PlaneBuzz

There were an interesting pair of news releases today regarding the settlement of the suit between Mesa and Hawaiian Airlines.

The settlement calls for Hawaiian to receive $52.5 million from a $90 million bond posted (in cash) by Mesa as security for the original judgment. In return Mesa will drop its appeal and get back the remaining $37.5 million of its own money.

The Hawaiian release characterized the original lawsuit as "Mesa's misuse of confidential and proprietary information obtained during Hawaiian's Chapter 11 plan of reorganization in 2004". The Mesa release characterized it as a "long-running lawsuit over Mesa's inter-island flight services operated under the go! brand name."

Tomato, tomahto I guess.

It may see a bit odd that Hawaiian would settle for less than the $80 million awarded, but it is hard to say how long the Mesa appeal would take to run its course. Suffice to say that in today's environment, "cash is king", and Hawaiian is probably happier to get $52.5 million today than it is to get an unknown amount (although probably higher than zero) some time in the future. On the other side, Mesa had to $90 million hanging out in that bond and they surely do need that cash, even if HA got the lion's share.

As for the Aloha suit, if their case is as strong as Hawaiian's then this kind of puts a number on that asset for them.

Posted by Godzilla at 3:50 PM | Permalink | Comments (0) | TrackBacks (0)

Yours truly is delivering a keynote luncheon speech today to the Airports Council International Economic and Finance Conference. As I sit here looking out my hotel window in Broomfield Colorado, I can see snow on the Rockies. But it was last night when I flew in that was spectacular.

For those of you into photography, you'll know what I mean when I say the light was simply gorgeous. Landed about half an hour before sunset and the golden light hitting the aircraft as they made their way out on the taxiways at DIA, or Senor Pena's Palace of Planes, as I dubbed it a long time ago, was so striking I just had to stop and watch it play out for a bit outside the huge windows of the concourse before I schlepped on into the terminal for my bag.

Yes, I am lucky. I apparently hit Denver as it was enjoying a brief bit of spring. But today, it's overcast once again, and I understand it's scheduled to get colder again in the next day or two.

Hold down the Fort while I attempt to entertain the airport folks in a bit. I figure with what all that is going on in the industry now -- that's going to be a tall order.

Talk to you guys later.

Try to behave in the meantime.

Posted by Holly at 10:57 AM | Permalink | Comments (0)

Posted by Holly at 11:51 AM | Permalink | Comments (2)

We waited and we waited and we waited.

Sources had told us that there was going to be a board meeting at Continental Airlines today. So we waited.

No news.

Finally, I made the decision that we had to go ahead and post PBB.

Figures.

We post, and not 20 minutes later, news hits that the board did, in fact,  meet today, and in a follow-up note to employees, Larry Kellner has told them that the board has decided that a merger is not in the best interest of Continental at this time.

Continental executives told employees that the risks of such a deal outweigh the potential rewards.

The company says it will continue to review potential alliances and membership in SkyTeam.

Looking more and more like the scenario we outlined last week in PlaneBusiness Banter where we discussed why it was United Airlines and US Airways could do a deal together just picked up more weight.

Posted by Holly at 5:44 PM | Permalink | Comments (0)

Just think of this week's issue as something akin to "War and Peace."

Subscribers to PlaneBusiness Banter can access this week's issue here.

Posted by Holly at 5:24 PM | Permalink | Comments (0)

How long can Silverjet hang on?

Another airline bites the dust, as EOS, the privately-held all business-class carrier that flew between London's Stansted and JFK has filed for bankruptcy and is flying its last flights today.

The airline, which had said earlier this month that it had closed on a deal that would bring it an additional $50 million in capital -- apparently saw that deal evaporate.

Eos’s first flight took place on in October, 2005. The airline purchased three Boeing 757s and reconfigured the 220-seat planes with just 48 business-class seats, which converted into fully flat sleeping quarters.

Posted by Holly at 9:43 AM | Permalink | Comments (0)

We set a record this week. Most number of printed pages in one issue.

Not sure if that is a good thing or not. <g>

Huge week for earnings last week, huge week for merger madness, and oh, let's throw in some volatile airline stock activity as well.

This week's PlaneBusiness Banter is in final edits this morning -- I'll be back to let you know when it's ready to roll.

In the meantime, go back to reading the Sunday paper and have some more coffee.

Or watch some NBA basketball.

Your choice.

Talk to you later.

Posted by Holly at 9:28 AM | Permalink | Comments (0)

Dear John, er, Dear Jim.

Thanks to a reader who sent a note that gave me an excuse to stop writing about earnings.

For those looking for more details on the proposed SkyWest/XJT deal, ExpressJet has filed some information with the SEC concerning the offer from SkyWest, and more importantly, the "other" deal between SkyWest and Continental.

I only thought this was a squeeze play before I read the letter from Continental Airlines' CFO Jeff Misner. Now-- I don't think there is any doubt.

According to Misner's letter that was sent to CEO Jim Ream and Chairman George R. Bravante,

"First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009.  Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.

We hope this information is helpful to you."

Hah. Yeah, I guess it was helpful. I'd say.

Here are links to the two pertinent letters.

First letter is from SkyWest CEO Jerry Atkin to ExpressJet CEO Jim Ream and Chairman George Bravante.

Second letter is from Jeff Misner, Continental's CFO to Jim and George.

Also for you union types, note the request for modification to the current contract between ExpressJet and its pilots. (They are represented by ALPA.)

As for my thinking on all this -- it looks pretty clear. Obviously the folks at ExpressJet decided they'd go public with this all in an attempt to get a better deal. From SkyWest or someone. But given the collaboration of Continental, I'm not so sure ExpressJet has that many options.

