Items from the Republic 2009Q4 Conference Call

Old Feb 26, 10, 6:18 am
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Items from the Republic 2009Q4 Conference Call

I know at least one or two things were posted from the conference call in various threads (although I can't seem to find any of them) but here is a bigger list, primarily about the branded operation side of things.

Cost per available seat mile (CASM) without fuel for the branded operation was 7.3 cents. However the "branded operation" totals include Midwest's ER3 and ERJs. The non-fuel CASM for the A319 and E-Jet fleet was in the low 6-cent range, which they described as right in line with their main competitors.

Loss on branded operations for the quarter was $18.5m, however that number has a lot of "noise" in it. When things like accounting rule adjustments and restructuring charges are removed...which totalled about $16m...the loss for the 4th quarter was right about $2.5m, described as in line with expectations.

Revenue per seat mile continues to be lower year-over-year, primariliy due to capacity increase and competitivbe pressures, although that is slowing.

Loads are stronger year-over-year for the branded operations as a whole, with January and February loads up 3 points and 2.6 points (to date), and March is so far running about 10 points above last year. Spcifically in Milwaukee, the Q1 load factor is running about 10 percentage points ahead of last year, though there is some yield errosion. Because of signficantly lower costs in Milwaukee, they are "very comfortable" in the current pricing environment. Cost savings are outpacing revenue weakness and they are "very pleased" with how Milwaukee is developing.

Replacing 717's with E-jets was described as saving $3-4m per year per aircraft. Replacing Skywest with Chautauqua was described as saving about $1m per year per aircraft.

The code share between Midwest and Frontier has boosted traffic at both carriers, with about 5% of each carrier's traffic coming from people flying on the partner's code. On their own, each carrier typcially served opposite-coast markets with just 1 or 2 flights per day, but now Midwest customers have more options via Denver to the west, and Frontier customers have more optinons via Milwaukee to the east.

The Q400's in Denver were described as "great aircraft" but were seeing increased negative customer reaction. Much of the negative revenue performance markets in DEN were the Q400 markets. 6 of 11 will be gone by mid April.

By mid April, all idle E-jets will be in service.

Stretch premium seating will be installed on the E170's by fall, and at that point only the ERJ/ER4 aircraft will not have Stretch.

Milwaukee was still described as in a "rebuilding" phase, and they pointed out that 2010 capacity is still well under 2008.

They expect to have more information on the "unified brand" later in Spring. Going to a unified brand is different than picking one name and dropping the other. Looking to use both brands in a way which retains as much of the brand strength of each...the "best of both what is Midwest and Frontier".

By fall they expect the branded operation to be on a single Sabre platform, a single internet booking engine, one set of product attributes, one set of policies, etc. They specifically stated being very "deliberate and cautious" in how they will consolidate.


I think a few of these things were posted by others, but hoepfully this gives a little larger snapshot.
knope2001 is offline  
Old Feb 26, 10, 6:32 am
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Thanks for the summary Knope... I would have listened in yesterday but my company blocks the website that does the audio streaming which is strange because I have no problem listening in on AirTran's conference calls at work. At least Bryan didn't say the Milwaukee market has matured like AirTran did. I wonder if AirTran just ran out of planes and that is why they declared Milwaukee mature?
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Old Feb 26, 10, 8:01 am
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Here is an article from the Center of Aviation which discusses yesterday's earnings call in detail and some of the other news from Republic in recent days.

http://www.centreforaviation.com/new...es-order/page1

As usual, knope did a great job of highlighting the main points from the call. There are some other interesting tidbits in the article that knope didn't include in his opening post.

It's a good read.
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Old Feb 26, 10, 8:02 am
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Even though this is five years, more if delayed, into the future, they said that the CSeries would have five rows of stretch seating. However, this can always change. Alot can happen.
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Old Feb 26, 10, 8:37 am
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"They expect to have more information on the 'unified brand' later in Spring. Going to a unified brand is different than picking one name and dropping the other."

"As we get into the spring we will announce a unified brand process and then it will be an execution proces probably through the rest of the year."

This implies either one or both airline names will certainly be changing.

"Both Frontier and Midwest bring great brand value to us and we must work a path of using these brands that retains as much customer loyalty as we can."

This implies that both brands will be kept. I don't see how you can retain brand value by erasing the brands.

The only way both could happen is by creating a blended brand: either "Midwest Frontier" which sounds oxymoronic or "Frontier Midwest", which just sounds dumb. "Midwest/Frontier" or "Midwest+Frontier" isn't as oxymoronic but just doesn't seem to be a viable option to me.

Any guesses about what this "unified brand" might actually be?
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Old Feb 26, 10, 9:13 am
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Brand refers to the product moreso than the name. By unified brand they mean the same experience whether you are flying on a Frontier route or a Midwest route. The name is still up in the air and personally I'd like them try to go with an Alaska/Horizon type situation where midwest flies p2p routes in the Midwest and Frontier flies everything else.
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Old Feb 26, 10, 9:57 am
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That would explain things. In that case BB should make it more clear that the "unified brand" he is discussing does not involve a "unified brand name", and that neither of the airline names or colors will change. There seem to be a lot of people speculating that they will. And a lot of people will question BB if they don't. Maybe the analysts know what BB is talking about but it doesn't seem the public does, despite the fact that BB has said multiple times that he is keeping both brands.

I don't understand why BB might want to adopt an Alaska/Horizon model for Frontier/Midwest. Horizon clearly is Alaska's regional airline, like Lynx was to Frontier or Republic is for Frontier and Midwest. The only difference is that Horizon has a public brand name and Republic and Lynx do not.

A move could be made to make Republic a branded regional carrier like Horizon, which would allow BB to easily swap planes between the two mainline carriers, but obviously this would create confusion for Midwest and Frontier fliers who might already wonder why the airline uses two names and would create signficant confusion with the contract flyer side of Republic Airways and RAH. The benefits seem minor compared to the costs.

If Bedford is planning to retain the two brands, why aren't the 10 swapped aircraft between Midwest and Frontier getting repainted, as well as the ERJ's replacing Lynx aircraft? Or are they?
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Old Feb 26, 10, 10:56 am
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The Journal Sentinel is picking up on the story.

http://www.jsonline.com/business/85502612.html
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Old Feb 26, 10, 11:03 am
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Despite the Milwaukee cheerleaders, Midwest name doesn't have a chance IMO - it's too regional.
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Old Feb 26, 10, 11:09 am
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Originally Posted by NoOneOfImportance View Post
as well as the ERJ's replacing Lynx aircraft? Or are they?
I believe the lynx flying is mostly being replaced by E170s.

Originally Posted by hazelrah View Post
Despite the Milwaukee cheerleaders, Midwest name doesn't have a chance IMO - it's too regional.
Which is why it would make sense to keep the name for Midwest routes. Think OMA-MKE or MSP-MKE.
MikeFromMKE is offline  
Old Feb 26, 10, 11:11 am
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Originally Posted by hazelrah View Post
Despite the Milwaukee cheerleaders, Midwest name doesn't have a chance IMO - it's too regional.
I agree.

If Republic were to drop on of the names, it would likely be Midwest. The cons associated with keeping the name far outweigh any benefits.

Who knows what Republic is thinking, though.
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