Lufthansa interest
Dec 15, 2007 | 9:13 pm
#46
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I agree that it is a last resort. The right/wrong comment focuses on operating a company based on a plan that is obviously flawed, such as $25 oil. You are the one who suggested that this is the reason for B6's cash crunch 
That the carrier hasn't managed to adjust to the change in reality is unfortunate. In most other industries, companies that declare bankrptcy never recover so well. For some reasons airlines are considered sacrosanct in the USA so they can't be allowed to fail despite their inability to operate under normal business rules. So if JetBlue were to declare bankruptcy they'll find a way out of it, though investors will still get hosed, and the government will ensure that they don't suffer too badly. The one thing I'm not sure of in B6's case is that they don't have union contracts they can renegotiate to reduce their costs, so that would be tough. I assume that most of the debt is secured by the aircraft, and most airlines have trouble operating without those, so that would be an interesting issue for B6 to face.
That's 600-800 TrueBlue points if I'm calculating correctly, right? That means you're flying ~30 r/t "long" flights purchased online, or spending a lot of money on the JetBlue AmEx card. That much travel/spending would be worth top level elite, so you're looking at ~300K RDMs on other carriers (150K BiS+ 150K bonus miles). The 300K miles would get you 6 transcons in slEasyPass or many more with standard rewards, or some number in between depending on your redemption pattern. The Carribean redemptions cost more on the other carriers, but you'd still probably come out ahead. Or you could buy a J RTW reward, something that you could not get from B6.
I am not in love with the legacy programs at all, but I do think that they are better than what TrueBlue offers.
That the carrier hasn't managed to adjust to the change in reality is unfortunate. In most other industries, companies that declare bankrptcy never recover so well. For some reasons airlines are considered sacrosanct in the USA so they can't be allowed to fail despite their inability to operate under normal business rules. So if JetBlue were to declare bankruptcy they'll find a way out of it, though investors will still get hosed, and the government will ensure that they don't suffer too badly. The one thing I'm not sure of in B6's case is that they don't have union contracts they can renegotiate to reduce their costs, so that would be tough. I assume that most of the debt is secured by the aircraft, and most airlines have trouble operating without those, so that would be an interesting issue for B6 to face.That's 600-800 TrueBlue points if I'm calculating correctly, right? That means you're flying ~30 r/t "long" flights purchased online, or spending a lot of money on the JetBlue AmEx card. That much travel/spending would be worth top level elite, so you're looking at ~300K RDMs on other carriers (150K BiS+ 150K bonus miles). The 300K miles would get you 6 transcons in slEasyPass or many more with standard rewards, or some number in between depending on your redemption pattern. The Carribean redemptions cost more on the other carriers, but you'd still probably come out ahead. Or you could buy a J RTW reward, something that you could not get from B6.
I am not in love with the legacy programs at all, but I do think that they are better than what TrueBlue offers.
Under Dave Barger a lot of that has changed and the basics are now all pretty good except for the LF. Perhaps B6 needs to start overbooking to help foster higher LF's.
As far as my TrueBlue pts, the calculation is one award ticket equals essentially 25,000 miles as it would with a legacy frequent flyer program.
The only difference is that I never have to worry about needing to double my points as I would with any legacy frequent flyer program (a la CO "EasyPass," or whatever corporate euphemism they're using for it now.)
95% of my paid flights are transcon and I can achieve 96 pts with 4 round trips. I supplement the balance with my jetBlue Amex. And, no I don't fly 30 rt a year so the balance comes out of Amex Membership Rewards.
Again, the value of the B6 pts corresponds to the "standard" award levels with the legacies so there is no penalty for using my Amex MR pts on B6 vs. a legacy's ff program (the contrary, since I never have to worry about EasyPass).
Plus there is the fact that I can always get my first choice itinerary and that my family enjoys the comfort of B6 and my kids love the PTV.
Dec 16, 2007 | 7:58 am
#47
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I am not convinced that this is anything more than an investment by LH where they see a potential profit with little downside, the Dollar is weak and the Euro is strong at the moment.
As JetBlue stands it is not up to the level of a carrier that LH would want to work with. They do not offer FC/BC nor do they have an elite program or any way for that matter to recognize elites from other airlines. JetBlue does not even interline with any major US or foreign carrier, unless things change dramatically, I really do not see this as more than a potential gamble by LH.
