DJ looking at new NB order

[BradR]

Interesting that DJ are discussing a new narrow-body order. Given they seem to have their hands full with V Australia you would have thought they may hold off but maybe they believe the next year or so will be a great time to get some good prices.

Brad

http://www.flightglobal.com/articles/2009/03/02/323239/virgin-blue-mulls-order-for-up-to-60-180-seat-aircraft.html

[Andrew McLaughlin]

Interesting that DJ are discussing a new narrow-body order. Given they seem to have their hands full with V Australia you would have thought they may hold off but maybe they believe the next year or so will be a great time to get some good prices.

It's a buyer's market at the moment!

[Will T]

Large scale fleet orders (for start-up, growth or renewal) at the bottom of the market are an essential feature of a successful low cost airline model, and certainly underpinned the successes of Ryanair and Easyjet in Europe. With much of the low-hanging fruit gone in the LCC arena, and the market saturated, fleet financing (price and arrangements) can be the key cost differentiator. Although DJ have adopted a 'new world' strategy, in reality this is underpinned by retaining the lowest available cost base within their target market(s), and this compels them to buy at the bottom of the aircraft market almost regardless of their current funding situation.

Closer to home, Qantas's taking over of the post-September 11 American Airlines 737-800 order book - at an amazing price - has underpinned the success of that fleet for QF.

[Mike W]

Large scale fleet orders (for start-up, growth or renewal) at the bottom of the market are an essential feature of a successful low cost airline model, and certainly underpinned the successes of Ryanair and Easyjet in Europe. With much of the low-hanging fruit gone in the LCC arena, and the market saturated, fleet financing (price and arrangements) can be the key cost differentiator. Although DJ have adopted a 'new world' strategy, in reality this is underpinned by retaining the lowest available cost base within their target market(s), and this compels them to buy at the bottom of the aircraft market almost regardless of their current funding situation.

Closer to home, Qantas's taking over of the post-September 11 American Airlines 737-800 order book - at an amazing price - has underpinned the success of that fleet for QF.

Nice answer Will and very well explained. I didn't realise how tactical this could be.

[D Chan]

what you said is true Will but I think the crisis of September 11 and today's financial crisis are quite different. While Sept 11 was more about terrorism, security and the downturn in pax numbers, today's problem is about the financial system and financial institutions. I wonder if it will be difficult to finance aircraft at a time like this when financial institutions are reluctant to lend each other money etc. and how this may affect aircraft financing I have no idea. And what about the airline's credit rating?

Though it is a good time to buy because the aircraft will probably be ready when the economy improves.

[Michael Morrison]

I wonder if it will be difficult to finance aircraft at a time like this when financial institutions are reluctant to lend each other money etc. and how this may affect aircraft financing I have no idea. .

I presume more govt backed borrowing will be in place.

I beleive the VA 777's are financed through a US govt back lender.

[Bernie P]

Just wondering, will this be for simply a mix of more 737-700/800 or IF the purchase of the 737-900 or even the 737-900ER (http://boeing.com/commercial/737family/pf/pf_900ER_back.html)would be a good fit into the fleet? Is there any issues with regards to fleet commanality, (assuming this would not be the case) and would the additional range AND seats be of any benifit for the long haul to WA and or Bali for Pac Blue?

Also, will they include into the fleet numbers possinilty for expansion, or will it be on a 1 for 1 replacement??

[BradR]

Also, will they include into the fleet numbers possinilty for expansion, or will it be on a 1 for 1 replacement??

As Godfrey referred to leases coming due, I assume this is largely replacement. DJ wants to market that it has a young fleet so it would make sense that some of the older 738s are replaced in the timeframe suggested. WIth the economy in the doldrums the case for capacity expansion at the moment would be almost non-existent.

Brad

[NickN]

How long has the 738 been in service for? By modern terms isn't it still a young aircraft?

[Marty H]

How long has the 738 been in service for? By modern terms isn't it still a young aircraft?

Young yes but in the case of VB, QF, JQ these are high cycle aircraft, therefore checks come up quicker, also once you go beyond 5 yrs you are looking at costly C and D checks which involves the aircraft being out of service for long periods of time and millions being spent.

[Andrew McLaughlin]

How long has the 738 been in service for? By modern terms isn't it still a young aircraft?

Modern FMS/avionics/nav systems, modern versions of 25-year old design engines, 45+ year old fuselage design.

