PlaneBuzz

It's Monday and this is our last day in the desert. Tomorrow, it's back to Dallas.

A couple of things. One, Terry Maxon posted a great summary of the proposed Southwest Airlines' pilot contract on his Dallas Morning News blog this morning. If you would like to read a copy of the entire summary of the tentative agreement that has been distributed to Southwest pilots, you can access one of those here.

Two, I am still working on this week's issue of PlaneBusiness Banter today -- as a result of my being involved with the Phoenix International Airline Symposium last week. I will post an update here later today when it is ready for subscribers to access.

In the meantime, a quick look at airline stocks this morning was not particularly pleasant, as the sector is down across the board. It would appear that Wall Street is a bit shaken this morning at the hard line the Obama administration has laid out for the U.S. automakers to follow. Airline stocks seem to be caught up in the downdraft.

Have to go finish this week's issue. More later.

Posted by Holly at 9:42 AM | Permalink | Comments (0)

This afternoon the White House announced that it will, in fact, nominate Randy Babbitt, former ALPA President and aviation consultant, to be head of the Federal Aviation Administration.

Randy, who is here in Phoenix at the Phoenix International Airline Symposium (actually he's up on stage right now moderating the executive panel) denied reports that he will bring his Hawaiian shirt dress code to the Washington FAA offices in Washington.

Posted by Holly at 5:35 PM | Permalink | Comments (0)

More good news today on the airline union front.

It was announced this afternoon that the pilots at American have come to terms with the company on a new Aviation Safety Action Program (ASAP) participation agreement.

As readers know, this issue has been a burr in my side. The ASAP program, which encourages pilots to self-report safety problems without fear of retaliation, knowledge of which can benefit pilots from all airlines, had become a "leverage" tool used by a number of airline pilot unions over the last couple of years.

As a result, pilots at American, Delta, and US Airways had stopped participating in their respective programs, citing a fear of lack of confidentiality -- or potential efforts to "get back" at those employees who participated in the program.

But after pilots at Delta Air Lines rejoined the program earlier this year, following the lead of the pilots at Northwest Airlines, the FAA took a hard line stand -- telling airlines and their pilot unions that were still not participating that they needed to rejoin the program, sooner rather than later.

With this news, all the major airline pilot groups are now once again participating in what is, no question, an excellent safety program that is run in conjunction with the FAA.

The pilots at US Airways had already agreed to participate in their company's program again about two weeks ago.

Posted by Holly at 5:48 PM | Permalink | Comments (0)

This morning it was announced that Southwest Airlines and its flight attendants have come to terms on a new four-year tentative agreement.

In its announcement, the TWU said the deal "includes raises, a boost in the 401k contributions and improvements in leave, flexibility, and job security among other areas. The tentative agreement contained no economic concessions."

Posted by Holly at 5:28 PM | Permalink | Comments (0)

Today is the first day of the 2009 Phoenix Sky Harbor International Airline Symposium. Yours truly is sitting on the back row of what is a gorgeous meeting room at the Arizona Biltmore Hotel with Dan Reed from USA Today and Brett Snyder, aka Cranky Flyer. Susan Carey from the Wall Street Journal is sitting a few rows in front of us, and there are a few other media types floating around.

Today has been a good start to what is always one of my favorite industry get-togethers. There are no power point presentations, the dress is casual, and the company is great.

DOT secretary Ray LaHood spoke to a packed house at lunch. John Byerly, deputy assistant secretary for Transportation Affairs at the State Department seemed to be more excited than most at comments that LaHood made, as, according to Byerly, it was the first public confirmation that the new administration is firmly (and trust me, LaHood was VERY direct and forceful about the fact) behind two major items. One -- the new NextGen navigation system and two, the concept of "Open Skies."

According to John, who came over and talked to me after the speech, this was the first time there had been public confirmation of the "Open Skies" support. Not that there was that much danger this would not the case. But I can understand why he was happy. As he said, "Whew, that's going to make my job much easier!"

John, of course, is preparing to start work on stage two of the EU/U.S. air liberalization agreement.

