« June 2006 | Main | August 2006 »

July 31, 2006

Northwest Flight Attendants Vote No

Nwa
Rut ro.

The Northwest Airlines' flight attendants have voted down the latest tentative agreement that was negotiated between its new union representative, AFA-CWA, and the company.

The vote was 2637 for and 3266 against.

All you good airline industry watchers know what this means. The bankruptcy court handling the Northwest bankruptcy gave the airline the right to impose new terms on the flight attendants in June. But both sides continued to negotiate on another tentative agreement, and after the flight attendants voted to change union representation.

The company said today it is moving forward with plans to implement contract terms that go back to the March 1 tentative agreement with the PFAA that was not approved.

AFA, for its part, says on its website today that it will attempt to go back to the negotiating table. In the meantime, it also says it is "preparing for CHAOS."

CHAOS is the acronym for "Create Havoc Around Our System," the union's method of using targeted unannounced work actions. AFA also could call for an all-out strike.

Stay tuned.

Update on United/Heathrow Slots; United Announces End of Profit Drought; ANA Correction Noted

Ual
As we anticipated, United will cease operating flights utilizing its remaining pair of slots at Heathrow-JFK . The airline is leasing the slots to Air Canada for a period of 3 years, according to Kevin Done of the Financial Times. (Entire article is free on MSNBC.)

More details of interest on the deal - Delta is apparently paying United about $21 million for its Gatwick/JFK routes.

If I'm United, I gotta love that.

Speaking of United, the airline announced second quarter earnings today. The big news here? For the first time in six years the airline reported an honest-to-god quarterly profit.

The not-so-good news? While the numbers were better than the most recent consensus numbers from the analyst community -- a fact highly touted by the airline -- those numbers were lowered, for the most part, because of guidance from United after first quarter numbers were released.

Mix it up and what do you get? The $119 million profit the airline reported was good news, but certainly not in the same league as the level of profits we've seen reported by Southwest, US Airways, American, and Continental this quarter.

Finally -- on Friday we originally mentioned here that ANA had recently begun service from Dulles-Narita. This was a brain fart. Obviously ANA has flown out of Dulles to Narita for years. Since 1986 as a matter of fact. However they just recently increased the frequency of service from Dulles, in addition to adding their new Boeing 777 service.

Sorry for the confusion. The new service is what I was thinking about, but obviously what I was thinking and what I ended up writing was two different things.

I have since corrected the original post, but I was still getting direct emails question on it. So, hopefully now all will be back to normal. If not, well, I've done all I can do to get us there.

Frontier Reports In; Guidance Down

Frontier
Friday Frontier Airlines reported earnings. The airline reported net earnings of $4 million, or $0.10 a share, which was a considerable improvement over last year's loss of $2.7 million or $0.08 a share.

However, looking at the airline's operating statistics, while the airline's CASM excluding fuel and special items was down 6.1% -- a nice number -- the airline's PRASM, which was up 8.5%, lagged the industry 15.9% increase average for the quarter significantly. This is a direct reflection of the increased competition at Frontier's home base of DIA.

Think United Airlines out of bankruptcy protection. Think Southwest building up its new service out of DIA.

Biggest negative from the airline's call last week? The airline said that we should expect to see "similar" profitability in the airline's second quarter (quarter ending Sept. 30.)

This was not good news, although it was also not unexpected. Considering consensus for the quarter, at the time of the call, was for the airline to report profits in the $0.19 a share range, essentially this means net earnings for the current quarter are now expected to be about half what analysts had forecast.

As a result, look for further reductions in earnings estimates here.

As we have written in PBB, with the airline generating about 90% of its revenue out of the Denver market -- and with the airline now facing a full-frontal assault from Southwest (which will increase flights in Denver by 60% in the next two months), it would certainly seem that this revenue deterioration is only going to continue.

Our take this spring, when we very reluctantly put Frontier Airlines on our resurrected Titanic Watch is this -- while the airline has enough cash for now ($296 million), the airline can't continue doing what's it's doing. Or it's going to be a slow and certain unhappy landing. Let's just say the revenue trend is not the airline's friend in this case. Something's got to change.

The guidance for next quarter last week reaffirmed my reasons for putting the airline on our Watch list.

July 28, 2006

Delta In Deal with United for JFK/Gatwick Routes

Delta

Signs of life this morning from both Delta Air Lines and United Airlines.

First United Airlines has agreed to transfer its route authorities between New York's JFK International and London's Gatwick Airport to Delta Air Lines. While United has not flown this route since 2000, the move more or less shows that someone at United has finally admitted the obvious: New York is not where United can make the most money with its airplanes.

For that matter, United has been reducing its service between JFK and Heathrow for the last five years. The airline did not say today whether it plans to drop its one remaining flight or not to Heathrow, but you have to believe this is probably going to happen.

When it does, it just won't be headlined in a press release.

While Gatwick is certainly not Heathrow, this move will give Delta more credibility in its efforts to actually establish a hub of sorts at JFK and boy does this route structure ever start to look more and more like the old Pan Am.

United Poster

But, United had other news as well. The airline is also shifting its New York to Tokyo flights to Dulles, starting in October.

Remember that ANA recently began daily service from Dulles to Narita with their new Boeing 777s, although ANA has served the route since 1986. United has a codeshare agreement with ANA. So those who want to fly Narita from New York and get UAL miles will still be able to fly ANA out of JFK and do so.

United also announced the reinstatement of San Francisco-Taipei nonstop flights, it is adding three weekly San Francisco-Hong Kong flights, and it is expanding service from San Francisco to Seoul to a yearly basis.

We like this news from United. I only wish we had heard more news like it the last four years.

PBB Subscribers: This Week's (Long) Issue is Now Posted

Home-Typewriter Copy-1-2

You can access this week's issue of PlaneBusiness Banter here.