Unfortunately, there are no new 130+ seat narrow bodies except Bombadier CSeries on the horizon for next decade at least, so the 737NG and A320 are pretty-much it!

But both Airbus and Boeing are making continual improvements in fuel burn,
pax comfort and reliability through small, incemental enhancements to their narrowbody aircraft (e.g. A320 winglets, 737 CFM engine software, 737 eyebrow window deletions, A320 LED lighting, A320 aerodynamics etc), many of which will be retrofittable to in-service jets.

[Andrew M]

Not turning this into a A vs B war, but the interiors of the A320 look alot newer than the 737's.

B should update the interior a little, but then again why bother when they still sell :cool:

[NickN]

The black leather and orange scheme looks great in the Jetstar aircraft. I also prefer the A320 over the B738.

[Rhys Xanthis]

The black leather and orange scheme looks great in the Jetstar aircraft. I also prefer the A320 over the B738.

Me too.

Perhaps its just the QF/JQ interior - but i always feel as though i have more room on the A320.

[NickN]

I always seem to have problems with my ears on the 737 and never have an issue in the A320.

[BradR]

The A320 is substantially wider and taller hence it feels bigger. The seats are about 20mm wider on an A320 compared with a 737. The windows are also bigger and higher meaning the cabins feel lighter.

Like all Airbuses, they are also quieter than their Boeing equivalent though the CFM engines on the Ansett A320s used to sound a bit like lawn mowers during climb.

Brad

[Mark Grima]

I always seem to have problems with my ears on the 737 and never have an issue in the A320.

Funny that, my ears always play up on all Airbus aircraft, most significantly on A330s but rarely on Boeings. Obviously a personal thing and is different for everyone.

Give me a 737 anyday.

Cheers

M

[Bernie P]

Not turning this into a A vs B war, ...

Your joking, right???

Look at all the comments so far!! :D :p :D

[Andrew M]

Your joking, right???

Look at all the comments so far!! :D :p :D

:p I think I always say it before saying anything about either A or B

At least the 777-200LR and 777-300ER makes up for the older looking 737's :)

[AdamB]

I have absolutely no connection to the industry, I just enjoy photographing & flying in commercial airliners. That said I always feel more at home in the Boeing & have no idea why? Maybe it's because the very first aircraft I ever flew in was an Ansett 737, maybe the more familiar aircraft is comforting to me, I really don't know. I've never experienced the ear problems of other board members on either aircraft, just always prefer the Boeing product. Of course that might change when I take an A380 to NZ later this year!

[Jack B]

funny about the ears....

I seem to have problems when seated at the REAR of the aircraft, but no problems at all over the wing?

And this is common to both boeing and airbus



coincidence, perhaps

[Marty H]

funny about the ears....

I seem to have problems when seated at the REAR of the aircraft, but no problems at all over the wing?

And this is common to both boeing and airbus



coincidence, perhaps

Same with me more middle of the aircraft Im okay, towards the rear I feel it alot more.

[Greg McDonald]

May not have to worry about DJ shortly....shares closed yesterday at 18.5cents !!!
At this rate you have to wonder how they're still a viable company!!
And no, I'm not a DJ basher...Qantas aren't doing any better!!

[AdamB]

May not have to worry about DJ shortly....shares closed yesterday at 18.5cents !!!
At this rate you have to wonder how they're still a viable company!!

My very basic understanding of a situation like this is that as long as revenue in exceeds revenues out (ie they make more than they spend & are cash flow positive) then the share price has little to no impact to the daily operation. It's only when you front up to finance ten new aircraft or capital works that the declining overall value of the company will come into play. This is how it was explained to me (very basically) by a friend. Happy to be corrected by smarter minds than me though.:D

[Andrew McLaughlin]

My very basic understanding of a situation like this is that as long as revenue in exceeds revenues out (ie they make more than they spend & are cash flow positive) then the share price has little to no impact to the daily operation. It's only when you front up to finance ten new aircraft or capital works that the declining overall value of the company will come into play. This is how it was explained to me (very basically) by a friend. Happy to be corrected by smarter minds than me though.:D


There's a bit more to it than that Adam...

The share price is often lead by the forecast profit which is usually issued annually and then updated quarterly or six-monthly.

If an airline (or any company for that matter) is tracking to achieve that profit, then the share price should be steady or even rise, but if the airline starts to fall behind the curve or issues a downgraded forecast, even if it's still going to be a profit, then that often has a fairly drastic implication to the share price.