Technorati Tags: airline mergers, airlines, Continental Airlines, ExpressJet, SkyWest

Posted by Holly at 5:36 PM | Permalink | Comments (0)

MarketWatch is reporting that not only has SkyWest confirmed the $3.50 a share deal for ExpressJet, but that:

"The St. George, Utah-based carrier also said it has negotiated the principal terms of a new contract with Continental Airlines which is intended to become effective after a deal with ExpressJet. 'We believe our offer is consistent with our strategy of pursuing viable opportunities to enhance shareholder value, while also offering value to Continental through a new code-share relationship,' said Bradford Rich, SkyWest chief financial officer."

Now, isn't that an interesting development?  So it would appear that it won't do any good for ExpressJet to sit down and talk to Continental about a new contract, because it sounds like Continental has already negotiated what it believes to be the new contract with ExpressJet. The only hitch is that it will only go in effect after SkyWest buys ExpressJet.

I think they call this a "squeeze" play.

One thing I do know for sure. Next week is going to be hoppin' in Houston.

Ticker: (Nasdaq:SKYW), (NYSE:XJT), (NYSE:CAL)

Technorati Tags: airlines, Continental Airlines, ExpressJet, SkyWest

Posted by Holly at 3:02 PM | Permalink | Comments (0)

I'd rather be here today.

Anyone else going to the New Orleans Jazz and Heritage Festival this year?

Posted by Holly at 11:58 AM | Permalink | Comments (0)

Okay, so I lied. I'm back.

I guess I need to talk about the SkyWest/ExpressJet deal. Or no deal as it stands right now.

ExpressJet said less than an hour ago that its board had unanimously rejected an offer by SkyWest to purchase the company for $3.50 a share.

ExpressJet said that the committee believes that the fair value of the company's stock is "substantially higher" than SkyWest's proposal and does not reflect the inherent value of ExpressJet or its prospects.

The offer would represent a 68% premium over the company's closing stock price Thursday of $2.09, and would values the company at about $181.5 million.

Jerry Atkin, SkyWest's CEO, said in a letter to ExpressJet officials that the offer constituted a "full and fair price" for the ExpressJet shares.

Meanwhile, ExpressJet says that it has set up a special committee of its board to look at perhaps a better deal with SkyWest. The committee will also assess the potential for a new capacity agreement with Continental, and it will talk to "other potentially interested parties about a potential acquisition of the company at a higher price."

Not surprisingly, shares of ExpressJet have soared on the news, and are now trading about 40% up for the day.

Ticker: (NYSE:XJT)

Technorati Tags: Continental Airlines, ExpressJet, SkyWest

Posted by Holly at 10:27 AM | Permalink | Comments (0)

"They listened to you Holly. Our company newsletter says that "Business" fares will be renamed "Anytime" fares starting today. The BS :) will remain the same."

A PlaneBusiness Banter subscriber wrote me this morning to alert me to the fact that effective today, Southwest Airlines has changed the name of its fare classes.

You may recall that yours truly has gone on a rant more than once over the fact the airline changed its three major fare classifications that potential customers see when they go to purchase a ticket to "Business Select, Business and Wanna Get Away" when they rolled out BS in November.

Not a good thing -- as customers were then assaulted with two columns of expensive fares, each labeled with a "business" moniker when they went to purchase a ticket.

As our subscriber noted and this screenshot shows, the airline has apparently come to its senses. Well, at least on the concept of labeling that second fare class as "Business" fares.  They have now been tagged "Anytime" fares.

Very good. I approve.

You folks at Southwest can send my marketing consulting check to me here c/o PlaneBuzz -- or I can just pick it up at the Southwest annual meeting next month.

:-)

On that note, you probably won't see much of me today as this week's issue of PBB is very long and I anticipate that I will still be working on it tomorrow.  That's what happens when you have a huge news week coupled with a huge earnings week.

Behave yourself in the meantime.

Ticker: (NYSE:LUV)

Technorati Tags: Southwest Airlines

Posted by Holly at 10:03 AM | Permalink | Comments (0)

My earlier post might have been a bit confusing. It's been a bit busy around here this week! My apologies if it was not clear.

In answer to some emails I've received this afternoon in regard to the Mesa/Delta litigation, the original suit was apparently filed by Mesa Air Group and Freedom Airlines on April 7, as they stated in an SEC filing.

The most recent filing, as of a check of the case files this morning, was a motion by Mesa for a preliminary injunction against Delta. Both sides will now have time to respond to that in the next 20 days or so, and the court has scheduled a hearing on Mesa's request on May 27-29.  So I doubt we are going to hear anything of note out of this situation until that point.

The case number, for those of you who would like to track it for yourselves, is  1:08-cv-01334-CC. The suit was filed in U.S. District Court, Northern District of Georgia.

Now, excuse me, I have one last earnings call to listen to. Talk to you guys later.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Posted by Holly at 6:11 PM | Permalink | Comments (0)

In last week's PlaneBusiness Banter I mentioned that the lawsuit Mesa Air Group said had been filed against Delta Air Lines in regard to Delta's canceling Mesa's Freedom Air contract flying had not been able to be found on the PACER system. (A public database of bankruptcy and Federal District courts in the U.S.)

That is no longer the case.

I suspect that because there was an initial motion entitled "Motion to Seal Case"  this was the reason the case was not immediately available in the database. However, the judge agreed only to seal the complaint in the case -- not the entire case.

So the case is there now.

Unfortunately because the complaint itself was sealed, we can't read any of the nitty gritty details. Not surprising, as the complaint no doubt contains a great deal of Delta-Freedom contract information that competitors would love to read. (Yes, we've already had folks from three airlines ask us if we have copies of the complaint.)

