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February 28, 2007

US Airways Pilots File Suit Against Airline

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As if migrating to a new reservations system was not enough to cause an airline angst, today the pilots at US Airways filed suit against the airline, claiming that the airline's move to one reservations system, and one electronic code scheduled to take place this weekend -- violates pre-merger agreements to run both airlines separately until new single contracts are in place.

This comes after the Arizona Daily Star reported Wednesday that the International Association of Machinists filed a federal lawsuit Monday, accusing US Airways of using bankruptcy court protection to avoid giving pay raises.

The paper reports arbitration on the matter was scheduled to begin Tuesday, but US Airways filed a complaint in bankruptcy court to block it, prompting the IAM lawsuit. US Airways refused to attend the hearing, according to union representatives.

"US Airways is attempting to use the bankruptcy court to shield itself from its contractual obligations 17 months after exiting bankruptcy," said IAM General Vice President Robert Roach, Jr. "If companies can get bankruptcy court protection without filing for bankruptcy, no business contract, labor or otherwise, is enforceable. Lessors, vendors, bondholders, stockholders and other creditors are also at risk."

US Airways spokeswoman Andrea Rader, told the paper the carrier concluded the dispute "was properly a bankruptcy issue." "The more we looked into it, we realized it shouldn't be in arbitration," she said.

The union argues that the 2005 merger of US Airways with America West forced a change of control, which then triggered contractual clauses guaranteeing annual raises.

In other US Airways' related news, the airline is apparently in talks to refinance its debt.

In a statement today the airline said that it had entered into an agreement with Citigroup Global Markets, Inc. and Morgan Stanley Senior Funding, Inc., as Joint Lead Arrangers, to arrange a debt financing transaction of up to $1.6 billion. The deal would see US Airways to refinancing $1.25 billion of its existing senior secured credit facility, refinancing $325 million of unsecured debt, while raising its incremental liquidity.

Got all that? Okay, good. You're going to be tested on it in the morning.

Ticker: (NYSE:LCC)

AirTran versus Midwest Airlines: Time to Stock Up on Tender Vittles

Woo hoo.

If anyone out there thought that management at Midwest Airlines had been a bit too reticent in terms of responding to some of AirTran's comments about their airline and a potential merger -- I think those thoughts can now be safely tucked aside the freshly-opened bag of Tender Vittles we just purchased for these two today. Yeah, you can forget the warm and fuzzy chocolate chip cookies.

Flying-Cat-Fight Midwest Airlines issued a statement today to its shareholders -- rebutting many comments that have been made by AirTran or its fearless leaders over the last couple of months.

Here you go, in all its glorious claw-bearing beauty.

February 28, 2007

Dear Fellow Shareholder:

During the past several weeks, the Midwest management team has met with numerous Midwest shareholders, customers, and business and civic leaders. We have received consistent, strong support for our strategic growth plan and for our long-standing commitment to providing travelers with an unparalleled travel experience. It is clear that our strategic plan is resonating with investors. We believe that investors recognize the value of our plan and believe in our management team.

However, we have also been confronted by many false and misleading claims made by AirTran about its offer and Midwest's business -- comments we believe are designed to divert attention from AirTran's deteriorating performance, lack of planning, and absence of a credible and profitable growth plan for its future. It is time to set the record straight.

AirTran's Business is Deteriorating

AirTran's low-cost carrier business model is in trouble. By virtually any metric, AirTran's business is deteriorating. AirTran is desperate to buy Midwest to stave off further erosion of its business.

-- AirTran's profits are deteriorating while Midwest's are improving. For the last half of 2006, AirTran's earnings per share (EPS) dropped $0.09, year over year, to a $0.09 per share loss. During that same period, Midwest's EPS improved $2.58 to a positive $0.25 cents per share.

-- AirTran's share price lags behind its peers and Midwest. Between January 3, 2006 and February 27, 2007, the average share price of low-cost carriers is down 7.7%, while the average share price of network carriers is up 35.5%. Midwest's share price is up an impressive 156.1% in the same period, compared to an unattractive 35.8% loss of value for AirTran's shareholders.

-- AirTran's earnings continue to disappoint while Midwest's show strong momentum. AirTran has failed to show a profit in three of the last four quarters, while Midwest has been profitable in three of the last four quarters. In an effort to obscure its own current poor performance, AirTran's statements about Midwest focus on years-old data that is heavily influenced by the after-effects of 9/11, which devastated the airline industry.

-- AirTran's load factors are on a downward track. AirTran's load factor declined 0.7 percentage points in 2006 and declined again in January 2007, down 1.6 percentage points. On the other hand, Midwest's load factor increased 5.2 percentage points in 2006, with increases of 6.6 percentage points in December 2006 and 3.8 percentage points in January 2007, placing Midwest among industry leaders in load factor improvement. AirTran's declining load factors reflect a pattern of excessive capacity expansion leading directly to lower unit revenue, lower profits and lower value for AirTran shareholders.

-- AirTran appears to be focused on adding capacity, not profits. In the last half of 2006, Midwest's revenue per available seat mile (RASM) was 12.40 cents -- a 12.1% improvement from the last half of 2005.AirTran's RASM was 9.54 cents in the last half of 2006 -- down 2.1% from the same period of 2005. AirTran's deteriorating RASM performance underscores its inability to efficiently utilize its existing capacity. To further compound the problem, AirTran has committed to purchasing an additional 60 planes with no clearly articulated strategic plan to deploy and utilize these planes on a profitable basis.

