Consolidation 2008..XJET joins SKW inc or Republic Holdings?

[Clocks]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

I don't know man, sounds like this guy has interest in the long term survival of XJET. From a business standpoint all his recommendations sound excellent and pretty common sense to me. Sometimes moves have to be made that will benefit the company and not the employee but hey, thats business.

I agree from my perspective as a fairly ignorant newbie that a lot of the recommendations make sense. My real point was that if the hedge fund's suggestions are good long term advice for xjet, it's just a coincidence. My understanding of hedge funds is that they dump a large amount of money into relatively risky proposals to turn a quick profit.

 

[kellwolf]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

You bet they have an interest in the company....They've lost 60% of their money since they've invested....i'm sure they are sick of standing by watching their money bleed away.

And yes, they are blaming management for not reducing rates for Continental. They wouldn't have been in this situation had they reduced their operating costs. Instead, they pulled the planes and started branded - ie....see multi million dollar losses and stock prices fall from 12 bucks to 2 dollars

How were they gonna reduce operating costs? They can't control the price of fuel. The only way to reduce operating costs would be to slash wages across the board. Then you've got a problem b/c you can't get pilots. Look at Pinnacle. We haven't lowered wages, but we're no where close to what other regionals pay. So, we wind up paying millions in cancellation penalties to NWA b/c we can't staff the flying. Management is probably breathing a sigh of relief that those planes are going to Mesaba, otherwise, we'd STILL be paying cancellation penalties. If XJT had slashed their pilot wages, FOs would have decided to go elsewhere, CAs wouldn't be sticking around and the stock price would be falling anyway (for the record PCL is at a 52 week low right now, mostly due to uncertainty with the labor issues). Instead, XJT can attract the cream of the crop when it comes to pilots at the regional level b/c of their pay and QOL. This increases the chances of people making it through training and increases the completion factor due to better experienced crews. Happy pilots mean fewer sick calls, which means less money spent to cover those calling in sick. You rarely have guys that start training at XJT only to drop out b/c they find out it's not for them. Can't say the same for PCL right now. Assuming we can actually fill an FO class (which is rare currently), probably 2-3 of those will bail sometime during training b/c they decided they don't like where they're working.

 

[Trip7]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Sounds to me like this firm thought they could invest in an airline and make money off the bat. Someone didn't research that too well.

Reading it, there are hints that Hayman Capital doesn't really understand how airlines work. Yes, the Delta stuff is good for XJT, but they can't just say "Let's fly more planes for Delta." If they could....they WOULD. What they fail to understand is that if XJT didn't go with the branded flying that money would have been gone anyway. You can't make money with those airplanes elsewhere. The company might not be down on reserve cash like it is now, but I'm willing to bet the shares would have drop anyway b/c they wouldn't be bringing in as much money with 69 fewer airplanes. I doubt they'd have the Delta flying either. If I recall, some of those 69 planes are the ones flying for Delta....and the ones that were under jetBlue and Frontier. Without taking the gamble on the branded flying, they wouldn't have had the airframes to position themselves for those contracts.

Kellwolf Im pretty sure J. Kyle Bass knows more about the airline business then you and I will ever know combined. Many pilots, especially those without business backgrounds, are quick to say 'these hedge fund managers don't know anything about the airline business' when a business decision affects them negatively. Do you honestly think a multi-million dollar hedge fund firm would invest millions of dollars in an airline without doing their homework?

 

[Trip7]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

How were they gonna reduce operating costs? They can't control the price of fuel. The only way to reduce operating costs would be to slash wages across the board. Then you've got a problem b/c you can't get pilots. Look at Pinnacle. We haven't lowered wages, but we're no where close to what other regionals pay. So, we wind up paying millions in cancellation penalties to NWA b/c we can't staff the flying. Management is probably breathing a sigh of relief that those planes are going to Mesaba, otherwise, we'd STILL be paying cancellation penalties. If XJT had slashed their pilot wages, FOs would have decided to go elsewhere, CAs wouldn't be sticking around and the stock price would be falling anyway (for the record PCL is at a 52 week low right now, mostly due to uncertainty with the labor issues). Instead, XJT can attract the cream of the crop when it comes to pilots at the regional level b/c of their pay and QOL. This increases the chances of people making it through training and increases the completion factor due to better experienced crews. Happy pilots mean fewer sick calls, which means less money spent to cover those calling in sick. You rarely have guys that start training at XJT only to drop out b/c they find out it's not for them. Can't say the same for PCL right now. Assuming we can actually fill an FO class (which is rare currently), probably 2-3 of those will bail sometime during training b/c they decided they don't like where they're working.

