Jet Blue Airlines
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Jet Blue Airlines
They went public yesterday. Opened at $27, closed at $44.
Quote from an analyst:
"+ Jet Blue Airline. I'm going next Thursday from New York to L.A. and coming back on the next day. American, United and Delta each want $2257. Jet Blue cost me $296."
108 flights a day. JFK hub. Non Union.
Quote from an analyst:
"+ Jet Blue Airline. I'm going next Thursday from New York to L.A. and coming back on the next day. American, United and Delta each want $2257. Jet Blue cost me $296."
108 flights a day. JFK hub. Non Union.
Join Date: Oct 2001
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Tha stock market is understanding what will probably be the ideal airline l profile in the near future. Good aircraft , simple but effective in board service with emphasis in entertainment and good attitude more than food etc., low cost operations, motivated and polite employees, all at very affordable and flexible ticketing system. A similar concept as Southwest also succesful.
Congratulations to whoever desrves the credit.
Congratulations to whoever desrves the credit.
Union Goon
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Peoples express had exactly the same thing. There were a lot of millionaires on paper who held Peoples stock. Now it makes nice toilet paper.
Same thing for Western Pacific. Doesn't mean a thing for the first couple of years when everyone is on first year pay...
Cheers
Wino
Same thing for Western Pacific. Doesn't mean a thing for the first couple of years when everyone is on first year pay...
Cheers
Wino
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Uh Huh....
Does anyone remember ValuJet, now AirTran?
$296.00 round trip, coast to coast, in an A320/1. How, exactly, does one pay for the fuel, let alone the salaries of the crew?
I'll just sit back and watch for a while.........
PB
$296.00 round trip, coast to coast, in an A320/1. How, exactly, does one pay for the fuel, let alone the salaries of the crew?
I'll just sit back and watch for a while.........
PB
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W.r.t.
Actually I just did a test booking for a return flight with JetBlue from New York City, JFK (JFK) to LA/Long Beach, CA (LGB) and the fare actually worked out as:
Fill all the seats - their A320's are configured with 162 - and that'll generate a round-trip revenue of $89,424 - and one would imagine at the above quoted fares they'll be well on the way to filling all the seats - but let's get some whole numbers here and call it $89,000.
Now assume that the total round trip flight time is 11 hours and that the aircraft burns (say) 3 tonnes of kerosene per hour, and that fuel costs (about) $230 / tonne, means the fuel for the whole trip costs in the region of $7600 - let's call it $8000.
So, subtract that from your pax revenue of $89,000 and you're left with $81,000.
Now for the crew salaries: Let's assume the following annual pay scales, Captain=$160,000 / FirstOfficer=$100,000 / CabinCrew (I'll assume there's five on-board - and take an average) = $150,000. So that crew has an annual wage bill of $410,000 - but let's be generous and round it up to $500,000.
Now if they operate 600 sectors per year (which would be a lot of sectors ! ) then that (300 round trips) equates to a crew cost on the above trip of (about) $1667 - but let's call it $2000.
Subtract that from $81,000 and you're left with $79,000.
The crew will also have some per Diems for this trip, so let's assume these are $1,000.
Subtract that from $79,000 and you're left with $78,000.
I'll assume that an A320 costs about $300,000 per month to lease (annual charge of $3.6m). so we can probably estimate the daily lease rate to be about $11,000 (assumes a/c spends one month in maintenance per year).
Now if the aircraft works say 15 hours per day, that equates to an equivalent hourly lease charge of about $733 - what the heck, let's call it $1000 per hour to cover the lease.
We need to keep it flying so we need to accrue DOC maintenance, engine reserves, etc. at (say) $500 / hour.
So the lease plus the DOC's come out to about $1500 / hour, which gives us a trip cost of $16,500.
Subtract that from $78,000 and you're left with $61,500 - but let's call it $61,000.
For our trip we also need to build in some averaged costs for office premises, advertising, ground staff, handling, landing, navigation, aircraft insurance, staff pension company contribs, in-flight food & entertainment, etc. so how about calling that $16,000.
Subtract that from $61,000 and you're left with $45,000.
Uhm,…… that's an interesting number, because it's almost exactly half of the total revenue of a fully sold aircraft, i.e. as soon as you've filled half the seats you should've covered your costs, and with any extra seats that you fill you then start making money !
