Tag Archives: JetBlue

PlaneBusiness Banter Now Posted!

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Hello all.

Live and direct from the PlaneBusiness Worldwide Steaming Hot Headquarters, we bring you a 150 plus-page issue of PlaneBusiness Banter.

Yes, this is, without a doubt, the mother of all earnings issues.

We have full transcripts and PlaneBusiness Banter earnings summaries for Southwest Airlines, AirTran, JetBlue, Alaska Air Group and Allegiant Travel this week.

Not only that but we give you the numbers that were just reported from Air France/KLM, Lufthansa, British Airways, ANA and Singapore Airlines.

Whew.

All of this plus our take on the more “newsworthy” topics from the past week including the meltdown at Mexicana (and no, we’re not talking about the FAA’s downgrade of the Mexican aviation safety rating) and the showdown between the pilots and management at Philippine Airlines.

So what do you think? Do you think the pilots and flight attendants at Mexicana should have taken up management’s offer to buy the airline?

Or — should they have cut their pay and benefits essentially in half?

As we were posting this issue, the news came down: Mexicana has filed for bankruptcy.

One thing that will do — it will stop airline leasing companies from taking their aircraft back. Apparently at least three of the airline’s aircraft had already been snatched back by their owners.

Aside from all this turmoil, we then have the latest attempt by the U.S. government to “make the airline industry a better and safer place.”

Yes, from the same folks who brought us the Three-Hour Tarmac rule, the Senate and the House passed a bill last week that will see the minimum number of flight hours required for a regional airline pilot position jump to 1500.

Needless to say, I can understand why members of Congress want to look like they are making the industry a safer place — but is a 1500 hour flight time minimum the way to do it?

One of our regular contributors gives us his take on the potential ramifications of this legislation in this week’s issue.

One thing that is a constant in this industry is that it always has a lot of debt.

But while most of the airline’s debt ratings are in the “junk” category, shrewd investors know that investing in airline debt can be quite profitable.

This week I assemble the latest credit and debt comments on the major airlines from Mark Streeter — the man who does this for a living for JPMorgan Chase. I think Mark is the sharpest guy on the Street when it comes to airline debt.

As for airline stocks — a Foreign Flyer took the first place nod last week in terms of gains. Overall, it was a good strong week for the sector.

All of this — and much, much, more in this week’s issue of PlaneBusiness Banter.

Subscribers can access this week’s issue here.

This Week in PlaneBusiness Banter

Terry Maxon with the Dallas Morning News dropped me a friendly note today and asked me if I had forgotten to finish my thought from last night.

No, just had to get my hard drive upgraded in the laptop today. And I simply forgot to update the post-in- progress from last night. My bad.

I could have used the excuse that I was trying to recover from what had to be one of the best sporting events I’ve ever watched last night — but no, I had a much more pedestrian excuse.

So what are we talking about in this week’s issue?

Judging from the email box today, the most talked-out piece is our PlaneBusiness Brown Bag Analyst guest column. In this column, a subscriber of ours who also just happens to be an expert in the confusing subject known as the Canadian aviation market, pens his take on the Southwest Airlines-WestJet codeshare “disagreement.”

Our guy knows his stuff.

And yes, of course I weigh in again on the American Airlines/JetBlue announcement from last week — following up on the blog post that first appeared here.

I still like the deal.

Then there is the story of the ALPA poster boy for ethics.

If you’ve read this month’s issue of Airline Pilot, the in-house mouthpiece of the Air Line Pilots Association, you know that, unfortunately, ALPA decided recently to parade out a particular ALPA member each month who it had determined exemplified the “best” of ALPA.

Yes, well, this month’s ALPA poster boy for ethics, Tim Martins, who we think has most recently been employed as a pilot for American Eagle, apparently has a problem with putting things on his Facebook page that aren’t true, much less telling the publication other, er, “facts” that now, apparently we find out, are not quite true.

A complete and total PR disaster for ALPA.

More on all this in this week’s issue.

We talk about the disappointing “agreement” that the EU and the U.S. recently trumpeted in the ongoing Open Skies negotiations. I’d argue, “What agreement?”

On the Wall Street front, one of the most well-respected airline analysts is coming back for more fun and frolic. He is going to take over for Mike Linenberg, who is getting ready to flee Bank of America/Merrill Lynch for Deutsche.

Who is the analyst that proves “everything new is old again?”

We also talk about Hudson Securities analyst Dan McKenzie’s latest competitive analysis notes. We always like to read these as they give us such a great insight as to how the major players are moving the chess men about the playing field.

We also have a couple of good letters this week, and a whole lot more.

