PlaneBuzz

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

Posted by Holly at 6:20 PM | Permalink | Comments (0)

It's Friday, and that means yours truly is working on this week's issue of Plane Business Banter. Actually for the last hour or so I've been going through the latest effort by Jamie Baker and Mark Streeter, analysts at JP Morgan. Yesterday the duo put out what they call v2.0 of their BOTBS.

Got that?

BOTBS stands for Battle of the Balance Sheets.

Yesterday the dynamic duo updated the first version of the BOTBS they put out last week -- and I'm going to be taking an updated look at some of their comments in this week's issue of PBB. The whole point of the exercise is to take a comprehensive view of the potential severity of the cash burn rates from airline operations, as well as identify capital raising options for those same airlines.

Last week's version was probably most noteworthy for the pair's "ranking" of what it considered to be each airline's bankruptcy risk.

As Jamie and Mark said in the report,

"Last week’s Battle Of The Balance Sheets report generated welcome feedback from managements and investors alike.  Managements, for the most part, felt our revenue inputs were too draconian.  We hope that turns out to be the case, though would still argue on behalf of our methodology.  We’ve generously given the industry only half- credit for a potential U.S. recession.  Demand trends consistently reverse 10 - 15% during recessions, whereas we assume a gentler 5 - 6% reversion this time.  And some managements (as well as investors) felt we did our liquidity analysis a disservice by not incorporating abundant capital raising progress.  But of course, that  was by design.  Our report is deliberately intended to highlight where needs are greatest, as well as broadly identify the capital steps managements are likely to seek in hopes of bolstering rapidly declining cash balances.  We readily concede that the liquidity projections in this report will likely never come to fruition – one can't actually run an airline with a negative cash balance.  But timing of cash flows is  paramount in this war of attrition, where managements appear fixated on outliving one another rather than taking the requisite steps to generate acceptable returns.  We continue, for example, to expect a flurry of press releases announcing European aircraft bank deals that raise cash against currently-or-soon-to-be unencumbered aircraft...and/or pre-delivery deposit facilities that free up cash being held by manufacturers...and/or convertible issues...and/or frequent flier mileage forward sales...and/or sale-leasebacks, vendor lifelines, non-core asset sales and the like. As these efforts play out, it will hopefully bring us closer to making the "buy the survivors” type call that investors increasingly appear to be clamoring for, now that the magnitude of projected losses is finally beginning to settle in."

Were there any changes to the pair's "bankruptcy rankings" in this version?

Yes.

Southwest, Alaska, Delta, and AirTran remain at the top of the list as those airlines having the least amount of Chapter 11 risk.

But after that, we had some moving around.

With the announcement of its debt offering, JetBlue moved up into fifth spot, behind AirTran, while Continental got knocked down to sixth place.

American moved up to seventh, from its former ninth place position, based on capacity cuts announced, while United Airlines moved up to eighth place from last place. Northwest dropped from sixth to next to last, and US Airways dropped from eighth to number ten -- last on the list.

But the news for US Airways was not all bad in this week's updated report. Like I said, more in this week's PlaneBusiness Banter, for those of you who are subscribers.

Posted by Holly at 12:23 AM | Permalink | Comments (0)

Along with the wings and the engines.

This morning Silverjet, the last remaining business niche trans-Atlantic airline, shut the doors.

You may recall that the airline, which halted trading in its shares on the London Alternative Stock Market a little over a week ago, claimed earlier in the month that it was going to receive another $100 million in capital from Viceroy Holdings, LLC., based in the U.A.E.

Apparently the money never came, and this morning the airline announced it was ceasing operations. Its Dubai-London flight Friday morning was it's last.

Technorati Tags: Silverjet

Posted by Holly at 12:35 PM | Permalink | Comments (0)

And I quote,

"United Airlines told US Airways on Thursday that it had decided not to continue talks on a possible merger, people with direct knowledge of the situation said.
The chief executive at US Airways, W. Douglas Parker, was told of United’s decision during a meeting with its chief executive, Glenn F. Tilton. The airlines are expected to announce Friday that the discussions have ended, these people said late Thursday. They spoke on condition of anonymity. Both airlines plan to cite the difficulty and expense of combining various labor contracts, particularly agreements covering pilots, these people said."

The Associated Press, meanwhile, reported this afternoon, " The CEOs of United Airlines and US Airways met Thursday but there were no indications a decision was near on whether to combine the two carriers, a person with knowledge of the meeting said."

If the Times' version is accurate -- then I'd say the folks at US Airways can start to prepare for some serious crunch time. We are told that US Airways' President Scott Kirby was pretty straightforward today in his assessment of what the airline is looking at now, as a result of higher fuel prices. Kirby, who spoke at a luncheon with a group of US Airways' pilots,  would not rule out the possibility of potential furloughs, further reductions in block hours, or the removal of some aircraft from the system as the airline tries to figure out how it is going to pay for an estimated additional $1.6 billion or so in fuel costs for the year.

Oh, yeah, and there are all those "ala carte pricing opportunities." Which begs the question.....how long until US Airways matches the American Airlines' $15 bag charge?

As for United -- I don't know what they intend to do. But given communications we have read over the last week from United employees -- particularly pilots -- apparently one thing we know very few United employees apparently wanted to do -- was a deal with US Airways.

Posted by Holly at 8:28 PM | Permalink | Comments (0)

I always said that this stock was a bad bet -- because the company did not control its own destiny.

