Us Relies On "transformation"

[Pragmatic]

Jack,

I agree with your assertion. This is simple ECO 101. The problem with our company is that we have not run this as a "pure business entity". Purchasing of the RJs was needed to catch up with the competitors such as DL, AA and CO. We should have done this a long time ago.

 

[BoeingBoy]

Pragmatic & Jack,

I'll ask a dumb question - what percentage of our available capacity do you think should be provided by express? Or put another way, what do you think the proper ratio of RJ's to mainline aircraft is about right? I'll even make it multiple choice:

A. Smaller % or smaller ratio than other network carriers.
B. About the same.
C. Larger % or larger ratio than other network carriers.
D. We can't have too many RJ's.

Jim

 

[Pragmatic]

BoeingBoy,

I think it depends on who are we competing against. To compete against DL and AA on the east coast, we need at least a similar ratio of RJs to Mainline (somewhere around 30%). But as WN and B6 penetrates more and more into our markets, we will need bigger jets. We are going to battle both legacy and low-cost carriers for a while till the industry transformation is complete in the next 4-5 years.

 

[funguy2]

Jack,

Do you, in your own finances, consider purchasing a home way beyond your means and then furnish it with all the bells and whistles the moment it is built, whereby increasing your debt load and increasing your financial risk exposure, and then tell your family enjoy the house and the funiture, but no one is permitted to eat every day, that the grocery bill and utility bills have to be cut to the bare minimum?

Answer to your question: No. I would have slowed down the purchase of RJ a/c and waited to have cash to work with with and acquiring LESS debt....so we don't just go and fall off a cliff.

However, there is always another prepackaged BK to keep the BOD happy and fat.
And there is always Labor to come in and throw themselves under the bus in order to save "shareholder value".

With your thinking, no wonder we are going out of business. :down:

PitBull:

I do not disagree with your analogy... But I want to carry it further... To illustrate the way the books work

If you buy that house in 2004... You put down the 20% deposit, closing fees, and begin making mortgage payments... In the owners personal "profit/loss" income statement, they would not expense the entire value of the house in the first year... Instead, they would expense the actual payments to the loan made, and perhaps some other fees pro-rated over 30 years of the mortgage. If you buy a $500K house, you (well most people) don't have a cash outlay of $500K that year... Even if they did, on their income statement, that would be divided by the number of years they intend to live there...

 

[BoeingBoy]

Pragmatic,

That's about what I figured.

Amazingly enough, at year end we had 113 RJ's in the Express network. Since then we've added at least 6 more - 4 Emb-170's at MAA and 2 CRJ-701's at PSA - for a total of at least 119 RJ's.

That's a ratio of over 40% RJ to mainline.

Not picking on you, but I constantly hear the "we're behind everybody" when it comes to RJ's, and the simple fact is that we're not. Especially when you consider the mainline fleet of the two network competitors you mentioned - roughly 50% widebodies.

Jim

 

[Pragmatic]

BoeingBoy,

Based on the figures that you have for US, this is how we compare Vs. DL.

DL (Source Delta.com)
Now Orders Total
Jets 472 5 477
RJs 288 116 404
Total: 760 121 881
RJs Ratio: 38% 46%

US:
Now
Jets 279
RJs 119
Total: 398
RJs Ratio: 30%

We are still behinde....

 

[Light Years]

Exactly. US was behind in terms of number of RJs, but not really in introducing them. When only 70 were allowed, US was introducing them about the same time as American, United, and Continental (IIRC). What they were behind on was allowing enough of them to replace the existing Express aircraft. Since US is such a regionalized carrier, the unions balked at the idea, figuring management would replace mainline flying with them. Looks like they were right!

To most travelers, US hasnt shrunk, only the planes. With a few exceptions US serves the same markets it did in 2000 (the only mainline I can think of is SNA and BRU), with one less hub (BWI), and much smaller aircraft flown by affiliates.

120 or so RJs doesnt sound like much when to compared to Delta's "armada" of them for example. But you've got quite a large "Express" fleet when compared to the dinky and shrinking "mainline" airline they supposedly feed. As BB pointed out, proportion wise, US has a very large RJ/turboprop fleet. They also have the largest number of affiliate airlines flying under thier banner, than any airline I can think of worldwide.

The US situation is opposite of most carriers, where the Eagles, Expresses, and Connections feed the larger airlines long haul and international routes. Here, the remaining mainline aircraft are feeding a complex web of short haul flights throughout the east of the country. The E170s take this even further, with much larger and comfortable planes fit to serve traditional 100 seat short/medium routes with higher frequencies.

They are certainly not going to be behind on the 70 seaters. With 80 of them coming by the end of next year, it really makes you wonder where on earth 260 or so narrowbody planes fit in?

 

[Light Years]

BoeingBoy,

Based on the figures that you have for US, this is how we compare Vs. DL.

DL (Source Delta.com)
Now Orders Total
Jets 472 5 477
RJs 288 116 404
Total: 760 121 881
RJs Ratio: 38% 46%

US:
Now
Jets 279
RJs 119
Total: 398
RJs Ratio: 30%

We are still behinde....

