PlaneBuzz

Hello everyone.

The latest issue of PlaneBusiness Banter is now posted. Subscribers can access this week's issue here.

Yours truly attended a wedding this past weekend. That is why I am a day late with this week's issue. As I told subscribers last week -- for the first time in 14 years I left on a weekend and never planned on picking up a laptop. Yay!

But back to the wedding. This was not just any wedding. It was a wedding of two industry employees. One a dedicated union dues-paying member. Another -- an executive member of an airline management team.

No surprise that I ruminate a bit this week on why it is that this industry is so hard on human relationships.

In other news, the JP Morgan Airline Investment Conference kicked off today, and it has already provided some good sound bytes, including a couple from the new sheriff in Houston, Continental Airlines' CEO Jeff Smisek. I really do believe that Jeff is attempting to channel Gordon Bethune -- only he's using a much younger persona.

On the potential airline strike front, it looks, as of this writing, that the cabin crew employees (flight attendants for those of this on this side of the pond) for British Airways could strike the airline as soon as next Wednesday, pending what happened today with talks.

Meanwhile, on this side of the pond, both the mechanics and the flight attendants at American Airlines continue their lock-step move towards both being released from the National Mediation Board from their negotiations with American Airlines. At essentially the same time.

Originally we had expected news on this front yesterday, but the NMB has asked both sides to keep talking. But we could get a release to a 30-day cooling off period before the end of the week for one or both unions, depending on what happens tomorrow.

We talk about this in this week's issue. How close is the airline to a potential strike? Pretty damn close. And the fact that the two unions are more or less joined at the hip in terms of the timetable here -- that does not help the airline at all. It gives the unions much more clout.

Airline stocks had another good week last week. And, as expected, the traffic and RASM estimates from those airlines that provide them have been almost -- across the board -- as expected or better. Southwest Airlines was a little light for some reason -- but the rest of the numbers have looked just as strong as the industry analysts had projected.

On another topic, we apparently have a new airline lurking in the weeds. Sorry. No more info until the end of the month.

And finally -- Allegiant Travel Company announced it was buying six 757-200s. The airline, which up until now has only flown Maddogs, is going to use the aircraft for new service to Hawaii. Hmmm. I can see it now. Des Moines to Maui.

Or something like that.

All this and more in this week's issue of PBB.

Posted by Holly at 7:38 PM | Permalink | Comments (0)

Hello everyone.

The latest issue of PlaneBusiness Banter is now posted. Subscribers can access this week's issue here.

So who do we dissect this week?

Republic Holdings.

I'll be honest. I'm still on the fence with this attempt by Bryan Bedford and the Republic management team to cobble together a new airline out of discarded parts of Midwest and Frontier Airlines.

I was hoping that this quarter we could get more visibility from the airline's earnings results as to how the grand experiment is faring -- but while Wall Street apparently liked the airline's results (the airline's stock led the sector this last week picking up a cool 14%), I didn't hear anything that really won me over.

So -- call me "continued skeptical."

Had to snicker when the airline talked about how it was "harvesting synergies" of the Midwest/Frontier combo. "Harvesting synergies".....fine example of corporate speak.

That kind of stuff makes me break out in hives.

We had one other regional airline report earnings this last week and that airline was ExpressJet. If you look only at the airline's net profit numbers, it would appear that the airline did pretty well for the quarter. But no -- the reason the airline posted a profit was because of a huge both cash and non-cash tax issue. The airline posted a $17 million operating loss -- that was also a clear indicator that no, this was not that good of a quarter.

Meanwhile, the airline remains without a permanent CEO. You may recall that the airline's CEO Jim Ream left the airline effective Jan. 1 -- as he took the SVP of Maintenance and Engineering gig at American Airlines.

The weather certainly created a whole slew of new cancellations last week for many of the U.S. carriers. Adding to the pain of the New York area airspace - the longest runway at JFK International was officially shut down today -- as the airport prepares to rebuild and widen it. It will be closed for four months.

I know. Let the fun begin.

On the economic front, it was another yin-yang week for economic tea leaf reading, but on the airline economic/RASM front, analysts continue to fall all over themselves about just how great year-over-year RASM numbers are going to be for the next 3-4 months.

Or as JP Morgan analyst Jamie Baker said at one point, "If it flies, buy it!" Actually Jamie acknowledged last week that he is not quite that bullish now -- but tonight we should get our first glimpse of higher RASM numbers -- as Continental rolls out its February traffic report.

All this and more, including Japan Air Line's horrendous loss, Air New Zealand's nice profit, Aircell's win at Alaska Air Group, fighting flight attendants, a new high-end, but reasonably priced crash pad for pilots in Houston, and more in this week's issue of PlaneBusiness Banter .

Posted by Holly at 9:49 AM | Permalink | Comments (0)

The energy gods have shown down upon the Worldwide Headquarters. There is once again electricity humming through the lines to the great outside world. Which means the computers are buzzing, the printers are printing, the washer is washing, the dryer is drying, the stove top is cooking, the television is yapping, and most importantly -- Holly got to take a nice hot shower and get cleaned up!

Ahhhhh. I can't remember the last time a shower felt so good.

As for PlaneDad, my thanks to the folks at Expedient Home Health services, who managed to find us a place to move him to -- had the energy gods not decided to play nice. But since it's warm again, he says he isn't going anywhere.

The man knows the food is definitely better if he stays here. (That's assuming the electricity stays on!)

Posted by Holly at 3:56 PM | Permalink | Comments (0)

Posted by Holly at 8:43 AM | Permalink | Comments (0)

I'm sitting here waiting for final edits to be done on this week's issue of PBB, and was just looking at the wild party going on with airline stocks today.

In case some of you are wondering what is going on with the sector today -- which is up significantly across the board -- United Airlines issued the first of its revised format traffic reports after the close of the market yesterday.

As CFO Kathy Mikells discussed in the airline's recent earnings call -- and we talked about in PlaneBusiness Banter -- she is attempting to increase the level of transparency in the airline's financial reporting. As a result, the airline is now going to provide a RASM estimate, along with the usual traffic information in its monthly traffic release. The airline is also going to provide an update as to its current fuel costs.

Airlines like Continental, JetBlue, and US Airways already provide RASM estimates when they report their monthly traffic numbers.

When the new-look United Airlines release hit the wires last night -- all of us received quite a shock.

The airline easily blew past analyst forecast RASM numbers -- as the airline estimated that its RASM in January was up between 9.5% and 11.5%. Analysts had forecast a figure somewhere between 3% and 6% -- depending on the analyst.

So -- there you go. That is why airline stocks are frolicking today.

At last check, shares of United were up 17% for the day, trading at about 15.28.

Posted by Holly at 1:43 PM | Permalink | Comments (0)

An advisory for our PlaneBusiness Banter subscribers. The latest issue will be posted today. My apologies for the delay. No, I am not still celebrating the Saints win Sunday night. No, no. I wish that was my excuse.

No, as most of you know, PlaneDad is camped out at the Worldwide Headquarters, as he recuperates from surgery to repair his broken hip.

Things generally have been going well on that front, but this weekend was rough, (a follow-up from some aggressive physical therapy on Friday) and Monday was a rather, er, trying day.

Hey, life happens.

This week's issue of PBB will be posted later today. I'll post a note here as I always do after it is up and ready for your perusal.

Now -- go do what you usually do on Tuesdays.

Posted by Holly at 9:13 AM | Permalink | Comments (0)

Thank you all for your patience as I try and absorb what I witnessed on television Sunday night. Forty three years of abject frustration and crushed hopes are now history.

The old visuals in my mind? When that damn field goal kicker for the Los Angeles Rams kicked one down the middle to keep the Saints out of the playoffs in the mid-80s. Or then there is the video in my head of the Monday Night Football game I attended in the Dome when Kenny Stabler and the Oakland Raiders erased a 28 point half-time deficit to come back and beat the Saints. Aint's bags. Archie Manning being booed off the field and trash dumped on his head.

I suppose my greatest ire is reserved for Saints owner Tom Benson, who clearly thought he was going to pick up the team and move it to San Antonio after Katrina. Watching him and his squirmy comments after Katrina made me want to reach through my television and strangle him.

But thankfully -- then-NFL Commissioner Paul Tagliabue had other ideas. Thank you Paul.

This morning, I am happy to report that the new visual in my mind is that of Drew Brees with his son on the podium last night -- enjoying the moment.

May we all have those times in our lives when we too can -- enjoy the moment.

Speaking of -- any of you want to enjoy a PlaneBuzz moment?

After the return of our long-lost guest columnist Frank Arciuolo last week, (and yes, I was glad to read that some of you got as much of a kick out of his photo as I did), I wanted to let all of you know that, yes, PlaneBuzz is always open to guess columnists.

Last year I began to focus more of my time and attention to our flagship publication of the PlaneBusiness empire, PlaneBusiness Banter. Why? Because those folks who subscribe to PBB deserve the bulk of my attention.

There are any number of blog sites/news sites now that can give you news-breaking tidbits about the various airline-industry antics. At no charge.

But I have no desire to try and compete in that league. I can't. Unless I want to go on food stamps and bask in the knowledge that I am working for a non-profit entity.

And no, I have no desire to do that. No sir-ee.

As a result, for the last six months or so I have struggled with just what I should and should not write about here in PlaneBuzz.

Going forward, I would like to hear from more of you about whatever topics are important to you -- and if you'd like to jot down some of your own thoughts -- just drop me an email.

In addition, from time to time, I am now going to post material from PBB either directly here in PlaneBuzz or I will link to it from here, enabling everyone to read certain columns or interviews. But these will be posted on a delayed basis. Subscribers to PBB will continue to get first dibs.

The first of these reposted pieces will come this week, when, after a tremendous number of requests to do so, I will let everyone read my recent interview with the Chairman of the Delta Air Lines ALPA MEC -- Lee Moak.

Again, look for access to that lengthy interview here in PlaneBuzz this week.

But again -- if any of you have a desire to tell all of us how you feel about something pertaining to the airline industry -- drop me a note. We can hash it out. Polish it up. And give you your own chance at having your own PlaneBuzz "moment."

Submission inquiries can be sent directly to me at hhegeman@planebusiness.com.

Just put "Buzz Comment" in the header of the email.

Now, excuse me while I go finish the in-depth earnings report on Allegiant Travel Company, parent of Allegiant Airlines, that will be included in this week's PlaneBusiness Banter. Yep, another mega-earnings issue is on tap this week. This week we have an interesting mix of airlines that we take a closer look at -- AirTran, Allegiant, and Alaska Air Group.

Posted by Holly at 10:17 AM | Permalink | Comments (0)

Posted by Holly at 9:42 AM | Permalink | Comments (0)

Posted by Holly at 12:00 PM | Permalink | Comments (0)

Editor's Note: This week I welcome a previous contributor to PlaneBuzz, Frank Arciuolo. Frank has not been seen around these parts in a long time. For reasons he talks about in his latest effort. I figure he felt sorry for me after it took him two hours to read this week's issue of PBB, and thought the environs around here had been much too quiet!

In his previous efforts in PlaneBuzz, we used a "Godzilla" rendering for his ID photo. I figured it's time you get to see the real deal. Mud and all. Enjoy!

Hi there, Godzilla here. I know it’s been a very long time since I’ve contributed to PlaneBuzz but I’ve been preoccupied with some of the more mundane things in life – like trying to find gainful employment. My plan when I left my last job at the beginning of 2008 was to do some part time flight instruction and get a part time job as an FO on a corporate jet – I even got my CE500 type rating.However, like they did so many other people, circumstances conspired against me. Taking flying lessons is well down the list of priorities for most people now, if it makes the list at all. And right seat jobs in corporate aviation are as scarce as, well, the hair on my head.

But, I digress. Anyway, thanks to Holly for letting me fill my idle time and the pages of PlaneBuzz simultaneously.

You know the feeling an ex-airport ticket agent gets when he/she wakes up on the Wednesday before Thanksgiving, looks out the window to see dense fog – then rolls over and goes back to sleep because they are off that day? That’s the feeling I got when reading about recent events at WestJet concerning their reservations system cutover and the system cutover at JetBlue this weekend.

In my previous lives I’ve participated in about 8 reservation system cutovers; one as an airline employee and the others as an interested bystander, AKA a vendor. My advice to any IT person working at an airline that is considering switching reservations systems is to dust off the resume and start networking (the people kind). People in the reservations system business (the “biz”) often refer euphemistically to a reservations system cutover as a migration. That’s a nice word, migration. It gives one the vision of a flock of Canadian geese traveling to MIA for a nice warm winter.

However a reservations system migration, or at least the ones I’ve been involved in, does NOT resemble a migration of birds to South Beach for the winter. Picture a reservations system migration as a flock of 1 million geese leaving Canada on a Friday night. On Saturday morning nobody can find ANY geese ANYWHERE. By Saturday mid afternoon 3 million birds arrive in Tampa, but only 25% of them are actually the geese that left Canada Friday night, the rest are pigeons. By Saturday night trucks have been chartered to take ALL of the birds from TPA to MIA because nobody wants to let them out of their sight. The trucks arrive in MIA Sunday morning and are gone through manually (by IT employees) to determine which are the geese they want to keep and which are the pigeons. Sunday night the airline CEO does the math and realizes that 25% of 3 million does NOT equal the 1 million geese he had Friday night. Where are the rest of the geese? Holy crap, what’d we do with those pigeons? Resumes and bird poo simultaneously hit the mail and the fan Monday morning.

Funny story, yes, but perhaps more real than you think. Airline reservations are literally money in the bank. Moving this valuable asset from one point in cyber space to another is fraught with land mines. There are a host of technical issues that would make your eyes glaze over and I’d be happy to talk about them in detail to any other IT geeks out there, but that’s not today’s point.

Since migrating is such a gut wrenching experience where the BEST result is a zero sum gain (and the worst result is working in bird poo), don’t do it! Some cutovers are unavoidable, like the DL/NW move and whatever will eventually happen with YX/F9 and the boyz in IND. Those cases also represent mergers/acquisitions, where the party on each side of the transaction has an interest in avoiding a train wreck. Migrations that are the riskiest are the ones where an airline is changing reservations systems they may have outgrown, or perhaps for a better deal.

Traditional hosting or multi host systems are very good at high volume transactions and at communicating with Global Distribution Systems (GDS) and other systems. Because they communicate with external systems so well, traditional host systems can greatly expand an airline’s distribution reach. However, since those external systems, by design, withhold certain information from the host system (like fare basis code, form of payment, and other key customer information), the host system has difficulty figuring out of someone booking in an external system has simply reserved a seat or has actually purchased a ticket. Traditional host systems are excellent for generating large volumes of bookings and they can ensure tickets are purchased on booking within its system, but not as good as ensuring the purchase of bookings made outside its system.

