PlaneBuzz

On the heels of already-announced cuts in management salaries, it appears that Frontier Airlines is now telling employees that all employees are now looking at a mandatory pay cut through September.

Channel 9 in Denver posted today what it says is an internal employee memo from management at the airline.

In the memo, the airline says cuts in labor costs are necessary because,

"At this critical time when we are trying to secure DIP financing, we must show these potential investors and the creditors' committee a viable business plan that will allow us to operate in this challenging environment of rising oil costs. They need to see that we are doing everything possible in relation to fuel costs and to improve Frontier Airlines Holdings, Inc. bottom line. Since we have entered bankruptcy, fuel has increased from $107/barrel to over $122/barrel. This represents an annual increase in expenses of nearly 75 million dollars. Unfortunately, these increases are no longer offset by fuel hedges as our hedging agreements became invalid when we entered bankruptcy.

Therefore, we need to make some significant changes to our cost structure in order to achieve a non-fuel cost per available seat mile (CASM) of 5.8 cents. We have aggressively been eliminating non-labor expenses as well as requesting cost reductions from our suppliers and vendors. Unfortunately, we cannot reach our CASM ex fuel goal by only reducing non-labor expenses. As a point of necessity, we are going to have to reduce our labor and benefit expenses very quickly. We recently announced pay cut reductions for the entire Frontier Airlines Holdings, Inc. officer group effective May 1. In addition, We are now asking that all employees also take a pay reduction through September 2008. At that time, we will review our financial situation and the market conditions again. We will also be suspending the 401(k) match for this period of time."

According to the letter, both the pilots' union and the dispatchers' union (FAPA and TWU) have already agreed to concessions. The airline's flight attendants are not unionized. The airline said that no agreement has been reached with the airline's mechanics, who are represented by the Teamsters.

Ticker: (Nasdaq:FRNT)

Technorati Tags: airline employee pay cuts, airline stocks, airlines, Frontier Airlines

Posted by Holly at 1:37 PM | Permalink | Comments (0)

If you subscribe to PlaneBusiness Banter, please note!

Next week we are going to be physically moving the server that hosts PlaneBusiness Banter and PlaneBuzz to a new location.

We will make accommodations so that PlaneBuzz is hosted on a temporary server next week, so we should be online here without a break.

However, the PlaneBusiness.com  website, and PlaneBusiness Banter access will not be available from sometime Tuesday morning until later on Wednesday. (Yes, our server gets to take a little trip via Federal Express -- so it's not just an "around the corner, down the block" kind of trip.)

Thank you for your patience as we make this move. It should stop the problem we've had recently with sporadic downtimes affecting access to both PlaneBuzz and PlaneBusiness Banter.

Posted by Holly at 1:11 PM | Permalink | Comments (0)

One headline really takes the cake today boys and girls.

"Tilton to Groom US Airways chief if deal goes ahead"

Publication: Financial Times.

Justin Baer's article talks today about how "United Airlines' chief executive Glenn Tilton has offered to make US Airways' Doug Parker a top contender to succeed him should the two carriers agree to merge, people familiar with the matter said."

Now mind you, I'm not arguing with the premise behind this article, because, unfortunately, it tracks with what I have heard as well. This continued mandated ego trip by Glenn Tilton and his hand-picked board is a big reason no deal came to pass with Continental Airlines.

Note: Hubbub today about talks concerning a Continental-United "alliance" is another deal altogether.

But the very idea that Glenn Tilton has anything to offer Doug Parker, or is in any way his superior in terms of how he runs a company, works with his employees, manages a merger like this (Parker has actually done one) or communicates with anyone is ridiculous. No, it's worse than that.

Or, then again, maybe I'll try to look on the bright side. Maybe this implies that Tilton will cut Doug's hair, give him manicures, and make sure his suits are pressed correctly.

Now that would be just fine.

Ticker: (Nasdaq:UAUA), (NYSE:LCC)

Technorati Tags: airlines, Continental Airlines, Doug Parker, Glenn Tilton, United Airlines, US Airways

Posted by Holly at 12:14 PM | Permalink | Comments (0)

Moody's Investors Service cut its liquidity rating on United Airlines today amid concerns about higher fuel costs, a slowing economy and rising costs.

