Tag Archives: Allegiant

PlaneBusiness Banter Now Posted!

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Good evening everyone!

Surprise!

Tonight we publish our second issue in four days — as we try and work our way through the recent compressed pile of 3Q airline industry earnings reports.

In this issue we take an in-depth look at the recent earnings calls from Hawaiian Holdings, parent of Hawaiian Airlines; Spirit Airlines; and Allegiant Travel Company, parent of Allegiant Airlines.

All three airlines made money, but all three made profits in very different ways.

In addition, one analyst, Hunter Keay with Wolfe Trahan, brought up a very interesting idea for the folks at Hawaiian Airlines. He thinks, as I do, that the airline’s stock is very undervalued. In fact, the airline has enough cash in the bank today to buy itself, the market cap of the airline is so small. Of course the airline would need more capital than that to pull off an LBO, but I found Hunter’s argument very persuasive.

Aside from that, looking at the airline’s earnings results for the third quarter — while the airline is clearly grappling with some capacity/demand learning curves, the airline’s decision several years ago to look west to Asia for expansion — as opposed to putting more effort in the U.S. trans-Pacific routes looks like it has been, without question, the right decision.

We also talk about the 3Q earnings announced by Spirit Airlines. Spirit had a very nice profitable quarter, but the airline is spending a bit of money these days both to support its current growth spurt, and to make sure its operations run more smoothly.

I have no problem with either of these. The underlying business plan of Spirit is solid.

Our third in-depth earnings report looks at Allegiant. The airline has flopped around a bit the last couple of years as it decided to go with another fleet type, it had to get ETOPS certification for those 757s, the airline’s IT infrastructure had to be totally reconstructed and upgraded, it switched its position on how to deal with engine overhauls. You know — the usual. Growing pains.

But the airline seems to have weathered all of this fairly well. In addition, the airline’s move to put 166 seats in its MD-80s (no, I am not about to fly on one of those airplanes anytime soon!) is moving along and the airline is now getting a better read on the revenue payback from the additional seat installs. The news? Good.

All in all a very good quarter for all three airlines — but in very different ways.

In other news we talk about the latest tidbits from American, although there aren’t many, and we celebrate today — United Airlines 787 Day. Today the airline put its first 787 into regular commercial service. A fun time was had by all — as best we can tell. We had both friends and subscribers onboard at least one, if not more of the inaugural flights. Nothing like some good plane porn to make us all forget about the everyday trials and tribulations of life.

All of this and much more in this week’s issue of PlaneBusiness Banter.

PlaneBusiness Banter Now Posted!

home-typewriter copy 1.jpg Hello everyone. No surprise that we are publishing on Wednesday night this week. Has something to do with some activity that was centered around the DFW Metromess today. Yes, there were three American Airlines‘ union votes announced today — two passed and one didn’t. And the one that didn’t was the big one.

The pilots at American Airlines decided that they would rather put their fate in the hands of U.S. Bankruptcy Judge Sean Lane than accept what many pilots apparently thought was an “unsatisfactory” contract.

As you can read in the blog post below, I thought the pilots should vote yes.

Meanwhile, the flight attendant voting period during which they need to decide if they are going to vote yes or no on their “last best and final offer” from the company continues.

As it is scheduled now, Judge Lane is supposed to rule on the airline’s request to abrogate the union contracts that have not been renegotiated next Wednesday as part of the standard Section 1113 procedure.

However, the outcome of the flight attendant vote will not be known by that time.

It will be up to the airline — whether it asks the judge to delay a ruling — or it simply allows him to abrogate the contracts that have not been agreed upon (which would then include the flight attendant contract) on Wednesday.

Meanwhile, this week is yet another big earnings week issue, as we take an in-depth look at the recent results of Spirit, Allegiant, Alaska Air Group, WestJet, and Republic Holdings.

We also give you overviews of the recent earnings news from IAG Group (owner of British Airways and Iberia), Virgin Atlantic, Lufthansa and Cathay Pacific.