AirTran Consistently Fails to Deliver on Its Promises

AirTran leaves a trail of broken promises in markets it enters with great fanfare. AirTran typically promises growth and enhanced service in new markets, only to quietly retreat when it can't keep its word. Since 2004, AirTran has exited 29 markets it had promised to serve, sometimes returning in a scaled-down version and sometimes not. Notably, at Dallas/Ft. Worth, AirTran promised a bustling mini-hub with 30 flights a day to seven destinations by the end of 2004. Regarding Dallas/Ft. Worth, AirTran famously boasted in 2004, "No matter how intense the competition gets ... We've never been driven out of a market before, and there have been plenty of attempts to push us out ... We're here for the long haul." The reality told a far less impressive story: AirTran never attained more than 17 flights a day at Dallas/Ft. Worth and now, two short years later, it has only eight flights a day to two destinations. Similarly, AirTran dropped service at Washington Dulles from 16 to seven daily departures and Pittsburgh from 13 to six.

Now AirTran wants everyone to believe that it will add and retain 74 daily departures and 29 new destinations out of Milwaukee alone. 23 of those markets are smaller than the smallest market AirTran currently serves. In fact, AirTran's speculative plan for Milwaukee would have more flights and many more destinations than its current operation in Atlanta -- a city much larger than Milwaukee. Why believe AirTran this time?

AirTran Offers an Inferior Product and Inferior Service

Midwest has been recognized as "the best" domestic airline more than 45 times in the past 17 years by a variety of renowned ratings surveys. AirTran ranks poorly, if at all, in many of the same surveys. Most recently, Midwest placed first among single class service in the 2006 Conde Nast Traveler Business Travel Awards poll; AirTran finished last of 10 in its business class category. In fact, Midwest far outranked AirTran on all five of the categories on which both airlines were rated. At Midwest, we know that customer service excellence requires committed, highly trained and loyal employees. AirTran has not demonstrated that it has the will or the infrastructure to maintain or build the marketplace differentiation that Midwest has mastered for more than 22 years.

Midwest's Plan Provides Shareholders With Greater Value Than the AirTran Offer

The Midwest Air Group Board of Directors recently reiterated its belief that AirTran's offer is inadequate because it does not fully reflect the long- term value of Midwest's strategic plan, including our strong market position and future growth prospects. Midwest's superior performance and positive trends demonstrate that the Midwest business model and strategic plan provide attractive value creation. We believe that Midwest's business model has staying power and can thrive in the restructured aviation marketplace. With a capable management team delivering strong results, projected 21% capacity growth in 2007 and projected 10% compounded annual capacity growth over the next three years, we believe Midwest shareholders will enjoy superior results by owning shares of Midwest. Midwest understands its markets and how to grow them profitably.

Midwest Air Group's Board of Directors has unanimously recommended that you reject AirTran's offer and not tender your shares. All of us on the Midwest management team fully support this position. We believe it is far wiser for you to own and hold Midwest stock than to tender your shares to the AirTran offer -- a company of declining value and broken promises. We are working hard every day to make sure that Midwest lives up to its potential. Thank you for your continued support.

Sincerely,
/s/ Timothy E. Hoeksema
Chairman and Chief Executive Officer

Now, being the cynical type I am, here's my bet as to why Midwest decided to drag out the heavy artillery. I would guess that AirTran has been making some inroads with some major shareholders involved here -- thus the need for a full-frontal assault.

Ticker: (NYSE: AAI, AMEX:MEH)

February 27, 2007

Boo Hiss to Boeing

Postponed
So what's the deal?

Today it was reported that the delivery of that new gorgeous Alaska Airlines' retro-livery 737 aircraft has been delayed by Boeing.

The plane, called the "DC-3 Starliner," was expected at ceremonies in Seattle Tuesday and in Alaska on Thursday. Those receptions have been canceled, Alaska Airlines told the Puget Sound Business Journal.

The livery was voted on by the airline's employees -- and is part of the airline's 75th Anniversary.

"The Boeing Company has notified Alaska Airlines that it is unable to deliver a 737-800 adorned in a classic paint scheme on Feb. 27 as scheduled," officials at the Seattle subsidiary of Alaska Air Group said in a statement.

Boo hiss to Boeing.

Ticker: (NYSE:ALK, NYSE:BA)

FInal Market Stats for the Day

Dow Jones Industrials 12.216.56 Down 415.86 (-3.29%)
Dow Jones Transports 4863.76 Down 172.96 (-3.43%)
AMEX Airline Index 56.03 Down 2.30 (-3.94%)
Nasdaq 2407.87 Down 96.65 (-3.86%)


These should be fairly close, although it appears that complaints have surfaced that the new "hybrid" system of the NYSE was not able to keep up with the volume, and as a result, we saw changes to the final figures after the official close of 4 p.m.

Market Update: Dow Jones Down 475 Points

At 3 p.m., the market took a header. The DJI A dropped about 200 points almost immediately -- falling back to more than 500 points down on the day.

However, as I write this, looking at numbers from 3:28 ET, prices seem to be creeping back up.

Here's how the stocks we track at PlaneBusiness are faring with about 1/2 hour to go before the close of trading.

Stocks227.07

Foto Fridays?

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Little did I think my little note posted in the wee hours last week about possibly posting photos from readers would get a resounding response, but it did! Thanks for all the comments, and in some cases, photos.

So I tell you what. We'll do it. As long as the photos are taken by you -- and they have something to do with the airline industry -- they are fair game.

For now, I'll simply post them here -- but we'll set up a separate little gallery page for them going forward so they won't slow down the speed of the blog pages for all other readers.

Cool.

Be creative!