The rating firm lowered the speculative grade liquidity rating to SGL-3 to SGL-2, and the outlook to “negative” from “stable.”

Moody's meanwhile affirmed the carrier's corporate family rating and other debt ratings, which remain at B2, which is a speculative or "junk" rating.

Moody's said it lowered the outlook because it expects the airline's operating and financial performance to deteriorate.

"Weaker results are likely because of materially higher fuel costs, but also the weakening economic conditions that are likely to reduce demand and limit recovery of higher fuel costs by raising ticket prices. United also faces continued challenges to control the growth of unit costs," Moody's said.

Sounds about right to me.

Ticker: (Nasdaq:UAUA)

Posted by Holly at 12:13 PM | Permalink | Comments (0)

Hello everyone.

Well, we here at the Worldwide Headquarters got smacked around pretty good yesterday, last night and again this morning by Mother Nature, as she ripped through with the usual cocktail mix of spring hoopla. You know, hail, wind, rain, thunder, lighting, tornados, more rain, more wind. You get the picture.

We did hit a new milestone for water creep in the back of the house however, as water actually hit the edge of the back of the house, and was just inches from coming into the back door. I guess there is a first for everything. Not surprising after I heard we had something like five inches of rain in about an hour. Just nowhere for it to go when it's coming down that hard, that fast.

And, as is usually the case with high winds and rain, we suffered from an ongoing series of power outages last night and again this morning.

So my apologies for being a bit "off-line" more than usual. But I don't like to tempt fate with computer equipment when power is "browning" and or flickering off and on. I learned that lesson years ago when I fried a processor.

Having said that, I'll be back shortly with some comments after I finish up going through the trusty email bag. I already know which story is going to be first, and I'm sure you do too. It's the headline from a Financial Times story.

Three guesses and the first two don't count.

Be back shortly.

Posted by Holly at 11:44 AM | Permalink | Comments (0)

My earlier post produced a couple of notes to me from readers and I have to admit --  the story here may not be the fact that Southwest is pulling some of its leverage levers to increase its cash balance in the bank.

The story is ....why.

The airline has a $500 million credit line. (Or is it $600 million?) One of the two.

And it had $3.1 billion, give or take, at the end of the first quarter.

So the question has to be ...why would they take on the "cost" to borrow another $600 million and mortgage 21 aircraft  if the airline has roughly $3.1 billion in the bank?

Is Southwest getting ready to buy something? Or someone?

Technorati Tags: Southwest Airlines

Posted by Holly at 7:51 PM | Permalink | Comments (0)

$600 million of them.

While Southwest Airlines has the strongest balance sheet in the industry, apparently even they are not taking the prospect of the current financial situation lightly.

The airline has borrowed $600 million, leveraging its ownership of 21 Boeing 737 aircraft, the airline disclosed yesterday.

Beth Harbin told Terry Maxon at the Dallas Morning News, "We felt it was wise to bolster our cash position with today's soaring fuel prices and uncertainty in the economy and the credit market. We want to be prepared for whatever happens."

At the end of the first quarter, Southwest had $3.12 billion in cash and short-term investments.

No word on whether or not Southwest CEO Gary Kelly is considering dressing up like one of these wacky squirrels next Halloween, but we think the idea has merit.

Ticker: (NYSE:LUV)

Technorati Tags: Southwest Airlines

Posted by Holly at 3:15 PM | Permalink | Comments (0)

Heh.

I just disposed of my earlier note on Doug Steenland's comments from yesterday, as  after I published them, I noticed that our esteemed guest columnist, Godzilla, aka Frank Arciuolo, had come in and done a much more thorough treatment of the subject.

That'll teach me to write first before I look at what has already been posted.

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

I'm really getting tired of writing the same old stuff.

You know. "Oil hits new record high."

<sigh>

Alas, it has already done it again today in intra-day trading. Oil traded as high as $126.30 today, until backing down to $125.70, where it is sitting now.

We'll see where it finally decides to land.