Some people wondered whether or not DOT Secretary LaHood would fomally announce the symposium moderator Randy Babbitt's nomination as the new FAA administrator at the conference, but there was no official announcement today.

However, that's not to say that LaHood did not discuss the topic. He made a point to discuss the extensive and grueling "vetting" process that nominees have to endure. My take on his comments at lunch were that this was why Babbitt was not announced formally -- the process has simply not been completed.

For those fans of old line airline types, Bill Franke was on the panel before the one that is speaking now. Yes, a real live recipient of the PlaneBusiness Ron Allen Airline (Mis) Management Award. That's okay. United's Glenn Tilton is our luncheon speaker tomorrow. As most of you know, he received a special PlaneBusiness Greed Award the year United came out of bankruptcy.

Meanwhile yours truly will participate on the labor management panel tomorrow afternoon.

Ye haw!

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

Just a friendly bit of self-promotion here today. In last weekend's issue of PlaneBusiness Banter I talked about how I wondered if the formal announcement of former ALPA President Randy Babbitt being tapped for the FAA Administrator's position would be made public during this week's Phoenix International Airline Symposium.

Babbitt has been involved with the event for many years. With many different companies.

Yesterday, readers of the Wall Street Journal found out that Babbitt was now apparently the administration's choice to lead the agency.

Score another one for us.

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

Yesterday was Media Day at US Airways. And a fine time was had by all.

Really.

Considering that the airline did not have any major news to release, the day was nonetheless helpful. Or as one newbie to the event told me late yesterday afternoon, "I'm glad I came. It helped me to understand where the airline sees itself and the niche it occupies much better."

The format of the day was much the same as it always is. The day opens with remarks by CEO Doug Parker, which are then followed by presentations by Scott Kirby, President, Robert Isom, COO, Derek Kerr, CFO and C.A. Howlett, the airline's government affairs VP. During lunch, all the top execs of the company then make themselves available for questions and answers from the floor.

After this -- the airline had a panel of those staffers who were most directly associated with the airline's response to the Flight 1549 crash landing into the Hudson River on January 15th. It was the perfect way to end the day as everyone involved, including Parker, gave their accounts of where they were and what they did after the news hit that the aircraft was in the water. Most interesting were the stories that we had not heard before -- such as the fact that Captain Sullenberger was initially told by the company's representative at the ops center when he called in that he would have to call back -- the operations center was really busy because there was a plane down. Sully managed to convince them that he was well aware of that fact.

I'll talk more about Doug Parker's opening comments in this week's PBB, but the Cliff's Notes version would be that airline managements need to stop comparing the financial performance of their respective airline to industry peers and start managing airlines like any other profitable business.

Of course, the fact that Congress tends to look at the airline industry as a type of "public good" and not an industry that is run for the benefit of shareholders is a big problem. He talked a great deal about this, and I agree, if the airlines are going to be deregulated, then they need to be truly deregulated. They still aren't, in a lot of ways.

As for the airline itself, it estimates that it will make between $400 and $500 million this year in ancillary revenues, and no, it has not been able to detect any type of "booking away" as a result of their additional baggage fees. The airline also said that this year, any new ancillary revenue changes will probably only be made in the area of seat selection -- as the airline continues to work on new technology that will allow passengers even more choice, in terms of price and seat selection.

The big story of the day was the airline's quite remarkable turnaround in operations in 2008. We're talking time of departure, time of arrival, lost bags, all those things. We told you guys last year that we liked this guy Robert Isom. And this year the numbers proved that the new COO of the company knows his stuff.

For 2009, the plan is to keep improving these operational aspects of the airline -- with more focus being put on those aspects of the customer experience that are direct -- web site ease of use, ease of rebooking, those types of things.

The most interesting thing I took from Isom's talk this year? I remember at one point in 2008, there was some grousing from other carriers that the only reason US Airways was doing so much better in the DOT statistics was because the airline had padded their block hours. Even US Airways' pilots jumped on the bandwagon, accusing the airline of being "inefficient."