If you are not already a subscriber to PlaneBusiness Banter — you should be. You can find out more here!

Happy April Fools Day

Thanks to JetBlue and American Airlines for providing us with a nice bit of April Foolery this year. Yeah, right, they are going to join in some kind of partnership, slot swap, interline agreement.

Good job guys.

Oh, wait.

That was yesterday.

Today is April 1.

Hmmmm.

So what is your take on all this news? I admit it. I was surprised at the news. I thought April Fools Day had come a day early when I first saw the headline.

If you could put two airlines in front of you that exhibit totally different cultures, management attitude, brand, and product — well, here you go.

If, on the other hand, you want to strip all that out and strictly look at the deal from a strategic viewpoint — then I can see the merit.

From American’s viewpoint, clearly this gives the airline an opportunity to strengthen its position in New York at a relatively low cost — as opposed to Delta Air Lines, which continues to throw the kitchen sink, the garbage pail, and the baby’s bath water into the market in an attempt to snatch market share.

From JetBlue’s standpoint, the agreement will allow its passengers to book international flights much more easily, utilizing JetBlue on the domestic segments, and American on the international legs. In addition, JetBlue should would get eight slot pairs at Washington Reagan (which the airline has lusted after for a long time) while American would pick up 12 slot pairs at JFK.

But having said that, we have to wonder — what does Lufthansa think about all this? Remember, the German uber carrier owns a piece of JetBlue. When the airline first wrote out the check to JetBlue, the assumption was that this was because Lufthansa was less than impressed with Star Alliance partner United Airlines’ presence into New York.

What presence? Exactly.

So what happens with all this? How can JetBlue serve two alliance masters?

Aside from that niggly problem, I think this is just another example of what we are now going to continue to see more and more of in this industry — creative deals that go against what we have seen done in the past. The reason for them? Necessity. Efficiency. This is what is motivating the Delta/US Airways slot swap request. The AirTran/Continental deal.

So, on the surface, I like it. I’d be happy to see even more of these things. (But only if the airlines’ respective IT systems are up to the task!)

My only question for JetBlue would be this — have you surveyed your passengers who fly into JFK as to whom they fly on to Europe? Is American their first choice?

I would be curious to know the answer, because my gut feeling is that someone who is going to fly on JetBlue into JFK and connect to Europe might not necessarily be someone who would fly on American.

Yep. It’s that mismash of culture and expectations thing I’m thinking about.

Then again, maybe, just maybe, that might be one of the reasons American was receptive to do the deal. They knew that too.

PlaneBusiness Banter Now Posted!

Hi guys. This week’s issue of PlaneBusiness Banter is now posted.

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This week we talk about round two of the British Airways strike — and about how we think Unite’s efforts are — or are not having — an effect on the airline’s operations.

Meanwhile, there is a pilot strike now scheduled against Lufthansa in two weeks. Not only are the pilots there picking up verbal support from other pilots groups worldwide, but now another airline employee group may join them on the picket line.

Did we just have an outbreak of Norovirus on an airline flight? Yuck.

WestJet’s new CEO dropped a bomb in an interview Friday with the Financial Post. Looks like WestJet isn’t going to wait on Southwest to get it’s IT act together. It’s apparently considering a codesharing agreement with Delta. Is this a good move for WestJet? We talk about it — as well as one of our subscribers who has been taking a closer look at the airline and its market opportunities.

Then there is the slot swap deal involving US Airways and Delta Air Lines. The two airlines don’t think the FAA should be involved in the deal at all. Or the DOT.

Want to take a guess as to who they think should make the decision on this proposed deal?

We have a guest columnist this week in PBB. I’m not tellin.’

Airline stocks had a great week again this week, we have the latest “Airline Question of the Week” from Morgan Stanley, and we talk about why it is Barclays is bullish on JetBlue in Beantown.

All this and more – as we all eagerly await the arrival of the Easter Bunny here at the PlaneBusiness Worldwide Headquarters later this week.

Subscribers can access this week’s issue here.

The Super Human IT Effort A Reservations System “Migration” Requires

Editor’s Note: This week I welcome a previous contributor to PlaneBuzz, Frank Arciuolo. Frank has not been seen around these parts in a long time. For reasons he talks about in his latest effort. I figure he felt sorry for me after it took him two hours to read this week’s issue of PBB, and thought the environs around here had been much too quiet!

In his previous efforts in PlaneBuzz, we used a “Godzilla” rendering for his ID photo. I figured it’s time you get to see the real deal. Mud and all. Enjoy!