Pushing prices up today were rumors making the rounds of the trading floors this morning concerning Iran. The reports had Iran considering cuts in its crude oil production.

As of this afternoon, most analysts feel that the cause for concern was overblown, as Iranian officials denied that production cuts were imminent, but said a reduction has been discussed.

However, look for prices to continue to be volatile this week and next, as traders begin to jockey into position for the June contracts, which will close at the end of next week.

We'll see if we can't rustle up the closing price of aviation fuel later today as well.

Technorati Tags: airlines, oil prices

Posted by Holly at 2:14 PM | Permalink | Comments (0)

There was an article in the Memphis Business Journal yesterday quoting Doug Steenland from NW as saying the combined DL/NW mega-carrier may ultimately be a smaller company if fuel prices continue to soar.

The reason? Simple. Fares have to go up to offset the high cost of oil, and rising fares will temper demand and result in fewer flights being offered in the marketplace. Where have I heard that mantra before? Oh yeah, me. I've posted several items about how the continued high price of oil has to be offset by higher fares, blah, blah, blah.

This news shouldn't be a surprise to anyone, except maybe to the people who heard the initial description of the merger as being a "1+1 = 2" transaction. Even with oil at $50 a barrel there would have to be some economies of scale realized from a merger, or else why do one? But with oil over $120 a barrel the economics are pretty clear; no matter how big you are, you can only last as long as your cash holds out.

The thing that bugs me about this is the way management has positioned this as a win-win (I hate that term). On the Delta web site there is a blurb touting the greatly improved pass benefits for employees. The sub header in the piece says "New reciprocal travel program adds to previously announced plans for a substantial equity stake, pay increases, seniority protection and other benefits for Delta, Northwest employees". That article is dated April 29 and the piece in the Memphis Business Journal is dated May 12. Has that much changed in 2 weeks?

To my knowledge the employees of Northwest and Delta are all tax paying adults who have responsibilities to pay their bills, raise their kids, and take care of their families and themselves. They deal with the realities of life every day, which includes dealing with bad news, and they certainly understand the basic tenant of economics that says if you have too much month left at the end of your money then something has to change. Better pass benefits are great, but if you can't afford to put gas in the SUV then a weekend flight to Disney World is just, well.......goofy (sorry, couldn't resist).

My advice (and you know what they say about free advice) to the people running NW and DL is to treat their employees like adults and level with them. Raising expectations about pay increases and seniority protection in the current economic situation is not going to have the desired result. The inevitable backpedaling has already begun, as witnessed in the quotes from Doug Steenland.

Posted by Godzilla at 7:59 AM | Permalink | Comments (0) | TrackBacks (0)

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

Posted by Holly at 9:34 PM | Permalink | Comments (0)

Thanks so much to a reader who just dropped me a note to let me know that ExpressJet cancelled their call this quarter.

Yes, there was a line about this at the bottom of their earnings release. I just blew right past it.

Thank you again to our reader friend at Continental for the news. No wonder I couldn't find the audio of the call, much less the transcript.

That's a shame. There should be a rule against canceling an earnings call when another airline is trying to buy your airline.

Don't you think?

Posted by Holly at 8:04 PM | Permalink | Comments (0)

You can tell I'm in my heavy duty writing and editing mode, can't you? Yes, must be those computer specs I have on in that last picture.

Just an update for PlaneBusiness Banter subscribers. As per our new schedule, which allows us to comment on end of week Wall Street activity and numbers, we will be posting this week's issue tomorrow. I think that will pretty much be the standard schedule going forward -- as subscribers seem to like the fact that it allows me to comment on the markets in a more timely fashion.

Still waiting on an earnings call transcript for Air Canada and ExpressJet though. I may wait and talk about them in more detail next week. We'll see.

Talk to you guys later. Have a great weekend. And give our best to your Mom on Sunday. Just don't take her out to eat. Worst day in the world to go out and eat.

Make something yourself. She'll love it. No matter what it is. And if she doesn't, well, then next year take her to some crowded brunch somewhere with cold roast beef, wilted vegetables and rubber chicken.

At least you will have tried to do the right thing!