Dan
As JetBlue stands it is not up to the level of a carrier that LH would want to work with. They do not offer FC/BC nor do they have an elite program or any way for that matter to recognize elites from other airlines. JetBlue does not even interline with any major US or foreign carrier, unless things change dramatically, I really do not see this as more than a potential gamble by LH.
Dan
Dec 16, 2007 | 10:23 am
#48
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Actually B6 is a top level US based carrier despite the fact that they have no BC/FC and that their FF program is limited. They have satisfied customers, great staff when you have to call in (think the horrors of the UA's automated system which dumps you off to an untrained contract worker), an excellent website, etc. Terminal 6 at JFK even has takeaway vegan meals now. Mention legacy carriers to a great many people and a complaint is surely right at the tip of their tongues. Look at all of the US legacy carrier's boards on flyertalk. Even hard core UA fans seem to delight is getting compensation for the many things that are wrong. Get on a jetBlue plane and people are generally happy to be there. This is why I switched from being a UA fan to a B6/VS flyer. I can take higher quality international airlines when I fly out of the country and within the US, unless there is no other choice, I will take B6/VX.
LH wants to partner with an airline that will treat its passengers well and provide connections out of BOS/JFK to where they want to go. Maybe B6 will evolve to offer BC/FC in the future. More international partnerships are already a given meaning that their FF program will offer significantly more benefits in the future.
A UA investment in B6 would be a big mistake. UA reached its apex in the mid-90s and has steadily fallen since. Why try to combine a company with demoralized employees and a management team that is looking to sell off the company with one that is actually trying to be innovative and focused on its customers? LH saw that it needed a quality partner in BOS/JFK and B6 fits the bill.
LH wants to partner with an airline that will treat its passengers well and provide connections out of BOS/JFK to where they want to go. Maybe B6 will evolve to offer BC/FC in the future. More international partnerships are already a given meaning that their FF program will offer significantly more benefits in the future.
A UA investment in B6 would be a big mistake. UA reached its apex in the mid-90s and has steadily fallen since. Why try to combine a company with demoralized employees and a management team that is looking to sell off the company with one that is actually trying to be innovative and focused on its customers? LH saw that it needed a quality partner in BOS/JFK and B6 fits the bill.
Dec 16, 2007 | 10:32 am
#49
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Actually B6 is a top level US based carrier despite the fact that they have no BC/FC and that their FF program is limited. They have satisfied customers, great staff when you have to call in (think the horrors of the UA's automated system which dumps you off to an untrained contract worker), an excellent website, etc. Terminal 6 at JFK even has takeaway vegan meals now. Mention legacy carriers to a great many people and a complaint is surely right at the tip of their tongues. Look at all of the US legacy carrier's boards on flyertalk. Even hard core UA fans seem to delight is getting compensation for the many things that are wrong. Get on a jetBlue plane and people are generally happy to be there. This is why I switched from being a UA fan to a B6/VS flyer. I can take higher quality international airlines when I fly out of the country and within the US, unless there is no other choice, I will take B6/VX.
LH wants to partner with an airline that will treat its passengers well and provide connections out of BOS/JFK to where they want to go. Maybe B6 will evolve to offer BC/FC in the future. More international partnerships are already a given meaning that their FF program will offer significantly more benefits in the future.
A UA investment in B6 would be a big mistake. UA reached its apex in the mid-90s and has steadily fallen since. Why try to combine a company with demoralized employees and a management team that is looking to sell off the company with one that is actually trying to be innovative and focused on its customers? LH saw that it needed a quality partner in BOS/JFK and B6 fits the bill.
LH wants to partner with an airline that will treat its passengers well and provide connections out of BOS/JFK to where they want to go. Maybe B6 will evolve to offer BC/FC in the future. More international partnerships are already a given meaning that their FF program will offer significantly more benefits in the future.
A UA investment in B6 would be a big mistake. UA reached its apex in the mid-90s and has steadily fallen since. Why try to combine a company with demoralized employees and a management team that is looking to sell off the company with one that is actually trying to be innovative and focused on its customers? LH saw that it needed a quality partner in BOS/JFK and B6 fits the bill.
Nobody ever said that B6 would not change their concept at some point. Of course they had to get started slim
Growth automatically means at some point to get internationalized, add up products like BC/FC, etc.