The newer reservations systems are much slicker at communicating with customers within their system and with the airline’s web site, but are not very good at communicating with outside GDS and other systems. Like the traditional hosting systems, they are good at forcing the customer to purchase a ticket before ending the reservation. One big advantage they have over traditional hosting systems is that the newer systems create a database of the airline reservations. A real database allows the airline to do detailed analysis of its customers and to effectively execute Customer Relationship Marketing (CRM) to its customers based on their purchases. This type of information makes airline marketing people salivate at the possibilities for the easiest type of marketing there is – to your existing customer.

For a boutique type airline starting out that has made the decision to remain out of the GDS and its evil and expensive booking fees, the selection of a reservations system would lean towards one that allows better CRM. However if the airline grows to a point where expanding the distribution network is necessary, as is agreeing to booking fees and all the rest, they’ve chosen the wrong reservations hosting system.

It makes sense to either add the robust external communication feature to the true reservation database system, or add the relational database feature to the traditional hosting systems. The first system to truly do that will have the golden egg. However, there are immense technical challenges of taking the incredibly dense set of text files (which is really what they are) that are contained in the reservations systems of AA, UA, DL, etc. and indexing them into a relational database. That would seem to argue for a solution that “bolts on” to the big hosting system and allows both systems to do what they do best.  

Until this happens, try to be on vacation the weekend your airline reservations migrate!

Posted by Holly at 12:27 PM | Permalink | Comments (0)

It's been almost 12 hours, but the shock has still not completely worn off.

Or maybe it's just my mind and body trying to get back to some semblance of normal after experiencing almost four hours of what was a roller coaster of emotions consisting primarily of terror and anxiety, interrupted occasionally by bursts of excitement. Only to be followed by attempts to keep that nauseous sense of dread from taking over the ride.

Yes, the New Orleans Saints are headed to the Superbowl.

There, they will meet New Orleans-native son Peyton Manning and the Indianapolis Colts.

Yes, that same Peyton Manning who grew up watching his father, quarterback Archie Manning, staring up at the roof of the Superdome more often than not on Sunday afternoons -- as the New Orleans Saints of another era were routinely pummeled by opposing teams.

Did I ever possess an "Aint's Bag"? Of course I did. Yours truly can remember many a game in the Superdome where I, along with a group of close pals, would drag in boxes of Popeye's Fried Chicken, along with the requisite strategically hidden stashes of liquid additives for our Coca-Colas, up to the nosebleed seats in the Terrace level in the Louisiana Superdome. Then, almost without fail, we would masochistically endure yet another heart-breaking loss by the then-hapless boys in the black and gold.

But not before we had made our hands sore and red from banging on the aluminum panels that cover the walls in the upper deck of the stadium. They made a huge racket.

And not before we had completely lost our voices.

But for some strange reason, we never lost our faith.

Faith in the team, and, well, in the city itself. And trust me, living in New Orleans will test your faith every single day -- in one way or another.

In fact, the game last night? Long periods of anxiety interrupted by bursts of over-the-top happiness, overlaid with this huge sense of dread that threatens to take over at any time? Yep. That's is essentially the metaphor for what it means to live in the city.

As I tell a lot of people -- it's just too damn complicated to explain. But once you experience it, you're doomed. Nothing else ever comes close.

You might as well face it -- you are going to be hearing a lot about New Orleans from the usual press sources over the next two weeks. Please be patient. Let the folks who still call the city home -- let them enjoy their time in the sun. They more than deserve it.

Besides, think of what the alternative would have been. Instead of learning what it means to "Second Line," what a truly great guy Drew Brees is in every sense of the word, and how you make barbecued shrimp from Mr. B's, you could be watching film clips of pine trees in Kiln, Mississippi, and yet another interview of a deliberately pensive Brett Favre, as he talks about how whether the Superbowl will be his last game or not.

Bzzzzzt. Not.

Brett, it really is now time to go ride that tractor. Ride, baby, ride.

And how 'bout the young man who calmly booted that winning field goal in overtime? Garrett Hartley is a product of that Texas high school football powerhouse that sits just down the road from the Worldwide Headquarters -- Southlake Carroll High School.

I mean, what else can one ask for?

Well, I guess I could ask for someone else to come in my office today and finish writing this mega-earnings issue of PlaneBusiness Banter that is sitting on my computer -- so I could just crawl the net and read all the stories I can find about the game. And continue to wallow in the warmth of the win.

But alas, duty calls. Subscribers, this week's issue of PlaneBusiness Banter will be posted later today. Talk to you then.

Posted by Holly at 9:18 AM | Permalink | Comments (0)

One of the things that airline management team members have to understand is this -- In this day of blogs and internet chat rooms -- you can't sweep the voice of concerned and/or pissed off and/or disillusioned employees under the rug like you used to years ago.

Nope. Those days are long gone.

Need we talk about the series of "Hitler" videos from the various airline pilot groups that popped up last year?

Today, the latest example of this: A blog by the name of "All Things Frontier Airlines."

No, I don't know who is writing this effort, but whoever it is is both very knowledgeable about the airline, and he/she has a razor wit to boot.

Kudos to whomever is writing this. It is one of the better "rogue" efforts we've seen in a long time.

Here is a snippet from the Thursday post.

"Today, Republic found themselves in the news twice. The first article which appeared in the Denver Post, was aptly named "Republic chief has "work to do". For the most part the article was pretty mundane, but for me the most telling quote in the piece was, "Bedford said there are no immediate plans to replace Menke but that if a successor is named, the person will be added at Republic headquarters." Apparently, Bedford has obtained a copy of "Revenue Management for Dummies" and feels that he no longer needs the services of anyone with experience in that field or that moving the functions to Indianapolis will magically solve all of those issues like it has everything else. The article goes on to mention that Frontier will be receiving 3 Airbus 330's and 7 Embraer 190 aircraft. I truly hope that the A330 mention was a misquote or a typo instead of A320, but at this point I can't say I would be surprised if it was not and Mr. Bedford doesn't realize the differences in the aircraft. Most of all, I really like the title of this article, "Republic chief has "work to do". Naturally, I began to wonder what work Mr. Bedford has in store. After much searching, I was finally able to obtain this mysterious "To Do" list and as I think you will see, it offers much insight on what it takes to be the CEO at Republic Airways.

Brian Bedford To Do list:
- Check E-Mail and forward "Obama no birth certificate email" again to the non believers.
- Look up current fuel prices and figure out what can be moved to Indianapolis or who's pay can be cut as a result.
- Take a nap.
- Call CEO of Qwest and convince him to move the business and employees to Indianapolis.
- Prepare weekly letter to employees by incorporating at least 2 scriptures, 1 quote from Winston Churchill, and the evils of same sex marriage."

Posted by Holly at 11:21 AM | Permalink | Comments (0)

I just remembered that this older version of Ecto won't let me simply replace a post with a corrected version. Oh no...it keeps both posts online. Ugh. Okay. Back later.

Posted by Holly at 3:11 PM | Permalink | Comments (0)

Blew the keyboard out of my laptop Tuesday night .... just trying to see if I can use my old configs on my desktop to get online!

Posted by Holly at 3:05 PM | Permalink | Comments (0)

Blew the keyboard out of my laptop yesterday Tuesday night .... just trying to see if I can use my old configs on my desktop to get online!

Posted by Holly at 3:05 PM | Permalink | Comments (0)

The New Orleans Saints.

I'm too nervous to write much. Headline says it all.

For those of you who are Phoenix Cardinal fans who I've got bets with on the outcome of the game today -- get ready to pay up.

Talk to you guys later.

Posted by Holly at 3:29 PM | Permalink | Comments (0)

In the last two days I have lost count of how many of you have sent me notes re: Mesa Air Group's bankruptcy filing.

No, I am not on another planet.

Yes, of course I am aware the airline filed for bankruptcy.

Yes, I'll be talking about it in this week's issue of PlaneBusiness Banter.

But I have what I think is a pretty good reason for not jumping in here and jabbering about Mesa, or anything else for that matter.

It goes something like this.

Over the last couple of days I traveled to New Orleans where I retrieved PlaneDad, who is now 90. We both drove back to the DFW Worldwide Headquarters, as he planned on staying in this part of the world for a week or so.

Up until that point, all was well, including a perfect flight for me on Southwest Airlines over to MSY.

But it was after he and I returned to DFW that the story takes a little more disheartening turn, for you see, my father decided in the early AM hours to go out to his car to retrieve a banana that he had brought with him. The banana, of course, was to go on his shredded wheat.

Yes, PlaneDad is a creature of habit. No shredded wheat without the banana. And the 2% milk. Accompanied, of course, by a glass of pulpless orange juice.

I told him no, don't go out there. It is icy. He said he would be careful. I said again, no, I will go get my shoes. Just sit down.

You know where this is headed.

I went in to put my shoes and my coat on -- and he went out the door. And not 10 seconds later, he was down on the driveway pavement of the Worldwide Headquarters with what appeared to be, and as of today has been confirmed -- a shattered left hip.

So pardon my silence on all things airline for the last couple of days -- particularly the news concerning the Mesa bankruptcy.

Then again -- I noted when we awarded the Mesa Air Group Board of Directors with our PlaneBusiness Ron Allen Airline Mismanagement Award two years ago that bankruptcy was probably a foregone conclusion for the airline.

Two years ago.

Can't say I didn't give you plenty of warning.

Posted by Holly at 5:50 PM | Permalink | Comments (0)

I am very happy to report that the braintrust at the TSA (is that an accurate assumption?) decided that perhaps slapping subpoenas on travel-site bloggers who posted revised TSA passenger security guidelines that were pretty readily available all over the web anyway was a big waste of time.

But not before some damage was done. Specifically to blogger Steve Frischling's hard drive.

But before I get into the details -- a mea culpa. I forgot to note the address of Steve's blog in my earlier post on this debacle. Steve, who is a photographer when not posting to one of his blogs, writes FlyingWithFish. I had previously only mentioned his work involving the KLM blog.

On New Year's Eve the TSA apparently notified both Steve and Chris Elliott that the previously served subpoenas on both were being dropped in their entirety.

What has not been determined yet is whether or not the TSA is going to repair or replace Steve's MacBook which they confiscated earlier in the week in their quest to find "the truth."

Apparently the machine's hard drive is toast. And of course, everything that was on it. I only hope Steve had backed up all his photographs recently.

Ugh.

Thank you to whomever it was at the TSA who did the right thing -- finally -- and dropped the subpoenas.

Posted by Holly at 11:48 AM | Permalink | Comments (0)

Hello everyone.

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

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

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

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

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

By now you all know the basics.

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

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

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

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

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

Huh?

I somehow don't think that is the case.

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

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

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

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

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

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

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

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

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

According to Chris's blog,

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

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

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

'Sir,' he repeated. 'You’ve been served.'"

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

According to a New York Times article this morning,

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

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

Clearly these two went with the information.

But hey, you J. Edgar Hoover types with the TSA -- back off. The information was "out there."

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

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

Ridiculous. Just friggin' ridiculous.

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

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

But for now -- I'll close today with a short and sweet admonition.

Happy New Year everyone!

Posted by Holly at 2:52 PM | Permalink | Comments (0)

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

Merry Christmas everyone.

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

Posted by Holly at 1:16 PM | Permalink | Comments (0)

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

Posted by Holly at 1:01 PM | Permalink | Comments (0)

Ho, ho, ho. Merry Christmas.

Or something like that.

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

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

Today Bill Greene with Morgan Stanley wrote,

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

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

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

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

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

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

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

Is this a bad thing? Not according to Mark.

According to Mark,

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

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

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

Posted by Holly at 6:01 PM | Permalink | Comments (0)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, sir. I do.

Posted by Holly at 11:54 AM | Permalink | Comments (0)

Scary news just posted on The Aviation Herald website. Simon reports that an Airbus A330-220 was flying from Rio de Janeiro to Charles de Gaulle in Paris when the crew issued a Mayday alert on the international emergency frequency, indicating the aircraft had encountered severe turbulence over the Atlantic.

According to Simon, "The Mayday call was relayed by the crew of a TAM Airbus A330-200."

This aircraft appears to be AF Flight 445 GIG-CDG and the route the aircraft was following is very close to that which AF Flight 447 was on when it disappeared.

Thanks much to PBB subscriber Brian Rynott for this head's up.

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

Someone sent me a note last week and told us that last week’s issue of PlaneBusiness Banter was over 100 pages when they printed it out. Heh. Well, this week’s is longer than last week’s issue was, so I have no idea how long this one will be when you hit the print button.

And no, I don’t own stock in Staples. Or Office Max. Much less Weyerhaeuser.

But one thing’s for sure. We had a lot to talk about this week.

Yes, once again, the bulk of this week’s issue is about earnings. This week we take a close look at the results posted by: AirTran, Alaska Air Group, JetBlue, Continental and Hawaiian Airlines.

This was a very interesting group of airlines because they all are somewhat “different.” This wasn’t the same as talking about American, United, Delta and Continental, for instance. In fact, Continental Airlines was more or less the odd-man out in this group.

That’s not to say that in terms of several measures that Continental did not turn in a third quarter that was better than its peers. But in listening to the airline’s call, it would be a huge stretch to say that the folks at Continental were happy with the airline’s results.

This was not the case however, with the four other airlines.

And especially not at Alaska Air Group, which turned in a drop-dead gorgeous quarter.

I’m serious.

The company, which is parent to Alaska Airlines and Horizon, has been a favorite of mine for years.

This quarter -- the company turned in one of the best, if not the best, quarters of the industry.

JetBlue was no slouch this quarter either, as its flat rate $599 “All You Can Jet” promotion it rolled out in August clearly gave the airline a huge boost to its September revenues. The airline has, in the past, made no secret about how weak its September performance is. This year -- things were different because of some out-of-the-box thinking on the part of the airline. Great idea.

AirTran also posted a great quarter. In case you are not aware - AirTran took over the rights to use the title of “Lowest Cost” airline a while ago. This quarter it proved its point again.

Hawaiian had a good quarter as well -- as the boys in Paradise continue to make money while the Smaller Frys continue to duke out it out in terms of interisland business.

Two metrics neither you nor I heard about on any of the earnings calls this quarter were two metrics that are near and dear to my heart.. Those metrics are: break-even load factor and operating margin, including interest expense.

This week we take the list of those airlines that have reported so far (which includes all the major players for the exception of the two north of the border) and look at how they stack up against these two measures.

The results were surprising for a couple of reasons -- with the main reason being that one airline finished with the highest break-even load factor for the quarter and it also posted the biggest negative operating margin -- when interest was added to the pot.

Anyone know which airline that was?

Subscribers can find out by clicking here to access this week’s issue of PlaneBusiness Banter.

Posted by Holly at 4:38 PM | Permalink | Comments (0)

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Anyone else out there using Ecto as a blog editor?

See that headline that says “CIT Bankruptcy Looks Imminent?”

That was, originally, a very long blog piece talking about how it appears CIT Group, the parent of CIT Aerospace, the third-largest aircraft leasing company, appears to have put together a pre-packaged bankruptcy deal.

Only one big problem.

When I pushed the “publish” button, the entire post disappeared. And yes, this was after I had carefully saved the thing at least three times to make sure nothing happened to it.

So I go to the software maker’s support boards.

