue, who did Congress turn to, for the Saving and Loan bail out?

So dumping $10 billion worth of debt and being allowed to continue to operate with $10 billion worth of assets makes sense? Was this the intent of the PBGC?

Let me ask you this. You claim your scenario would have saved the retiree pensions and that current UAL employees would have gotten new jobs in the industry at will. What kind of jobs are you talking about? Jobs with pension plans? Think about it. Liquidating UAL would have put plenty of aircraft and employees "on the market." New start ups would have been inevitable (like Virgin USA) to help the current LCCs put further unsustainable pressure on the remaining legacies with pensions.

That depends where the UAL employees went to work. How of the 61,000 employees would have remained in the airline business. Outside of the pilots and the FA's, higher paying jobs with pensions can be found outside of this industry. As for the pilots. UPS, Fedex and Airtran are all hiring and they all have defined benefit pension plans. As for the LCC what's wrong with working for SWA? If UAL goes under JBLU expands. The UAL pilot hired by JBLU now gets a profit sharing check deposited into his 401K. The Pacific routes get sold and the senior pilots transfer with the routes (just like with Pan Am). My point is for a vast majority of the UAL pilots, more secure higher paying jobs are available.

Let's see TWA, Pan Am and Eastern all disappeared and what happened to pilot wages at UAL and Deta? Your hypothesis about lowering wages is a bit flawed. It all revolves around supply and demand. The folks flying UAL will not stop flying. So the demand will still exist, hence UAL employees will still be needed.


With or without UAL, pensions in the industry are doomed.
That depends. AA and Airtran are still providing pensions. My point and you have to agree is: what UAL mgt did certainly didn't help the cause.

There used to be government imposed high barriers to entry in the airline industry. The government decided to remove those barriers, however, they certainly didn't require the new entrants to provide nearly the same level of benefits as the established legacy carriers. Why should they now be surprised at what is happening?

What happened when the government opened up the markets in the 70's. History is just repeating it's self. This time without pensions.

As for the overall dumping of the American pension system. Hmmmm. Are American companies competing globally now with the equivalent of LCCs? It seems to me that they are. If 80% of the goods at Walmart are Chineese made and the American Public is fine with that, then why should we be surprised at what is happening? GM can't compete because its foregin competition does not having anything like the health care and litigation expenses --- let alone pensions for a huge group of reitrees. Whose fault is that?

 

[Dave Siegel]

I personally would rather be 15 minutes late traveling on JetBlue than 15 minutes early traveling on Delta, United, or American...

My 2 cents...

Hi, it's Dave!

h25b, that's pretty much a completely mindless thing to say. If you are a businessman, which obviously you are not, time is money.

Personally, as a businessman, being on-time is very important to me. Personally, I think JetBlue's product is completely inferior. Delta has a real knack for randomly cancelling flights in order to chase on-time performance, which is fine with me, as long as they don't cancel my flight. Unfortunately, I've been at the short end of that as well.

Delta, United, JetBlue, or American. That's like picking your poision. They're all substandard.

 

[lowecur]

Smart Man

The real reason JetBlue is forecast to lose money is DEBT and DEBT service costs. JB owes more than SWA and has one tenth the revenues to service that debt. JB also took on tons of variable interest debt which, while risky, was fine as long as rates were low, but now that rates have increased, JB's interest obligations have soared exponentially.
The variable interest debt is like the backloaded airplane warranties in that they are great initially, but they are painful when the devil comes to collect his due.

Jetblue has debt problems but they will overcome them by the end of 2007 if the 190 is deployed properly. The airline has $3B in debt and all but $425M is financed at floating interest rates. CFO John Owen has been slow to convert the debt to fixed rates and this cost Jetblue big bucks. Interest expense increased 99% to $106.5M in 2005, while the number of aircraft only increased 28%. Interest expense will be $153M in 2006, up 44%. Since Jetblue is adding 35 or so more aircraft, his pro-forma statements take into consideration the conversion of debt to fixed rates. The question is what took him so long? My guess is the problem is Neeleman. He is a very impulsive individual and his lack of letting underlings make big decisions hurts the company. A little advice Dave, let the CFO do what he was hired to do.

Jetblue is taking on an additional $250M in a/c debt per year until deliveries are complete. It is no secret that yield mgt has been pathetic and needs to be corrected in a hurry. Moving that dept to NYC will help, but that's not the only problem. The initial 190 routes were a disgrace. The glamor shuttle routes are highly competitive and take up too many slots at JFK thus adding to congestion at an already overutilized terminal. They should have been added once the new terminal was open in 2008. Keeping them in the air on routes like AUS/JFK or adding direct flts to Florida from upstate would have been the way to go. It was noted in earlier threads that pilots were unable to gather the hours needed in the air on these short routes to satisfy requirements thus slowing the program down. The 190 is a RASM horse on short/medium routes that by-pass the hub. If Jetblue doesn't use them properly, US Airways will.

