How do you see your futur with JAZZ ?

[milehighclub]

Airlines

Regional Airlines Bulk Up To Fight Majors

Lisa DiCarlo, 10.06.03, 1:30 PM ET

NEW YORK - For two years, moneylosing U.S. airlines have been overhauling their businesses to stem the bleeding. Most are still operating in the red, but are establishing lower-cost subsidiaries to compete with smaller, profitable carriers. Now, those scrappy regionals are fortifying their positions against the encroachment.

Today's news--Mesa Air Group's (nasdaq: MESA - news - people ) $512 million unsolicited offer for Atlantic Coast Airlines Holdings (nasdaq: ACAI - news - people )--may be the first step towards consolidation among regional carriers, which have fared far better than their larger rivals during the worst-ever economic slump in the history of the American aviation industry.

The success of upstarts such as Jetblue Airways (nasdaq: JBLU - news - people ) and established discounters such as Southwest Airlines (nyse: LUV - news - people ) have forced the major carriers to change how they do business. Their enormously-high fixed costs and productivity inefficiencies makes it tough to turn a profit. The regionals, in contrast, have largely maintained profits through the slump. That's partly because they fly just one type of single-class plane between point-to-point routes.

After dipping their toes in the regional waters, major carriers are diving in headfirst. Delta Air Lines (nyse: DAL - news - people ) launched its Song subsidiary in the spring, after Jetblue stole some of its market share along the Eastern U.S. routes.

UAL's (otc: UALAQ - news - people ) United Airlines announced in late September that its forthcoming discount subsidiary, due in February, will establish its base in Denver. That happens to be the center of operations for Frontier Airways (nasdaq: FRNT - news - people ), a small but growing carrier which had $470 million in sales in fiscal 2003, ended in March.

Frontier recently began running television ads touting its emphasis on low fares, flexibility, customer service and especially its new Airbus planes, which come with DirecTV at each seat (Frontier charges $5 for the service; Jetblue's is free). Frontier is in the process of transitioning its entire fleet of planes from Boeing (nyse: BA - news - people ) to Airbus, which a spokesman referred to as the "Mercedes of flying."

While more details will be forthcoming during Mesa's conference call tomorrow, the company is no doubt looking to kick start its growth and reach more customers in the eastern U.S. In a statement, Mesa's Chief Executive Jon Ornstein said "ACA is a great company with an excellent operational track record" which includes "a proven history of financially successful code share partnerships. . . .We have the opportunity to create the leading regional airline in the United States."

In a memo to ACA Chief Executive Kerry Skeen, Ornstein says Mesa's offer represents a "full and fair price to ACA shareholders" but he notes that the company "may have flexibility on deal terms and structure" if Dulles, Va.-based ACA is warm to Mesa's offer. Currently, Phoenix-based Mesa is offering an all-stock deal, valuing ACA shares at $11.30 each.

Mesa's revenue for the fiscal year ended Sept. 30, 2002, was $496 million compared with $523 million in 2001. ACA's calendar 2002 saw revenue rise to $760 million from $583 million in 2001. Mesa's shares are up nearly 170% this year, to $11.40, but down 10% so far today. While ACA is down 16% year-to-date, to $10.83, it is up 20% today.

One thing is true: the major and regional carriers are increasingly crossing into each other's flight paths. While the majors are establishing low-cost subsidiaries, Jetblue and Southwest are adding more direct coast-to-coast routes. The big airlines are paring down while the small ones are bulking up.

Managing the changes won't be easy. The major carriers, some of which are carrying billions in debt, probably will have a tougher time of it.

[Guest Nova Zemlya]

Note: This is a very pessimistic outlook, so if you are with Jazz, then please take it with a grain of salt. I apologize beforehand if it does not meet with your expectations. However, I think it is high time it was reported in the press just what the situation is.

There is no future in Jazz. The company has announced via the Teamsters that they will retain 500 full-time equivalent flight attendants at some point in the near future, meaning once the lease negotiations are concluded and aircraft, mostly turboprops can be parked, then they can lay off en masse. This means that eventually, more than half the flight attendants will be on layoff status with no hope of returning. Any company that lays off more than half of its employees is quite frankly doomed.

A large chunk of jobs were recently trasferred to money-losing Zip, and it was disclosed that the fuel charges were being borne by Jazz. Jazz is not a viable airline, because of its relationship with the mothercorp. The airline actually pays the mainline for its services, rather than the other way around.

