more US Air woes.....

[flyover]

[ QUOTE ]
And those sweetheart deals on the leases start getting a lot less sweet very rapidly. We'll see how long JetBlue remains Wall Street's darling after they start paying much more on those leases.

[/ QUOTE ]

I'm curious what your source is on this. This was a hot rumor (still is) at my former legacy airline. Our union financial analysts said it was not accurate and that JetBlue was paying industry standard lease rates and maintenance costs.

[Doug Taylor]

I saw something from Mike Boyd (analyst) that talked about maintenance and lease "holidays". I'll try and dig it up when I get a chance and/or hold interest! (just being honest)

[Mr_Creepy]

When I interviewed at jetBlue (at least one of the times I interviewed) I had a chance to sit down with the CFO. I asked him about the Airbus deal. He would not give out numbers, but he said it was very favorable with a relatively quick payoff at low interest rates.

[Doug Taylor]

Where did you recieve Airbus time?

[Mr_Creepy]

This was prior to that requirement.

I haven't interviewed with them since 9-11

[stuckingfk]

[ QUOTE ]
[ QUOTE ]
And those sweetheart deals on the leases start getting a lot less sweet very rapidly. We'll see how long JetBlue remains Wall Street's darling after they start paying much more on those leases.

[/ QUOTE ]

I'm curious what your source is on this. This was a hot rumor (still is) at my former legacy airline. Our union financial analysts said it was not accurate and that JetBlue was paying industry standard lease rates and maintenance costs.

[/ QUOTE ]

I read an article on JetBlue this weekend and they debunked this rumor. They got a deal (when compared to Boeing) on the A320s, but they have been paying on them on delivery day 1.

[flyover]

[ QUOTE ]
When I interviewed at jetBlue (at least one of the times I interviewed) I had a chance to sit down with the CFO. I asked him about the Airbus deal. He would not give out numbers, but he said it was very favorable with a relatively quick payoff at low interest rates.

[/ QUOTE ]

Well that may well be. Airbus and Boeing have been fighting for this market and especially in the 737/320 fight I expect both to give good deals. I'm sure AirTran did quite well with Boeing on the 37s. Nobody ever discloses the true cost of these deals because of all the discounting.

But at some legacy carriers this has devolved to a "JetBlue is paying nothing for the airplanes for the first (fill in the blank) years and maintenance is nothing and boy when those chickens come home to roost they'll be in real trouble and then things will be OK for us" kind of prayer.

[tonyw]

Arrrgh, I'm drawing a blank here. I remember going through the management discussion of their financial statements, and looking at the projected aircraft rent and seeing it go from virtually nothing to a big number. It was a LONG time ago, about a year ago, that I saw that, and I so don't want to dig that up now.

Believe me, I didn't pull it out of my butt. Trust me on this one, okay?

[flyover]

[ QUOTE ]
Arrrgh, I'm drawing a blank here. I remember going through the management discussion of their financial statements, and looking at the projected aircraft rent and seeing it go from virtually nothing to a big number. It was a LONG time ago, about a year ago, that I saw that, and I so don't want to dig that up now.

Believe me, I didn't pull it out of my butt. Trust me on this one, okay?

[/ QUOTE ]

Could that be because their fleet is rapidly growing? It's no big deal, but as I said I've personally heard some accounting types debunk this "rumor". Having said that I think JetBlue has a steep climb ahead of them. That northeast market is the holy grail and whether it is SWA or bankrupt/reorganized legacies or more new entrants, the competition will be stiff.

[tonyw]

It very well could be due to the growth of the fleet. I don't recall exactly the specifics.

What I was struck by was that in their first few years of operation, the leases were practically nil and they were projected to grow very rapidly. Now, that may have been due to market conditions. With the complaints filed with the WTO alleging that Airbus is using below market prices and leases to gain business, it wouldn't surprise me if that was just the way Airbus got JetBlue's business.

Nevertheless, if you've got increasing fixed costs, and increasing operating costs such as fuel (who'd have thunk we'd say that fuel at $47 a barrel was cheap) and then you add in the costs of operating a multiple aircraft fleet, it is not an easy hurdle to overcome. And their labor won't stay cheap forever, union or not.

[kellwolf]

According to JetBlue's 2003 annual report, they own 29 A320s and lease 24. The leases are due to expire between 2009 and 2013, and the 29 owned a/c are "subject to secured debt financing." I guess that means they plan on using the equity in those aircraft to secure financing on the 100 ERJs they ordered.
Here's their long term debt payment:

2004 $102
2005 $103
2006 $99
2007 $98
2008 $98
After $934

Those are in millions of dollars. This is quite possibly one of the most unhelpful annual reports I've ever looked at. Most of them have their long term liabilities broken down on the balance sheet. Not this one. This is what you get:

Long Term Debt --- $1,011,610,000

Now is that financing on a/c, financing for building HQ, financing for the new training center in MCO, financing ground equipment, or all of the above? They have $570,695,000 cash on hand according to the assets, and their flight equipment is valued at $1,220,272,000.

[MikeD]

Liquidation looming unless labor contracts can get cancelled:

http://www.usatoday.com/money/biztra...ontracts_x.htm

[Kingairer]

I hate to say this, as this will certainly effect me and my compadres, but At this point the best thing long term could be liquidation. This gradual slash and burn concept isnt working and really there is no clear plan that will work to turn things around.

[kellwolf]

[ QUOTE ]
This gradual slash and burn concept isnt working and really there is no clear plan that will work to turn things around.

[/ QUOTE ]

I think we'll see routes and gates sold off before total liquidation sets in. Just ask Pan Am how well that works......

[TallBoy85]

Haha routes and gates are being sold off...it's called Mid Atlantic Airlines, Piedmont Airlines, Allegheny Airlines, Chataqua Airlines, and oh yeah...Mesa Airlines.

US Airways is very smart with their Express carrier and in fact plans on drastically altering their routes in February to handle the slower time after the holidays. This includes a something like a 25% productivity increase by the pilots and parking (yes parking) 25 airplanes from mainline while our schedules increase about that much also.

Anyone that's been to Philly should know the gates aren't worth anything anyway...it's Philly...

[Mr_Creepy]

[ QUOTE ]
Haha routes and gates are being sold off...it's called Mid Atlantic Airlines, Piedmont Airlines, Allegheny Airlines, Chataqua Airlines, and oh yeah...Mesa Airlines.

US Airways is very smart with their Express carrier and in fact plans on drastically altering their routes in February to handle the slower time after the holidays. This includes a something like a 25% productivity increase by the pilots and parking (yes parking) 25 airplanes from mainline while our schedules increase about that much also.

Anyone that's been to Philly should know the gates aren't worth anything anyway...it's Philly...

[/ QUOTE ]

Those routes all still belong to USAirways, but I think I know what you mean.

Kell is saying that OTHER CARRIERS may pay cash for some of the routes.

[Doug Taylor]

Besides LGA and international slots, probably better to pick them up after they get dropped as opposed to actually pay for them.

[seagull]

Domestically, there are no "routes" to own really, just gates and slots, possible exception of DCA. Internationally, the routes are something of actual value, since each has to be negotiated seperately as part of a bilateral through the U.S. DOS.