PlaneBuzz

Hello all.

Holly here.

I figured I'd take a minute away from my vacation mindset to drop in and say hello.

Yes, yours truly is "officially" on my usual August publishing hiatus, although with all the work I had put off doing until I had a break from publishing, I'm not sure what a real vacation looks like anymore.

One of the more distressing issues I faced in the last week or so was the fact that I am driving an official "clunker."

Yes, that's right. My "vintage" automobile as I prefer to call the Black Beauty, was on the government's official list of clunkers. Not only that, but the $4500 I would have been entitled to -- had I opted to go deeper into debt for an automobile that I am convinced would not be built nearly as well as mine is -- is probably $1500 more than what I would get today if I tried to sell her on my own.

Let those numbers sink in and then think about what I am driving.

A 1991 Lexus LS400. In its day, a revolutionary car. Today? The damn thing still holds up very well to whatever competition you want to throw at it.

Yes, my car has all the usual 1991 LS400 quirks -- a power steering pump that is going bad, brakes that have that unmistakable "soft" early Lexus feel to them, an a/c compressor that costs as much as a down payment on a small house to replace when it decides to stop working, and speakers that have finally, for the exception of two sets on the driver's side, seen their seals rot out from old age.

But it also rides great, gets good gas mileage for its class, only has 130K miles on it -- yes, after 18 years -- and still looks great, both on the inside and the outside. Just two days ago, someone came up to me and starting raving about how great that particular year was. And how he wishes he still had his. (He now owns one of the much more young and nubile models. Oh, and much more expensive.) Yet, for all of these "improvements," he told me he wished he had never traded in his 1991. "Too much crap on these new ones that can go wrong," was one comment he muttered as he walked around the back end of the car, gazing at it as one would a prized painting. Or horse.

Unfortunately, the Black Beauty goes in tomorrow for a thorough "20 point" evaluation by a garage that has been recommended to me here in Dallas. They specialize in taking care of prized possessions such as mine. I say unfortunately because I suspect I am looking at some expensive maintenance repairs here shortly. I know the front brakes need repair. It's time for an oil change. But then there is the power steering pump that I have continued to nurse through its dying days. Not to mention more than one "import" car center that knew nothing about the care of feeding of elder Lexii.

But back to my anticipated outlays. There is also a front suspension that needs some care and feeding. You know. Control arms. Ball joints. Bushings. Struts. The kind of things that when they need to be replaced, dollar signs begin to ring up like a pinball machine gone wild.

Then there are those speakers.

Do I pay to replace them? Or do I not?

Do I pay to repair the car? Or not?

Worse yet -- do I call one of the ads I saw in Craigslist for "parted-out" LS 400s? Could I bear to go see one in pieces? Much less pick my way through the carcass to pull out the parts I need?

Is it time, finally, to bite the bullet and start looking for a new "used" car? (I long ago stopped buying new vehicles. It's just too much money lost from the get-go in my opinion.)

The problem is -- I don't know of any new "used" cars that I would like better than this one.

While I contemplate my clunker dilemma, I suddenly realize that I am thinking about airlines again. Specifically, I am thinking about MD-80s. (I know, I'm supposed to be on vacation.)

But I would be crazy not to see the similarities to my situation and the Allegiant business model. You know -- the airline that defies conventional wisdom and flies aging, maintenance-heavy MD-80s. The same MD-80s that cost next-to-nothing, resulting in ownership costs that are also next-to-nothing.

When I look at my "clunker" in that respect, while I may be looking at some hefty maintenance expenses on the horizon, and while I may pay more for gas then someone who gets 30 miles to the gallon, I have no car payments. And I haven't had any in 10 years. (Yes, I am the Black Beauty's second owner.)

For my purposes, the Black Beauty gets me from point A to point B quite well. Quietly. And in style.

Taking this "Allegiant" approach, the answer is obvious. I think I'll keep her. Then again, I haven't seen the results of the "20 point check list" I'm going to get tomorrow.