According to the PACER documentation, Mesa Air Group and Freedom Air did file this week for a preliminary injunction against Delta Air Lines -- but the hearing on that request has not been scheduled until the end of May. May 27-29 to be exact.

Clarence E. Cooper, United States District Court Judge is presiding over the case in U.S. District Court for the Northern District of Georgia.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Posted by Holly at 12:52 PM | Permalink | Comments (0)

For those of you with enquiring minds.

Posted by Holly at 2:48 PM | Permalink | Comments (0)

It's not easy in the regional airline industry these days, as Mesa found out a couple of weeks ago when Delta Air Lines notified the airline that it was canceling its contract for more than 35 EMB-145 aircraft.

Today -- it appears that Frontier Airlines has severed its regional flying contract with Republic Airways Holdings.

This contract was not for fifty-seaters, however. This contract included 12 76-seat E170 aircraft -- an airplane that is in much higher demand.

The agreement provides for an orderly wind-down under which Republic will remove four aircraft on May 1, an additional six aircraft on June 2 and the final two aircraft on June 23, 2008. Immediately prior to Frontier's filing, Republic was generating approximately $6 million in gross monthly revenues under the agreement.

There are also another five E170 aircraft that were slated to go to Frontier that will now have to be placed with another airline or sold.

As a result of Frontier canceling the agreement, Republic says that it will seek a payment of $260 million. I guess this means Republic will now get at the back of the line in bankruptcy court.

Republic said in a press release that it will discuss all of this on its earnings call tomorrow.

The most troubling comment in the Republic press release? Republic's CEO Bryan Bedford's comment, "It's unfortunate that despite their [Frontier's] many efforts to reorganize their business outside of Chapter 11, factors beyond their control conspired to force a deeper reorganization."

Even more unfortunate is that this particular part of Frontier's business plan was the one that was supposed to be the "Southwest Buffer" -- an attempt to grow service to markets that Southwest Airlines could not duplicate out of Denver.

Not a good sign for the fine folks at Frontier, who recently filed for Chapter 11 protection after its credit card processor increased the airline's holdback allowance.

Technorati Tags: Delta Air Lines, Frontier Airlines, regional airlines, Republic Airways

Posted by Holly at 2:23 PM | Permalink | Comments (1)

Look, granted the airline industry is, with the exception of Southwest Airlines, losing money hand over fist this quarter. But it's not losing THAT much.

Perusing the usual headlines online, one would think that Delta Air Lines and Northwest Airlines posted a combined loss of more than $10 billion dollars for the first quarter.

No, they lost money, but not quite that much.

Those totals include some accounting hocus pocus "goodwill" write-offs. More on all that in a minute.

But first -- here is a rundown on the numbers that matter.

Excluding reorganization and special items, Delta Air Lines posted a loss of $274 million, or $0.69 today. Northwest posted a loss of $191 million or $0.78.

Both losses were larger than what analysts had expected. Analysts' forecasted EPS for Delta was a loss of $0.51, while they had Northwest pegged for a 34 cent loss.

So no, neither airline posted good numbers.

As for those big billion dollar write offs -- Delta took a $6.1 billion non-cash charge and Northwest took a $3.9 billion non-cash charge. These are paper losses that are related to the drop in market caps for each stock, and are related to each airline's Fresh Start accounting that both began this spring, as a result of their exiting bankruptcy protection. Essentially we're talking about Monopoly money. Not important in the big scheme of things.

Technorati Tags: airline earnings, airline stocks, Delta Air Lines, Northwest Airlines

Posted by Holly at 2:02 PM | Permalink | Comments (0)

PlaneBusiness Banter readers know that yours truly always looks forward to the airline industry earnings season for one big reason.

We just love to listen to United's CEO Glenn Tilton. His use of corporate double-speak and lexacon overuse (abuse?) has given readers and myself many well-deserved chuckles over the last couple of years.

I threatened to put together a book of Glenn's observations at one time. Maybe I need to revisit that plan.

Anyway, last quarter Glenn was not his usual self. I dunno. Maybe he was feeling a bit under the weather. But the old triangulation of synergistic applications working towards a mutual goal of corporate convergence just wasn't there.

However, I am happy to report, after checking in with the United call yesterday that Glenn is back to his old tricks again.

So much so that Dallas Morning News Aviation blog reporter Terry Maxon had to give him a shout out today. Hey, Terry, welcome to the Tilton Triangulation fan club.

There were a couple of good ones in this quarter's call, which we'll talk about in more detail in this week's PBB of course, but I think Terry did pick the most outstanding one to feature today in his blog.

Here you go. Way to go Glenn. In this quote he is responding to Credit Suisse analyst Dan McKenzie about whether or not there would be money available to back United -- if the airline were to become involved in a potential merger.

I would suggest that back to the earlier discussion, that if you take the plans that we're discussing today, capacity discipline as a principle rather than a synergy, take the focus on cost management that we are discussing today, again, the plan with respect to the value of each one of the businesses within the two portfolios that might consolidate, and if you took our plan and our discussion relative to that value that needs to be identified and unlocked, and you layered it over a consolidating scenario, I think you have an attractive investment proposition seen through the lens of a discussion that we're having about our own opportunities, which I don't think has yet made it to the back of the proverbial envelope.

Hey, this one's a keeper.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airline analysts, airline CEOs, United Airlines

Posted by Holly at 1:45 PM | Permalink | Comments (1)

Holy $%(@ Batman.

What a morning.

It took me more than an hour just to get through the emails. Then almost another hour reading all the great earnings news. NOT.

Wow, where do we start?