Dec 16, 2007 | 11:34 am
#50
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Actually B6 is a top level US based carrier despite the fact that they have no BC/FC and that their FF program is limited. They have satisfied customers, great staff when you have to call in (think the horrors of the UA's automated system which dumps you off to an untrained contract worker), an excellent website, etc. Terminal 6 at JFK even has takeaway vegan meals now.
Dec 16, 2007 | 11:59 am
#51
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I am not convinced that this is anything more than an investment by LH where they see a potential profit with little downside, the Dollar is weak and the Euro is strong at the moment.
As JetBlue stands it is not up to the level of a carrier that LH would want to work with. They do not offer FC/BC nor do they have an elite program or any way for that matter to recognize elites from other airlines. JetBlue does not even interline with any major US or foreign carrier, unless things change dramatically, I really do not see this as more than a potential gamble by LH.
Dan
As JetBlue stands it is not up to the level of a carrier that LH would want to work with. They do not offer FC/BC nor do they have an elite program or any way for that matter to recognize elites from other airlines. JetBlue does not even interline with any major US or foreign carrier, unless things change dramatically, I really do not see this as more than a potential gamble by LH.
Dan
B6 isnt joining *A nor M&M. Its simply an investment for now for LH. I dont think at this time B6 can offer LH passengers much in the way of connections to major cities that LH already doesnt serve Non-stop or via a Code-share with UA. But LH wants something just in case UA ends up elsewhere.
If LH starts now to funnel its passengers to B6 and not UA, that will start the swords a flying. So for now I dont see anything except for an Investment on LHs behalf. It wont be passive as it was announced that LH will have 1 rep on B6s Board.
As for the stk price, I think its gone as high as it will till B6 is out of the woods. After all LH got a new class of stk issued and paid $7.27 per sh, thats why B6 dropped from hitting $8.83 intra day the day the deal was annouced
BTW many a company purchased shares of another feeling the stk was very low and had no where else to go but Up and in the end were 100% Wrong. The lowest a stk can go is $0
Dec 16, 2007 | 1:11 pm
#53
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I don't think you're right. As someone who flies LH over the pond I love Jetblue. When I fly domestically in the US I try to get onto B6 or Horizon. I'd love to get Jetblue connections onto the same ticket. Note that we're not talking about transcons here, I love to take LH or another sane longhaul airline as close to the point I want to get and then a _short_ connection to exactly where I want to go. The B6 product is perfectly fine for that, and for sure a lot better than United RJs or E- in the quite likely case that they've already filled up F with upgraders, especially if you're on a discounted business fare.
Dec 17, 2007 | 6:33 am
#54
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I don't think you're right. As someone who flies LH over the pond I love Jetblue. When I fly domestically in the US I try to get onto B6 or Horizon. I'd love to get Jetblue connections onto the same ticket. Note that we're not talking about transcons here, I love to take LH or another sane longhaul airline as close to the point I want to get and then a _short_ connection to exactly where I want to go. The B6 product is perfectly fine for that, and for sure a lot better than United RJs or E- in the quite likely case that they've already filled up F with upgraders, especially if you're on a discounted business fare.
Dec 17, 2007 | 6:57 am
#55
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I don't mind flying even E- on the short flights when I know I'm in J/F on the long ones either. But it is all about setting expectations. Imagine an uninformed passenger (which most are) coming off their FRA-JFK flight in J/F and then heading over to their connecting gate in a different terminal. There's no lounge when you get to the gate area, which is very confusing. Then, no pre-boarding. And you get on the plane and there isn't even the fake intra-Europe J with the curtain and the blocked seat. It won't fly for the high revenue passnegers.
But here are a couple of considerations:
1. New terminal T-5 will be opened 9/08.
2. While B6 does not have Euro Biz class, it coes have 36" seat pitch which is more than Euro Biz.
3. Most customers (75%) who fly LH TATL are flying Y
4. As far as going to a different terminal, unless LH moves into T-5, that's the way JFK is laid out. At least there is now the AirTrain.
Finally, if LH is serious about making an alliance with B6, adding features as a lounge and a premium class are relatively simple, certainly a lot simpler than creating a carrier with the presence of B6 at JFK from scratch.
The one real plus of a B6/LH "alliance" is that unlike the other two carriers with a major presence at JFK (AA and DL) B6 does not compete with LH on TATL.
I think the biggest issue will be a possible conflict between the JBLU business model and the one LH might like JBLU to adopt. As a minority stakeholder it's not clear how much influence LH would have.
