B6 Continues to Blame DL for Over-Capacity

Ch. 12

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Nov 24, 2002
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B6 Announces DL Schedule Reductions for them (how nice)

My question is why does a carrier that is flooding already full markets with capacity make the case that it is the incumbents fault? B6 should be equally, if not more, responsible for removing capacity but blames DL for overcapacity?? Once DL removes capacity, B6 adds and the overcapacity issue remains...only thing that changes is that B6 gets more share and more revenue.

I don't feel too sorry for B6 in this case. If I come along with two extra cards to add to an already full deck of 52, I don't put the blame on the dealer for having too many cards. It would be nice to see some rational thought from Neelman regarding "rational capacity". Who is to blame?
 
B6 & Neeleman didn't follow Song. Song followed B6 into markets that they otherwise hadn't shown a huge interest in (e.g. high frequency JFK - Florida). Delta also decided to make sure there was no doubt of its intentions by trying to market Song in much the same tone as B6 - right down to the all coach configuration with more amenities on these flights than their regular mainline flights.

Delta has also done this with regard to AirTran. Akron comes to mind. Delta had shown little interest in serving that market, but when AirTran started there, the war for Akron was on!!!! There are other examples, too.

Neeleman's right. Delta has a rich history of caring more about beating the competition for market share than actually serving the routes that make the most sense in terms of its own profit and loss.
 
B6 & Neeleman didn't follow Song. Song followed B6 into markets that they otherwise hadn't shown a huge interest in (e.g. high frequency JFK - Florida). Delta also decided to make sure there was no doubt of its intentions by trying to market Song in much the same tone as B6 - right down to the all coach configuration with more amenities on these flights than their regular mainline flights.

Delta has also done this with regard to AirTran. Akron comes to mind. Delta had shown little interest in serving that market, but when AirTran started there, the war for Akron was on!!!! There are other examples, too.

Neeleman's right. Delta has a rich history of caring more about beating the competition for market share than actually serving the routes that make the most sense in terms of its own profit and loss.

Song was branding...not expansion. DL has ALWAYS had a major NYC to Florida presence. Then, all of a sudden, B6 came into the market serving the same routes via JFK (DL had alot of LGA-Florida IIRC) with a different brand strategy. DL simply added a brand to compete with the B6 brand in the same NYC to Florida markets.

Regarding "DL caring about beating the competition instead of profitability"...think about it. B6 enters markets, putting them overcapacity and then blames DL for capacity?? Of course DL will now lose on markets that they once profited on since there is too much capacity. But look back to see the NY-Florida markets prior to B6. It was US and DL with some AA mixed in. B6 saw that they could come in at lower costs and flooded the markets. Since then NK has also flooded the market (though much smaller scale than B6). B6 WAS able to come in at lower costs and stick it to the high-cost legacies NYC-FLA but then when EVERYBODY started realizing higher costs, companies such as B6 that didn't care much about low revenue all of a sudden had margins narrow and then go negative. NOW B6 claims overcapacity is the issue (even though that is what helped them in the beginning when they caused the problem) and they blame the incumbents. Again...look at the real root of the problem. You didn't help sway me for any sympathy on the over-capacity issue (just as I don't expect sympathy from the LCCs for DL's burgeoning cost issue).
 
Ch 12 -
Song was expansion! Every Song 757 represented a seat capacity increase over its former life as a DL mainline 757 of about 15%, IIRC. You will also recall that part of the Song strategy was higher frequencies with these 757s. BTW, these were added to the most of the existing DL flights between LGA and Florida, only minor schedule adjustments, not a lot of substitution there. Also, if DL believed it had the right number of NYC - Florida flights before B6 then what else could Song be other than an attack on B6 at the expense of its own profitability? Of course, Song represented "overcapacity" with no rational intent of actually making $$$.

Further, these moves by DL are not limited to B6. Again, look at some of the spoke markets for AirTran. AirTran moves in and DL adds capacity, new flights, and new destinations - but of course that's only if those destinations are served first by AirTran.

Neeleman's right. The only argument that can be made that B6 is responsible for overcapacity is that they started an airline, at all.
 
Neelman is a failure!