Posted by Holly at 5:30 PM | Permalink | Comments (0)

Closing price for oil today was $125.96. That is an increase of 2.27 on the day.

Looking at this news today, and absorbing all that has been swirling around the industry this week, including the testimony of both Northwest and Delta Air Lines' execs on Capitol Hill this week, I think there are some things that need to be said.

This week Steve Wallach, chairman of the United MEC of the Air Line Pilots Association issued a statement that said, "We are aware of continued speculation in the media of a possible merger between United Airlines and US Airways, and have serious concerns that the highly touted financial benefits to be derived from such a merger are unlikely to be achieved because these benefits are based on assumptions that have no basis in reality," Wallach said. "We therefore believe that a merger with US Airways should be a last resort and not a first choice for United."

I've been thinking about this statement.

First, who has been touting the "financial benefits" to a merger between US Airways and United?

I certainly haven't heard any, and you sure as heck haven't heard anything remotely close to this coming from Doug Parker or Glenn Tilton.

At least not yet.

So I'm not sure what benefits he's talking about, nor what assumptions. I think it's kind of hard to judge anything until you have something in front of you to pick apart. This smacks to me of the pronouncements from the Delta MEC when US Airways tried to do a deal with Delta. Before the details of the deal were even delineated, the MEC was out trashing it.

And why wasn't the United MEC making similar comments about a potential deal with Continental Airlines? Probably because the pilots at United were too mesmerized with the possibility they could bump up to the Continental pilots' pay rates. As this tidbit was mentioned to me by more than one United pilot -- I have to assume this was the case.

As to his comment that a merger with US Airways should be a "last resort," and not a first choice, I have to really scratch my head on this one.

Steve, Continental Airlines management has rejected a merger with your airline. There are no other reasonable potential partners out there. The out-of-bankuptcy financing package that United entered into when it exited bankruptcy was predicated on a merger or buyout occurring. The airline is too leveraged not to do a deal.

Did you look at the first quarter earnings report from United?

If you did, it should be pretty clear that if things stay "status quo" the airline is going to blow through whatever cash it now has (minus that nice shareholder Christmas present in December) in no short order.

In a perfect world, I don't think anyone would be looking to mergers as an answer to a problematic airline industry. Unless it was maybe those greedy investment bankers.

But this is not a perfect world.

In fact, I'd argue that with oil prices in this range, we're looking at the worst possible world for an airline to make a buck.

We're talking survival here.

And I think that all employees of this industry need to understand that union squabbles and pay rates and everything else are going to have to take second seat to something else -- survivability.

Oh, don't get me wrong. I'm the one who annointed United's Glenn Tilton as the Master of Greed. He received his own special award from PlaneBusiness Banter for it. And I think management at United has not done enough to overhaul its underlying operation. And they did little that required heavy lifting during bankruptcy -- except try and wrangle an ATSB loan and do away with their employee pensions.

But we all have to understand that we have to start looking at airlines as big companies with big infrastructure costs, and lots of moving parts. Some of those parts are making money and some aren't. Some made money at $60/barrel oil. Some still made money at $90/barrel oil. But most of them are not going to continue to make money at $125 or $130 barrel/oil or higher.

When it gets right down to it, the parts that are making money are going to be kept, and the parts that aren't, are going to have to be divested, put on a shelf, or parked in Arizona.

Passengers are going to have to get used to higher fares and fewer flights.

And airline employees are going to have to understand that we should not be surprised if we see airlines pulled apart, with pieces going here and other pieces going there. Furloughs, lay-offs. They are both very distinct possibilities. Talking to one analyst this week he and I were wondering just what airline is going to be the first to announce an across the board cut in employees -- beginning in the fall.

Unless oil drops -- we're going to see this happen.

Delta- Northwest is a perfect example.

Either Delta's Richard Anderson is living in la-la land, (which I don't believe) or I think it's a safe bet that after the merger of these two airlines is approved -- we are going to see cuts and changes that no one has even begun to guess about at this point in time.

So -- a potential merger with another airline should be a "last resort?" I think United and its employees should be happy that there exists an airline that would even consider merging with it at this point in time.

