SilverJet (Merged 30/05)
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Touchdown are selling their tickets real cheap to airline industry staff this week;
NYC & DXB - THE one week sale from £549 all in !!
Stop Press +++++ £549 return to NYC & DXB +++++ Stop Press
Good time to travel for the airline industry staff
NYC & DXB - THE one week sale from £549 all in !!
Stop Press +++++ £549 return to NYC & DXB +++++ Stop Press
Good time to travel for the airline industry staff
Join Date: Aug 2004
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Most people are not interested in share price movements, but just see the brand.
Selling seats at a deep discount to those in the industry makes things look better to shareholders who will see that the planes are maybe 60% full. The airline will have to pay £60-£78 tax for each £549 return seat sold. You cannot raise much of the £75K that is needed to run each return trip if you discount like that.
Airline seats are the ultimate 'perishable commodity'. Once check-in has closed, seats on that flight are not saleable. So airlines need to maximize the number of seats they sell, at the highest possible prices, even if individual seats sell at a 'loss'.
I'm sure the roundtrip cost of £75k is not very dependent on load, so the marginal cost of any additional seat occupied is minimal (a bit more fuel burn and some in-flight catering). Therefore any cash raised from concessionary seat sales is a bonus.
At this time of year, SJ will already know that they are unlikely to exceed x% load factor on certain flights, and are selling these surplus seats to concessions - hence the 'Times' offer and the travel industry discounts.
Yes, it will flatter their figures, but it's an essential part of business management/yield management. If they weren't making these offers, especially in the depths of the low season, they would be justifiably criticised for not maximizing yields.
By criticising such initiatives, befree and others seem to be implying that, whatever SJ do, they will not achieve the befree seal of approval (and how many tickets would that sell?
I'm sure the roundtrip cost of £75k is not very dependent on load, so the marginal cost of any additional seat occupied is minimal (a bit more fuel burn and some in-flight catering). Therefore any cash raised from concessionary seat sales is a bonus.
At this time of year, SJ will already know that they are unlikely to exceed x% load factor on certain flights, and are selling these surplus seats to concessions - hence the 'Times' offer and the travel industry discounts.
Yes, it will flatter their figures, but it's an essential part of business management/yield management. If they weren't making these offers, especially in the depths of the low season, they would be justifiably criticised for not maximizing yields.
By criticising such initiatives, befree and others seem to be implying that, whatever SJ do, they will not achieve the befree seal of approval (and how many tickets would that sell?
This often-heard comment ("offer the remaining seats cheaper, it will give at least some extra revenue") is false for a number of reasons.
First is a commercial phenomena known as "revenue dilution". Simplistically this is that, while you may get some extra revenue from those who might not have travelled with you, equally you get some passengers who would have paid the higher price but who, when they come to book, find the lower price is on offer and buy that instead. Dependent on the relative balance of the numbers involved, you might even find you end up with less revenue than if you had not made the offer, although you haul more people. So be certain those cheap fare travellers are not your potential full fare travellers.
Then there is the subsequent perception of those travelling at the reduced fares. If you have paid £750 on one trip, it is a very difficult decision to pay £2,000 for the comparable product the next time. Your expectations are that the product is "worth" £750 now rather than £2,000. And if your regular passenger got one or two of these cheap fares, it becomes difficult to get them back at the higher fare.
Chap at our office got by chance one day a Ryanair 99p fare London to Dublin. It became a topic of amused conversation, of course. But next trip his travel request was refused by the beancounters with "why haven't you got the 99p fare again", and it wasted half a day of his time overcoming this. Third trip the same. End of amusement. Watch you don't do something with your pricing that hacks business travellers off like this. Likewise someone who has paid £2,000 and is seated next to someone crowing about a £750 fare is another fast way to turn off your high-fare regulars.
Paxing All Over The World
Indeed WHBM. Many USA carriers got themselves into trouble by offering lots of free upgrades to Biz. They did so almost indiscriminately in the belief that pax would see how fantastic the Biz product was, that they would willingly pay for it next time around. Guess what, they didn't.
UK carriers started down this route but then learnt the lesson of social experimentation from across the pond and introduced the rigid rules of pecking order for who gets an upgrade. Yes, there are the occasional exceptions but they are occasional.
Airlines want you to get what you pay for. On the other hand, SJ has had to do lots of give-aways in order to promote the product and get it talked about. In that, they have succeeded. Friends of mine are going to the USA in a week or so and have paid a good price that gets them more than they would have had on the majors for the same price. It is a special holiday for them.
As to whether SJ will pull it off? I remain of the opinion that they started up too late in the economic cycle.
UK carriers started down this route but then learnt the lesson of social experimentation from across the pond and introduced the rigid rules of pecking order for who gets an upgrade. Yes, there are the occasional exceptions but they are occasional.
