Boyd Group AA Analysis
 

http://www.aviationplanning.com/Imag...%20Reality.pdf

Observations -

Eagle jet fleet subject to huge reductions

MD-80's while old are still a good aircraft

The majority of the Eagle fleet is obsolete(ERJ135/140, ATRs), but along with that is APAs scope clause. In BK I am guessing the eventuality is an industry average scope clause, which would mean lots more CRJ700s and probably either CRJ900s or ERJ170s at regionals.

CRJ700s and 900s could be added to Eagle's fleet very easily considering they already have the CRJ700 program going, and with little disruptions since they are going through the BK process as well.

Don't be so quick to think those planes if they ever come to fruition will arrive at Eagle. Skywest and the others will fly the routes at a loss if the can get a foothold in at AA.

Why would AMR get rid of CRJ700's?

I didn't mean AMR would get rid of the CRJ700. I meant that they will own the airplane and then bid out to the lowest regional to fly them. Just like big D.

No, I was referring to Boyd's analysis. He says by 2016 AE will be down to 39 ATR-72's & only 17 CRJ700's. That's obviously his guess, & nothing more. I was just curious why AMR would ditch thence. Unless he's assuming AMR will sell them/lease them to a different operator.

Michael Boyd has been wishing for and predicting the demise of AE for ten years. I think we lost his baggage once or something.

If he keeps saying it long enough, eventually he'll be right. Right?

While I agree that the 50 seat market is declining, none of us as yet knows what's up AMR's sleeve. I'm sure there'll be enough pain for all the employee groups.

Boyd is a complete tool. He is paid to say what someone wants to hear.
His wet dream is the demise of the 50 seater and Eagle in particular in the Regional world.

Take what he says with a grain of salt, a shot of tequila and a squeeze of lime!

After reading the analysis, I think it's the best take on the situation the I've seen. All of the business TV channels glossed over the sacrafices that the employees made and he even somewhat laments the likely pension termation. True, he's sour on 50 seat RJ's. The industry seems to be sheading those left and right, so is he wrong?

Really some thing's wrong I guessed, jonny! http://www.couponsindia.net/imgs/sig...ouponcodes.jpg

Just read the Boyd analysis. From that whole report did anyone read anything about scope. Do you people really believe scope will not be changed. Boyd completely avoided talking about this. WHY?

Who is this report really finaced by, unless you are to believe that BOYD did this because they had a few minutes spare to do an analysis.

I don't believe he is predicting Eagle's demise---just a reduction in the highest cost/least-revenue-producing units, the ERJ-135/140 series RJs that cost too much to operate, burn too much fuel and don't have enough seats to make operating them economically viable.

I think his analysis regarding older Eagle jets is correct---they're liabilities that will be shed at the 1st opportunity in bankruptcy. If scope relief is forthcoming (an explosive issue), then AE could operate more CRJ-700s with ATRs and a few ERJ-145s/50-seaters. But don't expect AMR Eagle to remain at 300+ aircraft.

The ATRs are OLD. Nobody but Boyd thinks they will be around, much less 39 of them, by 2016. I suspect a lot more EMBs will survive, but probably not the 135s, and most 140s, but I would be surprised if AE lost any CRJs, and possibly gaining more from scope relief.

Boyd also has some facts wrong in his tables. AE doesn't have 39 EMB-135s operational in 2011. More like 20 or so, maybe. 18 or so are parked in the desert.

Boyd hates Eagle. He also predicted Eagle being parked previously, like all of it, after 9-11.

Eagle makes money. To cut back a money making operation seems illogical.

It has already be stated that AE intends to shed the ATRs as their leases come due. Also, if we get rid of EMBs, it will be mostly because AA diversifies its feed, not because the EMBs are inefficient.

the MD-80 burns twice as much fuel as an E-140, but carries three times as many pax as the ERJ. The lease prices are similar. Cost per seat mile is MUCH higher on the ERJ.

The 737-800 burns about 20% less than the Super 80's, and carries about 10-15 more people than the Super 80, along with lower MX costs.... Now take that against the ERJ, its not even close.

RASM-CASM needs to be a positive number and a pile of ERJ's makes that a difficult prospect.

So we can expect to see 737s on routes such as: TLH-MIA, FAT-LAX, FAR-ORD, TYR-DFW etc?