Ever have that sinking feeling in the pit of your stomach? You know the one. When you start reading post after post after post detailing the same problem you have just encountered (and more than once -- it also ate my legendary “Ode to a Hot Dog” post in July) and it’s clear that the developers have not responded in months?

Bye bye Ecto.

Hello MacJournal.

Hopefully we have seen the last of the disappearing posts.

Grrrrrrrrr.

Posted by Holly at 1:52 PM | Permalink | Comments (0)

Posted by Holly at 12:19 PM | Permalink | Comments (0)

It's Halloween. BOO!

For at least two airlines -- that means it is time to get scary.

Especially for some of the airlines' top executives.

Friday over on Denton Drive here in Dallas, it appears that Southwest Airlines' former Chairman and CEO Herb Kelleher decided to go with the Willie Nelson/Biker combo look, while current Chairman, President and CEO Gary Kelly pranced down the Yellow Brick Road as Dorothy.

I don't know what it is with Gary and his cross-dressing tendencies, but ever since he turned out as Edna Turnblad a couple of years ago -- we're almost afraid to look. (Last year Gary and two associates were attired as ZZ Top.) Early betting this year had Gary dressing as Julia Child.

But here's the one that got me. Anyone know who that is?

That's US Airways' COO Robert Isom. I tell you what -- that boy has the Barry Gibb thing going, doesn't he? I hear he hit some pretty high notes Friday as well -- as the US Airways' executive team, aka the Bee Gees, entertained airline employees at the airline's headquarters in Tempe.

Gotta love that hair.

Posted by Holly at 10:33 AM | Permalink | Comments (0)

I'm sitting here writing this week's in-depth earnings call review of the third quarter results from Allegiant Travel.

It, along with in-depth looks at the earnings results from other airlines, will be in this week's issue of PlaneBusiness Banter, which will be posted Monday.

Inundated with numbers and corporate executive double-speak as I am this weekend (and yes, in case you missed it, we did have a moment of "triangulation" in this quarter's United Airlines' call) I simply had to stop and relay something I just wrote -- for all of you. Not just subscribers.

In fact, I should have mentioned it here in PlaneBuzz earlier this week. I simply forgot to do so.

(As for the "triangulation" reference, if you are a faithful reader you know that I am referring to a "Tiltonism.") Enough said.

But back to what I wanted to share. It needs no introduction except to say it comes from the beginning of my review of Allegiant's third quarter earnings performance.

And I quote,

"Maury [Gallagher, CEO of Allegiant] is never one for subtlety. And this quarter was no exception as he let everyone know two things on the call -- right off the bat. One, the third quarter is typically the weakest of the four for the airline. Two, the airline posted a 16.5% operating margin for the quarter."

I feel like I need to insert the sound of a rimshot here. Please.

Did you happen to catch that number? Let me replay it for you. S-l-o-w-l-y. The airline posted an operating margin of 16.5% for the quarter.

Okay, I'm going back to work. I suggest you close your mouth and go back to whatever it is you were doing before I interrupted you.

And people wonder why I like this airline's damn business plan so much. Sheesh.

Posted by Holly at 2:07 PM | Permalink | Comments (0)

During weeks like this, I'm not really sure if I should even get out of bed in the morning.

Considering we are enjoying a nice gentle Fall rain here in the DFW Metroplex this morning, that's even more incentive not to get up.

Alas -- duty calls.

Two days, and we have now had six airlines have report earnings so far this week -- with more to come. The rundown goes like this: Continental, UAL, parent of United Airlines, AirTran, Allegiant, Hawaiian, and AMR, parent of American Airlines.

Any surprises in the results that have rolled out so far this week?

No real "surprises" but a few things that do warrant some discussion.

One -- United Airlines posted pretty good numbers for the quarter. Excluding special items, the airline posted a loss of $0.43 a share. This was much better than the consensus forecast of loss of $0.94. The airline posted better than expected results both on the revenue and the cost side. The airline posted a 2.8% operating margin. Granted, that kind of margin would make people in other industries weep. But in this industry, it might end up being one of the better performances for the quarter -- compared to its peers.

AirTran? No real surprises here. The airline posted a good quarter. Forecast was for the airline to post a profit of 8 cents a share. That's what the airline did. It also posted a very nice 5.1% operating margin -- 13.5 points better than third quarter 2008.

Dovetailing with the upgrade note on AirTran issued by JP Morgan analysts Jamie Baker and Mark Streeter late Sunday, the airline did, in fact, post a better operating margin than Southwest this quarter. Southwest posted a 4.8 operating margin (excluding special items.)

Allegiant? Another great quarter by the airline. The airline reported a profit of $0.68, which was better than the Street estimate of $0.63. The best news from the airline's call to me was the fact that the airline's new service in Los Angeles seems to be off to a tremendous start. The airline said that July operating margins for the new service, which just started in May, were already pretty much up to the airline's system average. This compares to other markets, which have usually taken as long as two years to hit the same levels.

Continental reported this morning, as did AMR.

Continental reported a net loss of $18 million or $0.14. Excluding $20 million in special charges, the airline posted a profit of 2 cents a share.

Analysts had expected the airline to post a loss of 6 cents a share.

As for AMR, parent of American Airlines -- the news wasn't nearly as positive. The airline didn't come anywhere near a profit for the third quarter.

The airline posted a net loss this morning of $359 million or $1.26. Excluding special items, the airline posted a loss of $265 million or $0.93. Consensus had the airline expected to post a loss of $0.95. Operating margin? Excluding special items, a negative 2.5%.

We're off to listen to the calls from both CAL and AMR. Behave yourself while I'm gone.

Posted by Holly at 11:05 AM | Permalink | Comments (0)

Hello everyone.

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

Subscribers can access this week's issue here.

First up this week is an in-depth look at the third quarter results posted by Southwest Airlines last Thursday.

While I considered the airline's numbers to be in the "mixed" category, the airline saw its debt rating dropped yet another notch last week by S&P, and late last night JP Morgan analysts Jamie Baker and Mark Streeter issued a research note in which they downgraded the stock. And upgraded shares of AirTran.

The two minced no words as they wrote, "Investors aren’t likely to confuse Southwest with AirTran, as only one offers the combination of lower costs, higher profits, better current liquidity, a severely battered share price and cheaper valuation. If you still aren’t sure which, here’s your last hint: it’s the one with assigned seats. Our equity rating on AirTran moves from Neutral to Overweight, while Southwest equity drops from Neutral to Underweight."

Yowie.

That one hurts.

Great news for AirTran though. Can't say I disagree with the reasons behind the dynamic duo's downgrade or their upgrade.

In other news, the United Airlines' ALPA MEC made history this week. The pilot group elected a woman to be its new chairman. Captain Wendy Morse was elected Chairman and Captain Garry Kravit was elected vice chairman of the MEC. Yes Steve Wallach was sent packing. The vote was close, according to reports.

On the international front, it looks like the Japanese government is going to bail out JAL. No other choice. The airline's creditor banks refused to go along with a restructuring plan presented to them.

American Airlines' pilots were picketing in Washington last week. Why?

Good question.

And our final question for the week -- who is buying up shares of ExpressJet?

All of this and much much more in this week's issue.

Posted by Holly at 2:32 PM | Permalink | Comments (0)

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.

Posted by Holly at 2:04 PM | Permalink | Comments (0)

Hark! Today there is news of two proposed FAA penalties -- and the news does not involve an airline based in the Dallas area.

Today the FAA announced that it has assessed a proposed civil penalty of $5.4 million against US Airways, and a proposed civil penalty of $3.8 million against United Airlines.

in the case of US Airways, the FAA said in a statement that the airline allegedly operated eight aircraft while out of compliance with safety directives or its own maintenance program.

In a letter to employees issued just a few minutes ago, US Airways COO Robert Isom wrote,

"It is important to remember that today’s announcement references situations that are in the past, and in several cases, date back to two years ago. This isn’t to make light of the findings or our corrections to those findings, rather it’s to say these occurrences are behind us, and today, we have improved upon an already solid maintenance program.

The FAA proposed civil penalty dates back to challenges we faced related to our America West/US Airways maintenance integration in 2007. The integration presented some challenges in the areas of inspection and records during 2007, 2008 and early 2009. Our team has worked cooperatively with the FAA to investigate and correct any discrepancies to the FAA’s satisfaction.

More specifically, over the past nine months, we and the FAA have completed a formal review of our aircraft maintenance tracking systems as well as a comprehensive review of our maintenance program. This collaborative process included efforts to identify the issues, drill down to find the root cause and develop comprehensive fixes."

However, In the case of United Airlines, the FAA alleges that the airline flew one Boeing 737 aircraft on more than 200 flights after "violating its own maintenance procedures." That's the "official" language. In plain language, the airline apparently continued to fly a plane that had shop towels stuffed in the aircraft's engine.

On April 28. 2008, a United 737 returned to Denver after shutting down an engine due to low oil pressure indications. During teardown of the engine a week later, United mechanics found that two shop towels, instead of protective caps, had been used to cover openings in the oil sump area when maintenance was done in December 2007. As a result of United's failure to follow its maintenance procedures, between February 10 and April 28, 2008, the airline continued to fly the airplane on more than 200 revenue flights when it was not in an airworthy condition.

Wonderful. Shop towels?

As is the case with all proposed FAA fines, each airline will have 30 days in which to appeal the proposed fines. In the past, this would then be followed by a little horsetrading between the airlines and the FAA -- in an attempt to lower the fine amounts.

Will be interesting to see how much these fines are reduced. Especially the United one. While the US Airways' transgressions seems to be based on issues involving proper record keeping of the newly merged airline -- the shop towel incident with United strikes me as a much more serious "safety" issue.

Posted by Holly at 10:50 AM | Permalink | Comments (0)

Man oh man.

Some days you just couldn't do a better job of making up a blockbuster story if, well, you made it up.

Today is definitely one of those days.

According to a complaint filed in U.S. District Court for the Southern District of Texas, Kate Hanni -- the woman who has been at the forefront of the move to get a passengers' bill of rights passed on Capitol Hill, claims that Delta Air Lines hacked her email accounts, in addition to personal files on her computer.

What the hell you say? I know. When I read the headlines I was skeptical too. But that was before I read the formal complaint filed by Hanni's attorneys and the accompanying exhibits.

You too can do the same. You can access the complaint here, and the exhibits document here.

Here's the Cliff Notes version.

Hanni, who is the executive director of the Coalition for an Airline Passengers' Bill of Rights had her AOL email account hacked into. In addition, the attack was apparently done using some type of malicious little code that also copied files from her personal computer. According to Hanni's complaint, "Specifically, private e-mails and sensitive files were obtained by Delta Air Lines, Inc. (“Delta”) and subsequently used to sabotage Flyersrights’ efforts to pass the “Airline Passenger’s Bill of Rights of 2009” through Congress."

Here is the meaty stuff from the complaint:

"11. Beginning in February 2009, Hanni exchanged information with Frederick J. Foreman, PhD (“Foreman”), an MIT graduate working for Metron Aviation, Inc. (“Metron”). Foreman was hired by the FAA to analyze airline surface delays. During their correspondence, Foreman, with explicit permission from Metron, updated Hanni with public information and statistics from his research and analysis. Hanni, in return, provided Foreman with data and information she acquired about surface delays. In his final report, Foreman pinpoints Delta as an airline experiencing excessive surface delays.

12. During the time Hanni was sharing information with Foreman, Hanni’s personal computer files and Flyersrights e-mail accounts were hacked. America Online (“AOL”), Hanni’s e-mail service provider, confirmed the e-mail accounts were hacked. As a result of the hacking, spreadsheets, lists of donors, e-mails, Department of Transportation statistics and Hanni’s personal files were redirected to an unknown location. Additionally, all of the information on Hanni’s personal laptop was corrupted and rendered useless.

13. On September 25, 2009, Metron executives confronted Foreman with the stolen e- mails and claimed Delta, a client of Metron, was angry about Hanni getting information that would help pass the Airline Passenger Bill of Rights.3 Metron had the stolen e-mails and files from AOL and Hanni’s personal computer in its possession.

14. When Foreman asked Metron how Metron obtained the information, Metron claimed that Delta had provided them with the stolen e-mails.4 Confirming Metron’s claims, the screenshots of the stolen e-mails presented to Foreman were from Delta. Foreman was fired by Metron the same day."   

Holy crap.

All I can say is read the exhibits, particularly the statement from Mr. Foreman. Pretty damning stuff if you ask me.  

Can't wait for this one to unfold.

Hanni is asking for $1 million in actual damages and $10 million in punitive damages. More importantly, she wants to know how her personal files and emails were obtained by the Delta Air Lines and Metron.

I want to know too.

Posted by Holly at 12:55 PM | Permalink | Comments (0)

One can never have enough cash.

Especially not in these days and times.

Following this train of thought, today AMR, parent of American Airlines, announced that it has put together a deal that will bring $1.3 billion in additional liquidity to the airline. In addition, the company announced that it has negotiated a reduction in the airline's credit card holdback total of nearly $300 million. Combined, this means an additional $1.6 billion in new liquidity by the end of they year.

According to analyst Gary Chase with Barclays, this announcement, combined with the airline's revenue fundamentals means that, according to his estimates, the airline should end the year with about $4.3 billion in unrestricted cash or 22% of trailing revenue. Give or take.

As Gary also noted, he now expects the airline to have "ample cash to manage its upcoming debt maturities. Moreover, we suspect re-financing those maturities will now be facilitated by a stronger liquidity position."

Gary also noted that the airline is expected to release its mid-quarter update tomorrow, which effectively is a pre-announcement of third quarter earnings.

Gary expects the airline to post a $0.75 loss for the quarter -- which is right in line with consensus.

Posted by Holly at 12:01 PM | Permalink | Comments (0)

Hand in hand with the news about the new cash filling the coffers over at American today, the airline also announced that it is further cutting back on its routes into Raleigh and St. Louis.

Those assets are being redistributed to Dallas, Chicago, Miami, and New York (both JFK and LGA) and Los Angeles.

For 2010, mainline and consolidated capacity are now expected to be up only 1% (after 3.8% and 7.5% mainline capacity reductions in 2008 and 2009 respectively). However, excluding this year's impact of H1N1 and the 2010 launch of Chicago-Beijing, mainline capacity will be flat in 2010, versus 2009.

In a special JetWire sent to employees today, CEO Gerard Arpey said the following:

"The biggest growth will take place in Chicago, where we?ll add over 50 daily flights. Our Chicago customers will gain access to 12 new cities in the U.S., and three new international destinations. We are committed to making Chicago a major gateway to Asia, and are looking forward to the launch of our new service to Beijing in the spring. Other new AA destinations will include Honolulu, Anchorage, and Vancouver. Eagle will also offer new service to a number of cities, and customer service will be enhanced as Eagle deploys most of its 25 CRJ-700 aircraft - which will be reconfigured to offer a competitive First Class cabin - in the Chicago market. Eagle has also signed a  letter of intent with Bombardier to exercise options for the purchase of 22 additional CRJ-700s for delivery beginning in the middle of 2010. These new planes will complement the 126 aircraft (84 737s and 42 787s) American has ordered from Boeing. The new CRJs will be fully financed, with no impact on American's cash balance.