Nah, I still think I'll keep her.

Heck, maybe I'll even call one of these guys back who are parting out some of her siblings. Yank out a few tweeters and woofers. Oh, and an instrument cluster as well. (Another legendary weak point.) And maybe a power lock switch for the driver's door. (I broke the top off mine a few months ago.) Maybe I need to look at the process as the equivalent of performing an "organ transplant." Or stem cell renewal. As opposed to picking the carcass of similar vehicles in an effort to keep my official "clunker" on the road.

Yep, I'm game. Better yet, I'll still be much better off, financially, than had I sent her off to the equivalent of the automobile slaughter house. Even if I do have to spend a few bucks on getting her back into shape.

Thank you Allegiant. You've helped me make my decision.

Fie on the "Cash for Clunkers" program.

Posted by Holly at 12:22 PM | Permalink | Comments (0)

As one of our readers said in a note to me today, "A truly inspired sequel, with higher production values!"

Yes, Dave Carroll is back.

You know Dave. The man who grabbed more than five million sets of eyeballs to YouTube with his original hit, "United Breaks Guitars."

Yes, well, Dave's back.

This time with the promised part two of this his three part trilogy thrashing United Airlines for first, damaging his beloved guitar, 2) the airline's subsequent refusal to pay for the damage.

This second effort takes a pot shot directly at the United Airlines employee who Dave dealt directly with as he tried to get the airline to do the right thing -- Ms. Irlweg.

He serenades the caustic United supervisor who denied his claim back in 2008 by singing, "Oh, Ms. Irlweg, we don't need to fight. We could be best buddies, but our relationship has been muddied by a flawed United Airlines policy."

Dave's second effort is not as catchy as the first, but as our reader noted, "Be sure to watch for special guests Glenn Tilton, Miss Almighty Dollar and their body guards. Also, watch to the very end (after the song ends)!"

I think the tuba is the best part.

Here you go!

Posted by Holly at 4:27 PM | Permalink | Comments (0)

Subscribers can access the latest issue here.

And if you are not a subscriber, why aren't you?

Posted by Holly at 3:59 PM | Permalink | Comments (0)

For those of you out there who use a Mac, and who also blog, I need a recommendation for a new blog editor.

I've had it with Ecto.

That last post was about twice as long as it now appears on screen. The rest of it? Simply disappeared. Gone. Poof.

This is exactly what happened with our July 4th "Ode to a Hot Dog" column that I slaved over this year.

So that's it. No more lost missives for me.

Drop me a note at hhegeman at planebusiness.com and let me know what you use.

The only other one I have used in the past was Mars Edit, and frankly, I wasn't that impressed with it at all.

Thanks!

Posted by Holly at 3:18 PM | Permalink | Comments (1)

Hello all. I'm sitting here twiddling my thumbs, waiting for this week's issue of PlaneBusiness Banter to be posted. I'm done with my part. Just waiting for the editor person to give me the all clear to hit the "post" button.

Actually it's a bit more complicated than that, but you get the idea.

Was just nosing around the airline news from this weekend and today. That certainly didn't take long.

After last week's news-a-minute pace -- today seems slower than a herd of turtles.

For those of you who are PlaneBusiness Banter subscribers, (and if you aren't you should be), this is our final earnings issue for the quarter as this week I take a long look at the earnings announced by our two Canadian things with wings -- WestJet and Air Canada.

One thing I have to say for Sean Durfy, CEO of WestJet. He sure knows how to get your attention. He opened up the airline's earnings call by saying, "Our focus right now is navigating the short-term environment to achieve our long-term plans of becoming one of the five most successful international airlines in the world."

Posted by Holly at 2:24 PM | Permalink | Comments (0)

Thanks to our same reader from last night who suggested the theme song from "Jeopardy" while we all breathlessly awaited the news from the bankruptcy court.

Today? It's another day, another tune.