PBB Posting Time

Home-Typewriter Copy-1-1
Hey guys. Look for this week's issue of PBB to be posted Friday morning. What can I say -- it's a long issue! We'll post a note here when it's up and ready for perusal.

July 27, 2006

Earnings Madness: Thursday Update

Today we had three airlines report earnings -- US Airways, AirTran and Midwest Airlines.

Our thoughts after looking at the numbers, but not listening to earnings calls:

Usair
US Airways, not surprisingly, posted strong numbers for the quarter. Easily the best performance by a quasi-used-to-be-legacy-now hybrid airline. You get the point. No matter how you want to classify the new animal, the numbers were good.

The airline posted an 11.3% margin -- which gives it the second largest operating margin for the quarter -- right behind Southwest. And we all know Southwest posted exceptional second quarter results last week. So this is certainly not a bad place for US Airways to be.

Consensus here was for the airline to post profits of about $3.24/share. The airline posted profits of $315 million, or $3.35, excluding special items. Including items, the airline posted net profits of $305 million or $3.25 a share.

On a standalone basis, US Airways reported a profit of $246 million versus a loss of $44 million a year ago. As for America West, on a standalone basis, it reported a profit of $68 million versus a loss of $2 million for the same period last year.

AirTran also reported good numbers for the second quarter. The airline posted net earnings of $32 million or $0.33, slightly ahead of the consensus number of $0.28.

Operating margin here came in at a very strong 10.3% -- which puts AirTran in third place for the quarter, behind Southwest and US Airways. Nice performance here.

Finally, Midwest Airlines also reported in Thursday morning. Three airlines, three profits. Midwest reported profits of $8.8 million, or $0.39. While these results were not as strong as the ones reported by US Airways or AirTran, they certainly beat a loss, which is what Midwest reported for the second quarter of 2005. Furthermore, the airline posted an impressive 19.8% PRASM increase while CASM excluding fuel was down 7%. A very nice combination.

July 26, 2006

Earnings Madness

Earnings
Hey guys. Just thought I would pop in for a quick note. Yes, it's earnings madness. This week and next week are the heaviest earnings weeks for the industry and yours truly is up to her eyeballs in earnings statements and earnings call replays.

But just a couple of things concerning earnings, since I realize I had not commented on earnings since Continental reported in last week.

First while I said I was somewhat underwhelmed with Continental's numbers -- we have to look at the airline's results in context. Yes, the airline reported a profit. Yes, the numbers were quite good comparatively speaking. But Continental being Continental, and because the airline's stock has always been on and off our target lists over the years -- I was referring mainly to the fact I think the airline's stock is pretty overvalued right now.

With the airline looking to add capacity in the 3-4% range systemwide next year, with JetBlue knocking some of the wind out of their revenue sails in Newark (although it sounded in an interview today that JetBlue CEO David Neeleman was hinting the airline might pull out of Newark because of problems with the constant delays, etc. there), with costs running a bit higher than expected this quarter, and with comps continuing to be tough for the rest of the year -- I just don't think these numbers show me the kind of "notable" numbers the airline would need for me to get excited about the stock right now.

So -- no, in answer to a couple of notes, I had no problem with the results per se. I just didn't see anything in there that surprised me on the positive side enough to get me to dive into the stock shark pool. I'd like to see the stock slip back a bit more before that.

Alaska Airlines reported earnings this week, as did JetBlue.

Alaska had an excellent quarter. The airline continues to work at cutting its cost structure -- but it also appears that it just may have its operational issues under control as well. Numbers here were good. Revenues were good, and costs continue to be addressed. Horizon, Alaska's regional partner, also had a good quarter.

JetBlue, on the other hand, had a fair to middlin' quarter. Marginally good, I guess is what you could call it. One thing I would recommend is that if you are interested in JetBlue, listen to this quarter's earnings call. There are a lot of things that are addressed in that call. It's an interesting listen.

Mesa reported earnings this morning. I have not had a chance to listen to that call as of yet. I will do that in the morning. However, I can say that my first impression at looking at the airline's numbers was not positive. Looks like the airline had much higher start-up costs than expected as part of their Hawaii 5-0 project, aka "go!", and they are also up to their old tricks in terms of revenue items and unusual charges.

Essentially the airline included $13.1 million in U.S. Airways' bankruptcy gains as part of their earnings for the quarter. No. I don't think so. Neither does JP Morgan analyst Jamie Baker. That should have been treated as a one-time gain.

To put it another way, if you take that $13.1 million one-time gain out of the mix, it would make a big difference to the airline's earnings for the quarter, as the airline reported net earnings of $10.9 million.

Meanwhile Mike Linenberg, analyst with Merrill Lynch said in his note on the results that it was unclear what the $7.8 million in additional "one-time" additional expenses the airline reported were. As he put it, it was not clear if this was attributable to start-up costs with "go!," or the transition of aircraft from US Airways to United and Delta.

Maybe this explains why the airline went to the "economy" employee medical insurance plan this spring. Heh.

Hopefully these issues are addressed more fully in the airline's earnings call.

Talk to you guys later.

July 25, 2006

Wright Agreement: Rut-Ro.....or Maybe Not

Wright As we said in June when this rather strange thing called the "Wright Agreement" first became public -- getting the said agreement signed, sealed, and delivered intact by Congress before the end of the year looked like a tall order to me.

Last week the House bill on the agreement was not even scheduled, and this week it's still not scheduled. As a result, it increasingly looks like nothing is going to happen here until after Congress returns from its summer vacation.

Opposition has cropped up on the Senate side as well.

This afternoon, the Associated Press reported that the Justice Department had weighed in on the deal.

According to the AP, the Justice Department's antitrust division told lawmakers in a letter that restrictions in the agreement to repeal the Wright Amendment would be "hard-core, per se violations of the Sherman Act."