Yesterday, as Robert showed us graphically, while yes, the airline did initially pad the block hours a bit earlier in the year -- the airline actually not only went back to the "pre-padded" schedule in the last part of 2008, but it even cut block hours to a level lower than when the airline started 2008. And the airline still managed to post very respectable operational numbers.

Oh, and finally -- the really important news.

Monday night the airline held a dinner for those of us in town for the event at Cadillac Ranch in Tempe. Cadillac Ranch has a mechanical bull. As I forecast in this week's PBB, yes, Elise Eberwein, SVP of Communications and People at the airline rode the bull. Yes, Scott Kirby, President, rode the bull.

But surprisingly, neither won the contest.

Al Hemenway -- the airline's VP of Labor Relations took the prize. In belted khaki chinos no less.

I was impressed.

Even after repeated second and third attempts by Elise and Scott, and other attempts by media folks and US employees, Al hung on to win the prize.

Only appropriate that he persevered, considering he deals with labor relations, right?

I'll post some pictures later. Need to get out of here. Have to go check in over at the Biltmore for the Symposium. Talk to you later.

Posted by Holly at 12:20 PM | Permalink | Comments (0)

Posted by Holly at 7:29 PM | Permalink | Comments (1)

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

As UBS analyst Kevin Crissey said in a research note this evening, "The headline figure is bad."

Ah, yeah. I think you could say that.

Tonight Continental Airlines issued an update to its guidance. The company now expects March passenger unit revenue (RASM) to be down more than 18% year over year. This -- despite the airline's capacity cuts. And everybody's else's capacity cuts as well.

Continental also said that it is not yet seeing any kind of "stabilization in demand" that some other carriers have indicated of late they are experiencing.

On the plus side, the airline did say that they should beat their own cost guidance for the first quarter.

Woo hoo.

Posted by Holly at 8:58 PM | Permalink | Comments (0)

One of the best airline industry conferences around is the International Society of Transport Aircraft Trading. ISTAT for short.

Don't let the long name confuse you. This is the group you join if you sell airplanes, lease airplanes, want to lease airplanes, appraise airplanes, you name it.

As I have told PBB subscribers for years, it never matters what the U.S. airline industry is doing at any given point in time -- you come to one of these conferences and these are the guys who make money whether the economy is up or down. Most recently, the downturn after 2001 didn't particularly hurt their pockets either -- as aircraft sales continued to soar internationally, even if U.S. airlines more or less stopped ordering aircraft.

But this year, for the first year that I have ever experienced --and I have been coming to these for more than 10 years -- the tone is definitely different. Scottsdale is still gorgeous, but the mood here this week is definitely not what one usually encounters at an ISTAT function.

This year, as one person told me this morning, "It's scary."

Adam Pilarski, Senior Vice President with Avitas summed it up by saying, "It sucks. That's an industry technical term by the way."

Fred Klein, President of Aviation Specialists told me before his stint on the ISTAT Appraiser's Forum, "I can't believe that a handful of U.S. financial entities have managed to bring down the whole fucking worldwide financial system."

I asked, "Fred, can I quote you on that?" Fred, "Yes, damn it."

That kind of gives you a feel for the mood of the crowd. Deals are not getting done. Financing has dried up. Many aircraft values are down 20% since this time last year.

I have to hand it to the guys who put on the conference this year though. Is that an off-the-wall backdrop on stage or what? Doug Runte, Managing Partner with Piper Jaffray did look a bit uncomfortable when he was asked to come through the center of the turbine to the sounds of Coldplay's "Viva la Vida" though. Doug moderated the Appraiser's Panel. Doug's a good guy. And an art history major to boot.

Big Catch for Tomorrow: The Leeham Report's Scott Hamilton will be interviewing ILFC's Steve Hazy tomorrow on stage. Will not want to miss that.

Tuesday Night: Robert Crandall, former Chairman and CEO of American Airlines will be honored by ISTAT with a lifetime achievement award. And guess who else is supposed to be in the house? Yep. Herb.

I would bet money we are going to have a little roast of Bob before the evening is over tomorrow night -- compliments of Mr. Kelleher.