Wake up Neelebarger and stop believing all those press clippings that the New York Media is writing.

imp:

 

[FlyBoeingJets]

Thanks Lowecur. Very informative.

 

[koko nw]

Are you proud that your pension got dumped on the tax payers?[/quote


G5, this is your original statement, since your love fact based arguments. I gave you a fact based link....below

http://www.pbgc.gov/
PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of 44.1 million American workers and retirees in 30,330 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.


I have one question for all of you. It's very, very simple.

The PBGC is underfunded by over $25 billion.
Where do you think Congress is going to get the money from to bail out the PBGC?

Let me give you one guess, where did they go to for the money to bail aout the Saving and Loan scandal?

Still think that the tax payer doesn't have to pay for your bail out? Or that the PBGC can somehow survive with companies like UAL dumping billions of dollars worth of debt ont it? The shortage of funds has to come from somewhere, please tell us where you think it will come from?

Now your working with a "maybe", but hey it suits your attack don't even acknowledge the fact that the PBGC was set up as insurance in case of pension default by said premium paying company.


Yes, I fell the same way about USAir, this isn't a Socialist welfare system. Or is that what you are suggesting?
USAir is a bit different. First off your pension dump was 5x the size. No other major comanies started dumping pensions until UAL got away with it. USAir wound up getting taken over anyway, without cactus where would they be today?
How many folks TWA, Pan Am, Eastern, Braniff, yada yada were put out on the street? Do the you somehow feel that you are entitled to something special? That you are better then all of those folks?
How does dumping your pension on the American public, while your CEO takes million in stock options make it OK?

Did I say were entitled? No, were just using business tactics available to us in order to survive, would you expect any less? LCC's can come in and undercut and flood the market with cheap fares on selective high yield markets, another "business" tactic. We are fighting for our survival, choices were made. I'm sorry you felt that Big Bad UAL was the demise of the working class.

It's not a personal crusade, it pure common sense. I believe that if you spend an entire career showing up and doing a good job, the pension that you were promised at age 25 should be their when you retire? Plain and simple. It's not the UAL employees I have the beef with. It's your mgt.

Your point is taken and too a point agreed. What has happened to the retirees is nothing short of criminal. I just disagree with your remedy.
A frozen Fund or at least a partial lump sum payout with the available monies would have been preferred.

Take care

You also, fly safe.

Koko

 

[radarlove]

JB also took on tons of variable interest debt which, while risky, was fine as long as rates were low, but now that rates have increased, JB's interest obligations have soared exponentially.

Well, not "exponentially", how about "proportionally.

Do you know what exponentially even means?

 

[G4G5]

Jetblue has debt problems but they will overcome them by the end of 2007 if the 190 is deployed properly. The airline has $3B in debt and all but $425M is financed at floating interest rates. CFO John Owen has been slow to convert the debt to fixed rates and this cost Jetblue big bucks. Interest expense increased 99% to $106.5M in 2005, while the number of aircraft only increased 28%. Interest expense will be $153M in 2006, up 44%. Since Jetblue is adding 35 or so more aircraft, his pro-forma statements take into consideration the conversion of debt to fixed rates. The question is what took him so long? My guess is the problem is Neeleman. He is a very impulsive individual and his lack of letting underlings make big decisions hurts the company. A little advice Dave, let the CFO do what he was hired to do.

Jetblue is taking on an additional $250M in a/c debt per year until deliveries are complete. It is no secret that yield mgt has been pathetic and needs to be corrected in a hurry. Moving that dept to NYC will help, but that's not the only problem. The initial 190 routes were a disgrace. The glamor shuttle routes are highly competitive and take up too many slots at JFK thus adding to congestion at an already overutilized terminal. They should have been added once the new terminal was open in 2008. Keeping them in the air on routes like AUS/JFK or adding direct flts to Florida from upstate would have been the way to go. It was noted in earlier threads that pilots were unable to gather the hours needed in the air on these short routes to satisfy requirements thus slowing the program down. The 190 is a RASM horse on short/medium routes that by-pass the hub. If Jetblue doesn't use them properly, US Airways will.

Wake up Neelebarger and stop believing all those press clippings that the New York Media is writing.

imp:

That was a nice post. Thanks for the info

 

[Mugs]

"The Collateral is appraised on a current market value (“CMV”) basis. CMV is defined as the appraiser’s opinion of the most likely trading price that will result in an open and unrestricted market for an individual asset, and is not the equivalent of liquidation value."​

The footnote points to the fact that had there been a CH7 fire sale, $10 billion or even $8.7 billion would have been totally unrealistic, especially considering the weak balance sheets industrywide of those looking to buy. Plus, the unrestricted cash at exit is substaintially more than UAL had while pinned to the wall in CH11.

