PlaneBuzz

On the heels of already-announced cuts in management salaries, it appears that Frontier Airlines is now telling employees that all employees are now looking at a mandatory pay cut through September.

Channel 9 in Denver posted today what it says is an internal employee memo from management at the airline.

In the memo, the airline says cuts in labor costs are necessary because,

"At this critical time when we are trying to secure DIP financing, we must show these potential investors and the creditors' committee a viable business plan that will allow us to operate in this challenging environment of rising oil costs. They need to see that we are doing everything possible in relation to fuel costs and to improve Frontier Airlines Holdings, Inc. bottom line. Since we have entered bankruptcy, fuel has increased from $107/barrel to over $122/barrel. This represents an annual increase in expenses of nearly 75 million dollars. Unfortunately, these increases are no longer offset by fuel hedges as our hedging agreements became invalid when we entered bankruptcy.

Therefore, we need to make some significant changes to our cost structure in order to achieve a non-fuel cost per available seat mile (CASM) of 5.8 cents. We have aggressively been eliminating non-labor expenses as well as requesting cost reductions from our suppliers and vendors. Unfortunately, we cannot reach our CASM ex fuel goal by only reducing non-labor expenses. As a point of necessity, we are going to have to reduce our labor and benefit expenses very quickly. We recently announced pay cut reductions for the entire Frontier Airlines Holdings, Inc. officer group effective May 1. In addition, We are now asking that all employees also take a pay reduction through September 2008. At that time, we will review our financial situation and the market conditions again. We will also be suspending the 401(k) match for this period of time."

According to the letter, both the pilots' union and the dispatchers' union (FAPA and TWU) have already agreed to concessions. The airline's flight attendants are not unionized. The airline said that no agreement has been reached with the airline's mechanics, who are represented by the Teamsters.

Ticker: (Nasdaq:FRNT)

Technorati Tags: airline employee pay cuts, airline stocks, airlines, Frontier Airlines

Posted by Holly at 1:37 PM | Permalink | Comments (0)

If you subscribe to PlaneBusiness Banter, please note!

Next week we are going to be physically moving the server that hosts PlaneBusiness Banter and PlaneBuzz to a new location.

We will make accommodations so that PlaneBuzz is hosted on a temporary server next week, so we should be online here without a break.

However, the PlaneBusiness.com  website, and PlaneBusiness Banter access will not be available from sometime Tuesday morning until later on Wednesday. (Yes, our server gets to take a little trip via Federal Express -- so it's not just an "around the corner, down the block" kind of trip.)

Thank you for your patience as we make this move. It should stop the problem we've had recently with sporadic downtimes affecting access to both PlaneBuzz and PlaneBusiness Banter.

Posted by Holly at 1:11 PM | Permalink | Comments (0)

One headline really takes the cake today boys and girls.

"Tilton to Groom US Airways chief if deal goes ahead"

Publication: Financial Times.

Justin Baer's article talks today about how "United Airlines' chief executive Glenn Tilton has offered to make US Airways' Doug Parker a top contender to succeed him should the two carriers agree to merge, people familiar with the matter said."

Now mind you, I'm not arguing with the premise behind this article, because, unfortunately, it tracks with what I have heard as well. This continued mandated ego trip by Glenn Tilton and his hand-picked board is a big reason no deal came to pass with Continental Airlines.

Note: Hubbub today about talks concerning a Continental-United "alliance" is another deal altogether.

But the very idea that Glenn Tilton has anything to offer Doug Parker, or is in any way his superior in terms of how he runs a company, works with his employees, manages a merger like this (Parker has actually done one) or communicates with anyone is ridiculous. No, it's worse than that.

Or, then again, maybe I'll try to look the bright side. Maybe this implies that Tilton will cut Doug's hair, give him manicures, and make sure his suits are pressed correctly.

Now that would be just fine.

Ticker: (Nasdaq:UAUA), (NYSE:LCC)

Technorati Tags: airlines, Continental Airlines, Doug Parker, Glenn Tilton, United Airlines, US Airways

Posted by Holly at 12:14 PM | Permalink | Comments (0)

Moody's Investors Service cut its liquidity rating on United Airlines today amid concerns about higher fuel costs, a slowing economy and rising costs.

The rating firm lowered the speculative grade liquidity rating to SGL-3 to SGL-2, and the outlook to “negative” from “stable.”

Moody's meanwhile affirmed the carrier's corporate family rating and other debt ratings, which remain at B2, which is a speculative or "junk" rating.

Moody's said it lowered the outlook because it expects the airline's operating and financial performance to deteriorate.

"Weaker results are likely because of materially higher fuel costs, but also the weakening economic conditions that are likely to reduce demand and limit recovery of higher fuel costs by raising ticket prices. United also faces continued challenges to control the growth of unit costs," Moody's said.

Sounds about right to me.

Ticker: (Nasdaq:UAUA)

Posted by Holly at 12:13 PM | Permalink | Comments (0)

Hello everyone.

Well, we here at the Worldwide Headquarters got smacked around pretty good yesterday, last night and again this morning by Mother Nature, as she ripped through with the usual cocktail mix of spring hoopla. You know, hail, wind, rain, thunder, lighting, tornados, more rain, more wind. You get the picture.

We did hit a new milestone for water creep in the back of the house however, as water actually hit the edge of the back of the house, and was just inches from coming into the back door. I guess there is a first for everything. Not surprising after I heard we had something like five inches of rain in about an hour. Just nowhere for it to go when it's coming down that hard, that fast.

And, as is usually the case with high winds and rain, we suffered from an ongoing series of power outages last night and again this morning.

So my apologies for being a bit "off-line" more than usual. But I don't like to tempt fate with computer equipment when power is "browning" and or flickering off and on. I learned that lesson years ago when I fried a processor.