How do you know that? Have you been meeting with management? There is more to it than just slashing wages. You have to look at financial statements and see what included in operating costs. I doubt that pilot wages was the main cause of high operating costs. Apparently XJET could have dropped their rates with CAL because the rates with Delta are closer to industry average. Looks like they got too bold with Continental who laughed and ran off with Chataqwhatever to the Prom.

 

[stuckingfk]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Kellwolf Im pretty sure J. Kyle Bass knows more about the airline business then you and I will ever know combined. Many pilots, especially those without business backgrounds, are quick to say 'these hedge fund managers don't know anything about the airline business' when a business decision affects them negatively. Do you honestly think a multi-million dollar hedge fund firm would invest millions of dollars in an airline without doing their homework?

Just because someone does their homework, doesn't mean they did it well.

Apparently this company screwed the pooch and Kyle Bass is trying to save face, job, etc.

 

[Trip7]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Just because someone does their homework, doesn't mean they did it well.

Apparently this company screwed the pooch and Kyle Bass is trying to save face, job, etc.

Sounds more like he's trying to save their investment. I would say XJET management screwed the pooch, not the firm.

 

[WAFlyBoy]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

My understanding of hedge funds is that they dump a large amount of money into relatively risky proposals to turn a quick profit.

Not necessarily.

Hedge funds (as we know them today) are similar to mutual funds, except they're typically available only to a limited number of private investors. Because hedge funds are not subject to the same regulations as mutual funds, they can participate in riskier endeavors. The type of investments they participate in will depend on the fund's investment objectives. Since these funds are private, often the only folks privy to the funds objectives and performance are the holders.

There are a couple of mutual funds that have invested significantly in ExpressJet ($1MM+ shares). Being that these investment vehicles are perhaps designed to suit the needs of a more conservative investor, it's difficult to justify Hayman's ExpressJet position as particularly risky.

Apparently this company screwed the pooch and Kyle Bass is trying to save face, job, etc.

He's simply doing his job - saving his investor's money! His intentions with the stock are unknown to us (as previously explained), but it would be prudent for any large institution with a significant stake to engage in an active role for the preservation of their investment. Especially when the stock price begins to approach the liquidation value of the company, as in ExpressJet's case.

 

[WAFlyBoy]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

ExpressJet stock is up 10% so far today. I wonder if it has to do with this letter.....

 

[mikecweb]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

You can feel free . . . I already tagged that.

Not a big fan of the sloppies but I'll deal.
Unless she's a protoscab. Ain't sleeping with no non-union country singer.

 

[kellwolf]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Sounds more like he's trying to save their investment. I would say XJET management screwed the pooch, not the firm.

So, what would your solution be? Let the 69 planes go and deal with it? Sounds to me like XJT management did what they had to do. They found homes for some planes with Delta flying and some temp contracts with other airlines, but they were left with a lot of planes. So, they took a chance. The other option would be to let them go and settle for the slash in operating income that came along with them.

Like was said earlier, not everyone that does their homework gets an A. The business plan for the branded was sound, which is why XJT went through with it. Now that the price of fuel is continuing to go up along with an economic downturn, the business plan isn't working out the way it was originally designed. If the original business plan wasn't sound, then this letter should have been written BEFORE branded starting in order for them to announce their concerns. If the investing firm failed to read the business plan, then they really dropped the ball. If they read it and decided it was an acceptable risk, then they did what they were supposed to do. If that's the case, then this letter seems kinda hypocritical in a "We supported you before, but now that it's not working we think you wasted our money" way.

