PlaneBuzz

Photo: A U.S. Air Force VC-25 and F-16 escort in the skies near New York on Monday morning.

The FAA has said the flights were planned and that all agencies were notified. However, someone seems to have forgotten to tell the people living and working nearby, including New York Mayor Michael Bloomberg.

The NYPD issued this statement, according to The New York Times: "The flight of a VC-25 aircraft and F-16 fighters this morning was authorized by the F.A.A. for the vicinity of the Statue of Liberty with directives to local authorities not to disclose information about it but to direct any inquiries to the F.A.A. Air Traffic Security Coordinator."

Another video uploaded to YouTube illustrates one New York resident's fears about the low-flying planes. "That's not normal," says the woman in a concerned tone. No, it's not.

Why the secrecy? What were they thinking? My bet is that they weren't thinking at all. Still, I'm sure the resulting photos of the jet passing by the Statue of Liberty will be very provocative for future Air Force enlistment materials. Never mind the frayed nerves and panic induced by the photo shoot, right?

Update: Late this afternoon, Louis Caldera, Director of the White House Military Office, issued the following statement:

"Last week, I approved a mission over New York. I take responsibility for that decision. While federal authorities took the proper steps to notify state and local authorities in New York and New Jersey, it's clear that the mission created confusion and disruption. I apologize and take responsibility for any distress that flight caused."

Posted by Jonathan at 4:08 PM | Permalink | Comments (0)

Gary Chase, airline analyst with Barclays, issued a note this morning in which he listed the exposure of different airlines to the potential short-term risk of passengers curtailing travel to Mexico.

Gary also took a look at the effect that the SARS scare had on the Asian carriers in 2003, and then extrapolated a kind of "worst case" scenario for our carriers -- in terms of their Mexican exposure.

Of course, all of this is just conjecture at this point. This analysis is only looking at one part of the puzzle -- the US carriers current exposure to Mexican flying. This assumes, which Gary pointed out, that the flu is able to be contained in Mexico.

And right now, that looks like a big assumption.

But let's say that is the case. If that is the case, Alaska Airlines, Continental Airlines, US Airways and American Airlines are the four airlines that have the biggest percentage of their passenger revenue tied up on Mexican routes. Note that even though Alaska's total O&D revenue tied to Mexico puts it fifth on the list, those flights make up 8% of the airline's passenger revenues. A huge amount.

Posted by Holly at 10:56 AM | Permalink | Comments (0)

Just in case you were so wrapped up with the NBA playoffs or the NFL draft that you didn't watch much news over the weekend, or you didn't read Jonathan's note here that was posted last night -- the reason your favorite airline stock is posting a loss this morning is directly attributable to one thing. Swine flu.

Or rather, fears that the flu, which has, up to now, been concentrated in areas of Mexico, but has already crossed the border to the U.S., has gone beyond the stage where cases that have been confirmed can be 'contained.'

As a result, memories of the SARS epidemic of a few years ago, and what it did to the industry, (the Asian carriers were particularly hard hit) has investors selling off shares of airline stocks faster than you can buy a box of Kleenex.

The major airlines are taking the brunt of the selloff this morning, with shares of Continental, Delta, US Airways, United, Southwest, and American all down by double digits. Or very close to double digits.

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

A publishing update for PlaneBusiness Banter subscribers. We will be posting the latest issue of PlaneBusiness Banter later today. It is a huge issue, as we take a long look at not one, not three, but five airlines and their earnings. Delta Air Lines, Allegiant, AirTran, US Airways, and Continental Airlines.

I'll post a note here, as always, when the mammoth issue is ready to be digested.

Posted by Holly at 10:08 AM | Permalink | Comments (0)

Talk about bad timing.

The Associated Press headline reads, "Southwest Airlines to add link to Mexico's Volaris."

This morning Southwest Airlines issued a press release in which it announced that it was putting a link on its website which will allow customers to buy tickets on Mexican airline Volaris. The two had already announced plans for a marketing/codeshare agreement last year.

Just what I want to do today. Fly to Mexico.

Just what an airline wants today -- have their name in the headlines along with the word, "Mexico."

Posted by Holly at 9:04 AM | Permalink | Comments (0)

Photo: Health officials use heat-sensing cameras to scan arriving passengers at Tokyo's Narita airport.

The initial repercussion will be on those international airline passengers traveling to Mexico, but how far will the virus -- or simply the fear of the virus -- spread? Despite the milder cases of flu in the United States and Canada, compared to the nearly 70 deaths in Mexico, the declaration of a public health emergency by the Dept. of Homeland Security and World Health Organization will do little to encourage travelers to make short term plans to visit any affected areas of North America.