This Friday I'll post the first one in our Friday Foto series. To have your photo considered for posting, just send a copy to me at buzznotes@planebuzz.com. Be sure and put "Foto Friday" in your subject line. You'll need to tell me what the picture is of (if it's not evident), the name of your picture, and your name.

Oh, and to protect your images, I'd suggest you send a .jpg, no more than 800 pixels in any direction, and no higher than 72 dpi in resolution. That way nobody can rip your pics off and print them, because the resolution will only be adequate for web purposes only.

It's Tumult Tuesday On Wall Street

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We've mentioned the red hot stock market in China in PBB more than once of late -- primarily because it's gyrations and overheated condition have contributed to the two Chinese airline stocks we follow performing in a similar fashion, i.e, jumpy, volatile, and overheated.

For those paying attention, it was also interesting to note that China's consumption of oil was actually much lower for the last six months of 2006 than had originally been forecast.

Good news for us -- but a sign that perhaps the overheated Chinese economy was hitting some bumps along the superhighway of economic froth.

Today -- in case you're wondering why Wall Street is having such a bad day -- there's one big reason. The falling stock market in China.

The Shanghai Composite Index, which tracks shares listed on the larger of China's two stock exchanges, tumbled 8.8% to 2,771.79 before closing Tuesday. The decline rank as its biggest single-day drop since the benchmark plunged 9.4% on Feb. 18, 1997, which reportedly came after the death of reformist Communist Party elder Deng Xiaoping.

As for Wall Street, as of 2:46 ET, the Dow Jones Industrials are down a hefty 260 points, or just a little more than 2%. As for the airline sector, it's a sea of red with no airlines up on the day as of this writing.

Meanwhile, the price of oil is hanging around 61.60, after having been as high as 62.25 in intra-day trading.

February 23, 2007

Crack! Adam Air 737-300 Buckles After Hard Landing

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That's a sad looking aircraft if I ever saw one.

According to the Sydney Morning Herald,

"Indonesia's government has grounded budget carrier Adam Air's six Boeing 737-300 planes for safety checks after one of its aircraft cracked during a hard landing, officials said on Thursday.

The Boeings, almost a third of the airline's fleet, will not fly until they have passed the safety inspection from the government, Adam Air safety director Hartono said.

The Indonesian government has stepped up safety investigations since an Adam Air plane carrying 102 people disappeared in January."

You can read the rest of the story here.

February 22, 2007

FL Group Now Largest AMR Shareholder

Well, isn't this interesting? FL Group, which took a substantial position in AMR earlier this year, said today that it has increased its position in AMR to 8.63%. Unless one of the two biggest AMR shareholders has recently upped their positions, that would indeed make FL Group the largest single AMR shareholder.

Very interesting. Because as we all know, investment funds like this don't take a position in a company unless they see a potential for turning a nice profit. And I can't see that happening unless some kind of "deal" is part of the short-term landscape.

Ticker: (NYSE:AMR)

Photo of the Week?

For those who don't know, I have an expensive hobby. It's called photography.

Looking for photos every week as I do for both PlaneBuzz and PlaneBusiness Banter, it struck me that there are a lot of you out there who might have photos you'd like to share with us.

I think it could be cool. Or maybe not. But I at least thought I'd put the offer out there.

I guess what started me thinking was when I was in Flickr this week and noted some really nice airplane shots by a particular member there.

Anyway, if you do happen to shoot something you think our readers would be interested in looking at and it's in some way airline related, drop me a copy. Worldwide fame and notoriety could be yours.

Well, maybe not, but it's always cool to see one's work online.

PBB is Posted

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It's here! PlaneBusiness Banter subscribers can access this week's issue by clicking here.

PBB Posting Update

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We will post this week's issue of PlaneBusiness Banter today as normal. (Even though we're working on a VERY shortened week here in Mardi Gras land, I'll have you know!)

Look for us a bit later.

United and Pilots Come To Terms on Pilot Shortage Issue

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Wednesday United Airlines announced that it and ALPA had come to terms on what it calls a "cost-neutral" contract modification.

The agreement, which still has to be voted upon by the ALPA membership, is an effort to primarily alleviate the pilot staffing shortages the airline currently is experiencing, and would most likely see grow worse as we move into the summer months.

Here is a list of the included modifications, as per the employee hotline message that was sent out to United employees.

Contract Modifications Outline

Trip Construction Items:

* LCO pilots gets the same trip and duty rigs as mainline pilots, however, the look back pay system goes away.
* Duty based rest system instead of flight time based rest system.

Schedule Construction Items:

* All pilots have an 89 hours schedule cap.
* Pilots may voluntarily increase their cap from 89 hours to any value between 89 and 95 hours (in no less than 30 minute increments).
* Minimum Guarantee for line holders is increased from 65 hours to 70 hours to equal the minimum reserve guarantee.
* Trip Trade floor is changed from 50 hours to 65 hours.
* Company may offer Surplus Reduction Lines at 35 hours (1⁄2 of minimum guarantee).
* PBS Construction floor increased from 65 hours to 75 hours.

Actual Operation Items:

* Line Guarantee for each lineholder - the pilot's Pay Credit at the beginning of the month will be protected from being reduced by reassignments/cancellations, etc.

* The pay credit that is protected will increase and decrease with trip trading.
* If a trip or portion of a trip is cancelled the pilot will be permitted to pickup trips under 20-H or will be assigned other flying or telephone standby on each of the days the original trip was scheduled to operate. The Company must make this assignment only once during the cancellation, however, such assignment may involve all the days of the original assignment.

* The reassignment language in Section 20 is changed from 16 hours and 8 hours into a day off to 14 hours and 10 hours into a day off.