And yesterday, that fact hit home for employees of ABX Air and ASTAR Air Cargo, as Deutsche Post, parent of DHL,  announced that it had, for all purposes, given up the fight to set up its own competing delivery service here in the U.S.

The company has lost hundreds of millions of dollars in trying to establish DHL as a credible third option to UPS and FedEx. Yesterday, the company's parent, Deutsche Post World Net, said at a press conference in Bonn that it is going to partner with UPS for all of its air shipments and sorting operations in what it called a "radical" shake-up of it's U.S. operations.

The hard and cold facts for employees of ABX Air? More than 6000 employees will lose their jobs, including a good number of pilots.

Someone needs to write a book about the FedEx-DHL-UPS saga from start to finish. Would make a great read. I would, however, hate to think how much money all three players have expended over the last 15 years or so -- fighting each other in court almost continuously over the right of DHL to enter the U.S. domestic market.

Know anyone that would like to buy 39 DC-9s?

Ticker: (Nasdaq:ATSG)

Posted by Holly at 6:00 PM | Permalink | Comments (0)

Fitch Ratings has downgraded the debt ratings of US Airways Group:

--Issuer Default Rating (IDR) was dropped to 'CCC' from 'B-';

--Secured term loan rating was reduced to 'B/RR1' From 'BB-/RR1';

--Senior unsecured rating was reduced to 'CC/RR6' from 'CCC/RR6'.

Fitch's ratings apply to approximately $1.7 billion in outstanding debt.

"The downgrade follows the unprecedented spike in crude oil and jet fuel costs that continues to erode margins and operating cash flow generation for LCC and all of its competitors in the U.S. airline industry. Given the dramatic rise in energy prices, Fitch believes that the potential for a liquidity squeeze in early 2009 has increased significantly. Assuming no dramatic pull-back in jet fuel prices later in the year and increasing softness in domestic air travel demand as the U.S. economic slowdown continues, Fitch believes that LCC's unrestricted liquidity could decline toward the covenant level in its secured term loan facility by early next year. The 'CCC' IDR reflects the growing likelihood of a constrained liquidity position, as well as LCC's limited flexibility in raising additional cash through asset sales or new financings.

Because LCC's average length of haul tends to be shorter than that of the other legacy carriers, the airline's financial results are relatively more sensitive to swings in the price of jet fuel. Each 10-cent change in the average price of jet fuel for LCC drives approximately $120 million of annual mainline operating costs. While the carrier has hedged a considerable portion of expected 2008 fuel consumption, an increase in the full-year 2008 average jet fuel price to $3.30 per gallon from $2.20 per gallon in 2007 would result in approximately $1.2 billion of mainline expense pressure from fuel alone this year. With current jet fuel spot prices near $4.00 per gallon, a quick reversal in fuel prices would be necessary if LCC is to avoid an erosion of its cash position by Q109.

On the revenue side, industry fare initiatives aimed at offsetting the intense fuel pressure will likely boost yields on reduced domestic capacity, particularly after August as legacy carriers reduce their domestic schedules. Corresponding adjustments in domestic capacity will be somewhat constrained at LCC in 2008, however, by pilot contract fleet and aircraft utilization minimums that could reduce the airline's near-term flexibility in dealing with a worsening revenue and fuel environment. In 2009, LCC is expected to have more flexibility to reduce capacity, if needed."

Technorati Tags: airlines, US Airways

Posted by Holly at 5:45 PM | Permalink | Comments (0)

It's about time.

Then again, there is no telling how long the lull will last.

We have had a slew of conflicting influences this week on the oil markets.

But when everything was put in the Vitamix today, and swirled around, the markets decided that perhaps oil has finally reached a point where lessening demand is starting to have an effect.

The price of crude closed down $4.41 today, ending at 126.62.

Woo hoo.

Where are those sparklers and the Twinkies?

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

There was good news and not-so-good, but not unexpected news today for Mesa Air Group.

The good news is that  a Federal Court in Atlanta has granted Mesa a preliminary injunction that prevents, for the time being, Delta Air Lines from terminating its contract with Mesa's subsidiary Freedom Airlines.

This news sent the penny stock traders into a frenzy, as shares of the airline ended the day up 39% to 70 cents.

As for the not-so-good, but not unexpected news, the airline also acknowledged today that Nasdaq has sent the company an "Intent to Delist" letter.

However, this letter was not apparently a result of the airline's shares having traded below $1 for a given period of time. No, this delisting warning came because the airline still has not filed its quarterly earnings report for the quarter ending Mar. 31.

On May 13, the airline said it was delaying the report, and would file on May 20. But May 20 came and went and no filing. The airline now says it expects to file its quarterly report on or about June 2, which would be next week.

Ticker: (Nasdaq:MESA)

Posted by Holly at 4:06 PM | Permalink | Comments (0)

Is there an echo in here? Ah, we'll at least use another chart.

Fitch also lowered the boom and the ratings on United Airlines' parent UAL today.

- Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. (United) to Negative from Stable. Debt ratings for both entities have been affirmed as follows:

--UAL & United Issuer Default Ratings (IDR) are now rated at 'B-';

--United's secured bank credit facility (Term Loan and Revolving Credit Facility) is now rated at 'BB-/RR1';

--Senior unsecured rating for United is now rated 'CCC/RR6'.