Having said that, I'll be back shortly with some comments after I finish up going through the trusty email bag. I already know which story is going to be first, and I'm sure you do too. It's the headline from a Financial Times story.

Three guesses and the first two don't count.

Be back shortly.

Posted by Holly at 11:44 AM | Permalink | Comments (0)

My earlier post produced a couple of notes to me from readers and I have to admit --  the story here may not be the fact that Southwest is pulling some of its leverage levers to increase its cash balance in the bank.

The story is ....why.

The airline has a $500 million credit line. (Or is it $600 million?) One of the two.

And it had $3.1 billion, give or take, at the end of the first quarter.

So the question has to be ...why would they take on the "cost" to borrow another $600 million and mortgage 21 aircraft  if the airline has roughly $3.1 billion in the bank?

Is Southwest getting ready to buy something? Or someone?

Technorati Tags: Southwest Airlines

Posted by Holly at 7:51 PM | Permalink | Comments (0)

$600 million of them.

While Southwest Airlines has the strongest balance sheet in the industry, apparently even they are not taking the prospect of the current financial situation lightly.

The airline has borrowed $600 million, leveraging its ownership of 21 Boeing 737 aircraft, the airline disclosed yesterday.

Beth Harbin told Terry Maxon at the Dallas Morning News, "We felt it was wise to bolster our cash position with today's soaring fuel prices and uncertainty in the economy and the credit market. We want to be prepared for whatever happens."

At the end of the first quarter, Southwest had $3.12 billion in cash and short-term investments.

No word on whether or not Southwest CEO Gary Kelly is considering dressing up like one of these wacky squirrels next Halloween, but we think the idea has merit.

Ticker: (NYSE:LUV)

Technorati Tags: Southwest Airlines

Posted by Holly at 3:15 PM | Permalink | Comments (0)

Heh.

I just disposed of my earlier note on Doug Steenland's comments from yesterday, as  after I published them, I noticed that our esteemed guest columnist, Godzilla, aka Frank Arciuolo, had come in and done a much more thorough treatment of the subject.

That'll teach me to write first before I look at what has already been posted.

Posted by Holly at 3:02 PM | Permalink | Comments (0)

I'm really getting tired of writing the same old stuff.

You know. "Oil hits new record high."

<sigh>

Alas, it has already done it again today in intra-day trading. Oil traded as high as $126.30 today, until backing down to $125.70, where it is sitting now.

We'll see where it finally decides to land.

Pushing prices up today were rumors making the rounds of the trading floors this morning concerning Iran. The reports had Iran considering cuts in its crude oil production.

As of this afternoon, most analysts feel that the cause for concern was overblown, as Iranian officials denied that production cuts were imminent, but said a reduction has been discussed.

However, look for prices to continue to be volatile this week and next, as traders begin to jockey into position for the June contracts, which will close at the end of next week.

We'll see if we can't rustle up the closing price of aviation fuel later today as well.

Technorati Tags: airlines, oil prices

Posted by Holly at 2:14 PM | Permalink | Comments (0)

Thanks so much to a reader who just dropped me a note to let me know that ExpressJet cancelled their call this quarter.

Yes, there was a line about this at the bottom of their earnings release. I just blew right past it.

Thank you again to our reader friend at Continental for the news. No wonder I couldn't find the audio of the call, much less the transcript.

That's a shame. There should be a rule against canceling an earnings call when another airline is trying to buy your airline.

Don't you think?

Posted by Holly at 8:04 PM | Permalink | Comments (0)

You can tell I'm in my heavy duty writing and editing mode, can't you? Yes, must be those computer specs I have on in that last picture.

Just an update for PlaneBusiness Banter subscribers. As per our new schedule, which allows us to comment on end of week Wall Street activity and numbers, we will be posting this week's issue tomorrow. I think that will pretty much be the standard schedule going forward -- as subscribers seem to like the fact that it allows me to comment on the markets in a more timely fashion.

Still waiting on an earnings call transcript for Air Canada and ExpressJet though. I may wait and talk about them in more detail next week. We'll see.

Talk to you guys later. Have a great weekend. And give our best to your Mom on Sunday. Just don't take her out to eat. Worst day in the world to go out and eat.

Make something yourself. She'll love it. No matter what it is. And if she doesn't, well, then next year take her to some crowded brunch somewhere with cold roast beef, wilted vegetables and rubber chicken.

At least you will have tried to do the right thing!

Posted by Holly at 5:30 PM | Permalink | Comments (0)

Closing price for oil today was $125.96. That is an increase of 2.27 on the day.

Looking at this news today, and absorbing all that has been swirling around the industry this week, including the testimony of both Northwest and Delta Air Lines' execs on Capitol Hill this week, I think there are some things that need to be said.

This week Steve Wallach, chairman of the United MEC of the Air Line Pilots Association issued a statement that said, "We are aware of continued speculation in the media of a possible merger between United Airlines and US Airways, and have serious concerns that the highly touted financial benefits to be derived from such a merger are unlikely to be achieved because these benefits are based on assumptions that have no basis in reality," Wallach said. "We therefore believe that a merger with US Airways should be a last resort and not a first choice for United."

I've been thinking about this statement.

First, who has been touting the "financial benefits" to a merger between US Airways and United?

I certainly haven't heard any, and you sure as heck haven't heard anything remotely close to this coming from Doug Parker or Glenn Tilton.

At least not yet.

So I'm not sure what benefits he's talking about, nor what assumptions. I think it's kind of hard to judge anything until you have something in front of you to pick apart. This smacks to me of the pronouncements from the Delta MEC when US Airways tried to do a deal with Delta. Before the details of the deal were even delineated, the MEC was out trashing it.

And why wasn't the United MEC making similar comments about a potential deal with Continental Airlines? Probably because the pilots at United were too mesmerized with the possibility they could bump up to the Continental pilots' pay rates. As this tidbit was mentioned to me by more than one United pilot -- I have to assume this was the case.

