jetBlue Hiring
11-14-2013 | 04:35 AM
#441
Gets Weekends Off
Joined: Nov 2005
Posts: 2,700
Likes: 48
Jetblue just put out a 56 page document explaining why it can't pay pilots industry standard anything.
Stock price is the justification. Because pilots, not management, have everything to do with this.
Hunter Keay, Wolfe Research
Fourth consecutive EPS miss to consensus with EPS ex-items of $0.21, below the consensus estimate of $0.22 and our estimate of $0.23. We believe JBLU is facing material cost headwinds next year from new labor deals, and another year of likely high-single digit capacity growth should produce the same thing it’s produced since 2010: capital destruction.
Fleet restructuring not exciting to us. JBLU bought 35 more A320 family aircraft and deferred 24 E-190s as part of a fleet restructuring. No orders were cancelled, and near-term capex is likely to fall by just ~$70M/year (~10%). Today’s announcement of adding ~$1.8B to an already bloated order book despite carrying an after-tax ROIC that’s ~300bp below capital costs is indicative of a growth-first, returns-second strategy.
ROIC goal doesn’t appear to be driving the strategy. Talking about ROIC and taking clear actions to drive ROIC is quite different, and based on commentary from the call it appears that JBLU will fall short of its stated 100bp ROIC improvement goal for 2013. JBLU has the highest adjusted net debt to EBITDAR in our airline coverage at 4.0x, and ~135 committed aircraft deliveries over the next decade on a fleet of 189 means material looming debt with still-high capex. JBLU called its commitment to expanding ROIC by 100bp “non-negotiable” earlier this year, yet falling short of that goal oddly translates to buying more aircraft?
Rich valuation. JBLU’s multiple contracted steadily over the last ten years as growth has decelerated and debt levels accelerated, but it is still well above peers. We fail to understand why a company with poor returns, an aversion to commercially proven revenue initiatives (first bag fees), and a commitment to metrics we find not valuable (Net Promoter Score) garners the multiple it does. We downgrade to Underperform and use a P/E multiple of 9x our 2015 EPS estimate to derive a target price of $6.
You are having NPS shoved down your throat as some amazing metric for determining customer loyalty while Wall Street is laughing.
In reality, NPS is tied directly to management bonus structure.
Stock price is the justification. Because pilots, not management, have everything to do with this.
Hunter Keay, Wolfe Research
Fourth consecutive EPS miss to consensus with EPS ex-items of $0.21, below the consensus estimate of $0.22 and our estimate of $0.23. We believe JBLU is facing material cost headwinds next year from new labor deals, and another year of likely high-single digit capacity growth should produce the same thing it’s produced since 2010: capital destruction.
Fleet restructuring not exciting to us. JBLU bought 35 more A320 family aircraft and deferred 24 E-190s as part of a fleet restructuring. No orders were cancelled, and near-term capex is likely to fall by just ~$70M/year (~10%). Today’s announcement of adding ~$1.8B to an already bloated order book despite carrying an after-tax ROIC that’s ~300bp below capital costs is indicative of a growth-first, returns-second strategy.
ROIC goal doesn’t appear to be driving the strategy. Talking about ROIC and taking clear actions to drive ROIC is quite different, and based on commentary from the call it appears that JBLU will fall short of its stated 100bp ROIC improvement goal for 2013. JBLU has the highest adjusted net debt to EBITDAR in our airline coverage at 4.0x, and ~135 committed aircraft deliveries over the next decade on a fleet of 189 means material looming debt with still-high capex. JBLU called its commitment to expanding ROIC by 100bp “non-negotiable” earlier this year, yet falling short of that goal oddly translates to buying more aircraft?
Rich valuation. JBLU’s multiple contracted steadily over the last ten years as growth has decelerated and debt levels accelerated, but it is still well above peers. We fail to understand why a company with poor returns, an aversion to commercially proven revenue initiatives (first bag fees), and a commitment to metrics we find not valuable (Net Promoter Score) garners the multiple it does. We downgrade to Underperform and use a P/E multiple of 9x our 2015 EPS estimate to derive a target price of $6.