According to the AP,

"The Justice Department said the gates to be torn down could be used by other airlines to enter and compete there. Razing them "is the very kind of collusive output reduction that the antitrust laws are designed to prevent."

Southwest is also limited to 16 gates in the deal, which the Justice Department said is a hard cap on Southwest service from Dallas for more than eight years and would not allow Southwest to expand its operations once the Wright Amendment is lifted without leaving cities it now serves or facing penalties for starting up service at another Dallas area airport.

The department said the parties to the local agreement are aware of the antitrust violations because they have sought blanket immunity for the agreement, instead of including an "antitrust savings clause," which the agency said is commonly done to preserve competition under antitrust laws."

However, stop the anti-trust press.

Just as this news was being digested Tuesday afternoon, officials with the Justice Department apparently told Sen. Kay Bailey Hutchison, R-Texas, that they had not taken a position on the legislation.

Hutchison released a letter late Tuesday in which William Moshella, the assistant attorney general for legislative affairs of the Justice Department told her, "It has come to my attention that some believe the (Justice) department opposes ... the Wright Amendment bill. To the contrary, DOJ and the (Bush) Administration have not taken a position on the bill. In fact, we see laudatory elements in the bill including the phaseout of the Wright Amendment restrictions. We share your concern about fixing this several decades old issue and of course want to foster the maximum amount of competition in the airline industry which will be a benefit to consumers.”

According to the Ft. Worth Star-Telegram Tuesday night, the Justice Department did not, however, specifically disavow the earlier "unsigned" Justice Department memo.

I've forgotten what round we're on in this one. I think we may be approaching the triple digits.

BuzzBomb To Mesa Airlines

Mesa
I first received a note about the situation with employee medical coverage at Mesa about two weeks ago. This was shortly after we BuzzBombed Northwest Airlines for the short two-week time frame employees there were given to respond back to the airline in regard to their choice of medical coverage.

That week I received a note concerning employee medical coverage at Mesa, which, frankly, I just didn't believe.

But, it appears to be legit.

Here's the deal.

It appears that Mesa recently gave their employees all of 3 days.... yes ...3 days... to sign up for their new medical insurance coverage.

Only after employees screamed about the situation did the airline extend it for a week or so.

Oh, and for those employees that have been hired by the airline after Feb. 1 of this year -- I'd suggest they take a really close look at their medical insurance coverage limits.

It was confirmed to us this week that the maximum annual payment allowed under the new Mesa self-insured plan is $25,000.

That's right.

$25,000 a year max.

According to our sources, management has pointed out to employees that if they want additional coverage, they can buy it themselves.

I'd suggest Mesa employees might indeed want to look at additional policies with $25,000 deductibles, as one relatively normal visit to the hospital could easily exceed that total. My personal experience certainly bears this fact out. I say this, because I have a feeling that new hires may not pay much attention to the fine print and think they have a viable maximum lifetime payment provision -- as is the case with the majority of health insurance plans.

Meanwhile, given that Mesa Chairman and CEO Jonathan Ornstein has what appears to be the most lucrative compensation package in the regional airline sector -- not to mention the most lucrative severance agreement should the airline ever be sold -- I find both the initial three-day sign-up period, not to mention the paltry annual maximum on medical payouts worthy of BuzzBomb recognition.

And of course, the new limits are only in effect for worker bees -- not members of the Mesa management team.

July 24, 2006

New York Times Outdoes Itself

Arpspan

Yes, I'm being facetious.

There's a big article entitled "Anger Management at American Airlines" by Jeff Bailey in today's New York Times on American Airlines.

Don't bother reading it. You aren't going to miss anything, unless you think news of airline employees being upset with each other and management is news.

Worse, the article completely ignores the true reason as to what caused the deterioration of relations between union leadership at the airline and the company earlier this year.

First, it seems pretty clear that this story was the idea of American Airlines. Why? First because the airline gave Bailey access to Arpey in the first place. Trust me. We all know how this works. Second, because at the end of the article the "It's us versus the unions and the unions had better get their crap together or else" message is pretty obvious.

Yep. A clear example of using mainstream media in an attempt to influence your own employees. And investors perhaps.

There is a lot of old stuff in here. Yes, we all know American is the only legacy carrier not to file bankruptcy. Yes, we know about the way the maintenance function at the airline has changed and how the airline is now outsourcing maintenance to keep the worker bees productive and on the payroll.

But the most egregious thing to me about the article is the fact Jeff doesn't even get close to the real reason for the recent meltdown in relations between American and its unions.

Furthermore, by including comments from management members at American concerning their bonus payments and the fact that these payments are so important in keeping top employees at the airline, members of management quoted, such as Dan Garton, keep the myth alive that the current meltdown in management/union relations is due to the fact the unions at the airline objected to bonuses being paid to members of management.

As readers of PlaneBusiness Banter are well aware, this is simply not true.

What union leaders objected to in January was the fact that the company sought to pay these bonuses out under a plan that would allow them to be paid out all in cash -- not cash and stock -- as the agreement negotiated between the unions and American had stipulated in 2003.

Instead, management at the airline sought to do a "Texas Two-Step" if you will, and not adhere to the payout limitations set out in the agreements that were agreed upon at that time.

When union members made this point, the company basically told union leadership to go file a grievance if they were not happy.

Not what union leaders wanted to hear. Especially after the company had worked so hard the last several years to "improve" their relationship with labor.

No, this sounded much more like the days of Gerard Arpey's mentor, Robert Crandall, all over again.

So much for that "warm and fuzzy" trust that management had sought to instill in the union/management relationship -- and so much for those millions the company has paid consulting group Overland Resource Group over the last few years in an effort to do so.

So since the New York Times was unable to do so, let's get the facts straight here. The dispute here was NOT about the bonuses being paid. It was about the way in which the airline sought to pay them.