First, let's take a look at the price of oil. It's on the march again -- and looks like we are going to hit yet another record today unless something major changes between now and the close of trading.

Right now a barrel of crude is trading at about $119.50.

$120/barrel here we come.

But that may not be the worst news out there for the airline industry this morning.

No, United Airlines looks like it took care of that. Then again, AirTran is not too far behind.

First -- United Airlines posted a horrible set of first quarter numbers today. Horrible.

The airline reported a loss of $537 million or $4.45 a share. This did not compare favorably, as they say, to last year, when the airline reported a loss of $152 million or $1.32. Analyst consensus here had been for the airline to post a loss of $3.41 a share -- so it is no wonder why shares are now down about 32% ON THE DAY.

Shares in United, as we post this, are down 34% to 14.24.

Meanwhile, shares of AirTran are being beaten up as well. Shares here are presently down 23%, trading at 3.50.

Kind of strange thing with AirTran. The airline moved up its earnings call on very short notice to today. It was originally scheduled for Thursday.

I figured it was so the airline could come out and reassure investors about its  credit card processing hold back situation, cash levels, etc.

No.

Instead, the airline announced this morning that it was going to do a $65 million convertible note offering -- an acknowledgment that yes, it is short on cash. Oh, and the airline didn't post very encouraging first quarter numbers either.

The airline reported a first- quarter loss of $34.8 million or $0.38. This compares to last year, when the airline posted a profit of $2.16 million, or $0.02.

Analyst consensus here had been for the airline to post a loss of 32 cents, so while the airline missed, it wasn't as big a miss as United. But the results, along with the airline's liquidity issue, was still enough to spook the street.

Finally, JetBlue also reported earnings today, and considering the results posted by its two competitors -- the airline did pretty well.

JetBlue posted a loss of $8 million or $0.04 in the quarter. That is an improvement from a loss of $22 million or $0.12 in the first quarter of 2007, and was three cents better than the analysts' consensus figure of a loss of 7 cents.

Remember though that comps here were relatively easy for the airline -- the result of last year's St. Valentine's Day Meltdown.

If you haven't looked at your favorite airline stock today, I'd recommend caution. As of this posting, every airline stock is down for the day -- with some stocks posing very large declines. Throwing out the aforementioned selloffs in United and AirTran, it's clear that investors are not looking at the proposed Delta-Northwest deal as a trip to nirvana, as shares of Delta are now down 13% to 7.12, and shares of Northwest Airlines are down 15% to 7.74.

Even shares of Continental are not immune to the pressure this morning, as they are now down 12% to 18.30, while shares of AMR are down 11%, trading at 7.30.

Yikes.

Technorati Tags: airline earnings, airline mergers, airlines, AirTran, American Airlines, Continental Airlines, Delta Air Lines, jetBlue, Northwest Airlines, United Airlines

Posted by Holly at 11:41 AM | Permalink | Comments (0)

Okay all you airline fans.

This week's issue of PlaneBusiness Banter is now posted.

I note that the boys at JP Morgan were hard at work today as well. Received their always informative Monthly Airline/Aircraft/EETC Reference note in the wee hours this morning. Guess I'm not the only one working overtime this week.

Earnings. That's the reason.

Next week is going to be a real killer. Get ready. We'll have the biggest week of the quarter next week in terms of airlines posting first quarter numbers.

In the meantime, subscribers can now access this week's issue of PBB here.

Posted by Holly at 3:14 PM | Permalink | Comments (0)

It's Friday night. Do you know who is CEO of your newly merged airline?

Do you even know where the headquarters is?

Heh.

And the bonus question for the evening -- which livery will Delta Air Lines choose when it merges with Northwest? ANOTHER new one? I don't have that many fingers.

This week Southwest Airlines, Continental Airlines and American Airlines reported first quarter earnings. I've just finished with our PlaneBusiness Banter review of all three and their respective earnings calls.

Most uninspiring call of the three? No contest. American.

But hey, the real news is the next merger, right? That Continental-United deal? Right.

Not so fast.

In this week's issue of PBB I talk about why I don't think a United/Continental deal is a sure thing -- along with our usual mix of mirth and merriment.

Then there is the airline stock performance rundown for the week. Yes, that will be inspiring.

Oh, and we'll catch up on the latest with Alitalia, too.

Can't forget them.

Look for this week's issue in the morning. I'm still talking to some folks about merger mania. Or I was, until I stopped to write this.

Oh, and for all you folks in Dallas (and I know I've got a lot of you who stop in here on a regular basis ) -- Go Hornets.

Talk to you guys in the AM.

Posted by Holly at 9:29 PM | Permalink | Comments (0)

Here I was, happily writing this week's PlaneBusiness Banter when one of our subscribers dropped me a note with this headline: Another Day, Another Oil Record.

That's what I get for being buried in earnings call transcripts.

But yes, folks, the news is not good.

The price of light crude closed at $117 today in after-hours electronic trading. At the close crude ended the day at $116.69.

Happy weekend.

Posted by Holly at 5:51 PM | Permalink | Comments (0)

After my post regarding how fuel costs impact the P&L of a B737 flying a one hour route I received two corrections. The first one was received about 13 seconds after I posted (just kidding) from a reader who pointed out I had calculated correctly, but my explanation was a bit dyslexic. I had mistakenly typed that there are 6.84 gallons per pound of jet fuel, when it is obviously 6.84 pounds per gallon.

Another reader pointed out my flawed logic in using 800 gallons of fuel burned for the first hour of flight:

"In your fuel computation in Buzz, you compute an hourly fuel consumption of 800 gallons/hr for a B-737. This seems to be about right from my recollection of fuel burns on the 300/400 series at altitude. However, you have a small error in the logic of a 1-hour flight. While a 737 will burn 800 gallons per hour at altitude, getting there will cost you a whole lot more than 800 gallons per hour on any jet."

