2/18 CLT Crew News Session

[BoeingBoy]

ZW and RP negotiated favorable contacts because of their ability to give cash

That's odd - I didn't know that those were the first fee for departure contracts signed by US...I could have sworn that Mesa and Chautauqua were before them.

I don't know why you keep insisting that anyone "give" US cash. ZW's owners made a DIP investment in exchange for LCC stock (and did very well on it, I might add) while RP bought the E170's, E190's, and loaned US money. Neither "gave" US money.

US, for whatever reason, pays for 100% of the fuel used by the affiliated fee for departure carriers. They're not the only legacy to do so, but not every legacy does so. FWIW, it was the old US management that negotiated all but Mesa's current contract (that is the one negotiated by HP)

Jim

 

[pilot]

The argument is foolish either way it is framed.

The outsourcing of flying is a flawed business model. In fact, the entire hub and spoke system is a flawed business model. The insanity of the cretins running this business has been one of attempting to tweak this flawed plan for decades.

No one thinks outside the flawed business model and they all ignore the only one that works. Or they say that the successful model only has a few more years to work. And they don't adopt it. Or copy it. That it can't be successful as it matures. That it only makes money because of fuel hedging. yada...yada....yada.

That model was started in 1971. And it keeps making money.

Charging for bags, single engine taxi, and outsourcing flying to RJ's is where its at. Yep, that ought to do it.

 

[gabby]

The argument is foolish either way it is framed.

The outsourcing of flying is a flawed business model. In fact, the entire hub and spoke system is a flawed business model. The insanity of the cretins running this business has been one of attempting to tweak this flawed plan for decades.

No one thinks outside the flawed business model and they all ignore the only one that works. Or they say that the successful model only has a few more years to work. And they don't adopt it. Or copy it. That it can't be successful as it matures. That it only makes money because of fuel hedging. yada...yada....yada.

That model was started in 1971. And it keeps making money.

Charging for bags, single engine taxi, and outsourcing flying to RJ's is where its at. Yep, that ought to do it.

I agree with you, D.P. always states that there is too much capacity. Yet Republic continues to grow. Airtran continues to grow....
Maybe their growth is coming at the expense of US Airways.
With todays computer power i don't see how US Airways can't do both a hub and spoke and Point to Point flying.

Mesa has been flying for America West for years. Don't think you can blame that on the old management at US Air.

 

[N924PS]

[quote name='pilot' date='Mar 1 2010, 07:14 AM' post='733376
That model was started in 1971. And it keeps making money.
[/quote]

Actually, that model was started much earlier than 1971 by Pacific Southwest Airlines in San Diego.

Low fares, high frequency, and high hemlines that brought a smile to skies on the West Coast.

http://www.jetpsa.com/index2.html

Copied in 1971 by Herb Kelleher in Texas. And the rest is history.

 

[BoeingBoy]

Mesa has been flying for America West for years. Don't think you can blame that on the old management at US Air.

You are correct. As I think I said somewhere above, the current Mesa contract is courtesy of HP. The old US management did phase out Mesa and ended that contract, which was for smaller RJ's (Mesa itself got out of the EAS revenue sharing business). So management at both pre-merger companies are guilty of farming out flying to Mesa but the only remaining contract is strictly from HP's management.

Jim

 

[pilot]

I agree with you, D.P. always states that there is too much capacity. Yet Republic continues to grow. Airtran continues to grow....
Maybe their growth is coming at the expense of US Airways.
With todays computer power i don't see how US Airways can't do both a hub and spoke and Point to Point flying.

Mesa has been flying for America West for years. Don't think you can blame that on the old management at US Air.

Most things (even this pig) can be fixed if an astute and forward thinking management had the will and the brains (they have neither) to rethink the business model. The BOD and stockholders don't demand it and the employees are punch drunk from constant combined barrages of incompetence and scapegoating by DP and the money movers. This management's plan is for another merger. They are foolishly trying to hang on hoping against hope the economy pulls them out of their lack of skills of running an airline. Their bold moves are selling the furniture and closing crew bases staving off liquidity issues waiting for the economy to turn.

Opportunity doesn't find you. You find it. These guys don't want to change the business model because they have no skill or guts. Just the same old business school mentality that keeps the airlines from prospering.

It's too bad they don't get it. Not for them - for the employees and stockholders. They have the same assets Southwest has. They just don't know what to do with them.

 

[john john]

That's odd - I didn't know that those were the first fee for departure contracts signed by US...I could have sworn that Mesa and Chautauqua were before them.

US Airways was able to convince two regional carriers, Air Wisconsin Airlines Corp. and Republic Airways Holdings Inc., to each invest $125 million in US Airways. The investments came with the condition that US Airways agree to use those carriers as part of its US Airways Express regional fleet.

The deal with Wexford Capital, which controls Republic Airways, was also conditioned on US Airways' ability to attract additional financing. It also required US Airways to sell valuable slots at Reagan National Airport and LaGuardia Airport in New York, though US Airways also retained the right to repurchase those slots. And Richard Bartlett chairman of Air Wisconsin Airlines Corporation was put on US Airway board of directors


The deal was an exclusive

 

[BoeingBoy]

You got part of it right. Wexford was required to invest $125 million in LCC stock after BK2 exit if US wanted it, but US didn't - the outside investors that agreed to make equity investments after the merger was announced apparently weren't happy that Wexford and Eastshore got better terms, so US declined the Wexford investment. The Eastshore DIP money had already been spent by that point and US couldn't afford to pay it back - not enough cash and no one else wanted to replace them as the source of DIP financing, so they got their LCC stock in exchange for their DIP money with better terms than the other equity investors.

There were actually two agreements with Wexford - one for the sale of the E170's + slots with the fee for departure contract (the choice to require consummation of that deal was strictly Wexford's) and the equity financing (with the choice US' as I said). While negotiated at the same time, each side could back out of one of the agreements so they were unconnected at least that much. US wanted if possible and did keep the E170's "in the fold". Republic got the airplanes plus the affiliate contract that they couldn't get at any other legacy at the time - no other legacy pilot grou['s scope allowed over 70 seats at the time.

Although both were firsts in that an express carrier was willing to provide DIP or equity financing to a mainline type carrier that I know of, the Eastshore deal was more unique in my judgement. Air Wisconsin's contract with UA was ending and Eastshore effectively bought a place to put those airplanes. Fortunately for Wexford, they both made money on the equity and didn't have to be lowest bidder to get their foot in the door since US needed the cash more than it didn't need more 50-seaters. Other legacies were starting or were already moving to CRJ-700's.

Jim