Airlines want you to get what you pay for. On the other hand, SJ has had to do lots of give-aways in order to promote the product and get it talked about. In that, they have succeeded. Friends of mine are going to the USA in a week or so and have paid a good price that gets them more than they would have had on the majors for the same price. It is a special holiday for them.
As to whether SJ will pull it off? I remain of the opinion that they started up too late in the economic cycle.
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Selling spare seats in the mid week at a deep discount can be useful for an alrlines cashflow. Silverjet have gone past this point and it seems they are doing more of a fire sale. In the January sale almost any flight on any day was discounted. When people who would have paid the full price can buy a discounted ticket then income goes down.
Silverjet would need something like 75% load factor at an average return fare around £1099 (inc tax) to cover the flights costs. If 20% of the seats are sold at half price you would need over 85% loadfactor to cover the flights costs. Silverjet need full price ticket sales to keep going and it seems they are not getting them.
Silverjet would need something like 75% load factor at an average return fare around £1099 (inc tax) to cover the flights costs. If 20% of the seats are sold at half price you would need over 85% loadfactor to cover the flights costs. Silverjet need full price ticket sales to keep going and it seems they are not getting them.
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It is not the cost of the round trip flight that matters. It is the cost of that round trip plus the cost of "ownership" of the aircraft and the overheads. I appreciate that in Silver the overheads are likely to be low but they do include all salaries.
Silver has gobbled at least £50 million of shareholders funds in the last year plus any loans. At that burn rate who would lend them more? It is a bit like asking a drain how much money it wants to take from your pocket.
Silver has gobbled at least £50 million of shareholders funds in the last year plus any loans. At that burn rate who would lend them more? It is a bit like asking a drain how much money it wants to take from your pocket.
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Share price
Closing price today is 15.5p. One individual bought £37,500 worth of shares today at 15 pence per share so somebody has confidence, so let us all hope that there are right.
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For the expert posters who are criticising SJ for discounting some seats, they obviously haven't noticed that BA and Virgin do the same every year...and most people still pay their exhorbitant full whack fare prices.
...right now I believe Virgin are offering their premier product for a fraction of the normal retail.
..just the normal business practice to put bums on seats I'm afraid.
...right now I believe Virgin are offering their premier product for a fraction of the normal retail.
..just the normal business practice to put bums on seats I'm afraid.
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Compton
As much as I hope SJ trade for a long time and preserve employment in my chosen industry, people bet more than 37K on sporting events. Depends on the disposable income available.
Did I see Oil hit USD100/bbl earlier? Do SJ hedge? Just an aside question.
Did I see Oil hit USD100/bbl earlier? Do SJ hedge? Just an aside question.
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more pressure
back in 2006 when they did the share issue:-
In mid March 06 the price of jet fuel was $619/tonne. Today it is around $1000/tonne. If it used about 40 tonnes each way then the extra cost will be about $28,000/£14,000 per rotation. They will however gain around £4000 from the weaker $.
They face 2 other added costs. The £10m loan will cost them £0.6m/year in interest and the doubling of departure tax to £40 last year. From November they will have to pay £80/departing pax as the rules change to tax such flights at higher rate.
In March 2006, the Directors estimated the cost of a return flight of a 102 inclined flat bed Boeing 767 between London Luton and New York Newark to be approximately £67,000, the principal elements of which related to aircraft leasing, fuel, maintenance, navigation, handling and crew.
They face 2 other added costs. The £10m loan will cost them £0.6m/year in interest and the doubling of departure tax to £40 last year. From November they will have to pay £80/departing pax as the rules change to tax such flights at higher rate.
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Second Officers
A fantastic opportunity has arisen to join the team at Silverjet. Our future plans involve longer range operations requiring “heavy crew” (3 Pilots). As a result, we are exploring the possibility of giving the opportunity for employment to low hours 767 type rated pilots who are ready to share the responsibility of creating success and ensuring the safe, punctual operation of the airline.
LAS and SFO I suspect!
LAS and SFO I suspect!
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Silverjet founder Lawrence Hunt has claimed trade support for his all-business- class airline has been disappointing because many agents were too “set in their ways”.
Hunt revealed that only 30% of his sales came through the trade, when he had expected 70%, which he believed was down to agents being overly cautious.
He was speaking after weeks of negative publicity about Silverjet, which saw its share price plummet, billionaire investors decide against taking a stake in the airline, and increased competition from BA and rival business-class airline Eos.
Hunt feared Silverjet’s share price was now so low that the airline was vulnerable to a hostile takeover, and said he may consider de-listing it from the Alternative Investment Market (Aim).
He claimed the price had dropped because Silverjet’s investors are feeling the pinch
from the credit crunch and the problems afflicting Northern Rock, and suggested there could be a deliberate attempt to talk down his company.
“There are a lot of people who would like to see us fail either because they would like to be proved right, are competitors or want to buy us as cheaply as possible,” he said.
But he invoked Second World War commander Field Marshall Montgomery to insist Silverjet would survive: “You have to work on the basis that nothing is going to go according to your plan.