Posted by Holly at 11:43 AM | Permalink | Comments (0)

"We said all along that we would only move forward on this deal if it proved to be the right decision for our Employees and financially prudent for our Company," said Gary Kelly, Southwest's Chairman of the Board, President, and CEO. "We have a mission to preserve and protect our Culture and the best interests of our Employees, Customers, and Shareholders. This was a great opportunity that required us to act fast. A lot of people worked very hard with every intention of making this work. We were fortunate to be in a position to examine the acquisition to see if it was the right decision for Southwest Airlines. We chose not to amend our bid to remove the labor requirement, a key reason our bid was not selected. Our congratulations to Republic Airways and Frontier Airlines."

There you go.

Go talk amongst yourselves about this turn of events. I'm going to go read some of your email pelts.

Posted by Holly at 5:53 PM | Permalink | Comments (0)

Thanks to one of our readers who suggested we all download a copy of this and listen to it as we await more news from the bankruptcy auction.

http://world.std.com/~eshu/dbug/Jeopardy_Think_Music.mp3

Posted by Holly at 4:19 PM | Permalink | Comments (0)

Here's the latest missive from the Southwest Airlines' pilot group, SWAPA, to its members. FAPA is the Frontier Airlines Pilot Association, the union that represents the Frontier Airlines' pilots.

"It has been a whirlwind week for your M&A Committee. We have been in meetings with our M&A counsel in Washington Monday and Tuesday and quickly returned to Dallas on Wednesday for a pressing meeting with FAPA. We would like to bring you up to date on the Frontier transaction.

Weeks ago, the Company approached SWAPA for ideas on how to complete the Frontier transaction with our pilots' support. We expressed our concerns about new federal legislation on the books (McCaskill/Bond) and its potential effect on pilot seniority at Southwest. The Company, at SWAPA's request, included a "labor contingency clause" requiring labor agreements in place prior to the closing of the Frontier acquisition. This action took the possibility of binding arbitration out of play and protected our pilots from a harmful arbitrated seniority integration.

As the Company was developing their formal binding proposal to acquire Frontier out of bankruptcy, Southwest bankruptcy counsel expressed concern that the Southwest bid could be excluded from the auction process because Frontier legal counsel deemed the proposal "not qualified" for the auction process due to the labor contingency clause. However, the labor contingency clause would be deemed acceptable and the bid deemed qualified if SWAPA and FAPA reached an Agreement in Principle for seniority integration. That triggered negotiations Thursday between SWAPA and FAPA.

SWAPA's concerns throughout this process have been to protect our seniority list and our Collective Bargaining Agreement (CBA). The only way to adequately protect our entire pilot group was to place the FAPA pilots below the SWAPA pilots on our new Master Seniority List.

FAPA's concerns are:

• Job Protection
• Seat Protection
• Pay Protection
• Domicile Protection

FAPA's position was for relative seniority with a "variable" for the ratio for integration. Clearly, meeting all of FAPA's concerns would be an enormous windfall for Frontier pilots at the expense of Southwest pilots."

Oh boy. Here we go. All of these concepts sound very familiar don't they? Relative seniority. "Stapling" the Frontier pilots to the bottom of the list.

And this is supposed to be finalized with both groups signing off on it today??

Right.

Well, there you have it. Either there is an agreement in principle with both pilot groups as to the question of seniority, or it appears that the bid by Southwest will not be considered to be a "qualified" bid.

Do you suppose that Southwest knew this all along, and this is merely an anticipated 'squeeze play' made by the company, assuming that the "urgency" of the situation would prod both groups to an agreement before the clock strikes twelve? Or was this a surprise at the last minute to all parties concerned?

Stay tuned.

Posted by Holly at 12:44 PM | Permalink | Comments (0)

Today is the big day. Or it's supposed to be the big day.

After all the preliminary table setting over the last several days, today was or is supposed to be the day that Frontier Airlines is actually auctioned off.