First he failed with Morris Air, then he was fired by Southwest and now he is failing with jetBlue. Neelman is just trying to pass the failure onto someone else.

Face it Neelman, you can't run an airline! :lol:
 
Neelman sold Morris air to Southwest for lots of $$. He became an executive with SW as part of the Buyout. He then helped start WestJet in Canada( he had a non compete clasue for 5 years), that airline is flying high, so the record is great.
 
Neeleman's attention span seems to be five years, and then he's onto something else.

I find that B6 employees have an unhealthy fixation on DL, which clearly comes from the top down.

Yes, Song added more capacity than already existed in those markets, but why is it that Jetblue employees seem to forget all about the days before Sammy the Sperm, i.e. Delta Express and normal widget 767s and Tritanics running up and down the coast to Florida?...

And why exactly is Jetblue's capacity entirely justifiable while DL's is seen as excessive?...
 
Why? Because JetBlue's flights were put in to make money...which they did for several years until this most recent quarter. DL's capacity was added almost exclusively as an attack on B6 w/o a plausible plan for profit. That's the distinction.

If you take the position that JetBlue's capacity is "excessive" then you are really saying that noone should ever start a new airline, because by defintion it would be "excessive" capacity.
 
Why? Because JetBlue's flights were put in to make money...which they did for several years until this most recent quarter. DL's capacity was added almost exclusively as an attack on B6 w/o a plausible plan for profit. That's the distinction.

If you take the position that JetBlue's capacity is "excessive" then you are really saying that noone should ever start a new airline, because by defintion it would be "excessive" capacity.

B6's flights were put in to create an over-capacity issue that would mean that fares would be forced to be low and carriers with high-costs such as DL would have to operate at a loss in order to compete. DL WAS making money when the capacity was right-sized for the market. Titan- I do not expect you to try to think of the issue globally rather than at the rah-rah jetBlue scale but when you look at the industry...it truly is the new entrants that have created too much capacity. Then they have the gall to blame to mainstay carriers for not simply reducing capacity to create room for them. Why doesn't every legacy just shut down so that the capacity issue that was created by the new entrants is justifiable?

Again...going back to my main analogy...just b/c I bring a few extra cards to the deck, who am I to say that the dealer should remove some of his own cards to make room for mine?

And as far as adding a new airline...there is a time and a place. When there is already too much capacity, adding a new airline is careless. Trust me...I'm more for free-competition than most on these boards but I am also for intelligent business decisions and owning up to things that are your own fault. I don't think that a business model poised on flooding a market into overcapacity is intelligent and I don't think that B6 is immune at all. Your entire argument is based on "if B6 enters a market, any incumbent carrier should reduce capacity accordingly...ultimately vacating the market b/c there just isn't room". That's not competition. I applaud DL and others for branding to compete (Song and Ted) and defending once-profitable markets.
 
Couldn't agree more with Chapt 12 (for once... ;) ). UAL has a similar problem in DEN, and overly aggressive expansion by a MONEY LOSING LCC that then has the gall to criticise the rest of the industry for "overcapacity". Capacity reduction starts at home. Besides, I'd rather have a prosperous DAL (that can actually support the defence of our country with airlift) than see them get destroyed by the punk of the week club.
 
Ch 12 -
My argument is not based on the notion that DL should have reduced capacity at all. Why not keep what they had?...which was a solid amount from LGA and very little JFK to Florida. If you assume DL had the right number of flights in the NY to Florida markets before B6, then why add Song?

B6 launched a new airline into an underused airport in the number-one market in the nation. What was inappropriate about that in any way? They did so with low fares...a la Southwest and AirTran. What's inappropriate about that? On the other hand, Song, with its added daily flights and added capacity per flight, wasn't even a glimmer in anyone's eye until B6 came along. It was simply to beat up on B6. Most financial analysts knew Song was not long for this world when it started as it didn't appear to be designed to make money.

DL's reaction was the same as AA's in Long Beach...an airport AA wanted little or nothing to do with until B6 decided to focus on that airport. AA's plan made no financial sense for them from the start (simply not enough critical mass of AA flights there to be worth AA's effort), something they later conceded by pulling back so many of their new flights. I've already mentioned some of DL's responses to AirTran -- like flooding the cash-cow market of Akron! They're the same thing.