The bank facility rating applies to approximately $1.3 billion of funded term loan debt, and the unsecured rating applies to approximately $1.4 billion of outstanding notes.

Fitch said in its release:

"The Negative Rating Outlook reflects Fitch's view that the unprecedented rise in crude oil and jet fuel prices witnessed over the last several weeks will put increasing pressure on United's margins and cash flow generation capacity through the remainder of 2008, potentially forcing the carrier to consider asset sales or new financing to shore up liquidity in an increasingly challenging industry operating environment. United has taken steps in recent weeks to counter the fuel shock by cutting domestic available seat mile (ASM) capacity after the summer, while negotiating covenant waivers with its credit facility lenders to ensure access to its $1.5 billion secured credit facility. Still, the magnitude of the recent fuel price spike is leading United and other large U.S. carriers to pursue fare and fee increases that may well begin to crimp air travel demand and undermine the industry's ability to partially offset fuel-related cash outflows in a weak macroeconomic environment.

Ratings for UAL and United reflect the airline's highly levered balance sheet, volatile cash flow generation capacity, and ongoing susceptibility to intense fuel and revenue shocks in an industry that remains particularly vulnerable to macroeconomic risk. Following two years of improvements in cash flow generation and steady debt reduction in 2006 and 2007, United faces an increasingly difficult operating environment in 2008 that will likely lead to a deterioration in credit quality over the next few quarters.

In a prolonged high fuel cost scenario that assumes no significant pull-back in crude oil and jet fuel prices through early 2009, United and all of the major U.S. carriers will face intensifying liquidity pressures--particularly if an extended economic slowdown drives a sharp reduction in air travel demand. However, it is important to note that United's unencumbered asset holdings give it some room to maneuver with respect to liquidity preservation in a deep industry downturn. United's current unencumbered fleet of 113 aircraft could be financed to shore up cash balances if free cash flow trends deteriorate further. The potential sale of other assets such as United's maintenance, repair and overhaul (MRO) operations, spare parts, advance sales of Mileage Plus frequent flier miles and London Heathrow slots all represent sources of liquidity that could be tapped in the coming months if unrestricted cash balances fall closer to the $1.0 billion covenant level.

Taking into account the impact of fuel hedges, United remains highly sensitive to volatility in jet fuel prices. Fitch estimates that the annual mainline fuel cost impact of a 10-cent change in jet fuel prices is approximately $220 million. A full year 2008 post-hedge average fuel price of $3.20 per gallon (well below current spot prices of about $4.00 per gallon) would translate into approximately $2.2 billion of incremental mainline fuel costs this year versus 2007."

The rating agency added, as with US Airways, that "further negative rating actions, including a downgrade of the IDR into the 'CCC' category) could follow if sustained high jet fuel prices (above $3.50 per gallon) through the summer, coupled with weakening revenue per available seat mile (RASM) trends and softening air travel demand drive substantially negative free cash flow and force United to borrow heavily to avoid intensifying liquidity pressure moving into 2009."

Ticker: (Nasdaq:UAUA)

Posted by Holly at 4:00 PM | Permalink | Comments (0)

Godzilla here. Perusing the newswires today there were several stories that caught my eye, so here they are in no particular order.

Skydog Recovers

Not on the newswire, but nonetheless of utmost importance (at least to me and MB), Skylar (aka Skydog) has recovered from her rattlesnake bite without the aid of anti-venom. Evidently Mr. Snake slithered through a very small gap between our wrought iron fence and block wall in pursuit of a pack rat. Skydog thankfully came upon the rattler after it had expended some of its venom on the rat, so she didn't get a full dose herself. Since there is a shortage of anti-venom in Tucson and her blood count was low but not critical, the vet didn't give her a shot. After a couple of days of looking like a Shar Pei the swelling went down and she was her old self, which includes running out to the spot where the rattler was every time she goes outside. We're working on that.

A Fool For A Client

Delta is being sued for a million bucks by one of its customers, who also happens to be an attorney, for ruining his vacation. Must've been a helluva vacation he had planned.

According to the suit the passenger and his family "spent three days in airports, went days without their luggage, were treated rudely by airline employees and were forced to spend $21,000 on unused hotel rooms in Argentina, replacement clothes, and other costs." Evidently their flight from New York to Atlanta was delayed for 2 hours, and "the family was not allowed to board" their connecting flight in Atlanta. Because there were no Delta flights available for 2 weeks (according to the suit), the passenger re-booked his family on another airline and arrived at their destination three days late, with the luggage arriving five days after that.

Gag me with a habeus corpus.

Their flight was late out of NYC (we know THAT never happens) and although the connecting flight was still on the gate when they got there, it was too late to board. Due to the holiday season there were no Delta flights available, so it required flying on another airline. So far nothing sounds unusual, But $21,000 in unused hotel rooms, clothes, and "other costs" is unusual enough. Filing suit for $1 million is preposterous, and if the guy wasn't an attorney it would be very unlikely another attorney would even take the case.

My hope is that Delta tells him to go pound sand and asks that he not fly them anymore. Especially nowadays, no airline can afford a customer like that.

Fare or Fare?

When I read the headline "American Airlines Debuts Traditional Indian Fare" my initial thought was why AA would be announcing fare initiatives when everybody else was trying to raise fares and fees. But after reading the text I realized it was a promotion for their new inflight meals on the Chicago - Delhi service. I dunno, I'd probably have picked a different headline if I were writing the release.