There are many more horrible fates that could befall United Airlines than a potential merger with one of the best management teams in the industry. We all have to understand what the situation is now in the U.S. airline industry. No airline is really immune from potential extinction. But the bigger you are, the better you are managed, and the more resources you can tap -- the better your chances for survival are going to be.

Tickers: (Nasdaq:UAUA), (NYSE:LCC)

Technorati Tags: airline earnings, airline industry news, airline mergers, airline stocks, airlines, ALPA, Continental Airlines, United Airlines, US Airways

Posted by Holly at 5:16 PM | Permalink | Comments (2)

I've received quite a few emails over the last couple of days in regard to the recent incident involving an American Airlines' aircraft that apparently  left DFW and flew to Paris --after a piece of the plane apparently came off shortly after departing DFW.

You all know what I'm talking about so I won't bore you with any more of the details.

The reason I haven't said anything about it here before this is because the overwhelming majority of emails I've received seem to fall in one of two categories. Either pilots are bashing the flight attendants who have spoken out on the incident, saying that the pilot disregarded their comments and flew on to Paris without bothering to check out their reports of a loud "bang" that occurred. Naturally the pilots seem to think that flight attendants have no business commenting on the actions of a ....gasp....pilot.

Or two, the emails take the side of the flight attendants, and usually mention something about those "AArogant pilots." Or words to that effect.

I noted that Terry Maxon wrote this morning that the comments he has received publicly on his blog posts about the incident fall into pretty predictable categories as well.

As he wrote,

The pilot clearly should have gotten the airplane back on the ground, and should lose his license for not doing so.
The pilot clearly made the right decision and should be applauded.
The flight was in danger.
The flight was not in danger.
The incident shows how good Boeing aircraft really are, compared to Airbus aircraft.
The incident shows how bad Boeing aircraft really are, compared to Airbus aircraft.
Flight attendants should shut up and stay out of the pilot's business because they're not qualified to make judgments about safety of flight.
Flight attendants are well qualified to judge when something goes wrong, and pilots should listen.
No big deal.
Big deal.

Posted by Holly at 1:10 PM | Permalink | Comments (1)

They lower earnings estimates for airlines of course.

What else do they have to do?

This morning analyst Kevin Crissey from UBS issued  a research note in which he said, "The outlook for the US airline industry is changing very rapidly as fuel prices play an increasing role in painting the industry’s profit (well..loss) picture. As a result, our estimates have been getting stale quickly. In response we are moving to a periodic update schedule. We will be updating our forecasts at a minimum every two weeks to reflect changes in fuel and other factors."

He continued, "There is little to like about the financials of the airlines right now. We forecast 2008 losses as large as $10/share (UAUA and LCC) and only LUV will be profitable if our numbers are correct. The extent and duration of the cash burn is the question rather than whether or not there will be profits. We have no Buy recommendations and have a Sell on AMR and JBLU."

As for earnings revisions, Kevin noted, "We are updating our forecasts to reflect recent industry news, most of which has been negative. Our estimates now incorporate the 10-day moving average of forward fuel prices (~$3.40/gal) and include the unit revenue and traffic reports from the carriers. US Airways reported April passenger unit revenue (RASM) growth of flat to down two percent and jetBlue announced an April RASM increase of 3%. Both numbers are on tough comparisons given the shift of Easter to March this year but each also prompted us to slightly lower our Q2 revenue forecasts."

My apologies for the fuzzy chart, but it was reproduced from a PDF and had to be "upsized" before converting it so you could read it.

Posted by Holly at 12:46 PM | Permalink | Comments (0)

Oil closed up 16 cents on the day, ending the day at $123.16.

For those of you with really enquiring minds, the spot price of NY Harbor Jet Fuel closed today up six cents to $3.71 a gallon. Remember that this is just the raw fuel cost - no tax, no "in-plane" expenses.

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

United Airlines announced this morning that it has made a couple of changes in its upper executive ranks.

The airline announced that John Tague is the airline's new COO, replacing Pete McDonald.

And here is where the corporate nomenclature gets a little, ah, thick.

In its release, the airline says that McDonald will become the new chief administrative officer. But that Graham Atkinson, chief customer officer, will continue to spearhead United's customer experience work and will report to McDonald.