The full economic hit won't be known until after the medical crisis has passed and travel companies have reported traffic numbers. Just like SARS and other health outbreaks, airlines are in the trenches and have to respond fast to these threats. How much more can airlines and public health officials do to curtail the spread of swine flu and future disease outbreaks?

Posted by Jonathan at 7:02 PM | Permalink | Comments (0)

I can't resist. Today is the birthday of one of my favorite people. Some of you in the DFW Metroplex media market know her as Barbara Austin. Some of you in the New Orleans media market know her as BJ Austin. Some of you just know her as the eternally optimistic child-like small person with the red hair and maniacal laugh who asks very tough interview questions of her prey. Whoever that happens to be at the time.

BJ, who is currently working at KERA, after a long association with KRLD in Dallas, and I have known each other for 30 years. Ugh. That's almost embarrassing to admit.

She is not only one of the most delightful people on the planet, she is one hell of a good reporter.

And she is a fantastic waitress on roller skates. Which is no doubt a side result of having been a professional dancer for many years in New York.

Another lifetime. New Orleans. My second entrepreneurial adventure. Restaurant in the Quarter. BJ was working at WGSO, the all-news station in New Orleans, reporting on the antics of the Mayor Morial administration while serving up food and drink at night to hungry tourists. And yes, one night she wore roller skates.

Then there was the night she and another employee of mine, Larry Hart, put on a performance of "The Gin Game" for our regular customers.

You get the picture. She's one of my most creative and intelligent friends. And she is one of the best reporters anywhere. Not only that, but somehow in the midst of all this -- she and husband Jack raised a most creative and intelligent son, who I was honored to hear play at the Meyerson a few years back with his award-winning high school band.

Happy Birthday Ms. Austin. The world would be a much better place if more adults were like you.

Posted by Holly at 1:20 PM | Permalink | Comments (0)

It's Friday. Do you know how well YOUR favorite airline did for the first quarter of 2009?

As of today, all the major airlines have reported earnings.

So what have we learned? A couple of things.

One, Allegiant Air continues to blow away everybody else on the block. The travel company, which happens to include an airline that happens to fly only MD-80s that also happens to make money hand over fist had a spectacular first quarter. As I mentioned earlier this week, a 31.3% operating margin was posted by the airline.

You just don't see margins like that in this industry.

I told you guys not to believe that anti-Allegiant rant that CNBC's Jim Cramer spewed out not too long ago. Cramer, by lumping ALGT with Las Vegas "casino stocks," proved that his research is lacking.

We also learned this week that AirTran had a great first quarter. No, the results were not as stratospheric as those of Allegiant, but they were pretty damn good. Nice fat profit, and nice big declines in costs. Excellent job.

We also learned that while we may have hit a point where declines in demand have more or less leveled out -- nobody, and I mean, NOBODY, (well, except for Allegiant) is ready to call what is going to happen in May and June.

Preliminary bookings are down -- but will they recover, as more and more passengers continue to book tickets closer in? Then again, at the heart of the demand decline here in the U.S. is the declining number of premium passengers. That is only going to improve when the economy improves.

What I might have concerns about if I were an airline other than Allegiant is just how much of that previous business travel my airline had before does return. Even if the economy picks up.

You don't have to look very far to see what is happening in companies both big and small these days. Companies are cutting back on travel and are using video conferencing more and more. Heck, today anyone with a laptop can connect via video to a small one-on-one meeting or to a meeting with many more participants. There is no question that the quality and ease, not to mention the low to no-cost of such efforts -- has changed dramatically just in the last couple of years.

So yes, I am concerned that going forward -- if a company gets used to using video conferencing as a result of the current belt-tightening -- is that same company going to be anxious to start spending money on sending their employees to far-flung regions of the country? Much less the rest of the world? Just because they now have a little extra money to spend?

I'm not so sure.

And, if this is the case -- which airlines stand the best chance of inheriting the earth? Or at least the bulk of the shorter-term profit kitty? Those airlines that cater to the leisure traveler and have the low fares and low cost structure to make money doing so.

Which is one of the reasons why Morgan Stanley analyst Bill Greene recently advised airline stock investors to move out of U.S. legacy carriers and into low cost, low fare airlines such as Allegiant, AirTran and JetBlue. US Airways kind of sneaks in there as well, as it has the lower fares and the lower cost structure and a bigger domestic market than that of American, United, Delta, or Continental.

Posted by Holly at 12:50 PM | Permalink | Comments (0)

Hello everybody. It's earnings overload week in the airline sector this week, and my head is buried under the avalanche.

