JetBlue restructuring operations, to lay off employees

intotheair · Fri Jul 20, 2018 3:53 pm

JetBlue told employees today that some of them could be laid off or offered buyouts as the airline looks to restructure.

https://www.cnbc.com/2018/07/20/jetblue ... ernational

MO11 · Fri Jul 20, 2018 4:00 pm

intotheair wrote:
JetBlue told employees today that some of them could be laid off or offered buyouts as the airline looks to restructure.

https://www.cnbc.com/2018/07/20/jetblue ... ernational

"It's important to be here in person for these discussions."

I know how that works,,,

lightsaber · Fri Jul 20, 2018 4:06 pm

I'm sad for the employees. But... JetBlue vmust cut costs. Per your link, flight crew (front line customer service) are safe.

Back office... Sounds like outsourcing.

Lightsaber

tphuang · Fri Jul 20, 2018 5:34 pm

I think we are going to see that their Q2 numbers are a little disappointing, which probably accelerated these cost cutting moves.

janders · Fri Jul 20, 2018 5:40 pm

Having an HQ in NYC is not cheap. Long time ago they should have moved more support departments down their Orlando OSC.

COPolynesianPub · Fri Jul 20, 2018 5:49 pm

Gee, it must be catchy. UA revenue accounting in Houston were told last Friday that they will be outsourced to INDIA by July 2019.

LAXintl · Fri Jul 20, 2018 6:17 pm

Jetblue cost base has been creeping too high putting pressure on margins. Carrier has stated it needs to reduce op cost base by $300mil of which $90mil would be corporate overhead by 2020 and this is a move towards that.

Sooner or later the revenue environment will turn negative, which could leave the carrier precarious if it cant manage cost better. Unlike US3, B6 does not enjoy high revenues to start with so any downturn could leave it upside down with its relatively high cost.

UPlog · Fri Jul 20, 2018 6:21 pm

Sad but this is what happens when employees demand major like pay rates when the airline is largely a LCC when it comes to revenue generation.

Top pay is great, but if your business model is not geared towards generating commensurate revenue to cover for it, not sure how a company can afford it.

Yes I also agree moving ever more functions out of NY down to Florida likely be a smart move also. Not sure why they have not taken advantage of this even earlier.

KICT · Fri Jul 20, 2018 6:30 pm

Well, there is plenty of land next to the OSC for expansion...

drdisque · Fri Jul 20, 2018 6:32 pm

I think they were worried about moving to Orlando thinking they would lose too much of their institutional experience. It is also harder to recruit sharp young talent in Orlando (although getting easier). NYC also gave them a good package to stay where they were, matching any subsidy they would have gotten in Florida.

Polot · Fri Jul 20, 2018 6:37 pm

drdisque wrote:
I think they were worried about moving to Orlando thinking they would lose too much of their institutional experience. It is also harder to recruit sharp young talent in Orlando (although getting easier). NYC also gave them a good package to stay where they were, matching any subsidy they would have gotten in Florida.

I think it was less institutional experience and more it is a difficult to leave your “hometown” roots, especially when battling others in the region for NYC supremacy, and NYC offered a good package. There are a lot of people at JetBlue who take pride in the fact that are NYC’s hometown airline.

werdywerd · Fri Jul 20, 2018 9:13 pm

Alaska still has their sights on B6... trust me

usxguy · Fri Jul 20, 2018 9:33 pm

I was a contractor for an airline "somewhere in California" for a year and senior management had requested I consider moving over full time. I said no. I just couldn't afford to live there on the salary paid.

Air Tran was able to get a bunch of good talent in Orlando. I mean, it IS home to Disney.....

MO11 · Fri Jul 20, 2018 9:49 pm

Ah, yes. I remember when TWA offered me a job at its 2 Penn Plaza reservations center for $5.93/hour. Now, where to live?

tphuang · Fri Jul 20, 2018 9:59 pm

werdywerd wrote:
Alaska still has their sights on B6... trust me

So do a lot of airlines like United. As is going to have a real tough q2 and things aren’t getting better. Where are they getting the money?

And the b6 pilots wouldn’t want any part of as management.