Union leadership was vindicated when, in the grievance hearing this spring -- the judge hearing the case handed American their lunch -- siding with the unions.

But you never heard about this. Nor did this article even mention this process.

No, all you saw at the time was a press release touting the fact that American, and its board, had decided to change the way in which it would pay out the bonuses -- as though they had "worked this out" and this was after listening to complaints.

No, no, no. It was only after a judge forced them to do this.

But read today's New York Times and you'll get none of this. You'll get a story that appears to be hand fed to them -- with the underlying message basically voiced by a quote that is included by CEO Gerard Arpey.

"So, is Mr. Arpey's budding partnership with unions crumbling? 'I don't control them,' he [Arpey] said. 'I'm continuing to press on many fronts."

Sounds to me as though Mr. Arpey accepts none of the blame whatsoever for what is now going on.

Great.

Probably the most telling quote in the entire piece was the one from Robert Hughes, President of Overland Resource Group. Remember, they are the ones who have been working with the company and its unions since 2003 in an effort to improve union/management relations. “It’s a risk,” said Robert, “If it doesn’t go well, he’s [Arpey] put himself out there.”

Yes, he certainly has. He's also proven he still doesn't understand the mistake the company made earlier this year -- nor does it sound like he is ready to acknowledge it. In fact, it sounds just the opposite.

(Photo copyright Mark Perlstein/NYT)

July 20, 2006

Continental Reports In -- We're not Overwhelmed

Cal
The airline earnings parade continued today with Continental the latest to release its second quarter numbers.

The airline reported earnings of $198 million, or $1.84 a share. Before special items, the airline reported net income of $208 million, or $1.93 a share. Analyst consensus was for the airline to come in at $1.94 a share, so the airline missed that number by a whisker.

We're going to take a listen to the airline's earnings call tomorrow, as we were writing all day today. Just looking at the numbers in our PlaneBusiness Earnings Summary, however, it would appear that costs at the airline came in higher than we had expected, and RASM figures posted by the airline were not as strong as those posted by American.

Southwest was on another planet this quarter in terms of RASM performance. The airline saw RASM up 17.9% for the quarter. Outstanding revenue performance.

Let's hear it for fare hikes.

PBB Posted

Home-Typewriter Copy-1
Okay guys. PBB subscribers can now access this week's issue. We've got to get emails out and do some other minor housekeeping duties. We'll be back later.

PBB Publish Time

For PBB subscribers: Look for this week's issue to be posted by 7 PM or so today.

Thursday. Writing Day.

You know the drill. We're busy. Talk to you later!

July 19, 2006

For enquiring minds...

Wall-Street-Bull
Crude closed today at $72.66.

Very strange day on Wall Street today. First, it's clear the markets think the fighting in the Middle East is going to end sooner than later. I'm not so sure. Especially since today we saw a record number of bombings on both sides.

But secondly -- that thundering herd of bulls you heard today on the Street was put into motion thanks to Fed Chairman Ben Bernanke. Big Ben told Congress today that he thinks inflation can be controlled and the economy is slowing. The market did its own translation of those remarks: NO MORE RATE HIKES -- FULL STEAM AHEAD.

That is why the Dow Jones Industrials ended the day up 212.19 points, the second highest gain this year.

As for the airline sector today -- it doesn't take much to figure out what happened here. It's called the Southwest Airlines-American Airlines Profit Dance.

BuzzBomb to Spirit Airlines

Spirit April 11 2006

Okay, first things first. This BuzzBomb has nothing to do with employee benefits, lack of time to secure such things, or crappy things like that. No, we're still trying to confirm the details on our earlier BuzzBomb "teaser" from a few days ago. Look for this on Friday -- unless we hit some unexpected snag.

No, tonight dear readers I feel compelled to award a BuzzBomb to Spirit Airlines.

And what did the airline do to receive our ugly piece of notoriety today?

They were really, really stupid.

Yesterday the airline apparently went public on its website with a promotion called "The Hunt for Hoffa."

 41207645 Hoffa Ap203

Yes, like Jimmy Hoffa.

The airline promoted the game with the tagline, "Help us find Hoffa with our Hunt for Hoffa game and enjoy fares from just $39 each way."

According to an Associated Press report, the point of the game was to dig for Hoffa's body by clicking grids on the airline's site, "mirroring the massive effort at the Detroit-area horse farm in May."

Winners of the online virtual body part scavenger hunt were then taken to another page that greeted them with the message, "YOU FOUND HOFFA," thanking them for helping the "National Spirit Sale Center" find the missing union leader.

What in the world were these people thinking?

Obviously they thought it was funny.

Yes, well, we don't. And apparently we weren't the only ones.

The airline has now pulled the Hoffa body part scavenger hunt from its website. Promotion is over. Well, actually it's been renamed.

It's now the "Happy Sale."

I think we've said enough. You get the picture.

Spirit is more than deserving.

Northwest Reaches TA with Flight Simulator Techs

Even though it was a small group, and negotiations had not generated a lot of press, just as one of our readers pointed out here this week -- there was one other union group, besides the flight attendants, at Northwest, that had to come to terms with the airline.

That group was the flight simulator techs, who are represented by the IAM.

Wednesday it was announced that Northwest and the IAM have come to terms on a tentative agreement for the group.

Both the simulator techs and the flight attendants now have to ratify their respective contracts.

Profits Profits Everywhere

Southwestairlines
As expected, both Southwest Airlines and American Airlines reported nice second quarter profits today, with Southwest posting a record-setting net profit of $333 million, or 40 cents a share, more than double the $144 million, or 18 cents a share, the company reported for the same period last year.

Excluding special items, the Dallas-based company posted earnings of 33 cents a share.

This still blew away the analysts' pre-announcement consensus of 26 cents a share.

As for American, well, they can thank Southwest for continuing to raise fares throughout the second quarter as reduced capacity and more pricing power were clearly the big factors at work here.