I'll be back later with some observations from the airlines that have reported in so far this week.

For now, it's time to listen to another call.

Talk to you later.

Posted by Holly at 11:12 AM | Permalink | Comments (0)

Good morning earthlings. We are putting the final touches on this week's long issue of PlaneBusiness Banter. Yes, it's our first official earnings issue of the first quarter earnings season, and both American Airlines and Southwest Airlines get a very long look in this week's issue.

I'll post a note here when it is finished and posted for subscribers to read.

But in the meantime, I just wanted to mention an extremely impressive metric that was posted by Allegiant Travel in the first quarter.

While it is impressive enough that the airline posted better than expected profits for the quarter late on Sunday -- as the company reported earnings of $28.2 million or $1.37 a share -- that is only the tip of the impressive news.

The really impressive statistic in these results?

The airline posted a 31.3% operating margin.

Got that?

If that mind-numbing number doesn't get your attention, I don't know what will.

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

Posted by Holly at 8:09 AM | Permalink | Comments (0)

Thursday Southwest Airlines announced its first quarter earnings. Clearly the big headline grabber here was the fact the airline posted its first loss (no ifs, ands, or buts, much less special charge excuses) in 17 years.

The airline lost $91 million in the first quarter, or $0.12 a share. That amount included a loss of $71 million due to the falling value of its fuel hedges.

Without the fuel hedge losses, the airline posted a loss of $20 million or 3 cents a share.

Analyst consensus had the airline posting a loss of a penny, so the loss was more than analysts had expected.

Worse, CEO Gary Kelly said in the airline's earnings call that RASM, which declined 2.9 points in the first quarter, could take an even bigger hit in the second quarter.

The airline also announced that it was offering a buyout to virtually all employees, had instituted a hiring freeze and was freezing pay for its top execs.

A couple of observations. One, I know more than one Southwest Airlines Captain who, for the most part, sat around eating bon-bons for much of the first quarter. And yet, the pilots at the airline were just given a tentative agreement that, if anything, sweetened the pot. It doesn't take a mathematician to figure out that the costs involved in having more pilots than the airline needs right now is costing the airline a pretty penny.

Two, while the airline can offer buyouts to employees -- the timing is not exactly the best for this kind of move, as the airline's employees have seen the value of their Southwest Airlines' shares in their 401(k) accounts fall precipitously over the last year.

So while I applaud the airline for attempting to right the downsizing ship by natural attrition and voluntary departures, I'm afraid I have to wonder if these measures are going to be enough.

Three, I still think the airline's growth plan is too aggressive, it's capital spending plans too ambitious for 2009.

Third, I'm not the only one.

This morning Standard and Poor's put the airline's debt ratings on Credit Watch with negative implications. As we all know, this move is usually a precursors to a ratings cut.

S&P put Southwest's "BBB+" rated long-term corporate credit rating on negative Credit Watch because of 1) the airline's first quarter performance, 2) it's forecast for its second quarter revenue and 3) the fact that the airline has added more than $700 million in debt since just late last year, increasing its interest expense.

This increase in debt is a direct result of the airline having engaged in aircraft sale-leasebacks in an attempt to increase its liquidity.

I would add that this amount is only going to increase in the second quarter. As I reported in a recent PBB, there is yet another traunche of sale-leaseback financing in the works with BOC Aviation that is set to close in the second quarter. BOC has handled the bulk of the airline's recent sale-leaseback transactions.

Note that anything below "BBB" is no longer considered "investment" grade. It then falls into the "junk category."

My gut feeling is that we will see Southwest lose its lofty "investment grade" debt rating status before this downturn is finished.

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

Late Tuesday Las Vegas-based Allegiant Air pre-announced that it will report earnings for the first quarter of between $1.34 to $1.38 per share.

This estimate is far above the then-forecast estimate by analysts for the airline -- which had estimated the airline would post a profit of $1.20 a share.

The airline will report earnings this coming Monday.

So why the uptick from previous company guidance?

Analyst Dave Fintzen with Barclays, who recently initiated coverage of the airline's stock (we talked about his recent research note on the airline in the latest edition of PlaneBusiness Banter) said today that because the airline gave no details other than the higher EPS estimate, it's a bit hard to know where the better performance for the airline was. Although he assumes it was all on the revenue side, with revenue probably outperforming even the previous management guidance.

So what is Dave going to be looking for when the airline reports on Monday? Any feedback on the airline's booking trends in its new markets, especially Los Angeles, in addition to any updated information on where the airline is going to grow now -- as we move into the second quarter and third quarters.