727200 · Fri Jul 20, 2018 10:14 pm

Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

fastmover · Fri Jul 20, 2018 10:24 pm

werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

DarthLobster · Fri Jul 20, 2018 10:29 pm

fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

jaybird · Fri Jul 20, 2018 10:51 pm

COPolynesianPub wrote:
Gee, it must be catchy. UA revenue accounting in Houston were told last Friday that they will be outsourced to INDIA by July 2019.

It's the way things are now. The company I work for outsourced accounting and IT to India 2 years ago. And now they're closing 10 of our US offices. Employees have become less important and disposable and Wall Street is what matters.

SEAxSANxBOS · Fri Jul 20, 2018 10:57 pm

Sorry to hear and see anyone loss their jobs in this industry.

tphuang · Fri Jul 20, 2018 10:57 pm

DarthLobster wrote:
fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

Have you actually looked at the numbers? JetBlue has been the more profitable one the last 2 quarters.

777PHX · Fri Jul 20, 2018 10:59 pm

jaybird wrote:
COPolynesianPub wrote:
Gee, it must be catchy. UA revenue accounting in Houston were told last Friday that they will be outsourced to INDIA by July 2019.

It's the way things are now. The company I work for outsourced accounting and IT to India 2 years ago. And now they're closing 10 of our US offices. Employees have become less important and disposable and Wall Street is what matters.

I've worked in accounting/finance for the past decade. They're usually the second to be outsourced behind IT as it's not a value-add for the company and is a back office function.

DarthLobster · Fri Jul 20, 2018 11:05 pm

tphuang wrote:
DarthLobster wrote:
fastmover wrote:

Or is it the other way around?

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

Have you actually looked at the numbers? JetBlue has been the more profitable one the last 2 quarters.

Only because they don’t have integration costs that AS is facing post-VX merger. And it still doesn’t explain why B6 could be considering taking over a larger carrier while taking about chopping off their own limbs.

Byrdluvs747 · Fri Jul 20, 2018 11:22 pm

727200 wrote:
Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

Did I miss something? Since when did the idea of a US3 airline buying B6 become acceptable by regulators? If UA were to try and purchase B6, in part or whole, then expect AA to be in that fight.

737307 · Fri Jul 20, 2018 11:27 pm

Just image if JetBlue has been busy swallowing Virgin... results would have been disastrous and even more layoffs.
Death-by-Choking-on-VX!

Bobloblaw · Sat Jul 21, 2018 12:11 am

727200 wrote:
Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

I don't know why people think a legacy buying a LCC is smart move. B6 network at UA costs is instantly unprofitable. Lose the goodwill in BOS and give up slots in JFK. WN and NK in FLL and MCO push UA out of those hubs. If UA tries to raise fares, markets destimulate and traffic declines. When has a legacy buying a LCC ever worked? The corporate accounts in manhattan don't automatically flow from
B6 to UA if UA buys B6. They aren't a corporate asset on the balance sheet My guess is Delta wins them over UA.

Bobloblaw · Sat Jul 21, 2018 12:13 am

fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

Go check the market capitalization of AS and tell me if B6 can buy them.

planecane · Sat Jul 21, 2018 12:23 am

drdisque wrote:
I think they were worried about moving to Orlando thinking they would lose too much of their institutional experience. It is also harder to recruit sharp young talent in Orlando (although getting easier). NYC also gave them a good package to stay where they were, matching any subsidy they would have gotten in Florida.

I have to nitpick a pet peeve. A tax break and a subsidy are two very different things. A subsidy would be giving a company money. A tax break is an incentive that reduces the amount that they would have to pay. Even with the break, a JetBlue facility in Orlando will be paying more taxes than the vacant land that was there before it. If it was developed into a warehouse district or something similar then the property would be valued lower anyway. The facility also brings employees to the area that buy houses and rent apartments that raises the overall property tax base.

