Monthly Archives: December 2009

A Not-So-Quiet Holiday Season for the Airline Industry; TSA Goes After Bloggers Who Posted TSA Changes in Directives

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Hello everyone.

Alas, the holidays are almost over. Sigh. That means it’s time for yours truly to get back to work. And back here in PlaneBuzz.

You know, most holiday periods are relatively quiet in the airline industry. For the most part, Wall Street analysts are not cranking out research notes. All that fourth quarter “pre-announcement” Wall Street stuff has already been disseminated prior to Christmas. Airline CEOs are rarely squawking. It’s not usually a time for any “big time” announcements concerning mergers or other nefarious activities.

This is not the case on the front lines of any given airline’s operations, of course, where airline employees are faced with huge crowds of passengers who are sometimes not in the best of holiday spirits. Especially when flights are cancelled, packed to the gills, or weather rears its ugly head.

But I think it would be safe to say that this particular holiday season has been, well, how can I say this? Just a little bit too newsworthy.

Obviously the biggest topic on your minds, as judged by the contents of my email folder, is the continuing actions of the TSA, following the failed attempt by a passenger to detonate an explosive device on Delta Air Lines/Northwest Airlines flight 253 which operated between Amsterdam and Detroit Christmas day.

By now you all know the basics.

Umar Farouk Abdulmutallab, a 23-year old Nigerian, successfully passed through a security check at the gate in Amsterdam. This check included a hand baggage scan and a metal detector.

Officials say that Abdulmutallab then apparently assembled the explosive device, which included 80 grams of Pentrite, or PETN, in the aircraft lavatory — after which he returned to his seat where he attempted to detonate the device using a syringe of chemicals.

Passengers and aircraft crew members intervened, and the plane landed safely.

To say that things have been a bit confusing and frustrating for both airline passengers and airline employees since then would be a gross understatement.

Information being given passengers concerning what they can and cannot do while onboard aircraft has seemed to change every hour this week. In some cases it depends on just what particular flight you are on, apparently. One industry veteran we know told us that on his long-haul trans-Pacific flight home this week he was told by the Purser that no, there was no ban on passengers getting up from their seat in the last hour of the flight. This had been the case, however, when this same person flew in the opposite direction earlier in the week. According to the Purser, “All of that is up to the discretion of the Captain.”

Huh?

I somehow don’t think that is the case.

Meanwhile, our email bag is packed with emails from airline employees, many of whom are flight attendants and pilots — checking in with their take on how ridiculous the TSA has been in the last week.

But as bad, frustrating, and confusing as things have been at U.S. airports, I don’t think they are nearly as bad as they are in Canada, where TSA-mandated emergency rule changes to boarding procedures for U.S. bound flights there have made it a wonder any passengers are flying to the U.S. at all.

As of this writing, if you are in Canada and trying to fly in the U.S, you can only bring “small” purses, laptops, and a very small list of items, including some medical supplies, onboard an aircraft. That’s it.

We talked to one subscriber who works with Air Canada yesterday and he was so upset he could hardly keep the words in the email. WestJet passengers are facing the same new “rules.”

We are told that U.S. custom agents are telling U.S. bound passengers who have purses they consider to be “too large” that they cannot get on a flight unless those purses are checked.

It got so ugly this week that the Royal Canadian Mounted Police were called in to help with the process. This, after lines snaking out of Toronto’s Pearson International had passengers standing for three hours or more and hundreds of flights had to be cancelled as a part of the collateral damage.

But draconian rules regarding onboard carry-ons is not the only problem. U.S.-bound passengers out of Canada must also now pass through three levels of security: regular pre-flight passenger screening, U.S. Customs, and additional screening that can include physical pat-downs.

And if all of this wasn’t enough — and clearly this next situation hits close to home for me — TSA special agents went after travel bloggers Chris Elliott and Steve Frischling this week for writing about changes in security procedures put in place by the TSA after the bombing attempt.

Frischling writes a blog for KLM. Chris writes the blog Elliott.

According to Chris’s blog,

“We had just put the kids in the bathtub when [TSA] Special Agent Robert Flaherty knocked on my front door with a subpoena. He was very polite, and used “sir” a lot, and he said he just wanted a name: Who sent me the security directive?

I invited Flaherty to sit down in the living room and introduced him to my cats, who seemed to take a liking to him. The kids came by to say hello, too.

‘A subpoena?’ I asked the special agent. ‘Is that really necessary?’

‘Sir,’ he repeated. ‘You’ve been served.’”

