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FlightGlobal: United seeks return to New York JFK

FlightGlobal: United seeks return to New York JFK

Old Jun 20, 18, 8:06 am
  #151  
 
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Originally Posted by tphuang View Post
We know B6 has much higher profit margin system wide than UA. We know JFK is their 2nd most profitable station (they have said it many times), just behind BOS. And EWR isn't UA's most profitable station. It's probably IAH. If B6 ever obtains 2 or 3 more gates at EWR, UA needs to watch out.

In Q1, B6 pre-tax margin is 6.3, UA is 2.0 and DL is 7.2%. And B6 actually had higher margin that DL in Q2/Q3 last year. So it's very profitable in competitive environment.
Kirby has said DEN is United's most profitable domestic hub, and cerealmarketer quoted Kirby on the stats re: EWR I tried to locate in a brief, unsuccessful search. I think you're putting together some disparate facts to extrapolate a conclusion.

The scope of UA's network means there are many more inputs and profitability factors that drive margin; far more than B6, so looking at systemwide pretax margin and trying to correlate that to the profitability of a single hub, at least in the case of UA, is probably a futile effort.
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Old Jun 20, 18, 8:27 am
  #152  
 
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Originally Posted by tphuang View Post
B6 has a really solid balance sheet and owns most of its aircraft, which is not the case with UA/AA.
Is this accurate? I thought the majority of E190's were leased? And I'm pretty sure Wells Fargo owns a few of their 320's

Also, I asked up-thread about UA losing some of the bigger corporate contracts, can someone provide a link or something? (not that I doubt it at all, I just want to read/hear the whole thing)
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Old Jun 20, 18, 10:07 am
  #153  
 
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Originally Posted by jhayes_1780 View Post
Also, I asked up-thread about UA losing some of the bigger corporate contracts, can someone provide a link or something? (not that I doubt it at all, I just want to read/hear the whole thing)
In some cases it’s not that UA has totally lost the business, but that those contracts are no longer exclusive.
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Old Jun 20, 18, 10:50 am
  #154  
 
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Originally Posted by cerealmarketer View Post


Interesting AA undercutting here instead of falling in line on last minute avail corporate rates. Part of the make it painful for B6 narrative.
AA is aggressively undercutting the competition on some private (non-published) transcon business class fares. I don't manage any corporate contracts with AA, but they're offering my agency a 20% discount off base fares that we can offer to anyone. It brings the all-in cost of business class SFO->JFK to as low as $449.40.

I'd be surprised if they weren't being similarly aggressive on corporate contracts.
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Old Jun 20, 18, 12:16 pm
  #155  
 
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Originally Posted by EWR764 View Post
Kirby has said DEN is United's most profitable domestic hub, and cerealmarketer quoted Kirby on the stats re: EWR I tried to locate in a brief, unsuccessful search. I think you're putting together some disparate facts to extrapolate a conclusion.

The scope of UA's network means there are many more inputs and profitability factors that drive margin; far more than B6, so looking at systemwide pretax margin and trying to correlate that to the profitability of a single hub, at least in the case of UA, is probably a futile effort.
Yes, that's what Kirby said, but separate analysis have also yielded IAH as their most profitable. I think it really is up to how they do the calculation. Regardless, I think my point is while EWR is an above average hub, it's not their most profitable hub. An above average hub for B6 is going to have higher margin than an above average hub for UA.

Originally Posted by cerealmarketer View Post
And Kirby gave some stats for the others a year ago.

https://skift.com/2017/04/21/united-...rong-decision/

“We have about 15 percent margins here in Newark,” he told employees. “We estimate Delta in New York has a 4 percent profit margin, even when times are good. And American is somewhere in between.

JetBlue as a whole ran a 14% operating margin in 2017 but that was down from 20% in 2016 and 2015, and up from around 8% before that. it's hard to say what's Mint and what's simply fuel, but they at least publicly say they are pleased with Mint margin. But even before Mint JetBlue ran a decent operating margin with a NY centric operation by being a niche lower cost carrier.

