High Cost Hindrance

[diogenes]

Light Years,

Exactly so.

When PI began F28 operations, that flying stayed within mainline - they negotiated an appropriate payscale for pilots.

Why not revist that idea!

Also, even back in those days, some stations were express - EWN for instance.

The unions and co. could hammer out what constitutes express (annual boardings come to mind) with the provision (that exists in the current contract) that express operations can operate x amount of mainline jets.

Unless the goal is to screw labor, this should be doable.

 

[Tarheel]

I can't believe you guys are looking towards AC as a model. They have gone bankrupt in a socialist country competing against only 1 low cost carrier!! And how is US Airways going to afford to bring all their express flying in-house when they can barely afford financing on their last order of RJs??

 

[700UW]

the airlines have not been socialist in years. We can afford it by stop paying hundreds of millions to Mesa and the likes.

 

[Tarheel]

I see, so they stop paying Mesa and use their CCC+ credit to buy planes? You couldn't even get a cheeseburger on credit with that. I'd love to see them get more RJs in-house, but I thought the plan was to lower costs and then expand the airline dramatically?

 

[700UW]

Who owns American Eagle?

Who owns Pinnacle?

Who owns Express Jet?

Who owns ASA and Comair?

 

[ITRADE]

Interesting discussion this morning. Let's tackle each one.

Who owns American Eagle?

AMR Corp owns, but they do not integrate them into mainline. In fact AMR Corp. is considering spinning off the San Juan components into a separate company. AMR has chosen not to integrate its RJs and turbos into its mainline operations.

Who owns Pinnacle?

Pinnacle is a publicly traded entity - listed on the NASDAQ. Northwest Airlines owns about 12.7 million shares. Having spun off Pinnacle, its clear that Northwest does not think it prudent to integrate Pinnacle's operations into its mainline.

Who owns Express Jet?

XJT is a publicly traded entity - listed on the NYSE. Continental owns about 16.7 million shares. However, mutual fund companies (including Legg Mason and Barclay's) own well over 28 million shares. Like Pinnacle, its clear that Continental did not think it prudent to integrate ExpressJets's operations into its mainline.

Who owns ASA and Comair?

Delta owns both carriers but has not integrated either into its mainline. At the same time that Delta has owned these two carriers, Delta has chosen to allow Chautauqua, Skywest, and Atlantic Coast to do some of its Express flying. Again, its clear that Delta has found it prudent NOT to integrate its express aircraft into mainline.

Finally, several have commented about Air Canada. Consider a few facts:

Until recently AirCanada had a virtual monopoly on the Canadian commercial airline segment. Its only competitor was Canadian whom Air Canada drove out of business. Air Canada's rival now is WestJet - who is currently eating AC's lunch in the western 1/2 of the country.

With ONE rival, and with your touted system of RJ integration into mainline, Air Canada filed for bankruptcy protection under federal Canadian law.

Even US Airways maintained profitability when it had a virtual monopoly on the northeast United States.

Rely on Air Canada as a example to follow. Only a fool would do so.

 

[700UW]

From Express Jet's Annual report

Note 6 — Leases
We lease or sublease all 224 of our aircraft under long-term operating leases from Continental.
Our sublease agreements with Continental have substantially the same terms as the lease agreements between Continental and the third-party lessors, and expire between 2013 and 2019. We lease or sublease, under various operating leases, ground equipment and substantially all of our ground facilities, including facilities at public airports from Continental or the municipalities or agencies owning and controlling such airports. Our leases do not include residual value guarantees.

Note 8 — Note Payable to Continental
Under the promissory note dated March 31, 2001, net amounts due Continental were converted into a long-term note payable of $552.3 million, which bore interest at a fixed rate of 4.9% through June 30, 2001. Effective July 1, 2001, the rate for subsequent quarters was set at the three-month LIBOR plus 1.25% per annum, subject to a cap of 3.5% in 2002, 5.4% in 2003 and 6.7% in 2004. There is no interest rate cap after 2004. The note payable to Continental is our unsecured general obligation and is subordinated in right of payment to all of our future senior indebtedness.