Seems way too top-heavy to me. Smacks of a move designed to basically demote  McDonald, but at the same time, keep him in the executive ranks long enough for him to get a nice merger-related payoff.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airlines, United Airlines

Posted by Holly at 12:56 PM | Permalink | Comments (3)

As of this posting, crude oil futures are trading at......you sitting down?

$123.69.

This is up $1.85 on the day. Not only that, but once again as we have seen more than once over the last couple of weeks, higher than expected inventory numbers this morning from the Energy Information Administration did nothing to make traders back off from driving the price even higher.

Simply reinforces the belief that U.S. demand is taking second seat to the larger problem of the falling value of the U.S. dollar.

Technorati Tags: airline industry news, airlines, Economy, oil prices

Posted by Holly at 1:36 PM | Permalink | Comments (0)

Southwest Airlines poured more fuel on the "Frontier is Down and We're Going to Take Advantage of That Fact" fire today as the airline announced more expansion of its Denver operations.

Or as one of our favorite airline industry observers noted, "It's like watching a five year old pull the wings and legs off a bug. Just brutal... Taking down two more F9 markets (SMF and FLL)."

Southwest Airlines announced five new nonstop flights and three new destinations from Denver. The airline added new nonstop service between Denver and Sacramento, Ft. Lauderdale and New Orleans. The airline also will add one additional nonstop between Denver and Phoenix for a total of seven.

The new flights begin on Aug. 4.

Good. Nice to see a nonstop between New Orleans and Denver. Since Frontier stopped flying between MSY and DEN, the market has been owned by TED.

You know -- TED. Or as the excellent flight attendant I had on Ted recently explained to a plane full of passengers, with tongue firmly planted in his cheek, "People often ask me, "What is TED? Simple. TED -- the end of United."

Ticker: (NYSE:LUV)

Technorati Tags: airlines, Frontier Airlines, Southwest Airlines, United Airlines

Posted by Holly at 1:25 PM | Permalink | Comments (0)

Efforts to move forward with an FAA reauthorization bill stalled today, after the Senate voted 49-42, on a procedural vote to limit debate on the bill.

After two weeks of intense negotiations on both sides -- Senate Democrats and Republicans still could not come to an agreement on a bill that was not padded by amendments from both sides.

Unless they can revive the FAA bill, and I think chances of this happening now are slim to none, lawmakers will probably opt for a 15-month extension to re-authorize the agency through September 2009.

Posted by Holly at 4:10 PM | Permalink | Comments (0)

Hey, don't shoot the messenger.

Posted by Holly at 4:10 PM | Permalink | Comments (0)

As of this posting, crude oil futures are trading at $121.65, up 1.68 just since the open.

But that's just the tip of the iceberg this morning when it comes to bad news about oil prices.

Those who have been watching the rise of oil the last few years may recall when Goldman Sachs issued a research note in the spring of 2005. To say the note was controversial at the time would be an understatement. In that note, analysts at the investment firm wrote about a "super spike" in oil prices that could occur pushing oil prices between $50/barrel and $105/barrel until 2009.

This morning Goldman Sachs analysts issued an updated note saying that crude prices are now poised to potentially rise between $150 and $200/barrel. "The possibility of $150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the up-cycle remains a major uncertainty," the note said.

Why?

No surprises in their reasoning.

Demand growth is outpacing output growth. China has more than doubled oil use since New York crude dropped to $16.70 a barrel in November 2001. That has basically taken up most of the world's spare capacity, while at the same time supply has been cut in Nigeria, Iraq, and Venezuela.

Spare production capacity of the Organization of Petroleum Exporting Countries (OPEC)  is low, and the group's exports could easily fall because of "lackluster" supply growth and rising domestic consumption in member countries, the Goldman analysts added.

Underscoring this, Indonesia yesterday said it might quit OPEC as it consumes more oil than it produces, and lowered its oil sales estimate for 2008 to 927,000 barrels a day from 950,000.