The more I think, I believe Kirby's other reason for believing it was a mistake was diverting JFK capacity away from JetBlue. But that's something that's he'd be reticent to say in a public forum because it offers up anticompetitive evidence if they or AA / DL ever decide to acquire Jetblue. Remember these 'want back into JFK' statements are coming around the same time as some of the rumors of someone (including UA) wanting to acquire JetBlue.

http://www.chicagobusiness.com/artic...cquire-jetblue
Right, I think it's clear Delta is the least profitable airline in NYC. They've adopted a very expensive market share battle that has lasted for over a decade now. But I think they recognize the value of a presence in NYC to their national brand and corporate contracts, And they have some very profitable hubs that allow them to carry out these market share battles. And they are also doing it in LAX/SEA/BOS now. And at least in NYC, I think they are turning the corners, because AA is retreating. UA could've stuck around in JFK, but they chose to put all the eggs in EWR. They probably wouldn't be as profitable in NYC if they carried on at JFK, but it certainly hurts them elsewhere. And Kirby would say now that lossing some money in JFK is worth it for the overall system wide profitability.

B6 has limited number of slots in LGA which prevents them from being a major player in corporate market. They have a larger slot portofolio in JFK which allows them to dominate in Florida/Carribean/leisure market + transcon. Premium transcon was a huge liability until mint came around. Now, they are really hurting DL on transcon routes that DL was dominating like SAN/LAS/SEA.

In the next couple of years, B6 will get into TATL market out of JFK with A321LR. JFK slot will go away at some point and B6 has plenty of gate space in T5 to add more flights. They are going to be a bigger player in the nyc corporate market. And they are making a proposal for a unified terminal with T6/T7 that will likely be the largest in JFK. From that, DL will loose the benefit of having by far the most flights (they run 60 flights more a day than B6 at this point) and most likely NYC will start to loose money for them again. At which time, B6 will get very expensive since they will be managing the most valuable property in America's largest international gateway. With that in mind, Kirby better move fast if he wants to acquire B6 for a reasonable price. That's assuming UA doesn't go in the red-ink again. Things are not always going to be this good for the airline industry.

Originally Posted by jhayes_1780 View Post
Is this accurate? I thought the majority of E190's were leased? And I'm pretty sure Wells Fargo owns a few of their 320's

Also, I asked up-thread about UA losing some of the bigger corporate contracts, can someone provide a link or something? (not that I doubt it at all, I just want to read/hear the whole thing)
yep, E90s are leased, but pretty much all the A321s are owned and a good chunk of A320s. E90s are going away anyhow. It sounds like they are going with C Series sometimes after it becomes an airbus program.
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Old Jun 20, 18, 2:55 pm
  #156  
 
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Originally Posted by tphuang View Post
Yes, that's what Kirby said, but separate analysis have also yielded IAH as their most profitable. I think it really is up to how they do the calculation. Regardless, I think my point is while EWR is an above average hub, it's not their most profitable hub. An above average hub for B6 is going to have higher margin than an above average hub for UA.
B6 is 6.2% PTI and 7.3% OpInc in Q1 systemwide.

Kirby said UA EWR 15%, I’m presuming he’s using OpInc to paint the rosiest picture, and that could be in 14.5-15.4% within “legal weasel room”. I dunno if that comment is applicable for that quarter only or rolling 4-quarters annual average. Let’s just call it 14.5%.

Unit market share for Trailing 12m ending April 2018:
UA 23.7%
DL 22.4%
B6 13.0%
AA 12.8%

i’d love to see how one can use these plus other public figures to at least derive a B6 JFK ballpark figure that is at least 14.5 given their system wide of 7.3 without using the same talking points -

eg “I believe JFK commands a premium so therefore it only stands to reason B6 will be at least 14.5% margin there”

As great as the Mint product has been to structurally shift the price points of premium transcons, you might be slightly overhyping the potential B6 TATL using A321LR (i would guess they start at BOS first but that’s just my guess), B6 needs to seriously up their business destination offerings if they actually wanna shoot for corporate share. A quick search of B6 JFK mosntops on Friday 8/17 shows -

3x ORD
2x ATL CLT DEN
1x HOU
0x DFW MSP DTW




Last edited by williambruno1975; Jun 20, 18 at 3:05 pm
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Old Jun 20, 18, 3:30 pm
  #157  
 
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Originally Posted by williambruno1975 View Post
B6 is 6.2% PTI and 7.3% OpInc in Q1 systemwide.

