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Intl Economy plus being looked at; CRJs phasing out, juicy Q4 conf call

Intl Economy plus being looked at; CRJs phasing out, juicy Q4 conf call

 
Old Jan 17, 2008, 10:22 am
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Intl Economy plus being looked at; CRJs phasing out, juicy Q4 conf call

I can't post the verbatim transcript here because of copyright issues, but if you're interested, go to CO.com Investor Relations and listen to the webcast of today's earnings conference call.

A number of interesting things including:


- Top 50 corp customer meeting in December revealed they will not pay more for a lie flat product, but very interested in something between business first and economy.

- Smisek said looking at an Economy Plus type product internationally

- A new biz class product will roll out on the 787 and will go on the rest of the fleet

- CO would like to avoid a 3 class product though

- EWR will see reduction of regional jets through upgauging of flights in concert with the voluntary flight caps the D.O.T. announced

- First quarter bookings still healthy even with strong pricing

- Bonus disbursement will once again be on Valentine's Day

- CRJ's are starting to leave -- 7 will be given back this year, and what I saw indicated they were trying to phase them out, but may be misinterpreting

- Clearly said they don't have enough Pacific service and the 787s will do a lot to fill that gap. Did acknowledge domestic weakness is north-south West Coast market

- Got very guarded by the lawyers when asked whether there had been discussions about the 'golden share' with Northwest in the last couple weeks (read: they have)

- Summer 2009 will be tough with China expansion and 787 delay

- New 737s will get a lot of play in Latin America markets

- Mobile checkin will be expanded to Boston / Reagan National / Newark when TSA is ready. Goal is to someday no longer have paper involved in the boarding process.

- On fuel surcharge pullback...Continental actually went in with a much broader surcharge across more fares, but they saw other airlines were being more narrow, so they were forced to pull it.
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Old Jan 17, 2008, 10:36 am
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Originally Posted by cerealmarketer
I can't post the verbatim transcript here because of copyright issues, but if you're interested, go to CO.com Investor Relations and listen to the webcast of today's earnings conference call.

A number of interesting things including:
...
- Smisek said looking at an Economy Plus type product internationally

- A new biz class product will roll out on the 787 and will go on the rest of the fleet

- CO would like to avoid a 3 class product though...
Those statements would appear to be inconsistent with each other. That aside, this is the highest quality Aeroporn I have read all week. Things are beginning to get intriguing. Let the rampant, mostly unfounded hard-product speculation commence.
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Old Jan 17, 2008, 10:43 am
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Interesting, especially with how adament CO execs have been in the past about how they would never implement an international PE product.

And, I think we will still see lie flat in BF, anyway.
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Old Jan 17, 2008, 10:46 am
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Originally Posted by CO 1E
And, I think we will still see lie flat in BF, anyway.
Agreed. I believe the key word was that the top 50 Corporate customers would not pay more for lie flat. They didn't say they wouldn't take it if offered at present prices. As long as they can find a way to maintain the size of the J cabin, without losing Y seats (or a minimal number, due to introduction of Y+), then it has a shot.
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Old Jan 17, 2008, 10:59 am
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Originally Posted by Anglo Large Clawed Otter
Those statements would appear to be inconsistent with each other. That aside, this is the highest quality Aeroporn I have read all week. Things are beginning to get intriguing. Let the rampant, mostly unfounded hard-product speculation commence.
Yes, they are....as in, they haven't made a decision on how to reconcile.

Smisek said they had a meeting w/ top business travel mgrs, and asked whether they would pay a premium for lie-flat. Their answer was 'no,' but they expressed interest in something 'cheaper than businessfirst' but more amenities and premium priced vs today's economy product. His comment was, they are exploring how to accomplish that, but noted they prefer to stay with a 2 class product.

It may also mean a singapore air EWR-HKG type intl config on some flights (i.e. the 777/787 get a premium economy throughout). Or (hopefully not and unlikely) business first becomes business lite. It would depend on whether there is proof people will pay for an improvement from 9 across / 31" pitch to 35" pitch, etc. Sounds dubious either way.

As for lie flat...

Yup, if they can get it to fit in the same space that's a green light but from his comments sounds like that hasn't yet been resolved.

Last edited by cerealmarketer; Jan 17, 2008 at 11:05 am
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Old Jan 17, 2008, 11:01 am
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PE is what I was thinking.

- Top 50 corp customer meeting in December revealed they will not pay more for a lie flat product, but very interested in something between business first and economy.

