Monthly Archives: June 2009

TGIF: It’s a Cat Pant Day

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It’s Friday. It’s already 85 degrees here in Big D. And it’s not even 10 o’clock yet.

Not a good sign.

My trusty Apple iPhone weather app informs me that it will be 103 later today.

Hmmmmm.

You know it’s really hot when the cats pant.

I’ve written before about this.

We all know dogs pant all the time. But have you ever noticed how cats, being the more discreet and elegant animals that they are, are not that enthusiastic about showing public displays of pending heat stroke?

So when you open the door to a little face that has a jaw dropped and a little tongue furiously darting in and out — cats really do look funny when they pant — you know it is friggin’ hot outside.

So there you go. Looks like another “Cat Pant Heat” day for us, in addition to much of the rest of the country.

Why Are Changes in Air Fares Worthy of National News Coverage?; It Doesn’t Have to Be This Way

I’m sure glad the general public got to see a slew of those stupid “at the airport live” reports yesterday dished out from a local reporter — stationed at their local airport. The occasion? Rising air fares.

CODE RED. CODE RED. Beep. Beep. Beep.

Oh my god Ethel, grab the children, bring them inside and make sure the doors and windows are locked.

Is there any other industry that all of us utilize on a fairly regular basis that has its prices examined so closely by the media?

Seriously.

Why is this?

I mean, how would other industries fare if every time they raised a price, we were treated to a live, on-the-scene report with the local newshounds?

Rental car companies for example.

Cable television companies.

Hotels.

Cat and dog food manufacturers. (Can you tell I was at PetSmart yesterday?)

Oh, and then there is ice cream. As my father commented the last time I visited with him, “If they make the Breyer’s package any smaller, you are going to have to put your glasses on to find it in the damn freezer at Safeway.”

You know the game that packaged goods companies play. They keep “downsizing” the package size, while also raising the price. In effect — netting a double increase in price in some cases.

And on it goes.

But do we see local and national news stories about these types of price increases. Not really. We see them, but there is never a unified “Code Red” alert put into effect that causes reporters and news outlets to attack the story as if it were a matter of national importance.

But on the heels of two airfare increases that have been put into effect over the last week — now the fact that airfares are RISING is right up there on the top ten news story list of the day. No, actually, the top five.

No matter that air fares were, before the increases, and still are, in many cases, at rock-bottom levels. Levels so low that airlines are in a fight for survival because of the fact.

But here’s the deal. There is no “voice” for this industry of that nature. No credible “voice” that is out there constantly getting this, and other messages out.  

PlaneBusiness Banter subscribers know that I have been doing a continuing series of columns over the last few weeks on the “perception” problem that plagues this industry in the U.S.  The industry needs to create, support, and foster an entirely new way of positioning itself with the general public in this country. Not to mention with those on Capitol Hill.

And no, the Air Transport Association is not the answer. Far from it.

Lee Moak, the head of the Delta Air Lines‘ ALPA MEC and I talked this spring about how the pilots in this industry suffer from much the same problem. A huge problem of perception. I agreed 100% with him. He talked to me about some of the activities that he has been involved with — with the Delta pilot group — that no one ever hears about. No one knows about. But positive community projects that reflect the fact that hey — pilots are not just greedy bastards who fly airplanes and chase nubile young women around their hotel rooms at night.

Well, not all of them.

Seriously. Lee understands how the perception game is played. He understands that the old “PR” rules no longer apply. So do others in this industry. Unfortunately, while positive strides have been made in some quarters, the enlightened types are still outnumbered by members of the “old guard” who are not enlightened and who continue to hold sway in this industry.

Yeah, I know. As more than one subscriber has written me over the last couple of weeks, maybe this needs to be a project that I take on. Personally.

Dunno. I think I value my sanity too much.

LSU Takes College World Series

Whew. For a couple of innings tonight I suffered some ugly thoughts of having to wear that Orange Pimp Suit. And of having my picture made while wearing it. And of having said picture then posted here on PB.

However, LSU was successful tonight in beating the University of Texas Longhorns 11-4 to take the NCAA College World Series National Championship.

One of the big reasons was that guy right here. Chad Jones. In his other life, he plays safety for the Tiger football team. But in this tournament, he was fantastic in the role of relief pitcher.

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Then there was Jared Mitchell, the tournament’s most valuable player.

Texas played a great series. But in the end, LSU played a better one.