On your federal income taxes, a deduction is an incentive while a tax credit is a subsidy. The tax credit to buy a Tesla is for all intents and purposes a subsidy paid to Tesla. Deducting your mortgage interest gives you incentive to own a home vs. renting because your housing expense might be the same but you will pay less in tax if you have a mortgage.

fastmover · Sat Jul 21, 2018 12:33 am

DarthLobster wrote:
fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

Jetblue is hardly bleeding.
This has been in the works for a long time. They restructured things and even brought back a few teams like market planning. There is this drama on airliners that jetblue is super weak and limping along and that is simply not true. They are not moving the HQ. There has always been talk of moving the operations side to MCO but that is because we have so much room where the sims and jetblue crew hotel is. That does not make the company weak. They had fat that needed to be trimmed which is what any good corporation should do. They have already done this work in other areas and it was time for HQ. What is wrong with controlling costs?

fastmover · Sat Jul 21, 2018 12:49 am

Bobloblaw wrote:
fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

Go check the market capitalization of AS and tell me if B6 can buy them.

My gosh it was more tounge and cheek with weirdy since we chatted via email before. I can tell you that it’s a never ending story here that someone is going to buy us.

aemoreira1981 · Sat Jul 21, 2018 1:04 am

I'm actually surprised that B6 hasn't moved some back office jobs to an area near MCO, where costs would be cheaper.

SPREE34 · Sat Jul 21, 2018 1:23 am

727200 wrote:
Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

That^^^^^^^ It would give them the routes they need to compete with AA and DL in the East.

tphuang · Sat Jul 21, 2018 1:24 am

DarthLobster wrote:
tphuang wrote:
DarthLobster wrote:

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

Have you actually looked at the numbers? JetBlue has been the more profitable one the last 2 quarters.

Only because they don’t have integration costs that AS is facing post-VX merger. And it still doesn’t explain why B6 could be considering taking over a larger carrier while taking about chopping off their own limbs.

What AS faces now is their new reality. While B6 will see significantly lower margin this quarter compared to last year, AS will face a larger drop.

What's wrong with a company trying to cut cost and move more operation to cheaper place? It happens all the time to New York and California companies.

Bobloblaw wrote:
fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

Go check the market capitalization of AS and tell me if B6 can buy them.

All that's based on the expectation that AS will have higher profits. Which they are unlikely to do going forward. Remember, B6 owns some of the most valuable real estate in the world in their JFK slots and terminal space. Nothing AS has is as valuable. While that is not reflected in their market cap, any takeover will result in a high premium due to that asset. Let's watch where their market cap by the end of this year.

737307 · Sat Jul 21, 2018 1:43 am

tphuang wrote:
DarthLobster wrote:
tphuang wrote:
Have you actually looked at the numbers? JetBlue has been the more profitable one the last 2 quarters.

Only because they don’t have integration costs that AS is facing post-VX merger. And it still doesn’t explain why B6 could be considering taking over a larger carrier while taking about chopping off their own limbs.

What AS faces now is their new reality. While B6 will see significantly lower margin this quarter compared to last year, AS will face a larger drop.

What's wrong with a company trying to cut cost and move more operation to cheaper place? It happens all the time to New York and California companies.

Bobloblaw wrote:
fastmover wrote:

Or is it the other way around?

Go check the market capitalization of AS and tell me if B6 can buy them.

All that's based on the expectation that AS will have higher profits. Which they are unlikely to do going forward. Remember, B6 owns some of the most valuable real estate in the world in their JFK slots and terminal space. Nothing AS has is as valuable. While that is not reflected in their market cap, any takeover will result in a high premium due to that asset. Let's watch where their market cap by the end of this year.

The airline industry is probably close to its cycle high. If I look at Southwest, I would not be surprised to see it trade much lower 3-7 years from now (relative to the overall market).

Bobloblaw · Sat Jul 21, 2018 1:57 am

B6 owning slots and gates at JFK doesnt increase their ability to buy AS, unless they were to find someone to lend them the money against their assets. Server leverage. AS market cap is nearly $8b, 20% more than B6. Buying AS doesnt solve any of B6's problems and only adds more problems

727200 · Sat Jul 21, 2018 2:02 am

Byrdluvs747 wrote:
727200 wrote:
Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

Did I miss something? Since when did the idea of a US3 airline buying B6 become acceptable by regulators? If UA were to try and purchase B6, in part or whole, then expect AA to be in that fight.