In Miami, American and Eagle together will add 23 daily flights. Including changes that will take place by the end of 2009, Miami will serve four new domestic and three new international destinations. At DFW, overall capacity will increase modestly as 17 new daily departures at AA offset some Eagle CRJ flying that is being shifted to Chicago. Service to San Salvador will be reinstated after a two-year hiatus.

In New York, our JFK service will grow by seven flights a day and include six new destinations, three domestic and three international (Madrid, Manchester, U.K., and San Jose, Costa Rica). Two daily flights will also be added at LaGuardia Airport. In Los Angeles, American and Eagle will add two daily flights.

The growth at our hubs and Los Angeles will be offset by reductions in St. Louis and Raleigh/Durham. I realize these will be difficult changes for some of our colleagues at those stations. But as flying shifts from one part of the network to another, so will job opportunities, and we will work with our people in areas impacted by a decrease in flying to make new jobs available in the parts of the network that will be growing."

Posted by Holly at 11:18 AM | Permalink | Comments (0)

We're baaack!

This week's issue of PlaneBusiness Banter is now posted. If you are a subscriber, you can access your issue here.

What are we talking about in this week's issue?

American Airlines and JAL: I think this is the deal that has the traction. I think Delta's just trying to make life difficult for American here. JAL needs cash, American wants the joint venture. Now the bigger question is -- where will American get the cash? With JAL looking for at least $500 million and maybe more -- this will be a costly little venture for the folks over on Amon Carter.

The FAA. Both Southwest and American had more altercations with the agency while we were on vacation. But the big question subscribers were asking me was: Did I think the FAA gave Southwest preferential treatment in allowing them more time to install authorized parts?

Airline stocks: It has been a blockbuster three-week period for airline stocks. (That's what we get for leaving.) Will it continue? Analysts last week were falling all over themselves with positive comments. Hmmmm.

ILFC: We have the latest. Now it looks like AIG doesn't want to sell the whole thing. That's okay with ILFC CEO Steve Hazy who apparently is now looking at a partial deal. He's going to start a rival company. Go Steve.

RBS: Another aircraft lessor is about to go up for sale. Another victim of government subsidies given to its parent company. This time? It was the U.K. government.

DOT Airline Consumer Travel Report for July: A great month. Lower capacity does wonders for operational integrity.

Was I too harsh on Southwest in my comments in the last issue concerning the failed attempt to grab Frontier? We talk about it.

And more.

Posted by Holly at 1:20 PM | Permalink | Comments (0)

For the last three weeks I've faced the dilemma that many of you are familiar with. Because I no longer live in the NFL television coverage area of my favorite NFL team, the only other alternative (until now) has been to shell out big bucks for the DirecTV Sunday Ticket package.

The package offers every NFL game played -- anywhere you live. As long as you are hooked up to DirecTV and pay the big bucks for the package itself.

Well, the first problem is that I don't have DirecTV.

One of the best things about moving to the DFW area this year was the fact that I got to hook up with Verizon FIOS at the new Worldwide Headquarters.

But -- this choice then complicated the watching options as football season neared.

Or so I thought.

What Verizon does have is NFL Network. I am not here to get into a long discussion about how this issue is all so very warped -- with the NFL itself going up against DirecTV, which has exclusive rights to the NFL's own "Sunday Ticket" package.

This is a very volatile and angry debate. Especially for those cable customers who have access to neither. Like our subscription manager who is forced to settle for Time-Warner over in Las Colinas. No NFL Network, no Sunday Ticket. But because of where his apartment is located -- no satellite either.

No, that debate is for another day.

What I am here to do is to give the NFL Network's new "Red Zone" channel a big thumbs up. For only $49.95, I now get full coverage of all NFL games played on Sundays. The coverage consists of the network bouncing back and forth between all the games being played -- showing you the highlights only. Goal-line stands, runbacks, attempts to score, long down-the-field passes. Whatever.

After one half of football today -- I simply love it. I have been able to watch my beloved New Orleans Saints run and pass all over the Detroit Lions. Drew Brees has never looked better. Oh, and yes, Reggie Bush has never looked worse. But that's not anything new. What a bust he's turned out to be.

I haven't missed one major play from the game. I haven't missed one major play from any other game either. But I don't really care about those. But still -- it's cool to see them.

So for those of you who are in the same boat as I am -- don't think that the expensive DirecTV "Sunday Ticket" package is the only deal in town.

If you get NFL Network, check out the "Red Zone."

It's pretty cool.

Okay, I'm going back to work on this week's issue of PlaneBusiness Banter.

And oh, yes, the second half of the Saints-Lions game. ;-)

Posted by Holly at 1:05 PM | Permalink | Comments (0)

Eight years ago today we all awoke to the horrific events of September 11 as they began to unfold -- events that began and ended with the destruction of four aircraft, the death of hundreds of innocent passengers, and many innocent airline crew members.

While the world takes a moment today to commemorate the events that happened that day in a much larger sense -- as we have since that awful day, focus on our departed airline family members. Those crew members who just went to work on what was a beautiful day in the Northeast that day -- but never came home.

We will never forget them.

This is our corner of the world. And as I see it, the courage and bravery of these crewmembers deserve our heartfelt acknowledgment. And remembrance.

American Airlines Flight 11, Boston to Los Angeles, crashed into the World Trade Center.

CREW: John Ogonowski, Dracut, Mass., Captain; Thomas McGuinness, Portsmouth, N.H., First Officer; Barbara Arestegui, flight attendant; Jeffrey Collman, flight attendant; Sara Low, flight attendant; Karen Martin, flight attendant; Kathleen Nicosia, flight attendant; Betty Ong, flight attendant; Jean Roger, flight attendant; Dianne Snyder, flight attendant; Madeline Sweeney, flight attendant.

United Airlines Flight 175, Boston to Los Angeles, crashed into the World Trade Center.

CREW: Victor J. Saracini, Lower Makefield Township, Pa., Captain; Michael Horrocks, First Officer; Amy Jarret, flight attendant; Al Marchand, flight attendant; Amy King, flight attendant; Kathryn Laborie, flight attendant; Michael Tarrou, flight attendant; Alicia Titus, flight attendant.

American Airlines Flight 77, Washington to Los Angeles, crashed into the Pentagon.

CREW: Charles Burlingame, Captain; David Charlebois, First Officer; Michele Heidenberger, flight attendant; Jennifer Lewis, flight attendant; Kenneth Lewis, flight attendant; and Renee May, flight attendant.

United Airlines Flight 93, Newark, N.J., to San Francisco, crashed in Shanksville, Pa.

CREW: Jason Dahl, Colorado, Captain; Leroy Homer, Marlton, N.J., First Officer; Sandy Bradshaw, flight attendant; CeeCee Lyles, flight attendant; Lorraine Bay, flight attendant; Wanda Green, flight attendant; Deborah Welsh, flight attendant.

May they all be at peace in a much better place.

Posted by Holly at 12:00 PM | Permalink | Comments (0)

As many of you are aware, a number of pilots representing the group of pilots at US Airways which was originally with America West, or the "West" pilots as they are nornally referred to -- entered into litigation last year against USAPA, the independent pilot union that was created as a result of the original ALPA merger seniority award. That organization was, and is, made up primarily of old US Airways' pilots, or the "East" pilots as they are known.

The reason for the litigation -- the seniority award.

As many of you also know, this spring, after months of intense legal wrangling, US District Court Judge Neil Wake had whittled down the case to one central issue: whether the union is fairly representing all the pilots at US Airways. The legal term is duty of fair representation, or DFR.

The verdict after all the screaming and teeth gnashing? The court found in favor of the former America West pilots. In other words, the court agreed that yes, the formula used for the award was fair, and that by dumping ALPA and setting up USAPA in an attempt to circumvent that award -- that the union did indeed not represent all of its members fairly.

But as we all know -- this decision, which cost both sides millions of dollars in legal fees, really brought very little closure to anything.

First, the braintrust at USAPA basically refuses to admit that this means it needs to back off and allow the original ALPA seniority award, which used a "blended" process, and not date-of-hire method, to be used as part of any collective bargaining agreement. So essentially there has still been no movement in terms of negotiating a new contract agreement for the pilots.

And second, there is the question of damages.

And no damages are more attention-getting than the legal fees that both sides have incurred since the start of this huge mess.

This week I continue to get caught up on all my email that came in over the last couple of weeks, and today I was reading the latest missive from Leonidas, the group that sued USAPA.

In their latest missive, the group tells its members that its legal team has submitted a request that their legal fees be paid by the union, or USAPA.

"In essence though, we are making a request for the reimbursement of all legal fees and non-taxable expenses spent while protecting the careers of our pilots and protecting the validity of “binding arbitration.” To do this, we are not asking for anything too novel in that we have requested that all members of the bargaining unit share in the expense. There is no division of East or West with regard to who would be forced to pay for this legal action. On the surface, this may seem unjust, but what must be considered is the superb return on investment for all US Airways pilots should this request be granted. If the plaintiffs prevail here, then the $1.8 million in total expenses would be repaid to our legal counsel, and the balance of contributions received thus far would remain in the Leonidas trust, standing by to protect the minority for many years to come, just as stated in our Leonidas LLC objectives which were published long ago; “'We will remain perpetually poised to aggressively defend our rights until such time when we are no longer threatened.”'

So just how much are we talking about?

As they said in their comments above, the legal fees for the America West pilot group now stand at about $1.8 million.

And the litigation is not over yet.

As the folks at Leonidas point out,

"Back to that return on investment for the victims (for simplicity sake, we will use a little “chainsaw” math in this analysis):

$1,821,000 Approximate West legal expenses

5200 Approximate number of pilots subject to USAPA
$350 Approximate pro-rata share of expenses

$1,260,700 Approximate East pilot share of expenses

3600 Approximate number of East pilots

1600 Approximate number of West pilots

$560,300 Approximate West pilot share of expenses

The net result is that the class of West pilots would receive $1,260,700 from the East pilots in return for their own contributions of only $560,300- an instant return on investment of 125% for the West pilots. We will acknowledge that this does not seem fair to those West pilots who have voluntarily funded our legal effort on the front end, but it would have the benefit of compelling those unwilling West beneficiaries of our legal campaign to finally contribute something nonetheless. Of course, true justice would be served by seeking these funds directly from the primary author of the entire USAPA saga; Lee Seham himself. That will be up to either the current USAPA leadership [unlikely], or perhaps a future and competent leadership team that will take over once Cleary and his team are removed and forever banished from union affairs."

So while now the two sides continue to fight out the damages part of the ruling in court -- let's look again at how much money we're talking about -- just to pay off the legal fees for the America West-led group of plaintiffs. Almost $2 million bucks.

And I would add -- how much is USAPA itself now on the hook for -- in terms of its own legal fees it has racked up in defending this ridiculous stance of theirs?

But here's the ironic part. All those expenses are having to be paid out of the general union dues pot -- that same dues pot that is supposed to fund USAPA, which is supposed to represent all pilots at the airline. Yes, including the ex-America West guys.

I've said it before, and I have to say it again. The utter stupidity of this situation -- on more than one front -- continues to just flat out amaze me.

I'm not sure we've ever seen anything, in terms of scope, that rivals this situation in terms of sheer union leadership idiocy.

And for this industry -- that's saying something.

Here's hoping that the pilots at US Airways elect new union leadership at USAPA that understands, at least, the concept of rational thinking. Or maybe ..... reasoned thinking. Or maybe just .....thinking. Period.

Posted by Holly at 1:45 PM | Permalink | Comments (0)

I hate it when this happens.

Apparently the classic Hitler clip with the Southwest Airlines storyline has now disappeared from YouTube. I've been told by several folks that there was apparently a full-fledged effort by certain entities to find out who did it and get it removed from the public air space.

Whatever the reason -- I'd bet on the new TA between the pilots and management-- the video is gone.

Hey, I want a copy. It needs to go in the archives.

As one reader wrote this morning, "Alas, the stunningly funny video is no longer available on YouTube... Any chance you downloaded a copy and can email to me? Something this much of a classic must be saved for posterity.... Thanks..."

Okay -- a one-year complimentary subscription to PlaneBusiness Banter is on the line. I know somebody out there has one. So -- give it up!

hhegeman at planebusiness.com is the email address.

Posted by Holly at 9:20 AM | Permalink | Comments (0)

Hey, I could be talking about the push to get a passenger rights bill passed.

No, I really didn't plan for today to be the Southwest AIrlines news day.

But this afternoon SWAPA, the pilot's union at Southwest, announced a new tentative agreement with the company. This will be the second attempt by both sides at getting a new contract ratified.

Highlights of the contract behind door number two are:

The current number of Lance Captains, as of the ratification date, will be grandfathered for the term of the agreement. (This was a big reason the attempt to ratify the last last TA failed.)

ELITT restrictions will drop from previous TA and is now contractual.

The new Open Time system as explained in the previous TA will now have a test period (circuit breaker) in which SWAPA can opt out.

In terms of compensation, the new agreement includes raises and full retro pay.

There is an increase in 401(k) matching by the company.

And on the subject of codesharing, the TA lowers the previously negotiated near-international ASM cap, and it removes Frontier-specific RJ exemption language.

Posted by Holly at 5:46 PM | Permalink | Comments (0)

Oops.

Maybe this was not a good time for Southwest Airlines to throw a big $49 sale.

I am traveling to Austin the week after next where I will be giving the luncheon keynote address at this year's  The BeatLIVE Conference.  More on the conference this week.

Anyway, I have to get there. So I just went to make a reservation on Southwest's brand new website.

I tried three times.

Very odd payment processing problems. After two attempts to pay by credit card failed, I tried to pay by PayPal.

When I did that, things really got strange, as the card information that was brought up was OLD PayPal account and card information. I mean, I've changed this information in the last two months. I've used PayPal in the last week and it had all the new information keyed in with the right account and address information.

So where did the old information come from?

Was this actually stored on some server at Southwest? Dunno. But it was kind of unsettling.

Against my better judgment, I then re-entered and changed all the information, although the whole process didn't seem right to me.

Didn't matter. When I tried to purchase the ticket, I got the same error message.

Guess I'll just have to call the number they gave me to call and do it the old fashioned way.

Anyone else having problems with the new site?

Posted by Holly at 4:54 PM | Permalink | Comments (0)

Hello all.

Well, it's the Tuesday after Labor Day.

No more excuses for not working.

Unfortunately our return to work each time this year now coincides with the anniversary of one of my least favorite historical events. I'm sure you agree.

Yes, this Friday will be the 8th anniversary of the events of September 11, 2001.

As always, we will honor those employees of this industry who lost their life that day in both PlaneBuzz and PlaneBusiness Banter this week.

Yep. Can't help it. For me at least, this week is, and will always be, one of reflection and remembrance.

Posted by Holly at 12:55 PM | Permalink | Comments (0)

Thanks to all of you who have been attempting to get me to comment this week on any number of goings-on in the airline industry.