Posted by Holly at 8:24 PM | Permalink | Comments (0)

Posted by Holly at 8:00 PM | Permalink | Comments (0)

Today AMR, parent of American Airlines reported their first quarter results.

What is it they say -- it's all about managing expectations.

And in the case of American's first quarter numbers that were released today, that is exactly what management did -- as the airline had just recently warned Wall Street that its first quarter numbers might not be as strong as first expected.

As a result of that guidance, analyst forecasts were then lowered.

Previous to the airline's announcement today, the analysts' consensus forecast a loss of $1.62 a share.

The reason for the better-than-expected numbers? Operating costs were down a bit more than forecast and RASM declines were not as sharp as previously indicated.

American's stock was not the only airline stock that picked up some ground today -- comments the airline made in its earnings call helped push up other airline stocks as well, as CEO Gerard Arpey indicated that the airline is not seeing any "further deterioration" as those in the revenue world like to put it. But, just as Alaska Airlines indicated in an SEC filing last week, Arpey said that American is also looking at May and June bookings that are off noticeably from this same time last year. He said that May and June bookings are off by about 2 percentage points.

This percentage drop is more or less in line with what Alaska reported last week.

AMR ended the quarter with $3.3 billion in cash and short- term investments, including $462 million that is restricted.

Posted by Holly at 7:58 PM | Permalink | Comments (0)

Sorry folks. Have been tied up almost all day. Just got back online and thanks for all the emails and comments on the ASA photos! See, just goes to show you what happens when you believe what a pilot tells you.

Ahem.

All I can say is this. Even though it wasn't apparently a lightning strike, it still would have certainly gotten my attention. Whew.

Posted by Holly at 4:53 PM | Permalink | Comments (0)

Thanks to one of our American Airlines' pilot friends who sent us these photos this morning of an Atlantic Southeast Airlines/Delta Connection aircraft, after it suffered a lightning strike.

If these photos don't scare the you-know-what out of you, I'm not sure what would.

As he said to me in his note, "Wonder what the Captain's seat cushion looked like after this..."

Posted by Holly at 10:01 AM | Permalink | Comments (5)

[Editor's Note: Talk about technology crapping out. It wasn't until I went to post the note about the Banter being posted that I realized this was NEVER posted on Sunday!

I finally found it -- posted on March 23.

Can I just tear the rest of my hair out now?

Then again, I have been so absorbed with techo issues for four days straight that until someone called me last night, I had forgotten the NCAA finals were on television.

I know. It's sad. Very sad. ;-)

But there's hope. I'm off to get my new logic board!]

How many of you have ever found yourself in a position where some form of technology failed you? A piece of software....a computer.... A gadget of some sort?

If you've ever been in that situation you'll understand when I ask the question,"Why is it that they always decide to quit, break, or stop working just when you need to use it the most?"

It's Sunday and as usual I should be wrapping up this week's issue of PlaneBusiness Banter. One problem. My laptop's display unit died last night. No see. No write. No nothing.

The good part? The friendly folks at the Apple Genius Bar were able to determine the problem this morning. Even better, Apple is picking up the tab to fix it.

The bad part? I was told to come home and clone my hard drive and bring the computer back in ... TOMORROW. And the new display unit won't be in stock until TUESDAY.

So here I sit with external drives daisy chained and two laptops chugging away ( had to use target disk mode to boot up the MacBook Pro because... Well.....there is no display!)

Meanwhile I sit and twiddle my thumbs and contemplate what kind of happy pills Apple must give those guys who work the Genius Bars. I don't see how they do it. And how I'm going to try and get an issue written.

And....how am I going to get all this done and be back to the Swamp to take my Dad for eye surgery at 6 a.m on Tuesday?

As the guy at the Apple Store said..."There are always Margaritas."

Posted by Holly at 3:30 PM | Permalink | Comments (0)

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

My apologies. This week's issue was delayed because the logic board failed in my laptop Saturday night. Sigh. However, the Apple Store just called, the logic board is in, as promised, and hopefully this means all techo issues will be resolved soon.

Posted by Holly at 3:18 PM | Permalink | Comments (0)

Wow. Thanks to all of you who have written me about your experiences with cable/satellite/fiber choices in the DFW metro area. The clear choice of my American Airlines' pilot readers who wrote me is FIOS. The clear choice of everybody else is ....FIOS. So no need for a vote of no confidence here.