The general feeling on Wall Street is because the ATT merger was allowed, that this administration is more open to corporate take overs than the previous one. As such additional consolidation in the airline sector is inevitable. Having said that, Both AA and DL will have a very difficult time to acquire additional JFK and BOS slots because of the size of their operation. This is not to say that UA wont package something together to throw SW or AS a piece of the pie and get it thru the regulators. But for the other two to try and make a play for B6 isn't going to have much of a chance. Its extremely difficult to make the argument you need more slots at JFK to make yourself bigger when the other guys are not even in that market.

madpropsyo · Sat Jul 21, 2018 2:22 am

tphuang wrote:
DarthLobster wrote:
tphuang wrote:
While B6 will see significantly lower margin this quarter compared to last year, AS will face a larger drop.

From what I can find the Q2 consensus is ALK will see a ~35% drop in earnings per share while JBLU will see a ~44% drop vs last year. ALK is projected to have earnings per share about 3.5 times higher than JBLU.

Honestly though I don't see any airline buying any other in this environment. Airline stocks have been stagnant to down over the last year or two and with fuel prices going up it seems like a big risk for any management team to try to sell an acquisition right now.

NWADTWE16 · Sat Jul 21, 2018 2:34 am

another week, another ridiculous merger mania thread

tphuang · Sat Jul 21, 2018 2:35 am

Bobloblaw wrote:
B6 owning slots and gates at JFK doesnt increase their ability to buy AS, unless they were to find someone to lend them the money against their assets. Server leverage. AS market cap is nearly $8b, 20% more than B6. Buying AS doesnt solve any of B6's problems and only adds more problems

not saying B6 could or even wants to buy AS. But that something fluid like market cap always changes based on the profitability of a company. And with fuel prices what they are and the competitive nature of the domestic airline industry, market cap is going to look different a year from now.

And also the idea that B6 is somehow struggling financially is not based on reality. Which is what started this argument. It's the reality of anyone who live and work in New York that your company might move your job to a cheaper place of operation.

DL747400 · Sat Jul 21, 2018 3:40 am

B6 is laying off staff to reduce overhead as they prepare for one of two futures: Selling the airline or seeking the funding needed to acquire another airline. Either way, reduced overhead will make them look more attractive on paper to a potential acquirer or lender. Handwriting is on the wall: There is no future for B6 unless they combine with someone else of similar or larger size.

catiii · Sat Jul 21, 2018 3:57 am

It was a sad day for those who left and those who remain at the support centers, but the reality it that these staff moves roughly compiled less than 5% of the support center staff, half of whom voluntarily left with the opt out package. It’s a simple realignment, not a precursor to selling the company. The fact is that there was headcount creep and the cost diligence that used to exist in that regard no longer does. It is no different than what AA is doing at its Director and above level.

The downside is that a number of talented people who weren’t let go will now leave on their own because of the new lack of upward opportunities that exist (at all levels of the company).

VS11 · Sat Jul 21, 2018 4:00 am

Bobloblaw wrote:
fastmover wrote:
werdywerd wrote:
Alaska still has their sights on B6... trust me

Or is it the other way around?

Go check the market capitalization of AS and tell me if B6 can buy them.

Yeah, JetBlue can totally buy Alaska. Market cap of JetBlue - $6.3 billion. Long term debt - $1 billion. Market cap of Alaska $7.5b . Long term debt - $2.3 billion. In any case, smaller companies can buy larger ones.

Super80Fan · Sat Jul 21, 2018 4:04 am

I'm assuming B6 no longer has any employees up in Connecticut?

PlanesNTrains · Sat Jul 21, 2018 4:04 am

DarthLobster wrote:
tphuang wrote:
DarthLobster wrote:

How could an airline that’s bleeding enough that they have to lay off a good chunk of their staff and maybe relocate to another state possibly have their eyes on taking over a larger, more profitable carrier?

Have you actually looked at the numbers? JetBlue has been the more profitable one the last 2 quarters.

Only because they don’t have integration costs that AS is facing post-VX merger. And it still doesn’t explain why B6 could be considering taking over a larger carrier while taking about chopping off their own limbs.