Being the good blogger that he is, Chris advised him that he would call his attorney and be back in touch.

According to a New York Times article this morning,

“Frischling said he met with two TSA special agents Tuesday night at his Connecticut home for about three hours and again on Wednesday morning when he was forced to hand over his lap top computer. Frischling said the agents threatened to interfere with his contract to write a blog for KLM Royal Dutch Airlines if he didn’t cooperate and provide the name of the person who leaked the memo.

”It literally showed up in my box,” Frischling told The Associated Press. ”I do not know who it came from.” He said he provided the agents a signed statement to that effect.

I can certainly relate to that. That is exactly how it goes. Something shows up in our email box. Sometimes we know who sent it. Sometimes we don’t.
It’s then our call as to whether to go with the information or not.

Clearly these two went with the information.

But hey, you J. Edgar Hoover types with the TSA — back off. The information was “out there.”

I can state, flatly, that there were discussions of parts of the new rules included in emails to me. Not the entire documents. But let’s just put it this way — when these directives came down on the heads of the airlines — it was to be expected that the gist of them would be “out there” in no short order.

Chris and Steve did not obtain this information “illegally,” nor was the fact they posted the information going to interfere with any “security” measures contained in the documents. After all — thousands of airline employees received the same information. Or are all airline employees who received the information required to sign confidentiality statements? I don’t think so.

Ridiculous. Just friggin’ ridiculous.

Just like most everything else we’ve seen and heard from the TSA over the last week as the government tries, once again, to cover its rear as once again, the futility of taking our shoes off and removing our clothes every time we fly is exposed, once again, to be the transparent exercise in futility that it has always been.

Yes, there’s clearly a lot more to be said about all this.

But for now — I’ll close today with a short and sweet admonition.

Happy New Year everyone!

Santa Watch

While the white stuff accumulated last night, you can see that the resident canine remained diligently vigilant on Santa Watch. Actually she was far happier to take on the responsibility of Santa Watch than she was to take on the task of actually going out into the white stuff.

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Merry Christmas everyone.

Fly safely. Love warmly. Enjoy the magic of the day.

White Christmas!

I think the last time I enjoyed a White Christmas I was five years old and living on an Army base outside of Joliet, Ill. Who would have thought that it would take all these years to duplicate the event — and in Dallas no less?

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Airline Pre-Earnings Whispers Continue to Sound Positive

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Ho, ho, ho. Merry Christmas.

Or something like that.

Thanks to a wickedly strange website entitled Sketchy Santas for today’s visual. If you have a warped sense of humor like I do, go on over and take a peek. I’ll use a couple more of them here before we say goodbye to the Christmas season. I mean, after all, a little warped sense of humor is good for us all this time of year — yes?

Speaking of this time of year — it’s the time of the year when those folks who run the airlines start talking. To analysts. About their respective fourth quarter results that will be finalized in a little more than two weeks.

Today Bill Greene with Morgan Stanley wrote,

“We expect near-term data points and commentary to excite investors about the on-going airline recovery, pushing potential concerns of an anemic 2010 to the background, for the time being.”

Oh my. Let’s pop some champagne corks. What do you think?

Bill went on to talk more specifically as he added that AMR now expects fourth quarter mainline PRASM to be down more or less 5% year-over-year. This is better than Bill’s previous 7% estimate. The airline also said this week that close-in bookings continue to be strong.

US Airways said this week that it continues to see revenue improving “rapidly.” The airline said this week that corporate revenues could be up by as much as 10% year-over-year in 2010. Delta expects strong demand trends in 2010 and fourth quarter guidance updates imply better than expected top-line growth and United Airlines aid this week that it also continues to see improvement in corporate and premium cabin bookings.

Yesterday analysts Jamie Baker and Mark Streeter with JP Morgan issued a note in which they talked about both stock and debt updates.

They also talked about the positive comments from Delta and US Airways as did Bill. JP Morgan lifted its fourth quarter estimates for both Delta Air Lines and US Airways based on the latest updates from both carriers.

On the debt side, Mark Streeter gave all of us some good background on the fact that Delta Air Lines did also offer year-end liquidity estimates that were lower than those previously distributed this week.

Is this a bad thing? Not according to Mark.

According to Mark,

Delta offered year-end liquidity guidance of $5.1 billion (versus our prior estimate for YE09 of $5.4 billion), or about $700 million lower than the $5.8 billion total liquidity as of 30-Sept-09. Given a seasonal air traffic liability shift of $800 million-$1 billion (per management), the net burn is deceiving. As we have discussed, Delta has reduced 2010 debt maturities by 55% from $3.4 billion prior to recent capital markets transactions (mainly secured first and second lien notes and a secured aircraft EETC deal) to $1.5 billion.

