Because Of Ted Ii

[Busdrvr]

http://biz.yahoo.com/prnews/040607/lam117_1.html


Frontier Airlines Reports Preliminary Traffic for May 2004
Monday June 7, 9:30 pm ET


DENVER, June 7 /PRNewswire-FirstCall/ -- Frontier Airlines (Nasdaq: FRNT - News) today announced preliminary traffic results for May 2004. Revenue passenger miles (RPMs) increased 33.8 percent to 486,935,000 for May 2004 from the same period last year. Available seat miles (ASMs) increased 32.7 percent to 742,827,000 for May 2004 from the same period last year. This resulted in a load factor for May 2004 of 65.6 percent, an increase of 0.6 points from May 2003, when the airline reported a load factor of 65.0 percent. The airline carried 495,000 passengers during May 2004, a 24.2 percent increase from May 2003. The airline reported passenger yield of 10.15 cents for the month of May 2004, a decrease of 10.9 percent from the same period last year. Its passenger Revenue per Available Seat Mile (RASM) was 6.65 cents, down .76 cents or 10.3 percent from May 2003.

Instead of repeating what I said before, here it is

"Now lets look at traffic trends
In March and April of this year, UAL flew roughly the same number of ASM's. UAL's LF in March was 80.1% and in April, it was 79.9% for a drop of .2%

Meanwhile at FRNT, March LF was 74.9%, while April's was 69.1% That's a 5.8% drop. But surely FRNT enjoyed a revenue bump....right.....? Not hardly. In March, PaxRASM at FRNT was 8.27 cents (7.65 for the entire money losing Q4[jan-mar]) How about April? 7.06 That's a 15% drop from March and a 8% drop from the MONEY LOSING Q4!!!!! That is an incredible drop, especially when you consider the increased costs of fuel in April."

Now to update it

FRNT LF has fallen to 65.6 and the PRASM has collapsed to 6.65. This is down 15% from the money losing winter Quarter. This is just on the revenue side. the increased costs associated with fuel may drive the margins down even more.

Meanwhile, back at the ranch....

Press Release Source: United Airlines


United Airlines Reports May Traffic Results
Monday June 7, 1:35 pm ET


CHICAGO, June 7 /PRNewswire-FirstCall/ -- United Airlines (OTC Bulletin Board: UALAQ - News) today reported its traffic results for May 2004. For the second month in a row, United broke its load-factor record for the month. At 80.1%, United reached its highest-ever May passenger load factor, up 2.9 points over May 2003 and 0.2 points above April 2004. United's total scheduled revenue passenger miles (RPMs) increased in May 2004 by 21.6% on a capacity increase of 17.2% available seat miles (ASMs) vs. the same period in 2003.

 

[C54Capt]

So...do all these facts and figures mean United is profitable now?

 

[Busdrvr]

"So...do all these facts and figures mean United is profitable now?"

What this says is that UA continues to enjoy LF and revenue growth, while one of those immortal LPC is having BIG trouble. Keep in mind, this is a 15% DROP in PRASM BELOW what was a LOSING PRASM level with LOWER FUEL COSTS. keep in mind, UAL has stated publically that they would be profitable this quarter without the staggering rise in fuel costs. That suggests to me that UAL has seen a RISE in PRASM so far this Q vs Q1 while it has literally collapsed at it's LPC competition. It make Potters contention that they haven't been affected by Ted downright comical.

What this also seems to show (along with ATA's problems in Chicago), is UAL is the one major that seems to finally be turning the tide against LPC competition. UAL ALREADY had one of the highest LPC overlaps in the industry (over 70%). I wouldn't expect it to get much tougher for UAL on the LPC induced revenue collapse, and would expect airlines with much lower overlap (DAL, NWA, U) to wear the LPC target in the near future.

 

[WorldTraveler]

Since United or any other legacy carrier doesn't report hub specific financials, your conclusions are speculative at best. It is possible that United has indeed heard Frontier but it is far more likely that United is simply flooding the market with plenty of cheap seats which would be a dramatic departure since United didn't even match Frontier's fares before. Analysts will eventually be able to figure out what United has done based on their route specific government filings in a couple quarters. However, market share is relatively easy to build; profits are much harder.

I wouldn't exactly jump to the conclusion that United has finally figured out how to compete against LCCs. American and Northwest particularly have a long history of being very competitive against LCCs in their markets. Delta has been more aggressive lately while Continental has taken the approach of skimming off the most profitable passengers - a strategy that is more likely to work for them since they hub in large cities and use small planes.

Finally, the key figure in determining whether an airline is competing successfully against LCCs is consistent profitability, something that no legacy carrier including United has been able to generate. I'm glad United is aggressively competing against Frontier and every other LCC that enters their key markets - including Washington and now San Francisco. Unless United employees are willing to dramatically change the way United does business (including the way employees are compensated), United will not be able to generate sustained profits when competing against LCCs.