But, as I wrote about this week in PBB -- I think the assumption that this thing was a done deal for Southwest was a bit premature. In addition, yes, I think that if Republic were to be awarded Frontier -- that Frontier could continue to operate and it could be profitable. This is not a case where the bankrupt company is on death's door. Quite the contrary, Frontier has been posting good operational numbers of late, and they have actually used the bankruptcy process to do what a company is supposed to do while in bankruptcy -- they've restructured themselves quite nicely.

Therefore, I am not surprised at all that reports last night and this morning say that all is not well on the labor front. Specifically in the negotiations between the Frontier pilots and the Southwest Airlines' pilots.

Remember that Southwest said going into this that their pilots would have to sign off on a deal with the Frontier pilots or the airline would not go through with the deal.

Not sure if Southwest realized that this, coupled with the fact that the Frontier pilots are taking the position that Frontier does not HAVE to go with Southwest for it to remain a viable business -- and you've got a pretty strong negotiating position for the pilots at Frontier.

We'll keep you posted.

Posted by Holly at 11:22 AM | Permalink | Comments (0)

For those who are addicted to tweets, PlaneBusiness is now on Twitter.

The account name is: PlaneBusiness. Creative, huh?

Just an updated note for subscribers. I did not realize that Twitter account names are case sensitive. I think that is nuts, but it is what it is.

This week I alerted PlaneBusiness Banter subscribers that we had a new Twitter account and that the account name was PlaneBusiness.

No, apparently I was mistaken.

It was actually "planebusiness."

Okay, so now the account has been "tweaked" and it is now, officially, "PlaneBusiness." (Two capital letters in a sea of lower case.)

Whew.

It may take a while for that change to propagate through the system, but if you would like to follow us, just look for either version today. The corrected account name should be the only one active tomorrow.

Just a cautionary note. If you need to contact me about a potential story, or news item, or you have a question or whatever -- please continue to send me an email to: hhegeman at planebusiness.com.

I don't intend to use the Twitter feed as a two-way communication device.

Posted by Holly at 11:26 AM | Permalink | Comments (0)

First, AirTran and Continental announce a slot swap involving slots at Newark, Reagan National and LaGuardia on Tuesday. But the scope of that deal was swamped this morning with news that US Airways and Delta Air Lines have agreed to terms on a much larger deal that involves both a swap of slots, and a few routes thrown in for good measure.

This morning US Airways announced that it will obtain 42 pairs of slots at Reagan National, as well as access to slots in Tokyo (NRT) and Sao Paulo, Brazil (GRU) from Delta Air Lines.

In return, US Airways is giving Delta Air Lines 125 pairs of slots at LaGuardia.

This is a big deal for US Airways. The airline estimates that the deal will create an additional $75 million dollars in revenue per year.

It's a positive for Delta Air Lines as well, as Delta continues to muscle into the New York market in a major way. This is a huge gain for them.

And no, this does not affect the US Airways' Shuttle operation in any way.

Meanwhile, yesterday it was reported that AirTran plans to stop flying to and from Newark completely -- giving its takeoff and landing slots to Continental Airlines. In exchange, Continental is going give AirTran slots at both Washington Reagan and LaGuardia.

Apparently AirTran will give Continental 10 slots, a single gate and a jetway at Newark. In exchange, Continental will give AirTran four slots at LaGuardia and six slots at Washington Reagan.

So, those are the facts.

What does all this horse trading mean?

It means that the bigger airlines are doing exactly what we said they were going to do. They're getting creative.

While most headlines over the last few months have continued to talk about the lack of liquidity, "Which airline is most at risk?" -- we have continued to make the argument in PlaneBusiness Banter that in this industry -- good management teams are going to find a way to survive.

Look at the airlines involved in these two deals announced. Four of the better management teams out there.

We don't see United, we don't see a mention of American.

Meanwhile, Republic and Southwest are slugging it out over Frontier. Again, two of the better management teams in the industry.