Posted by Holly at 7:05 PM | Permalink | Comments (0)

This just in fromMediaBistro.com's "Revolving Door" Email Blast:

HarperCollins imprint William Morrow will give [US Airways Captain] Chesley "Sully" Sullenberger $3 million for two books: one memoir, one full of his "inspirational" poetry."

Guess this means he can probably stop moonlighting as an aviation consultant in an attempt to make ends meet.

Posted by Holly at 1:50 PM | Permalink | Comments (0)

Today the Wall Street Journal ran a story which seems to confirm what we had assumed was going to happen, as we had discussed in PlaneBusiness Banter a number of times over the last several months.

The two "U.S." firms that invested in Richard Branson's Virgin America operation have apparently taken advantage of the fine print in their investing agreement with the airline and headed for the hills.

These investors controlled 77% of the airline.

Since U.S. carriers must be at least 75% owned and controlled by U.S. investors, this departure would seem to place Virgin America's status as a US-owned carrier in jeopardy. Unless the airline has somehow been able to find other U.S. based investors to fill the void. But as far as we have heard, that has not happened.

Word on the street for the last several months has been that Black Canyon Capital and Cyrus Capital Partners were going to pull the trigger on their investment. Heck, in my opinion they would have been crazy not to. The two negotiated a sweet "out clause" when they put money into the venture.

By pulling the plug now, the two were entitled to receive all of their original investment back, plus 8% interest, amounting to roughly $150 million combined between the two.

Not bad, considering the airline the two "invested in" has done nothing but lose hundreds of millions of dollars since its start-up -- a fact the airline couldn't hide any longer after it was finally forced to submit its Form 41 DOT data to the DOT recently.

A normal person could conclude that if, in fact, Black Canyon and Cyrus have exited the mood-lighted building, Virgin America would now either a) have new investors already lined up or b) be in violation of DOT ownership requirements.

It is important to note that Virgin has not issued a statement or release trumpeting the corralling of any additional U.S. investors.

One would think that the airline would have been out in front of this -- announcing new money -- as a way to deflect talk of its being in violation of DOT ownership regulations or of being in danger of a possible shutdown.

But they have been noticeably mute.

Which is exactly why we are talking today about how it would appear the airline is, just as Alaska Air Group claimed in a recent complaint to the DOT, not in compliance with the DOT foreign ownership rules, and two, yes, this means the airline is in danger of being shut down.

Posted by Holly at 10:36 AM | Permalink | Comments (0)

A shout out to Hawaiian Advertiser reporter Rick Daysog today.

Because of Rick, the "behind closed doors" bankruptcy agreement that saw Yucaipa Companies be granted the intellectual property rights to Aloha Airlines, including the airline's name, was thrown out by U.S. Bankruptcy Judge Lloyd King this week.

You may recall that we talked about this questionable deal back in November and December. The deal would have resulted in Mesa Air Group taking over the Aloha Airlines name -- because Yucaipa had already struck a deal to license the name to Mesa. Yucaipa was the largest shareholder in Aloha.

Judge King, emphasizing that the auction to buy Aloha's intellectual property should have been a public process, blasted the attorneys conducting the auction for refusing to allow Honolulu Advertiser reporter Rick Daysog into the proceedings. Daysog wrote a letter to the court voicing his complaint about his being excluded from the proceedings.

King ruled that the auction must be reheld.

Mesa apparently wants to obtain the name, and rebrand its regional Hawaiian airline go! -- with the Aloha name. A fact that has not gone over very well with a lot of people in Hawaii, including former employees of Aloha, and, apparently, Judge King, who blasted the proposed deal with Mesa in the first hearing held on the deal in December, where King postponed approving the auction the first time. Many in Hawaii blame Mesa for Aloha's demise.

Kudos to Rick. Keep up the good work and keep working to keep those deals out in the open.

Posted by Holly at 3:13 PM | Permalink | Comments (0)

That huge sucking sound you hear coming from the airline industry today is the sound of airline stock prices falling off the ledge.

