July 28, 2012

JetBlue Quarterly results

Click here    Biggest expense for a airline is fuel...  Read through the the quarterly press conference and JetBlue forecasts their fuel costs at 2.94 per gallon.  Meanwhile if you buy fuel from the FBO is the cost I believe is in the $5.50 per gallon range.

The start-up airline that was looking at ORH would need to buy fuel from the FBO and their planned routes would burn 3,000 gallons of fuel. They have told me at $5.50 per gallon , there is no way the numbers work...  

I am guessing that this is the same problem Allegiant had at ORH?


Anonymous said...

You seem to be talking to this airline instead of Massport. How does that work?

Anonymous said...

I beleive airlines buy their own fuel in bulk called interplane bulk rate. The FBO usually stores,tests, and distributes the fuel for the airline. The airline buys the fuel in bulk, and the FBO can charge a distribution and handling fee (ex. 9 cents per gallon).

The other charges the airlines would have to negotiate with an FBO would be de-icing (which can be quite expensive per gallon) and ground handling charges if the airlines do not supply their own ground handling personnel (i.e. baggage,check-in,ground crew).

Add to that landing fees, terminal fees, and gate fees from the airport itself, an airline depending on the type of aircraft it uses usually needs from 75-85% capacity just to break even.

I hope that with a new FBO along with the existing FBO at Worcester can create a healthy competitive atmosphere that may make it viable for an airline to consider ORH.

Cross your fingers!


jose said...

like i said earlier, the two biggest expense is fuel and taxes. still feel like taxing the rich? increase the fuel tax? wondering why the airline industry isnt making a bigger push to lobby for lower taxs and cost of fuel? if those 2 werent so high, the prices of tickets would be cheaper, how much more full would planes leaving orh be? airline industry is being killed.

Jahn said...

So who s/b called out ABOUT the FBO operators price that is twice what JBs price is? Either Massport or the city had to sign the contract or be involved in landing the current FBO at ORH.

Do we know if JBs price is less b/c they may be on the right side of the jet fuel futures contract(s) or if maybe the FBO is on the wrong side of a jet fuel futures contract(s).

This similar to why I bring my Chris Craft yacht to the gas station on a trailer vs. filing it up at the marina..............but double the price of jet fuel at ORH is way out of line. I can see it maybe being 25, 30, or 35% higher, but 100% higher? CAn you captive audience?

MSWOMer said...

Jahn, in answer to your JetBlue question, as you saw above, JetBlue's prices are lower because they buy their own fuel in bulk. Smaller companies don't have this luxury and have to buy from the FBO.

Swissport is one of the FBO's in Logan, so I assume that's why they are currently in ORH. If you play around in airnav.com, you can see that the current fuel prices at ORH are higher than the surrounding airports (big and small), but not a whole lot ($6.70 for 100LL and $6.20 for Jet A as of 7/11/12). Logan is insane and even Hanscom is higher.

The hope is that when Rectrix comes in, that they will be able to offer lower fuel prices. Currently they are the FBO in Hyannis and if you look at the fuel prices there, it is one of the lowest I saw hopping around ($5.85 for 100LL and $4.95 for Jet A as of 7/19/12). Not only will Rectrix hopefully bring those low prices to ORH, but when they are FBO at 3 airports in Massachusetts, maybe that will enable even lower prices. I have no proof of this, merely a hope. Thanks.

Jahn said...

Anonymous, wouldnt another FBO be just like adding another custodian at the airport? I.e. there is not enough work now to justify even one FBO, never mind two. Yes, there would be more price competition, but until we have significantly more flights, I just have a hard time seeing the demand for a 2nd FBO.

Awhile back I saw a piece on TV show (60 Mins?) that was probably a re-run that dealt with the commercial passenger airline industry. THe airline executive who was interviewed and who had worked in the industry his entire career said he would never, ever, ever invest in the stock of this industry. Just look at the bankruptcies and airlines that no longer exist.

He further said that over the course of the last few decades the entire industry as a whole has lost money. Hard to fathom but that is what he said.

Bottonline was that these one way $59 & $99 type fares just cannibalize the entire industry.

I recall reading that comm. passenger airline fares are very elastic. For example, this means that a 5% drop in fare prices will result in an increase of 10% in passengers. The elasticity factor being 2.0....a 10% drop in price divided by a 5% increase in business = 2.0. Any factor above 1.0 is considered an elastic demand and any factor below 1.0 is an inelastic demand.

The problem is that over the years the comm. airline paseenger business has been destroying itself by loading up airplanes with add'l incremental passengers and the fares these incremental passengers are paying do not cover the add'l costs of loading up the airplane with no/lo fares. Additionally, many customers just wait until the airlines drop the fares to book their flights. This is similar to how the city of Worcester loads itself up with low income housing and low income occupants bring little or no revenue to the city yet cost a small fortune in add'l, incremental carrying costs...... e.g. public schools, add'l social costs, more crime, etc, etc.