But, I am happy to say -- I resisted.

Until today.

No, I said, I am on vacation, and damn it, I am going to stay offline. Until Tuesday.

Until today.

And what got me to finally break my silence? Something wickedly funny. Of course.

Most of you probably saw the recent YouTube effort in which some enterprising Boeing employee ( I would bet) did a take off on Boeing's continued delays with the 787. The video used? A now-familiar clip from a recent Hitler made-for-television movie that seems tailor-made for such antics. In fact, there are scores of these parodies now on YouTube, including one dealing with Brett Favre's sign-up with the Vikings. I know. Just one of those things that seems to be tailor-made for mischief.

This week das Fuhrer has made yet another appearance.

But this time it appears that a Southwest Airlines' pilot is the one responsible for the sub-titles. And Southwest's CEO Gary Kelly is the one barking out German invectives to his underlings.

I've had more than a handful of you inquire as to whether moi had anything to do with this. I think the reason is because there are some very "inside" management barbs in this new satire. So I guess the assumption is that this was something right up my alley.

But I am here to say -- I am completely innocent.

That is not to say that I didn't chuckle out loud more than once when I watched it, though. (Yeah, you know Business Select takes a hit in here, along with....."It's ON!") But I think I may have laughed the loudest at the "deck party" comment.

Not sure some folks over on Denton Drive are going to be too amused, however. This one hits just a little too close to home. On more than one front.

Serious stuff? Oh of course there has been a lot of serious stuff going on in the industry this past week -- including headline-grabbing FAA interventions with both American Airlines and Southwest Airlines. I mean, if this continues, the FAA should just move their headquarters to Dallas, don't you think?

And yes, Southwest, when not feverishly repairing aircraft this week, also announced a new "fee" for passengers. I'll be talking about this news this next week, along with a whole lot more. When my vacation finally ends on Tuesday.

Sigh.

Enjoy your Labor Day weekend everyone. Tennis in the greatest city in the world, college football at a stadium near you, and cooler temps almost everywhere.

Life simply doesn't get any better than this. Get out there and enjoy it.

Posted by Holly at 1:48 PM | Permalink | Comments (0)

Hello all.

Holly here.

I figured I'd take a minute away from my vacation mindset to drop in and say hello.

Yes, yours truly is "officially" on my usual August publishing hiatus, although with all the work I had put off doing until I had a break from publishing, I'm not sure what a real vacation looks like anymore.

One of the more distressing issues I faced in the last week or so was the fact that I am driving an official "clunker."

Yes, that's right. My "vintage" automobile as I prefer to call the Black Beauty, was on the government's official list of clunkers. Not only that, but the $4500 I would have been entitled to -- had I opted to go deeper into debt for an automobile that I am convinced would not be built nearly as well as mine is -- is probably $1500 more than what I would get today if I tried to sell her on my own.

Let those numbers sink in and then think about what I am driving.

A 1991 Lexus LS400. In its day, a revolutionary car. Today? The damn thing still holds up very well to whatever competition you want to throw at it.

Yes, my car has all the usual 1991 LS400 quirks -- a power steering pump that is going bad, brakes that have that unmistakable "soft" early Lexus feel to them, an a/c compressor that costs as much as a down payment on a small house to replace when it decides to stop working, and speakers that have finally, for the exception of two sets on the driver's side, seen their seals rot out from old age.

But it also rides great, gets good gas mileage for its class, only has 130K miles on it -- yes, after 18 years -- and still looks great, both on the inside and the outside. Just two days ago, someone came up to me and starting raving about how great that particular year was. And how he wishes he still had his. (He now owns one of the much more young and nubile models. Oh, and much more expensive.) Yet, for all of these "improvements," he told me he wished he had never traded in his 1991. "Too much crap on these new ones that can go wrong," was one comment he muttered as he walked around the back end of the car, gazing at it as one would a prized painting. Or horse.

Unfortunately, the Black Beauty goes in tomorrow for a thorough "20 point" evaluation by a garage that has been recommended to me here in Dallas. They specialize in taking care of prized possessions such as mine. I say unfortunately because I suspect I am looking at some expensive maintenance repairs here shortly. I know the front brakes need repair. It's time for an oil change. But then there is the power steering pump that I have continued to nurse through its dying days. Not to mention more than one "import" car center that knew nothing about the care of feeding of elder Lexii.

But back to my anticipated outlays. There is also a front suspension that needs some care and feeding. You know. Control arms. Ball joints. Bushings. Struts. The kind of things that when they need to be replaced, dollar signs begin to ring up like a pinball machine gone wild.

Then there are those speakers.

Do I pay to replace them? Or do I not?

Do I pay to repair the car? Or not?

Worse yet -- do I call one of the ads I saw in Craigslist for "parted-out" LS 400s? Could I bear to go see one in pieces? Much less pick my way through the carcass to pull out the parts I need?

Is it time, finally, to bite the bullet and start looking for a new "used" car? (I long ago stopped buying new vehicles. It's just too much money lost from the get-go in my opinion.)

The problem is -- I don't know of any new "used" cars that I would like better than this one.

While I contemplate my clunker dilemma, I suddenly realize that I am thinking about airlines again. Specifically, I am thinking about MD-80s. (I know, I'm supposed to be on vacation.)

But I would be crazy not to see the similarities to my situation and the Allegiant business model. You know -- the airline that defies conventional wisdom and flies aging, maintenance-heavy MD-80s. The same MD-80s that cost next-to-nothing, resulting in ownership costs that are also next-to-nothing.

When I look at my "clunker" in that respect, while I may be looking at some hefty maintenance expenses on the horizon, and while I may pay more for gas then someone who gets 30 miles to the gallon, I have no car payments. And I haven't had any in 10 years. (Yes, I am the Black Beauty's second owner.)

For my purposes, the Black Beauty gets me from point A to point B quite well. Quietly. And in style.

Taking this "Allegiant" approach, the answer is obvious. I think I'll keep her. Then again, I haven't seen the results of the "20 point check list" I'm going to get tomorrow.

Nah, I still think I'll keep her.

Heck, maybe I'll even call one of these guys back who are parting out some of her siblings. Yank out a few tweeters and woofers. Oh, and an instrument cluster as well. (Another legendary weak point.) And maybe a power lock switch for the driver's door. (I broke the top off mine a few months ago.) Maybe I need to look at the process as the equivalent of performing an "organ transplant." Or stem cell renewal. As opposed to picking the carcass of similar vehicles in an effort to keep my official "clunker" on the road.

Yep, I'm game. Better yet, I'll still be much better off, financially, than had I sent her off to the equivalent of the automobile slaughter house. Even if I do have to spend a few bucks on getting her back into shape.

Thank you Allegiant. You've helped me make my decision.

Fie on the "Cash for Clunkers" program.

Posted by Holly at 12:22 PM | Permalink | Comments (0)

Thanks to one of our readers who suggested we all download a copy of this and listen to it as we await more news from the bankruptcy auction.

http://world.std.com/~eshu/dbug/Jeopardy_Think_Music.mp3

Posted by Holly at 4:19 PM | Permalink | Comments (0)

Here's the latest missive from the Southwest Airlines' pilot group, SWAPA, to its members. FAPA is the Frontier Airlines Pilot Association, the union that represents the Frontier Airlines' pilots.

"It has been a whirlwind week for your M&A Committee. We have been in meetings with our M&A counsel in Washington Monday and Tuesday and quickly returned to Dallas on Wednesday for a pressing meeting with FAPA. We would like to bring you up to date on the Frontier transaction.

Weeks ago, the Company approached SWAPA for ideas on how to complete the Frontier transaction with our pilots' support. We expressed our concerns about new federal legislation on the books (McCaskill/Bond) and its potential effect on pilot seniority at Southwest. The Company, at SWAPA's request, included a "labor contingency clause" requiring labor agreements in place prior to the closing of the Frontier acquisition. This action took the possibility of binding arbitration out of play and protected our pilots from a harmful arbitrated seniority integration.

As the Company was developing their formal binding proposal to acquire Frontier out of bankruptcy, Southwest bankruptcy counsel expressed concern that the Southwest bid could be excluded from the auction process because Frontier legal counsel deemed the proposal "not qualified" for the auction process due to the labor contingency clause. However, the labor contingency clause would be deemed acceptable and the bid deemed qualified if SWAPA and FAPA reached an Agreement in Principle for seniority integration. That triggered negotiations Thursday between SWAPA and FAPA.

SWAPA's concerns throughout this process have been to protect our seniority list and our Collective Bargaining Agreement (CBA). The only way to adequately protect our entire pilot group was to place the FAPA pilots below the SWAPA pilots on our new Master Seniority List.

FAPA's concerns are:

• Job Protection
• Seat Protection
• Pay Protection
• Domicile Protection

FAPA's position was for relative seniority with a "variable" for the ratio for integration. Clearly, meeting all of FAPA's concerns would be an enormous windfall for Frontier pilots at the expense of Southwest pilots."

Oh boy. Here we go. All of these concepts sound very familiar don't they? Relative seniority. "Stapling" the Frontier pilots to the bottom of the list.

And this is supposed to be finalized with both groups signing off on it today??

Right.

Well, there you have it. Either there is an agreement in principle with both pilot groups as to the question of seniority, or it appears that the bid by Southwest will not be considered to be a "qualified" bid.

Do you suppose that Southwest knew this all along, and this is merely an anticipated 'squeeze play' made by the company, assuming that the "urgency" of the situation would prod both groups to an agreement before the clock strikes twelve? Or was this a surprise at the last minute to all parties concerned?

Stay tuned.

Posted by Holly at 12:44 PM | Permalink | Comments (0)

Today is the big day. Or it's supposed to be the big day.

After all the preliminary table setting over the last several days, today was or is supposed to be the day that Frontier Airlines is actually auctioned off.

But, as I wrote about this week in PBB -- I think the assumption that this thing was a done deal for Southwest was a bit premature. In addition, yes, I think that if Republic were to be awarded Frontier -- that Frontier could continue to operate and it could be profitable. This is not a case where the bankrupt company is on death's door. Quite the contrary, Frontier has been posting good operational numbers of late, and they have actually used the bankruptcy process to do what a company is supposed to do while in bankruptcy -- they've restructured themselves quite nicely.

Therefore, I am not surprised at all that reports last night and this morning say that all is not well on the labor front. Specifically in the negotiations between the Frontier pilots and the Southwest Airlines' pilots.

Remember that Southwest said going into this that their pilots would have to sign off on a deal with the Frontier pilots or the airline would not go through with the deal.

Not sure if Southwest realized that this, coupled with the fact that the Frontier pilots are taking the position that Frontier does not HAVE to go with Southwest for it to remain a viable business -- and you've got a pretty strong negotiating position for the pilots at Frontier.

We'll keep you posted.

Posted by Holly at 11:22 AM | Permalink | Comments (0)

For those who are addicted to tweets, PlaneBusiness is now on Twitter.

The account name is: PlaneBusiness. Creative, huh?

Just an updated note for subscribers. I did not realize that Twitter account names are case sensitive. I think that is nuts, but it is what it is.

This week I alerted PlaneBusiness Banter subscribers that we had a new Twitter account and that the account name was PlaneBusiness.

No, apparently I was mistaken.

It was actually "planebusiness."

Okay, so now the account has been "tweaked" and it is now, officially, "PlaneBusiness." (Two capital letters in a sea of lower case.)

Whew.

It may take a while for that change to propagate through the system, but if you would like to follow us, just look for either version today. The corrected account name should be the only one active tomorrow.

Just a cautionary note. If you need to contact me about a potential story, or news item, or you have a question or whatever -- please continue to send me an email to: hhegeman at planebusiness.com.

I don't intend to use the Twitter feed as a two-way communication device.

Posted by Holly at 11:26 AM | Permalink | Comments (0)

First, AirTran and Continental announce a slot swap involving slots at Newark, Reagan National and LaGuardia on Tuesday. But the scope of that deal was swamped this morning with news that US Airways and Delta Air Lines have agreed to terms on a much larger deal that involves both a swap of slots, and a few routes thrown in for good measure.

This morning US Airways announced that it will obtain 42 pairs of slots at Reagan National, as well as access to slots in Tokyo (NRT) and Sao Paulo, Brazil (GRU) from Delta Air Lines.

In return, US Airways is giving Delta Air Lines 125 pairs of slots at LaGuardia.

This is a big deal for US Airways. The airline estimates that the deal will create an additional $75 million dollars in revenue per year.

It's a positive for Delta Air Lines as well, as Delta continues to muscle into the New York market in a major way. This is a huge gain for them.

And no, this does not affect the US Airways' Shuttle operation in any way.

Meanwhile, yesterday it was reported that AirTran plans to stop flying to and from Newark completely -- giving its takeoff and landing slots to Continental Airlines. In exchange, Continental is going give AirTran slots at both Washington Reagan and LaGuardia.

Apparently AirTran will give Continental 10 slots, a single gate and a jetway at Newark. In exchange, Continental will give AirTran four slots at LaGuardia and six slots at Washington Reagan.

So, those are the facts.

What does all this horse trading mean?

It means that the bigger airlines are doing exactly what we said they were going to do. They're getting creative.

While most headlines over the last few months have continued to talk about the lack of liquidity, "Which airline is most at risk?" -- we have continued to make the argument in PlaneBusiness Banter that in this industry -- good management teams are going to find a way to survive.

Look at the airlines involved in these two deals announced. Four of the better management teams out there.

We don't see United, we don't see a mention of American.

Meanwhile, Republic and Southwest are slugging it out over Frontier. Again, two of the better management teams in the industry.

Oh, and speaking of American - is it just me, or does that Holy Grail of a British Airways - American Airlines anti-trust agreement seem to continue to diminish in importance as the days go by?

I continue to believe that American, by putting all of its eggs in one basket it doesn't even have in its possession yet, runs a big risk of being odd man out when the music stops.

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

Things are just a teensy bit wild around the Worldwide Headquarters tonight. Yes, it all has to do with the auction. If you don't know WHAT auction, then you shouldn't be allowed to call yourself a legitimate airline expert. Much less even a casual observer of all things with wings.

Having said that, subscribers can now access this week's issue of PlaneBusiness Banter here.

We've got some snooping to do. Talk to you later.

Posted by Holly at 5:42 PM | Permalink | Comments (0)

Southwest Airlines is holding a press conference in about 10 minutes to discuss its "sweetened" offer for Frontier Airlines. The airline submitted a binding offer of $170 million.

The airline issued a release in which it said,

"The offer contemplates that Southwest acquire approximately 80 percent of Frontier's existing Airbus fleet, which translates into about 40 aircraft, plus all of Lynx. Initially, Frontier would operate its Airbus aircraft as it does today, with a planned retirement of the Airbus fleet and transition to Southwest's Boeing 737s over a period of approximately 24 months. Despite the initial reduction in the fleet, Southwest intends to maintain all existing markets, as well as add new nonstop routes from Denver that are not served by either Southwest or Frontier today."