Speaking of Allegiant, the airline said on its earnings call last week that it was very happy with the first month of its new service to Hawaii. The airline is using 757s to fly to Hawaii, and today, the airline announced even more service to Hawaii. Know what new routes were announced? Better yet, know which airline Allegiant seems to be targeting with their latest choices?

WestJet had an interesting announcement last week — for those of you who agree that passengers will pay for meaningful upgrades. The airline announced it was putting in four rows of “premium economy” seats on all of its 737s. It is also adding seats to its 737-800s.

Meanwhile, Spirit just keeps making money. Although I think the airline showed evidence of some growing pains in the second quarter — as costs were above where the airline wants them to be.

In terms of Republic Holdings, the hybrid holding company did quite well, as the Frontier Airlines’ restructuring process is really beginning to shine. So now what?

Meanwhile Republic continues to work through its issues with its Chautauqua, aka Chicken Taco, operation. Republic remains convinced it can make the 50 seat aircraft work –but it is going to have to be flown at exceptionally low rates to mainline airlines if that is the case.

While we don’t do a full earnings review of SkyWest this week, as they reported earnings today, I will tell you that the airline blew away estimates — sending shares of the stock up 23% on the day.

As always, all this, and more — in this week’s issue of PlaneBusiness Banter.

Also — a friendly reminder for our subscribers. This is our last issue for August. We are now officially on vacation. Our next issue will be published after Labor Day!

PlaneBusiness Banter Now Posted

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This week’s issue of PlaneBusiness Banter is now posted.

It was a busy week for the Things With Wings last week.

First, American Airlines reported its second quarter earnings results. The airline lost a lot of money. $390 million to be exact. $319 million excluding special items. However, you’d never have known it if you listened to the airline’s earnings call — which seemed focused on one thing — liquidity. Oh, and capacity reductions. That’s fine, but there are other aspects of an airline’s operations I’d like to hear about.

Then we had the blockbuster news concerning Continental’s Chairman and CEO, Larry Kellner. As I write in this week’s PBB, even though the management backbench strength at Continental Airlines is strong, and the airline should be able to carry on just fine as Larry goes to seek his fortune in the equity investment game — it’s quite discouraging to see one of the industry’s best and brightest leave.

Following up on our piece in last week’s issue about United’s bone-headed (or would that be heavy-handed) attempts to get travel agencies to take on more financial risk — or rather some travel agencies — the airline said late last week that it is going to give agencies 60 days to implement the business operation changes it seeks.

This whole thing still reeks. Nothing the airline says rings true.

Southwest Airlines had its own place in the spotlight last week, or would that be the sunlight, as the airline had a 737-300 aircraft develop a hole in the roof while enroute from Nashville to BWI. Not what the airline wants or needs — especially considering the issues the airline has had with the FAA concerning fuselage checks in the past. Preliminary NTSB report says there was no evidence of previous corrosion at the site.

That was not the only bad news Southwest had last week. The airline was also notified that its debt rating with Moody’s is under review, signaling a potential downgrade.

The Senate produced its version of an FAA Reauthorization bill last week. How did it differ from the House version? It differed on quite a few items. We talk more about that in this week’s issue.

Those misguided folks at the US Airways Pilot Association, the pilot union that was created in an attempt to circumvent the original ALPA seniority award that was handed down after US Airways and America West combined forces — had their head handed to them on a plate by U.S. District Judge Neil Wake last week. Wake issued his final injunctive order on the case brought against USAPA by the former America West pilots. Yes, we talk about this too.

Oh, and speaking of USAPA, we also give them, and our readers, a handy step-by-step instruction of how you correctly determine just how much an airline executive makes, using SEC documentation. Apparently the folks at USAPA have a problem figuring these things out.

British Airways raids its guaranteed employee pension benefit larder, Air Canada gets all of its employees “on board” with its 21-month contract extension program, and 215 Delta pilots sign up for the airline’s sweetened “early-out” package. Somehow I think the guys in suits over in Atlanta had hoped that number had been higher.

All this and more in this week’s issue of PlaneBusiness Banter.

If you are a subscriber, you can access this week’s issue here. If not, you can learn how you can become a subscriber by clicking here.

