Originally Posted by
modandm
Initially I had my doubt's about Luxton. His somewhat patronizing tone in the media, and on investor calls irritates me, but then few know the company like I do. However, I have become increasingly convinced of his quality, as I have seen sensible decisions being made, partnerships negotiated, and a more cut-throat approach to distribution (his forte). The most recent initiative, the establishment of a business performance unit to continuously drive down costs (targeting 0% non-fuel CASM growth), is brilliant, and if successful gets the company of a cost treadmill which is the bane of the industry. I think he the the ideal man for the job, Fyfe did a great job building the culture, but its time for a more commercially orientated individual to really drive shareholder value. The CFO is also very good, although a bit conservative, especially compared to US CFO's.
Actually as an interesting side note, I was researching and speaking to management of AAL (American), and UAL (United) last week. They have leverage ratio's of close to 100%, vs AIR c.50%. Although AAL is just out of bankruptcy management is already deploying current windfall profits and cash-flows to buy-back shares, instead of paying down debt. It's unbelievably aggressive. The contrast to banks and insurers which have been forced to rebuild capital is quite extraordinary. As a result of capital returns US airline share prices are rocketing - this is partly why I encourage AIR to allocate more capital to shareholder returns, rather than reinvesting it all in the usual...
As to the squeezy 777 seats - as a shareholder I fully support the reduction in economy seating comfort. On the minimal LH routes AIR faces competition on I expect little in the way of customer blowback. It also encourages those who can afford to trade-up to either the skycouch or premium economy to do so. So long as economy passengers make decisions based on price it makes total business sense to increase density - this has pretty much been accepted across the industry.