JetBlue''s turn in the barrell?

UA777DEN

Member
Aug 19, 2002
75
0
www.usaviation.com
Uh oh, this is probably a sign that jetBlue may not be with us in the near future.......

I'd give them 6 months, then bye-bye.













I'm bored right now, so I'm just talking a bunch of nonsense. [:p]

Nice forum by the way. Too bad we lost all the old posts. I wanted to reply to an Alaska Airlines post. [:((]

See how bored I am? I'm talking about how great the forum is, and how I wanted to reply to an Alaska Airlines post. [:bigsmile:]

Regards
 

Speedbird

Advanced
Aug 20, 2002
134
0
www.usaviation.com
JetBlue is in big trouble alright.

They are able to generate more revenue/aircraft than any other airline in the industry, even the gold-standard Southwest Airlines.

Just a thought for the day! [:)]
 

eagleflip

Member
Aug 20, 2002
27
0
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On 8/20/2002 1:42:50 AM

Uh oh, this is probably a sign that jetBlue may not be with us in the near future.......

I'd give them 6 months, then bye-bye.

----------------
Lessee...the stock drops 10% and you forcast doom? In that case, none of us are going to be around in six months...

Fly safe!
 

autofixer

Veteran
Aug 20, 2002
1,804
241
www.usaviation.com
Is it true that Jet Blue only pays intrest only on their Airbi? Is it true that they have a "modest" balloon payment on aircraft leases after a term of 5 years? Is it true that they amortize their equipment for 30 years (will an airbus last that long?)? Did their CEO sign off on all of this? Inquiring and contrarian minds want to know!
 

Jeff G

Member
Aug 20, 2002
65
0
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On 8/24/2002 1:43:47 AM

Is it true that Jet Blue only pays intrest only on their Airbi? Is it true that they have a "modest" balloon payment on aircraft leases after a term of 5 years? Is it true that they amortize their equipment for 30 years (will an airbus last that long?)? Did their CEO sign off on all of this? Inquiring and contrarian minds want to know!
----------------

No, don't know, no (don't know), and yes.

Hope this helps. [:bigsmile:]
 

UalPilot

Newbie
Aug 23, 2002
9
0
Jet Blue does not own any aircraft... they are all under long-term lease with Airbus with favorable rates. I believe (don't know) that JBLU has a lower payment schedule during the first few years then they increase (balloon) over the duration. Jet Blue will not have teflon protection from the downturn in the market... its just a matter of time. The low wages, non-union, and happy employees will eventually turn "ugly" when they see profitable quarters and now real wage increases (110/hr for an airbus captain is over 35-40 percent below the majors). Eventually these aircrew will want more money... kinda like SWA. In addition, eventually these "new" airbus will get old and start needing repairs... which are not cheap (parts or mechanic payments) by any stretch. I think you will see the CEO of Jet Blue "run with the money" when he knows the good years are gone (first 3-5) years. JMHO.
[:halo:]
 

Jeff G

Member
Aug 20, 2002
65
0
I'll take these one at a time.

Jet Blue does not own any aircraft... they are all under long-term lease with Airbus with favorable rates. I believe (don't know) that JBLU has a lower payment schedule during the first few years then they increase (balloon) over the duration.

Actually, about half the aircraft are owned by JetBlue. The others are leased through various companies, such as ILFC. The rates and terms are not disclosed, just the lease duration, which varies. The balloon payment terms are a rumor, but might be true, I don't know. Nobody knows except the parties involved since the terms are confidential.

Jet Blue will not have teflon protection from the downturn in the market... its just a matter of time.

JetBlue has weathered the downturn very well, thank you. Better than just about any other airline. If it's just a matter of time, when will that be? We've been in a recession since JBLU started operations.

The low wages, non-union, and happy employees will eventually turn "ugly" when they see profitable quarters and now real wage increases (110/hr for an airbus captain is over 35-40 percent below the majors). Eventually these aircrew will want more money... kinda like SWA.

That would be true if there was a perception that "they" (the management) is making a fortune off the backs of "us" (the labor). That perception does not exist. Mainly because for the most part, the company pays good wages, as good as you could get with a union, certainly more than you could get with a first contract. Besides, there's profit sharing, which last year was 13.5% of income, in addition to the paycheck. There's no sense that the cash is being hoarded to benefit a few higher-ups. There's no outrageous salaries for management and no attempt to squeeze the little guy. Until that perception changes, there is little chance of things turning "ugly".