Dec 17, 2007 | 2:33 pm
#56
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This is definitely true, though B6 does compete with UA and US. This may cause some issues with those relationships, though if I were in LH's shoes I'd tell the others to shut up and deal.
Dec 18, 2007 | 7:01 am
#57
Join Date: May 2003
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I have re-read all the pros and cons to an LH/B6 alliance and I still do not see this investment as anything other than that, an investment.
Yes, B6 could morph over time into a more full service airline but, I highly doubt it. Yes, F/J pax might be willing to overlook the transition from a great long-haul flight in F/J to a better coach product but, again I highly doubt it. Yes, most PAX are flying coach/economy but, as others have said, airlines are trying to court full-fare F/J pax, not low-fare coach pax.
All of this says to me that the LH financial leaders are making a calculated investment, and nothing more at this point. Possible they might also view this as a hedge against any troubles with UA in future but, that is not as likely in my opinion.
Dan
Yes, B6 could morph over time into a more full service airline but, I highly doubt it. Yes, F/J pax might be willing to overlook the transition from a great long-haul flight in F/J to a better coach product but, again I highly doubt it. Yes, most PAX are flying coach/economy but, as others have said, airlines are trying to court full-fare F/J pax, not low-fare coach pax.
All of this says to me that the LH financial leaders are making a calculated investment, and nothing more at this point. Possible they might also view this as a hedge against any troubles with UA in future but, that is not as likely in my opinion.
Dan
Dec 18, 2007 | 7:25 am
#58
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I have re-read all the pros and cons to an LH/B6 alliance and I still do not see this investment as anything other than that, an investment.
Yes, B6 could morph over time into a more full service airline but, I highly doubt it. Yes, F/J pax might be willing to overlook the transition from a great long-haul flight in F/J to a better coach product but, again I highly doubt it. Yes, most PAX are flying coach/economy but, as others have said, airlines are trying to court full-fare F/J pax, not low-fare coach pax.
All of this says to me that the LH financial leaders are making a calculated investment, and nothing more at this point. Possible they might also view this as a hedge against any troubles with UA in future but, that is not as likely in my opinion.
Yes, B6 could morph over time into a more full service airline but, I highly doubt it. Yes, F/J pax might be willing to overlook the transition from a great long-haul flight in F/J to a better coach product but, again I highly doubt it. Yes, most PAX are flying coach/economy but, as others have said, airlines are trying to court full-fare F/J pax, not low-fare coach pax.
All of this says to me that the LH financial leaders are making a calculated investment, and nothing more at this point. Possible they might also view this as a hedge against any troubles with UA in future but, that is not as likely in my opinion.
Are there any precedents in Lufthansa's history for speculative investments of the kind you suggest? From what I've seen, the only time LH have got involved with another company it's been with an eye on a longer goal and, unlike FAR too many US corporations, their goals are long term, not just about next weeks stock price. The nearest equivalent I can think of is their strategic holding in BD, where I believe they have some kind of 'put' option that could well see them acquire BD in the next couple of years.
Dec 18, 2007 | 7:50 am
#59
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Dan
Dec 18, 2007 | 9:19 pm
#60
Join Date: Oct 2005
Posts: 294
"For JetBlue it's about the money; for Lufthansa investment may mean more"
Quoting ATW- "For JetBlue it's about the money; for Lufthansa investment may mean more"
JBLU's liquidity is an issue with high fuel price + debt maturing. So selling out is the natural step, and who can beat an European buyer with inflated currency.
The downside for JBLU are two-folds
1. It will play with StarAlliance rules more or less, sooner or later
2. LH will eliminate the probability that JBLU establish a full range of connecting service with ALL carriers into JFK, which might be the best way out of the woods
The upside for LH are two-folds as well
1. A great call option on JFK assets and airbus+ Embraer aircrafts
2. A great beach head for assaults under Open Skies
JBLU's liquidity is an issue with high fuel price + debt maturing. So selling out is the natural step, and who can beat an European buyer with inflated currency.
The downside for JBLU are two-folds
1. It will play with StarAlliance rules more or less, sooner or later
2. LH will eliminate the probability that JBLU establish a full range of connecting service with ALL carriers into JFK, which might be the best way out of the woods
The upside for LH are two-folds as well
1. A great call option on JFK assets and airbus+ Embraer aircrafts
2. A great beach head for assaults under Open Skies