American-Retro-Classic-Pedal-Plane-American-Airlines-Airplane-Ride-On
American reported a net profit of $291 million or $1.14 a share, up from $58 million, or 30 cents a share in 2005.

These numbers were right on the money in terms of analysts' forecasts.

Call for Referrals

Magnifying-Glass-Small-Lr
Speaking of blogs, we're getting ready to add our list of "Recommended Blogs" and other links to our main page here at PlaneBuzz. While we have our initial list ready to go, part of what makes an effort like this successful is the feedback from you guys. Do you have a favorite aviation blog you would like us to consider for inclusion in our list? Drop us a note. We'll send our crack team of investigators to check it out!

For Airline Geeks Only

Airshow
If the cost of attending personally was just simply not in your budget this year, AvWeek is blogging from this year's Farnborough Festivities.

Thanks to the legendary Queen of Regional Aviation, Benet Wilson, for the heads up.

July 18, 2006

Score: JetBlue 1, IAM O

Jetblue

Looks like those blue chips will not be loaded on JetBlue aircraft with union labels attached anytime soon.

The IAM's effort to become the representative for JetBlue's employees involved in ground operations, provisioning, and other related positions was dismissed by the National Mediation Board today.

The NMB dismissed the petition because the union failed to produce evidence that at least 35% of the eligible employees had supported holding a representational election.

JetBlue remains the largest airline with no union representation of its employees.

Reports Say Major Conflicts in Proposed Pension Bill Have Been Resolved

Wonders never cease.

The Wall Street Journal (sub required) reports tonight that House and Senate negotiators are close to coming to terms on a new pension bill.

PBB readers know that we have been following the progress, er, lack of progress on this bill since last year.

Negotiations on the bill have been mired in Potomac Muck for months, but last weekend, according to the WSJ,

"A bipartisan bloc of five House and Senate members began drafting a proposed settlement independent of Sen. Michael Enzi (R., Wyo.), the official leader of the talks and chairman of the Senate Health, Education, Labor & Pension Committee. The unusual process is politically delicate for all involved, but it has had the active support of House Majority Leader John Boehner (R., Ohio). "I think we are very close to an agreement," Mr. Boehner said yesterday. Montana Sen. Max Baucus, the ranking Democrat on the Senate Finance Committee, said there's a "good chance of getting this all wrapped up before the August recess."

Interesting. And yes, this does sound like a rather unusual way to get the bill put together.

According to the report, "The agreement is also expected to include a break for Northwest Airlines and Delta Air Lines, giving them a period of 20 years to fully fund their pension plans, rather than the seven-year deadline all other companies would face. The agreement would also require a so-called hard freeze of pension benefits for the airlines. AMR Corp.'s American and Continental Airlines would get 10 years to meet their current pension obligations and would also have to freeze new obligations."

Employees of Northwest and Delta swarmed the Hill this week, trying to cajole, connive, or, as a last resort, break some arms -- in an attempt to impress upon legislators not only on the importance of a pension bill -- but a pension bill that gives breaks to the airline industry.

Earnings Begin Tomorrow

Ah, our favorite time of the year. Make that one of our favorite four times of the year.

Tomorrow Southwest and AMR, parent of American Airlines report second quarter earnings. Continental Airlines reports on Thursday.

Overall, second quarter earnings results should be strong pretty much across the board for the Things with Wings. Get ready to see some of the best numbers posted by many airlines since early 2001.

July 17, 2006

July 17, 2006

Twa

It's hard for me to believe that it has been ten years since TWA Flight 800 went down over Long Island Sound. I was living in New York then, and I remember how hot that evening was. And I still remember the sickening feeling when I turned on the television and saw the first reports of the crash.

I remember thinking at the time, "It was just out there -- in the sky" -- not too far from where I was -- as I stood and listened to the drone of the newscasts.

Terrible night. Terrible, terrible night.

Airbus A350 Redesign Confirmed at Farnborough

A350

As expected, Airbus today released details of its revised A350 design.

What was not expected, at least for me, was that the manufacturer kept the A350 moniker. There was talk last week that Airbus would probably move to an "A370" tag in an attempt to distance the old from the new.

Technically the new aircraft is dubbed the X-WB.

Isn't that a wanna be television network?

Whatever. No, actually it stands for Xtra Wide Body.

Airbus now estimates it is going to spend about $10 billion in development costs on the Boeing 787 Dreamliner competitor. Estimated arrival time for the new baby is now 2012.

Meanwhile, I was *shocked,* simply *shocked* to hear today that Boeing did confirm in Farnborough that it is experiencing production delays with the 787.

Reasons? The two usual suspects. Excess weight and problems with suppliers.

The percentage of outsourced components on the 787 is unprecedented. As a result, this news really does not come as a surprise, as industry observers have said for years that the high number of outsourced elements of the new jet would be problematic when crunch time rolled around.

Northwest and Flight Attendants Come To Terms

Not much of a surprise here, as today -- the day Northwest would have been given the right to impose terms on the flight attendant union -- both sides announced that a tentative agreement has been reached.

Apparently both sides negotiated all night, with a deal being hammered out this morning.

There are no details out yet about the deal, except that it does provide for a quick vote by the flight attendant membership.

July 14, 2006

Judge Gives Mesaba the Okay to Throw Out Contracts

Mesaba
U.S. Bankruptcy Judge Gregory Kishel told Mesaba Airlines today that it can throw out its contracts with its three major labor unions.

The judge also said that Mesaba must give the unions 10 days notice if it intends to do so. This will allow both sides one final chance to come to terms on new contracts.

I would expect that we will hear shortly that Mesaba has indeed given notice they intend to reject the contracts.

PBB Out This Morning

For those anxiously awaiting this week's issue of PBB, we'll be up and posted this morning. No worries. Well, except if you need to go buy a barrel of crude oil for some reason this morning.