* 16 to 14 example:
If a pilot is scheduled to get home at 16:00 and he is reassigned, the reassignment must have the pilot scheduled to be home no later than 0600 instead of 0800.
* 8 to 10 example:
If a pilot is scheduled to get home at 20:00 and he is reassigned, the reassignment must have the pilot scheduled to be home no later than 1000 instead of 0800.

* If a lineholder falls one day below the minimum days off for operational reasons (not due to a reassignment) his schedule will not be repaired.

Training Freeze Items:

* All freezes for future LCO bids will now equal the freezes for the mainline.
* If a pilot currently has a freeze greater than 48 months, that freeze will be reduced to 48 months.
* The time permitted to get a pilot scheduled for training is increased to nine months from the current six months. The pay trigger associated with a new bid will remain unchanged at 62 days after the advertised effective date.

Miscellaneous Items:

* Pilots vacating their lines for OE training will be paid the line value plus three hours instead of cap plus three hours.

* Pilots will be given the option of doing some TK CBT training at home and paid at 2.8 hours per day (limit of eight hours per day)

* PC/PT required pre-study limited to 25 hours. Currently no contractual limit.

* All credit time above 95 hours will be put in the bank.

* Beginning in December of each vacation year if the company solicits, pilots may be permitted to sell some of their unassigned vacation. The amount subject to be sell back is subject to limits to reduce manpower implications. This will reduce the number of pilots that have vacation involuntarily bought back.

IAD-PEK Driven Temporary Wide Body Items:

* In order to reduce international "W" trips, reduce involuntary TDY, reduce 8-L-6 assignments, and reduce re-assignments, the following scheduling caps are temporarily increased through the October Bid month:

o 777 and 400 increased from 89 to 96 hours.

* In order to permit pilots to be released from flying to attend training for their wide body bids, the following scheduling caps are temporarily increased through the October Bid month:

o 767 increased from 89 to 92 hours.

* No changes to the 737 or 320 scheduling cap of 95 hours until November.

* All credit time in excess of 96 hours through October will put in the bank

* In November, all pilots will go to the voluntary Flexible Cap outlined in Schedule Construction Items above.


Any United pilots out there who would like to comment on these changes and modifications? Are these enough? Is this a good move on the part of the company? Let me know what you think.

February 21, 2007

JetBlue Stock Swings

Since we just mentioned JetBlue stock, let's take a look at how the shares have fared over the last five days.

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As you can see, shares have recovered nicely. Adding to that recovery was a note this morning from Mike Linenberg at Merrill Lynch in which he said that shares had been oversold. He upped his rating on the shares to "buy."

Ticker: (JBLU:Nasdaq)

Blue, Blue, Our World is Blue

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Well, since last week when it appeared JetBlue was suffering from a weather-related meltdown of sorts -- this story has certainly changed complexion.

Now we know it was not just a mistake to try and get those planes up and flying -- the ones that ended up freezing to the concrete at JFK. We now know that this decision then kicked off what appears to have been a collapse of the airline's crew and scheduling system. This collapse was then complicated by the fact the airline's reservations system and customer call function were totally unable to handle the demand brought on by the airline's shutdown.

Was the airline just deaf, dumb, and blind as to how to be prepared for such a situation?

From what I hear, no. But they were too slow in starting upgrades that are now in progress. Or, as someone said to me this weekend, "We just grew this damn thing too fast over the last two years."

I tend to believe that. As I wrote over a year ago -- JetBlue was moving "Too Much, Too Hard, Too Fast."

I think that about says it all.

The airline has massive internal infrastructure issues to contend with here -- this is just not a matter of leaving some planes off the gate for 10 hours. The problems are much deeper.

On the good side, as I wrote in PBB last week, as this mess was only beginning to show its really ugly ramifications, I had to give CEO David Neeleman high-fives for being out there in the public and taking full blame.

This week, he's been out even more -- and guys, that is not easy to do. And I can count on one hand the times we've seen other airline CEOs do the same thing.

I don't think there's any question that his personal efforts to numb the sting felt by their customers, by going out and taking the blame, and offering up the airline's own version of a "bill of rights" for passengers is brilliant from a crisis communications standpoint.

Excellent decision on his part to get out there and take the lumps.

His YouTube video effort was also a brilliant idea. It appears to be unscripted. David is just David, talking as he normally does. It plays as though you're listening to some guy in his house. Basement with a JetBlue sign behind him? Perfect feel. If they had trotted out some professionally produced slick piece of video, the effect would not have nearly been as positive. Good decision on someone's part.

But in the meantime, the airline's operations systems are in need of serious upgrades -- and quickly.

Not to mention the stock. Down 7% on Tuesday when the markets reopened, I would have seen this as a buying op, if one was so inclined. And apparently many were.

Northwest Doesn't Waste Much Time Responding to the Intruder

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As we conjectured about here last week, Northwest didn't take much time to unload the expected heavy artillery -- and aim it directly at Frontier's recently announced expansion into Memphis.

Northwest announced Monday that it was going to increase its flying out of Memphis to Orlando, Denver, and Las Vegas. Duh. So are we surprised? These are the same three routes Frontier announced last week.

And on the Denver routes, (just in case Frontier missed the intent of the announcement) the airline really brought out the reinforcements as the airline will move from flying three fifty-seat regional jet flights a day to three A319s and A320s. You can do the math.

These changes take effect June 7.

Northwest also announced new service from Memphis to Seattle and Indianapolis as part of the same release.

Good luck to the folks at Frontier.

Ticker: (FRNT:Nasdaq)

Yo! It's Time to Get Back to Work

Okay, enough bead catching, enough great food, and enough of watching celebrities look strange riding atop floats.