Interesting. "Intends to maintain all existing markets." That means no route rationalization? My guess is it means rationalization through reduction in frequency. But not routes themselves.

Also the question of Lynx and what Southwest would do with it has been determined.

More later. Now I'm trying to do at least three things at once. Oh, and eat lunch. That's four.

Posted by Holly at 12:58 PM | Permalink | Comments (0)

The last printer-choking edition of PlaneBusiness Banter for the quarter will be posted later today.

Hopefully this next week's issue will be of more normal length -- and scope -- thus allowing a more timely posting. Hey, there is only one of me. Until I figure out a way to clone myself.

More later.

Posted by Holly at 10:35 AM | Permalink | Comments (0)

This week the big news in Airlineland (at least at this point early in the game) is the pending bankruptcy auction of Frontier Airlines.

Today is the deadline for interested parties to place their bids.

Could we see another "interested party" besides the two we already know about -- Republic and Southwest -- show up at the last minute?

I doubt it.

One reason is that Aug. 3 was the deadline for informal bids by potential buyers. No more likely prospects entered the fray as of that date. Last week officials of Frontier also said publicly that they had not been approached by any other potential buyers.

If no more live potential buyers show up between now and the end of the day -- then what?

Then the auction will begin on Tuesday.

At that point, officials from Frontier, and the airline's unsecured creditors, (which include Republic let's not forget) will begin to consider their options.

As most of you know -- the Republic deal would see Frontier remain intact -- as a separate entity. The Southwest deal (whatever the final numbers prove to be) is predicated on Southwest swallowing Frontier whole. It would take a while, but eventually Frontier would cease to exist as a separate airline.

While we might see some off-the-wall attempt at an offer by some entity today -- I doubt we see any kind of new serious offer materialize.

Stay tuned. The real fun begins tomorrow.

One last note: For fans of Frontier's animal tails, and I am one of the biggest fans of them anywhere, check out this website, LockOn Aviation Photography. They have photographs of all the tails. The photo above is theirs. Thank you guys!

Posted by Holly at 10:29 AM | Permalink | Comments (0)

This week's mega-earnings issue of PlaneBusiness Banter is now posted. I think this one has set a new record at around 100 pages. Hey, I like to give you lots to think about.

This week I look at five airlines that recently reported second quarter earnings in-depth: AirTran; Alaska Air Group; Delta Air Lines; United Airlines; and JetBlue.

We also have earnings summaries now posted for ExpressJet, Republic Holdings, and Hawaiian Airlines on the site for PBB subscribers.

So what did we like or didn't like about the earnings from this crop of airlines?

It was nice to have three honest-to-god profits to talk about this week. AirTran had an excellent quarter, Alaska was no slouch either, and JetBlue also had a nice quarter -- although their profits were not as hefty as those posted by either AirTran or Alaska.

Then there is Delta. The airline continues to slog through some very costly underwater fuel hedges. And of course the airline is being hit hard on the international front as demand has simply gone into hiding for not only Delta but all the U.S. carriers who fly internationally.

And then there is United Airlines. CFO Kathryn Mikells was hammered in the airline's call about the "L" word -- yes, that would be liquidity.

But she retained her poise and kept telling those analysts that they were asking "terrific" questions.

Meanwhile, down in Atlanta, Delta's Richard Anderson was called out by yours truly for his excessive use of corporate speak. And if I hear the word "synergy" one more time, I'm going to go stark raving mad.

But of course, the big news of last week was the news that Southwest Airlines had made a bid on Frontier Airlines -- as part of that airline's bankruptcy auction process.

Southwest is now burning the midnight oil, doing their due diligence, as final bids need to be in the hands of the court by Aug. 10. (Yes, look at your calendar. That's next Monday.)

All this and much, much more, including details on the $1 billion cobbled-together financing deal that Air Canada announced this week -- The Patron Saint of Failing Airlines Lives! (We are referring of course to GECAS)

All that and more in this week's issue of PlaneBusiness Banter. Subscribers can access your issue here.

Posted by Holly at 10:13 PM | Permalink | Comments (0)

If it's Monday and this week's issue of PlaneBusiness Banter is not posted yet -- you know the reason. Yep, it's another monster earnings issue. This week we take a long look at the earnings results and dissect the earnings calls from United Airlines, JetBlue, Alaska Air Group, AirTran and Delta Air Lines.

Talk about a group with a split personality. Three of these airlines posted profits. Two didn't.

Last week's issue apparently clocked in a little under what I had estimated -- at 74 pages someone wrote me. This week's is probably closer to 85. Happy reading. We will be posted later today.

Meanwhile, there is no question that the big story here in the U.S. domestic airline market today continues to be the bankruptcy bid by Southwest Airlines for Frontier Airlines.

There are way too many angles to cover here in terms of this attempt by Southwest to grab Frontier, and I'll be talking about some of those in this week's PBB.

However, there is one big falsehood that I want to dispel that a number of you have written to me about, and which, for whatever reason, seems to have been picked up by an analyst at Gimme Credit.

The questions concern a quote that was used in a Ft. Worth Star-Telegram story concerning the move.

In this story that ran Thursday, reporter Andrea Ahles quotes "Wall Street" Gimme Credit analyst Craig Hutson as saying, "Southwest entered Denver again in January 2006, and it has been among its most successful markets."

I do not believe this is the case. Far from it. Frontier Airlines has given Southwest fits. I think it's clear that Southwest thought they were going to go into Denver and kill Frontier. Didn't happen.

I'm not sure who this guy is, or what his background is, but according to the Wall Street analyst who I think knows Southwest Airlines' the best from stem to stern -- this is not the case. That analyst is Gary Chase with Barclays Capital, formerly Lehman Brothers.

There is no question that if you listen to the airline talk about Denver on its earnings calls, you would get the impression that everything is just rosy-posey in the Mile High city.

But as Gary Chase reaffirmed in his research note on the proposed deal Friday,

Our analysis suggests that Southwest is losing a significant amount of money in Denver while Frontier has been profitable year to date. Frontier has made substantial cost progress during its bankruptcy proceedings and currently enjoys a significant revenue advantage to Southwest in Denver markets. That combination defines the contrast between what we believe is money making at Frontier and a loss position for Southwest.

And no, this is not the first time Gary has written similar comments. He has tracked their presence in Denver for many years. And other markets as well.

Posted by Holly at 3:52 PM | Permalink | Comments (0)

The press conference with Southwest Airlines just ended.

Handling the call for the airline was Ron Ricks, Executive VP of Corporate Services and Corporate Secretary and Bob Jordan, Executive VP, Strategy and Planning.

The airline says their idea at this point at time is to initially operate Frontier Airlines as a separate entity until a certain point in time. But the eventual goal, they say, is to merge Frontier into Southwest in a "reasonable" amount of time.

The binding bid is due into the bankruptcy court no later than Aug. 10.

Quote of the conference: "When United flies certain banks out of there [Denver] it's like a solar eclipse there are so many flights."

That was Ron Ricks talking about why he did not think there was going to be a problem with any "competition" issues involving the deal, were it to go through.

The next ten days the airline will be working on their due diligence, in regard to a final bid. This preliminary bid allows them access to Frontier Airline's information.

Comments about the possible length of a transition period? As long as two years, but nothing is set at this point.

Mary Schlangenstein from Bloomberg asked on the call if the airline was ready for a "fight" with Republic over Frontier. Ron Ricks was pretty straight up that "Southwest's bid is going to be superior in every respect."

He left no question that the airline intends to fight as hard as it can, that it feels it can provide a better offer than Republic, and that it intends to win.

Overlap of markets between the two airlines now -- about 27.

For those with enquiring minds, there are about 12 markets or so that Frontier flies into that Southwest does not, including a number of markets in Mexico.

Dan Reed with USA Today asked if the airline was going to sell the Frontier Lynx operation. Ron said the airline is going to use the due diligence period to determine more about Lynx and other aspects of the Frontier operation. No decision has been made as of yet. This is something that will be determined in the next ten days.

Eric Torbensen from the Dallas Morning News asked if one of the reasons behind the deal was not to more or less remove a competitor that could come out of bankruptcy leaner and more competitive.

Ron said no. This was about growth, a "jumpstart" as he put it.

"This was an opportunity to get back in a growth mode," Ron said. "This was an opportunity that presented itself. We are just trying to react to the timelines set up by the bankruptcy court."

"If you look at Denver prior to our entry, I think there is a lot of evidence that we are the ones that brought low fares to Denver," said Bob Jordan.

The question was asked, "How much capacity can you add with this deal?" Bob responded that it would be roughly about 10% -- over time.

A question was asked as to whether their bid is being encouraged by those at Frontier and creditors of the airline. Bob Jordan said that the bankruptcy attorneys "verified through the process that our offer would be welcome."

Ron made the point that there are "dozens and dozens of non-stop monopoly markets out of Denver today that we feel would benefit from competition."

David Jonas from Promedia brought up the point that CEO Gary Kelly said in the earnings call just last week when asked about Denver, and whether the airline would be interested in assets there, that he said, "The right fit had not been found yet" or words to that effect.

So, as David said, had something happened between then and now?

[David, we know that nothing happened between then and now...]

As expected, Bob said he didn't remember the remark, and Ron didn't want to go any further with it. But the comment was made that well, Gary probably did not want to say anything because of confidentiality issues.

I think it would be safe to say that Gary just didn't want to talk about it.

The question was asked if the airline had bank financing for the deal. The answer was yes.

"A pocket of opportunity in a sea of pain," is how Ron Ricks typified the deal, when asked if the move to get bigger, given the current economic situation, and given Gary Kelly's comments just last week in the airline's earnings call, was not contradictory.

Lisa Stark from ABC asked if there was anything that might keep them from making a final binding bid. Ron said that because they already know a lot about Frontier -- they doubted it. But in the next ten days, the work is going to be intense as the airline reviews contracts, etc., as part of the due diligence process.

Bob said, "We're in this to win."

Posted by Holly at 2:00 PM | Permalink | Comments (0)

One of our PlaneBusiness Banter subscribers just passed along this information to us. It was communicated to employees via a Southwest Airlines' Today@SWA email.

The airline has a press conference scheduled for 2 p.m. CT to talk about the airline's bid.

Southwest Submits Nonbinding Proposal to Acquire Frontier Airlines

On Thursday, July 30, Southwest Airlines submitted a nonbinding proposal to acquire Frontier Airlines in accordance with the bidding procedures in the bankruptcy court.  We view this as an exciting opportunity for the Employees and Customers of both Southwest and Frontier. It represents an opportunity for Southwest to grow our Denver Customers; grow our revenues; and grow our profits. We must caution, however, that this is merely a preliminary step in the bidding process.

We must submit a binding proposal by August 10.  If there is more than one qualified investor, and at this time Republic Airways has also submitted a bid, an auction will be held beginning August 11.  Frontier will determine, in consultation with the unsecured creditors committee, which bid to accept and present to the bankruptcy court for approval.   

Although our plans may vary as we work our way through this process, we wanted to share with you our present plan as we envision it.  Frontier would continue to operate independently and separately for a period of time with its Airbus aircraft and personnel.  We do not intend to integrate the Airbus into our Boeing 737 fleet. As we are able to retire Airbus aircraft, we will add Boeing 737 aircraft. Over time, Frontier employees would be hired into Southwest as needed to support our fleet growth and expanded operations.  There are many details to be worked through, but we are confident that the effort will be worthwhile. We are also confident that our bid, if successful, will boost low-fare competition and benefit consumers in Denver and other cities our expanded network will serve.

Even if our bid is accepted and approved by the bankruptcy court, our closing on this transaction will be subject to several contingencies. These will include the negotiation of acceptable labor agreements dealing with the interim period of separate operation and seniority; and the appropriate regulatory review.  Absent the negotiation of these labor agreements, we will not go forward with this transaction.  However, we are confident that the benefits of such a transaction for Employees of both Southwest and Frontier will become self-evident and that we will be able to obtain such agreements.

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

Just never know what the day's news is going to bring. Especially in this environment.

Today, news of a fight for Frontier Airlines.

Southwest Airlines announced today that it has filed a bid of $113.6 million for Frontier Airlines. Republic Holdings, as most of you are aware, has already submitted a bid of $108.8 million. That proposal has already been approved by the U.S. Bankruptcy Court for the Southern District of New York.

However -- just because the bankruptcy court approved that offer -- Frontier still had the right to seek a higher bid. And apparently that is what it did. Actually I don't think Frontier solicited anything. I'm pretty sure Southwest is the one who made the call.

Under terms of the Frontier bankruptcy auction, bidders can submit offers until Aug. 3 and a final proposal has to be submited by Aug. 10.

The auction is scheduled for Aug. 11.

Is it just me, or are memories of the fight over ATA creeping into your consciousness as well?

Well, we certainly now have something more to talk about than earnings.

Posted by Holly at 11:49 AM | Permalink | Comments (0)

Holly here. Reporting from the airline earnings bunker where I have been toiling since last week.

This week's PlaneBusiness Banter will be posted later today. It's one of those monster issues. Next week's issue will be just as packed, as we finish up from the group that reported last week. Just way too many earnings reports compressed in too short a period of time last week. Whew.

Having said that, it was an interesting group of calls last week. Just a couple of tidbits from what we heard.

One, US Airways, which has flirted with the idea of grounding its Embraer 190 fleet in the past -- in an effort to cut capacity further at the airline -- sounds like it is now looking at the possibility in a much more serious way. Because of the airline's contract with its pilots -- the airline is constrained in terms of how much flying it can remove. But it could remove the 25 Embraer 190 fleet in one fell swoop -- thus cutting their capacity by 2.5%. It's really the only option the airline has left if it wants to cut capacity further and in listening to the airline's call last week, it sounds like the airline is very close to pulling the trigger on the move.

Two, I'm getting pretty tired of hearing the folks at Southwest Airlines keep talking about all these revenue initiatives they are going to do in the ...future. Third quarter, fourth quarter. First quarter 2010. Who knows.

I am assuming the reason the airline keeps talking about all these things we are going to see -- someday -- is because the airline does not have the technological backbone in place to do them ..NOW.

Meanwhile the airline still does not charge for passenger bags. And revenues generated from their Business Select program continue to be under original forecast.

I think there is way too much money being left on the table here.

Three, the whole question of liquidity and who has it and who doesn't permeated the calls last week.

Jamie Baker and Mark Streeter, analysts at JP Morgan Chase found themselves right in the middle of the fray after they published a note on where they saw United, American Airlines, and US Airways in the "Dance of the Cash Constrained."

Hoping to clear up any confusion they had caused with their note, they issued another note later in the week in which they wrote:

Did We Not Make Ourselves Clear? – We are surprised by the volume of incoming calls from people who believe that our view is that LCC [US Airways] somehow disappears.