International Woes

IATA put out a report saying the number of international airline passengers traveling first class and business class in March declined the most since 2003. Just what airlines need - reduced volume from high margin business travelers with $130/barrel oil prices. The global first/business class numbers fell 3.9% in March 2008 compared to March 2007. Within that number there was some slop, mostly the fact that Easter fell earlier this year as compared with 2007. Adjusted for this factor the overall decline was 1 - 2%, but within those numbers the U.S. domestic first/business class market declined 8.5% and intra-Europe was down 17%. Just another day in paradise.

Traditional wisdom (now there's an oxymoron if I ever wrote one) is that business travel has relatively inelastic demand and is less affected by economic cycles than leisure travel. However, business travel is not immune to having their travel budgets reduced, which precludes them riding up front. In addition, the price difference between F/C and Coach on international segments is not insignificant.

A typical Business Class fare from the U.S. to Europe can easily cost $10,000, while a coach ticket on the same airplane, though in the back of the bus, can be had for less than $2,500. Though some corporations have a travel policy that prescribes the conditions under which the employee can fly in F/J, expense budgets were made to be cut. Even if there were work rules precluding it, offering employees an incentive to sit in coach bus might even make sense.

In light of this it is not surprising that MaxJet and EOS foundered, nor that the list of international service being eliminated by major airlines is growing almost daily.

Posted by Godzilla at 6:48 PM | Permalink | Comments (0)

Late news out this afternoon has United's Glenn Tilton and US Airways' Doug Parker now scheduled to "talk" tomorrow. Where is that Star Trek miniaturization device when we need it, so we could all be the proverbial flies on the wall?

Not surprising that the deal is not officially "dead." It does seem there has been a lot of "posturing" in the press with this one, so I have made it a point to take whatever is "reported" with a heavy grain of salt, as I mentioned earlier.  (Makes that turkey taste better as well.)

The latest scoop has United still considering the more "traditional" merger agreement  with US Airways, or a more marketing/alliance type of agreement with Continental Airlines. So nothing has changed on that front.

Technorati Tags: airline mergers, airlines, United Airlines, US Airways

Posted by Holly at 6:45 PM | Permalink | Comments (0)

In its second attempt to gain the right to represent the flight attendants at Delta Air Lines, this time the Association of Flight Attendants once again came up short. But this time it was because not enough flight attendants voted.

Apparently 5,253 of 13,380 eligible flight attendants cast "yes" ballots, well short of the majority required, the National Mediation Board reported today. Employees who don't vote are counted as "no" votes. A total of 5,306 ballots were cast.

So while the AFA made the point on its website that it received a majority of the number of votes cast, a majority of eligible voters must vote for an outcome to be certified by the NMB.

This is an interesting election for a number of reasons. One, because AFA probably thought it had its best chance in years to get the prize, considering the Delta flight attendants are going union-less into a merger deal with Northwest.

Secondly, AFA represents the flight attendants at Northwest.

So this presents an interesting scenario, as Delta F/As easily outnumber the total at Northwest. So it is going to be very interesting to see how the representational vote goes for the merged group -- if and when the Delta/Northwest deal finally comes to pass.

Ticker: (NYSE:NWA); (NYSE:DAL)

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

Posted by Holly at 5:38 PM | Permalink | Comments (0)

Hi guys. I know. I've been absent for a couple of days. And look what happens when I go off and leave you on your own.

First, the US Airways/United deal appears to be floundering, or at least that is what the New York Times reported late yesterday. Although for those of us who read such reports carefully, if I was a betting woman, it would appear that there were some union "sources" talking to Ms. Maynard and Mr. Sorkin because of that one telltale line in the story.

The line? "In particular, it became clear that the labor agreements would have to be sorted out before the combined airline could see any of the savings from the deal, which could have been in the hundreds of millions of dollars."

My translation of this is that union leaders wanted a seat at the table - before negotiations could go any further. And having listened to US Airways' Chairman and CEO Doug Parker talk this spring about how he did not think giving labor a mandate to sort out their differences ahead of time was such a hot idea (aka Northwest and Delta) -- I doubt that US Airways would agree to give labor that kind of position in a potential deal up front.

If the deal is indeed dead, this certainly puts Mr. Tilton and United in a strange position. After putting themselves on the block openly for years -- this will be the second deal to fall through involving the airline in less than two months. So much for the great deal hunter.

I wish management at United would figure out that it's more important to actually run a good airline, as opposed to constantly running numbers on various merger scenarios.

Alas, now it looks like the airline is rather inept at both.

Meanwhile, Airbus warned earlier this week about additional problems with its manufacturing process, and American Airlines has been announcing cuts in routes right and left -- including JFK/Stansted.

American said Tuesday it is discontinuing flights between Chicago and Buenos Aires, as well as its Boston to San Diego route. It will also reduce its flights from Chicago to Honolulu to only  "peak demand days." The airline is also restructuring its operations in San Juan, Puerto Rico.

Today the airline announced it is cutting service between New York's John F. Kennedy International Airport and London's Stansted Airport effective July 2.

As one of our industry buddies wrote today, "I'm shocked. Simply shocked."

Wise guy. Yeah, right.

No one should be shocked at this news, as American added this flight less than a year ago in response to competitive service on the route by EOS. EOS is now gone, so bye bye American.

Anyone taking bets as to when American finally shuts down its money-losing Love Field adventure?