Well actually, my analysis assumed that the B737 would be taken directly to FL350 on the belly of a B52 and then released into cruise flight. OK, fine. My quasi P&L for a B737 on a one hour flight was flawed. Using this information the first hour of flight will cost an additional 33% in fuel burn. So instead of fuel costing $30 per onboard passenger for a one hour flight, it really costs almost $40 when/if a barrel of oil costs $150. Yeah, that's much better, thanks!

He also had an interesting theory about a new, more equitable way to asses a fuel surcharge, taking into consideration the impact of stage length on fuel burn:

"I'm waiting for the fuel surcharge to be a function of actual burn... you know... a meter at the entry door of the airplane where each passenger will slide his AmEx card. At the end of the flight, the flight attendant will give you a little slip like at the rental car return that has your actual fuel surcharge based on actual fuel burn on that flight. That would be more equitable than a per leg fuel surcharge, don't you think?"

I think he may have a future as Director of Ancillary Revenue at an airline near you!

Posted by Godzilla at 4:28 PM | Permalink | Comments (0) | TrackBacks (0)

We called it right a couple of months ago. But it sure sounded this week like ALPA had pulled the upset.

Sources tell PlaneBuzz that ALPA has lost the pilot representation election at US Airways by about 500 votes. Repeat: ALPA has lost the election to USAPA.

More details to come as we get them.

Posted by Holly at 1:21 PM | Permalink | Comments (0)

The vote will be made official today as to just which union will represent the pilots at US Airways going forward. Will it be the incumbent, ALPA? Or will it be the upstart USAPA -- a product of the US Airways' East group's unhappiness with the ALPA seniority arbitration process?

In our unofficial poll of US Airways East and West pilots who we talk to on a semi-regular basis over the last couple of days, it sounds like ALPA may have pulled it out. But barely. And I mean b-a-r-e-l-y.

I think if ALPA pulls it out, it will be because members thought twice about what they would lose if they left the ALPA fold, (insurance and other benefits that members have paid into for years for example) and the fact that USAPA has no resources to speak of.

It would also mean that almost every US Airways West pilot voted for ALPA, and enough middle-of-the-road members of the US Airways East group joined them to swing the final count.

We'll see.

Ticker: (NYSE:LCC)

Posted by Holly at 11:41 AM | Permalink | Comments (0)

In a note this morning, analysts Jamie Baker and Mark Streeter from JP Morgan give their assessment of a potential AMR bankruptcy. Good read. Note also their mention of the fact AMR did the right thing by not foolishly (our words) give back cash to shareholders, ala United Airlines.

What a stupid move on the part of United Airlines' management. We said it was stupid then, but man, does it look even dumber today.

But back to AMR. This is a good summary of AMR's cash situation.

From Jamie and Mark:

"Assessing the Chapter 11 Risk For AMR – Unlike some carriers with less to gain from the Chapter 11 process, AMR remains a reluctant candidate under certain circumstances. Specifically, labor costs are higher than others, there is some (albeit manageable) pension exposure, aircraft savings perhaps are available in Chapter 11 given recent trends, and some unsecured debt remains in the cap structure. Yet much more relevant, in our view, is AMR's liquidity situation as that is likely still the only real trigger for an embracement of the Chapter 11 option. Absent a sharp decline in jet kero prices and/or a material economic improvement and/or additional capital raises and/or no increase in credit card holdback, current jet kero prices imply that unrestricted cash could approach $2 billion in 2009 (inclusive of today's Beacon sale and the associated proceeds). We consider this level to closely approximate AMR's minimum bankruptcy filing threshold. Of the aforementioned caveats, we consider capital raising and the absence of holdbacks to be of critical importance. Beacon is a welcome surprise in terms of timing (we expected a 2H08 announcement) but proceeds were in line with our expectations. Next up could be an Eagle sale or perhaps a British Air lifeline or Heathrow slot-supported borrowings. Keep in mind that AMR likely triggers the >1.4x fixed charge covenant on its $440 million term loan later this year if oil and/or the economy don't cooperate, with early repayment to avoid a default or onerous consent fees a potential use of liquidity. While AMR has thus far failed to disclose any information in regard to its credit card processors, owners of the company are likely to compel management to revisit this policy, in our view. Also keep in mind that if AMR embraces consolidation, that may also pave the way for a positive liquidity event (e.g. an infusion of capital). Our base case remains that AMR avoids a bankruptcy fate, but we simply cannot ignore the potential realities of current fuel and economic conditions in which the company may be forced to operate for a sustained period of time. It wasn't long ago that some were calling for AMR to return cash to shareholders ala United's move earlier this year. Fortunately, AMR's fiscal prudence has given management the benefit of time...for now."

Ticker: (NYSE:AMR), (NYSE:UAL)

Technorati Tags: airline analysts, airline stocks, airlines, American Airlines, United Airlines

Posted by Holly at 11:00 AM | Permalink | Comments (0)

Everybody loves statistics. In an era where we count everything, we can now come up with a baseball player's batting average with men on second and third base during a day game on a weekday when the pitcher's last name begins with the letter "P". I've seen stats that show which airlines can make money at various oil prices, and understandably the list of profitable airlines gets shorter as the price gets higher.

One metric I haven't seen is a graph showing a correlation between the number of U. S. domestic airlines and the price of oil. I don't think it is quite as linear as the comparison of profitability and the price of oil. There are most likely plateaus where the inevitable decrease in capacity boosts the revenue line by allowing the remaining airlines to raise prices to offset the increasing cost. The wild card here is finding the point at which air travel becomes too expensive for the discretionary traveler, and what price the remaining customers are willing to pay.