The only "substandard" wages paid in the company at the moment are pilot wages, and that's only if your standard is UAL, AMR, etc. However, those rates were unilaterally increased by 32% last year. Since pay is unofficially tied to SWA rates, they will likely go up again soon, probably next year. The goal isn't to have industry leading pay (whatever that happens to be at the moment), but to pay rates somewhere around the midpoint of the industry's narrowbody pay. Currently, though, our "peer group" is not the full-service major airlines, all of which have decades-old contract history to build on. Rather, it's companies like Frontier and AirTran. We already pay more than any other national carrier, and some majors. Not bad for two years of operation. Considering that we all signed contracts that specified the rates up front, and that we are otherwise well taken care of, you won't find the pilots agitating anytime soon either.

In addition, eventually these "new" airbus will get old and start needing repairs... which are not cheap (parts or mechanic payments) by any stretch.

No doubt you are the first ever to realize that airplanes get older as they age. And sometimes need repairs. That never happens at other airlines. Want to be a consultant?

I think you will see the CEO of Jet Blue "run with the money" when he knows the good years are gone (first 3-5) years. JMHO.

You wish. But, that could happen. I'll take his word for it when he says that it won't. He's been as good as his word so far, and I've not been given reason to doubt it. Besides, the only way he can "run with the money" is somehow liquidate his sizable share of the company without reducing its value. How would he do that?

He could also die in a car wreck tomorrow. It would hurt badly, but JetBlue wouldn't roll over and die without him.
 

UalPilot

Newbie
Aug 23, 2002
9
0
Jeff,
Hope it works out for you... I think you will change your thinking after a few years of working 90 hrs a month to make the same wages as your competition who work 75 and make 40% more.[:halo:] I took your response and broke down your responses with quotes from JBLU filings this year... apparently you don't read them?

“Actually, about half the aircraft are owned by JetBlue. The others are leased through various companies, such as ILFC. The rates and terms are not disclosed, just the lease duration, which varies. The balloon payment terms are a rumor, but might be true, I don't know. Nobody knows except the parties involved since the terms are confidential"

JBLU - Aircraft Costs Will Increase as We Expand and Financing is a Problem: We typically finance our aircraft through either mortgage debt or lease financing (JBLU owns less than 10 aircraft... lease the rest at variable interest rates). As of March 31, 2002, we had firm orders to purchase 58 aircraft from Airbus through 2007 and options and purchase rights to acquire 49 additional aircraft. We have arranged financing for only two of these aircraft. Although we believe that debt and/or lease financing should be available for the remaining 56 firm aircraft deliveries, we cannot assure you that we will be able to secure such financing on terms attractive to us or at all. While these financings may or may not result in an increase in liabilities on our balance sheet, our fixed costs will increase significantly regardless of the financing method ultimately chosen. To the extent we cannot secure such financing on acceptable terms or at all, we may be required to modify our aircraft acquisition plans or to incur higher than anticipated financing costs.

“No doubt you are the first ever to realize that airplanes get older as they age. And sometimes need repairs. That never happens at other airlines. Want to be a consultant? “

JBLU - Our maintenance costs will increase as our fleet ages: Because the average age of our aircraft is about 13 months, our aircraft require less maintenance now than they will in the future. We also currently incur lower maintenance expenses because most of the parts on our aircraft are under multi-year warranties. Our maintenance costs will increase, both on an absolute basis and as a percentage of our operating expenses, as our fleet ages and these warranties expire. Although we cannot accurately predict how much our maintenance costs will increase in the future, we expect that they will increase significantly

“Until that perception changes, there is little chance of things turning "ugly"”

JBLU - We may be subject to unionization, work stoppages, slowdowns or increased labor costs: Unlike most airlines, we have a non-union workforce. If our employees unionize, it could result in demands that may increase our operating expenses and adversely affect our profitability. Each of our different employee groups could unionize at any time and require separate collective bargaining agreements. If any group of our employees were to unionize and we were unable to reach agreement on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could harm our business.

“That would be true if there was a perception that "they" (the management) is making a fortune off the backs of "us" (the labor). That perception does not exist. Mainly because for the most part, the company pays good wages, as good as you could get with a union, certainly more than you could get with a first contract. Besides, there's profit sharing, which last year was 13.5% of income, in addition to the paycheck. There's no sense that the cash is being hoarded to benefit a few higher-ups”