But hope springs eternal at JetBlue, which this week not only announced it was delaying a slew of new aircraft deliveries -- 21 aircraft for as long as five years -- the airline also issued a prospectus on a $160 million bond offering.

Gotta hand it to them -- it's probably better to do an offering now than later this summer. Stock up those cash assets while you can.

Finally, while there were a lot of headlines yesterday talking about "lower" energy prices, remember that term is soooo relative. Prices yesterday were not that much lower. Not only that, but today, prices were back up again.

Crude oil closed at $131.03/barrel today, up almost 2% on the day, while N.Y jet fuel closed at $3.96/gallon. West Coast jet fuel is still running above $4/gallon.

Ticker: (Nasdaq:UAUA); (NYSE:LCC); (NYSE:AMR), (Nasdaq: JBLU)

Technorati Tags: airline CEOs, airline mergers, airlines, American Airlines, jet fuel, jetBlue, United Airlines, US Airways

Posted by Holly at 5:37 PM | Permalink | Comments (0)

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

Posted by Holly at 9:35 PM | Permalink | Comments (0)

Here snakey snakey, come on snakey snakey, give us a little rattle. Come "say hello to my lil friend", Mr. .22 long rifle. Oh, sorry. In between trips taking Skydog to the vet I've been hunting for a rattler in my back yard. My walled in, sealed up, and supposedly snake-proof back yard, at least until this week. We've had snakes before in the walled in dog run, which is down in the wash behind the house, but never in back of the house. Ms. Skydog isn't feeling that well, but we're hoping to nurse her back to health. Meanwhile Nikko and I have been patrolling the back looking for revenge.

In between sorties to the backyard today I was reading some press releases by several airlines announcing the inevitable fare increases made necessary by you know what. (I am committed to write at least one post without using the "O" word).

United announced a $10 - $60 roundtrip fare increase (I hope it's closer to $60 than $10). Midwest Airlines announced it would begin charging $20 for the second checked bag. I know people in Wisconsin are nice, but that boat already sailed. Airlines are begining to charge for the First checked bag now, if the recent American Airlines initiative sticks.

One announcement that was relatively amusing was that Frontier had raised a whole host of their service fees, including raising the fee to check antlers from $75 to $100. Their baggage fees will obviously have the biggest positive revenue impact, since presumably more passengers check bags than animal parts, but I could be wrong.

Of the three announcements I think the United initiative will generate the most revenue for the least additional cost. A fare increase is the most logical and equitable way to recoup costs that are caused by the rising cost of you-know-what; although baggage (and antlers) do add more weight and consequently incrementally increase the cost of flying the airplane, it's like urinating in the ocean. Not much of a difference to the ocean whether you do, or whether you don't.

However, unless the airline is set up to force those fees into the initial transaction while the customer is buying their ticket, or at least provide the flexibility for the customer to pay the baggage fee while checking in at the kiosk, I think the revenue benefit will be mitigated. Maybe a lot. Down in the FAQ section of the Frontier announcement is a statement that says "You must pay the baggage fees at the ticket counter only." That doesn't sound to me like it is available at a kiosk. This will force lots of additional people to check in with a live person, and those are sometimes at a premium while at an airport. Head count is usually the first cost to eliminate when it is time to cut costs, so implementing a fee that requires a passenger is manually processed by a person is counter-productive, or ticket counter-non-productive, if you will.

Most traditional airlines have traditional distribution systems, meaning they are pretty good at collecting fares and not-so-good at collecting ancillary fees. Airlines like Allegiant or Air Canada, who have gone to great lengths to commodotize their products can more easily charge for each feature. Airlines with more traditional distribution who try and match this flexibility without corresponding flexibility in how they collect the fees, will be increasing their costs to collect the fees.

In addition to the hard costs of personnel, the boarding process becomes more complex. It will be interesting to see how airlines will handle checking those carry-ons that don't fit on the airplane. That there will not be enough room for carry on bags doesn't usually become apparent until towards the end of the boarding process. The usual drill is for the bag to be tagged at the jetway and then put in the baggage compartment - will that be cash or credit card sir?

Just raise the stupid fares.

Posted by Godzilla at 3:00 PM | Permalink | Comments (0)

Frank Arciuolo, aka Godzilla, who blogs for us here at PlaneBuzz on a semi-regular basis, and his lovely wife MB have two dogs. One is a beautiful German Shepherd named Nikko. He really is the nicest German Shepherd I've ever met.

The other is a Heinz 57 pound puppy by the name of Skylar. Or, as her friends are allowed to call her, Skydog. Skydog is a mess. In the absolute best sense of the word. She also is the alpha of the two dogs, even though Nikko now towers over her.

Wednesday Skydog was apparently doing what she usually does outside the Arciuolo compound in Tucson -- sniffing, looking to see what new smells were to be had in the sunshine.

Apparently there was more than just a few new smells in the sunshine, as Skydog was bitten by a rattlesnake.

See poor Skydog's swollen face here.

Frank tells us that the snake bit her inside the mouth so she is in some pain, "but her heart rate and stuff is good. The vet said her blood platelets were about 100,000 yesterday, and normal is 200,000, while below 50,000 is very bad.  So we decided not to give her the anti-venom because of that, plus the anti-venom treatment isn't a lot of fun for the dog anyway.  The swelling around her neck is gone but her face is still swollen."