I've worked at XJT in the past. If any management team can pull it off, it's Ream and co. If they can't....well, at least they tried.

 

[OldTownPilot]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Marcus et al., XJT could have said "we'll fly these airplanes for free" and the flying still would have gone to Chatauqua. CAL saw what happened to Delta in CVG during the Comair strike, and would not let that happen to them. They now have 3 airlines providing feed in IAH and CLE, and there will be 2 in EWR next month. The RFP had nothing to do with XJTs costs, they were going to lose the flying anyway. Ream and co.'s big decision was not what cost level to offer to CAL, but weather they were going to give 69 airplanes to CHQ or keep them and try to find a place for them to fly. At that time I bet Hayman, if they were share holders, were applauding the decision to try to source more flying than to roll over and give up the planes.

 

[Airdale]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Hayman Capital Master Fund, L.P., an investment fund that my firm advises, currently owns 3,420,206 shares, or 6.25%, of the outstanding common stock of ExpressJet Holdings, Inc. (the “Company”).​

Sooo....I'm just curious why nobody has pointed out the fact that this "investment firm" owns a measly 6.25% of Xjet? Which basically means, this letter is pointless, holds no water and is a waste in arguing over. At 6.25%, they might own a few paint guns in that paint shop Wheels mentioned, but nothing more. Who cares? Why do you have this letter anyway?​

 

[Trip7]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

So, what would your solution be? Let the 69 planes go and deal with it? Sounds to me like XJT management did what they had to do. They found homes for some planes with Delta flying and some temp contracts with other airlines, but they were left with a lot of planes. So, they took a chance. The other option would be to let them go and settle for the slash in operating income that came along with them.

Like was said earlier, not everyone that does their homework gets an A. The business plan for the branded was sound, which is why XJT went through with it. Now that the price of fuel is continuing to go up along with an economic downturn, the business plan isn't working out the way it was originally designed. If the original business plan wasn't sound, then this letter should have been written BEFORE branded starting in order for them to announce their concerns. If the investing firm failed to read the business plan, then they really dropped the ball. If they read it and decided it was an acceptable risk, then they did what they were supposed to do. If that's the case, then this letter seems kinda hypocritical in a "We supported you before, but now that it's not working we think you wasted our money" way.

I've worked at XJT in the past. If any management team can pull it off, it's Ream and co. If they can't....well, at least they tried.

Yeah I see where you're coming from. Overall, I think Ream and company should look real hard at Bass' advice. Its a cut throat industry out there right now. Two companies have gone tango uniform within a month of 08 and they won't be the last. From a business perspective, I would recommend a merge with RAH. Welcome to consolidation 2008!

Marcus et al., XJT could have said "we'll fly these airplanes for free" and the flying still would have gone to Chatauqua. CAL saw what happened to Delta in CVG during the Comair strike, and would not let that happen to them. They now have 3 airlines providing feed in IAH and CLE, and there will be 2 in EWR next month. The RFP had nothing to do with XJTs costs, they were going to lose the flying anyway. Ream and co.'s big decision was not what cost level to offer to CAL, but weather they were going to give 69 airplanes to CHQ or keep them and try to find a place for them to fly. At that time I bet Hayman, if they were share holders, were applauding the decision to try to source more flying than to roll over and give up the planes.

Do you know this for sure or just speculation? Bass clearly said XJT was too 'heavy-handed' in negotiation and pissed CAL off.

 

[ljg]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

6.25% corresponds to a massive loss of investment.

 

[OldTownPilot]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Yeah I see where you're coming from. Overall, I think Ream and company should look real hard at Bass' advice. Its a cut throat industry out there right now. Two companies have gone tango uniform within a month of 08 and they won't be the last. From a business perspective, I would recommend a merge with RAH. Welcome to consolidation 2008!



Do you know this for sure or just speculation? Bass clearly said XJT was too 'heavy-handed' in negotiation and pissed CAL off.

That was never flat out said, and would never be if it were fact. However reading the "Daily News Update" on Coair (the CAL employee website) it was implied. Things like "very happly with the diversification of the CoEx services".

