Poor ExpressJet. They’ve been trying to make their “branded operations” work, but they seem to be running out of time. As the months pass and they continue to lose money on it, shareholders will become more restless. The latest? Hayman Capital Master Fund.
Hayman owns just over 6% of the airline and they aren’t happy with the branded flying. They sent a letter to ExpressJet Chairman and CEO Jim Ream saying that they want the branded flying to immediately stop and they want an expanded, more stable relationship to be established with Continental. They also want the airline to look at potential buyers. Well, this is just some of the fun you get when you’re a public company. There’s not nearly as much tolerance for new ventures that don’t pay out quickly, and that’s too bad.
Why do I say it’s too bad? It looks like there might be some hope for this service in some areas. Just recently, the October T100 government data was released and that’s the first month ExpressJet was forced to release its information for their branded flying routes. You may remember they were fighting this for awhile, but they’ve apparently officially lost the fight, because we can now take a peak.
What we’ll take a look at here is seat factor, or the percentage of seats that were filled with people on each route during the month. For all branded flying, they had a dismal 59.0% seat factor for October. This is very close to the 59.1% load factor they publicly announced back in November, so we’re on the right track.
So what do we see? Of the 58 markets I found, 10 of them had a seat factor of better than 70%. The bad news is that 11 markets were at less than 50%. In other words, some of these appear to be working while others aren’t. I say “appear” to be working, because we don’t know whether all those people on those flights were paying enough money to make it profitable or not, but we do know that people are at least interested in flying those routes.
I can see why ExpressJet didn’t want to release these traffic numbers. I mean, it’s pretty easy to see which markets are worth considering for other airlines and which ones aren’t. The only thing is that most other airlines won’t be interested in flying in these markets. Southwest is the only one I could see really coming in to any of these, and with 737s that’s going to be a hard sell.
That’s why I think that ExpressJet could do very well if only they were Southwest Express. The connection to a large airline’s frequent flier program and access to passenger feed from a broader route network would be exactly what they’d need. Just look at the routes that are working here and you can see them fitting into the Southwest network quite nicely.
Unfortunately, I’m guessing we won’t see this happen, though it would be nice. For now, I’m just hoping that ExpressJet can find a way to tweak their network quickly enough that they won’t have to give in to shareholder demands to disband the network. Then again, flying 50 seat jets in the era of $90 fuel makes that an incredibly difficult task even with high levels of demand.
If you’d like to see the full spreadsheet with seat factor by market, click here. (I learned from my last post that you guys like the raw data.)
As you point out yourself, load factor doesn’t mean squat if they aren’t making any money.
I think two major factors working against XJ are its fleet type and lack of FF program reciprocity. Business travelers for whom time is money and who want those non-stops between otherwise non-connected cities are also the types who complain endlessly about RJs and fight tooth-and-nail for their free upgrades and status privlidges. It’s a culture over reason thing… but I think your average high-end business traveler flying from MCI to TUS would rather connect at DFW or DEN if it means collecting miles on their preferred airline and potentially getting a free upgrade to first on all segments.
Hmm.. Without doing too much of a full blown analysis I wonder why Southwest wouldn’t be interested in a business partnership. I’d guess that XJet would still be doing the flying at-risk, but XJet’s targeted consumer is right up Southwest’s alley, business consumers who want point to point service. I can’t see southwest putting any money up al la ATA, but perhaps a frequent flyer alliance and some baggage and schedule coordination would do it. It could help both out without hurting either too badly.
Cranky, minor point of contention. I think the fund’s name is very likely the Hayman Capital Fund, probably run by either Hayman Asset Management or Hayman Capital Mnagement…you probably saw “Hayman Capital Master Fund” because they possibly utilize what’s known as a “master-feeder” structure, which allows better tax efficiency for US investors into their fund. The master-level fund can have many “feeder” funds below it, one may have “offshore” (non-US taxable, like foreign entities or not-for-profits) and another may have “onshore” investors. Then each feeder agrees to invest its assets entirely in the “Master.” THEN, the “Master” fund is the one that does the actual investing in the final investments (in this case, ExpressJet). It’s just a funny structure, in reality it just plays out that the gang at Hayman whatever is investing in ExpressJet. Anyhow, you can tell what I do all day for my real job but yea, saying something “Master” fund sounds similar to saying “I rode on this great (horrible?) airline called American Airlines Limited Liability Company.”
I’m still surprised that XJ has not figured out to fly into Phoenix Mesa/Williams-Gateway airport.
Phoenix is the fifth largest city in the US (by population), after all.
A lot of people (ie: most folks over in the Mesa, Tempe, and Gilbert areas) live closer to IWA than to PHX/Sky Harbor, and it’s got the passenger terminals and runways to handle the traffic. XJ could even run directly against Usair on nonstop Phoenix business routes and likely fill the planes if they timed their flights right…
Not long ago, I was on a Continental Express flight. I was in seat 1A, so during takeoff and approach I was talking to the flight attendant. She said she also worked some ExpressJet branded flights. In their training, the FAs were told that they only need 12 people on most flights to make money. Now, I’m sure that’s using the assumption that passengers would be buying full fare. And the cynic in me thinks that they may be fudging the numbers a bit to make the FAs feel more secure in their job. But it seemed to me that if they’re only trying to get 12 people on a flight, they’re doomed for failure from the beginning.
Ok, I downloaded the spreadsheet but i failed to find the market for OMATUS or TUSOMA…did you leave that one out?
OMATUS didn’t start until November 13, so we’ll have to wait another month until that data comes out.