While poking around the net I found a neat matrix put together by ATA (not the airline) that shows the average price per gallon of jet fuel and the average price per barrel of oil by year. Looking at the 10 year period 1998 - 2007 there is a very consistent correlation between what a barrel of oil costs and what a gallon of jet fuel costs. Plugging the cost per gallon of jet fuel into a simple matrix that calculates the fuel burn of a commercial jet airliner is a simple matter. Then it becomes a exercise of masochism; how bad you want to make yourself feel?

Oil at $150 a barrel means jet fuel at ~$3.60 a gallon, and that means a 737 burns up almost $3,000 an hour for fuel alone. At an 80% load factor with 130 coach seats that means almost $30 per onboard passenger goes for fuel on a one hour flight. (Check my math; [5500 LBS/hour for a 737-300 x 6.84 pounds per gallon of jet fuel = ~800 gallons/hour] x $3.60 = $2,880 / 104 passengers). Plug your own numbers in for your favorite aircraft, and adjust the fuel burn numbers for a longer average stage length if you'd like.

Using my simplistic model, outside of fares, a lot of things get smaller when oil gets that expensive; fewer short flights in a 737, fewer passengers (due both to higher fares and less service) flying on even fewer airlines, and the ATC and Airport Security problems diminish (there is a silver lining).

Play it forward - how high can the price of oil go? $150? $200? Higher? The absolute number doesn't really matter. The price of oil will be what the buyer is willing to pay and what speculator thinks it will be worth in the future. Oil price volatility is the new "re-regulation", forcing airlines to remove themselves from markets that don't make economic sense and presenting a significant barrier to entry to the industry for new carriers.

Determining the shape and size of the airline business in the future is more difficult, and probably a fruitless exercise anyway. It's Airline Darwinism, which is to say it is an evolution that requires the industry to adapt to the new world of expensive fuel. Those unable to make a profit on their basic business will burn cash until they either figure it out, run out of cash and things to sell off, or oil prices significantly reduce (in which case they remain exposed to another upturn in prices). Or, they will survive if they do nothing but have the financial stamina to hang on until the industry shrinks enough so that fares can rise to offset the new cost structure.

How much capacity will have to be pruned is a question best left to experts, of which I ain't one. Regardless of how much capacity reduction is 'enough' to generate a positive revenue impact, in my view it will require more than just temporarily parking airplanes. Unfortunately the additional pain of workforce reduction is necessary in order that airlines don't adversely affect their unit costs.

A less important but nonetheless interesting issue is the question of how ancillary revenue plays a part once fares rise. Anyone who read my post entitled "Ancillary Agida" knows my view of that issue. If fuel prices stay high, or volatile, and another 5 or 6 airlines stop flying, will the survivors continue to put lipstick on that pig? Or instead, will they raise fares $50 each way and include checked bags, advanced seat assignment, and bad airline food?

Posted by Godzilla at 6:08 PM | Permalink | Comments (2) | TrackBacks (0)

Another nasty day in the energy futures trading pits.

At one point, the price of a barrel of crude oil traded over 115/barrel. But when all the shouting was over, light crude closed at 114.93/barrel, up 1.14 on the day.

This, after news this morning from the Energy Information Administration showed that crude oil inventories dropped down 2. 3 million barrels last week, to 313.7 million.

The consensus forecast of those who follow such things was that we should have seen an increase of 1.5 million barrels.

In addition, the euro hit a new all-time high against the dollar today. Here's the two-year chart tracking the increase in value of the euro to the dollar.

In case you haven't noticed -- when the dollar drops against the euro, you can pretty much count on an increase in the price of oil.

And we all know why that is. With the price of oil pegged to the dollar -- as the dollar drops in value against the euro -- there is then reason for traders to bid the price up.

Yes, this is one of the ugly side effects of the Federal Reserve continuing to lower interest rates. The lower the rates, the more the dollar drops in value compared to other currencies. Meanwhile, commodity prices continue to go higher and higher.

A nice fine economic mess, now isn't it Ollie?

Or as one Wall Street-employed airline analyst said to me off the record today, "Oil scares the living shit out of me."

Yep. Me too.

Posted by Holly at 4:42 PM | Permalink | Comments (0)

Ta-da.

Yes, boys and girls, it's that time again.

And what time is that?

Why it's earnings time!

Leading the charge, or maybe the retreat, AMR, parent of American Airlines, announced their numbers this morning.

The numbers were pretty much what had been expected, as the company reported a $328 million loss for the quarter. While operating revenue was up 5%, operating expenses rose 13.6%. And a big chunk of that was you-know-what. Yes, fuel.

Cost per ASM, excluding all costs associated with the airline's regional airline American Eagle, was up a hefty 15.8%. Excluding fuel, that same number drops to an increase of 3.3% for the quarter.

The airline's earnings call is slated to start in just a couple of minutes.

Tomorrow? We hear from the folks on Denton Drive in Dallas -- Southwest Airlines, as well as the folks in Houston -- Continental Airlines.

All Texas all the time. Yee haw! Bring me that piece of brisket....oh, don't forget that pulled pork sandwich and some slaw while you're at it.

Posted by Holly at 12:59 PM | Permalink | Comments (0)

Yep, oil futures did set a new record today when all the shouting was done.

Crude oil futures closed at 113.79 -- up more than $2 on the day.

More bad news. Oil futures are up as high as 114.08 in after-hours trading.

Posted by Holly at 6:22 PM | Permalink | Comments (0)

At the recent Phoenix International Airline Symposium, Lehman Brothers analyst Gary Chase said something I thought was worth repeating.