July 13, 2006

Crude Closes at $76.60 -- It's Not Done Yet

While the price of crude closed in New York today at $76.60, the shouting is far from over. Forward contracts are already trading at $80 plus, and I don't think Friday is going to be a good day.

Reason? Israel's attacks on Lebanon, which came after Hezbollah forces apparently fired some 80 rockets into Israel earlier in the day.

Oh, and if you were planning on flying into Beirut tomorrow, I would suggest you contact your travel agent and make other arrangements.

BuzzBomb Alert

It's Thursday. That means it's writing day for PBB.

But in the midst of all this mayhem, I wanted to let you know that we should be awarding another BuzzBomb shortly.

Following up on our recent award to Northwest Airlines, in honor of the way in which that company recently handled changes in its employee health care programs -- we have been told that we have another airline that has outdone Northwest -- in spades.

More to come.

Oil Surges to $76 plus

Let's see. Iran says it won't abandon its right to continue its nuclear energy program, there were have been two suspected explosions at a crude oil pipeline in Nigeria, and tensions between Israel and Lebanon are escalating.

Just the cocktail for higher oil prices, and the market, as of this writing, has not disappointed.

Will be interesting to see how high oil ends today.

July 12, 2006

Attention American Airlines: Cat for Hire

Max2

For Rent: Max the Cat. Proven Mouse Killer. Snake enthusiast. Avid bird watcher. Will work for cat treats, preferably salmon flavored.

EEK! Mice on a Plane! Mice on a Plane!

Mouse-Fat Sm
In what could be the basis for a script for the new Samuel. L. Jackson sequel to "Snakes on a Plane," (which will arrive in a theater near you in August), a television station in Kansas City this week went live with video shot by an American Airlines' employee of the Kansas City overhaul base.

According to the whistleblower in the report who did not want to be identified, American Airlines' N20, a Boeing 767, came in for maintenance service infested with mice.

The whistleblower told the station that workers had found mouse nests in air vents and dead mice in emergency oxygen masks. Video of the inside of the plane shows where mice ate through insulation. Several calls were apparently made to the
FAA concerning the infestation during the month of May, including one that said the mice had chewed through wires, and one that reported there were mouse nests near oxygen generators.

According to the aircraft logs, mechanics first noticed a mouse sighting on April 20 while the aircraft was at JFK. But the note was tagged as "deferred maintenance." Three days later there was apparently another incident where a mouse was observed.

The plane was, however, not flown into Kansas City for inspection until 11 days later.

Exterminators in Kansas City apparently told workers there could have been anywhere from 900 to 1000 mice on the plane.
American Airlines disputes that number. In a written statement to the station, the airline said they found only 17 live mice.

Not sure if three of them were blind or not. The report did not say.

While it's funny to joke about, the pictures of the mouse feces and the damage to the insulation of the plane were not particularly amusing to look at.

The airline says that the aircraft has now been completely rodent-proofed, all wiring inspected (and replaced if it had chewed on we assume), and, as of this week, the aircraft was back in the air.

As one industry expert said who was interviewed as part of the report, "It's probably now the cleanest, safest aircraft in the fleet."

Meanwhile, the line of the day goes to
American Airlines, which said that the situation was an anomaly, and while an occasional mouse has boarded, infestations simply don't happen that often.

As one distinguished airline observer we know noted after reading that line,

"We see a little StuAArt Little-type mouse, holding his little boarding card, strolling onto the aircraft in his little suit, carrying his little rollerboard."

July 11, 2006

This Time the Culprit is an Analyst Downgrade, not Oil

In case you're wondering why airline stocks are taking a dive today, this time the price of crude is not a factor.

Analyst Mike Linenberg at Merrill Lynch issued a downgrade on three of the industry biggies today -- US Airways, American Airlines, and Continental Airlines.

Mike downgraded the three to "neutral" from "buy" on valuation concerns, i.e, he thinks they are too expensive.

I don't disagree. Then again, the valuation issue is just a short-term concern. Longer-term we need to look at where the economy is headed in general for the rest of the year, and that, as I talk about each week, is certainly quite a nebulous thing. Although I think overall we're still going to see the economy continue to slow down -- as the year itself winds down. The only question is how fast the process will move, and if it will gain momentum later in the year -- or if it will flatten out before then.

Good Read

no_welch.02
For those of you who have read my comments concerning the good, the bad, and the ugly in terms of airline CEOs over the years, I had to smile when I read a column in Fortune this week by Betsy Morris entitled, "Tearing up the Jack Welch Playbook."

Amen.

July 10, 2006

Turboprops Return

When I spoke recently at the Regional Airline Association soiree in Dallas, (no, it wasn't particularly a joyous gathering) one of the questions that came up concerned turboprops. Was it my opinion that the lowly turboprop could indeed be on the cusp of a revival?

I said yes for a couple of reasons.

Economics and passenger comfort. If you've talked to the folks at Horizon, you know that they simply love the airplane.

Guess the news is getting out. Last week it was reported that Continental is looking to replace some of its smaller regional jets with 24 Bombardier 70-passenger Q400 aircraft.

All I know is that Horizon loves them, and the people I know who have flown on the aircraft have nothing but good things to say about them.

Good news for Bombardier -- which continues to sit on its hands, while Embraer eats its lunch in the 100-seat market.

Northwest Flight Attendants Resume Talks on Tuesday

Last week when we published PBB, we were told that there was a possibility that negotiators for AFA would sit down Friday -- after having just won representation of the flight attendants at Northwest Airlines on Thursday, and resume negotiations.

That didn't happen.

But talks will restart tomorrow, Tuesday, with AFA-CWA negotiators in place.

The judge here has given both sides until July 17 to come to terms on a new contract. If not, Northwest has been given the authority to impose contract terms on the group.

Any bets on what is going to happen with these talks?