There were also a few U-Verse fans thrown in here and there, along with those fanatics (and I admit, I'm on that border as well) who have a combination of satellite and cable. But those folks usually are in areas where the new fiber options are not available. In case you don't understand why someone would do this -- you'd have the cable for the fast internet capabilities, and back-up television viewing for when the hail starts to beat the crap out of the satellite dish.

And yes, I now am very well versed in the difference in technology between U-Verse and FIOS. With U-Verse, ATT brings new fiber to a switching location, and then the information is sent into the house using the old copper. But with Verizon FIOS, they bring all new fiber right to the house.

Technologically speaking, that seems the better way to go -- especially as all of us are only going to want more and more bandwidth going forward.

Thanks again!

Posted by Holly at 10:08 AM | Permalink | Comments (0)

It's official.

The Worldwide Headquarters of PlaneBusiness is moving to Texas, effective May 18th.

I guess I should say moving back, as Dallas is where PlaneBusiness was born in 1997.

As Delta Air Lines ALPA MEC Chairman Lee Moak and I talked about in Phoenix recently, I will always love New Orleans. And just as much as I love it, I hate it. Anyone who has lived there knows what I mean. A love/hate relationship with the city is normal. (Lee and his wife also live in New Orleans.) And yes, he chastised me severely for leaving. He also shared his Katrina stories.

But enough of my New Orleans angst. It will always be with me. Besides, PlaneDad is still over there. It's not like I won't be returning on a regular basis, thanks to those canyon blue birds that fly between here and there with the frequency of a shuttle operation.

So here is my question for those of you who live in the Grapevine area of DFW. What internet/cable/satellite combination are you using and what would you recommend?

I'm using the Time-Warner combination at the WWH branch office in Las Colinas now, but only because it's my only choice.

Clearly reliable high speed broadband connectivity is top priority, with a good HD selection second.

FIOS? Time-Warner? DISH and a DSL line? Direct and a DSL line? ATT Uverse?

Either drop me a line personally (hhegeman at planebusiness.com) or post your recommendations below.

Thanks!

Posted by Holly at 12:19 PM | Permalink | Comments (0)

Well, we called this one.

Actually, I called it the day the airline came out of bankruptcy several years ago.

If you want to see what happens to an airline when the financial types pull off a slick version of bankruptcy (one in which inherent problems with an airline are not really changed -- but bankers, hedge funds, and airline executives make off with a lot of cash in the process) you need look no further than the sickening situation that began at Air Canada when the airline came out of bankruptcy in 2004 and which will end when the airline ends up back in bankruptcy again. An event which is probably not that far down the road.

This week Montie Brewer, CEO of Air Canada was forced out of the airline as CEO. Technically, he "resigned." Yes, well, that was only after he was told he was fired.

I don't blame Montie for the position Air Canada finds itself in today. I blame Robert Milton, the former CEO of Air Canada, and all the rest of that airline's top executives who made off with a s%^* load of money when the airline came out of bankruptcy in 2004. It was this group, along with the various banks and hedge funds that fueled the airline's exit, all wrapped around a nice new holding company, ACE Holdings, that is to blame for the situation Air Canada is in today.

Milton was made Chairman, President and CEO of ACE.

Very convenient. And yes, the position has also been very lucrative.

To the bankers, to the hedge funds, and to Milton. And his friends.

And guess what? Two of the members of that Milton brain trust are now back at the top of Air Canada -- Calin Rovinescu and Duncan Dee.

In an article in the Globe and Mail, Milton was quoted as saying, "Look at this as Calin's and Duncan's chance to make good things happen with a terrible backdrop."

How so very convenient. I mean, what are friends for anyway?

Air Canada has been on the PlaneBusiness Titanic Watch for more than a year.

Posted by Holly at 10:39 AM | Permalink | Comments (0)

Continental Airlines released their traffic report last night and the result was more or less what had been expected -- in terms of what analysts had expected the airline would post in terms of its estimated RASM figures.

The airline said that it estimates RASM was down, year-over-year, by between 18.5% and 19.5%.

This was just a hair worse than the estimate of both analysts Jamie Baker with JP Morgan and Bill Greene with Morgan Stanley.

As for basic traffic, the airline said that its domestic traffic levels were down 12.4%, while international was down 7.5%. Total traffic was down 10%. Capacity, meanwhile, was down 7% overall. This resulted in a decline in load factor of 2.7 points, down to 79.9%.

The rest of the sector will begin to roll out their bad traffic news today.

One thing to remember, however. As bad as these numbers are -- remember that Easter came very early last year, and all the revenue bump associated with Easter was in March last year. So comps were going to be difficult regardless.

Not to say that this makes these abysmal numbers any easier to swallow in the big picture, but jus' sayin.

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