[Raymond Rowe]

Interesting times ahead. Be no tears here.

[John C]

Raymond,

It has been 8 years and yet you still have not recognised the fact that Ansett did not collapse because of VB.

Ansett collapsed because of the way it was run. The people in it didnt kill it, the management did.

I find it offensive that you show such undisguised glee at the remote prospect of VB going under.

[Robert S]

I find it offensive that you show such undisguised glee at the remote prospect of VB going under.

I do too... said it before on the old board often enough. Virgin Blue may have benefited but they had nothing to do with Ansett's collapse... and for anyone to speak positively of the concept of a large number of other Australians in the industry losing their jobs is absolutely deplorable.

In fact, I would completely expect someone who has been through that experience to be the first to hope it doesn't happen to anyone else.

[Nigel C]

In fact, I would completely expect someone who has been through that experience to be the first to hope it doesn't happen to anyone else.


+1

[Marty H]

If anyone wishes 4000-5000 people lose their jobs then they have some huge issues personally. If that person who wishes the same company that supports the Sydney Airport Message Board spotting w/end and bent over backwards to support it and involve those who attended with the V Australia launch and happened to attend that w/end also wishes they go under it further highlights those personal issues.

Ray if VB did coloapse the only thing you will be crying over is your keyboard when QF charge you $500 for a MEL-SYD return.

[NickN]

People losing their jobs is always a terrible thing to see. I can't imagine how 1850 Pacific Brands employees are feeling right now.

I personally think VB will bounce back and will be here for a long time to come. The shares have taken a hammering because of the last quarters loss but as was discussed, that's a one off writedown and won't be a regular occurrence.

Revenue was up 12% they are still in a strong position. Tiger will go long before VB.

[Rhys Xanthis]

Tiger will go long before VB.

Hit the nail right on the head.

[Lukas M]

Tiger will go long before VB.
Please explain Nick.

TT are not heading into the negative direction that they were mid-08', things have changed.

[Marty H]

Please explain Nick.

TT are not heading into the negative direction that they were mid-08', things have changed.


Until Tiger release some sort of profit/loss figures nobody is really going to know that, but giving away seats in the current market isnt a good move.

Personally I hope all airlines can get through this tough next 18mths, the more competition its better for everyone not only keeping people in jobs but for the travelling public.

[NickN]

Please explain Nick.

TT are not heading into the negative direction that they were mid-08', things have changed.

Lukas we all know that if it was legal to marry an airline you'd be married to Tiger and no matter what I said you'd be upset.

As for explaining, Andrew already came up with the information I would have given you for my reasons.

Tiger are in a much more fragile position than DJ at this point in time. And the reluctance of Tigers parent company to release any real fiscal information suggests everything is being done to save every dollar through strict accounting practices before they lodge their documents.

[NickN]

You'd be crazy not to throw $500 bucks into DJ shares at that price.

[Ben Thiele]

Qantas start of January $2.65
Qantas yesterday $1.42

.............. thats a drop of 57.7%

.............. and you think Virgin Blue is performing badly !!!!!

[Rhys Xanthis]

If I had the cash, I know where I would be putting it in the next month or so...18.5c is cheap for an airline that will start making some decent money (I am convinced that VAU will be huge).

[Ash W]

If I had the cash, I know where I would be putting it in the next month or so...18.5c is cheap for an airline that will start making some decent money (I am convinced that VAU will be huge).

Huge profits, with 1 or 2 aircraft? You know what they say about a fool and his money.....

[Ash W]

Qantas start of January $2.65
Qantas yesterday $1.42

.............. thats a drop of 57.7%

.............. and you think Virgin Blue is performing badly !!!!!

It is a tad more complex than that. You must also factor in how many shares there are as well as the assets and liabilities of said company.

Although Qantas's share may have fallen by a higher percentage the other factors still make it a much more finacially viable company.

VB at sub 20c shares is on shaky ground no matter how much you sugar coat the simple facts.

[Andrew M]

Huge profits, with 1 or 2 aircraft? You know what they say about a fool and his money.....

4 aircraft by May/June from memory! :)

[Ash W]

4 aircraft by May/June from memory! :)

Even with 4 they are not going to be making money for some time yet. I know for certain I wouldn't be putting any money into VB (or Qantas for that matter) unless of course I wanted to lose some or all of it.