Hi there, Godzilla here. I know it’s been a very long time since I’ve contributed to PlaneBuzz but I’ve been preoccupied with some of the more mundane things in life – like trying to find gainful employment. My plan when I left my last job at the beginning of 2008 was to do some part time flight instruction and get a part time job as an FO on a corporate jet – I even got my CE500 type rating.However, like they did so many other people, circumstances conspired against me. Taking flying lessons is well down the list of priorities for most people now, if it makes the list at all. And right seat jobs in corporate aviation are as scarce as, well, the hair on my head.

But, I digress. Anyway, thanks to Holly for letting me fill my idle time and the pages of PlaneBuzz simultaneously.

You know the feeling an ex-airport ticket agent gets when he/she wakes up on the Wednesday before Thanksgiving, looks out the window to see dense fog – then rolls over and goes back to sleep because they are off that day? That’s the feeling I got when reading about recent events at WestJet concerning their reservations system cutover and the system cutover at JetBlue this weekend.

In my previous lives I’ve participated in about 8 reservation system cutovers; one as an airline employee and the others as an interested bystander, AKA a vendor. My advice to any IT person working at an airline that is considering switching reservations systems is to dust off the resume and start networking (the people kind). People in the reservations system business (the “biz”) often refer euphemistically to a reservations system cutover as a migration. That’s a nice word, migration. It gives one the vision of a flock of Canadian geese traveling to MIA for a nice warm winter.

However a reservations system migration, or at least the ones I’ve been involved in, does NOT resemble a migration of birds to South Beach for the winter. Picture a reservations system migration as a flock of 1 million geese leaving Canada on a Friday night. On Saturday morning nobody can find ANY geese ANYWHERE. By Saturday mid afternoon 3 million birds arrive in Tampa, but only 25% of them are actually the geese that left Canada Friday night, the rest are pigeons. By Saturday night trucks have been chartered to take ALL of the birds from TPA to MIA because nobody wants to let them out of their sight. The trucks arrive in MIA Sunday morning and are gone through manually (by IT employees) to determine which are the geese they want to keep and which are the pigeons. Sunday night the airline CEO does the math and realizes that 25% of 3 million does NOT equal the 1 million geese he had Friday night. Where are the rest of the geese? Holy crap, what’d we do with those pigeons? Resumes and bird poo simultaneously hit the mail and the fan Monday morning.

Funny story, yes, but perhaps more real than you think. Airline reservations are literally money in the bank. Moving this valuable asset from one point in cyber space to another is fraught with land mines. There are a host of technical issues that would make your eyes glaze over and I’d be happy to talk about them in detail to any other IT geeks out there, but that’s not today’s point.

Since migrating is such a gut wrenching experience where the BEST result is a zero sum gain (and the worst result is working in bird poo), don’t do it! Some cutovers are unavoidable, like the DL/NW move and whatever will eventually happen with YX/F9 and the boyz in IND. Those cases also represent mergers/acquisitions, where the party on each side of the transaction has an interest in avoiding a train wreck. Migrations that are the riskiest are the ones where an airline is changing reservations systems they may have outgrown, or perhaps for a better deal.

Traditional hosting or multi host systems are very good at high volume transactions and at communicating with Global Distribution Systems (GDS) and other systems. Because they communicate with external systems so well, traditional host systems can greatly expand an airline’s distribution reach. However, since those external systems, by design, withhold certain information from the host system (like fare basis code, form of payment, and other key customer information), the host system has difficulty figuring out of someone booking in an external system has simply reserved a seat or has actually purchased a ticket. Traditional host systems are excellent for generating large volumes of bookings and they can ensure tickets are purchased on booking within its system, but not as good as ensuring the purchase of bookings made outside its system.

The newer reservations systems are much slicker at communicating with customers within their system and with the airline’s web site, but are not very good at communicating with outside GDS and other systems. Like the traditional hosting systems, they are good at forcing the customer to purchase a ticket before ending the reservation. One big advantage they have over traditional hosting systems is that the newer systems create a database of the airline reservations. A real database allows the airline to do detailed analysis of its customers and to effectively execute Customer Relationship Marketing (CRM) to its customers based on their purchases. This type of information makes airline marketing people salivate at the possibilities for the easiest type of marketing there is – to your existing customer.

For a boutique type airline starting out that has made the decision to remain out of the GDS and its evil and expensive booking fees, the selection of a reservations system would lean towards one that allows better CRM. However if the airline grows to a point where expanding the distribution network is necessary, as is agreeing to booking fees and all the rest, they’ve chosen the wrong reservations hosting system.