"They told us to watch for bruising on her skin, which would indicate
internal bleeding.  So we found some bruising this morning and are on the
phone to the vet now to see if we should bring her in for another blood
test."

"Mr. Nikko has been guarding her when she goes outside.  Still haven't found  Mr. Snake yet after looking a few times, but I've got the rifle at the ready."

I wouldn't expect Godzilla to respond in any other way.

Our best to Skydog. Hope you feel better soon sweetie.

Posted by Holly at 2:01 PM | Permalink | Comments (0)

I figured the Dallas Morning News would have some nice video from the Southwest Airlines' annual meeting, aka Herb LUV Fest, on Wednesday and I was not wrong.

Click here to watch a video from Wednesday. I think it gives you a good feel for how it was there on Denton Drive.

Ticker (NYSE:LUV)

Technorati Tags: airlines, Herb Kelleher, Southwest Airlines

Posted by Holly at 1:16 PM | Permalink | Comments (0)

Bloomberg reports this morning that trading in shares of Silverjet have been suspended in London because the airline has yet to receive a promised $5 million investment.

The airline said today in a statement that it had asked for the money as part of a loan agreement from Viceroy Holdings LLC, a U.A.E.-based fund. But the airline said that it has yet to receive all of the money. Shares were suspended from trading on the London Stock Exchange's Alternative Investment Market at the request of the Luton, England-based airline.

In the statement, the airline said, "Silverjet's working-capital reserves are limited and advances under the loan facility are required as a matter of urgency,'' the carrier said. "Silverjet continues discussions with other parties, which have confirmed an interest in investing in the company.''

Uh-huh.

Technorati Tags: airline stocks, airlines, Silverjet

Posted by Holly at 12:40 PM | Permalink | Comments (0)

Anybody got a cucumber?

Okay, smart guys. It's for my eyes!

It's Friday in the great DFW Metropolis and yours truly is now trying to see the computer screen. This is day three of waking up with swollen, scratchy eyes and congestion.

(Day one -- Tuesday, I was not so similarly afflicted in that I had been nicely confined in a controlled environment, i.e., the Grand Hyatt at DFW International.) And when I say "nicely" confined in the Grand Hyatt, I'm not kidding.

I'm not sure I have stayed in a nicer room -- speaking from someone who wants a comfortable bed, a fairly large room that doesn't feel cramped, a comfortable place to work, and and all the latest tech goodies to boot. On this front the room offered up an iPod charger/player clock radio, nice 32 inch flatscreen Samsung television, a chair that is actually not built for dwarfs -- that adjusts just like a real office chair. And a  good sized desk that you can actually work on. And hey, all of this is accompanied by the sound of jet turbines -- right outside your window. Who could ask for more? Well, you could, and you'd probably get that as well. The food was great, the service from everyone was excellent and hey, there's a pool on the roof. Not to mention the black marble "spa-like" bathrooms.

I wonder if the airport has considered putting in penthouse suites on the top of the hotel? It would be a great place to live.

But I digress. My thanks to Joe Lopano and the rest of the folks at DFW who had me over on Monday for a nice 2 hour session.

I think I've now figured out  how I am going to board any flight going out of DFW. I'm going to go over to terminal D, park my car, go through the short security lines, enjoy the beautiful terminal and yes, it is gorgeous, and then take the tram to wherever else I need to go from there.

Almost like having a brand new airport. And a chance to pixel peep at airplanes between the concourses. Sounds pretty good to me.

But first I need to be able to see. Period.

After all that blowing dust and whatever yesterday (yes, another windy day here in the metropolis) yours truly looks like she's gone about 7 rounds with someone. Not sure who. I really will have to resort to putting a bag of ice over my eyes after I finish this post. Then I'm off to Walgreens for the Zyrtec I forgot to pack. Thank goodness they sell it over the counter now.

Technorati Tags: DFW Grand Hyatt, DFW International Airport

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

Or would that be a "smudge"?

We got a small bit of relief on the energy price front today, but not much.

Crude closed at 130.81 for the day, but jet fuel prices pretty much stayed the same, with the average closing price for New York Jet, Gulf Coast Jet, Mid-Continent, and West Coast Jet coming in at $4.09/gallon.

For the day, shares of ExpressJet posted the biggest loss for the day, as they dropped back a whopping 41%, closing at 1.61. Another day of decline for the airline -- after it said Wednesday it was cutting its branded flights by 30%.

Shares of Mesa Air Group didn't have a good day either, as the airline was forced to talk about its dwindling cash situation and potential revenue shortfall as a result of the loss of the Delta Air Lines/Freedom Air contract today in SEC filings. Shares here dropped back 16%, closing at 48 cents after the airline's discussion of a potential bankruptcy filling. With the equity in this stock already shot for the most part, one has to wonder why the airline has not already filed for bankruptcy protection.

Republic didn't have a good day either, as shares here were down 12%, ending the day at 12.45.

SkyWest was the one regional that pretty much held down the fort, as shares here were only down 1% on the day, closing at 15.48.

As for big Wednesday loser AMR, parent of American Airlines, the stock posted a small recovery today -- but nothing to write home about. The shares recovered 5%, closing the day at 6.56, after its 24% jump off the cliff on Wednesday.

Things didn't get much better for airline stocks after hours as S&P put the ratings of nine U.S. airlines on CreditWatch negative.