Oh, and speaking of American - is it just me, or does that Holy Grail of a British Airways - American Airlines anti-trust agreement seem to continue to diminish in importance as the days go by?

I continue to believe that American, by putting all of its eggs in one basket it doesn't even have in its possession yet, runs a big risk of being odd man out when the music stops.

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

Things are just a teensy bit wild around the Worldwide Headquarters tonight. Yes, it all has to do with the auction. If you don't know WHAT auction, then you shouldn't be allowed to call yourself a legitimate airline expert. Much less even a casual observer of all things with wings.

Having said that, subscribers can now access this week's issue of PlaneBusiness Banter here.

We've got some snooping to do. Talk to you later.

Posted by Holly at 5:42 PM | Permalink | Comments (0)

Southwest Airlines is holding a press conference in about 10 minutes to discuss its "sweetened" offer for Frontier Airlines. The airline submitted a binding offer of $170 million.

The airline issued a release in which it said,

"The offer contemplates that Southwest acquire approximately 80 percent of Frontier's existing Airbus fleet, which translates into about 40 aircraft, plus all of Lynx. Initially, Frontier would operate its Airbus aircraft as it does today, with a planned retirement of the Airbus fleet and transition to Southwest's Boeing 737s over a period of approximately 24 months. Despite the initial reduction in the fleet, Southwest intends to maintain all existing markets, as well as add new nonstop routes from Denver that are not served by either Southwest or Frontier today."

Interesting. "Intends to maintain all existing markets." That means no route rationalization? My guess is it means rationalization through reduction in frequency. But not routes themselves.

Also the question of Lynx and what Southwest would do with it has been determined.

More later. Now I'm trying to do at least three things at once. Oh, and eat lunch. That's four.

Posted by Holly at 12:58 PM | Permalink | Comments (0)

The last printer-choking edition of PlaneBusiness Banter for the quarter will be posted later today.

Hopefully this next week's issue will be of more normal length -- and scope -- thus allowing a more timely posting. Hey, there is only one of me. Until I figure out a way to clone myself.

More later.

Posted by Holly at 10:35 AM | Permalink | Comments (0)

This week the big news in Airlineland (at least at this point early in the game) is the pending bankruptcy auction of Frontier Airlines.

Today is the deadline for interested parties to place their bids.

Could we see another "interested party" besides the two we already know about -- Republic and Southwest -- show up at the last minute?

I doubt it.

One reason is that Aug. 3 was the deadline for informal bids by potential buyers. No more likely prospects entered the fray as of that date. Last week officials of Frontier also said publicly that they had not been approached by any other potential buyers.

If no more live potential buyers show up between now and the end of the day -- then what?

Then the auction will begin on Tuesday.

At that point, officials from Frontier, and the airline's unsecured creditors, (which include Republic let's not forget) will begin to consider their options.

As most of you know -- the Republic deal would see Frontier remain intact -- as a separate entity. The Southwest deal (whatever the final numbers prove to be) is predicated on Southwest swallowing Frontier whole. It would take a while, but eventually Frontier would cease to exist as a separate airline.

While we might see some off-the-wall attempt at an offer by some entity today -- I doubt we see any kind of new serious offer materialize.

Stay tuned. The real fun begins tomorrow.

One last note: For fans of Frontier's animal tails, and I am one of the biggest fans of them anywhere, check out this website, LockOn Aviation Photography. They have photographs of all the tails. The photo above is theirs. Thank you guys!

Posted by Holly at 10:29 AM | Permalink | Comments (0)

This week's mega-earnings issue of PlaneBusiness Banter is now posted. I think this one has set a new record at around 100 pages. Hey, I like to give you lots to think about.

This week I look at five airlines that recently reported second quarter earnings in-depth: AirTran; Alaska Air Group; Delta Air Lines; United Airlines; and JetBlue.

We also have earnings summaries now posted for ExpressJet, Republic Holdings, and Hawaiian Airlines on the site for PBB subscribers.

