Tag Archives: earnings

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!

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Hello everybody!

This week’s insanely long and informative earnings issue of PlaneBusiness Banter is now posted! At last!

This week we take an in-depth look at the recent 3Q earnings results from: Delta Air Lines, US Airways, United Airlines, Alaska Air Group and JetBlue. We also have earnings summaries for Hawaiian, Allegiant and Spirit. We’ll get caught up with those in our next issue. Meanwhile, Republic Holdings announced earnings today.

Is it five-o-clock somewhere? Please?

Overall, it was a great quarter for the U.S. airline industry, although two of the big boys definitely came in with results that underperformed their peers — United Airlines and Southwest Airlines.

Here’s a riddle for you. Which airline posted an unbelievable 21.3% EBIT margin for the quarter? (FYI: That is four times what Southwest posted for the quarter.)

PlaneBusiness Banter Subscribers, your massive issue awaits. Along with the answer to that question.

Speaking of Southwest — we noted last week the airline had not mentioned Atlanta at all in its last two earnings calls. But Delta Air Lines had no problem responding to a question about Southwest and Atlanta in its earnings call this quarter. The response seems to confirm what we had suspected: Delta is seeing an uptick in market share out of Atlanta at the expense of AirTran/Southwest.

US Airways had a great record-breaking quarter, as did Alaska Air Group.

The laggard of the bunch this week? United Airlines.

We’ll also tell you about the latest strategic moves by Virgin Australia, we have great industry Halloween pics for you to peruse, we wonder why Boeing was late in delivering the second 787 to United, and we have some pics of our awesome flight on Row 44’s Grumann Albatross last week off the coast of California. We went to play with the company’s new streaming video product. We left in love with a very unusual airplane.

Like I say, a huge, huge issue this week.

Subscribers can access the monster here.

PlaneBusiness Banter Now Posted!

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Hello all.

Live and direct from the PlaneBusiness Worldwide Steaming Hot Headquarters, we bring you a 150 plus-page issue of PlaneBusiness Banter.

Yes, this is, without a doubt, the mother of all earnings issues.

We have full transcripts and PlaneBusiness Banter earnings summaries for Southwest Airlines, AirTran, JetBlue, Alaska Air Group and Allegiant Travel this week.

Not only that but we give you the numbers that were just reported from Air France/KLM, Lufthansa, British Airways, ANA and Singapore Airlines.

Whew.

All of this plus our take on the more “newsworthy” topics from the past week including the meltdown at Mexicana (and no, we’re not talking about the FAA’s downgrade of the Mexican aviation safety rating) and the showdown between the pilots and management at Philippine Airlines.

So what do you think? Do you think the pilots and flight attendants at Mexicana should have taken up management’s offer to buy the airline?

Or — should they have cut their pay and benefits essentially in half?

As we were posting this issue, the news came down: Mexicana has filed for bankruptcy.

One thing that will do — it will stop airline leasing companies from taking their aircraft back. Apparently at least three of the airline’s aircraft had already been snatched back by their owners.

Aside from all this turmoil, we then have the latest attempt by the U.S. government to “make the airline industry a better and safer place.”

Yes, from the same folks who brought us the Three-Hour Tarmac rule, the Senate and the House passed a bill last week that will see the minimum number of flight hours required for a regional airline pilot position jump to 1500.

Needless to say, I can understand why members of Congress want to look like they are making the industry a safer place — but is a 1500 hour flight time minimum the way to do it?

One of our regular contributors gives us his take on the potential ramifications of this legislation in this week’s issue.

One thing that is a constant in this industry is that it always has a lot of debt.

But while most of the airline’s debt ratings are in the “junk” category, shrewd investors know that investing in airline debt can be quite profitable.

This week I assemble the latest credit and debt comments on the major airlines from Mark Streeter — the man who does this for a living for JPMorgan Chase. I think Mark is the sharpest guy on the Street when it comes to airline debt.

As for airline stocks — a Foreign Flyer took the first place nod last week in terms of gains. Overall, it was a good strong week for the sector.

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

Subscribers can access this week’s issue here.

Southwest Airlines Kicks Off Third Quarter Earnings Parade

This morning Southwest Airlines kicked off the third quarter earnings parade for the things with wings.