It's the old rack'em high, sell'em cheap philosophy.
So, on my proposed flight, if we assume a 75% load factor ( i.e. a revenue of $67,000, with costs of $45,000 ) then one might say that JetBlue could return a profit on it of $22,000, or about $2,000 per hour flown - pre tax.
But let's assume that I've got this way out and chop it in half to an operating profit of $1,000 per hour - it's still a pretty good return - i.e. a 1.1% of revenue profit margin (which in any other business would be laughable - but this is the airline business, in which the turn-over / revenue is enormous ).
Now based on that ($1,000/hour profit), assume each aircraft operates 15 hours per day, for 335 days per year (a month out for maintenance) with a 75% load factor, it'll return a profit of about $5m - pre tax.
JetBlue currently have 23 aircraft ( adding flexibility, and economy of scale ), which could potentially generate a profit for the company of $116m.......... but let's assume that I've also got that wrong, and halve it down to a profit of $58m - which is still very respectable ( albeit that as a % of total revenue, it's lousy ).
All of this so far is based only on a passenger revenue stream, and I've added nothing for putting some freight in the hold, plus there's the fact that it's a cash-rich business, i.e. as soon as you book they've got your money in their bank and when you've got several million $'s in cash sitting in your account you can invest that in 'overnight' funds etc, and make a tidy little profit on that too.
Also there's the supply and demand effect, which the companies 'Yield Management / Network' department will constantly monitor to maximise the seat yield, i.e. the cost you see above might go up if the demand goes up.
Ultimately the big trick is to fill the aircraft, fly them to the max, and keep your overheads way down !
Ps. It goes without saying that the above all include some serious Wide Ass Guestimations.
$296.00 round trip, coast to coast, in an A320/1. How, exactly, does one pay for the fuel, let alone the salaries of the crew?
Fill all the seats - their A320's are configured with 162 - and that'll generate a round-trip revenue of $89,424 - and one would imagine at the above quoted fares they'll be well on the way to filling all the seats - but let's get some whole numbers here and call it $89,000.
Now assume that the total round trip flight time is 11 hours and that the aircraft burns (say) 3 tonnes of kerosene per hour, and that fuel costs (about) $230 / tonne, means the fuel for the whole trip costs in the region of $7600 - let's call it $8000.
So, subtract that from your pax revenue of $89,000 and you're left with $81,000.
Now for the crew salaries: Let's assume the following annual pay scales, Captain=$160,000 / FirstOfficer=$100,000 / CabinCrew (I'll assume there's five on-board - and take an average) = $150,000. So that crew has an annual wage bill of $410,000 - but let's be generous and round it up to $500,000.
Now if they operate 600 sectors per year (which would be a lot of sectors ! ) then that (300 round trips) equates to a crew cost on the above trip of (about) $1667 - but let's call it $2000.
Subtract that from $81,000 and you're left with $79,000.
The crew will also have some per Diems for this trip, so let's assume these are $1,000.
Subtract that from $79,000 and you're left with $78,000.
I'll assume that an A320 costs about $300,000 per month to lease (annual charge of $3.6m). so we can probably estimate the daily lease rate to be about $11,000 (assumes a/c spends one month in maintenance per year).
Now if the aircraft works say 15 hours per day, that equates to an equivalent hourly lease charge of about $733 - what the heck, let's call it $1000 per hour to cover the lease.
We need to keep it flying so we need to accrue DOC maintenance, engine reserves, etc. at (say) $500 / hour.
So the lease plus the DOC's come out to about $1500 / hour, which gives us a trip cost of $16,500.
Subtract that from $78,000 and you're left with $61,500 - but let's call it $61,000.
For our trip we also need to build in some averaged costs for office premises, advertising, ground staff, handling, landing, navigation, aircraft insurance, staff pension company contribs, in-flight food & entertainment, etc. so how about calling that $16,000.
Subtract that from $61,000 and you're left with $45,000.
Uhm,…… that's an interesting number, because it's almost exactly half of the total revenue of a fully sold aircraft, i.e. as soon as you've filled half the seats you should've covered your costs, and with any extra seats that you fill you then start making money !
It's the old rack'em high, sell'em cheap philosophy.
So, on my proposed flight, if we assume a 75% load factor ( i.e. a revenue of $67,000, with costs of $45,000 ) then one might say that JetBlue could return a profit on it of $22,000, or about $2,000 per hour flown - pre tax.