Not likely. The turbo prop is making a comeback. You'll probably see some of those. It's hard to swallow because the results aren't pretty for a lot of people, but the 50 seat RJ is highly inefficient. The CASM is just too high to make revenue, and they truly are a dying breed. DAL is shedding them at a rapid rate. AMR's BK is basically a free pass to do the same.

Please understand, I don't wish job loss on anyone. But the reality of the airline industry is in order to survive, one must adapt. It's obvious that barring a massive change, oil is not coming down to a price that will make the 50 seater once again profitable. Continental parked all of ExpressJet's E-135 years ago, and I can't see AMR keeping either the E-135's or E-140's. BK is a golden opportunity to shed a dying, money losing aircraft.

Good luck to everyone effected by AMR's BK. It's not a fun situation for anyone.

WWSWD (What Would Southwest Do)

Stop serving those markets, if they can't support a jet or an efficent turboprop.

Southwest doesn't have 777s to fill

Its not only fuel (a huge part of the equation) but the per person operating costs are just too high even without fuel. Back in the RJ heyday, the main reason you wanted them was to raid another airline's hub/network with a low segment cost (even if it was a high per pax cost) so every airline panic ordered a million of them. Once everyone had a ton of them, no one had a competitive advantage from them. In addition to fuel going way up, most of the RJs were bought at real estate bubble-esque prices from the MBA blunder mass order peak.

This is one area that will be a huge win for AA. Getting out of the RJ albatross at rock bottom demand for the airframes. The ones they end up keeping will be almost free. The other legacies were trying to beat up on their aircraft leases in BK when the RJ was at bubble prices. Add that to the multi billion dollar mistakes/mistiming of the era of RJ outsourcing.

That is all and good if the MD-80 fills those seats, which would have to have the same price per seat for the comparison to work. The problem is that on many E-140 routes the MD-80 might only be 1/2 full, and half of those seats sold will be at cheap rates to try to cover the costs of the flight, which attempts to compete with a low cost carrier, which we just can't.

The mistake many pilots make is that you can't compare apples and oranges as they do with hub and spoke -vs- low cost carriers; -where the hub and spoke ticket prices vary greatly (first class/coach, point to point/connection, domestic/international) whereas the LCC tickets are more uniform. One connecting passenger on a E-140 can pay for the whole flight and part of the next one to support the frequency, which attracted the international customer in the first place. Without frequency to the hub, and connection to those smaller cities in general, you might not fill that international flight. That is where market share comes in.

So the EMB-140 might have more costs per seat mile, but it's revenue per seat mile is much higher on average because a larger percentage of the aircraft is higher priced tickets. And without frequency those high priced international first class tickets would go to the competition.

Costs per available seat mile is only part of the equation for hub and spoke. LCCs have a much easer equation, where lowest Costs per seat mile are much more critical. I suspect that is where Boyd goes wrong so consistently.

All that was true in the 90's and early 2000's. A lot has changed since then. Gone are the $2500 walk up cash cow business travelers throwing around company gold cards like dealers at Vegas. Even a fuel sucking pig like an MD80 will fly 3 for the price of 2 when compared to an ERJ/CRJ. So the mainline plane doesn't have to be full to make sense. It doesn't even have to be 2/3 full to make sense, as odds are you wouldn't have year round 100% load factors on any 2 consecutive RJ's either. While the lease numbers go up for newer mainline planes, the fuel and maintenence numbers go down with newer planes and as fuel stays high I suspect that's an even bigger deal.

Plus mainline can control its own product and never has to get into spats with itself about FFD's and performance metrics. Also, other than the leases, mainline can increase or decrease utilization significantly without worrying about long term contracts with the regionals. Many of which are remaining balls and chains from the albatross of a massive regional fleet that's no longer needed.

Also, the differences between a "LCC" and a "legacy" are blurring more and more by the day. SWA is very much a hub and spoke carrier. So is JB. So was AT. While these airlines (particularly SWA) may indeed do more "point to point" than a legacy, the differential just isn't that staggering. As the Wright fades away SWA's route structure will see even less point to point as all that was done out of legal necessity. Again, there will still be some, and likely more than at so called legacies, but the difference and cost gaps are narrowing significantly.