As to his comment that a merger with US Airways should be a "last resort," and not a first choice, I have to really scratch my head on this one.

Steve, Continental Airlines management has rejected a merger with your airline. There are no other reasonable potential partners out there. The out-of-bankuptcy financing package that United entered into when it exited bankruptcy was predicated on a merger or buyout occurring. The airline is too leveraged not to do a deal.

Did you look at the first quarter earnings report from United?

If you did, it should be pretty clear that if things stay "status quo" the airline is going to blow through whatever cash it now has (minus that nice shareholder Christmas present in December) in no short order.

In a perfect world, I don't think anyone would be looking to mergers as an answer to a problematic airline industry. Unless it was maybe those greedy investment bankers.

But this is not a perfect world.

In fact, I'd argue that with oil prices in this range, we're looking at the worst possible world for an airline to make a buck.

We're talking survival here.

And I think that all employees of this industry need to understand that union squabbles and pay rates and everything else are going to have to take second seat to something else -- survivability.

Oh, don't get me wrong. I'm the one who annointed United's Glenn Tilton as the Master of Greed. He received his own special award from PlaneBusiness Banter for it. And I think management at United has not done enough to overhaul its underlying operation. And they did little that required heavy lifting during bankruptcy -- except try and wrangle an ATSB loan and do away with their employee pensions.

But we all have to understand that we have to start looking at airlines as big companies with big infrastructure costs, and lots of moving parts. Some of those parts are making money and some aren't. Some made money at $60/barrel oil. Some still made money at $90/barrel oil. But most of them are not going to continue to make money at $125 or $130 barrel/oil or higher.

When it gets right down to it, the parts that are making money are going to be kept, and the parts that aren't, are going to have to be divested, put on a shelf, or parked in Arizona.

Passengers are going to have to get used to higher fares and fewer flights.

And airline employees are going to have to understand that we should not be surprised if we see airlines pulled apart, with pieces going here and other pieces going there. Furloughs, lay-offs. They are both very distinct possibilities. Talking to one analyst this week he and I were wondering just what airline is going to be the first to announce an across the board cut in employees -- beginning in the fall.

Unless oil drops -- we're going to see this happen.

Delta- Northwest is a perfect example.

Either Delta's Richard Anderson is living in la-la land, (which I don't believe) or I think it's a safe bet that after the merger of these two airlines is approved -- we are going to see cuts and changes that no one has even begun to guess about at this point in time.

So -- a potential merger with another airline should be a "last resort?" I think United and its employees should be happy that there exists an airline that would even consider merging with it at this point in time.

There are many more horrible fates that could befall United Airlines than a potential merger with one of the best management teams in the industry. We all have to understand what the situation is now in the U.S. airline industry. No airline is really immune from potential extinction. But the bigger you are, the better you are managed, and the more resources you can tap -- the better your chances for survival are going to be.

Tickers: (Nasdaq:UAUA), (NYSE:LCC)

Technorati Tags: airline earnings, airline industry news, airline mergers, airline stocks, airlines, ALPA, Continental Airlines, United Airlines, US Airways

Posted by Holly at 5:16 PM | Permalink | Comments (2)

I've received quite a few emails over the last couple of days in regard to the recent incident involving an American Airlines' aircraft that apparently  left DFW and flew to Paris --after a piece of the plane apparently came off shortly after departing DFW.

You all know what I'm talking about so I won't bore you with any more of the details.

The reason I haven't said anything about it here before this is because the overwhelming majority of emails I've received seem to fall in one of two categories. Either pilots are bashing the flight attendants who have spoken out on the incident, saying that the pilot disregarded their comments and flew on to Paris without bothering to check out their reports of a loud "bang" that occurred. Naturally the pilots seem to think that flight attendants have no business commenting on the actions of a ....gasp....pilot.

Or two, the emails take the side of the flight attendants, and usually mention something about those "AArogant pilots." Or words to that effect.

I noted that Terry Maxon wrote this morning that the comments he has received publicly on his blog posts about the incident fall into pretty predictable categories as well.

As he wrote,

The pilot clearly should have gotten the airplane back on the ground, and should lose his license for not doing so.
The pilot clearly made the right decision and should be applauded.
The flight was in danger.
The flight was not in danger.
The incident shows how good Boeing aircraft really are, compared to Airbus aircraft.
The incident shows how bad Boeing aircraft really are, compared to Airbus aircraft.
Flight attendants should shut up and stay out of the pilot's business because they're not qualified to make judgments about safety of flight.
Flight attendants are well qualified to judge when something goes wrong, and pilots should listen.
No big deal.
Big deal.

Posted by Holly at 1:10 PM | Permalink | Comments (1)

They lower earnings estimates for airlines of course.

What else do they have to do?

This morning analyst Kevin Crissey from UBS issued  a research note in which he said, "The outlook for the US airline industry is changing very rapidly as fuel prices play an increasing role in painting the industry’s profit (well..loss) picture. As a result, our estimates have been getting stale quickly. In response we are moving to a periodic update schedule. We will be updating our forecasts at a minimum every two weeks to reflect changes in fuel and other factors."

He continued, "There is little to like about the financials of the airlines right now. We forecast 2008 losses as large as $10/share (UAUA and LCC) and only LUV will be profitable if our numbers are correct. The extent and duration of the cash burn is the question rather than whether or not there will be profits. We have no Buy recommendations and have a Sell on AMR and JBLU."

As for earnings revisions, Kevin noted, "We are updating our forecasts to reflect recent industry news, most of which has been negative. Our estimates now incorporate the 10-day moving average of forward fuel prices (~$3.40/gal) and include the unit revenue and traffic reports from the carriers. US Airways reported April passenger unit revenue (RASM) growth of flat to down two percent and jetBlue announced an April RASM increase of 3%. Both numbers are on tough comparisons given the shift of Easter to March this year but each also prompted us to slightly lower our Q2 revenue forecasts."