Airline Traffic Reports Roll Out for December

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If it’s the first week of the month, that means it’s time for airline traffic reports.

And it’s time for all of us who look at them with a jaundiced eye to try and figure out what they mean. Actually all they mean is that for the month of December a particular airline did this.

In this environment, the question of whether they portend any kind of trend or not is a rather risky assumption.

The good news overall is that demand held up fairly well in December for the most part. However, one caveat. Remember that for the purposes of the reporting month, the backend of Thanksgiving travel fell into the “December” reporting month this year.

In addition to the usual traffic reports, Continental Airlines also issued its RASM estimates for the month. On that front, the news was not bad either.

Commenting on both topics, JP Morgan analyst Jamie Baker wrote this week,

“Demand weak but steady, for now. November was a noisy month, requiring yr/yr adjustments for the portion of Thanksgiving travel falling in December and a higher November weekend-to-weekday ratio (weekend revenue production is typically penalized by lower business travel). Additionally, disproportionate leisure demand in the final two weeks likely resulted in higher revenue retention as weather deteriorated across much of the country (vacationers are more apt to push on, whereas business travelers give up more easily – as did this analyst in the week before Christmas). So while December offers no assurances as to F2009’s demand outcome, the aforementioned adjustments do suggest that while weak, December does not appear to have gotten any weaker than November for Continental. Furthermore, given Continental’s recent relative RASM outperformance, our ATA December mainline RASM forecast of 2.5% does not appear to be in jeopardy.”

In terms of Continental’s RASM performance, Jamie added, “December better than feared. Continental December mainline and consolidated RASM rose 4.5% and 4%, respectively, a respectable outcome versus our more dire +1% consolidated forecast. Based on the midpoints of this guidance, consolidated revenue fell 4.5%, while yield rose 2.4%. Additionally, November’s initial 1.5% consolidated RASM midpoint was slightly lowered to +1.2%.”

As for the basics, Continental reported that consolidated RPMs were down 6.7% while capacity was down 8.1%, resulting in a 79.9% load factor, up 1.2 points from December of 2007.

United Airlines

RPMs were down 11.5% in December, as the airline slashed capacity by some 12.7%. This resulted in a load factor of 79.9%, an increase of 1.1 points from December 2007.

Note for you trend watchers: The airline reported that traffic fell faster on its Pacific and Atlantic routes. (More ammunition for the idea that the glory days of continued international growth are coming to a screeching halt.)

Southwest Airlines

RPMs were up 1.1%, while capacity declined 1%. This resulted in 1.5% increase in load factor.

This was a nice rebound from Southwest’s rather anemic November numbers.

Allegiant Airlines

RPMs were up 9.6% while capacity was down 2.6%. Ah….now here are some healthy numbers.

This resulted in the airline posing an 88.7% load factor, up from 78.9% last year. That’s a 10.2 point increase – the largest posted so far by a U.S. carrier.

Delta AIr Lines

Delta reported that RPMs were up 0.7% for the month, while capacity was down 2.4%. This resulted in a load factor increase of 2.4 points over December 2007 numbers.

Again, however, as we saw with the United numbers, the international numbers were not too pretty. The airline reported that international RPMs were up 9.2%, but capacity was up 13.7%. This resulted in a decline in load factor of 3.2 points.

American Airlines

American reported that both domestic and international traffic declined in December, unlike United and Delta, which both posted increases in their domestic traffic.

This makes sense, in that American is taking a bigger hit because of its previous heavy investment banking/Wall Street trans-Atlantic business. A fact the airline supported by its comment that its sharpest decline in international traffic was on the trans-Atlantic segment, which was down 8%.

The airline reported that domestic RPMs were down 9.6% while capacity was down 11.8%. Meanwhile international traffic was down 5.7% on a capacity reduction of only 3.2%.

Overall, the airline ended the month with a 79.2% load factor, up 0.4 points from December 2007.

AirTran

AirTran saw RPMs up 2.3% in December, while capacity was down 6.9%. This resulted in a very nice increase in load factor for the month — up 7.1 points to 79.8%.