- Smisek said looking at an Economy Plus type product internationally

- A new biz class product will roll out on the 787 and will go on the rest of the fleet

- CO would like to avoid a 3 class product though

I just returned from EWR-HKG. I got my upgrade about 3 hours before the 24 hour rule would have kicked in. I was thinking of canceling the trip just because of the fear of flying in economy. I don't care if you are Platinum or even if you paid full Y fare, on CO, in economy you are just a nuisance. A PE would be a welcome addition. What are they thinking with row 16-24 being premium? A few inches of leg room and some extra pitch in the seats would make me a lot happier.
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Old Jan 17, 2008, 11:05 am
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Yes! CRJs going away! Best news I've had this week. Makes sense though -- as they get the Q400s and reduce ERJs at EWR, those planes have to go someplace. Why not reduce the CRJs, which were on very short-term leases anyway. I'd already noticed that some of the intra-Texas routes that had gone to mostly Chautauqua CRJs are cycling back to more ExpressJet ERJs over the next few months.
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Old Jan 17, 2008, 11:18 am
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Originally Posted by cerealmarketer
- A new biz class product will roll out on the 787 and will go on the rest of the fleet
Does this mean they will be auctioning off a set of the BF seats at the 2009 DO?
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Old Jan 17, 2008, 11:18 am
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Originally Posted by cerealmarketer
It may also mean a singapore air EWR-HKG type intl config on some flights (i.e. the 777/787 get a premium economy throughout).
Its very likely that SQ will remove their Executive Economy from their A345's later this year and go all Business Class for the EWR-SIN and LAX-SIN Nonstops.
If CO gets a premium economy , i think it will be a few rows (the premium seating) and still have a regular Y class.
i dont even care if they give me more amenities or not, as long as its a litte more leg room and maybe a foot rest. Ill bring my own eye mask.
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Old Jan 17, 2008, 11:25 am
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Originally Posted by ssullivan
Yes! CRJs going away! Best news I've had this week. Makes sense though -- as they get the Q400s and reduce ERJs at EWR, those planes have to go someplace. Why not reduce the CRJs, which were on very short-term leases anyway. I'd already noticed that some of the intra-Texas routes that had gone to mostly Chautauqua CRJs are cycling back to more ExpressJet ERJs over the next few months.
LK pretty much indicated that they were disappointed with the CRJs at the last 'Do. I am sure they got a great deal on them in regards to $$$ and luckily most of them are on short term leases. Thanksfully!
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Old Jan 17, 2008, 11:25 am
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Originally Posted by rolov
Its very likely that SQ will remove their Executive Economy from their A345's later this year and go all Business Class for the EWR-SIN and LAX-SIN Nonstops.
If CO gets a premium economy , i think it will be a few rows (the premium seating) and still have a regular Y class.
i dont even care if they give me more amenities or not, as long as its a litte more leg room and maybe a foot rest. Ill bring my own eye mask.

Typical PE is BA, VS, JL etc who are offering 38-40" pitch and 8 instead of 9 wide on a 777. CO would be crazy not to offer at least this. It translates to around 50% more floor space, and an equivalent price premium which I think many corporates are willing to pay, as well as quite a few longhaul leisure travellers.
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Old Jan 17, 2008, 11:38 am
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Originally Posted by cerealmarketer
Smisek said they had a meeting w/ top business travel mgrs, and asked whether they would pay a premium for lie-flat. Their answer was 'no,' but they expressed interest in something 'cheaper than businessfirst' but more amenities and premium priced vs today's economy product. His comment was, they are exploring how to accomplish that, but noted they prefer to stay with a 2 class product.
I'm assuming your repetition of this point is because Smisek emphasized it. And frankly, I think Smisek is downright delusional to think that introducing a premium-priced PE can be done within a 2-class structure. I hope they don't introduce something half-a**ed, as it will not be a good thing for either CO or the customer.

Then again, maybe they are trying to say that they are going to abandon the arms race and the new BF will be a step down in amenities and price...
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Old Jan 17, 2008, 11:39 am
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Y+: I think its fairly easy to see that PE is a good price point to consider. Y- sucks. And a lot of companies can't justify 10x the cost for J, but something that's a bit more for a bit more comfort is a sweet spot. FTers have asked for it for a while...

Lie-flat J: they may not pay more for it, but they'll sure as heck fly another carrier if they offer it on the same route!

CHQ: Good riddance. We called this one last year.

Summer 09: "No new longhaul planes that aren't 787s..." OOOOPS! For such risk-averse management, its pretty amazing that they put ALL their eggs in an extremely risky basket. Hopefully the delays in the 787 would give them the pull with boeing to convert some 738 order dollars into some 777s and good delivery slots.
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Old Jan 17, 2008, 11:48 am
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While I am not sure what is being said without actyally saying anything (mergers, etc.), it would seem that CO Mgmt is trying to size up the market before moving forward.

Dan
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Old Jan 17, 2008, 11:49 am
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Originally Posted by entropy
Lie-flat J: they may not pay more for it, but they'll sure as heck fly another carrier if they offer it on the same route!
Exactly. I wonder if all of Smisek's talk is just that and that he grasps this basic concept.
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