Crude Closes at $73.61

Just amazing what a drop of roughly 50 cents will do. Most airline stocks closed higher today -- as the price of oil declined a smidgen.

Monday Night Television Alert

If you are at home tonight and looking for something to watch -- you might want to tune into the National Geographic Channel which can be found on your friendly cable or satellite channel lineup.

On tap tonight is a program that details the events of FedEx Flight 705 from April 1994. This flight, as you may recall, was hijacked by a suicidal crew member wielding a hammer and a spear gun. Apparently this is the first time the crew of the aircraft has authorized a production detailing the events, and members of the crew are interviewed as part of the program. This is part of the channel's "Air Emergency" series.

The program, entitled, "Suicide Attack" airs tonight at 10 PM EDT. It will also air Tuesday, July 11, at 1 AM, EDT.

July 7, 2006

TGIF: Crude Closes at $74.09

The price of a barrel of crude closed at $74.09 today. Yee haw.

However, while rising crude oil prices are bad enough, this has also been a bad week for jet fuel prices too, as I mentioned in this week's PBB. NY Jet closed at $2.16/gallon on Thursday, and I doubt it dropped back much today, although I have yet to check.

And no, jet fuel and crude don't always move in the same direction. Why? Because of the cost to refine jet fuel. A number of factors enter into this. The metric that is used to tell us just how expensive it is to refine a barrel of crude is called the crack spread.

As a result, sometimes the price of jet fuel dips below rising oil prices, sometimes it tracks the price of crude fairly closely. Other times -- it tracks above the price of crude.

July 6, 2006

PBB Posting Time

For PBB subscribers, an update on our publishing time this week. Due to the delayed issuance Thursday of the May DOT report, and other odds and ends, look for this week's issue to be posted Friday.

Breaking News: AFA-CWA Wins Northwest Election

Today is writing day for yours truly.

Yes, I do have a day job, and that is writing
PlaneBusiness Banter.

But I thought some of you might be interested in this news that just sailed into the PB email bag.

Here's the release:


AFA-CWA Wins NWA Flight Attendants Representational Election; PFAA Pledges Smooth Turnover

Professional Flight Attendants Association officials said today they will cooperate with the Association of Flight Attendants-Communications Workers of America (AFA-CWA) as that union now takes over representation of Northwest Airlines following their representational election victory.

After polls closed earlier today, the National Mediation Board announced that AFA-CWA won out over PFAA to serve as the NWA Flight Attendants new bargaining representative. The final results were 2,668 votes for PFAA, and 4,349 for AFA-CWA.

“While we are disappointed with today’s results, as a group all Northwest Flight Attendants must now fall in ranks behind our new leadership,” said PFAA President Guy D. Meek. “We must now look to the future, and fight together to get the best contract possible for our group.”

PFAA served as representative for NWA Flight Attendants from June 2003 until today during perhaps the most difficult times the airline industry has endured.

“Despite the many problems we had to face, it was a great three-year run, and we’ll always be proud of our service on behalf of NWA Flight Attendants,” Meek said. “On behalf of PFAA, we would like to thank our group for allowing us to represent them.”

July 5, 2006

Crude Closes at All-Time High -- $75.19/barrel

Just goes to show what a few North Korean missiles will do.

Actually, today's record-breaking move was motivated more by gasoline supply concerns. But those geo-political factors didn't help much.

Look for gas prices to be closer to, or above, $3 a gallon by this weekend -- depending on the weekly energy inventory numbers the Department of Energy reports Thursday.

Airliners International Show This Weekend in DC: Airline Geeks Unite

If you are in the DC area, or even if you're not, be sure and check out the 2006 Airliners International Show this weekend at the Sheraton Premiere at Tysons Corner. Billed as the "World's Largest Airline Collectibles Show," it should be a good one this year, with over 200 tables of airline memorabilia looking for a new home. If you go, send us some photos of your adventure. Or your purchases.

Airbus DelayGate: Noel Forgeard's Departure from EADS Followed by News of Audit

forgeard
Seems like only last week that we heard EADS co-CEO Noel Forgeard proclaim that he was not going to resign. Never. Ever.

Actually it was last week.

But obviously someone finally sat Forgeard down and explained the "Don Carty" facts of life to him the end of last week, as Sunday it was announced that both Forgeard and Airbus CEO Gustav Humbert had resigned over the Airbus A380 DelayGate scandal. All I can say is I would not have wanted to be in the room with Forgeard and the folks from DaimlerChrysler the last time they met. (Daimler Chrysler AG is EADS's largest shareholder, and it has been reported that the company had been putting heavy pressure on Forgeard to resign for two weeks.)

Forgeard will be replaced by Louis Gallois, the 62-year-old head of the French railway system and a former senior executive at two French aerospace companies.

Humbert will be succeeded by Christian Streiff, 51, who most recently worked at the French company Saint Gobain Cristaleria, EADS said Sunday in a statement.

The company's decision to continue to go with split management team has not been met with overwhelming approval by many close observers or the EADS debacle.

"The major shareholders clearly recognized the need for change, but this is like treating a broken leg with a band-aid,'' said Doug McVitie, managing director of Arran Aerospace, a forecasting company based in Dinan, France in a Bloomberg article Sunday. "They need to streamline the management structure and have one CEO with complete authority. That they haven't done yet shows this is still a Franco - German political entity.''

While Humbert threw himself under the (Air)bus more as a symbolic measure than anything else, I'd say Forgeard is in the much more precarious position here, having personally profited from some very suspect stock sales in March. Forgeard, as well as other members of his family, sold 5.2 million euros ($6.6 million) of EADS shares, giving him 2.5 million euros ($3.2 million) in gains. Forgeard, of course, contends he knew nothing about the probable additional delays in the A380 delivery schedule at the time. Instead, he said in a statement that the sales were done with "strict respect for ethics and the rule of law.''