Newer ponzi scheme airlines will always pop up with new planes with no MX, Chapter 7-like start up pay and regional ramp agent benefits for everyone and of course zero longevity on top of it all. This goes for regionals too BTW, which is a permanant destabilizing force in that sector as well, in addition to the garden variety cut throat deam me an ace predatory bargaining thats common. But things are different for the airlines now than they were back when each one had thousands of RJ's on order with the intent to raid everyone's hub and small markets once or twice per hour with miracle RJ's.

Mainline flying makes more sense to more and more markets once again. Regional flying is an over used burden the legacies are shackled with and have to find some place for until the long, drawn out process of reducing further can be accomplished. That is, unless mainline pilot groups give up more scope. Then you will see one more regional growth wave before even more fierce bargaining takes place come contract time. Let's hope that doesn't happen.

There will always be a marginal need for some 50-70 seat aircraft to fill in gaps here and there. But they were never needed in anywhere the numbers that were ordered and we're seeing that play out now. Management rolled the dice that they weren't gap fillers but rather some new world order of how things would be done. They appeared right for a brief snapshot in history, but we now see how insanely and comically wrong they were. We will see some smaller RJ's around for a long time, but not nearly as many as we have today. Not even close. We are in the process of correcting one of the failed legacy management mistakes of the previous reigns of incompetence.

amazing if the big lesson in all of this is that majors should have flown their own passengers all along, versus send them to the Eagles, Comairs, etcs of the world.

There are a couple wild cards that are of interest. The Century CS-300 Canadair (120-140 seats) and the MRJ-90 (86-96 seats), both of which are in the scope prohibited range for most major scope agreements, but both also incorporate the newer geared turbofan, as in the Airbus NEO, which is a game changer. (on the order of 15+ percent fuel savings)

What I have to wonder is what Trans States (50 orders/50 options MRJ-90) and Chataqua (40/40 CS-300) are thinking by placing large orders of each. They each represent major investments into aircraft with no codeshare applicability.

Are they going to go it alone? They have to have a plan for such an investment. Any guesses? I think these orders were made over a year ago. I am sure that the AMR bankruptcy and potential Scope concessions are of interest to those operators.

Modern MBA managers aren't that smart. They had outsourcing fed to them constantly as the ultimate way of saving money. They can't get away from that mindset....

I'm guessing they ordered them thinking they can use then for multiple things.

1) Fly them under a FFD contract, which is highly unlikely.

2) Defer/sell deliveries

3) Lease them to other airlines.

They still do clamp. Only now it's called code share.

Let's not forget that you can easily replace the 3 to 4 RJs a day to smaller destinations with 2 73s a day. The small town Chamber of Commerce might not like the reduction of service, but the same number of passengers will be accommodated.

Sorry if they're inconvenienced, but that's the economics of today's airline business. The additional benefit of dumping RJs is congestion reduction at hub airports.

you gotta wonder how profitable running 5 RJ's a day versus 2 737's a day is, say, to Midland, TX. I mean how many LBS of Jet-A does one RJ burn X 5. etc etc.

The other argument of "yeah but 10 filled seats on a 737 is worse than 10 on an RJ" doesn't fly because total pax load spread amongst the scheduled flights should be the same. Sure, some flights are gonna be light sometimes, welcome to the airline biz

But from a marketing/business standpoint, as Grandma Passenger, I would rather board a 737 than an ATR

maybe we will all return to the "good old days" of commuters/regionals flying J-31's and Bandits

that plus 1500/500 required just to get hired as FO on the Bandit

this is what is happening now with the jfk - bos route now, right? no more eagle, three flights on the 73 instead, all full

mainline pax with mainline metal

amazing concept

thye will be gone soon, just like the last time.

Exactly right. Great post.

Carl

The New York times had an article talking about Boyd ..
Also had a nice article referring to a Captain of AA , and how the labor unions are going to get screwed in return for management making profits for themselves.

is there a link??

Sorry couldn't find it anywhere on the internet, read it in the paper !

This one:

http://www.nytimes.com/2011/12/06/bu...nces.html?_r=1

Yep that's the one .. good read.

"For passengers," he said, "nothing will change other than a potential deterioration of the already mediocre level of service provided by employees who have been beaten down for so long that it is hard for them to come to work with a positive outlook."

Please attach this to the "Sign up for the RJ transition course today!" ads. Kind of like a surgeon general's warning label.

thanks guys