It makes sense to either add the robust external communication feature to the true reservation database system, or add the relational database feature to the traditional hosting systems. The first system to truly do that will have the golden egg. However, there are immense technical challenges of taking the incredibly dense set of text files (which is really what they are) that are contained in the reservations systems of AA, UA, DL, etc. and indexing them into a relational database. That would seem to argue for a solution that “bolts on” to the big hosting system and allows both systems to do what they do best.

Until this happens, try to be on vacation the weekend your airline reservations migrate!

Virgin America: Now It’s Not Just Us Questioning the Airline’s Financial Viability

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Monday the Bureau of Transportation Statistics of the DOT issued the latest Form 41 data for the industry. The information covered the fourth quarter 2008 numbers.

Needless to say, for airline geek types, the release of Form 41 data is like a huge box of goodies, all wrapped up with a nice big bow. The only problem is — you have to take the time to get in the box and carefully unwrap all the nuggets.

This morning analyst Gary Chase with Barclays issued a research note on Virgin America’s financial situation — a note that was clearly based on Gary and fellow analyst Dave Fintzen’s careful unwrapping of the Virgin America nuggets.

But wait — Gary doesn’t even cover Virgin America. The airline is not publicly traded.

Oh, but he does cover airlines that are currently affected by the airline’s presence. Most notably JetBlue and Alaska Air Group. Of all the major airlines Virgin overlaps about 25% of JetBlue’s capacity, while it overlaps about 17% of Alaska’s.

In his note this morning, Gary noted that while Virgin has been in the news a good deal lately because of questions concerning its ownership structure — “we cannot know the details of the company’s ownership structure.” But Gary and company can, and did, analyze the airline’s operating performance for the fourth quarter as reported to the DOT.

The verdict?

“The airline is now beyond the point in its development where JBLU turned profitable; Virgin America’s results would show losses in late 2008 even at sub-$1.00 fuel prices.

DOT filings point to substantial losses that go well beyond high fuel prices. We estimate that to break even in 2009 (similar to the rest of the industry on an un-hedged basis), the airline would need to drive significant improvement in revenue or cost performance, or both. For example, one path to break-even would be to achieve a roughly 20% higher unit passenger revenue (in an environment where industry RASM is declining by nearly 10%) and reduce non-fuel costs by almost 10% while fuel prices remain at the $1.49 level.”

He continued, “Virgin America’s premium strategy, including its First Class and Main Cabin Select products, does not appear to be generating a meaningful revenue premium. Rather, unit revenue performance lags JBLU and the industry at-large. Virgin America’s unit revenue performance has shown relative improvement as the airline spools-up, but still lags a typical new JBLU markets despite having a first class option and fewer seats on an equivalent aircraft (which should translate into both higher RASM and CASM). While Virgin America has found some relative success in short-haul West Coast markets, revenue performance in Transcon and longer-haul West Coast (i.e. Seattle) lags the industry by a wide margin.”

In addition, Gary said, “The premium strategy likely contributes to the airline’s relative cost problem, with non-fuel unit costs that are 40% higher than JBLU today and ~30% higher than JBLU at the same point in its life cycle. Unit cost tends to improve dramatically during the first year of an airline’s operations, but Virgin America is now beyond the point where JBLU’s cost structure stabilized. The cost structure remains significantly higher than JBLU, not to mention other low-fare airlines.”

In typical carefully worded “analyst-speak” he concludes: “We believe the Virgin situation represents a potential opportunity for the industry generally, but for JBLU and ALK in particular. Even if the press surrounding the ownership structure proves inaccurate, operating losses could also prompt a move away from its Transcon and long-haul West Coast routes, where performance has been the weakest.”

So how bad were the numbers themselves?

Virgin America’s recent DOT filings show the airline posted significant losses through its first year of operations. In total, the airline posted a 2008 pre-tax loss of ~$207mm on revenue of ~$370mm, for a pre-tax margin of negative 56%. While margins did improve, DOT reports show 4Q08 pre-tax margin was a negative 29% with a pre-tax loss of $32 million.

Now, is there anyone out there who still wonders why it was that Virgin America fought for so long to keep from reporting its results to the DOT?

I didn’t think so.

Bleak Cold Day on Wall Street

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Yikes. It wasn’t the bad weather up and down the East Coast today that made investors shiver.

The folks on Wall Street did a find job of doing that on their own.

And not just for airline stocks.

When all the shouting was over, the Dow Jones Industrials ended the day down 299.64 points, or 4.2%. This brought the Dow down to 6763.29. This was the first time the Dow has closed below 7000 since May 1, 1997.

Meanwhile, the S&P 500 fell 4.7% or 34.27 points, while the Nasdaq lost 4% or 54.99 points, closing at 1322.85.