There is no way for the regional operation to function as a business, with publicly traded shares, and its own marketing since the plan at the mothercorp is to cull any growth from the regional to higher paid jobs, or to the low cost sector.

There have been much fewer layoffs of pilots from the regional, since many have taken the opportunity to jump ship to the low cost sector, outside of the mothercorp structure.

Many of us who still retain their jobs are wondering what's going to happen next, as the net transfer of jobs and the crushing rejection at the EI office of our rights as full time employees right when the company declared bankruptcy make contemplating being laid off in the interim no prospect at all, since there is a reduced safety net until recovery is established.

This will force many a lower paid F/A out of the industry or into lower-paid positions in the low cost sector. Going over to Zip from Jazz is not a given, and if you do manage, then you still face the prospect of liquidation. Jazzers hope futilely that liquidation will occur, since Jazz can somewhat obliquely considered an asset.

This means the possiblity of facing layoffs in a recession with little or no EI protection and jobs transfer to other portions of the mothercorp as mainline unions attempt to protect their jobs.

There is no prospect for the company to be sold unless the mothercorp is liquidated, but this could mean us being liquidated as well. A regional operation like Jazz could be amazingly profitable, since it can turn about $1 bil. dollars in revenue a year and consistently experiences growth in the Canadian marke, as well as retain market share. But there are serious challenges to reaching that since 9-11 has forced people onto the road, avoiding the alienating process of airports.

The management is shrewd, but hampered by obsessive compulsive cost-cutting manias, and have in the process almost totally alienated their employees. They try to be as understanding and as nice as possible, but this is really window dressing for a dire situation. Bankruptcy was declared for the regional by the mothercorp, because there is no way the regional will be allowed to grow beyond a certain point, or be permitted to function as a business. The "cost-effective" rumours in the press bandied around the world are hot air, as the mothercorp will eventually decide to place as many aircraft within their own sphere as appeasment of mainline unions is a priority over making money.

If Jazz were to operate somewhat independantly, then the landing fees alone would put us under, as privatised airports attempt to gouge whatever they can out of us, but let low cost sector airlines escape with no charges. This is because there is a heavy involvement at the local municipal and provincial level in these low cost operations, otherwise they just would not fly.

Mostly we sit and wonder at the reverse economic that is practised at the mothercorp fully at the expense of the consumer and the regional employees and question whether economic reality will ever set in.

My personal position is that Jazz will not be here this time next year, since it is likely that I will face yet another upheaval through layoffs. Much as I hate to admit it, Wejest's Klyde is right and he is seeking an opportunity to take as much of a chunk of flying from the regional network he can before the unltimate collapse and liquidation of the mothercorp.

:[

NZ

[Guest HPT-TOUR]

The Jazz pensions are in a lot better shape than the mainline, with both creditors looking to break up the company down the road I would suspect that Jazz would be in a more favorable position than mainline to operate a lot more aircraft types.

[Guest Nova Zemlya]

The pension issue is a key factor whether the mothercorp will continue to operate, which I doubt. I have to agree.

I can see an operation for Jazz down the road of some kind, but it involves concentrating the operation out of YYZ and chopping just about every dash route that doesn't make money to support- yet again -the mothercorp.

Pensions are a problem with the regional and they have attempted to side step payments to the Teamsters pension, which they can't do legally and are currently tied up in the courts over that issue. Back payments and lost appreciation since Feb. 2003.

I still don't see a future for Jazz, because once all of those Dash-100's are parked, and only 50-seat aircraft are left over, then this leaves a large swack of flying open to prospective operators like Regco.

It just seems the mothercorp is so intent on enacting some kind of Munchausen-by-proxy to cover up for astoundingly bad operational gaffes, and the inference, if you care to draw it, is that the regional suffers when this happens.

Regional F/A's like myself are looking straight at layoffs, limited EI access, and possible immediate bankruptcy as has happened to others already.

So, imo, no there is no future at jazz, unless you have something like 15 years seniority. Yes, the airline has been showing growth, and they have been relying on WDO's to tie up loose ends, and this has something to do with not paying moves, lots of commuting, reduced flying... - its a downward spiral. And all we get is news just how great things are going under judge hornswoggled.

Sorry if that's the case.

:[

NZ