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Case in point: James Gandolfini, aka Tony Soprano. "T" was chosen to be the King of Bacchus this year -- a gig that not only lets you ride the King's float in one of the biggest parades of the season -- but you are asked to do a variety of charity meet and greets as well.
Gandolfini1

At times, James looked a bit like a fish out of water up there on his float, then again, sometimes he did look like he was having a hell of a time. I think maybe it had something to do with the tights.

And what was with the hat and the cigar? is this Tony or is it James?

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Ah, the Bacchigator float. One of my faves. It can hardly make corners without taking people out behind it.

On the other hand, while I am not a big Taylor Hicks fan, I had to admit the man looked like he was really enjoying himself the other night as he reigned as the celebrity monarch of Endymion, one of the other city's "super krewes" as they are called.

All in all it appears it was a good Mardi Gras for the city -- larger than last year, and with few hiccups to speak of. One small step forward. For that we can all be thankful.

February 20, 2007

It's Mardi Gras!

382339941 4Edfa4Af77 M

Just a reminder. While it may be the day after President's Day in the rest of the world, it's Mardi Gras here in New Orleans.

We'll be back to the wacky world of airlines tomorrow!

(Besides, this will give JetBlue one more day to get its act together.)

February 16, 2007

PBB Now Posted

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Actually we're still doing final tweaks, but hey, it's Friday and I know you guys are antsy to read. PBB subscribers can access this week's issue of PlaneBusiness Banter by clicking here. Be aware that the editing drones are still in there doing their thing.

PBB Posting Update

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We're here. Look for this week's issue to be posted this afternoon. (Just didn't want you to think we'd chucked it all and run off to Mardi Gras.)

Aviation Director Sought

Helpwanted
DIRECTOR OF AVIATION

Broward County, Fla., seeks dynamic and progressive executive to help lead its airports operations as the director of aviation. Broward County is located at the center of the southeast Florida “Gold Coast,” between Palm Beach and Miami-Dade counties. The county has a population of approximately 1.8 million citizens in 30+ cities, with 170,000 residing in Fort Lauderdale, the largest municipality and the seat of county government.

Broward County is managed under a charter form of government, with a nine-member board of county commissioners. Submit resumes online at www.watersconsulting.com/recruitment. Position open until filled; however, the first review of applicants will take place late Feb. 2007. For information, contact Andrea Sims at (877) 356-2924, or visit www.watersconsulting.com to view the detailed recruitment brochure.

WebPage: http://www.watersconsulting.com/

__._,_.___

February 15, 2007

After Hours Trading: AMR up 10%

Last time I looked, shares of AMR were up about 10% in after-hours trading.

Amazing what one headline can do, isn't it?

AMR Said to be Target of Buyout Deal

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Oh boy. Here we go again.

Business Week in its Feb. 26 issue, reports that AMR, parent of American Airlines, may be a buyout target of a group including Goldman Sachs and British Airways.

The proposed bid is said to be between $9.8 billion, or $46 a share, and $11.1 billion, or $52 a share, according to the magazine.

Sources say it is uncertain that a bid for the company will materialize.

Neither Goldman nor British Airways would comment on the matter to BusinessWeek. AMR told the magazine that while it has lots of conversations, it doesn't comment until discussions result in substantial outcomes.

Sounds familiar.

Just an aside. Earlier today, Goldman Sachs analyst Robert Barry cut his rating on AMR to "neutral" from "buy" saying the stock is now up about 20% since he began coverage of the stock in November.

Barry said he doesn't anticipate shares to rise much further ahead, especially given expected labor talks and costly plane replacements ahead.

Heh. Wonder if this means the investment banking department at Goldman doesn't talk to its analyst -- or does this mean the deal is now dead, so Robert decided it was time to lower his rating on the stock?

I know. I'm so jaded.

Can't help it.

On another front, over the years Business Week has published a couple of "rumors" concerning this industry that were simply that. And nothing more.

So I'd say, "Don't get excited -- yet."

Money Honey Update

Intrepid PBB subscriber Joe Colella tells us,

"Ms. Bartiromo just finished the inview w/Neeleman. He - understandably - looked exausted during the interview.

Not much was said that we didn't know or assume already.

Neeleman did indicate that the operations people did in fact attempt to get some of the jets that were holding for the longest periods of time back to be unloaded. However, the combination of ice, B6 gates filled to capacity and JFK airport gridlock made the situation difficult."

Another reader just sent us a note and said David looked like he hadn't slept in days.

I can imagine.

But it's not only JetBlue folks. And it wasn't just yesterday. We're getting scattered ugly reports from a number of locations on the East Coast. And from a number of different airlines.

Neeleman Money Honey Alert

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Tune those channel clickers to CNBC. A subscriber just alerted me to the fact that the Money Honey herself, Maria Bartiromo, will be interviewing JetBlue CEO David Neeleman in the next hour or so.

Whhhhheee.

PBB Posting Update

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Hey guys. Speaking of the JetBlue experience -- I'm going to go ahead and tell you now, and not later, that this week's issue of PlaneBusiness Banter will be posted Friday. We had three airlines report earnings Wednesday, and we're also having to work around some formatting issues that I mentioned in an earlier post.

Damn weather.

So there. Now you can go back to whatever you were doing before I interrupted your train of thought.

JetBlue Passengers: Blue, Blue, our World is Blue

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Only about six weeks after the American Airlines' debacle in Austin that left many passengers sitting on jets for hours -- and hours -- yesterday, JetBlue passengers in New York got a taste of what it was like.

