CAL & XJT Relationship
 

I have been reading a lot of things in other threads about why CAL took flying away (Larry is a bean counter, CHQ is a better "wh0re") so I thought I'd comment.

CAL didn't take away part of their flying from XJT to lower costs. The previous relationship was extremely beneficial to both companies from a financial perspective. CAL wanted to diversify their feeder service so that they could avoid a situation where XJT could have them by the balls, like Comair did to Delta. The move was strategic and was not motivated by the "bottom line". It would have been cheaper to keep using XJT that it will be to use another carrier.

XJT is a great company because it was molded in the image of a major instead of a regional. The training department is great and actually having things like their own FOQA department (something that AA and other majors still don't have) are indications of what a great company XJT is.

I have never worked there, so my observations may be flawed, but XJT sure is acting like a teenager being on his own for the first time. They seem very confident that they know the ways of the world. I hope XJT does well, but there may be some humbling experiences in store for them.

Your first two paragraphs were right on, the last one not so much. Everyone is entitled to their opinion, but like you said, you don't work here, so you just don't know! No offence, but unless you've dealt directly with our management you don't know what we need or don't need. I will say this however; when it's all said and done people's jaws are going to drop.

How do you know this? And of course XJT will feel slighted. They have 69 airplanes to find new work for and by your own admission, the decision had nothing to do with a the bottom line. This move could potentially cause them to lose growth and profits.

You don't keep up with industry news often do you?

10 XR's to Charter Operations, for which we already have clients.

25 LR's heading south of the border.

That leaves a marginal 34 aircraft, which I can assure you, will find homes whether at one of the current carriers we're looking at, or on our own. Either way, with our current rate of attrition (about 30 a month going to CAL) I promise you noone will be hurting over here. Just keep your ear to the ground, the other shoe will drop before you know it.

I just hope our management knows what they are doing, I guess only time will tell

This is the attitude I'm talking about. I admire your enthusiasm for the company, but most people who have been around this industry long enough know better than to make "promises" about their company's success in the future.

When you've been here long enough and have dealt with them, you'll know we have very capable folks running this operation. Just don't pay any attention to the negativity from some of these folks, who are just jealous of our contract and quality of life, or simply don't know what their talking about. Hope your training is going well.

It depends on the circumstance, I'll explain my view with facts.

1. We have 206 aircraft that will continue to generate revenue with CAL under our CPA.

2. We have 10 possibly 15 aircraft that will be generating income on the charter side.

3. We have other ventures generating income (paint shop, mx shop in Mexico, the leases on the 25 LR's)

4. Our rate of attrition is going through the roof as most of our guys are finally getting calls from CAL now that their hiring full swing.

So if you lay out a worse case, best case scenario, here's what you got:

Worst case, we park the remaining 34 aircraft, we continue to hire and upgrade based on attrition, and things stagnate for a while.

Best case, we find homes for the rest of the aircraft, and continue to hire at higher levels as the operation demands it.

Either way no furloughs for the next 36 months, you can take that to the bank.

I think you hit the nail on the head with CAL splitting their flying. They don't want all their eggs in one basket. Everyone please excuse the comments of my less informed rookie XJET coworkers. I don't know if you're right about the humbling experiences though. The company has done a good job of diversifying themselves over the last several years by paying off our debt to CAL, opening a paint shop in Mexico, and being the only MX in the US able to rebuild/repair the EMB145 thrust reversers. And I am glad the company is going to do flying outside of the Legacys. I'm tired of being at the mercy of the Legacy beancounters, being their puppets. The regionals are like a pack of wolves fighting over a piece of meat that is always getting smaller. For all of you doubters out there saying 50 seat flying is dead we already have enough customers for 10 airplanes for our charter, and the branded flying might work better than everyone thinks. It does great for Southwest, and how many times do you hear people in the airports complaining about making their connections? How would like to be able to fly from the midwest to a coastal city and avoid connecting through ORD, DFW, IAH, LGA, JFK, IAD, LAX, ATL, EWR, CLT, avoiding ground stops and EDCs. Our branded flying will not be exactly like Independence because we WILL NOT BE COMPETING DIRECTLY WITH A LEGACY FLYING IN AND OUT OF THEIR HUB. Point to point flying is something I think a lot of travelers would welcome with open arms. Rant over.

I agree that brand flying would be a good direction take the company into. As you mentioned we're not competing with any majors, we have the infrastructure (MX and parts, training facilities, station facilities) to support it. Plus we are still generating revenue from our other sources. If it works branded flying would allow XJT to have more control over the future.

Yes, I do keep up....and I know a number of people who work for XJT. The corporate announcement hardly guarantees success, but it is a start. I was not aware of the "south of the border operation". My point is, things were good the way they were and if these new ventures don't work out, it could potentially , be problematic down the road. And as far as Im concerned, the guys and gals ar Comair did what needed to be done, even if only in principle.

Again everyone is entitled to their opinions, and we can agree to disagree. The point is that no one hired this year will be furlough...could it get stagnant if the worse case scenario happens? Sure! But I'll put my money that it doesn't.

To be fair, its not like Jim Ream and the boys were pulled off the street yesterday. There is a lot of airline experience and some really smart guys in those executive offices. Heres a link if you are interested:
http://investor.expressjet.com/phoen...rol-governance

Very true. Another good thing going for XJT is that it appears to be run by very intelligent individuals. The same can be said for CAL. And don't get me wrong, Im not saying XJT is doomed to fail. But the role of regionals jets works best in the mainline feed/codeshare arrangement. Going it alone, A LA Independence Air...we all know how that story ends.