Posted by Holly at 10:30 AM | Permalink | Comments (0)

Scrolling through the various April traffic reports today and looking at the reported load factors I noted that the lowest reported today was Southwest's 72.%, which is slightly higher than April 2007. Actually, American Eagle reported a lower load factor than Southwest - 70.8% - but typically regional airlines have lower load factors because their aircraft have fewer seats and a no show on a 50 seat aircraft has a statistically more significant impact than one on a 140 seat aircraft. If we had ever achieved a 70% load factor at Business Express while I was there, well, I'd still be there.

United reported 80.5%, USAirways reported 83.2, Delta was at 81.4%, American reported 80.1, and Alaska was at 75.0 for the month of April. Although the load factors for UA and AA were down year-over-year (-3.6 points for UA and -2.0 for AA), others reported load factors that were unchanged or even slightly higher than April 2007.

Excess capacity? I'm not sure how that is defined, but with many carriers running load factors around 80% it sure doesn't seem like there are too many seats out there. Heck, nobody's got any room to accommodate many more passengers. With an average load factor of 80% on all flights, it is safe to say that peak flights are sold out - all the time. Hey - anybody want to start an airline!

Ironically, it is the carrier with that reported the lowest April load factor today, Southwest, that has managed to remain somewhat profitable during these last few months. Hmm......maybe the unprofitable airlines need to fire some of their customers and hire the ones flying on the profitable ones; evidently it takes fewer of them to make a profit.

Of course, I am being facetious, but here's the point. If you can't make money with an 80% load factor I am not sure the problem is too much competition. True, the cost of oil is a big factor, and the economic pressures on the consumer are real. But the size of the U.S. domestic airline market isn't the problem; the problem is finding the profitable customers within that market.

Posted by Godzilla at 6:37 PM | Permalink | Comments (5) | TrackBacks (0)

Not quite $120, but close enough.

Posted by Holly at 4:30 PM | Permalink | Comments (0)

And you wonder why I opened up today with sports musings?

Earlier this morning the price of a barrel of crude hit $120 plus in trading. As of this posting, it's hovering around $119.90 and change. Stay tuned.

Not too far removed from the issue of higher oil prices is the news today that United Airlines is probably going to ask its bankers that hold its debt, which include JP Morgan Chase, and Credit Suisse for some "concessions." Or to put it another way, United looks like it wants more "wiggle room" in terms of its credit facilities.

The Financial Times reported today that "While United has maintained that it has enough cash and earnings to remain in compliance with the credit facility's terms, concerns about its financial health helped persuade Continental Airlines Inc. (CAL) to end merger negotiations, people familiar with the matter have said."

Sounds about right to us.

Wouldn't it be nice if you and I had the same option? You know -- your car payment putting just a bit too much strain on your monthly finances? Well, just call up Chase and ask them to re-negotiate that car loan. Piece of cake. Or call  Bank of America and ask that your mortgage be re-negotiated for a longer term.

Unfortunately things don't seem to work that way.

Posted by Holly at 12:55 PM | Permalink | Comments (1)

Okay, so did anyone stay up and watch the entire Dallas Stars-Sharks OT playoff game last night? Better yet, did anyone go to the game?

If so, you are pretty tired today as the thing went for four overtimes and wasn't over until 1:30 or so this morning.

Whew.

Congrats to the Dallas Stars, who now get the rather dubious pleasure of playing the Detroit Red Wings in the next round of the playoffs. No, I didn't stay up the entire time either. Although I was fortunate to get to watch the game in HD, here in the swamp no less -- as the Fox Southwest sports network broadcast it.

I still remember the three overtime Stars win that Brett Hull led in 1999--which gave the Stars the NHL Championship. (Yes, I lived in Big D back then, as many of you know.)

Gotta hand it to the NHL. The best thing it does is playoff games. And the best of those are the overtime playoff games. This one was right up there with the best.

Meanwhile, tonight, closer to home, the Beehive comes alive again as the New Orleans Hornets go up in game two against the hated and despised San Antonio Spurs. Let's go Hornets! They soundly defeated the defending champs Saturday night -- it will be interesting to see what changes San Antonio puts into effect tonight in an attempt to snatch one at the Bee's home court.