As noted earlier this week, “assuming LCC or UAUA die off, as we believe some do, is a mistake, in our opinion.” What we do take issue with is US Airways’ ability to raise incremental capital should industry fundamentals deteriorate further or even remain stuck here in neutral. There has been very little dialogue, as near as we can tell, as to the potential that 2010 demand may prove as bad as 2009’s. Alternatively, bump up your RASM and fuel by similar amounts and one’s industry models probably won’t show any meaningful improvement. It is against this backdrop that we continue to believe that borrowing power (as well as the need for incremental borrowing) at AMR & UAUA significantly exceeds that of LCC. Put another way, AMR needs to borrow a lot of money, and we think it has plenty of ways to do so. United needs to borrow less, and we think it also has a few bullets left to fire in the capital-raising gun. However, our view on LCC is that while its near-term needs are arguably low, its capital-raising options appear largely nonexistent if demand trends simply bump along from here or in fact worsen. We therefore believe that some form of Washington-mandated combination might potentially occur. Nothing this earnings season changed our view in this regard, nor our opinion that risk/reward in LCC shares remains weak assuming most scenarios short of quick recovery (though LCC’s peer-leading 54% decline since May 6th obviously tempers our negativity).

Posted by Holly at 7:03 AM | Permalink | Comments (0)

Another day, another round of airline earnings reports -- and yet another notice from Standard & Poor's that another airline is now on credit watch, with further rating downgrades a distinct possibility.

Allegiant Travel Company posted results late Tuesday while AirTran came flying in today. The one thing both airlines have in common? They both posted nice profits for the quarter.

Take these guys out and buy them a beer. They certainly deserve it.

Allegiant posted a profit of $23.8 million, up 801% from a year ago. The airline flies only MD-80s. I would have expected nothing less, considering the drop in the price of fuel.

But there is much more to the Allegiant story as those of you who hang out around here know. And in regard to their overall business model -- which relies heavily on ancillary revenue -- this quarter really didn't disappoint as the airline saw its ancillary revenues per ASM increase 17%.

AirTran, which is currently running kind of a hybrid operation in terms of ancillary revenues and more demand based scheduling that has been so advantageous to Allegiant versus the more traditional legacy carrier business model turned in another good quarter today as well.

The airline posted a profit of $78.4 million or $0.56. This was a huge turnaround from last year, when the airline posted a loss of $14.8 million or $0.14.

Excluding unrealized derivative gains associated with the airline's hedging activities, the airline posted a profit of $46.6 million or $0.34.

Interestingly, even here though, unlike at Allegiant, revenues were down. At Allegiant the airline saw operating revenues up 12.5%. on a 30.3% growth in ASMs no less.

AirTran posted a 12.9% drop in revenues. However, the airline also posted a whopping 27.3% drop in operating expenses. There is where the profit came from. ASMs here were down 7.6% for the quarter.

All said and done -- a good quarter for both airlines. Especially considering the rest of the carnage we've seen reported from almost everybody else.

One late note that hit the wires after the close today. Standard and Poor's said this afternoon that it had put UAL Corp., the parent of United Airlines on credit watch for a possible further downgrade.

The company's S&P rating is already buried in the "junk" status, sitting at a "B -."

S&P also warned that AMR, parent of American AIrlines is also now on the bad list as well, as it was also placed on the list for a potential downgrade. American currently is also rated "B -."

We'll look at the Delta Air Lines loss in another post.

Posted by Holly at 5:19 PM | Permalink | Comments (0)

On the first of a three-day onslaught of earnings that can only be described as "earnings hell," Southwest, Continental, and United Airlines all reported their second quarter numbers today.

The short and sweet?

While Southwest Airlines reported a profit for the first time in three quarters, the airline's guidance for the third quarter was not very rosy. So much so that the airline said it could not guarantee a profit for the third quarter. The airline posted a profit of $54 million or $0.07 for the quarter. This represented a 51% decline in profits over last year's $121 million.

Operating income at the airline declined by 40%, to only $123 million.

Based on weak travel demand and fuel price volatility, we cannot predict a profitable third quarter," said Gary Kelly, Southwest chairman, president and CEO.

United Airlines also posted a "profit" -- but don't let those headlines fool you. The airline only posted a "profit" as a result of one-time items and fuel hedge gains. Repeat after me: The airline did not post a real honest-to-God profit.

Excluding all the accounting handiwork, the airline lost $323 million or $2.23 for the quarter. This was, however, better than what the analyst consensus had been for the airline. Analysts had forecast the airline would post a loss of $2.61.

As for Continental, the airline posted a loss of $213 million, or $1.72 a share. Excluding special items, the airline posted a loss of $169 million or $1.36.

Continental posted a $154 million operating loss, which was 116% worse than the second quarter of 2008.

Those are the basics folks. Not exactly the kind of news that makes you want to jump up and down. Much less buy airline stocks. Because as we all know -- if the airlines can't make money in the second quarter -- we don't even want to see what's coming next in the third and fourth quarters.

Someone noted to me in an email this morning,

"Holly, just looking over the Continental numbers. You know I was thinking about what you wrote this week in PlaneBusiness Banter concerning why Larry [Kellner] would choose to leave the airline right now, and the strength of the management team at Continental. I think the reason Larry has decided to leave this industry is obvious when you look at these results and realize that this airline clearly has one of the best management teams around. But even as good as they are -- the airline is STILL not profitable. I can see Larry's point.

Larry, get out of this industry, go make some money and have a good time doing it."

I'm afraid our PBB subscriber speaks the ugly truth.

Posted by Holly at 2:12 PM | Permalink | Comments (0)

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.

Posted by Holly at 8:52 AM | Permalink | Comments (0)

Had to chuckle this morning when I read the JP Morgan Equity/Debt review of American Airlines' earnings release.

As most of you know, Jamie Baker is the equity analyst for JP Morgan, but Mark Streeter handles the debt side.

Mark's snarky side came out today in his headline as he wrote in the note,

Some Airlines Bust Guitars, Some Also Bust Covenants - We have been worried for some time that airlines (AMR, LCC & UAUA, more so than others) could violate bank debt covenants later this year or early next year if industry conditions don't suddenly improve. AMR likely shared this concern as the company last month sought and received fixed charge coverage relief from banks. Specifically, the AMR bank debt fixed charge coverage ratio for the June 2009 quarter was waived. Going forward, the ratio remains at 0.95x for the September 2009 quarter (no change) but stays at that levels through year-end (i.e. lower threshold) with reduced step-ups through September 2010 as well. While our more bearish-than-consensus revenue forecast continues to show AMR tight (if not busting) covenants during 2H09 (along with others), additional bank relief remains achievable, in our view."

As for the all-so-important liquidity question, the duo commented,

"AMR's Liquidity Pantry Is Still Fairly Well Stocked - Unlike the pantry at USAirways, which we consider bare, and the pantry at United, which is stocked with canned goods long past their expiration date (i.e. older aircraft and parts that are very tough to finance), AMR boasts of $3.7 billion in unencumbered asset provisions, real liquidity flexibility, in our opinion (with the untapped AAdvantage forward mileage sale the most obvious component). Now, not all of the contributing assets to this estimate are readily-financeable (such as AMR's ownership of Eagle) but at least $2-$2.5 billion represents real liquidity flexibility in our opinion. Furthermore, $500 million of additional assets will become unencumbered later this year (including some not-too-old-to-refinance aircraft falling out of maturing EETCs). The bottom line is that USAirways and United are at or past V1 in their burn-the-furniture liquidity takeoff rolls, in our view, while AMR is just now nudging its throttles forward, with still-adequate runway remaining. Boiled down, we remain of the view that Chapter 11 can be averted at AMR."

Posted by Holly at 12:02 PM | Permalink | Comments (0)

See the picture. See the sunshine. Uh-oh.

This morning, details are slowly coming out concerning Southwest Airlines' flight 2294 that was forced to make an emergency landing in Charleston, West Virginia last night.

According to reports, a one by one foot hole developed in the roof of the Boeing 737-300 developed while the flight was in progress between Nashville and Baltimore/Washington International. After looking at video of the aircraft it appears that the hole in the fuselage developed directly in front of where the tail section is attached to the top of the aircraft.

The photo above was taken by a passenger on the aircraft, using his Blackberry.

According to a post by Southwest's Paula Berg posted on the airline's website Monday night,

"The aircraft cabin depressurized approximately 30 minutes into the flight, activating the passengers’ onboard oxygen masks throughout the cabin. Medical personnel in Charleston assessed passengers and no injuries are reported. Southwest Airlines is sending its maintenance personnel to Charleston to assess the aircraft, and the airline will work with the NTSB to determine the cause of the depressurization. According to initial crew reports, the depressurization appears to be related to a small-sized hole located approximately mid-cabin, near the top of the aircraft."

The airline apparently began an emergency inspection of all of its 737-300s last night. Not much more information this morning on just which aircraft were inspected or if that inspection process is continuing this morning.

No more information is known about what happened at this time, but I think it would be safe to assume that the incident is going to restart the conversation concerning the airline's previous issues with the FAA -- most of which concerned inspection for cracks on the airline's older aircraft.

The NTSB has already been on the scene, as they used a cherry picker to inspect the hole from the top of the aircraft.

Posted by Holly at 8:11 AM | Permalink | Comments (0)

Okay, I give in.

Either I talk about this, or you guys are going to continue to pelt me unmercifully until I do!

No question that the number one item generating reader response in the email bag this week is the case of United Airlines and Dave Carroll's smashed guitar.

It appears that Dave Carroll of the band Sons of Maxwell hopped a plane with his bandmates from Halifax to Omaha by way of Chicago last year. As the plane unloaded atn O’Hare, Dave happens to look out the window in time to witness the baggage handlers throwing around instrument cases, namely THEIR instrument cases, like beach balls.

He said something to the flight attendants on board -- but was met, as he put it, with "disinterest and disregard."

Fast forward to Omaha, and no, Dave is not surprised at all when he finds that the base of his 710 acoustic Taylor guitar is smashed when he retrieves it from baggage claim. However, the show must go on, and Dave makes do with a stand-in.

A week later Dave made a formal complaint to United, which he says was never acknowledged. Over the next several months, Dave says that he called, emailed, and generally tried to get attention paid to his situation, and the best he received was a denial based on the fact that he didn’t “complain in the right place, or at the right time.”

Having spent some $1200 to repair his guitar, Dave was still not a happy man. Nor was his guitar the beauty she used to be.

So Dave did what song writers do.

He sat down and wrote a song about the whole thing, "United Breaks Guitars." Actually he wrote three songs. "United Breaks Guitars" is actually "Song One." "Song Two" is supposed to be posted shortly.

The video of "Song One" was posted on YouTube this week and it has already generated about 1.5 million views. "Song Two" is apparently already written and the video is "underway." "Song Three" is still in the creative process.

For those of you with really enquiring minds, or if you just want to see some cute shots of Dave (hey, he's a doll -- with a Canadian accent no less) you can read the long version of the story on his website.

The PR machine at United has ground itself into action over this. In an update video, Dave says that the airline has, belatedly, offered to hand over some bucks. Dave says in the video that he doesn't want the money. But he does want United to take the money and give it to a charitable organization. And yes, then United needs to tell all of us just which organization that was.

In the meantime, he told the last person he dealt with at United, Ms. Irlweg, that he was going to write three songs, and that is what he still intends to do.

Can't wait to see and hear song two -- which apparently deals mainly with "Ms. Irlweg."

A story like this warms my heart. For more than one reason. The main one being that it illustrates so clearly why old style methods of "command and control" management and/or PR just are not going to cut it anymore these days.

You can't control the web. You can't keep this guy from writing his songs. And an offer to compensate him at this point -- not enough. The airline comes across as slow-footed and dim-witted.

It's a PR nightmare -- one that all companies, not just airlines, need to understand.

Enquiring minds want to know... I wonder if United made it even worse and "requested" that he not post any more songs -- when they finally made him their "compensation" offer this week?"

Posted by Holly at 1:31 PM | Permalink | Comments (1)

Continental Airlines was granted limited antitrust immunity today by the U.S. Department of Transportation -- a move that will allow it to join United Airlines and other airlines in the Star Alliance in creating schedules and determining fares.

The order did, however, set limits on the antitrust immunity in regards to some international routes.

The order excludes rights between the U.S. and Beijing. In addition, the order also does not grant immunity for those flights between U.S. and Canada, and to those flights between New York and Copenhagen, Geneva, Lisbon, and Stockholm.

These "strings" were more or less foreshadowed in the recent Department of Justice filing, in which the DOJ discussed the possibility of "harm to consumers" on routes between the U.S. and China, Canada, Denmark, Portugal, Sweden and Switzerland.

The decision did, however, give the green light to a proposal that will see Continental, United, Lufthansa and Air Canada create a joint venture for some international flights.

This was the right call for the DOT to make, although the DOJ ruling last week was a bit troubling. As I have said for years, if U.S. ownership laws continue to hamstring U.S. carriers from linking up directly with international counterparts, then antitrust immunity -- which allows them to participate more fully with international carriers -- is the answer.

Posted by Holly at 11:30 AM | Permalink | Comments (0)

This week I was happy to see an old name reappear at the top of a handful of airline research reports. That name? Dan McKenzie.

Most recently Dan was the airline analyst for Credit Suisse. Dan has now resurfaced as the airline analyst for Next Generation Equity Research.

This week Dan initiated coverage on JetBlue, Southwest and AirTran.

Dan initiated coverage of JetBlue with a "buy" rating and a $6 target price.

In his note, Dan commented,

Our 2009 profit forecast is largely in line with a consensus outlook, however, our modestly better 2010 outlook results from jetBlue’s new revenue management system, legacy carriers that continue to exit jetBlue’s largest markets, and revenues that begin to finally trickle in from a Lufthansa code share (which is not yet announced but a logical assumption in our view given the close relationship between the two carriers).

Despite its smaller size and five years of reported losses or weak profits, our outlook is on balance positive based on a number of unique findings in our proprietary capacity study.

We found the industry cutting head to head flying by 15% in jetBlue’s routes, leaving jetBlue with the industry’s best competitive dynamic. In particular, we found AMR cutting as much as of 50% of its flying in jetBlue’s top 50 markets (airport to airport), while other carriers are cutting 15-30%.

At Fort Lauderdale, a focus city, we found both AMR and US Airways shrinking 47% and 14% respectively (as jetBlue grows +16%).   

Dan also initiated coverage of Southwest Airlines.

Dan assigned Southwest a "neutral" rating and a $7 target price.

In his note, Dan wrote,

Southwest is the industry’s best fundamental story and as such, continues to be a longer-term play on the industry. However, given our anticipation of upcoming earnings disappointments, we’d wait for a better entry point.

Southwest is transitioning from a growth carrier to a cyclical carrier, but it’s not there yet. Substantial market share gains against weak legacy carriers underpin our view that the industry consolidates over the next two years, and Southwest is positioned to be a primary beneficiary.

Our slightly more aggressive valuation multiple vs the Street partially factors in earnings optionality from further industry consolidation over a 2 year time horizon.

Despite a cost structure that has inflated over the years, Southwest is still the lowest cost producer. And its cost advantage is set to widen as legacy carriers reset labor contracts higher.  