But where are the future stats for US? Add in every RJ that US has on order for MAA and PSA, plus the orders for each affiliate that will introduce jets in US colours. And dont forget the 279 mainline minimum thats not going anywhere.

I'd be interested to see a TOTAL of all Express aircraft, jet or not as compared to mainline. I'd also like to see what percentage of the US network are flown by Express.

 

[BoeingBoy]

Pragmatic,

Sorry, I was out a while. We figured the percentages differently - I used RJ's as a percent of mainline a/c, not total a/c - but the result is the same.

I notice you didn't list AMR - their 730 mainline vs 179 RJ's would definitely skew your numbers if you looked at them and DAL combined (AMR comes in at 20% by your method of RJ's as % of total). And for Light Years, AMR's eagle has 262 total aircraft. (To be completely open, AMR does have some non-eagle feed but it is minor and I don't know how many airplanes.)

As for DAL, here's the info I come up with on their site:

550 mainline jets
288 express aircraft
269 RJ's
RJ's = 32.8% of total fleet
(Again, DAL has some express feed thru affiliates - without digging thru the annual report I don't know how many planes this represents, although ACA is likely to end their relationship)

Now look at percent of capacity provided by express:

AMR - 5.4%
DAL - 11.3%
USA - 12.1%
I'm unable to break this down to that provided by RJ's.

If you've been lurking for a while, you may have noticed that I've never said that RJ's aren't a vital part of our future. I only question the number of RJ's that we're getting. Pending some change, by the end of 2006 we'll have about the same number of RJ's as mainline aircraft based on firm orders (IIRC we have 140 or so still coming as of 3/31/04). If you add in the options - well, express will be the "main" line with feed from the "new" express division. To put some $$$ on this, a CRJ-701 or Emb-170 will have a CASM about 2-3 cents higher than mainline.

Jim

 

[700UW]

You all seem to forget US is replacing a lot of MAINLINE flying with RJs therefore increasing costs, not reducing them.

 

[USFlyer]

You all seem to forget US is replacing a lot of MAINLINE flying with RJs therefore increasing costs, not reducing them.

Doing this also increases RASM, or so I've been told. You fly an A319 with 50 passengers or a RJ with 50 passengers -- RASM will increase with the RJ.

 

[BoeingBoy]

700UW, you are correct and I for one haven't forgotten.

USFlyer, you are also correct. The key is using the RJ's (and turboprops) properly. Some markets will only support smaller planes. Some markets will only support smaller planes at some times of the day (or days of the week). If you're flying 7 or 8 small planes a day between a city pair, it might be worth looking at putting some bigger planes in and reducing frequency.

Jim

 

[jack mama]

Well Boeing Boy, it is hard to say what the perfect mix of RJs and Mainline is going to be. The lower fares will generate more traffic at lower yields, and those routes will get mainline a/c, because you have the seats in order to generate profit. On the other hand, the routes that don't get lower fares will be left to the RJs...so the business traveller paying top dollar could spend most of their time on the smaller plane (with no FC), kind of seems backwards. Of course the RJs will also be used for long thin routes (hopefully new markets), and probably add some point to point flying as well.

For the bottom line, the large RJs bring mainline capacity at express pay rates. I'm sure those in yield mangement are salvating to get the maximum number of large RJs as they can!

 

[PITbull]

How ironic, because I feel the same about your thinking...

you see, this is a business designed to make money, not a family, not my home....if the cash was available to buy the RJs to try and transform the company into a profit generating machine, then I would of done the same thing.

What makes you think those RJs are way beyond our means...we were cash neutral though the 1st qtr...we generate billions in revenue...the cash flow is there....

The structural cost (not the labor costs) have to come down and then we will reap the rewards. Employee concessions from the wallet will not lower the CASM significantly, as seen over the last 4-5 yrs (our casm only dropped 1 cent) and hopefully someone will figure that soon!!!

Jack Mama,

I agree. Managment needs to change the business structure FIRST.

But, that's not going to happen. Why? Cause its much easier to go after employees to subsidize the new business plan, than to start to change the structure. Of course, management always has an excuse...."not enough time".


What I don't agree with is, U doesn't have the cash flow to be spending on RJs (that subsequentely RAISE the overall CASM) , they need to conserve and put the money into the now LARGEST EXPENSE FOR USAIRWAYS...future fuel.

 

[PITbull]

PitBull:

I do not disagree with your analogy... But I want to carry it further... To illustrate the way the books work

If you buy that house in 2004... You put down the 20% deposit, closing fees, and begin making mortgage payments... In the owners personal "profit/loss" income statement, they would not expense the entire value of the house in the first year... Instead, they would expense the actual payments to the loan made, and perhaps some other fees pro-rated over 30 years of the mortgage. If you buy a $500K house, you (well most people) don't have a cash outlay of $500K that year... Even if they did, on their income statement, that would be divided by the number of years they intend to live there...

I'm not talking about paying for a house all cash. I stated buying a house that is way beyond your means...meaning "disposable monthly income" outlay.

Where did you get the implication you cite? You made no sense, because rarely, folks pay all cash for a house, especially in our income. So, why would you illustrate that meaning? My example was an analogy to spending money, you don't have! LIke building a yearly budget on the prospects of winning the lottery.