We only thought airline stocks had been hammered prior to this week.

When last we looked here are just a handful of the declines we were looking at: US Airways, down 16%, trading at 1.99; Alaska Air Group down 17%, trading at 15.04; Continental down 13%, trading at 7.31; Delta down 10%, trading at 4.01; Hawaiian down 13%, trading at 2.25; JetBlue down 11%, trading at 2.86; Southwest down 4.41, trading at 4.99; and United Airlines, down 11%, trading at 3.75.

Yeoww.

This week the winged ones began to report their traffic numbers for the month of February, and folks, even taking into consideration that there was one more day in the month of February last year -- it was a leap year -- the numbers coming out this week have scared the bejesus out of airline stock traders and investors.

How bad have the traffic numbers been? Here is the latest rundown.

(RPMs are revenue passenger miles, ASMs are available seat miles. RPMs represent traffic, while ASMs represent an airline's capacity.)

American Airlines RPMs down 13.5% ASMs down 10.1% Load factor down 2.9 points to 73.9%

American Eagle RPMs down 14.1% ASMs down 9.1% Load factor down 3.8% to 65.2%.

US Airways   RPMs down 9.3% ASMs down 9.3% Load factor steady at 77.2%

Delta Air Lines RPMs down 11% ASMs down 7.8% Load factor down 2.7 points to 74.3%

United Airlines RPMs down 15.2% ASMs down 14% Load factor down 1 point to 73.2%

Southwest Airlines RPMs down 6% ASMs down 6.5% Load factor was up 0.5% to 69.1%

Continental Airlines   RPMs down 13.2% ASMs down 8.9% Load factor fell 3.5 points to 72.9%

AirTran RPMs down 13.6% ASMs down 9.1% Load Factor down 3.9 points to 74.2%

JetBlue   RPMs down 8.3% ASMs down 5.5% Load Factor down 2.3 points to 74.5%

Then of course there is PlaneBusiness favorite Allegiant Air. The airline continues to buck the trend, as it reported that its RPMs increased 9.8% in February, while the airline increased capacity by only 5.2%. This resulted in a nice 3.8 point increase in load factor to 90.2%.

Other than renegade Allegiant -- the two airlines that clearly did the best job in February at managing capacity reductions with declines in traffic were Southwest and US Airways.

But as we see today, that has clearly not helped the stock price of either airline.

Posted by Holly at 2:43 PM | Permalink | Comments (0)

Yikes. It wasn't the bad weather up and down the East Coast today that made investors shiver.

The folks on Wall Street did a find job of doing that on their own.

And not just for airline stocks.

When all the shouting was over, the Dow Jones Industrials ended the day down 299.64 points, or 4.2%. This brought the Dow down to 6763.29. This was the first time the Dow has closed below 7000 since May 1, 1997.

Meanwhile, the S&P 500 fell 4.7% or 34.27 points, while the Nasdaq lost 4% or 54.99 points, closing at 1322.85.

The big news pushing stocks lower today concerned insurance giant AIG. The federal government announced that it was increasing its stake in the company by some $30 billion. The total for both U.S. Treasury and Federal Reserve investments in the cratering financial giant is now about $163 billion.

The market was in no mood to hear this today, and stocks took the brunt of investors angst as a result.

In the airline sector, the carnage was deep, and it ran pretty much across the board.

Of all the stocks we track at PlaneBusiness, none, not one, was up for the day.

The biggest losers for the day included: AirTran, which lost 15%, closing at 2.54; Hawaiian Airlines, which also dropped back 15% to close at 2.68; US Airways which lost 13%, closing at 2.47; JetBlue, which was down 14% to close at 3.29; Pinnacle, which lost a whopping 20%, closing at 1.12; ExpressJet, which was down 10%, closing at 1.22; and United Airlines, which lost 13% to close at 4.26.

Whew.

That's all I can say.

Oh, and Southwest shares, which are plumbing unbefore seen depths of late, closed at 5.52, down 6% for the day.

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

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

Posted by Holly at 10:33 PM | Permalink | Comments (0)