My apologies for the fuzzy chart, but it was reproduced from a PDF and had to be "upsized" before converting it so you could read it.

Posted by Holly at 12:46 PM | Permalink | Comments (0)

Oil closed up 16 cents on the day, ending the day at $123.16.

For those of you with really enquiring minds, the spot price of NY Harbor Jet Fuel closed today up six cents to $3.71 a gallon. Remember that this is just the raw fuel cost - no tax, no "in-plane" expenses.

Posted by Holly at 4:28 PM | Permalink | Comments (0)

United Airlines announced this morning that it has made a couple of changes in its upper executive ranks.

The airline announced that John Tague is the airline's new COO, replacing Pete McDonald.

And here is where the corporate nomenclature gets a little, ah, thick.

In its release, the airline says that McDonald will become the new chief administrative officer. But that Graham Atkinson, chief customer officer, will continue to spearhead United's customer experience work and will report to McDonald.

Seems way too top-heavy to me. Smacks of a move designed to basically demote  McDonald, but at the same time, keep him in the executive ranks long enough for him to get a nice merger-related payoff.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airlines, United Airlines

Posted by Holly at 12:56 PM | Permalink | Comments (3)

As of this posting, crude oil futures are trading at......you sitting down?

$123.69.

This is up $1.85 on the day. Not only that, but once again as we have seen more than once over the last couple of weeks, higher than expected inventory numbers this morning from the Energy Information Administration did nothing to make traders back off from driving the price even higher.

Simply reinforces the belief that U.S. demand is taking second seat to the larger problem of the falling value of the U.S. dollar.

Technorati Tags: airline industry news, airlines, Economy, oil prices

Posted by Holly at 1:36 PM | Permalink | Comments (0)

Southwest Airlines poured more fuel on the "Frontier is Down and We're Going to Take Advantage of That Fact" fire today as the airline announced more expansion of its Denver operations.

Or as one of our favorite airline industry observers noted, "It's like watching a five year old pull the wings and legs off a bug. Just brutal... Taking down two more F9 markets (SMF and FLL)."

Southwest Airlines announced five new nonstop flights and three new destinations from Denver. The airline added new nonstop service between Denver and Sacramento, Ft. Lauderdale and New Orleans. The airline also will add one additional nonstop between Denver and Phoenix for a total of seven.

The new flights begin on Aug. 4.

Good. Nice to see a nonstop between New Orleans and Denver. Since Frontier stopped flying between MSY and DEN, the market has been owned by TED.

You know -- TED. Or as the excellent flight attendant I had on Ted recently explained to a plane full of passengers, with tongue firmly planted in his cheek, "People often ask me, "What is TED? Simple. TED -- the end of United."

Ticker: (NYSE:LUV)

Technorati Tags: airlines, Frontier Airlines, Southwest Airlines, United Airlines

Posted by Holly at 1:25 PM | Permalink | Comments (0)

Hey, don't shoot the messenger.

Posted by Holly at 4:10 PM | Permalink | Comments (0)

As of this posting, crude oil futures are trading at $121.65, up 1.68 just since the open.

But that's just the tip of the iceberg this morning when it comes to bad news about oil prices.

Those who have been watching the rise of oil the last few years may recall when Goldman Sachs issued a research note in the spring of 2005. To say the note was controversial at the time would be an understatement. In that note, analysts at the investment firm wrote about a "super spike" in oil prices that could occur pushing oil prices between $50/barrel and $105/barrel until 2009.

This morning Goldman Sachs analysts issued an updated note saying that crude prices are now poised to potentially rise between $150 and $200/barrel. "The possibility of $150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the up-cycle remains a major uncertainty," the note said.

Why?

No surprises in their reasoning.

Demand growth is outpacing output growth. China has more than doubled oil use since New York crude dropped to $16.70 a barrel in November 2001. That has basically taken up most of the world's spare capacity, while at the same time supply has been cut in Nigeria, Iraq, and Venezuela.

Spare production capacity of the Organization of Petroleum Exporting Countries (OPEC)  is low, and the group's exports could easily fall because of "lackluster" supply growth and rising domestic consumption in member countries, the Goldman analysts added.

Underscoring this, Indonesia yesterday said it might quit OPEC as it consumes more oil than it produces, and lowered its oil sales estimate for 2008 to 927,000 barrels a day from 950,000.

Posted by Holly at 10:30 AM | Permalink | Comments (0)

Not quite $120, but close enough.

Posted by Holly at 4:30 PM | Permalink | Comments (0)

And you wonder why I opened up today with sports musings?

Earlier this morning the price of a barrel of crude hit $120 plus in trading. As of this posting, it's hovering around $119.90 and change. Stay tuned.

Not too far removed from the issue of higher oil prices is the news today that United Airlines is probably going to ask its bankers that hold its debt, which include JP Morgan Chase, and Credit Suisse for some "concessions." Or to put it another way, United looks like it wants more "wiggle room" in terms of its credit facilities.

The Financial Times reported today that "While United has maintained that it has enough cash and earnings to remain in compliance with the credit facility's terms, concerns about its financial health helped persuade Continental Airlines Inc. (CAL) to end merger negotiations, people familiar with the matter have said."

Sounds about right to us.

Wouldn't it be nice if you and I had the same option? You know -- your car payment putting just a bit too much strain on your monthly finances? Well, just call up Chase and ask them to re-negotiate that car loan. Piece of cake. Or call  Bank of America and ask that your mortgage be re-negotiated for a longer term.

Unfortunately things don't seem to work that way.