How do you know that your new ventures will generate "income"? I think what you mean is revenue. Income implies that your operating expenses and other costs will not exceed your revenues. Just because you plan to operate somewhere doesn't guarantee revenue, and often in the first couple years in a new market/operation expenses combined with one time expendictures and other unforseen costs will exceed revenues. It seems like a lot of young guys out there assume that whenever a business operates it "makes money." Any operation can generate revenue, but to truely be financially benificial to a company is something completely different.

Thanks for the young comment! I'm sure you can do basic math, 216 aircraft generating a profit per the CPA vs 53 aircraft (very unlikely) not generating any income whatsoever. I say 216, because the 10 going to the charter will generate profit. See here's how it works chief, prior to any of this 69 aircraft nosense popping in the horizon, we were already doing charters for college teams and others. They were booked through CAL and we ran them with the newest of the newest. Well, let's see in the announcement made at the launch of the Charter it was said that we already had clients for the business. Again you do the math. 216 making money vs 53 (very unlikely!) not making money. hmmmmmm

[quote=duvie;76038]How do you know that your new ventures will generate "income"? I think what you mean is revenue.

I think its pretty clear that leasing airplanes that you already own will make you money. And the paint shop is a pretty safe bet since its already passed all the inspections with flying colors. I'm sure they know what they will be paying the employees, and they already have customers lined out the door. The charter ops may or may not make money. We already have customers and I think the company probably factored the pilot expenses into the picture before the presented to TA to the union. Now, I don't know if they will find a way to not fly empty airplanes around to pick people up, or if that might be something they're not planning on. But, we already have people lined up. So I'd say its safe to say that at least two of the three will make us profit or income.

I don't think you guy's understand the charter industry. It's a totally different animal than airline ops. Unlike airline, charter's don't fly everyday, and have a fairly low utilization rate. This is why most jets for charter have an owner. The owner is responsible for the owning and operating costs of the aircraft. Charter companies will market these aircraft for a price and offer the owner a percentage of the rate charged. This in no way covers all the costs of the aircraft. So if your jets don't have charter customers everyday, their probably not turning a profit.

I didn't mean to belittle you or other young guys with the young comment, in fact I was born in the 80s so most people would consider me young as well. I just meant to say that many younger pilots don't have a good understanding of the financial workings of an airline, you seem to proof of this.

For clarification, are you saying that you think If the majority of XJT A/C turn profits and the minority lose money, then majority wins and you will be profitable?

I didn't take it as an insult, I'm about ten years older than you, and I like to believe I'm still young.

Are you familiar with our capacity purchase agreement with CAL for the 206 aircraft? If you are it will answer all your questions, if you're not I'll be more than happy to elaborate on the basics of it. Either way, the margin of losses on the 53 aircraft would have to exceed the margin of profit on the 206 aircraft (which by the way is guaranteed per our agreement) for XJT to see red on the books.

So, again state your knowledge of the financial workings in relation to our situation...young man. :)

You're assuming we're just wating for the phone to ring! We already have clients lined up for this operation. Here's the site for any of you who might be interested:

http://www.expressjet.com/corpAviation/index.htm

Two items,

1) CAL still owns about 8% of XJT directly, CAL's retirement fund owns about 10%. Many of the mutual funds & institutional investors who have a signifigant position in XJT also have a signifigant position in CAL.

Therefore it is illogical that CAL cut XJT loose without some assurance that Ream, et al would find something usefull to do with those airplanes.


2) Just because XJT does have something worthwhile to do with those airplanes doesn't mean XJT pilots will have anything to do with it. I haven't heard anything recently about XJT Eurpoe, but if and when, you can bet that nobody on your seniority list will be doing any CDG-LHR flying.


So, nobody panic, XJT isn't going anywhere. But nobody celebrate, either XJT hasn't gauranteed anything either.

[QUOTE=Sanchez;76088]the margin of losses on the 53 aircraft would have to exceed the margin of profit on the 206 aircraft (which by the way is guaranteed per our agreement) for XJT to see red on the books.
QUOTE]

I guess the part I find hard to believe about your argument is that the hypothetical margins of loss would be small enough to be covered. I realize XJT's contract with CAL is quite lucrative, but the type of operations, like charters and independant airline ops, that XJT is exploring are far from cash cows. We've all seen how a little mismanagement in an airline can be devastatingly expensive.

What do you mean by "clients"? Are they owners who are taking whole or partial ownership? Or are they clients who only pay on a per trip basis?

NCAA team charters, casino tours, medical groups, signed on the dotted line for charters. Length of agreement is unknown to employees

This is my point about someone having to pay the cost of ownership while the aircraft are not being utilized. According to the company website, they offer jet charter without the hassle of ownership. This meaning XJT retains ownership and therefore the costs associated. Personally, I don't expect these clients to be utilizing the 5 or so aircraft on a daily basis.
My original topic being that without high utilization of aircraft, owners don't turn profits. They can only reduce the cost with the revenue gained.

Yes, you are correct ziggy, but I think the company chose the amount of airplanes based on the demand that they had prior to making the announcement of going into the charter field. I do see your point though, and only time will tell.