tag:blogger.com,1999:blog-4631423976894080706.post2954340482553858891..comments2023-10-17T06:55:06.255-04:00Comments on the red corner: Dart Group: Looking back & looking forwardred.http://www.blogger.com/profile/04089263693762295793noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-4631423976894080706.post-85171545942816092632013-09-03T15:38:35.421-04:002013-09-03T15:38:35.421-04:00likewise, always enjoy your blog.likewise, always enjoy your blog.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-62891011463616864932013-09-03T14:59:19.704-04:002013-09-03T14:59:19.704-04:00Alright, I will look at the numbers again. Thanks ...Alright, I will look at the numbers again. Thanks for the comments, btw. <br /><br /><br /><br />red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-73489882861578261002013-09-03T14:48:55.906-04:002013-09-03T14:48:55.906-04:00OK thanks Red - in which case I think you definite...OK thanks Red - in which case I think you definitely would want to exclude accommodation costs which are about £113m as they don't relate to flying the fleet and are not included in net ticket yield or revenue per pax, and I would also deduct the charter revenues from the op costs to determine the extent they can compete on price. <br /><br />To be fair to Mr Meeson & Co they have done pretty well during the past 5 years in growing and running the airline.<br /><br />On the rest I am not sure I agree with you but heck the future will tell I guess ;)!<br /><br />All the best<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-91681807836032185842013-09-03T14:02:25.672-04:002013-09-03T14:02:25.672-04:00Hi,
I have deliberately co-mingled the Jet2 and p...Hi,<br /><br />I have deliberately co-mingled the Jet2 and package holiday business in the following way: Dart minus Fowler Welch = Jet2.<br /><br />Why? Because the business of the holiday, charter, and scheduled carrier businesses is the same: to translate aircraft into revenues. If there were a better mix (e.g. all scheduled, no charter) Dart would have done it by now. Charters exist to use the planes in the off peak periods. That is, charters reduce the average cost of the airline segment.<br /><br />The Royal Mail contract is what allows use of Dart's planes when people can't fly. The chances of Dart being able to pick up new 16 flights a day without adding new planes is close to zero. <br /><br />In other words, Jet 2's business model is premised on the Royal Mail contract. (That and cross-subsidization from on-board retail revenue account are the twin legs of what makes Dart work). You'll notice that Royal Mail has been there from the beginning; it made the whole enterprise possible.<br /><br />I know that "we'll make up for it via growth" is Phil Meeson's standard line but growth doesn't keep your asset turns (aircraft usage) steady.<br /><br />Picking profitable routes, being smart etc: I think that will work for a little while. At the current valuation, however, one needs to be confident that it will work for more than a decade into the future. That's a long time. <br /><br />In the end, the only thing that will matter -- as every legacy airline trying to break even on the tourist trade has found -- is cost. Can ye get me to Lanzarote & back for under a 100 quid? <br /><br />I don't have a dog in this hunt, btw, but I think the risk/price balance has tilted toward the unfavorable on this one. <br /><br />re: Southwest. It is barely a low cost airline at this point. It has kept its CASM numbers respectable (though not good) by acquisition. It is certainly not as competitive as Ryanair. <br /><br />Allegiant is quite different to Jet2: it is almost entirely an ad-hoc package holiday / charter business and it's the sort of business model that can only really work in very large countries -- by acreage and population. One needs a large number of isolated towns and new customer groups to keep the offer fresh. red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-35864963735125291052013-09-03T13:31:55.382-04:002013-09-03T13:31:55.382-04:00Hi Red, thanks for an interesting article and anal...Hi Red, thanks for an interesting article and analysis, a few thoughts:<br /><br />1. I make operating cost for DTG airline to be £529.5m per accounts?<br /><br />2. RYA and EZJ are both schedule only LCC, whereas DTG also charters its aircraft - I calculate charter/cargo revenues at around £100m year on year. I would deduct this from the operating cost of £529.5 to show the net operating cost to be considered for pricing power purposes when competing against pure LCC.<br /><br />3. The cost advantage of pure LCCs is true but they need their aircraft in the air 24/7, so certain routes/schedules that may work for DTG won't work for RYA and EZJ - there is space to go for as long as you are careful on route and schedule planning. The cost advantage of pure LCCs is not new and if you look back RYA moved into LBA but DTG continued to grow, and the growth isn't all down to the holiday business its about picking off routes you can be profitable and maximising efficiency/load factors.<br /><br />4. The loss of 25% of the Royal Mail cargo business will effect the net operating cost calculated under point 2, but this can be compensated by increasing number of routes operated by existing aircraft - I'd be surprised if they stand still to this.<br /><br />5. Management have navigated some pretty tough waters and there is nothing significantly new in above - I wouldn't discount their ability to deliver again.<br /><br />Personally, although I don't think the EZJ and RYA models are all dominating, it is a different model and bolt on holiday business just adds to that. I think there are a lot of opportunities that would enable DTG to co-exist (allegiant/southwest) quite happily as long as they are smart and my guess is that they are.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-68699691805681355812013-08-21T18:49:18.738-04:002013-08-21T18:49:18.738-04:00Hi Richard,
I've adjusted the figures above. ...Hi Richard,<br /><br />I've adjusted the figures above. I think that Jet2's strategy of subsidizing ticket prices by means of on-board retail sales has narrowed the ticket price gap so that it is not yet the most attractive target for Ryanair's attentions. <br /><br />Nevertheless, Ryanair's revenue per unit is lower than Jet2'c cost per unit even though Ryanair earns 11% margins. So it's not, I think, a matter of if but a matter of when. red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-68664606437175294092013-08-21T11:06:42.014-04:002013-08-21T11:06:42.014-04:00Hi Red. I'm just looking at Ryanair's rout...Hi Red. I'm just looking at Ryanair's route map and comparing it to Dart's. There's already a lot of overlap, and Dart says price competition is intense from all its bases. I'm puzzled by your figures, and wondering if Jet2.com customers are prepared to pay more for flights because of the level of service (Ryanair's being next to zero). Jet2 makes a big deal about family friendly schedules for example.Richard Beddardhttp://beddard.net/noreply@blogger.com