"The dramatic increase in jet fuel prices has increased airline costs significantly over the past two months, and, if sustained, could threaten their liquidity and financial profiles," said Standard & Poor's credit analyst Philip Baggaley in a statement.

S&P placed the following airlines on CreditWatch: AirTran Holdings Inc.; Alaska Air Group Inc., the parent of Alaska Airlines: AMR Corp., parent of American Airlines; Continental Airlines Inc.; JetBlue Airways Corp.; Southwest Airlines Co.; UAL Corp., which owns United Air Lines: and US Airways Group Inc., which owns both US Airways and America West Airlines.

Southwest Airlines, the most heavily-hedged U.S. airline, and Alaska Air Group, the second-best fuel hedged carrier, are in a "somewhat better" position than others, according to S&P.

Northwest Airlines Corp. and its Northwest Airlines unit are already on already on CreditWatch due to the proposed merger with Delta Air Lines Inc., which is currently on positive CreditWatch.

Technorati Tags: airline stocks, airlines, AirTran , Alaska Airlines, American Eagle, AMR, Continental Airlines, debt ratings, Delta Air Lines, ExpressJet, jetBlue, Northwest Airlines, regional airlines, Republic Airways, SkyWest, Southwest Airlines, United Airlines, US Airways

Posted by Holly at 8:14 PM | Permalink | Comments (0)

Herb sits down with CNBC after yesterday's annual meeting talking high oil prices, airline bankruptcies, employee productivity, and the lack of clear understanding on Capitol Hill about the problems affecting the U.S. airline industry.

Ticker: (NYSE:LUV)

Technorati Tags: airlines, Herb Kelleher, Southwest Airlines

Posted by Holly at 11:16 AM | Permalink | Comments (0)

Along with all the other emails in my box this morning was an SEC alert on Mesa Air Group.

The airline says in the filing that if it loses in its effort to keep the Delta Air Lines' contract in effect with its subsidiary Freedom Airlines, that it could be forced to seek bankruptcy protection. This shouldn't come as a surprise to many folks -- if you can simply do the math concerning the business that Mesa is slated to lose as a result of losing the contract.

As we reported here last month, a hearing on the matter is now scheduled to be heard beginning next week in Federal District Court in Atlanta.

I think the deal here is now pretty clear. If the judge agrees that Delta had the right to cancel the contract for just cause, Mesa will have no choice and will probably be forced into bankruptcy.

Ticker: (MESA:Nasdaq)

Technorati Tags: airlines, bankruptcy, Mesa Air Group

Posted by Holly at 10:48 AM | Permalink | Comments (0)

Top Ten Excuses of Naked Pinnacle Pilot

From David Letterman's home office in Wahoo, Nebraska.

10. "I was just helping her with her bags"

9. "You don't say 'no' to Barbara Walters"

8. "Well Harrisburg is the 'City of Love'"

7. "Come on -- Amtrak engineers run around naked in the woods all the time"

6. "Uh...a bear stole my pants?"

5. "I always get aroused after browsing through the Skymall catalog"

4. "So we can't fly drunk or have sex -- what is this, Russia?"

3. No number 3 -- writer still playing Grand Theft Auto 4 on XBox -- will try very hard to have jokes tomorrow

2. "Airline lost my clothes"

1."I thought it was a layover"

Technorati Tags: airlines, naked pilot, Pinnacle Airlines

Posted by Holly at 10:21 AM | Permalink | Comments (0)

Okay, is the funniest part about this story the fact he still had his watch on....or the "heat-seeking" helicopter? You decide.

"An airline pilot was found hiding behind a shed wearing only flip-flops and a wristwatch as a nighttime romp in the woods with a flight attendant ended with both under arrest, police said.

Jeffrey Paul Bradford, 24, and Adrianna Grace Connor, 24, both employees of Pinnacle Airlines Inc., were at a diner on the outskirts of Harrisburg on Sunday night before they apparently decided to walk into the woods, police said.

"They told the officer they wanted to go do it in the woods, essentially," said Lower Swatara Township police Sgt. Richard Brandt. "That's the best answer they had."

The two somehow became separated, and people who live in the neighborhood summoned police around 9:30 p.m., saying they had seen a naked man and an intoxicated woman.

A helicopter with heat-seeking equipment was called in, and Bradford was discovered hiding behind a shed shortly before midnight.

Bradford, of Pittsburgh, was charged with indecent exposure, public drunkenness and other offenses. Connor, of Belleville, Mich., was charged with theft from a motor vehicle, public drunkenness and other offenses; police said she took a flashlight from a neighbor's vehicle.

A spokesman for the Memphis, Tenn., airline said the two were suspended while the company investigates.

The office of District Justice Michael John Smith, where Bradford and Connor were arraigned, said they were not represented by lawyers. Telephone listings for them could not be located by The Associated Press."

Technorati Tags: heat-seeking helicopter, naked pilot, Pinnacle Airlines

Posted by Holly at 9:54 AM | Permalink | Comments (0)

Oh wow guys. It's been a busy, busy day.

It all started this morning with the Southwest Airlines' annual meeting. Herb Kelleher's last meeting as Chairman of the airline that he helped to start. Here you see Herb engaged in one of his favorite activities -- the kissing of women. Any woman. I think this proclivity of his probably ranks behind only drinking and smoking on Herb's list of his most favored activities. I still remember the night he grabbed me at an ISTAT convention and kissed me. So do a number of folks who witnessed the-feet-off-the-ground event.