So what did we like or didn't like about the earnings from this crop of airlines?

It was nice to have three honest-to-god profits to talk about this week. AirTran had an excellent quarter, Alaska was no slouch either, and JetBlue also had a nice quarter -- although their profits were not as hefty as those posted by either AirTran or Alaska.

Then there is Delta. The airline continues to slog through some very costly underwater fuel hedges. And of course the airline is being hit hard on the international front as demand has simply gone into hiding for not only Delta but all the U.S. carriers who fly internationally.

And then there is United Airlines. CFO Kathryn Mikells was hammered in the airline's call about the "L" word -- yes, that would be liquidity.

But she retained her poise and kept telling those analysts that they were asking "terrific" questions.

Meanwhile, down in Atlanta, Delta's Richard Anderson was called out by yours truly for his excessive use of corporate speak. And if I hear the word "synergy" one more time, I'm going to go stark raving mad.

But of course, the big news of last week was the news that Southwest Airlines had made a bid on Frontier Airlines -- as part of that airline's bankruptcy auction process.

Southwest is now burning the midnight oil, doing their due diligence, as final bids need to be in the hands of the court by Aug. 10. (Yes, look at your calendar. That's next Monday.)

All this and much, much more, including details on the $1 billion cobbled-together financing deal that Air Canada announced this week -- The Patron Saint of Failing Airlines Lives! (We are referring of course to GECAS)

All that and more in this week's issue of PlaneBusiness Banter. Subscribers can access your issue here.

Posted by Holly at 10:13 PM | Permalink | Comments (0)

If it's Monday and this week's issue of PlaneBusiness Banter is not posted yet -- you know the reason. Yep, it's another monster earnings issue. This week we take a long look at the earnings results and dissect the earnings calls from United Airlines, JetBlue, Alaska Air Group, AirTran and Delta Air Lines.

Talk about a group with a split personality. Three of these airlines posted profits. Two didn't.

Last week's issue apparently clocked in a little under what I had estimated -- at 74 pages someone wrote me. This week's is probably closer to 85. Happy reading. We will be posted later today.

Meanwhile, there is no question that the big story here in the U.S. domestic airline market today continues to be the bankruptcy bid by Southwest Airlines for Frontier Airlines.

There are way too many angles to cover here in terms of this attempt by Southwest to grab Frontier, and I'll be talking about some of those in this week's PBB.

However, there is one big falsehood that I want to dispel that a number of you have written to me about, and which, for whatever reason, seems to have been picked up by an analyst at Gimme Credit.

The questions concern a quote that was used in a Ft. Worth Star-Telegram story concerning the move.

In this story that ran Thursday, reporter Andrea Ahles quotes "Wall Street" Gimme Credit analyst Craig Hutson as saying, "Southwest entered Denver again in January 2006, and it has been among its most successful markets."

I do not believe this is the case. Far from it. Frontier Airlines has given Southwest fits. I think it's clear that Southwest thought they were going to go into Denver and kill Frontier. Didn't happen.

I'm not sure who this guy is, or what his background is, but according to the Wall Street analyst who I think knows Southwest Airlines' the best from stem to stern -- this is not the case. That analyst is Gary Chase with Barclays Capital, formerly Lehman Brothers.

There is no question that if you listen to the airline talk about Denver on its earnings calls, you would get the impression that everything is just rosy-posey in the Mile High city.

But as Gary Chase reaffirmed in his research note on the proposed deal Friday,

Our analysis suggests that Southwest is losing a significant amount of money in Denver while Frontier has been profitable year to date. Frontier has made substantial cost progress during its bankruptcy proceedings and currently enjoys a significant revenue advantage to Southwest in Denver markets. That combination defines the contrast between what we believe is money making at Frontier and a loss position for Southwest.

And no, this is not the first time Gary has written similar comments. He has tracked their presence in Denver for many years. And other markets as well.

Posted by Holly at 3:52 PM | Permalink | Comments (0)