What would you expect Bass to say in this letter? Kum-by-yah? He sends letters like this all the time to stocks that lose money, then "leak" them out online so suckers like you (no offense) will buy into the merger hype and pump up the stock price, so he can recoup 'some' of his investment. Five bucks his fund owns less stock tomorrow morning than it did last night.

 

[N826AW]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Sooo....I'm just curious why nobody has pointed out the fact that this "investment firm" owns a measly 6.25% of Xjet? Which basically means, this letter is pointless, holds no water and is a waste in arguing over. At 6.25%, they might own a few paint guns in that paint shop Wheels mentioned, but nothing more. Who cares? Why do you have this letter anyway?

They're now the 4th largest shareholder. The "investment bank" can probably get a few other large shareholders to agree with their position when you consider XJT is trading almost 75% off it's 52 week high.

 

[meritflyer]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Marcus et al., XJT could have said "we'll fly these airplanes for free" and the flying still would have gone to Chatauqua. CAL saw what happened to Delta in CVG during the Comair strike, and would not let that happen to them. They now have 3 airlines providing feed in IAH and CLE, and there will be 2 in EWR next month. The RFP had nothing to do with XJTs costs, they were going to lose the flying anyway. Ream and co.'s big decision was not what cost level to offer to CAL, but weather they were going to give 69 airplanes to CHQ or keep them and try to find a place for them to fly. At that time I bet Hayman, if they were share holders, were applauding the decision to try to source more flying than to roll over and give up the planes.

OldTown,

Diversification was without question an issue on the table but dont kid yourself, ExpressJet still held the cards with respect to the CoEx feed after the release of the 69 jets with 205 frames still on the Continental side. This was discussed in detail by Jamie Baker after the initial release. The reason for the release as discussed time and time again, was the low ball offer from CAL on rates. ExpressJet made more on the 205 jets still in service than the 274 at the new rate.

Now, if I am the CEO of ExpressJet, I would've approached the deal with CAL a little more carefully. As I believe, ExpressJet thought it held the cards once rates couldn't be agreed on and ultimately CAL called their bluff. ExpressJet had little options with the frames they decided to keep.

The MEC was very clear that if they wanted to accept CAL's proposal, it would result in a complete restructruring of the company and ultimately cost the pilot group concessions. In retrospect, it was an issue they should've looked at a little more carefully since with the amounting losses, lack of new flying, and the other associated risks with operating your own airline.

I would've liked to see ExpressJet do the following -

• Accept the lower rates from Continental with certain conditions -
• One being the elimination of the most favored nation clause which prevents XJT from offering lower rates to other carriers and flying into a CAL hub;
• Enter into an ammended CPA that extends terms, options, and rates.
• Profits would've fallen but cash reserves in excess of $300M would've remained untouched for diversification.
• XJT's deal with Delta could've been executed as XJT still has options for 100 EMB-145XR's. At a higher margin than CAL, profits begin to climb again.
• Open the corporate aviation department as they did. Corporate is doing well and has offered a very niche market with 50 seat jets. They've been flying for Virgin Charter, NetJets, political figures, and so forth.
• Begin fleet diversification to be competitive with SkyWest and Republic. This could've included ERJ-170's, Q400, ect. Thils ultimately positions XJT for the release of jets from CAL in the future with little or no impact to operations and earnings.

There are are a lot of "what if's" that floated around and still float around. Hell, Ream even went to the Boeing factory and tried to get them to re-open the 717 line. Obviously, Boeing said they couldn't. The question is how does ExpressJet recover or position themself for a better future. That is the million dollar question.

 

[Maximilian_Jenius]

Re: Consolidation 2008..XJET joins SKW inc or Republic Holdi

Marcus, me thinks your buying too much into the hype here.

"Pump and dump man pump and dump."

I'm no business analyst, but anytime you hear the word synergies, I say beware.

Hedge funds, are all about risk and big profit, hedge funders care only about the bottom line, not the company or the employee.

They're capitalist personfied.

Beware cheering on this advance of mergers, as the end result I'm positive will be pilots, and other employees out of work, more especially with an empending recession.