Posted by Holly at 12:55 PM | Permalink | Comments (1)

Okay, so did anyone stay up and watch the entire Dallas Stars-Sharks OT playoff game last night? Better yet, did anyone go to the game?

If so, you are pretty tired today as the thing went for four overtimes and wasn't over until 1:30 or so this morning.

Whew.

Congrats to the Dallas Stars, who now get the rather dubious pleasure of playing the Detroit Red Wings in the next round of the playoffs. No, I didn't stay up the entire time either. Although I was fortunate to get to watch the game in HD, here in the swamp no less -- as the Fox Southwest sports network broadcast it.

I still remember the three overtime Stars win that Brett Hull led in 1999--which gave the Stars the NHL Championship. (Yes, I lived in Big D back then, as many of you know.)

Gotta hand it to the NHL. The best thing it does is playoff games. And the best of those are the overtime playoff games. This one was right up there with the best.

Meanwhile, tonight, closer to home, the Beehive comes alive again as the New Orleans Hornets go up in game two against the hated and despised San Antonio Spurs. Let's go Hornets! They soundly defeated the defending champs Saturday night -- it will be interesting to see what changes San Antonio puts into effect tonight in an attempt to snatch one at the Bee's home court.

Hopefully the Hornet's mascot, Super Hugo, won't be trying to fly through any more burning hoops on his way to making a slam dunk tonight. Saturday night his "ring of fire" wouldn't go out like it was supposed to and some wary firefighter types decided it was time to get out the real fire extinguishers. Yep, all that white stuff, all over the basketball floor.

The game ended up being delayed by almost 20 minutes as they tried to clean up all that white stuff. Then the half-time show was cancelled so they could clean it up some more.

Only in New Orleans. Gotta love it. Now that I think about it, It's a wonder he wasn't trying to eat a soft-shell crab po-boy out of his non-shooting hand as he went through the ring of fire on his way to the basket.

Which he made, by the way.

I admit it. I love this time of year. Can't you tell?

Posted by Holly at 12:45 PM | Permalink | Comments (0)

PlaneBusiness Banter subscribers can access this week's issue here.

Posted by Holly at 3:12 PM | Permalink | Comments (0)

Hi guys.

Just taking a break from writing this week's issue of PlaneBusiness Banter, and I thought I'd drop in here for a bit and get you caught up on few things of note.

One, the price of crude took a hefty bounce upward today, after having lost some ground on the news Wednesday that crude inventories had risen in the U.S. this week.

Light crude futures closed Friday at 116.32, up 3.80 for the day.

As for airline stocks, it was one crazy week in the airline sector, as shares of Mesa Air Group really took off after the airline announced that it had settled with Hawaiian Airlines earlier this week. Shares of Mesa, which closed last Friday at 47 cents, closed today at 1.10. Woo hoo. That's what happens when a potential bankruptcy filing is able to be put off -- at least for now.

Oh, and that gain? A cool 134% on the week.

The second biggest gainer on the week was Allegiant. The airline posted great first quarter numbers this week, as did WestJet. But Allegiant is the one investors jumped on after the news. Shares here ended the week up 39%, closing today at 27.99.

Shares of WestJet were up 3% for the week, ending at 17.03 today. The deal here in a nutshell? The airline posted excellent first quarter earnings this week, but the airline also talked about the challenge of fuel going forward. I think this spooked some folks. But actually the numbers WestJet posted were nothing short of stellar.

All in all, it was a drop dead great week for the airline sector, as we had the vast majority of stocks we track post gains on the week, and we had seventeen airline stocks post double-digit gains for the week.

Not a bad recovery from last week's carnage on Wall Street for the things with wings.

Technorati Tags: airline stocks, airlines, Allegiant Airlines, Hawaiian Airlines, Mesa Air Group, WestJet

Posted by Holly at 8:49 PM | Permalink | Comments (0)

Hi guys. I see where our friend Godzilla reported the news from yesterday concerning the Mesa Air Group/Hawaiian Airlines settlement. One thing he didn't mention but was fairly telling as to why the suit was settled for the amount it was. Mesa was forced to put up a bond for $90 million as a result of the original trial verdict in which U.S. Bankruptcy Judge Robert Faris found the airline guilty of using confidential information about Hawaiian as part of its planning for its start-up airline go!.

Subtract the $52.5 that Hawaiian received in the deal and what do you end up with?

That's right. Basically $37.5 million.

And how much cash does Mesa Air Group need to pay off its convertible bond owners in June - when that convertible issue becomes due? That's right. About $37.5 million.

So, you say -- so what? Well what it says to me is that Mesa is not, obviously, going to go into bankruptcy without putting up a fight. The other reason this is good news for Mesa is that they would have found it hard to get any traction on any kind of potential "deal" involving the airline or parts of the airline, as long as that verdict stood and the appeal was still in motion -- and it did not seem like it was going to be possible to get an answer from the appeals court until after the convertible note was due in June.

So it works out well for Hawaiian, as I think they are probably ecstatic to get their hands on $52.5 million in cash, especially in this environment, and for Mesa's immediate financial situation -- it gives them more time to figure out their next move. But make no mistake -- they just coughed up $52.5 million in cash -- a major hit. No matter how you try and slice and dice it.

Ticker: (Nasdaq:MESA)

Technorati Tags: airlines, Hawaiian Airlines, Mesa Air Group

Posted by Holly at 2:40 PM | Permalink | Comments (0)

Yours truly is delivering a keynote luncheon speech today to the Airports Council International Economic and Finance Conference. As I sit here looking out my hotel window in Broomfield Colorado, I can see snow on the Rockies. But it was last night when I flew in that was spectacular.

For those of you into photography, you'll know what I mean when I say the light was simply gorgeous. Landed about half an hour before sunset and the golden light hitting the aircraft as they made their way out on the taxiways at DIA, or Senor Pena's Palace of Planes, as I dubbed it a long time ago, was so striking I just had to stop and watch it play out for a bit outside the huge windows of the concourse before I schlepped on into the terminal for my bag.