JBLU - We have a significant amount of fixed obligations and we will incur significantly more fixed obligations which could hurt our ability to meet our strategic goals:
As of December 31, 2001, our debt accounted for 67.7% of our total capitalization. As of December 31, 2001, maturities of our long-term debt were $55.0 million in 2002, $30.0 million in 2003, $22.8 million in 2004, $23.8 million in 2005, $22.0 million in 2006 and an aggregate of $192.0 million for the years thereafter. All of our long-term and short-term debt has floating interest rates. In addition to long-term debt, we have a significant amount of other fixed obligations under operating leases related to our aircraft, airport terminal space, other airport facilities and office space. As of December 31, 2001, future minimum lease payments under noncancelable operating leases with initial or remaining terms in excess of one year were approximately $45.4 million in 2002, $44.8 million in 2003, $44.7 million in 2004, $43.3 million in 2005 and $41.8 million in 2006 and an aggregate of $281.8 million for the years thereafter. Four of these aircraft leases have variable-rate rent payments. As of December 31, 2001, we had commitments of approximately $2.3 billion to purchase 61 additional aircraft over the next six years, including estimated amounts for contractual price escalations. We will incur additional debt and other fixed obligations as we take delivery of new aircraft and other equipment and continue to expand into new markets
 

Jeff G

Member
Aug 20, 2002
65
0
That's quite an argument there, taking the doom and gloom language from the prospectus and using it as a template to predict JetBlue's future. The prospectus is required by law to lay out the worst case scenario for investors, but not the likelihood that it'll happen. I've read it quite thoroughly. At least you're honest, if not especially realistic.

JBLU - Aircraft Costs Will Increase as We Expand and Financing is a Problem: We typically finance our aircraft through either mortgage debt or lease financing (JBLU owns less than 10 aircraft... lease the rest at variable interest rates).

Indeed. That was the case six months ago, but all of the aircraft delivered since except one are owned. That brings the percentage up to about half.

No doubt you are the first ever to realize that airplanes get older as they age. And sometimes need repairs. That never happens at other airlines. Want to be a consultant?

This was irony. As you have thoughtfully quoted from the prospectus, I don't need to point out that perhaps someone at JetBlue has already considered this.

JBLU - We may be subject to unionization, work stoppages, slowdowns or increased labor costs: Unlike most airlines, we have a non-union workforce. If our employees unionize, it could result in demands that may increase our operating expenses and adversely affect our profitability. Each of our different employee groups could unionize at any time and require separate collective bargaining agreements. If any group of our employees were to unionize and we were unable to reach agreement on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could harm our business.

Well... yeah, but I just got through saying why it wasn't likely. The prospectus points out possibilities, not likelihoods.

JBLU - We have a significant amount of fixed obligations and we will incur significantly more fixed obligations which could hurt our ability to meet our strategic goals:

I'm a little slow. What has this to do with keeping the workforce happy?
 

Jeff G

Member
Aug 20, 2002
65
0
They are mortgaged. I'm assuming that the mix of leased airplanes and mortgaged ones depends on the available terms. Buying airplanes with cash is a tall order for a new airline. Obviously, that's preferred if you want to minimize debt, but probably all things considered, at this stage it's better to have the cash.

Leveraging growth against long term debt is risky, but it's fast. Waiting to generate the cash to actually buy the planes outright would likely be unacceptably slow. The gamble is that the company can service the lease or mortgage terms, maintain those assets, and still make money. So the risk becomes whether or not the assets are correctly managed to avoid having that debt load catch up with you, IOW making the assets ultimately pay for themselves as they are consumed. So far, it is working, and I have confidence that these folks know what they're doing.
 

Rhino

Senior
Aug 20, 2002
308
0
Jeff, perhaps you know?

I heard B6 depreciates their planes over 25 years, with a residual value of 20%, but industry standard is 20/10.

Someone on another board stated this methodology accounts for a significant % of JB profits.
 

UalPilot

Newbie
Aug 23, 2002
9
0
<<<I heard B6 depreciates their planes over 25 years, with a residual value of 20%, but industry standard is 20/10.

Someone on another board stated this methodology accounts for a significant % of JB profits>>>

Rhino,
Don't forget that JBLU does not count its "stock options" on its balance sheet either... JBLU and SWA "hide" costs to labor by not counting retirement programs like the rest of the majors (UAL, AMR, CAL, DAL, NWA)... The SEC is changing its rules next year regarding this accounting practice... then the Real numbers will come out.
[:halo:]
 

UalPilot

Newbie
Aug 23, 2002
9
0
Jeff,
Don't get me wrong... I think Jet Blue has a nice product with nice packaging... the problem is that everything is peachy right now with the company and the work force. Eventually the laborers (you) will get tired of working your butt off to line the pockets of your CEO... You apparently work for JBLU... spend some time and dig to find out what the balance sheet really looks like... you might be suprised. JBLU is riding a big wave right now... if they don't watch it they may wipe out and get sucked under like many before them. In other words... don't put all your eggs in one basket... take that stock options they are "handing out like candy" with a grain of salt... its toilet paper. Eventually you will want a more secure retirement program (ala B-FUND, A-FUND) that will be available to you when its time to retire... Your stock just paper. Good Luck to you... I have many friends at JBLU... and they love working there...
[:halo:]
 

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