But let's assume that I've got this way out and chop it in half to an operating profit of $1,000 per hour - it's still a pretty good return - i.e. a 1.1% of revenue profit margin (which in any other business would be laughable - but this is the airline business, in which the turn-over / revenue is enormous ).
Now based on that ($1,000/hour profit), assume each aircraft operates 15 hours per day, for 335 days per year (a month out for maintenance) with a 75% load factor, it'll return a profit of about $5m - pre tax.
JetBlue currently have 23 aircraft ( adding flexibility, and economy of scale ), which could potentially generate a profit for the company of $116m.......... but let's assume that I've also got that wrong, and halve it down to a profit of $58m - which is still very respectable ( albeit that as a % of total revenue, it's lousy ).
All of this so far is based only on a passenger revenue stream, and I've added nothing for putting some freight in the hold, plus there's the fact that it's a cash-rich business, i.e. as soon as you book they've got your money in their bank and when you've got several million $'s in cash sitting in your account you can invest that in 'overnight' funds etc, and make a tidy little profit on that too.
Also there's the supply and demand effect, which the companies 'Yield Management / Network' department will constantly monitor to maximise the seat yield, i.e. the cost you see above might go up if the demand goes up.
Ultimately the big trick is to fill the aircraft, fly them to the max, and keep your overheads way down !
Ps. It goes without saying that the above all include some serious Wide Ass Guestimations.
Last edited by Devils Advocate; 14th Apr 2002 at 14:30.
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They use a software package from a company called Navitaire
This was formerly known as OpenSkies (a Hewlett Packard company), which HP sold told PRA, which laterly changed its name to Navitaire, and which has recently joined a strategic alliance with Manugistics (a supplier of Airliner Revenue Optimisation software)
Nb. Some other notable 'lowcost' airlines also use it, e.g RyanAir, GoFly, Buzz, Virgin Blue, etc...
Indeed all the of the above use two products from Navitaire, one to handle Reservations, one to handle Revenue Management.
Hope that helps.
This was formerly known as OpenSkies (a Hewlett Packard company), which HP sold told PRA, which laterly changed its name to Navitaire, and which has recently joined a strategic alliance with Manugistics (a supplier of Airliner Revenue Optimisation software)
Nb. Some other notable 'lowcost' airlines also use it, e.g RyanAir, GoFly, Buzz, Virgin Blue, etc...
Indeed all the of the above use two products from Navitaire, one to handle Reservations, one to handle Revenue Management.
Hope that helps.
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Jet Blues is the poster child for start-ups in the US. As long as they're able to keep their employees believing that they're all in this together, then they'll do OK. However, if they're unable to maintain equity between employee groups and management, ( like who wins in their IPO ) then they'll start to see the same in-fighting that everybody else endures. As soon as employee groups suspect inequity, its only a matter of time until unions appear and with them, better pay and conditions for a smaller number of employyes. Why? Because thaty whats unions do, drive up the costs that then need to be offset by a smaller number of people. When will airlines learn that this is counter-productive?
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I think $16K for all those "miscellaneous" items sounds low. Insurance alone would have to be in the neighborhood of $5K I'd think.
I am no airline executive, but just off the top of my head it seems some really expensive items were missed:
-Training (ouch)
-Hotel/Accomodations
-Deicing
-Interest on loans
-Maintenance salaries
-Maintenance training
-Management salaries
-$500/hr for engine reserves, rotables, consumables and misc. maint sounds really, really low.
-By overestimating the crew's flying (as you said, 600 sectors per year is HIGH) you artificially drive down the per sector cost of flight crew wages
It is insane that companies in such a high risk sector are considered successful if they can eke out a 0.5% profit margin. All I can say is WOW
I am no airline executive, but just off the top of my head it seems some really expensive items were missed:
-Training (ouch)
-Hotel/Accomodations
-Deicing
-Interest on loans
-Maintenance salaries
-Maintenance training
-Management salaries
-$500/hr for engine reserves, rotables, consumables and misc. maint sounds really, really low.
-By overestimating the crew's flying (as you said, 600 sectors per year is HIGH) you artificially drive down the per sector cost of flight crew wages
It is insane that companies in such a high risk sector are considered successful if they can eke out a 0.5% profit margin. All I can say is WOW