How in the world does a B6 layoff thread morph into this again? Now we have to endure the back and forth - AGAIN.

CobaltScar · Sat Jul 21, 2018 4:23 am

tphuang wrote:
Remember, B6 owns some of the most valuable real estate in the world in their JFK slots and terminal space. Nothing AS has is as valuable.

Get ready for a certain someone to sweep in and correct your statement with Dallas Love Field. (despite the fact its a dumpster fire of a failed operation there for them).

Byrdluvs747 · Sat Jul 21, 2018 8:57 am

727200 wrote:
Having said that, Both AA and DL will have a very difficult time to acquire additional JFK and BOS slots because of the size of their operation.

I can understand denying DL, but AA can make the argument that they are just trying to become as large as DL at JFK.

727200 wrote:
This is not to say that UA wont package something together to throw SW or AS a piece of the pie and get it thru the regulators.

There's nothing preventing AA from doing the same, and AA at least has a relationship with AS.

727200 wrote:
Its extremely difficult to make the argument you need more slots at JFK to make yourself bigger when the other guys are not even in that market.

I never agreed with the egalitarian attitude of the DOT. JFK is not like FLL or LAS. The DOT/DOJ needs to consider that the evening slots are needed for TATL flights, and its not in the public interest to waste them just so that WN, FL, or NK can offer Florida Fun Fares.

Cointrin330 · Sat Jul 21, 2018 11:28 am

727200 wrote:
Don't think for a NY minute that UA hasn't looked at B6 and all those slots at JFK and BOS as well as the operation at MCO. Acquiring them would give UA the instant JFK access that they need to get back into trans con market and the corporate accounts located in Manhattan. UA is not going to let this prize slip or it would face the reality of being shut out of that market for a long, long time. Nothing against EWR, but it isn't JFK.

If B6 were to merge (or be acquired) by one of the other major US carriers, it's a lot less likely that it will be UA. Operationally, UA has demonstrated it can't execute a merger correctly and is finally getting out from under the experience 8 years after it merged with CO. Plus, from a DOJ standpoint, it would have to divest so much to acquire another airline with a major NY area presence. United controls something close to 60% of the traffic at EWR and sets prices accordingly. Why would it dilute that just to get back into JFK? There are other ways for UA do get back into JFK and even if they did, it would be in the transcontinental market to LAX and SFO and unlikely to be much more. The more logical acquirer of B6 would be AA. It would give them a much bigger slice of the JFK pie and they'd likely only have to divest FLL slots, which would seem fine given the major hub they have down the road in MIA. If costs continue to creep up at B6, it will be a target for acquisition.

michman · Sat Jul 21, 2018 11:38 am

Bobloblaw wrote:
B6 owning slots and gates at JFK doesnt increase their ability to buy AS, unless they were to find someone to lend them the money against their assets. Server leverage. AS market cap is nearly $8b, 20% more than B6. Buying AS doesnt solve any of B6's problems and only adds more problems

Neither airline is really in a position to "buy" the other. If they get together, it will almost certainly be some sort of consensual cashless merger rather than a "buy-out" or a "takeover". Just like DL-NW, UA-CO, and AA-US. They'll need to be one surviving "brand", and one management team will likely come out on the top over the other. But in the end, if they both want to make it work, it can happen. Not sure why there are so many here that think it can never happen when we have three recent examples among the big 6 legacies of exactly how these things can be structured.

catiii · Sat Jul 21, 2018 12:22 pm

Cointrin330 wrote:
they'd likely only have to divest FLL slots.

There is no such thing as “FLL slots.”

STT757 · Sat Jul 21, 2018 12:42 pm

I think there's a merger or acquisition in B6's future, but it isn't any of the big three. I predict WN, regardless of thee fleet issues B6 gives WN what it needs to grow its presence where it's tried and the far had little results (BOS, NY, FLL) .

I see UA perusing an acquisition, but not of a larger carrier. Something small that is just absorbed by UA, not trying to blend cultures or merge brandings. Think CO / PeoplExpress which was actually quite successful in that they gained the EWR hub which has been lucrative for both CO and now UA.

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