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Originally Posted by ciaobel
(Post 9167619)
1. Dilution of the current stock base by selling to, surprisingly, a state-owned legacy
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you are right, I will edit the post.
What I meant is more flagship country carrier, and legacy.
Originally Posted by bernardd
(Post 9168134)
If you're talking about Lufthansa you might want to check your facts - it was privatized in two stages in the 1990's and has minimal state ownership today.
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Originally Posted by ciaobel
(Post 9167619)
4. Attempt to build more code-shares
5. Attempt to tier reward structure So did they make an attempt and fail, or not attempt at all :confused: |
Originally Posted by ciaobel
(Post 9167619)
you counted UA twice and left out WN conveniently - if that is the your perspective.
To be fair, if you adjust for the length of existence for the carrier, and the special charges that the legacies took for Bankruptcies, JBLU will be right in the middle of the pack. What happened is that JBLU narrowly avoided a near-death, as evidenced by the rebound of stock price. And what did it have to do to avoid that near death? 1. Dilution of the current stock base by selling to, surprisingly, a foreign flagship legacy 2. Tighten up the fees for change and re-pricing 3. Raise the ticket price - evidenced by the posts in the forum about lack of deals and the rollout of Y refundables 4. Attempt to build more code-shares 5. Attempt to tier reward structure 6. Cut down freebies and start charging fees All that sounds familiar? Yes, JBLU is becoming a legacy, or part of. We judge by the action not the words. GONE are the days where you get superior service for below the cost. Unfortunately, those "deals" were built on the subsidy of investors and un-jaded employees. Now JBLU starts behaving like a legacy, or rather business, those people who love the company for the wrong reasons will have to eat crow, if not now, will be soon. Last but least, the development of relationship between CO and LiveTV is a very interesting one. It is effectively a cash infusion by CO - JBLU has to pledge something down the road. My guess is it is either the ease of price war over Florida market, or a signal for the upcoming merger mania for the industry. I did, however, mention WN, here is the excerpt: "And no, B6 has not been more profitable than WN in the period since 9/11." First, it is indeed hard to make an apples-to-apples comparison between JBLU and the legacies because B6 was a fast-growing start-up while the legacies were dealing with decades of accumulated debts, many of which were structural (of course, many dealt with it by filing chptr 11). No question that JBLU is maturing and becoming more like a legacy. Perhaps that is an inevitable feature of flying so much long-haul Remember WN's real ace is that it flies so much higher RASM short haul. As far as the deal between LiveTV and CO, B6 is essentially bearing the full burden of the risk since they are installing and maintaining the systems at no cost to CO. If people buy, it will be a good deal for JBLU, but if they don't, the only cost CAL has to shoulder is the slightly higher cost of fuel due to heavier payload. Not much of a partnership if you ask me. |
Originally Posted by TWA Fan 1
(Post 9168477)
No question that JBLU is maturing and becoming more like a legacy. Perhaps that is an inevitable feature of flying so much long-haul Remember WN's real ace is that it flies so much higher RASM short haul.
You recognize it, I recognize it (and every airline analyist realizes it) - too bad Neeleman lost sight of that. The guy sells a small airline to WN for a fortune, stays on the payroll (via his noncompete) and then tries to start WN v2.0. Problem is, he didn't learn anything from WN. Instead of slow, responsible growth, he charts the opposite course. Instead of a single fleet type, he violates the cardinal KISS rule of WN and buys the problematic 190s. Numerous posts can be found in the FT archives predicting the recent near-death experience and attributing it to the failed decision to order the second fleet type. Instead of strategically grabbing only those high yields on short-haul routes, he turns B6 into a transcon and Florida-vacationer airline. Maybe Barger can fix it. If I were in charge? When the stock price hit $4.30 the other day, I'd have filed a Ch 11 petition to correct the 190 mistake. |
Originally Posted by FWAAA
(Post 9168615)
EXACTLY!
You recognize it, I recognize it (and every airline analyist realizes it) - too bad Neeleman lost sight of that. The guy sells a small airline to WN for a fortune, stays on the payroll (via his noncompete) and then tries to start WN v2.0. Problem is, he didn't learn anything from WN. Instead of slow, responsible growth, he charts the opposite course. Instead of a single fleet type, he violates the cardinal KISS rule of WN and buys the problematic 190s. Numerous posts can be found in the FT archives predicting the recent near-death experience and attributing it to the failed decision to order the second fleet type. Instead of strategically grabbing only those high yields on short-haul routes, he turns B6 into a transcon and Florida-vacationer airline. Maybe Barger can fix it. If I were in charge? When the stock price hit $4.30 the other day, I'd have filed a Ch 11 petition to correct the 190 mistake. The B6 transcon strategy only worked when fuel was $25/barrel... |
I would disagree - in my view, this deal is huge.
