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To: ordinaryguy

1) The discounters have very different business models: complete fleet commonality (just one type of plane saves on maintenance and training costs - majors that serve many different types of routes can't do that) and they don't go international or into secondary markets, among other issues. Discounters have tried and failed at those areas.

2) Cash is king. Delta had to sell its fuel hedges for operating costs when things started looking bad. It seems like a bad idea now, but cheap gas in the future won't pay your workers today.

3) Even with those factors, we haven't seen quarterly reports from the discounters since oil's been consistently above $60/bbl. They may very likely be unprofitable also at that level. They also may not be able to buy (or to afford) hedging contracts.


37 posted on 09/14/2005 3:21:19 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: Turbopilot
That was my point. The discounters have grown with an eye toward keeping their cost structure as low as possible. The difference in cost structure is certainly a factor in addition to fuel costs.

Would you hazard a wild guess as to what Jet Blue might be paying for fuel these days? In their last 10-Q, they predicted an operating margin of 5-7% if fuel was at $1.59. In the first quarter of 2005, their average cost was $0.97, and in the second quarter they paid an average of $1.50. In the second quarter their operating margin was 9.1%.

41 posted on 09/14/2005 3:37:29 PM PDT by ordinaryguy
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