Yes, I am lucky. I apparently hit Denver as it was enjoying a brief bit of spring. But today, it's overcast once again, and I understand it's scheduled to get colder again in the next day or two.

Hold down the Fort while I attempt to entertain the airport folks in a bit. I figure with what all that is going on in the industry now -- that's going to be a tall order.

Talk to you guys later.

Try to behave in the meantime.

Posted by Holly at 10:57 AM | Permalink | Comments (0)

Posted by Holly at 11:51 AM | Permalink | Comments (2)

Just think of this week's issue as something akin to "War and Peace."

Subscribers to PlaneBusiness Banter can access this week's issue here.

Posted by Holly at 5:24 PM | Permalink | Comments (0)

We set a record this week. Most number of printed pages in one issue.

Not sure if that is a good thing or not. <g>

Huge week for earnings last week, huge week for merger madness, and oh, let's throw in some volatile airline stock activity as well.

This week's PlaneBusiness Banter is in final edits this morning -- I'll be back to let you know when it's ready to roll.

In the meantime, go back to reading the Sunday paper and have some more coffee.

Or watch some NBA basketball.

Your choice.

Talk to you later.

Posted by Holly at 9:28 AM | Permalink | Comments (0)

Dear John, er, Dear Jim.

Thanks to a reader who sent a note that gave me an excuse to stop writing about earnings.

For those looking for more details on the proposed SkyWest/XJT deal, ExpressJet has filed some information with the SEC concerning the offer from SkyWest, and more importantly, the "other" deal between SkyWest and Continental.

I only thought this was a squeeze play before I read the letter from Continental Airlines' CFO Jeff Misner. Now-- I don't think there is any doubt.

According to Misner's letter that was sent to CEO Jim Ream and Chairman George R. Bravante,

"First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009.  Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.

We hope this information is helpful to you."

Hah. Yeah, I guess it was helpful. I'd say.

Here are links to the two pertinent letters.

First letter is from SkyWest CEO Jerry Atkin to ExpressJet CEO Jim Ream and Chairman George Bravante.

Second letter is from Jeff Misner, Continental's CFO to Jim and George.

Also for you union types, note the request for modification to the current contract between ExpressJet and its pilots. (They are represented by ALPA.)

As for my thinking on all this -- it looks pretty clear. Obviously the folks at ExpressJet decided they'd go public with this all in an attempt to get a better deal. From SkyWest or someone. But given the collaboration of Continental, I'm not so sure ExpressJet has that many options.

Technorati Tags: airline mergers, airlines, Continental Airlines, ExpressJet, SkyWest

Posted by Holly at 5:36 PM | Permalink | Comments (0)

Okay, so I lied. I'm back.

I guess I need to talk about the SkyWest/ExpressJet deal. Or no deal as it stands right now.

ExpressJet said less than an hour ago that its board had unanimously rejected an offer by SkyWest to purchase the company for $3.50 a share.

ExpressJet said that the committee believes that the fair value of the company's stock is "substantially higher" than SkyWest's proposal and does not reflect the inherent value of ExpressJet or its prospects.

The offer would represent a 68% premium over the company's closing stock price Thursday of $2.09, and would values the company at about $181.5 million.

Jerry Atkin, SkyWest's CEO, said in a letter to ExpressJet officials that the offer constituted a "full and fair price" for the ExpressJet shares.

Meanwhile, ExpressJet says that it has set up a special committee of its board to look at perhaps a better deal with SkyWest. The committee will also assess the potential for a new capacity agreement with Continental, and it will talk to "other potentially interested parties about a potential acquisition of the company at a higher price."

Not surprisingly, shares of ExpressJet have soared on the news, and are now trading about 40% up for the day.

Ticker: (NYSE:XJT)

Technorati Tags: Continental Airlines, ExpressJet, SkyWest

Posted by Holly at 10:27 AM | Permalink | Comments (0)

"They listened to you Holly. Our company newsletter says that "Business" fares will be renamed "Anytime" fares starting today. The BS :) will remain the same."

A PlaneBusiness Banter subscriber wrote me this morning to alert me to the fact that effective today, Southwest Airlines has changed the name of its fare classes.

You may recall that yours truly has gone on a rant more than once over the fact the airline changed its three major fare classifications that potential customers see when they go to purchase a ticket to "Business Select, Business and Wanna Get Away" when they rolled out BS in November.

Not a good thing -- as customers were then assaulted with two columns of expensive fares, each labeled with a "business" moniker when they went to purchase a ticket.

As our subscriber noted and this screenshot shows, the airline has apparently come to its senses. Well, at least on the concept of labeling that second fare class as "Business" fares.  They have now been tagged "Anytime" fares.

Very good. I approve.

You folks at Southwest can send my marketing consulting check to me here c/o PlaneBuzz -- or I can just pick it up at the Southwest annual meeting next month.

:-)

On that note, you probably won't see much of me today as this week's issue of PBB is very long and I anticipate that I will still be working on it tomorrow.  That's what happens when you have a huge news week coupled with a huge earnings week.

Behave yourself in the meantime.

Ticker: (NYSE:LUV)

Technorati Tags: Southwest Airlines

Posted by Holly at 10:03 AM | Permalink | Comments (0)

My earlier post might have been a bit confusing. It's been a bit busy around here this week! My apologies if it was not clear.

In answer to some emails I've received this afternoon in regard to the Mesa/Delta litigation, the original suit was apparently filed by Mesa Air Group and Freedom Airlines on April 7, as they stated in an SEC filing.

The most recent filing, as of a check of the case files this morning, was a motion by Mesa for a preliminary injunction against Delta. Both sides will now have time to respond to that in the next 20 days or so, and the court has scheduled a hearing on Mesa's request on May 27-29.  So I doubt we are going to hear anything of note out of this situation until that point.