1. CAL fully understands that its adoption might drive a cascading effect of other airlines adopting the product for the competitive reason - more money to JBLU 2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow Basically, it is the diminution of product differentiation. CO decided not to do whatever to kill JBLU, while JBLU ate the pride of the only "humanity" carrier in air travel. It is the shift of paradigm at JBLU, and a new approach to competing at CO. The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait. Not co-inccident is that Barger is an ex-CO guy and has a great understanding of how a legacy with a NY hub makes money.
Originally Posted by TWA Fan 1
(Post 9168477)
As far as the deal between LiveTV and CO, B6 is essentially bearing the full burden of the risk since they are installing and maintaining the systems at no cost to CO. If people buy, it will be a good deal for JBLU, but if they don't, the only cost CAL has to shoulder is the slightly higher cost of fuel due to heavier payload. Not much of a partnership if you ask me. |
Originally Posted by ciaobel
(Post 9169021)
2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow
<snip> The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait. As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does. |
Originally Posted by sbm12
(Post 9169239)
As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does.
It looks to me as if B6 is taking a more direct route than WN towards legacy carrier strategies. Staying with the herd is safer if you want to avoid premature death, but you won't have any new pastures to yourself that way either. Just ruminating... |
Originally Posted by nsx
(Post 9169334)
Just ruminating...
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I am not under-estimating anything, both are huge. My point was that both CO and JBLU changed way of doing business, and JBLU bears more risk since it is not an equal exchange.
In addition, you misunderstood what I meant by fares in overlapping market. JBLU has been pricing its product aggressively (discounted) trying to take market share, and it will do less of that now. The result will be higher fare. My bet is that JBLU will change its pricing behavior and adjust capacity, and CO will follow to reciprocate.
Originally Posted by sbm12
(Post 9169239)
I think that you are underestimating the impact of number 2; I agree more with TWA Fan 1 that this is a huge risk to JBLU because of the sunk cost and unknow upside for revenue, especially since JetBlue always gave it away for free, and they're planning on charging for it on CO.
As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does. |
Originally Posted by ciaobel
(Post 9169538)
I am not under-estimating anything, both are huge. My point was that both CO and JBLU changed way of doing business, and JBLU bears more risk since it is not an equal exchange.
In addition, you misunderstood what I meant by fares in overlapping market. JBLU has been pricing its product aggressively (discounted) trying to take market share, and it will do less of that now. The result will be higher fare. My bet is that JBLU will change its pricing behavior and adjust capacity, and CO will follow to reciprocate. S. |
Originally Posted by ciaobel
(Post 9169021)
I would disagree - in my view, this deal is huge.
1. CAL fully understands that its adoption might drive a cascading effect of other airlines adopting the product for the competitive reason - more money to JBLU 2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow Basically, it is the diminution of product differentiation. CO decided not to do whatever to kill JBLU, while JBLU ate the pride of the only "humanity" carrier in air travel. It is the shift of paradigm at JBLU, and a new approach to competing at CO. The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait. Not co-inccident is that Barger is an ex-CO guy and has a great understanding of how a legacy with a NY hub makes money. Current clients include F9, WS, FL, DJ, XE, AP and Blue Wings of Germany. Clearly, though, CO is the biggest client to date. |
exactly my point - CO is the first legacy to adopt.
Originally Posted by TWA Fan 1
(Post 9169998)
That's a compelling theory, except for the fact that LiveTV has been actively marketing and leasing systems to other carriers for some time.
Current clients include F9, WS, FL, DJ, XE, AP and Blue Wings of Germany. Clearly, though, CO is the biggest client to date. |
Originally Posted by ciaobel
(Post 9170280)
exactly my point - CO is the first legacy to adopt.
If other legacies decide to adopt then B6 might have found a cash cow in this sideline, likely never a huge source of revenue, but enough to help with the cash flow. As far as product differentiation, agreed, but only up to a point since the fact that LiveTV is a free service on B6 is a clear plus for JBLU. |
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