Instead of proactively canceling flights Wednesday morning as the weather worsened over much of the Northeast, JetBlue boarded full flights at New York's JFK Airport. The only problem? Most of the flights never went anywhere.

Some passengers were on planes as long as nine hours, before they were brought back to the terminal Wednesday night.

But before they were finally allowed off the planes, many passengers also began making calls to local New York television stations -- complaining of stuffy interiors, screaming children, no food to speak of, no water, and no information as to what was going to happen to them. Some sent videos of the situation inside the aircraft.

Not good.

I'm not sure what happened with JetBlue's JFK operation Wednesday, but it was not a positive. On any level. In addition, the airline's follow-up comments did not seem to be on a par with what we've seen from the airline's PR department in the past.

I have a suspicion that "all hands" are out there today from headquarters, slinging bags and helping to reschedule passengers.

February 14, 2007

Frontier into Memphis: Blood Bath in the Making?

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In doing my usual news snooping today, I have to admit -- I saw the headline about Frontier moving into Memphis and I thought it was a joke. I had to pull up the story to make sure it wasn't.

Today Frontier announced that it is going to start new service to Memphis in May. Flights will serve Denver, Orlando and Las Vegas.

Yikes.

As one reader wrote to us today, "Just how medieval is Northwest going to go on Frontier’s ass in responding to Frontier’s announcement of service from Memphis to Denver, Las Vegas and Orlando?"

No question, this is the most direct assault on Northwest out of Memphis by any competitor.

Personally -- I'm still waiting for Southwest to announce its move into Minneapolis.

But in the meantime, do we have any comments from the peanut gallery out there on Frontier's latest move?

Let me hear 'em. As always you can either email me or comment here.

One Hot Airplane

Alkretro
Thanks to Jonathan, our web editor, who spied this last night over at Airliners.net.

While this is not the real plane, it's a pretty nice computer rendering of what the new Alaska Airlines' retro livery jet is going to look like.

What a gorgeous airplane!

It's the Weather, Stupid

Snowbenches
Monday Texas was hit with nasty storms. Monday night we had tornadoes here in New Orleans. Yesterday, Illinois, Ohio, and other states north of a line running east/west across the country's eastern portion were hit with snow. Today much of the northeast is having to deal with ice and/or snow.

One report we saw last night had Washington National Airport running out of deicing fluid.

Great timing.

With a potential ice storm approaching the DC area, we here at PlaneBusiness were forced to take some preventative action ourselves last night. Our web editor lives in the DC area, and concerned that he might be without power later today, or tomorrow, he had to, in effect, set up blank templates for us to use for this week's issue of PlaneBusiness Banter. Just in case.

Meanwhile, I've stopped counting the number of flight cancellations this latest slap from Mother Nature has caused. But if this pattern of weather continues for the rest of the month, I don't know how we won't see the negative after-effects reflected in some airlines' first quarter earnings results.

Speaking of those deadly tornadoes that ripped through this part of the world Monday night -- we are okay. The damage was south of us -- as at least one, and possibly two F2 tornadoes touched down on a southwest/northeast path.

Unfortunately over 200 homes were destroyed or seriously damaged, and one woman was killed. Why more people weren't killed is a mystery. For those familiar with the New Orleans area, parts of the West Bank, Uptown, and Gentilly were the main areas affected.

Unfortunately many folks who suffered damage were, like the woman who was killed, still working to repair damage from Hurricane Katrina. In fact the woman who was killed was living in a FEMA trailer next to her house. She was waiting on news about a potential payment from the "Road Home" program to finish the repair work on her home.

The tornado destroyed her half-finished home, and tossed the trailer she was living in with her daughter down the street like a small toy.

For a winter that started out fairly tame, this one has certainly turned nasty the last couple of weeks.

February 13, 2007

egads...

Sorry about the previous posts and their various editing snafus. Seems that our new version of Ecto decided it did not want to behave. It has now been beaten back into submission.

Southwest Move to San Francisco: A Shot to the Flank of United

The Thinking
We received a note from one of our readers last week, pointing out that I neglected to point out in our note about Southwest moving back to SFO, that this is yet another move by Southwest into a United stronghold.

Shame on me. Must be all that King Cake I've been munching on of late. It has slowed my brain activity. Thankfully Mardi Gras is next week, so I won't have to see anymore of it after that.

But yes, of course he's right.

While he agreed that the pre-entry news was clearly a direct warning shot aimed at Virgin, the bigger impact is going to be on United, and to a lesser extent, Frontier.

Think about it. United is now plane-constrained, so they aren't going to be able to go after Southwest to much extent out of SFO. Furthermore this is the third major United hub Southwest has gone into of late. Denver, Dulles, now San Francisco.

"In sum, I don’t see this as being directed at JetBlue much at all. The only places JetBlue flies to SFO from are places that Southwest probably won’t be in for the foreseeable future: JFK and BOS. In fact this is more Southwest looking at what JetBlue is doing and saying “hey, what a good idea, let’s try that ourselves…”


As for Frontier, if Southwest decides to set up San Francisco- LAX service, Frontier's attempts to get their SFO/LAX service off the ground will probably come to a grinding halt.

Tickers: (NYSE:LUV), (Nasdaq: UAUA), (Nasdaq: FRNT), (Nasdaq: JBLU)

What Happened to the Net Income?

Air Canada Logo
We're going to be talking about the results from Air Canada this week in PlaneBusiness Banter, but for those of you who haven't had a chance to glance at their financial results -- just a heads up. When was the last time you saw an airline report quarterly results and not report a net income figure?

Yeah, they're real fun to try and dissect.

Not only that, but the operational stats they give for the airline this quarter are shown only in terms of percentage changes, so one can't easily compare actual cost/ASM numbers, or RASM numbers, for example, with those posted by other airlines.