The bulk of the sector reports earnings next week.

Excluding items, the airline reported a profit of 3 cents a share. This was a bit better than the street consensus, which had forecast the airline would post a profit, excluding items of two cents.

On the revenue side, the airline saw passenger revenue per available seat mile (PRASM) down 2.2%. This was much better than the airline’s PRASM drop of 6% it recorded in the second quarter. However, yields were down 12% to 12.94 cents/mile.

On the cost side, the airline saw CASM jump 6.6%, excluding fuel and special items. Last quarter, CASM was up 5.9%.

Operating margin came in at 4.8%. This was a tad lower than last year, when the airline posted a 5.1% operating margin. Not necessarily that good a thing when you consider where the price of fuel was for much of the third quarter last year.

The basics reported today were: Net loss for the quarter was $16 million or $0.02 a share. This compared to last year when the airline posted a loss of $120 million or $0.16 per share.

The results included the following special items: A charge of $27 million related to the airline’s early-out program they offered employees and a loss of $12 million related to non-cash mark-to-market items related to the airline’s fuel hedging program.

Excluding the special items, the airline posted a profit of $23 million or $0.03. This compared to last year when the airline posted a profit of $69 million or $0.09.

Allegiant Air Pre-Announces Earnings

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Late Tuesday Las Vegas-based Allegiant Air pre-announced that it will report earnings for the first quarter of between $1.34 to $1.38 per share.

This estimate is far above the then-forecast estimate by analysts for the airline — which had estimated the airline would post a profit of $1.20 a share.

The airline will report earnings this coming Monday.

So why the uptick from previous company guidance?

Analyst Dave Fintzen with Barclays, who recently initiated coverage of the airline’s stock (we talked about his recent research note on the airline in the latest edition of PlaneBusiness Banter) said today that because the airline gave no details other than the higher EPS estimate, it’s a bit hard to know where the better performance for the airline was. Although he assumes it was all on the revenue side, with revenue probably outperforming even the previous management guidance.

So what is Dave going to be looking for when the airline reports on Monday? Any feedback on the airline’s booking trends in its new markets, especially Los Angeles, in addition to any updated information on where the airline is going to grow now — as we move into the second quarter and third quarters.

AMR, Parent of American Airlines, Posts $375 Million Loss

Today AMR, parent of American Airlines reported their first quarter results.

What is it they say — it’s all about managing expectations.

And in the case of American’s first quarter numbers that were released today, that is exactly what management did — as the airline had just recently warned Wall Street that its first quarter numbers might not be as strong as first expected.

As a result of that guidance, analyst forecasts were then lowered.

Previous to the airline’s announcement today, the analysts’ consensus forecast a loss of $1.62 a share.

So today, when the airline reported a loss of $375 million or $1.35 a share — the shares of the airline took a nice bounce, gaining 19% on the day, closing at $5.01.

The reason for the better-than-expected numbers? Operating costs were down a bit more than forecast and RASM declines were not as sharp as previously indicated.

American’s stock was not the only airline stock that picked up some ground today — comments the airline made in its earnings call helped push up other airline stocks as well, as CEO Gerard Arpey indicated that the airline is not seeing any “further deterioration” as those in the revenue world like to put it. But, just as Alaska Airlines indicated in an SEC filing last week, Arpey said that American is also looking at May and June bookings that are off noticeably from this same time last year. He said that May and June bookings are off by about 2 percentage points.

This percentage drop is more or less in line with what Alaska reported last week.

AMR ended the quarter with $3.3 billion in cash and short- term investments, including $462 million that is restricted.

Southwest Airlines’ Stock Goes Up, Goes Back Down

I’ve had a couple of emails this morning from readers wondering why Southwest Airlines’ shares, which rose yesterday on the news that the airline was essentially shutting down the growth faucets, are now moving in the opposite direction today.

As of this posting, shares of Southwest have lost 17% for the day, now trading around 8.10 a share, down from their close yesterday of 9.81.

So what gives?

Simple. The market reacted positively yesterday to the headline news: growth being curbed.

Today, investors have had more time to think about the rest of the news the airline gave us yesterday. And, investors have also had the benefit of a number of airline analyst research notes on the results.