 

[C54Capt]

Busdrvr,

From your statements "UA enjoying LF and revenue growth...", and the immortal LPC (F-9) being "in BIG trouble", I would think that F-9 was on the verge of liquidation and UA was enjoying prosperity. Your statements paint a totally different picture than the reality of the industry. BTW, Tilton mis-spoke about woulda coulda shoulda been profitable last month. He meant to say "woulda had an operating profit", big difference. Lastly, Potter I think is telling it like it is in regard to TED. The numbers you cited in your last post reflect system wide performance, which has been adversely affected by the initiation of a mini-hub or "focus city" in LAX with a ton of expansion.

BTW, Busdrvr, are you working for F-9 while on furlough from UA?

 

[mweiss]

I ... would expect airlines with much lower overlap (DAL, NWA, U) to wear the LPC target in the near future.

US has had that target painted on its airplanes for years. It's just that, instead of sticking around to fight, they've run off with their tail between their legs. So, yeah, their overlap is low, but it's not because they haven't had any competition from, say, WN.

 

[ac500]

Exactly what we should fear about corporate welfare, ie bankruptcy. The government should stay out of the airline business and stick with what it does best...what I don't know. If they continue to help these failed business plans carriers like Frontier and ultimately the consumer will suffer.

 

[Fly]

You are absolutely right. Of course that means "hands off". Here's a suggestion to No Government Assistance from another board:

(1) When a low cost carrier enters a market, allow majors to flood the market with capacity and undercut prices. The justice department calls it predatory pricing. Really it’s just conservative, free market, laissez faire capitalism. Why are low cost start ups protected and allowed to cherry pick the best routes? Get the government out.
(2) Drop all federal mandates. No security mandates, no safety mandates, etc. We want the government out, don’t we? We want free market capitalism, don’t we?
(3) Allow price fixing among competitors. (Do you really believe price fixing doesn’t occur in other industries, oil for example?) Get the government out.
(4) Drop the wide range of taxes and let the system find a way to survive without government intervention. Let’s get the government out.
(5) Open the skies to unlimited routes and privatize air traffic controllers. (Control from India via Internet. Or maybe Saudia Arabia?) You want a free market, don't you?
(6) Abolish all external control and let the carriers themselves structure the industry just as they please. Get the government out.
I suspect you want GOVERNMENT to mandate safety and security issues (paid by carriers), PLUS enact legislation which favors protectionism for low cost carriers (the Wright Amendment for LUV and predatory pricing as above), while RESTRICTING mergers and acquisitions for the purpose of competitive advantage and economies of scale. You want the government to guarantee you a cheap seat by keeping the industry in chaos.
Incidentally, I noticed when Reagan’s policies gutted the S&L industry, the 'conservative', free market group didn’t have a problem confiscating a half trillion taxpayer dollars for a bailout.

 

[767jetz]

RIGHT ON, FLY!

 

[jimntx]

Hale yayus, Fly! Kin I have uh AMEN from the choir?

Though I'm confused. You said "I suspect you want GOVERNMENT to mandate safety and security issues (paid by carriers), PLUS enact legislation which favors protectionism for low cost carriers (the Wright Amendment for LUV and predatory pricing as above)," Are you saying that the Wright Amendment protects an LCC? Over on the Wright Amendment thread, all the experts are saying that it is AMR that is fighting to keep the WA. I'm just a junior (and furloughed) flight attendant. I don't understand all this big bidness talk.

 

[TJoe]

So...do all these facts and figures mean United is profitable now?

No, it means Frontier is having to compete with a carrier in BK protection. Joe

 

[sfb]

Exactly what we should fear about corporate welfare, ie bankruptcy. The government should stay out of the airline business and stick with what it does best...what I don't know. If they continue to help these failed business plans carriers like Frontier and ultimately the consumer will suffer.

Well, it can easily be argued that Frontier had help from the government as well in the form of $50 million or so in loan guarantees, which, to their credit, they paid off within several months. Unfortunately, it seemed that FRNT management learned little from the situation which led up to the liquidity crunch necessitating those loan guarantees -- expanding too quickly in a less-than-robust air travel market is not good for profitability.

And I'd argue that's part of why Frontier's PRASM was so dreadful in April and May (especially when viewed against their CASM). They've been adding seat-miles at a rate of over 30% year-over-year, but United's not cutting capacity in competing markets anymore. And with passenger perceptions of service at UA improving and Ted providing more effective competition, it seems Frontier is going to have a tougher revenue situation going forward. Count me (for one) as skeptical about their addition of capacity at LAX -- though it avoids high costs and heavy competition at DEN, it also competes directly with WN (STL, MCI, PHL), NW, AA, and US. You can fly today on F9 from LAX to MCI and return tomorrow for $221.40 before taxes -- a yield of a whopping 8.1 cents on last-minute travel. That does not scream "successful route" to me. LAX-PHL for the same dates, round-trip, is $360.92 before taxes -- 7.5 cents/mile.