Quarterly earnings reports should not be an exercise in "Hide and Seek."

Speaking of all things north of the border, WestJet is scheduled to report its fourth quarter numbers tomorrow. (Wednesday)

The Clock Strikes Twelve for Comair Pilots; Agreement Minutes Later

061115 Comair Jets

The clock struck midnight last night with no tentative agreement between Comair and its pilots' union on the table.

But about 20 minutes later, the two sides came to terms.

Comair was prepared to impose $15.8 million in concessions at 11:59 p.m. Monday, if no agreement had been reached.

The deadline had already been extended once. The original deadline expired Friday night after the pilots' union presented management at Comair with a new proposal. The airline extended the time limit, saying it needed time to study the new proposal.

But, you say, why are the pilots and the airline going through all this again. Didn't these two already sign off on a concessionary agreement before?

Yes, they did.

But when the flight attendants okayed a deal in November that saw annual costs cut by $1 million less than had been requested by the airline -- that put contracts already negotiated with the pilots and the mechanics up for grabs. The airline was successful in getting the mechanics to agree to a modified deal with the airline -- the pilots would not go so quietly into the dark night.

Pilots at the airline now have until March 4 to ratify the deal. Pilots at the airline are represented by ALPA. If the pilot group does not vote to ratify the agreement, the airline will implement wage cuts and other concessions as per the recent U.S. Bankruptcy Court ruling.

February 9, 2007

Big News Friday

Southwestairlines
No, I'm not talking about US Airways' CEO Doug Parker's DUI encounter with the Scottsdale police.

I'm talking about the announcement that Southwest Airlines is going to start flying to San Francisco again. The last time the airline flew into SFO was in March of 2001. At the time of its departure, the airline cited the airport's high costs. In an article in today's San Francisco Chronicle, SFO airport director John Martin said that he has been wooing Southwest for the last year and a half. Martin also claims that SFO's landing fees and other airport charges have been slashed 30% over the past five years.

Southwest announced it will begin service at SFO this fall with at least 14 daily departures and a mix of short, medium and long flights. No other details were given.

Talk about a move that hits squarely in the jaw of not one, but two competitors, this would be it. Or maybe I should say one competitor and one would-be competitor.

To Virgin America, the move sends a clear message. "You want to play in the big leagues? Get ready."

And to JetBlue, which just recently announced new service into SFO beginning in May (in what was the first shot across the bow to Virgin's still grounded operation), the message would be something like, "The more, the merrier."

I do so love a good street fight. Don't you?

Tickers: (NYSE:LUV, Nasdaq: JBLU)

PBB Now Posted

Home-Typewriter Copy-14

PlaneBusiness Banter subscribers can now access this week's issue here. Off to send out subscriber emails. Have a great night everyone!

February 8, 2007

One More Major Reason for Oil Price Spike

Oil-1
Thanks to our Brown Bag Analyst here at PlaneBusiness, who was paying more attention to news today than I was, being tied to the keyboard as I have been for much of the day.

Apparently Occidental Petroleum Corp. said today it would be unable to meet commitments to its customers after a fire led to the shutdown of most production from its Elk Hills field in California. Elk Hills is California's largest gas field. 60% of the field's output is crude oil.

Bloomberg reports that there is no timeframe for resuming production at the field, which normally has an output of 120,000 barrels of oil equivalent a day, said Occidental spokeswoman Susie Geiger. About 95% of output is shut down. Occidental spokeswoman Jan Sieving confirmed in an interview that the company declared force majeure.

Yep. I'd say that was the biggest reason for the jump.

PBB Posted Later Today

Home-Typewriter Copy-13
Hark! If you are a subscriber to PlaneBusiness Banter, this week's issue will be posted later today. I'll update you here when it's ready for perusal.

Just When People Were Getting Excited About $55/barrel Oil

Oil
It's going bye-bye.

Today the price of crude closed at $59.71, up a hefty two bucks a barrel.

Why all the excitement? Good question, especially after the price of crude fell 2% on Wednesday.

Couple of reasons. Continued bitter cold in the northern U.S. with predictions of more to come, along with a little good-old-fashioned short covering session on Wall Street. Oh, and yes, the DOE reported that stocks of distillates (which includes the precious jet fuel) and crude both declined for the week, ending Fri. Feb. 2 yesterday.

Guess it took a day for that news to sink in.

Look for continued volatility here before we start to see a trend that sticks.

February 6, 2007

Nice Catch for Pinnacle's New Colgan Air Acquisition

As you know, Pinnacle recently purchased Colgan Air.

Today it was announced that Colgan will be a new regional flying partner to Continental Airlines.

According to Bloomberg,

"Continental Airlines has selected a Pinnacle Airlines unit to fly 15 turboprops that will ferry passengers to its Newark, N.J., hub.

The flights by Pinnacle's Colgan Air will begin in early 2008, Houston-based Continental said Monday.

Continental and Memphis, Tenn.-based Pinnacle reached a 10-year contract for flying the 74-seat Bombardier Q400s.

The accord will let Continental collect passengers for its U.S. and international flights at Newark's Liberty International Airport from cities too small for larger planes. Pinnacle is a regional carrier spun off from Northwest Airlines Corp. in 2003.

The planes will operate under the Continental Connection name."

Southwest Airlines Founder Lamar Muse Dead at 86

0206Muse
Lamar Muse, the feisty, controversial, egotistical, and always opinionated co-founder of Southwest Airlines, died late Monday in Dallas after a battle with lung cancer.

