Tag Archives: AMR:NYSE

Five Things I Know About the American Airlines Bankruptcy




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This much I know is true about the American Airlines bankruptcy.

1) With another record number of pilots about to opt for retirement on Dec. 1, the company could ill afford another run on cash reserves

2) The company can talk about “costs” all it wants, but the airline has systemic network and revenue problems it has yet to effectively address. Even if labor costs and productivity were “righted” — airline would only break even at current revenue levels

3) Gerard Arpey had to leave. No option.

4) Expect to see a number of other high-level departures from the AMR C suite.

5) While the pilots have taken the brunt of recent headlines, I suspect it will be the flight attendant group that will be faced with the harsher changes to their contracts as part of bankruptcy process.

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PlaneBusiness Banter subscribers — this week’s re-written <!> issue will be posted later today.

Meanwhile, for our latest take on the American situation, please join our Twitter feed at @planebusiness.

AMR Board Member Charged by SEC With Insider Trading

The Securities and Exchange Commission today charged Rajat Gupta, former head of McKinsey and Co., and former Goldman Sachs board member, with insider trading. The charges were filed in a civil administrative proceeding filed by the SEC’s Division of Enforcement.

What does this have to do with airlines? Gupta is a member of the AMR Board of Directors. AMR is the parent of American Airlines.

After the news broke today, Gupta voluntarily resigned from the Proctor and Gamble BOD.

According to the complaint, Gupta provided insider knowledge to Galleon Group founder Raj Rajaratnam “about companies in which he was a board member,” according to the Wall Street Journal.

The Journal says that specifically mentioned in the complaint are tips Gupta provided about upcoming earnings results for Proctor and Gamble and Goldman Sachs. He is also accused of also tipping off Raj Rajaratnam about a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway company.

Jet Fuel Closes Up 13 Cents on the Day: $3.22/gallon

New York Harbor Jet picked up another 13 cents in trading today. Closed at $3.22/gallon.

Last week Southwest Airlines CEO Gary Kelly said the airline would not reassess its capacity plans unless fuel hit $3.30 a gallon. Looks like that day could come sooner than he had anticipated.

Meanwhile, American Airlines became the second major US carrier (behind Delta who did so in February) to announce a cutback in 2011 capacity as a result of higher fuel prices.

PlaneBusiness Banter Now Posted!

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Good evening everyone.

This week’s issue of PlaneBusiness Banter is now posted. Subscribers can access this week’s 80-plus page issue here.

It’s that time of year. Yep. Earnings time.

This week we have our in-depth look at the earnings calls and our PlaneBusiness Earnings Summaries for Southwest Airlines, American Airlines, and Delta Air Lines.

If you are wondering why it was that airline stocks took a header last week — it was not because of higher oil prices. It was because Wall Street was not overly impressed by the earnings posted by Delta, or Southwest — much less American Airlines.

American, once again, is slated to be the only major airline which will not post a profit for the quarter — much less the year.

In the case of Delta, analysts were disappointed by the airline’s revenues, and by the fact the airline says, at least for now, that it intends to keep its existing plans for capacity growth intact.

Southwest Airlines also warned that revenue “head winds” are going to be tough in the first quarter and a profit for that airline for the first quarter is “iffy” if you look across the sector analysts’ current estimates. The airline also forecast a rather sharp increase in costs for the first quarter.

As for American, I don’t know where to start. As I tell my subscribers in more detail, I think the AMR earnings call was an embarrassment. Add that to the fact that the airline continues to lose money and we heard nothing whatsoever in the airline’s call in regards to a specific plan to turn the airline around and …..it’s pretty ugly.

Meanwhile, on the American/GDS War frontline, American and Sabre called a truce Monday. Not unexpected. I was surprised when Sabre threw its hissy fit and pulled American’s fares from its GDS. No way Sabre’s customers were going to let this situation remain in effect.

Truce is officially until June 1 — we’ll see something negotiated between the two before then.

American also announced a new deal with Priceline, which allows Priceline to use the airline’s new “Direct Connect” product. (And yes, this deal was announced before the truce with Sabre, which leads me to believe it was done to push Sabre back to the table — which is what happened.)

US Airways also announced a new deal with another OTA, Expedia, but that deal uses the more traditional GDS method of delivery. It will allow Expedia to market “seat choice” options and other goodies though.

Meanwhile, we did our own little test today of what showed up and at what price when I Iooked up fares between Dallas and LGA on both Expedia and Priceline. That was a fun experiment.

Our new “Retro” feature this week takes us back to 1994, and British Airways. And the billion dollars plus it invested in airlines such as USAir, TAT, and Deutsche BA. That strategy really didn’t work out too well for the airline, did it?

But enough of all this fun and frivolity. This week the emphasis is on earnings. Next week, we’ll be taking a gimlet-eyed view of United/Continental, US Airways, Alaska, and JetBlue -- all of whom report this week.

Speaking of Alaska Airlines — did they not blow the doors off in the fourth quarter or what? I remain tremendously impressed with the airline. I like the decision to de-brand Horizon as well.

But that’s for next week.

Meanwhile, all the rest — and more! — in this week’s issue of PlaneBusiness Banter.

PlaneBusiness Banter Now Posted

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Greetings to one and all.

Let it be known that yes, the second quarter earnings season for the airline industry is now officially upon us. Before the week is over, nine major airlines will have reported earnings.

Yes, count them. NINE.

Kicking off this quarter’s festivities was Delta Air Lines. And boy, did the airline make a scene. While the airline posted its biggest quarterly profit since 2000, analysts and traders were none to happy with the airline’s guidance comments, and its fourth quarter capacity forecast.

While we don’t do our formal transcript review and earnings summary for Delta in this week’s issue, I do talk in detail about what the airline reported and give PlaneBusiness Banter subscribers a cross-section of comments from a number of analysts who cover the stock.

This is also a big week for those who love airplanes and the men who like to buy them.

Yes, it is time for Farnborough. I talk about the big deals that were announced Monday — and update you on just how well capitalized Steve Hazy’s new leasing venture is. Answer: Very.

Don’t look now but Congress is sniffing around airline fees. Not only does Congress want to make sure that passengers know exactly what they are going to have to pay for when they book that flight, Congress is also now making noise about how it wants to start taxing those fees that passengers are clearly aware of.

Remember — fees are not taxable, whereas fares are hit with a 7.5% tax.

Things are so dire in Washington that 7.5% looks like a potential luscious low-hanging fruit.

We had another airline analyst pick up her bags and move to new environs over the last two weeks. Helane Becker, formerly with Jesup and Lamont, is now with Dahlman Rose and this week she issued a slew of new coverage on the sector.

Finally, a big thank you to our subscribers who have experienced some weird goings-on with the site the past two weeks. Page numbers have been screwy, log-in credentials have changed, and I just realized tonight, for example, that our headline page on the planebusiness.com site somehow got changed to one from June 28. Nice. I’m sure some of you were wondering what planet we were on.

No planet. Just our own small equivalent of IT cutover hell.

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

PlaneBusiness Banter subscribers can access this week’s issue here. (Note, that is a new link folks. Please bookmark it as such.)