In our Airline Credit Outlook 2010 webcast, we reiterate our bullish view on airline credit (Overweight) and our specific opinion that Delta is our favorite legacy airline credit from a relative value perspective. We recommend Delta A (offered at 400bp+) and B tranche (9%+ yield) EETCs basically across the board (As for HG and HY investors, Bs for HY investors only) as well as the Delta first (9.5% bonds yielding 8.5%) and second lien (12.25% bonds yielding 13%) backed by Delta’s Pacific operations. On the situation in Japan, AMR has the most to lose and Delta the most to gain if JAL defects from OneWorld to SkyTeam.

On the other hand, US-Japan Open Skies remains a long-term wild card from the perspective of how appraisers and the market will value Delta’s Pacific collateral. Regardless, we expect Delta to maintain a large, significant presence in Asia and Narita specifically (and perhaps Haneda over time). Therefore, the short relative duration of the 9.5%s (due Sep-14) and the 12.25%s (due Mar-15) coupled with high current yields relative to credit ratings (credit ratings that should INCREASE over time given our forecasted improvement in Delta’s credit metrics against our bullish industry recovery thesis) forms the basis of our favorable opinion on these unique bonds.”

Yes, that man is still bullish on Delta Debt.

Saints 38, Patriots 17: Caution –No Airlines Are Discussed in This Post

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I don’t think about how good we’ve been,” Brees said. “I think about how good we can be.”

Last night the now 11-0 New Orleans Saints systematically demolished the New England Patriots in the Louisiana Superdome 38-17. Drew Brees, above, threw five touchdown passes as he threw for a season high total 371 yards. His passer rating? 158.3 — which is technically a perfect rating.

This is the first time in NFL history that we have had two teams with 11-0 records — the Indianapolis Colts being the other team that currently remains undefeated. (And yes, I would be remiss if I did not remind you that a New Orleans native, Peyton Manning leads that powerful offensive machine.)

Trying to explain the relationship between the New Orleans Saints and the city itself is not an easy thing to do. That relationship became even more emotional after Hurricane Katrina, when then-NFL Commissioner Paul Tagliabue and the NFL swooped into the city and essentially told Saints owner Tom Benson — “You’re not moving this team.”

The NFL then proceeded to work behind the scenes to assist with the refurbishment of the Louisiana Superdome.

That next season, against a backdrop of many naysayers who never thought it would ever happen, the Saints took the field at the Superdome again. On ESPN Monday Night Football. The game was against the Atlanta Falcons. The game’s opening act? Bono and U2. The mood of the city? Electric. Emotional. Really, really, emotional.

I didn’t think I’d see a game played in that stadium again that would ever come up to the same level of emotional intensity as that one — ever. But last night came pretty damn close.

Because you see, what people don’t understand is that through all the heartache, the pain, and the suffering the city of New Orleans endured during that period of time following the storm, the Saints were something that we all could look at — as a symbol of how the city could return. Would return. All was not lost. There was going to be a better tomorrow after all.

That season, which started with that special game, was magical. One of those things that we see happen in sports every once in awhile. Andre Agassi’s last hurrah at the U.S. Open. An injured Kirk Gibson rounding the bases in the bottom of the ninth of the 1988 World Series. It’s those moments that make sports worth watching.

That season wasn’t about X’s and O’s. It was about a team that played week in and week out on a current of raw emotion — theirs and that of their fans.

Week after week as people tried to rebuild their homes and their lives, as electricity came and went, as basic services remained unavailable, as people in other parts of the country wondered in public just why it was that the city deserved any help at all — the Saints were, oftentimes, the only positive thing that many people had to hold onto in their lives.

The Saints made it all the way to the NFC Championship game that year.

After all was said and done, Drew Brees had found a new home. Bill Parcell’s old protege Sean Peyton clearly had what it took to be a great head coach. And New Orleans’ Saints fans felt like they finally had the nucleus of an honest-to-god championship caliber football team.

Last night — on national television — that championship team we in New Orleans saw born out of a city in ruins was suddenly there. In person. On the field. On my television screen. Making Tom Brady and the New England Patriots regret they had ever shown up.

As sportscaster Al Michaels’ exclaimed when covering the 1980 U.S. Olympic Hockey team’s victory over the USSR, “Do you believe in miracles? “

Yes, sir. I do.