Preferred Stock. We have 10 million shares of authorized preferred stock, par value $.01 per share. One share of preferred stock was issued and outstanding at December 31, 2003.
The share of preferred stock that is outstanding is called Special Voting Preferred Stock. This stock is owned only by Continental (or its successor) and its controlled affiliates. So long as the Special Voting Preferred Stock is beneficially owned by one of these parties, its holder will be entitled to elect to our board of directors:
• three directors, for so long as Continental and its controlled affiliates own
shares representing 30% or more (but less than 40%) of our outstanding shares
of common stock;
•two directors, for so long as Continental and its controlled affiliates own shares
representing 20% or more (but less than 30%) of our outstanding shares of
common stock; and
• one director, for so long as Continental and its controlled affiliates own shares
representing 10% or more (but less than 20%) of our outstanding shares of
common stock.
Once the number of directors that Continental (or its successor) and its controlled affiliates are entitled to elect decreases, it cannot be increased. However, even if Continental’s rights to designate directors under its preferred stock cease, it will be entitled to elect one director to our board during the term
of our capacity purchase agreement.

 

[ITRADE]

But, is XJT integrated into Continental's mainline operations?

 

[700UW]

Who owns the planes? Who pays for everything? Who owns ALL the preferred stock?

Who was totally owned until the IPO?

Until the IPO Express Jet was on CAL's annual report and issued no seperate 10K.

Hmm, they use the same gates, in most cases same employees to handle the aircraft, has no reservation system and is totally done on System One by CAL.

Might be seperate on paper, but pretty funny how CAL does so much for them.

 

[ITRADE]

You're not answering the question:

Is Express Jet integrated into Continental Airlines mainline operations?

Yes or No.

 

[A Baby Ate My Dingo]

The answer is NO!

There are NO integrated seniority lists.

Expressjet has its own financials, balance sheets, and P&Ls.

BY DEFINITION, they cannot be integrated.

 

[700UW]

Pinnacle Airlines 10K

Aircraft Financing

We lease all of our regional jets from Northwest at a fixed monthly rate
under the ASA. We also sublease our spare engines from Northwest. The fixed
monthly rental rates on our regional jets include certain fleet management costs
of Northwest and are not representative of the rates paid by Northwest to
third-party lessors. Under the ASA, our aircraft rental expenses are reimbursed
in full by Northwest.

Northwest has obtained long-term financing commitments from Bombardier for
all of the additional regional jets that it has agreed to provide to us under
the ASA, eliminating the need for us to obtain financing with respect to these
aircraft.

Northwest grants us the right to use facilities that it leases from authorities at various airports. In addition, at a number of airports where Northwest operates, we do not maintain our own ground support equipment and
personnel and instead obtain ground handling services from Northwest. These
services include gate access, aircraft loading and unloading and passenger
enplaning and deplaning services.

 

[ITRADE]

Dingo answered the question, but:

Is Express Jet integrated into Continental Airlines mainline operations?

Yes or No.

 

[Light Years]

Air Canada's problems have more to do with competing with CP and then merging it. I think they'd disagree about competition- Westjet, Jetsgo, etc. Thier problems are certainly not due to flying thier own airplanes.

And as for buying airplanes, US is buying planes for its MidAtlantic division and PSA subsisiary. Whats the difference? A whole load of wasted and redundant management, facilities etc. Is there a need for a name for our Embraer division, and seperate management positions? Not unless your planning to put it on a sepaerate contract, sell it or do something shady.

We can all sit here and argue about technicalities of who owns what, but I've still never seen proof that subcontracting to and paying the way of multiple airline companies is somehow cheaper than controlling it yourself. The only benefit is avoiding major but seldom labor issues affecting operations (Comair strike), and being able to pit companies against each other. These savings are pretty dubious when compared to the costs of the whole charade.

Here we are at the brink of extinction, and our competitors are eating our lunch and laughing at us while we sit around negotiating ways to make sure the airline actually has employees. I dont see Jetblue worried about in-house EMB flying... isnt that who we're supposed to be this month?

This airline will fail without the support and spirit of the employees. In fact, they'll make sure of it. If they stop trying to bulid a virtual airline (it wont work) and work with the people they are LUCKY to have we can work towards success.

 

[ITRADE]

Interesting tht 700UW isn't able to answer a single yes/no question.

Go figure. Should have expected as much.