You are having NPS shoved down your throat as some amazing metric for determining customer loyalty while Wall Street is laughing.
In reality, NPS is tied directly to management bonus structure.
11-14-2013 | 09:14 AM
#443
Gets Weekends Off
Joined: May 2010
Posts: 900
Likes: 0
From: A320 FO
The non compete has been referenced in the PEA for years. Guys are just so ****ed off now they're actually reading what they sign. That and it was right next to the new pay rates, so everyone saw it. They haven't been enforcing it, assuming "affiliate" actually means what people are inferring.
According to both the definitions elsewhere in the PEA, the SEC definition and the definition as per the State of Florida (mentioned in the non compete clause) using the term "affiliate" with a contracted regional doesn't mean what people are inferring. Change the term to "regional partner," and suddenly do we even have an argument? Now, wholly owned regionals obviously count since "parent" is mentioned. And "affiliate" would have control over the regional. Outside of some issues spelled out in the contracts between regionals and majors, they have little to no control over their regional partners that aren't wholly owned. For example, Delta can't tell Skywest how to run their United operation or vice versa.
That's my opinion of it at least. If you're concerned about it, spend the money for a hour of legal council with a contract lawyer and get an official answer.
According to both the definitions elsewhere in the PEA, the SEC definition and the definition as per the State of Florida (mentioned in the non compete clause) using the term "affiliate" with a contracted regional doesn't mean what people are inferring. Change the term to "regional partner," and suddenly do we even have an argument? Now, wholly owned regionals obviously count since "parent" is mentioned. And "affiliate" would have control over the regional. Outside of some issues spelled out in the contracts between regionals and majors, they have little to no control over their regional partners that aren't wholly owned. For example, Delta can't tell Skywest how to run their United operation or vice versa.
That's my opinion of it at least. If you're concerned about it, spend the money for a hour of legal council with a contract lawyer and get an official answer.
11-14-2013 | 11:26 AM
#444
Line Holder
Joined: Jul 2011
Posts: 95
Likes: 0
From: CA
Fresh from the conference call regarding the non-compete clause....."JB has never gone after guys who leave, but if we have a large amount of guys leave then we have it that we CAN use it to protect the company"......paraphrased of course......
11-14-2013 | 12:33 PM
#445
Gets Weekends Off
Joined: Jan 2013
Posts: 406
Likes: 0
From: 190 FO
So does that mean take a chance and hope for the best when every legacy is hiring?
11-14-2013 | 12:42 PM
#447
Line Holder
Joined: Jul 2011
Posts: 95
Likes: 0
From: CA
It means they can legally go after you if you leave. Also no monetary penalty has been noted in the PEA so who knows what number they could come up with, could be $5000 or $50000, who knows.
11-14-2013 | 12:47 PM
#448
Gets Weekends Off
Joined: Jan 2013
Posts: 406
Likes: 0
From: 190 FO
11-14-2013 | 01:24 PM
#449
Furloughed Again?!
Joined: Aug 2007
Posts: 4,948
Likes: 109
From: Boeing 737
jetBlue Hiring
Did the mention who they were trying to target with the non-compete? Who is it directed towards? Not every pilot who leaves, because - for example - an Eagle pilot comes to JetBlue and then leaves to go to Delta or SWA - if I'm reading the non compete correctly that is permissible.
Or an I missing something?
Or an I missing something?
11-14-2013 | 01:26 PM
#450
SDQ Base Chief
Joined: Mar 2006
Posts: 6,057
Likes: 34
From: 320 CA
Did the mention who they were trying to target with the non-compete? Who is it directed towards? Not every pilot who leaves, because - for example - an Eagle pilot comes to JetBlue and then leaves to go to Delta or SWA - if I'm reading the non compete correctly that is permissible.
Or an I missing something?
Or an I missing something?
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