whlinder

Average passenger yield X average stage length is what I used.

Be fair now, FlyI had an early retirement charge for some aircraft that pushed the CASM up. Without that, their CASM was 13-something. I'm sure someone could make the argument that when flying the same equipment on the same route, DH can operate with a lower CASM (lets hope so with no F or E+). However, flying CRJs up against anything bigger puts them at a huge cost disadvantage, and they are already obviously at a revenue disadvantage as has been pointed out over and over and over on here.

HeathrowGuy

To be honest, probably not - remember, United has the ability to spread its fixed costs over a much larger route network and asset base, and can also better leverage economies of scale (not to mention the bankruptcy process) in its dealings with 3rd party vendors/suppliers, which would give the airline some CASM advantage over Independence Air in nearly every instance.

mid

I could point out the serious disadvantages that UA has: unions, pensions, higher aircraft maintenance cost, etc.

I also don't think you can point to Ch11 as a good long-term strategy for dealing with vendors/suppliers.

For all the jawboning going on in this thread, the thing we're seeing is an airline that was running CRJ's being transitioned to an airline that is running A319's. They ran with CRJ's because that's what they had. I don't think they had a long term vision of using CRJ's across their entire network.

SO....don't you think that DH will be able to bring that CASM down a bit once the A319's figure more prominently into their cost numbers?

HeathrowGuy

1. DH has to contend with unions, including the militant AMFA. Furthermore, the UA pension issues have been effectively resolved.

2. The A319s *won't* figure much more prominently into cost equation anytime soon. Recall that Airbus refunded DH's deposits for addiitonal aircraft, and has deferred the remaining deliveries to H2 2007 and beyond:

""On August 10, 2005, the Company's wholly-owned subsidiary Independence Air, Inc. ("Independence Air") amended its agreement with Airbus' wholly-owned affiliate, AVSA S.A.R.L. ("AVSA") to defer the delivery dates for the six A319s previously scheduled for delivery in 2006, and finalized delivery dates for other aircraft previously deferred. The number of aircraft on order under the agreement remains at sixteen, with six A319s now scheduled for delivery during the second half of 2007, six in 2008, and four in 2009.

In connection with the August 10 agreement, Independence Air will soon receive an additional cash refund of $31.2 million of previously paid predelivery payments. Under this and related agreements entered into with AVSA, since June 30, 2005 Independence Air has also deferred $11.5 million in payments that it otherwise would have been required to make during the remainder of 2005, and has deferred a significant amount of the aircraft purchase commitments that it otherwise would have been required to pay in 2006. In addition, $16.5 million in notes previously issued to finance a portion of predelivery payments has now been extinguished without penalty. The agreement requires Independence Air to make initial deposits and progress payments prior to the delivery of the deferred aircraft, a portion of which are financed by the airframe manufacturer. Independence Air will owe predelivery payments in the future prior to each delivery, and will finance a portion of these obligations."

If anything, DH needed accelerated deliveries of the A319s to reduce its CASM to respectable levels for a low-cost carrier. The fact that the A319s won't be coming in the near-term seals the airline's high-CASM fate, and fuel costs will likely deliver the KO punch (leading to a bankruptcy filing) within the next few weeks.

UALPilotDC

Question for you?

FlyI says it takes @ 3500 gallons to fly to LAX (7000 roundtrip) in roughly 11 hours of flight time (RT), and with fuel prices can't justify burning that much. So they are reallocating the aircraft to East Coast routes...

Ok sounds good initally until one gets to thinking....so if they now are flying up and down the East Coast for a similar amount of hours...or even more...more flights= more takeoffs, and given that the first hour of flying will burn the most gas/hr, it should follow that FlyI will be burning/spending more on gas!!!!!!

Does this make sense to any one else? The ASM will drop (say for example a 319 will do IAD-JAX (630 miles)-IAD-ORD(589)-IAD-BOS(413)-IAD in one day total miles would be 3264 vs a LAX turn of 4576 miles) causing an increase in CASM.....but the revenue intake should be higher since ideally you have more people paying a fare then just two plane loads to LAX and back...

To me it just proves that that the pulling of West Coast flying is more of a revenue issue than a cost one. Fuel is just the easy scapegoat.

Any thoughts?

DC

HeathrowGuy

You're exactly right - the focus on short-haul flying will *increase* DH's CASM, as fuel consumption and labor costs become problematic for short-haul operations. It is true that short-haul flying can bolster revenues - however, that won't help much in this case because Independence Air is flying almost exclusively to mature, well-served (and often with DH's presence, overserved) markets with little revenue growth potential.

ExCrew

But, wouldn't, say, 2 IAD-BOS-IAD and maybe 2 IAD-CLT-IAD, all with roughly 110 pax each and an average fare of say $75 garner a BIGGER return than just one daily transcon for that same a/c? More likely with the same amount of pax and somewhere around the same ticket price?

IAD-LAX-IAD (one flight out and back) 110 pax X $125 avg. fare X 2 legs = $27,500
IAD-BOS-IAD (2 flights out and back) 110 pax X $75 avg fare = $33,000
- plus -
IAD-CLT-IAD 110 pax X $75 avg fare = $33,000

Total rev. for the LA turn = $27,500
Total rev for the 2 BOS and 2 CLT turns = $66,000 combined.