My distinction on "overcapacity" or "excessive" flights is simple. If the carrier adding the flights puts the flights in to actually make money then it's legit. If the carrier is simply engaged in a money-losing, knee-jerk reaction to someone else's new flights then it's "excessive." Not a case of B6 rah-rah - a simple standard that could be applied evenly across the board.
 
Just listen to the latest conf calls from Airtran management re Delta, and adding seats.

Goes something like this: Airtran starts a new city pair, Delta floods the same city pair. Delta looses too much money and soon exits/draws down capacity. Airtran stays in said city pair and starts making money.

The same could be said about Delta's plan after US Airways' first CH11. Plan: Wait for US Airways to go away. Plan did not pan out, next...

Needleman will most likely sell out one day, because at the end of the day JBLU is public company and the smart money are in to make money. Not too much Needleman can say/do about that...

That being said, JetBlue has their work cut out for them...The lower cost of all the legacy carriers are not helping them, but more of a threat is the benefit of legacy carrier code-share/frequent flyer miles, first class etc., just what the higher yield pax is looking for...Personally, onboard TV's must be nice, but is it enough...

And after all that, I'm actually nibbling on JBLU stock...;)
 
My distinction on "overcapacity" or "excessive" flights is simple. If the carrier adding the flights puts the flights in to actually make money then it's legit. If the carrier is simply engaged in a money-losing, knee-jerk reaction to someone else's new flights then it's "excessive." Not a case of B6 rah-rah - a simple standard that could be applied evenly across the board.

How about branding yourself differently or moving flights from one NYC airport to another in order to try to prevent another carrier from taking all of your profits? Just b/c B6 or FL wants to come into a market already served doesn't mean that the carrier already serving the market should resign itself to a slow death in that market. Sometimes that means adding seats b/c if you don't try to compete, you will be slowly whittled out of the market. Nobody ever had a successful comany by NOT competing when their 'bread-and-butter' was attacked.

Now go to your NY papers and look for B6 ads. Apparently they are running ads questioning if Virgin America is really a wise decision since it would create "overcapacity". It is funny that you argue that B6 had NOTHING to do with overcapacity yet your darling company understands that adding a new airline will continue to perpetuate the problem of overcapacity. I'd say that when the company is running full pagers to state that adding a new carrier will perpetuate overcapacity, they tend to agree with my argument. But then again...B6 can take no responsibility at all, right? It is the fault of the carriers already there? :rolleyes: Tell that to your company since they seem to agree with me.
 
From Today's "Air Transport World Online"....

JetBlue, which earlier forecast a full-year loss for 2006, instead should see a return to profit, according to JP Morgan analyst Jamie Baker, who cited the positive impact of dramatic cutbacks by primary competitor Delta Air Lines in key north-south East Coast markets that should boost JetBlue system revenue by 5%. Based on its latest schedule filings, Delta is cutting capacity significantly between the Northeast and Florida as a result of the demise of Song as an independent entity, resulting in 13 fewer daily departures across 13 markets, "a decline of one-quarter," according to JP Morgan. Actual reduction in seats is likely to come in at 32%, since Song's 757s are being replaced by smaller aircraft such as mainline MD-80s. These markets "collectively account for 34% of JetBlue system revenue," said the analyst. JP Morgan forecasts JetBlue will enjoy a revenue boost of $30 million starting with the second quarter, enough to propel it to a small profit this year.

Timely article. 32% seat reduction?! From what I can see, this is not dropping below what DL had pre-B6, yet it's a 32% cut in the number of seats. This simply reinforces what SoftLanding said earlier. DL piles on to attack a competitor, bleeds money on flights where there was never a credible plan to turn a profit, then drops the flights when the bleeding is too much to take anymore. Seems like excessive capacity to me.
 
One could look at JetBlue's purpose to create over capacity in markets to help the demise of the legacy carriers! Neeleman should not blame any other carrier. There is over-capacity. Period!

Just think of the further over-capacity when Virgin USA takes to skkies1