I will keep all of you posted as to the “pay up” of the bet between myself and Mr. Parker. Heh. Tomorrow I will start putting together the appropriately atrocious LSU fan attire that I am going to force Mr. Parker to model.

I can’t wait. ;-)

Ex-Southwest Airlines CEO Takes the Tiger Bait Bet

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I knew somebody was going to take up the challenge.

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Jim Parker, former general counsel and CEO at Southwest Airlines and devoted, er, obsessive University of Texas alum, has entered into a bet with me on the outcome of the College World Series. (The second game of which is now on hold because of a rain delay.)

If LSU wins, he has promised that he will allow himself to be photographed wearing some outrageous LSU attire. Of my choosing. I had suggested that he be forced to fly an LSU flag outside of his house for a week, but he declined, explaining, “I am not sure if Pat [Jim's wife] would shoot me or divorce me first if I ever allowed an LSU flag to be hung on our house for a second, let alone a week.   I am pretty sure she would do both, I am just not sure in what order.”

If Texas wins, I am going to be forced to wear what we have dubbed, “The Orange Pimp Suit.” You may have seen them. LSU has a purple and gold version. Texas has an outrageous orange colored one with black and white zebra stripes. The only place I’ve ever seen them sold was on Bourbon Street.

Anyway, Jim’s son has one that he wore to the Texas-USC National Championship game a few years back.

Take my word for it. It’s atrocious.

So if Texas wins, I have to go get the Orange Pimp Suit and have my picture recorded for historical purposes. Although I do promise that I will wear more than just my underwear underneath it. Ahem.

Maybe instead of the Orange Pimp Suit, I could just wear this Bevo Hat. Nah, I’m not going to have to wear anything. I’m eagerly anticipating seeing Jim Parker in a purple and gold lame jumpsuit with matching tiger tail. Or something close to it.

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Republic Makes the Anticipated Midwest Acquisition Announcement

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While this is technically “breaking news,” we’ve all suspected something like this for months. Especially after the last TPG/Republic cash infusion given to Midwest.

This afternoon, Republic made it official. It is buying the remains of Midwest Airlines. I say, “remains” because what constitutes Midwest Airlines these days is a far cry from what most people think of when they think of “Midwest.”

Republic announced that it will acquire 100% of the equity in Midwest, in addition to TPG’s $31 million secured note from Midwest.

According to the airline’s statement,

Consideration will be $6 million in cash and a $25 million, five-year note, which may be converted to RJET stock at $10 per share. In addition, TPG will have the right to nominate a member to the Republic Board of Directors.

Under the agreement, Midwest will become a wholly owned subsidiary of Republic Airways, with the Midwest brand continuing. Midwest’s Boeing 717s will be replaced with Embraer 190 aircraft, enhancing Midwest’s ability to offer nonstop service to key destinations important to its frequent flyers.”

Well, how ’bout that?

It looks like the gang that started out with Chicken Taco has decided to add chocolate chip cookies to the mix.

So how does this help Republic? The airline has now announced that it is going to buy both Frontier Airlines and Midwest AIrlines in the span of two days. What I continue to have a problem with, and even more so now that the Midwest part has been added to the mix — how can Republic continue to operate as a regional carrier when it will now be a major entity in operations that go up against major players?

Then there is the AirTran marketing agreement with Frontier — what is going to happen to this?

My bet is that we are going to hear more about all of this before the week is over. You have to think that there was a reason the announcements were stair-stepped, and that they both came immediately on top of one another. A defensive play against another potential deal that was about to go down? That would be my guess.

LSU Wins!

Former Southwest Airlines CEO Jim Parker is cursing me somewhere right now.

And Gerard Arpey.

And Gary Kelly.

I don’t care.

Go Tigers.

(Yes, they are all Texas alums)

Republic Holdings To Buy Frontier Airlines? Yowsa — Wonder What United Airlines Thinks of This?

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Just never know what news is going to come across the wires these days.

Hi guys.

It’s good to be back.

Yes, moi has been a bit offline over the last month or so. No, I still love you. It was not because of anything you said. Or did. Or didn’t do. Stop it.

Without going into detail, maybe this analogy will help explain. If someone is a pilot, then it’s pretty hard to also work the back of the plane, sell the tickets at the counter and make sure the engine is functioning properly.

Moving, new website drama and delays, exhaustion. I just had to step back and concentrate on our flagship operation — PlaneBusiness Banter for a bit.

But hey — as I told PBB subscribers today — it’s time to get back into the swing of things.

And what fortuitous timing for our coming out party!