Independence is wise not to deploy their a/c resources on transcons. If an a/c needs maint. or a crew member gets ill, they have to CX a flight, thereby stranding pax. On the east coast, a quick flight to the destination with a spare a/c is in order. Not possible on the left coast.

HeathrowGuy

Short-hauls will bring in more revenue, but at the expense of higher fixed costs and decreased operating efficiency, leading to an increase in CASM. Furthermore, the transcon/midcon market was the segment where DH had the greatest chance of overall success, due to the relative dearth of competition for such flying compared to the saturated and ultra-competitive intra-East Coast market.

By staying east, Indy Air will continued to get hammered by the likes of DL/NW/CO/US/AA/FL who have Eastern/Midwestern strongholds to protect, and cost/revenue/resource infrastructures that can compete effectively against any DH encroachment.

Cohiba

Some interesting analysis, but these are all still theories. DH did not make these decisions purely on theory and speculation.

We can throw out possibilities of what will happen to RASM & CASM due to flying routes transcon or in the East. However, what really matters is achieving greater revenue than cost equalling profit. Here there is no speculation. The West Coast routes are not profitable, in fact, they are some of the worst in terms of profitability. Flying the A319s to cities in the East is. So while what some of you are saying about more take offs = higher CASM is not incorrect, the method is already in practice and is still yielding more success than transcons.

Secondly, the high yield East Coast flights are invested very little with the West Coast; connecting pax to/from the West Coast has little to do with their success so pulling out transcons should have a negligible impact on success east of the Mississippi.

I think that's the logic being operated on.


Cheers.

Cohiba

One more thing. I would argue it is the other way around. Yes, the majors, particularly UA, are extremely competitive with DH. However, the competition proves far more dog-eat-dog and unsustainable on the transcons than on some of the East Coast routes where DH is only one of three carriers to regularly service the market.


Cheers.

HeathrowGuy

What "high-yield" East Coast flights are you referring to? Virtually *every* East Coast/Midwest market DH offers was already well-served (if not overserved), often with considerable competition. DH's presence in these markets functions not as a consumer-friendly influence (ala WN) but rather as a fare-dumping parasitic distortion that ends up hurting the consumer in the long run by adversely impacting the legitimate operators. Furthermore, DH's pricing behaviors negated any chance for "high yields" to develop - the airline hasn't gone a month since its birth without a systemwide firesale of some kind.

HeathrowGuy

It only appears this way because the volume of transcon flights is far lower than the volume of intra-East Coast/Midwest flying - among other things, DH witnessed cutthroat competition from CO bringing in 737s on EWR-IAD, and NW introducing RJs on IAD-LAN, both of which succeeded in reducing or eliminating the DH presence in those markets.

Cohiba

While data can mean different things to different people, what I have seen and have access to does not support your conclusions.

If people want to continue to believe that there are absolutely no high-yield flights, that's up to them, but I can tell you with certainty that this is not the case.

Again, yes there are examples of severe competition like those cited by HeathrowGuy, but it is not a matter of appearances...the competition is worse for DH to sustain on the West Coast routes, generally speaking, compared to the East.

I guess some of us have to agree to disagree, but one thing I don't understand is the vitrolic attitude some take towards DH. Characterising an air carrier as an illegitimate operator creating a "fare-dumping parasitic distortion" is over the top in my opinion. I guess all the consumers, including those who do not always or even usually pay "low" fares, yet continue to fly Independence have no clue that they are adversely impacting themselves. Maybe I should go back to UA/US and let their employees treat me, my family and my friends poorly.


Cheers.

HeathrowGuy

Describing DH as a "fare-dumping parasitic distortion" is not vitriol but rather a straightforward assessment of the effects of their pricing/capacity behaviors upon the market.

Like National Airlines a few years back, DH floods already-saturated markets with capacity at unsustainably low fares. Indy Air loses by having negative profit margins that would likely get a legacy airline CEO shot in broad daylight. Competitors that have to deal with DH's incursion into their market segments suffer by having to match the firesale fares and add capacity to now-overserved routes. Customers lose once the competitors redirect capacity away from other markets to compete against the incursion (e.g., CO pulling 735s from other markets to run EWR-IAD flights last year), and by having the legitimate players weakened generally. In the end, nobody will profit from the Independence Air experience except the attorneys.

L Dude 7

1) Indy Air touts its #2 (after jetBlue) customer sat ranking (http://biz.yahoo.com/prnews/050906/dctu044.html?.v=21)
2) Indy has some of the lowest load factors in the industry (72.2% in August) .http://biz.yahoo.com/cbsmb/050906/ca...224a.html?.v=1
3) Indy is noted by many for having extremely low fares - especially at smaller airports on the east coast. (For example: http://biz.yahoo.com/prnews/050823/dctu027.html?.v=19)
4) FlyI is losing gobs of money. (For Example: http://biz.yahoo.com/prnews/050809/dctu035.html?.v=21)

jetblue has a high customer sat, and low fares, but it is profitiable and has insanely high load factors.
Southwest has lower load factors (but higher than FlyI), low fares, high customer sat, and is making money.

The Airbus plan looks like a good idea, very similar to the way jetBlue started out. High quality service, launching on some overpriced, underserved routes.
However, the big problem is that FlyI is trying to launch a small discounter while having a huge RJ airline to serve it. It would be difficult for a discount RJ airline to be profitable if fuel were free, let alone if it is sky high like it is today.