Kirby said UA EWR 15%, I’m presuming he’s using OpInc to paint the rosiest picture, and that could be in 14.5-15.4% within “legal weasel room”. I dunno if that comment is applicable for that quarter only or rolling 4-quarters annual average. Let’s just call it 14.5%.

Unit market share for Trailing 12m ending April 2018:
UA 23.7%
DL 22.4%
B6 13.0%
AA 12.8%

i’d love to see how one can use these plus other public figures to at least derive a B6 JFK ballpark figure that is at least 14.5 given their system wide of 7.3 without using the same talking points -
eg “I believe JFK commands a premium so therefore it only stands to reason B6 will be at least 14.5% margin there”



As mentioned above, their full year margin is a lot higher than 7.3%. Q1 is typically the worst quarter for both all the carriers. Their full year margin was about 14% last year and 20% the year before and JFK is probably 5% above system average. Since Scott Kirby made his comment in 2017, it would most likely have been about UA's performance in 2016 or 2017 rather than this year, when fuel prices are going through the roof.

As great as the Mint product has been to structurally shift the price points of premium transcons, you might be slightly overhyping the potential B6 TATL using A321LR (i would guess they start at BOS first but that’s just my guess), B6 needs to seriously up their business destination offerings if they actually wanna shoot for corporate share. A quick search of B6 JFK mosntops on Friday 8/17 shows -

3x ORD
2x ATL CLT DEN
1x HOU
0x DFW MSP DTW
I'm not expecting them to have corporate contracts with everyone, but certainly more than the penetration they have now if they start flying to London. It would certainly hurt the JFK-LHR revenue of legacy carriers if they start flying there. And as for domestically, they fly their current schedule because the leisure + transcon stuff generates far more profit than the within perimeter domestic stuff. But if they weren't slot constrained, then they will be able to have more than 3 flights a day to Chicago and start flying to DFW/CLE/DTW/BNA and such. Without more LGA slots, they are never going to be big on the within perimeter cities. But they can still be bigger with business travellers than they are now.

After all, business travellers also fly a lot leisurely and they offer a great leisure network out of new york.
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Old Jun 21, 18, 9:35 am
  #158  
 
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Originally Posted by tphuang View Post
As mentioned above, their full year margin is a lot higher than 7.3%. Q1 is typically the worst quarter for both all the carriers. Their full year margin was about 14% last year and 20% the year before and JFK is probably 5% above system average. Since Scott Kirby made his comment in 2017, it would most likely have been about UA's performance in 2016 or 2017 rather than this year, when fuel prices are going through the roof.



I'm not expecting them to have corporate contracts with everyone, but certainly more than the penetration they have now if they start flying to London. It would certainly hurt the JFK-LHR revenue of legacy carriers if they start flying there. And as for domestically, they fly their current schedule because the leisure + transcon stuff generates far more profit than the within perimeter domestic stuff. But if they weren't slot constrained, then they will be able to have more than 3 flights a day to Chicago and start flying to DFW/CLE/DTW/BNA and such. Without more LGA slots, they are never going to be big on the within perimeter cities. But they can still be bigger with business travellers than they are now.

After all, business travellers also fly a lot leisurely and they offer a great leisure network out of new york.
You've laid out the 'everything goes right case' for JetBlue. Business travelers want reliability, which JetBlue hasn't been able to get right. And with no interline it's a non starter for a lot of folks.

https://www.travelweekly.com/Travel-...mance-continue

Delta has them pretty well boxed in on the corporate front at LGA/JFK. London is tougher because Virgin has staked out the let's call it 'unmanaged' traveler, or smaller corporate that doesn't do enough volume with BA/AA to get a deal there. Layer on what Norweigian, etc are trying to do and, well...wish them well.

They're a nice boutique airline - if they try to get too ambitious, expect DL to be first in line to absorb, maybe UA. Two bidders would be a nice thing for shareholders.

Though if LGA loses the perimeter restriction with its expansion transcons out of there with a fresh new terminal would upend the JFK transcon model.
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Old Nov 10, 20, 11:51 am
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CNBC reporting the return is effective Feb 1. Awesome!
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Old Nov 10, 20, 12:00 pm
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Originally Posted by dkc715 View Post
CNBC reporting the return is effective Feb 1. Awesome!
Let's continue this discussion in Could the Coronavirus be UA’s opportunity to get back to JFK? (Appears so 1 Feb 2020)
Will close this older thread

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