Hopefully the Hornet's mascot, Super Hugo, won't be trying to fly through any more burning hoops on his way to making a slam dunk tonight. Saturday night his "ring of fire" wouldn't go out like it was supposed to and some wary firefighter types decided it was time to get out the real fire extinguishers. Yep, all that white stuff, all over the basketball floor.

The game ended up being delayed by almost 20 minutes as they tried to clean up all that white stuff. Then the half-time show was cancelled so they could clean it up some more.

Only in New Orleans. Gotta love it. Now that I think about it, It's a wonder he wasn't trying to eat a soft-shell crab po-boy out of his non-shooting hand as he went through the ring of fire on his way to the basket.

Which he made, by the way.

I admit it. I love this time of year. Can't you tell?

Posted by Holly at 12:45 PM | Permalink | Comments (0)

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

Posted by Holly at 3:12 PM | Permalink | Comments (0)

Hi guys.

Just taking a break from writing this week's issue of PlaneBusiness Banter, and I thought I'd drop in here for a bit and get you caught up on few things of note.

One, the price of crude took a hefty bounce upward today, after having lost some ground on the news Wednesday that crude inventories had risen in the U.S. this week.

Light crude futures closed Friday at 116.32, up 3.80 for the day.

As for airline stocks, it was one crazy week in the airline sector, as shares of Mesa Air Group really took off after the airline announced that it had settled with Hawaiian Airlines earlier this week. Shares of Mesa, which closed last Friday at 47 cents, closed today at 1.10. Woo hoo. That's what happens when a potential bankruptcy filing is able to be put off -- at least for now.

Oh, and that gain? A cool 134% on the week.

The second biggest gainer on the week was Allegiant. The airline posted great first quarter numbers this week, as did WestJet. But Allegiant is the one investors jumped on after the news. Shares here ended the week up 39%, closing today at 27.99.

Shares of WestJet were up 3% for the week, ending at 17.03 today. The deal here in a nutshell? The airline posted excellent first quarter earnings this week, but the airline also talked about the challenge of fuel going forward. I think this spooked some folks. But actually the numbers WestJet posted were nothing short of stellar.

All in all, it was a drop dead great week for the airline sector, as we had the vast majority of stocks we track post gains on the week, and we had seventeen airline stocks post double-digit gains for the week.

Not a bad recovery from last week's carnage on Wall Street for the things with wings.

Technorati Tags: airline stocks, airlines, Allegiant Airlines, Hawaiian Airlines, Mesa Air Group, WestJet

Posted by Holly at 8:49 PM | Permalink | Comments (0)

Hi guys. I see where our friend Godzilla reported the news from yesterday concerning the Mesa Air Group/Hawaiian Airlines settlement. One thing he didn't mention but was fairly telling as to why the suit was settled for the amount it was. Mesa was forced to put up a bond for $90 million as a result of the original trial verdict in which U.S. Bankruptcy Judge Robert Faris found the airline guilty of using confidential information about Hawaiian as part of its planning for its start-up airline go!.

Subtract the $52.5 that Hawaiian received in the deal and what do you end up with?

That's right. Basically $37.5 million.

And how much cash does Mesa Air Group need to pay off its convertible bond owners in June - when that convertible issue becomes due? That's right. About $37.5 million.

So, you say -- so what? Well what it says to me is that Mesa is not, obviously, going to go into bankruptcy without putting up a fight. The other reason this is good news for Mesa is that they would have found it hard to get any traction on any kind of potential "deal" involving the airline or parts of the airline, as long as that verdict stood and the appeal was still in motion -- and it did not seem like it was going to be possible to get an answer from the appeals court until after the convertible note was due in June.

So it works out well for Hawaiian, as I think they are probably ecstatic to get their hands on $52.5 million in cash, especially in this environment, and for Mesa's immediate financial situation -- it gives them more time to figure out their next move. But make no mistake -- they just coughed up $52.5 million in cash -- a major hit. No matter how you try and slice and dice it.

Ticker: (Nasdaq:MESA)

Technorati Tags: airlines, Hawaiian Airlines, Mesa Air Group

Posted by Holly at 2:40 PM | Permalink | Comments (0)