 

[The Ronin]

Flight fight costs Frontier

By Greg Griffin
Denver Post Staff Writer


Frontier Airlines and Northwest Airlines are waging a dogfight in Los Angeles, where Frontier launched a cluster of new flights in April.

The airlines slashed round-trip fares on the L.A.-Denver and L.A.-Minneapolis routes to as low as $98 in May. On Tuesday, prices available online were $200 to $220 round-trip.

"These are can't-afford-to-stayhome fares," said Minneapolis-based fare watcher Terry Trippler. But he called the lowest prices "obscene" because the airlines are pricing below cost.

The cheap fares in L.A., and elsewhere across Frontier's expanding route network, are biting into revenues just as high fuel prices and other expenses are pushing its costs up. That's contributing to losses at the Denver-based airline and raising questions about its growth plans.

Frontier lost $5.8 million last quarter, thanks to rising fuel costs, low fares and several one-time charges. Analysts expect the publicly traded Frontier to lose $2 million to $7 million in the current quarter, before earning a modest profit in the July-September quarter.

Meanwhile, Frontier is increasing its seating capacity by 30 percent to 40 percent this year.

"Those are very large capacity increases in a very difficult fare environment," said Jim Parker, an analyst with Raymond James Financial in St. Petersburg, Fla.

JP Morgan analyst Jamie Baker criticized Frontier's growth in a research note last week, suggesting the company should scale back its growth.

"Unless Frontier can profitably accelerate diversification into non-Denver markets, we believe the carrier may reconsider its growth ambitions," he said.

In an interview last week, however, Frontier chief executive Jeff Potter reiterated the carrier's commitment to continue increasing its fleet of 44 planes.

"We've got firm commitments to have about 62 aircraft by March of '08. We're not going to stop at 62," he said. "We've looked out to that point, and we'll see what happens beyond that."

All U.S. airlines are struggling with low fares and high fuel prices, but Frontier has been hobbled recently by other factors.

Its expenses are inflated by pilot-training costs associated with its transition to an all-Airbus fleet, Potter said. He expects those costs to begin coming down by midsummer, giving Frontier more breathing room.

Frontier's Los Angeles expansion, announced last fall, was the airline's first serious foray into another market with non-Denver flights. The airline chose Los Angeles in part because its gate space at Denver International Airport is limited.

Officials have not said how much it cost to launch several daily round-trip flights from L.A. to Minneapolis, St. Louis, Kansas City, Mo., and Philadelphia.

Potter said the L.A. service got off to a slow start, as he had expected, but that bookings for summer are "looking very good."

"We're going through our fall planning right now, and I expect we will make some adjustments," he said. "L.A. is a large metropolitan market, and we don't have the name recognition that we do in Denver. It's been a new experience on several fronts and taught us a lot. ... If it doesn't work, it's very easy to unwind and incorporate back into our system."

Parker said Frontier may have moved too quickly into Los Angeles.

"It might have been a good idea to have done it one market at a time," he said. "Northwest has a clear history, and everyone knows that it goes after low-cost carriers aggressively."

Northwest added two daily Denver-L.A. flights to its schedule after Frontier announced its new L.A. service in December in what industry observers called a retaliatory move.

Northwest spokesman Kurt Ebenhoch said the airline is just competing.

"Every market is its own unique pricing event. Denver-Los Angeles and Minneapolis/St. Paul-Los Angeles are priced competitively," he said.

The fares in L.A. aren't the only ones hurting Frontier. Round-trip flights between Phoenix and Denver were just $146 online last week and have gone as low as $91. Fares to Phoenix were typically $250 or more before United launched its low-cost unit, Ted, on that and a handful of other Denver routes.

Competition between Frontier and Ted is producing other relatively low fares, including $274 to Tampa, Fla., and $237 to Reno, Nev.
Interesting article....comments....Busdrvr???

 

[Busdrvr]

So...do all these facts and figures mean United is profitable now?

Ahem... Yes, on an operating basis. Meanwhile, FRNT lost a sizable amount, yet still continues to grow dramatically in an already saturated market. This will be looked back as the quarter that the "LCC tide" turned for the worse.

 

[mrfish3726]

BUSDRVR,

I know you think you got all the angles on the LCC's especially F9. But you know what? Profit or loss for the time being, F9 is a much better place to work at than UAL HELL. Expansion or not, we are still a big threat to the viability of UAL in the DEN market. We've always been a thorn in your side and WE ALWAYS will be. Gloat as you will, UAL is still going to go through HELL before you ever see them make a profit again, if they survive intact at ALL! Whether your company survives or not, you'll still see us here celebrating our 20 year anniversary in grand style just as we did on our 10th.