Today was an emotional affair. Herb cried. Colleen cried. We all cried. Ginger Hardage, Southwest Airlines' SVP of Corporate Communications told me that she only had one Kleenex with her, but hearing CFO Laura Wright sniffling in the seat in front of her, she tore her one tissue in half and shared it with Laura.

Yes, it was a very special day. Only fitting, because folks, Herbert David Kelleher is one special man.

Then, as we started the press conference part of the annual meeting, all the media types who had been at the American Airlines' annual meeting joined us (as the American meeting is always held earlier the same morning....something that someone should change).

It was at that point that I first heard about the changes American had announced, including the $15 charge for the first checked bag. (I want to see the nightmare this causes at check-in ....), the many employees who stood up and talked at the meeting, the hundreds of protesting airline employees there, major cuts in capacity, and on and on.

Meanwhile over on Denton Drive, it was a Herb LUV fest.

As Herb and Colleen left the press conference, Gary "The King" Kelly strode in. While technically he is not "King" of Southwest, I guess he is pretty close. The board of directors named Kelly Chairman of the airline today, and he will also assume the "President" title in July when Colleen steps down officially from her Presidential Perch.

He did tell me I could kiss his ring.

It is also always great to see all my Dallas media friends such as Dan Reed with USA Today, Terry Maxon and Suzanne Marta with the Dallas Morning News, Mary Schlangenstein with Bloomberg, and others.

Not long after Gary had left the building, and all of us were back and connected to the outside world, news hit that shares of AMR were down 25%  on the day.

The shares didn't move much for the rest of the day, as shares of AMR, parent of American Airlines ended the day at 6.22, down 24%. It was the biggest decline posted by any airline on the day.

While AMR posted the biggest decline, it was a horrible day for the entire airline sector as a whole -- driven by the record uptick in fuel, the dire tone set by the American Airlines' news and its annual meeting, and Kevin Crissey's downbeat research note comments.

Posted by Holly at 8:31 PM | Permalink | Comments (0)

Or so said UBS analyst Kevin Crissey in a research note today.

"The legacy airlines have grown passenger revenue 7% so far this year. Although this is a good result by historical standards during a period of weak economic growth, it is not remotely close to what’s needed (think 4x this amount). Spot gulf coast jet fuel prices are up an incredible 85% y/y. The industry needs to shrink in a huge hurry to be able to raise fares and reduce fuel burn and other expenses.

It is difficult to make a compelling (or even decent) case to buy any US airline stock right now. The status quo in terms of fuel prices likely results in multiple bankruptcies. We continue to have no Buy recommendations and have Sells on AMR and JBLU."

Just food for thought. This note was published this morning -- BEFORE oil picked up more than $4 on the day, setting a new all-time high of $133.17 a barrel.

Jet fuel? Another new record, and this one is a big one.

Jet fuel closed today at over $4 a gallon. $4.09 a gallon to be exact.

Posted by Holly at 7:33 PM | Permalink | Comments (0)

Hi everyone. Thank you so much for your patience yesterday and today.

The server that houses both PlaneBuzz and the rest of the PlaneBusiness empire was moved, and I mean physically MOVED and shipped by Federal Express on Tuesday. Jonathan Bare, our esteemed Apple Certified Consultant then worked all day today cleaning up the drives on the server, and reinstalled our server in a nice new neighborhood. In Maryland.

Yea! Hopefully this will bring to a close the shut down problems we had been having over the last couple of weeks.

It's good to be back. The silence was killing me.

Be back in just a couple of minutes.

Posted by Holly at 7:23 PM | Permalink | Comments (0)

Your friendly server admin here, just posting to let you know that the PlaneBusiness/PlaneBuzz server had migrated to its new confines and is up and running again. It took a little longer than anticipated to update the software and perform other maintenance (it has been over a year since it was seen in person for updates and fixes), but we're excited to have the server online again. If you see anything that looks out of order, please don't hesitate to let us know here in the comments or by e-mail.

Update: In testing the comments, I found that it may be necessary to first sign out, and then re-authenticate with your TypeKey username and password, before posting your comment, in order for the Movable Type software to correctly recognize you. Sorry for any inconvenience.

Posted by Jonathan at 6:54 PM | Permalink | Comments (1)

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

Posted by Holly at 9:20 PM | Permalink | Comments (0)

Oil prices bounced around a bit today, but when all the shouting was done, crude oil futures closed at 126.29, up $2.17 on the day.

Spot price for New York Jet Fuel closed at $3.88/gallon.

Posted by Holly at 4:52 PM | Permalink | Comments (0)

One of our regular readers sent us an email this morning that I thought was a great opening for a short story.

"In the morning, I wake up, turn on CNBC to check the price of oil, utter a few curse words and head to the fridge for a Diet Pepsi."

He added, after I sent him a note about his very descriptive prose, "And yes, it happened today!  I saw $126 and change and said 'F**k, here we go again!!' That oil ticker provides more of a jolt on some days than either Diet Pepsi or coffee!!"

As of this posting, crude is running at about $126.65, up 2.53 on the day, but off the $127.40 mark it hit earlier in the day.

The price of oil: our industry's contradictory equivalent of Jolt. Twice the caffeine, providing twice the incentive to just go back to bed.

Posted by Holly at 12:10 PM | Permalink | Comments (0)

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 (1)

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 (1)

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)

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)

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)