From Gary Chase, analyst with Barclays:

…LUV results were better than we expected, largely on better passenger revenue performance. Non-fuel costs came in a touch better, but remain under pressure. We expect LUV will benefit from industry capacity reductions and lower fuel prices, but don’t see nearly as compelling an opportunity in LUV shares as we see in other names…….2009 estimate is reduced from $0.65 to $0.45, principally on lower passenger revenue assumptions.We’ve been modeling RASM out-performance for LUV relative to other LFCs and the industry at-large given its revenue initiatives, but think it will be increasingly difficult for the company to outperform the industry to that extent given economic slowing.”

From Kevin Crissey, UBS Securities:

…”Our view on the stock

We view LUV’s valuation as getting stretched. It is trading at we view as an ‘okay’ 6x 2009 EV/EBITDAR but a robust 16x our 2009 EPS estimate. With growth non-existent, unit costs rising, economic fuel prices above peers and the balance sheet okay but less impressive, we question whether there is upside potential to valuation from here. We are cautious on LUV and rate it Neutral…”

From Ray Neidl, Calyon Securities:

“We believe investors should take profit,” Neidl said in a research note this morning as the firm dropped its target price on the shares from $8 to $7. The firm also cuts its rating on the stock from underperform to “sell.”

When was the last time we saw a “sell” rating on shares of Southwest?

American Airlines and United Spill the Fourth Quarter Beans

It’s that time once again dear friends. That time when we get the straight scoop on just how bad, or how good, the previous quarter was for our friends, The Things With Wings.

This morning both AMR, parent of American Airlines, and UAL Corp., parent of United Airlines, reported their fourth quarter 2008 earnings.

Top line assessment? Both airlines reported numbers that came in comfortably within previously anticipated analyst forecasts.

That does not mean, however, that the numbers were overly pleasant to digest.

Especially in the case of United, which reported a net loss of $1.3 billion or $9.91, compared with a loss of $53 million or $0.47 a share the previous year. Excluding non-cash, net mark-to- market hedge losses and certain accounting charges, the airline reported a pre-tax loss of $547 million for the quarter. This figure compares to an adjusted pre-tax loss of $105 million in the fourth quarter of 2007.

A huge contributing factor here was the fact the airline got caught on the wrong side of some very expensive hedge positions during the fourth quarter. The effect of this wrong-way bet was clearly seen in the sharp drop in the airline’s cash balance for the quarter.

At the end of the quarter, United was sitting on only $2 billion in unrestricted cash, a restricted cash balance of $272 million, and $965 million in cash deposits held by its fuel hedge counterparties. The airline saw $989 million in cash go out the door during the fourth quarter in operating cash flow and it posted a negative $1.1 billion in free cash flow during the quarter.

Excluding one-time items, the airline said it lost $4.22 per share compared with Wall Street analyst consensus forecast of $4.42.

In the case of American, the airline reported a loss of $340 million or $0.77 a share, excluding special items. This performance was more or less in line with expectations as well.

A year ago the airline reported a loss of $184 million or $0.74 a share, without special items.

The full American Airlines’ release has yet to hit the wires.

We’ll also learn more about the results from both airlines later today, after their respective earnings calls.

In the meantime, go have some more coffee.

Earnings Start: American and Delta Air Lines Report Losses

Both American Airlines and Delta Air Lines kicked off the earnings season this quarter by announcing third quarter earnings today.

The results?

Not especially heartening — yet, as analyst Jamie Baker with JP Morgan wrote this morning — third quarter results are going to be somewhat of a major aberration. Or as he said, “3Q jet fuel averaged over $1.00/gallon higher than today’s spot, the industry hadn’t undertaken unprecedented capacity cuts, and demand had yet to reflect the most recent global malaise. As such, we broadly consider 3Q industry results to be irrelevant, offering little to no insight as to the industry’s 2009 profit potential.”

Delta Air Lines reported a loss of $50 million, opposed to a profit of $220 million last year, while American Airlines reported a loss of $360 million. This compared to a profit of $175 million last year.

Yes, the airline DID lose that much.

Headline numbers are touting the fact the airline posted net income of $45 million, but that number includes a huge one-time gain and other items. That one-time $432 million gain came from the sale of American Beacon Advisors.