March Traffic Slide

[pilot]

"I guarantee you that you'll be regretting this post once 1Q05 results are announced. And when you see 2Q, you'll flip your lid and wonder what you were thinking."

I've been wrong many times in my life. I truly hope you are right. I'll be the first to give credit if, a big if, these seemingly inept managers finally are able to run an airline profitably.

I am an expert at one thing. Flying an airliner. I'm also pretty good at running a business. It makes money and has since I opened it almost 25 years ago. I guess that would make me an expert at running that specific business too although I learn about each of these endeavors almost each and every day.

If I flew an airliner the way these cretins have run this business over the past 10-15 years I would have been either fired or dead. Hence, my anger. Incompetence here is rewarded with keeping your job or leaving with a golden parachute. That is disgusting.

As far as pricing goes, no matter what business, it is economics 101. Supply and demand. Elasticiy vs. inelasticity. I truly don't think it's as complicated as you make it out to be. But, as I said, if I'm wrong I'd be thrilled.

pilot

 

[jack mama]

pilot, there is a big diff in running a business for profit, and running one just to stay in business....lcc is just a cash generator...for the govt, for the employees for the board, for the ceo, etc...

 

[sfb]

If they're talking combined vs combined year over year change (apples to apples), a 20% increase in PRASM should be close to if not profitable. There wasn't that big a difference between CASM & RASM last year, at least I don't think so.

Any idea?

Jim

I'm going to assume that it is an apples-to-apples comparison since they are speaking of the "combined system." West would have been nicely profitable on a 20% RASM increase, while East would be close to break-even, taking into account higher fuel prices year-over-year. Mainline CASM for East was about 10% higher than total mainline RASM in 1Q2005, but raising fuel by about 1/3 ($1.40 vs. $1.90) would put CASM just under 20% above last year's RASM. If memory serves, 1Q2005 already reflected many of the labor cost cuts for East.

I wouldn't be surprised if March were profitable for the combined entity.

 

[sharktooth]

Do you think that management at every major airline in the country is intentionally not raising prices as much as they could? I could buy an argument that management at one or two airlines was that stupid and incompetent, but all of them? Their problem isn't some imaginary refusal to raise prices; their problem is a glut of high-priced ham sandwiches.

You have never run a business, have you?

Just one point to consider.

Fifteen of the last sixteen years, U has not shown a profit, yet, they never went out of business. In fact, their "losses" were horrible, many times exceeding 3 mil per day.

Perhaps you might wish to reconsider the term, "profit". It really has very little to do with what you think. I laugh when employees state that "we will get our concessions back when we show a profit".

Well, OK, just do me a favor and don't hold your breath. I hate it when people get hypoxic.

 

[BoeingBoy]

US has throughout those years been Cash Positive alot of the time. True profitability is elusive due to the relatively high capital costs and the cyclical nature of the business. In fact being cash positive through much of the 2 BK's is one of the reasons US is still here.

PineyBob,

Generally I'd agree with you - being cash flow positive is 2nd only to being cash flow positive and profitable. But in this case, I have to disagree a little. If you'll check you'll find that over the last 15 or so years, US was cash flow positive (increased unrestricted cash/short term investments year over year) for about 3 years pre-911. Post-911, the positive cash flow has come from two sources - BK wiping out the stockholders and finding someone else to sell "new" stock to, and loans. The post-911 methods may have been what was necessary to keep the company afloat but I wouldn't put them in the "running a successful company" catagory. The first attempt at "success" using those methods resulted in re-entering BK 18 months later. Don't forget, we exited BK1 with nearly as much free cash - $1.25 billion - as we had on 12/31/05 - $1.58 billion.

Jim

 

[PITbull]

You have never run a business, have you?

Just one point to consider.

Fifteen of the last sixteen years, U has not shown a profit, yet, they never went out of business. In fact, their "losses" were horrible, many times exceeding 3 mil per day.

I think you need to reconsider your years of losses. U showed a profit in 2Q1995, 1996, 1997, 1998, and 3 quarters of 1999. In 2Q2003 U showed a profit I believe $37M, hence the return of our 5% war deferral was triggered at the resistance of senior managment and the CEO.

You have two Majors in BK, and when they emerge, their costs will be at USAirways levels or lower than U's. So USAirways can not depend on having the lowerst labor costs in order to show a profit. Hopefully, they have a better strategy than that! But, I won't hold my breath.

With the fuel prices rising and civil unrest in IRAQ along with threats of war games with IRAN, any profits predicted should soon evoporate. And I suspect the stock price should be on the slippery slide as well.