As Montgomery said: ‘No battle plan has ever survived first contact with the enemy’.”
Hunt said it had been frustrating persuading agents to sell the airline. “The travel agency community is very cautious and didn’t understand the concept,” he said. “A lot are quite set in their ways. They need to learn to adapt.”
Silverjet’s share price is hovering at about 15p, down from 54p at the start of the year. Hunt said he would look at options including de-listing if publicity about the price continued to undermine its position.
“The share price is so low, we are vulnerable to a hostile takeover.”
Hunt insisted Silverjet was on course to meet its target of its first monthly profit in March, and a full- year profit in its third year of operations in 2010.
Although some high-profile agents have publically supported Silverjet (TTG February 15), others claimed its Luton location made it hard to sell. Cheryl Essam, director of Sunways Travel in Kent, said corporate clients preferred to fly with BA or Virgin Atlantic. “Everybody here understands exactly what is being offered, but corporates do not seem to want it,” she said.
Danny Price, operations manager of The Appointment Group in Kilburn, north London, said: “We don’t know the product. Eos often comes in to see us, so we know what the seat is like. And we are familiar with BA products, which are always in demand.”
Tracy Hirsz, national account manager for Gold Medal, said it had taken time for agents to “understand and believe” in Silverjet, although sales had picked up after fam trips to New York and Dubai.
Other travel businesses on the Aim agreed that market volatility was undervaluing companies.
Travelzest chief executive Chris Mottershead said Aim’s trading mechanism made companies more vulnerable to steep drops in share prices if only one or two investors decided to sell.
Western & Oriental chairman David Howell said Silverjet’s price was suffering because of Maxjet’s demise, but that did not affect operations, and its value was likely to rise.
from ttg
Hunt revealed that only 30% of his sales came through the trade, when he had expected 70%, which he believed was down to agents being overly cautious.
He was speaking after weeks of negative publicity about Silverjet, which saw its share price plummet, billionaire investors decide against taking a stake in the airline, and increased competition from BA and rival business-class airline Eos.
Hunt feared Silverjet’s share price was now so low that the airline was vulnerable to a hostile takeover, and said he may consider de-listing it from the Alternative Investment Market (Aim).
He claimed the price had dropped because Silverjet’s investors are feeling the pinch
from the credit crunch and the problems afflicting Northern Rock, and suggested there could be a deliberate attempt to talk down his company.
“There are a lot of people who would like to see us fail either because they would like to be proved right, are competitors or want to buy us as cheaply as possible,” he said.
But he invoked Second World War commander Field Marshall Montgomery to insist Silverjet would survive: “You have to work on the basis that nothing is going to go according to your plan.
As Montgomery said: ‘No battle plan has ever survived first contact with the enemy’.”
Hunt said it had been frustrating persuading agents to sell the airline. “The travel agency community is very cautious and didn’t understand the concept,” he said. “A lot are quite set in their ways. They need to learn to adapt.”
Silverjet’s share price is hovering at about 15p, down from 54p at the start of the year. Hunt said he would look at options including de-listing if publicity about the price continued to undermine its position.
“The share price is so low, we are vulnerable to a hostile takeover.”
Hunt insisted Silverjet was on course to meet its target of its first monthly profit in March, and a full- year profit in its third year of operations in 2010.
Although some high-profile agents have publically supported Silverjet (TTG February 15), others claimed its Luton location made it hard to sell. Cheryl Essam, director of Sunways Travel in Kent, said corporate clients preferred to fly with BA or Virgin Atlantic. “Everybody here understands exactly what is being offered, but corporates do not seem to want it,” she said.
Danny Price, operations manager of The Appointment Group in Kilburn, north London, said: “We don’t know the product. Eos often comes in to see us, so we know what the seat is like. And we are familiar with BA products, which are always in demand.”
Tracy Hirsz, national account manager for Gold Medal, said it had taken time for agents to “understand and believe” in Silverjet, although sales had picked up after fam trips to New York and Dubai.
Other travel businesses on the Aim agreed that market volatility was undervaluing companies.
Travelzest chief executive Chris Mottershead said Aim’s trading mechanism made companies more vulnerable to steep drops in share prices if only one or two investors decided to sell.
Western & Oriental chairman David Howell said Silverjet’s price was suffering because of Maxjet’s demise, but that did not affect operations, and its value was likely to rise.
from ttg
CH3CH2OH
Hmm, interesting comment, I'm off to DXB in a few weeks and suggested Silverjet to my corp travel people who were not keen but agreed to book it for me. At around half the standard published price of EY, EK and BA for the dates I require it would be irresponsible of me (although allowed) to make use of their J/C products.
When a company's share price is poor, doesn't that normally mean its financial performance is poor - or is that too logical an explanation for Mr Hunt? A hostile takeover is laughable unless you wanted some retained losses to offset against tax.