Actually he said more than one thing that was worth repeating.

But given the events in the energy markets the last two days, I'm going to pick his comments about how everyone in the industry was talking about "$100 a barrel oil." Paraphrasing, he said something like, "Who says this is going to stay at $100? It seems like some people in the industry are looking at this as some arbitrary cut-off point. That they are revamping spreadsheets to take that number in account. What about $130/ barrel oil? $150 a barrel? Who says that oil is going to continue to hover around $100/barrel?"

As I talked about in a recent issue of PlaneBusiness Banter, he then went on to explain just what massive changes we could begin to see -- when, not if, oil began to move even higher.

Well folks, today the price of oil is inching closer to that $130 mark.

Yesterday oil closed at a new all-time high price of $111.76.

Today, it's up again.

As I post this, light crude oil futures are trading at $113.60, up 1.84 for the day.

Posted by Holly at 11:06 AM | Permalink | Comments (0)

All you ever wanted to know about the new venture between Delta Air Lines and Northwest Airlines. Yes, that address is newglobalairline.com

A good friend offered this evening that he had heard American Airlines was looking around for its checkbook so it could grab http://sizedoesntmatter.com

Posted by Holly at 9:27 PM | Permalink | Comments (0)

Why am I not excited about this?

I can think of many reasons.

But whether I am excited about it or not -- Delta Air Lines and Northwest Airlines made their not-so-secret engagement official this afternoon -- as the two airlines announced their intention to merge.

According to the various PR releases that were issued, Delta and Northwest will combine in an all-stock transaction with a combined enterprise value of $17.7 billion, creating the nation's largest passenger carrier.

Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own, representing a premium to Northwest shareholders of 16.8% based on Monday's closing prices.

Yes, Delta is considered the acquiring carrier in this one.

Maybe one of the reasons I'm not so excited about this deal (besides the fact that Delta Air Lines' management had to basically bribe their pilot union to go along with the deal, a bribe that included pay raises and a new contract) is that the Northwest Airlines' pilot group was essentially shut out of the party last week -- while Delta Air Lines cut a nice new deal with its pilots.

I talked about this here. I talked about it last week in PlaneBusiness Banter.

I don't understand the rationale in this move with the Delta pilots -- one that essentially puts a gun to the side of the Northwest pilots' head. Go along with everybody else -- you have no choice.

Not surprisingly, not long after all the party balloons were released this afternoon, the Northwest Airlines' pilot MEC issued a release that reaffirmed my earlier misgivings about this bizarre situation.

Some snippets from the release issued not too long ago:

Dave Stevens, the NWA MEC Chairman, stated, 'This agreement clearly disadvantages NWA pilots both with respect to economic issues and seniority list integration. A merger built on this unstable foundation is likely to put the combined airline in a position similar to that of USAirways. A USAirways-style labor relations scenario at the merged carrier, combined with the current and projected price of fuel and the looming economic downturn, is likely to place the Northwest pilots and all other Northwest employees at greater risk than as a stand-alone carrier.'

This merger announcement comes after months of negotiations which had resolved all joint pilot contract issues, but which stalled due to differing views on the integration of pilot seniority. The NWA MEC, on numerous occasions, stated their willingness to resolve the seniority integration by expedited arbitration. The Delta MEC rejected arbitration as a means of resolving the seniority list issue at that time.

'The NWA MEC will use all resources available to aggressively oppose the merger. The risk to Northwest Airlines and to the Northwest pilot group from letting this merger proceed, as it is now structured, is simply too great."'

Ticker: (NYSE:DAL), (NYSE:NWA)

Posted by Holly at 8:02 PM | Permalink | Comments (1)

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

Posted by Holly at 11:00 PM | Permalink | Comments (0)

Hoping to quell potential motivations behind a panic sale in its shares late Friday afternoon, AirTran issued updated financial information concerning the airline's financial status.

The airline said it is in full compliance with the terms of its credit card agreements, and has no holdbacks with any of its major credit card processors.

AirTran also said its liquidity position has strengthened this year, with the total cash and investments balance increasing to $358 million at March 31, up from $326 million at Dec. 31.

The airline said it expects its liquidity to further strengthen during the second quarter.

Ticker: (NYSE:AAI)

Posted by Holly at 8:53 PM | Permalink | Comments (0)

Another day, another day of carnage for airline stocks. Three in particular, including one notable newcomer.

With Frontier Airlines going into Chapter 11 bankruptcy protection, it's no surprise that shares here were down dramatically on the day. Shares ended the day down a whopping 69%, on more than five times the normal volume, as the stock ended trading at 48 cents. (It started the day at 1.57.)

Shares of Mesa Air Group also had another bad day. Shares here were down 17%, ending the day at 67 cents. The stock started the day at 81 cents. Market Cap here is now down to $18 million and change.

And finally, we had a notable newcomer to the share sell-off club today -- another member of the PlaneBusiness Titanic Watch. AirTran shares were simply hammered today, as they lost 35% of their value, closing at 4.13. The stock opened this morning at 6.31.

Again, volume here was more than five times the norm.

What's going on here? My guess is that It's a little thing about credit card holdbacks. The same reason Frontier sought Chapter 11 protection today. Investors apparently don't like the airline's cash position, relative to what could happen if the airline's credit card processor decides to up its reserve amounts for the airline.

Oil? Oil today closed at 110.14/barrel, up 3 pennies on the day.

Tickers: (Nasdaq:MESA), (Nasdaq:FRNT); (NYSE:AAI)

Technorati Tags: airline stocks, airlines, AirTran , Frontier Airlines, Mesa Air Group

Posted by Holly at 3:47 PM | Permalink | Comments (0)

(Photo:Ft.Worth Star-Telegram)

Finally.