Are UAL and UsAir the only companies to drop the pension plans on the PBGC and continue operating? You make it sound as if they are. Had the intent been for companies to liquidate when handing over their plans to the PBGC, the government would have written it into law. They never tried, and I didn't hear anyone other than you insist that UAL be liquidated and all proceeds go directly to the PBGC. That is pure fantasy. The PBGC is a creditor in a CH11 just like all other creditors. That was known the day the PBGC was created. They had plenty of opportunities over the years to change the system and they didn't. They didn't even begin talking about market forces and the impact of the funding rules until it became critical. I guess the world changed too quickly for them.

Your part about UAL employees waltzing into something better is amazing. I just spent 3 years watching employees work under the stress and uncertaintly of CH11 on the frontline. Have you ever done that? You claim that with the exception of pilots and F/As, other employees will simply leave the industry and go get those higher paying, pension providing jobs outside of aviation that are ripe for the picking. Well, why didn't they do it in droves? Why would a ramp worker tolerate a bankrupt airline on the ramp at ORD during January? Why would a CSR that is dealing with record load factors while being forced to do more with less stick around? Why do furloughed employees return? The grass may be greener for you in a G5 (good for you honestly), but it isn't that way for everyone.

As for the pilots, how many can expect to get on with a UPS or Fedex --two companies that still have defined benefit pensions because for now they still enjoy the luxury of being able to raise prices when costs go up without getting hammered? A few pilots will, but not many overall. Oh by the way, if Airtran has a "defined benefit pension" as you say (you mentioned it twice) then I guess I still have one too --- I'm starting to wonder what your definition of a defined benefit pension plan is.

It is true that wages did not plummet at the legacies in the wake of Pan Am and Eastern (though the loses were staggering during the Gulf War period). They did take a beating in the wake of your TWA example. Pan Am and Eastern failed when the overall economics of the business were much different. Today, UAL faces LCC competition on 80% of its domestic routes. It was nowhere near that in the immediate wake of PA / EAL. The fares and revenues generated back then and for a decade after prove it. Thus, wages (not counting the ESOP give backs at UAL) did not go down. Today is a totally differnent ball game. Any legacy failure today guarantees more LCC competiton tomorrow to put additional pain on the remaining legacy carriers. That is what awaits the vast majority of pilots after their legacy goes under --- just look where the vast majority of the furloughees that did get another flying job found employment.

I will say, as I have said to you before, that I take your point on the UAL fuel projections. Who knows what is really going on behind the scenes, but you do raise fair questions. Tilton and Brace are supposed to present at a JP Morgan conference Wednesday morning. It will be available on the investor relations page of the website. Hopefully, they will have to answer some tough questions on the issues you point out. We will see. Then again, the industry is one major event away from having all fuel projections thrown out the window anyway.

 

[race#53]

Anyway, what does UAL's fuel planning have to do with JBLU anyway?
People ripped JBLU for having a loss in 2006. What do you think is more realistic, Neelmans $1.98 or Tiltons $1.81? Try to keep in mind that UAL spent $2.09 last quarter.b

Someone asks a question on why JBLU is forecasting a loss for 2006 and someone throws UAL in the mix. That's cool. If that's what it takes for you to feel better. If you wanted to consider every aspect of each compnay you still wouldn't be comparing apples to apples. They're in the same field but in different ballgames. I don't have to elaborate.

in a previous post i tried to point out Tilton was being avenged with the
current reduction in oil prices but the post was pulled...why?

 

[Bavarian Chef]

Someone asks a question on why JBLU is forecasting a loss for 2006 and someone throws UAL in the mix. That's cool. If that's what it takes for you to feel better. If you wanted to consider every aspect of each compnay you still wouldn't be comparing apples to apples. They're in the same field but in different ballgames. I don't have to elaborate.

in a previous post i tried to point out Tilton was being avenged with the
current reduction in oil prices but the post was pulled...why?

Duuuuuude -- this thread is almost 12 months old. Did you and Wilson just get back from Tahiti?

Prediction: JB posts a profit for all of 2006. Results coming in nine days.

 

[Longhorn]

No kidding...why is a thread that is 12 months old creeping back to the top....its old, and inaccurate information.

The reason that the thread was pulled was that there was no reason to go into the archives and search for this thread, then bring it back to life after a post had not been made on it in over a year...unless it was for the reason of stirring the pot. So, if you want to start a new thread...start a new thread. I try to not touch jb threads but when a 12 month old thread with bad info is brought back to life for no reason, I have to question the reason behind it.

 

[Blue Dude]

Wow, somebody had to exhume this horse to resume beating it. Must have been a slow weekend.