Muse, who was still feisty until the end -- contributing regularly to an airline industry email list from a rehabilitation facility in Dallas after having undergone treatment for the cancer -- was, along with Herb Kelleher and Rollin King, one of the three founders of Southwest Airlines. Or Air Southwest as it was originally dubbed.

As Terry Maxon mentioned in his article on him today in the Dallas Morning-News,

"In early 1973, Braniff began offering $13 fares on Southwest’s routes, a half-price fare that threatened to steal many of Southwest’s customers. Southwest and Mr. Muse responded with large newspaper ads proclaiming: "Nobody is going to shoot Southwest Airlines out of the sky for a lousy $13."

Southwest gave travelers a choice: They could fly on a full $26 fare and get a free bottle of liquor, or get the $13 fare. The offer boosted ridership so much that Mr. Muse later credited the Braniff offer for Southwest’s eventual financial success."

Just one of many, many stories out there.

But, as Southwest grew in the 70s, so did tensions between King and Muse. Not surprising -- given the egos involved. Finally, in March 1978, Muse thought he would force a showdown with King, after which the board of directors would choose Muse over King. Muse submitted his resignation.

Big mistake, as Muse admitted later.

The board accepted his resignation and named Herb Chairman of the Board. Bye bye Lamar.

What many people may not remember is that later that same year, Southwest named Howard Putnam (yes, the same Howard Putnam who starred in the infamous Bob Crandall recorded telephone conversation) the airline's President and CEO.

Putnam would leave for Braniff and his date with airline anti-trust history in 1981. It was then that Herb became CEO of Southwest.

Muse, meanwhile, along with his son, started Muse Air in 1981. Given the circumstances, it was nicknamed, "Revenge Air" at the time. The airline was eventually sold to Southwest, which shut down the remains of the carrier in August 1987.

February 2, 2007

PBB is Now Posted

Home-Typewriter Copy-12
If you normally print it out -- a warning. It's a long one this week.

PlaneBusiness Banter subscribers can access this week's issue now.

Tired Fingers; AirTran Tales

PBB is done. Well, not done. It's in final edits. But yours truly is done writing for the most part.

We should be posted in a couple of hours. It's a long issue. Very tedious to edit those earnings call write-ups.

Writing about earnings calls is certainly not the most creative thing in the world, but it sure is fun to listen to the calls and see how much the participant's personalities come through.

Case in point this week: Joe Leonard at AirTran. We all know Joe. Joe is not the shy and retiring type. Nothing warm and fuzzy about this guy.

This was certainly proven last week in AirTran's call last week. Mostly silent throughout the bulk of the call, Joe came roaring out of hiding when analyst Jamie Baker from JP Morgan asked the airline's CFO Stan Gadek, "Stan, you mentioned in some of your prepared remarks about raising the service bar. I was wondering if you'd be comfortable elaborating on that as it relates to the merger just given that Midwest [Airlines]is already so highly regarded it seems more likely than not that the local Milwaukee passengers would in fact witness some sort of a decline in what they've come to expect. Can you add anything to that?"

At that, the slumbering giant -- that would be Joe -- sprang into action with this rapidfire response:

Monta 2547

"Well, yes, this is Joe. I mean we have business class on every single flight. We have XM Radio on every single flight. The fact of

the matter the MEH product offering is all over the place. I mean they have this image which they deserve, a very high-quality service and I hear about lobsters and they haven't served lobsters in six years, and they have 2-by-2 seatings on less than half of their flights where we have 2-by-2 seating on every flight.

Is there a quality of service on 18 passenger Beech 1800s or is it Dornier 32 passenger RJs or is it 50 passenger RJs or is it's all coach MD80s? So you know their product offering is all over the place quite frankly. I think their image there's a lot of nostalgia in their image that doesn't fully bear out. So we think that by putting our product in there and also they've done a better job of brand management than we have. Adopting some of the things that they do that we don't would be the best of both worlds."

Pause.

Jamie then added, "So maybe the mystique exceeds the reality. I guess you'd have to drink quite a bit for a chocolate chip cookie to look like a lobster. All right. Thanks for the color. I appreciate it. Good luck."

Great stuff.

Talk to you again in a bit. Off to set up our subscriber e-mailings.

Ticker: (AMEX: MEH), (NYSE:AAI)

February 1, 2007

Bored? Need Something to Listen To; ExpressJet Routes Posted

Earnings-2
The Raymond James Growth Airline Investment Conference is being held in New York today. Many airlines are there, and if they are, chances are they have a weblink on their respective website to their presentation. (Or to an archived copy if they presented earlier in the day.)

Yes, both AirTran and Midwest are there, as well as Allegiant, Frontier, and others. I haven't heard yet whether or not they had to keep Joe Leonard and Tim Hoeksema separated by 2-foot thick walls or not.

And of course ExpressJet also presented today. In fact, if you would like to see the route map of the airline's new regional operation, you can see it on their website now. I like it.

We've got a couple of PBB moles who are there -- and I'll be waiting to hear their reports later today. I'm also listening to several presentations myself.

Oh -- which reminds me.

Yes, this week's issue is going to be published on Friday. No question. I wanted to listen to the presentations in New York today and talk to folks who were there before finishing up this week's issue. In addition, we're working on earnings reports as well.

Meanwhile, back to Midwest/Airtran for a minute. AirTran has extended by one month its offer of $345 million in cash and stock for Midwest Airlines’ parent company.

Midwest Air Group shareholders have until March 8 to consider the offer, which was to expire Feb. 8.

Tickers: (NYSE:AAI); (Nasdaq:ALGT); (Nasdaq:FRNT); (NYSE:XJT); (AMEX:MEH).