The case number, for those of you who would like to track it for yourselves, is  1:08-cv-01334-CC. The suit was filed in U.S. District Court, Northern District of Georgia.

Now, excuse me, I have one last earnings call to listen to. Talk to you guys later.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Posted by Holly at 6:11 PM | Permalink | Comments (0)

In last week's PlaneBusiness Banter I mentioned that the lawsuit Mesa Air Group said had been filed against Delta Air Lines in regard to Delta's canceling Mesa's Freedom Air contract flying had not been able to be found on the PACER system. (A public database of bankruptcy and Federal District courts in the U.S.)

That is no longer the case.

I suspect that because there was an initial motion entitled "Motion to Seal Case"  this was the reason the case was not immediately available in the database. However, the judge agreed only to seal the complaint in the case -- not the entire case.

So the case is there now.

Unfortunately because the complaint itself was sealed, we can't read any of the nitty gritty details. Not surprising, as the complaint no doubt contains a great deal of Delta-Freedom contract information that competitors would love to read. (Yes, we've already had folks from three airlines ask us if we have copies of the complaint.)

According to the PACER documentation, Mesa Air Group and Freedom Air did file this week for a preliminary injunction against Delta Air Lines -- but the hearing on that request has not been scheduled until the end of May. May 27-29 to be exact.

Clarence E. Cooper, United States District Court Judge is presiding over the case in U.S. District Court for the Northern District of Georgia.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Posted by Holly at 12:52 PM | Permalink | Comments (0)

It's not easy in the regional airline industry these days, as Mesa found out a couple of weeks ago when Delta Air Lines notified the airline that it was canceling its contract for more than 35 EMB-145 aircraft.

Today -- it appears that Frontier Airlines has severed its regional flying contract with Republic Airways Holdings.

This contract was not for fifty-seaters, however. This contract included 12 76-seat E170 aircraft -- an airplane that is in much higher demand.

The agreement provides for an orderly wind-down under which Republic will remove four aircraft on May 1, an additional six aircraft on June 2 and the final two aircraft on June 23, 2008. Immediately prior to Frontier's filing, Republic was generating approximately $6 million in gross monthly revenues under the agreement.

There are also another five E170 aircraft that were slated to go to Frontier that will now have to be placed with another airline or sold.

As a result of Frontier canceling the agreement, Republic says that it will seek a payment of $260 million. I guess this means Republic will now get at the back of the line in bankruptcy court.

Republic said in a press release that it will discuss all of this on its earnings call tomorrow.

The most troubling comment in the Republic press release? Republic's CEO Bryan Bedford's comment, "It's unfortunate that despite their [Frontier's] many efforts to reorganize their business outside of Chapter 11, factors beyond their control conspired to force a deeper reorganization."

Even more unfortunate is that this particular part of Frontier's business plan was the one that was supposed to be the "Southwest Buffer" -- an attempt to grow service to markets that Southwest Airlines could not duplicate out of Denver.

Not a good sign for the fine folks at Frontier, who recently filed for Chapter 11 protection after its credit card processor increased the airline's holdback allowance.

Technorati Tags: Delta Air Lines, Frontier Airlines, regional airlines, Republic Airways

Posted by Holly at 2:23 PM | Permalink | Comments (1)

Look, granted the airline industry is, with the exception of Southwest Airlines, losing money hand over fist this quarter. But it's not losing THAT much.

Perusing the usual headlines online, one would think that Delta Air Lines and Northwest Airlines posted a combined loss of more than $10 billion dollars for the first quarter.

No, they lost money, but not quite that much.

Those totals include some accounting hocus pocus "goodwill" write-offs. More on all that in a minute.

But first -- here is a rundown on the numbers that matter.

Excluding reorganization and special items, Delta Air Lines posted a loss of $274 million, or $0.69 today. Northwest posted a loss of $191 million or $0.78.

Both losses were larger than what analysts had expected. Analysts' forecasted EPS for Delta was a loss of $0.51, while they had Northwest pegged for a 34 cent loss.

So no, neither airline posted good numbers.

As for those big billion dollar write offs -- Delta took a $6.1 billion non-cash charge and Northwest took a $3.9 billion non-cash charge. These are paper losses that are related to the drop in market caps for each stock, and are related to each airline's Fresh Start accounting that both began this spring, as a result of their exiting bankruptcy protection. Essentially we're talking about Monopoly money. Not important in the big scheme of things.

Technorati Tags: airline earnings, airline stocks, Delta Air Lines, Northwest Airlines

Posted by Holly at 2:02 PM | Permalink | Comments (0)

PlaneBusiness Banter readers know that yours truly always looks forward to the airline industry earnings season for one big reason.

We just love to listen to United's CEO Glenn Tilton. His use of corporate double-speak and lexacon overuse (abuse?) has given readers and myself many well-deserved chuckles over the last couple of years.

I threatened to put together a book of Glenn's observations at one time. Maybe I need to revisit that plan.

Anyway, last quarter Glenn was not his usual self. I dunno. Maybe he was feeling a bit under the weather. But the old triangulation of synergistic applications working towards a mutual goal of corporate convergence just wasn't there.

However, I am happy to report, after checking in with the United call yesterday that Glenn is back to his old tricks again.

So much so that Dallas Morning News Aviation blog reporter Terry Maxon had to give him a shout out today. Hey, Terry, welcome to the Tilton Triangulation fan club.

There were a couple of good ones in this quarter's call, which we'll talk about in more detail in this week's PBB of course, but I think Terry did pick the most outstanding one to feature today in his blog.

Here you go. Way to go Glenn. In this quote he is responding to Credit Suisse analyst Dan McKenzie about whether or not there would be money available to back United -- if the airline were to become involved in a potential merger.