The big news pushing stocks lower today concerned insurance giant AIG. The federal government announced that it was increasing its stake in the company by some $30 billion. The total for both U.S. Treasury and Federal Reserve investments in the cratering financial giant is now about $163 billion.

The market was in no mood to hear this today, and stocks took the brunt of investors angst as a result.

In the airline sector, the carnage was deep, and it ran pretty much across the board.

Of all the stocks we track at PlaneBusiness, none, not one, was up for the day.

The biggest losers for the day included: AirTran, which lost 15%, closing at 2.54; Hawaiian Airlines, which also dropped back 15% to close at 2.68; US Airways which lost 13%, closing at 2.47; JetBlue, which was down 14% to close at 3.29; Pinnacle, which lost a whopping 20%, closing at 1.12; ExpressJet, which was down 10%, closing at 1.22; and United Airlines, which lost 13% to close at 4.26.

Whew.

That’s all I can say.

Oh, and Southwest shares, which are plumbing unbefore seen depths of late, closed at 5.52, down 6% for the day.

Airline Stocks Tumble as It’s One Messy Day On the Street

Poking our head around the damage from today’s Wall Street activities, it was not a good day for the airline stocks, as almost every one of them ended lower for the day.

While the Dow Jones Industrials were down as much as 200 points earlier in the day, the Dow ended the day down 80.05 points, or 1.09% for the day.

However, the Dow Transports and the AMEX Airline Index both had a more miserable run of it. The AMEX Airline Index ended the day down a little more than 4%, closing at 16.43, while the Dow Jones Transportation Index ended down 4%, closing at 2602.06.

The top losers for the day included: AirTran, which lost 9%, closing at 3.27; Alaska, which lost 7%, closing at 22.27; JetBlue which lost 7%, closing at 4.26; US Airways, which lost 10%, closing at 3.30; Southwest Airlines, which dropped another 7%, closing at 6.07; and Continental, which ended the day down 6%, closing at 11.15.

Ugly day.

Airline Stock Winners for 2008: Allegiant (ALGT) Gets Top Performance Nod

When all was said and done, and the crystal ball descended in Times Square Wednesday night — I know that you were, just as I was, chomping at the bit to know the answer to one burning question.

Which airline stock was the top performer in 2008?

Against all odds, including floods, snow, sleet, testy employees and the darkness of oil (prices), which airline stock still managed to shine brightly against the setting sun of demand?

I am very happy to report that the airline stock that posted the highest return to shareholders in 2008 was one of our favorite airline stocks here at PlaneBusiness.

That stock was — Allegiant Travel Company. The company is the parent of Allegiant Airlines.

The airline, which managed to continue to post profits in 2008 — even though it was flying fuel-guzzling MD-80s, saw its shares climb a whopping 51% for the year, ending 2008 at 48.57 a share.

Not surprisingly, this year was one of the worst on record in terms of yearly gains and losses for the things with wings, collectively speaking.

Of all the airline and airline-related stocks we track, only four managed to post a gain for the year.

Those four were:

Allegiant 51%

Hawaiian Airlines 25%

JetBlue 20.3%

Alaska Air Group 17%

*Alaska and JetBlue are also two PlaneBusiness favorite stocks.

To see how your favorite (or not-so-favorite) airline stock performed in 2008, click here.

Picture of the Week: jetBlue Goes Swimming at O’Hare

I’m sure most of you have seen some of these pictures that are the hot item in all of our inboxes this week. I would have posted some sooner, but we had to get our upgrade bugs here at PlaneBuzz taken care of.

While Hurricane Ike and its effects to south Texas were widely disseminated this week — what a lot of people did not know is that while Ike was battering the southern coast of Louisiana and Texas, a nasty storm, unassociated with Ike, decided to batter the heck out of the Midwest. Particularly the Chicago area.

These are pics that were taken on Saturday at O’Hare and I think they give you a pretty good idea of how high the water levels were. I would give credit to the photographer, but I’ve received copies from so many people and no one seems to know exactly who took them.

My only question is this. Who was the bright guy who thought that putting snow removal equipment out there was going to help?

From what we understand, the move didn’t do much more than create waves that of course made the water levels even higher as they moved to the gate areas.

Good thinking guys.

Needless to say, these kinds of water levels are not good for equipment — brakes, rims, not to mention the bottom halves of engine cowlings. That water was way too close to those engines for me.

As one pilot wrote me today, “There’s no way I would want to taxi through that kind of water.”

Tell you what. I’m not a pilot, but I wouldn’t want to taxi through it either.