This afternoon the newswires were literally abuzz with the news that Republic Holdings is buying Frontier Airlines.

As we all know, Frontier has been trying to put together a financing deal that would allow it to exit bankruptcy protection.

We also all know that Republic had already stepped up its financial involvement with Frontier as part of its current bankruptcy process.

Yes, well — this afternoon Frontier announced that it has entered into an agreement under which Republic will serve as the equity sponsor for Frontier’s reorganization plan.

But the big newsmaking kicker is this: Republic will then purchase 100% of Frontier’s equity for $108.75 million

Under the agreement, Frontier Airlines Holdings Inc. would become a wholly owned subsidiary of Republic.

Frontier Airlines and its short-haul unit, Lynx Aviation, will keep their current names and operate as they do now.

A hearing on the proposed deal is now scheduled in bankruptcy court for July 13.

Frontier’s reorganization plan calls for general unsecured creditors to get $28.75 million.

It said an additional $40 million of the sale proceeds would repay outstanding “debtor-in-possession” financing from Republic Airways Holdings.

If approved by the bankruptcy court, Frontier’s current equity “would be extinguished and holders of that equity would not receive any recovery,” the airline’s statement said.

Okay, so while this is great news for Frontier Airlines — I think a very real question is this one — what happens when Republic, which does a chunk of regional flying for United Airlines, essentially becomes the new owner of Frontier — a major thorn in the side of United?

Stay tuned. This one should be fun to watch.

May Airline Traffic and RASM Out-Takes

American Airlines Cancellations

This week the U.S. domestic carriers have been in the throes of the usual first-week-of-the-month traffic and RASM reporting ritual.

And what have we found out from the various press releases full of mind-numbing numbers?

I think Gary Chase, analyst with Barclays started the week off on the right tone as he wrote, “We think the market was largely ready for numbers as bad as CAL posted last night, even if we had hoped for better.”

Continental reported at the beginning of the week that it estimates the H1N1 scare cost the airline at least $30 million in revenue. This was more than many analysts had expected, and was clearly a big factor in the airline reporting that consolidated PRASM for May was down between 19.5% and 20.5%. Mainline only was down between 19% and 20%.

Friday morning Bill Greene, analyst with Morgan Stanley issued a note in which he said, “Recent, May traffic reports highlight the severity of the supply/demand differential plaguing the industry with RASM falling ~20% YoY at both CAL and LCC. Surprisingly, managements continue to bet on a 4Q recovery, as evidenced by the sequential acceleration in capacity growth between 3Q and 4Q09.However, even if a rebound does materialize, we worry that higher oil prices obstruct profit-improvement at many airline.”

Looking towards June, as I wrote in this week’s PBB, I am not hearing much of anything positive from the airline folks I am talking to — in terms of demand uptick.

Kevin Crissey, analyst withUBS wrote this week, “Airline financials are troubling, particularly with fuel prices rising.” He continued, “We are concerned about the revenue outlook after May,” said Crissey, who forecasts that June traffic “will be 2 to 3 percent worse” than May and “July could look like May. The forward curve for fuel is higher.”

Of course, as has been the case over the last year, there is one domestic airline that just keeps bucking the drop in demand trend. That airline is Allegiant Air, the airline portion of Allegiant Travel.

The airline reported Thursday that its total RPMs rose 20.1% while capacity was up 19%. While this resulted in only a 0.8 point increase in load factor for the month, you can pretty much be assured that this is going to be the most positive combo of demand and capacity that will be reported for the month.

Scheduled service at the airline increased 23.9% while capacity jumped 22.9%. Load factor increased 0.7 percentage points to 90.6% from 89.9%.

Both AirTran and Southwest Airlines announced drops in load factor this week.

Remember that these declines also came as both airlines were engaged in pretty stiff fare competition, so we can pretty much figure both airlines posted some healthy declines in yield and RASM as a result.

US Airways, which also reports RASM estimates, as does Continental, reported on Wednesday that its mainline traffic declined 5.2% on a 5.8% cut in capacity. As a result, the airline actually posted a .5 point increase in load factor.

However, as Bill Greene mentioned in his note on Friday, the airline also said that its consolidated PRASM fell between 18% and 20% during the month.

Also note that American Airlines saw traffic fall much more than the airline’s capacity cuts — as the airline reported that mainline traffic declined 11.7% in May, on a capacity decline of only 8.8% This resulted in a 2.6 point drop in load factor for the month. Ouch.