Yesterday American Airlines' CEO Gerard Arpey took the podium, and took control of a situation that the airline had failed to take control of since news of the airline's MD-80 groundings first hit the news wires on Tuesday.

Gerard said all the right things -- and in the right ways. He was just a bit late in saying them.

Next time, I suggest that American Airlines engage in some online technology to get Gerard and his take on the situation out there sooner. Yes, I know he was out of town when this story hit, but the airline could have used a video teleconference set-up, much like Southwest Airlines used recently to unroll their Business Select product. Reporters all over the country could listen and watch Gary Kelly make the presentation and could then type in questions, or call in with a question. It was all real time. Worked very well.

I would highly suggest the crisis communication team at American consider such an alternative next time -- as the Admiral's Club in Los Angeles does have broadband connectivity.

And yes, it needs to be Gerard. Not Dan Garton.

Speaking of, I am glad to see that Dan apologized to the airline's mechanics, who were, I think, justifiably pissed off at some comments Dan made in his attempt at a press conference that we noted here in PlaneBuzz yesterday.

What a mess.

Ticker: (NYSE:AMR)

Technorati Tags: airline CEOs, airlines, American Airlines

Posted by Holly at 12:01 PM | Permalink | Comments (3)

It's getting so that it's scary to crank open the computer and open up the email bag.

Another Friday, another airline bankruptcy.

Frontier Airlines Holdings, Inc. today announced that, following an unexpected attempt by its principal credit card processor to substantially increase a "holdback" of customer receipts, which threatened to severely impact Frontier's liquidity, Frontier and its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

We had talked about the shares of Frontier being in freefall here earlier this week. We formally placed the airline on our PlaneBusiness Titanic Watch last week. Yesterday shares of the airline took another dive, closing at $1.57.

Unlike the last several airline bankruptcy filings however, Frontier remains in business.

Frontier said it expects to continue operating its full schedule of flights, adding it will honor tickets and reservations as well as providing refunds and exchanges as usual.

"We felt that Frontier would be able to withstand the challenges confronting the U.S. airline industry, which include unprecedented and significant increases in the cost of jet fuel and the impact of the credit crisis in the financial markets, without seeking bankruptcy protection," said CEO Sean Menke in a statement.

Just a note here on the increase in credit card holdbacks. We've seen this happen in the past -- and it is something we can certainly expect to see again with other airlines that book their own reservations and find their cash reserves under scrutiny. (Clearly this does not apply to the bulk of regional airline flying.)

Ticker: (Nasdaq:FRNT)

Technorati Tags: airlines, bankruptcy, Frontier Airlines

Posted by Holly at 9:47 AM | Permalink | Comments (0)

Former NTSB Director Jim Hall on this morning's Today Show:

“What we have is a situation where these rules were not being properly followed and the oversight was not in place by the FAA."

Correctomundo.

I hate to say this, but one of the airlines who is being put through hell by the FAA should not be afraid to say the same thing, instead of waffling around -- which just makes the airline look worse.

Anyone know an airline that might want to do that?

Hey, don't laugh. A major grounding could be coming to an airport near you. Jonathan Bare, who is our website guru, just wrote to tell me that his parents are stuck in Las Vegas with no way home to Milwaukee. They were booked on Midwest Airlines. Midwest now finds itself with a pack of grounded MD-80s as well.

Ticker: (NYSE:AMR)

Technorati Tags: airline delays, airline earnings, airline unions, American Airlines, Midwest Airlines

Posted by Holly at 2:15 PM | Permalink | Comments (0)

This one actually flew over our radar earlier in the week, but with so much happening in the industry I forgot. Until a reader reminded me.

Would someone please explain to me why it is that Delta Air Lines pilots have been granted permits to picket at Northwest Airlines hub airports from today through April 24? Are they going to be picketing the pilots at Northwest? The airline? What in the world is this all about?

"They won't play with us. We're mad." I can see the signs now. "Make them merge!"

Then again, I thought it was the Delta pilots who were the fly in the ointment to begin with when both pilot groups couldn't come to terms on a new seniority agreement.

This has to be one of the goofiest damn things I've ever heard.

I wondered yesterday was Delta Air Lines' MEC Chairman Lee Moak had been up to lately. I guess I know.

Or, as one of our pilot friends wrote us when he reminded us of the news, "Ya gotta admit -- your 50" Plasma TV with surround sound doesn't get any more
entertaining then the airline business on your 19 inch monitor."

He's right. Especially this week.

Technorati Tags: airline mergers, airline unions, Delta Air Lines, Northwest Airlines

Posted by Holly at 1:18 PM | Permalink | Comments (1)

The Senate Committee on Commerce, Science, and Transportation is now holding hearings on Aviation Safety. You can watch them live here.

Nick Sabatini from the FAA is on the hot seat as we post this -- and he's not having a particularly good day. Much like last week. Senator Claire McCaskill (Missouri-D)is now asking Sabatini why it was that no one has been fired at the FAA for "lying." She is referring to a comment made last week in reference to the Dallas Ft. Worth tracon by the office of the DOT special counsel. The DOT special counsel, who is at the hearing, just said that problems have "reoccurred" in the Dallas office, but that their investigation is "not yet complete."

McCaskill is now pressing the issue of the need for accountability at the FAA, and what Sabatini intends to do about it.

Meanwhile, for those of you who are interested in the Hawaiian air service environment (and you certainly know who you are), the committee is scheduled to hold hearings this afternoon on that hot topic. These hearings will start at 2:30 pm edt. You can