The AMF, which regulates the stock market in France, is investigating these sales, as well as others undertaken by other EADS officials during the same time period.

Meanwhile, today, Britain's BAE Systems said that it has told Airbus it will undertake a full audit of the Airbus Group.

Talk about bad timing.

BAE was scheduled to sell its 20% stake in the European planemaker in June. However, with shares of EADS sinking as a result of DelayGate -- a valuation performed for BAE over the last week came in well below the expected price BAE had expected to make on the sale. Prior to the DelayGate news breaking, it had been expected that BAE could pull in as much as 5 billion euros ($6.6 million) on the deal.

But the valuation this last weekend not only was below that figure, it was below the 3.5 billion euro ($4.5 million) value the 20% stake carries on the EADS balance sheet.

BAE said in a statement today that it is in their shareholder's best interest to conduct the audit, to determine the best course of actions for its shareholders.

It is anticipated the audit will be completed by the end of August.

What a mess.

We still think one of the best takes of DelayGate so far came from Richard Aboulafia, analyst with the Teal Group. Here are two excerpts from his recent take on the issue.

"What’s bizarre about the recent Airbus A380 announcement is its excuse.'Some wires are tough to install. So production will be cut by 70% next year, and the delays will continue after that.'Damn that Radio Shack. This is the dumbest effort to deflect blame for the disaster (okay,second dumbest; first prize goes to Noël Forgeard’s pinning the blame on Gustave Humbert: 'Mon Dieu! Leave the company in this German’s hands for a few months and this happens!'"

Later he adds, "The situation was bad enough before the new delays. The new schedule implies an ongoing ulcer that distracts from the other 90-95% of the market. In the interests of fairness, here’s some free (and obvious) advice to Boeing: as soon as the 787 is out the door, launch the 797 narrowbody. Do to the A320 what the 777 and 787 are doing to the A330/340."

"To sum, if there is no hope of quickly turning the A380 into a competitive plane with decent economics and then shifting design and production resources to more important segments, kill it.

The write-offs and political shame will be terrible. But national, continental, and corporate pride should have nothing to with what is essentially a business decision. More importantly, the alternative — to keep going and risk losing everything—is worse."

July 4, 2006

Transmission Problems Taken Care Of

Okay folks. The two issues from this weekend have been remedied. Email works, and Movable Type is now playing nice -- ready and waiting to accept your comments.

Users to PlaneBuzz, We Have Transmission Problems

If you are in here at all, you are aware that we opened up PlaneBuzz to PlaneBusiness Banter subscribers last week, as we continue to beta test the site.

Please be patient as we continue to work out the kinks. It is one of those chicken and egg things. We want things to work right, but we really can't know if they are working right until we get folks in here, testing the various links, systems, etc.

Friday night and Saturday we were down for a few hours with a software upgrade and other things. Some of you could not access the site. That problem is over and done with.

Monday I received notes saying that the Buzznote email address was not working properly and that the Typepad registration process is sending back weird messages to those trying to sign up to comment.

First, the email issue. That was operator error on my part. The address is now working with no problem. Buzznotes@planebuzz.com

However, please note. This is a different address than I had originally posted! Please make note of the change.

Yeah, I know. Time for 100 lashes with a wet noodle for yours truly.

As for the Typepad registration issues -- we still have those as of this morning. We're working to resolve the problem. Big problem, as we definitely want all of you to be able to comment.

Thanks to those of you who have taken the time to let us know of problems you've encountered.

At least we don't have pieces of cracked foam core to worry about. Then again...that problem might actually be easier to fix.

Happy Fourth of July

What would the Fourth of July be without a story about grilling? We already did our yearly "Ode to the Hot Dog" for PlaneBusiness Banter readers this week. Hey -- it's a tradition. What can I say?

114158Main Sd Shuttledog

Even though that "Shuttle Dog" creative project in eating from NASA was truly revolting to contemplate.

So today it's time to alert you to a story in the weekend edition of the Wall Street Journal. (sub requred) Not only is it about grilling, but it features an airline CEO -- Jeff Potter of Frontier Airlines.

Hmmmm.

This piece screams "PR Placement" to me. I noted last month that Frontier Airlines announced that it had hired a Denver-based PR firm, Linhart McClain Finlon to help "boost" awareness of the airline on a national level. I would bet money this is a result of the firm beating the media pavement.

Whether or note a low-cost airline should not just hire a cracker-jack internal PR person to do this type of thing is an argument I won't get into today. After all, it is a holiday.

What I will comment on is Jeff's recipe for Chimichurri Marinade. I'm a big fan of grilled steak with Chimichurri, and this recipe sounds like it would work pretty well.

Hc-Gi273 Potter 20060629182523-1

Jeff Potter's Chimichurri Marinade

Yield: 2 cups; enough for steaks for four
Active preparation time: 15 minutes

1 teaspoon chicken bouillon, preferably Maggi brand
8 peeled garlic cloves
3 cups tightly packed fresh flat-leaf parsley
1 cup fresh cilantro
½ cup extra-virgin olive oil
¼ cup fresh lime juice (from 2 or 3 limes)
¼ cup red wine vinegar
2 teaspoons salt
1 teaspoon freshly ground pepper
Dissolve chicken bouillon in ½ cup boiling water and set aside to let cool.

• With the motor running, drop 1 garlic clove at a time into a food processor. Scrape sides of bowl. Add cooled bouillon, parsley, cilantro, olive oil, lime juice, vinegar, salt and pepper. Blend.

• Pour 1/3 to ½ of marinade in bowl, press a piece of plastic wrap directly on surface, refrigerate until ready to serve as sauce. Use remaining chimichurri as a marinade for flank steak.

And oh, the best quote from Jeff "Mastergriller" Potter? That he first saw the 40,000 BTU grill he uses on the deck of his house in an in-flight magazine -- of another airline.