I would suggest that back to the earlier discussion, that if you take the plans that we're discussing today, capacity discipline as a principle rather than a synergy, take the focus on cost management that we are discussing today, again, the plan with respect to the value of each one of the businesses within the two portfolios that might consolidate, and if you took our plan and our discussion relative to that value that needs to be identified and unlocked, and you layered it over a consolidating scenario, I think you have an attractive investment proposition seen through the lens of a discussion that we're having about our own opportunities, which I don't think has yet made it to the back of the proverbial envelope.

Hey, this one's a keeper.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airline analysts, airline CEOs, United Airlines

Posted by Holly at 1:45 PM | Permalink | Comments (1)

Holy $%(@ Batman.

What a morning.

It took me more than an hour just to get through the emails. Then almost another hour reading all the great earnings news. NOT.

Wow, where do we start?

First, let's take a look at the price of oil. It's on the march again -- and looks like we are going to hit yet another record today unless something major changes between now and the close of trading.

Right now a barrel of crude is trading at about $119.50.

$120/barrel here we come.

But that may not be the worst news out there for the airline industry this morning.

No, United Airlines looks like it took care of that. Then again, AirTran is not too far behind.

First -- United Airlines posted a horrible set of first quarter numbers today. Horrible.

The airline reported a loss of $537 million or $4.45 a share. This did not compare favorably, as they say, to last year, when the airline reported a loss of $152 million or $1.32. Analyst consensus here had been for the airline to post a loss of $3.41 a share -- so it is no wonder why shares are now down about 32% ON THE DAY.

Shares in United, as we post this, are down 34% to 14.24.

Meanwhile, shares of AirTran are being beaten up as well. Shares here are presently down 23%, trading at 3.50.

Kind of strange thing with AirTran. The airline moved up its earnings call on very short notice to today. It was originally scheduled for Thursday.

I figured it was so the airline could come out and reassure investors about its  credit card processing hold back situation, cash levels, etc.

No.

Instead, the airline announced this morning that it was going to do a $65 million convertible note offering -- an acknowledgment that yes, it is short on cash. Oh, and the airline didn't post very encouraging first quarter numbers either.

The airline reported a first- quarter loss of $34.8 million or $0.38. This compares to last year, when the airline posted a profit of $2.16 million, or $0.02.

Analyst consensus here had been for the airline to post a loss of 32 cents, so while the airline missed, it wasn't as big a miss as United. But the results, along with the airline's liquidity issue, was still enough to spook the street.

Finally, JetBlue also reported earnings today, and considering the results posted by its two competitors -- the airline did pretty well.

JetBlue posted a loss of $8 million or $0.04 in the quarter. That is an improvement from a loss of $22 million or $0.12 in the first quarter of 2007, and was three cents better than the analysts' consensus figure of a loss of 7 cents.

Remember though that comps here were relatively easy for the airline -- the result of last year's St. Valentine's Day Meltdown.

If you haven't looked at your favorite airline stock today, I'd recommend caution. As of this posting, every airline stock is down for the day -- with some stocks posing very large declines. Throwing out the aforementioned selloffs in United and AirTran, it's clear that investors are not looking at the proposed Delta-Northwest deal as a trip to nirvana, as shares of Delta are now down 13% to 7.12, and shares of Northwest Airlines are down 15% to 7.74.

Even shares of Continental are not immune to the pressure this morning, as they are now down 12% to 18.30, while shares of AMR are down 11%, trading at 7.30.

Yikes.

Technorati Tags: airline earnings, airline mergers, airlines, AirTran, American Airlines, Continental Airlines, Delta Air Lines, jetBlue, Northwest Airlines, United Airlines

Posted by Holly at 11:41 AM | Permalink | Comments (0)

Okay all you airline fans.

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

I note that the boys at JP Morgan were hard at work today as well. Received their always informative Monthly Airline/Aircraft/EETC Reference note in the wee hours this morning. Guess I'm not the only one working overtime this week.

Earnings. That's the reason.

Next week is going to be a real killer. Get ready. We'll have the biggest week of the quarter next week in terms of airlines posting first quarter numbers.

In the meantime, subscribers can now access this week's issue of PBB here.

Posted by Holly at 3:14 PM | Permalink | Comments (0)

It's Friday night. Do you know who is CEO of your newly merged airline?

Do you even know where the headquarters is?

Heh.

And the bonus question for the evening -- which livery will Delta Air Lines choose when it merges with Northwest? ANOTHER new one? I don't have that many fingers.

This week Southwest Airlines, Continental Airlines and American Airlines reported first quarter earnings. I've just finished with our PlaneBusiness Banter review of all three and their respective earnings calls.

Most uninspiring call of the three? No contest. American.

But hey, the real news is the next merger, right? That Continental-United deal? Right.

Not so fast.

In this week's issue of PBB I talk about why I don't think a United/Continental deal is a sure thing -- along with our usual mix of mirth and merriment.

Then there is the airline stock performance rundown for the week. Yes, that will be inspiring.

Oh, and we'll catch up on the latest with Alitalia, too.

Can't forget them.

Look for this week's issue in the morning. I'm still talking to some folks about merger mania. Or I was, until I stopped to write this.

Oh, and for all you folks in Dallas (and I know I've got a lot of you who stop in here on a regular basis ) -- Go Hornets.

Talk to you guys in the AM.

Posted by Holly at 9:29 PM | Permalink | Comments (0)

Here I was, happily writing this week's PlaneBusiness Banter when one of our subscribers dropped me a note with this headline: Another Day, Another Oil Record.

That's what I get for being buried in earnings call transcripts.

But yes, folks, the news is not good.

The price of light crude closed at $117 today in after-hours electronic trading. At the close crude ended the day at $116.69.

Happy weekend.

Posted by Holly at 5:51 PM