In the near term, Dan said the airline's revenues and cost headwinds are pressuring margins. Because or this, and the fact the airline now has to renegotiate its pilot contract, Dan advises, "We're not telling investors to race into thie stock, though for those that can look longer-term, Southwest continues to be a great play on the industry."

And finally, Dan also initiated coverage on AirTran this week. AirTran also received a "neutral" ranking from McKenzie, along with a $7 price target.

In his note on AirTran, Dan wrote,

Following years of growth, AirTran, along with others, is responding to a demand shock by cutting growth and spending. The network changes position the carrier to report profits and begin the process of balance sheet repair (which is in contrast to AirTran’s 2008 loss that nearly erased five years of profits).

AirTran, like others, lacks adequate pricing power given industry overcapacity which means profits will remain levered to fuel prices. However, when removing fuel from the equation, upside to our modest profit this year and next appears unlikely based on our proprietary network study.

We found competitors cutting head to head flying on AirTran’s routes by 1.9% in 2Q09 and by 5.5% when factoring in indirect competition. While it’s always encouraging to see less capacity, AirTran’s competitive dynamic nonetheless ranks last on our industry measures.   

AirTran’s smaller size and lack of dominance in its markets leaves its revenues more exposed (vs peers) to larger and better capitalized competitors. As one of the lowest cost, lowest fare carriers in the industry, AirTran’s cost structure is thus a critical source of competitive advantage.      

AirTran’s current level of liquidity is not robust and limits the carrier strategically, but it’s adequate. And while AirTran’s liquidity strengthens on our outlook, an even stronger balance sheet would aid AirTran’s competitive position and revenue stability. As a result, we don’t rule out new equity issues (perhaps in the $7 to $10 stock price range).

Posted by Holly at 4:17 PM | Permalink | Comments (0)

I couldn't help but laugh when one of our readers sent us this note today:

"I noted with interest yesterday the appointment of [former Northwest Airlines CEO] Doug Steenland and [former United and US Airways CEO] Stephen Wolf to the new Chrysler board of directors.

In a perhaps related development, did you hear that Chrysler as part of its push for streamlined operations and greater efficiency is going to adopt the Henry Ford model for paint choices. From now on, you can order your new Chrysler, Dodge or Jeep in any color you wish -- as long as it's gray.  

Blue and red pinstripes, $500 extra."

Rimshot please.

Posted by Holly at 1:20 PM | Permalink | Comments (0)

Uh-ho. Our Ode to a Hot Dog column literally disappeared into the depths of the Internet, while leaving only a headline. Well.....$&$O#OLGl.

Be back later -- hopefully with a column.

Posted by Holly at 5:07 PM | Permalink | Comments (0)

Posted by Holly at 4:58 PM | Permalink | Comments (0)

It's Friday. It's already 85 degrees here in Big D. And it's not even 10 o'clock yet.

Not a good sign.

My trusty Apple iPhone weather app informs me that it will be 103 later today.

Hmmmmm.

You know it's really hot when the cats pant.

I've written before about this.

We all know dogs pant all the time. But have you ever noticed how cats, being the more discreet and elegant animals that they are, are not that enthusiastic about showing public displays of pending heat stroke?

So when you open the door to a little face that has a jaw dropped and a little tongue furiously darting in and out -- cats really do look funny when they pant -- you know it is friggin' hot outside.

So there you go. Looks like another "Cat Pant Heat" day for us, in addition to much of the rest of the country.

Posted by Holly at 8:58 AM | Permalink | Comments (0)

I'm sure glad the general public got to see a slew of those stupid "at the airport live" reports yesterday dished out from a local reporter -- stationed at their local airport. The occasion? Rising air fares.

CODE RED. CODE RED. Beep. Beep. Beep.

Oh my god Ethel, grab the children, bring them inside and make sure the doors and windows are locked.

Is there any other industry that all of us utilize on a fairly regular basis that has its prices examined so closely by the media?

Seriously.

Why is this?

I mean, how would other industries fare if every time they raised a price, we were treated to a live, on-the-scene report with the local newshounds?

Rental car companies for example.

Cable television companies.

Hotels.

Cat and dog food manufacturers. (Can you tell I was at PetSmart yesterday?)

Oh, and then there is ice cream. As my father commented the last time I visited with him, "If they make the Breyer's package any smaller, you are going to have to put your glasses on to find it in the damn freezer at Safeway."

You know the game that packaged goods companies play. They keep "downsizing" the package size, while also raising the price. In effect -- netting a double increase in price in some cases.

And on it goes.

But do we see local and national news stories about these types of price increases. Not really. We see them, but there is never a unified "Code Red" alert put into effect that causes reporters and news outlets to attack the story as if it were a matter of national importance.

But on the heels of two airfare increases that have been put into effect over the last week -- now the fact that airfares are RISING is right up there on the top ten news story list of the day. No, actually, the top five.

No matter that air fares were, before the increases, and still are, in many cases, at rock-bottom levels. Levels so low that airlines are in a fight for survival because of the fact.

But here's the deal. There is no "voice" for this industry of that nature. No credible "voice" that is out there constantly getting this, and other messages out.  

PlaneBusiness Banter subscribers know that I have been doing a continuing series of columns over the last few weeks on the "perception" problem that plagues this industry in the U.S.  The industry needs to create, support, and foster an entirely new way of positioning itself with the general public in this country. Not to mention with those on Capitol Hill.

And no, the Air Transport Association is not the answer. Far from it.

Lee Moak, the head of the Delta Air Lines' ALPA MEC and I talked this spring about how the pilots in this industry suffer from much the same problem. A huge problem of perception. I agreed 100% with him. He talked to me about some of the activities that he has been involved with -- with the Delta pilot group -- that no one ever hears about. No one knows about. But positive community projects that reflect the fact that hey -- pilots are not just greedy bastards who fly airplanes and chase nubile young women around their hotel rooms at night.

Well, not all of them.

Seriously. Lee understands how the perception game is played. He understands that the old "PR" rules no longer apply. So do others in this industry. Unfortunately, while positive strides have been made in some quarters, the enlightened types are still outnumbered by members of the "old guard" who are not enlightened and who continue to hold sway in this industry.

Yeah, I know. As more than one subscriber has written me over the last couple of weeks, maybe this needs to be a project that I take on. Personally.

Dunno. I think I value my sanity too much.

Posted by Holly at 8:53 AM | Permalink | Comments (1)

Posted by Holly at 9:32 PM | Permalink | Comments (0)

Whew. For a couple of innings tonight I suffered some ugly thoughts of having to wear that Orange Pimp Suit. And of having my picture made while wearing it. And of having said picture then posted here on PB.

However, LSU was successful tonight in beating the University of Texas Longhorns 11-4 to take the NCAA College World Series National Championship.

One of the big reasons was that guy right here. Chad Jones. In his other life, he plays safety for the Tiger football team. But in this tournament, he was fantastic in the role of relief pitcher.

Then there was Jared Mitchell, the tournament's most valuable player.

Texas played a great series. But in the end, LSU played a better one.

I will keep all of you posted as to the "pay up" of the bet between myself and Mr. Parker. Heh. Tomorrow I will start putting together the appropriately atrocious LSU fan attire that I am going to force Mr. Parker to model.

I can't wait. ;-)

Posted by Holly at 8:03 PM | Permalink | Comments (0)

I knew somebody was going to take up the challenge.

Jim Parker, former general counsel and CEO at Southwest Airlines and devoted, er, obsessive University of Texas alum, has entered into a bet with me on the outcome of the College World Series. (The second game of which is now on hold because of a rain delay.)

If LSU wins, he has promised that he will allow himself to be photographed wearing some outrageous LSU attire. Of my choosing. I had suggested that he be forced to fly an LSU flag outside of his house for a week, but he declined, explaining, "I am not sure if Pat [Jim's wife] would shoot me or divorce me first if I ever allowed an LSU flag to be hung on our house for a second, let alone a week.   I am pretty sure she would do both, I am just not sure in what order."

If Texas wins, I am going to be forced to wear what we have dubbed, "The Orange Pimp Suit." You may have seen them. LSU has a purple and gold version. Texas has an outrageous orange colored one with black and white zebra stripes. The only place I've ever seen them sold was on Bourbon Street.

Anyway, Jim's son has one that he wore to the Texas-USC National Championship game a few years back.

Take my word for it. It's atrocious.

So if Texas wins, I have to go get the Orange Pimp Suit and have my picture recorded for historical purposes. Although I do promise that I will wear more than just my underwear underneath it. Ahem.

Maybe instead of the Orange Pimp Suit, I could just wear this Bevo Hat. Nah, I'm not going to have to wear anything. I'm eagerly anticipating seeing Jim Parker in a purple and gold lame jumpsuit with matching tiger tail. Or something close to it.

Posted by Holly at 4:43 PM | Permalink | Comments (0)

While this is technically "breaking news," we've all suspected something like this for months. Especially after the last TPG/Republic cash infusion given to Midwest.

This afternoon, Republic made it official. It is buying the remains of Midwest Airlines. I say, "remains" because what constitutes Midwest Airlines these days is a far cry from what most people think of when they think of "Midwest."

Republic announced that it will acquire 100% of the equity in Midwest, in addition to TPG's $31 million secured note from Midwest.

According to the airline's statement,

Consideration will be $6 million in cash and a $25 million, five-year note, which may be converted to RJET stock at $10 per share. In addition, TPG will have the right to nominate a member to the Republic Board of Directors.

Under the agreement, Midwest will become a wholly owned subsidiary of Republic Airways, with the Midwest brand continuing. Midwest’s Boeing 717s will be replaced with Embraer 190 aircraft, enhancing Midwest’s ability to offer nonstop service to key destinations important to its frequent flyers."

Well, how 'bout that?

It looks like the gang that started out with Chicken Taco has decided to add chocolate chip cookies to the mix.

So how does this help Republic? The airline has now announced that it is going to buy both Frontier Airlines and Midwest AIrlines in the span of two days. What I continue to have a problem with, and even more so now that the Midwest part has been added to the mix -- how can Republic continue to operate as a regional carrier when it will now be a major entity in operations that go up against major players?

Then there is the AirTran marketing agreement with Frontier -- what is going to happen to this?

My bet is that we are going to hear more about all of this before the week is over. You have to think that there was a reason the announcements were stair-stepped, and that they both came immediately on top of one another. A defensive play against another potential deal that was about to go down? That would be my guess.

Posted by Holly at 2:37 PM | Permalink | Comments (0)

I may live in Texas now, but that doesn't mean my allegiance to the Southeastern Conference has changed. At all.

11th inning in the NCAA College World Series.

LSU 7, Texas 6.

One out from a win.

Go Tigers!

Posted by Holly at 9:17 PM | Permalink | Comments (0)

Just never know what news is going to come across the wires these days.

Hi guys.

It's good to be back.

Yes, moi has been a bit offline over the last month or so. No, I still love you. It was not because of anything you said. Or did. Or didn't do. Stop it.

Without going into detail, maybe this analogy will help explain. If someone is a pilot, then it's pretty hard to also work the back of the plane, sell the tickets at the counter and make sure the engine is functioning properly.

Moving, new website drama and delays, exhaustion. I just had to step back and concentrate on our flagship operation -- PlaneBusiness Banter for a bit.

But hey -- as I told PBB subscribers today -- it's time to get back into the swing of things.

And what fortuitous timing for our coming out party!

This afternoon the newswires were literally abuzz with the news that Republic Holdings is buying Frontier Airlines.

As we all know, Frontier has been trying to put together a financing deal that would allow it to exit bankruptcy protection.

We also all know that Republic had already stepped up its financial involvement with Frontier as part of its current bankruptcy process.

Yes, well -- this afternoon Frontier announced that it has entered into an agreement under which Republic will serve as the equity sponsor for Frontier's reorganization plan.

But the big newsmaking kicker is this: Republic will then purchase 100% of Frontier's equity for $108.75 million

Under the agreement, Frontier Airlines Holdings Inc. would become a wholly owned subsidiary of Republic.

Frontier Airlines and its short-haul unit, Lynx Aviation, will keep their current names and operate as they do now.

A hearing on the proposed deal is now scheduled in bankruptcy court for July 13.

Frontier’s reorganization plan calls for general unsecured creditors to get $28.75 million.

It said an additional $40 million of the sale proceeds would repay outstanding “debtor-in-possession” financing from Republic Airways Holdings.

If approved by the bankruptcy court, Frontier’s current equity “would be extinguished and holders of that equity would not receive any recovery,” the airline’s statement said.

Okay, so while this is great news for Frontier Airlines -- I think a very real question is this one -- what happens when Republic, which does a chunk of regional flying for United Airlines, essentially becomes the new owner of Frontier -- a major thorn in the side of United?

Stay tuned. This one should be fun to watch.

Posted by Holly at 8:11 PM | Permalink | Comments (0)

This week the U.S. domestic carriers have been in the throes of the usual first-week-of-the-month traffic and RASM reporting ritual.

And what have we found out from the various press releases full of mind-numbing numbers?

I think Gary Chase, analyst with Barclays started the week off on the right tone as he wrote, "We think the market was largely ready for numbers as bad as CAL posted last night, even if we had hoped for better."

Continental reported at the beginning of the week that it estimates the H1N1 scare cost the airline at least $30 million in revenue. This was more than many analysts had expected, and was clearly a big factor in the airline reporting that consolidated PRASM for May was down between 19.5% and 20.5%. Mainline only was down between 19% and 20%.

Friday morning Bill Greene, analyst with Morgan Stanley issued a note in which he said, "Recent, May traffic reports highlight the severity of the supply/demand differential plaguing the industry with RASM falling ~20% YoY at both CAL and LCC. Surprisingly, managements continue to bet on a 4Q recovery, as evidenced by the sequential acceleration in capacity growth between 3Q and 4Q09.However, even if a rebound does materialize, we worry that higher oil prices obstruct profit-improvement at many airline."

Looking towards June, as I wrote in this week's PBB, I am not hearing much of anything positive from the airline folks I am talking to -- in terms of demand uptick.

Kevin Crissey, analyst withUBS wrote this week, "Airline financials are troubling, particularly with fuel prices rising." He continued, "We are concerned about the revenue outlook after May," said Crissey, who forecasts that June traffic "will be 2 to 3 percent worse" than May and "July could look like May. The forward curve for fuel is higher."

Of course, as has been the case over the last year, there is one domestic airline that just keeps bucking the drop in demand trend. That airline is Allegiant Air, the airline portion of Allegiant Travel.

The airline reported Thursday that its total RPMs rose 20.1% while capacity was up 19%. While this resulted in only a 0.8 point increase in load factor for the month, you can pretty much be assured that this is going to be the most positive combo of demand and capacity that will be reported for the month.

Scheduled service at the airline increased 23.9% while capacity jumped 22.9%. Load factor increased 0.7 percentage points to 90.6% from 89.9%.

Both AirTran and Southwest Airlines announced drops in load factor this week.

Remember that these declines also came as both airlines were engaged in pretty stiff fare competition, so we can pretty much figure both airlines posted some healthy declines in yield and RASM as a result.

US Airways, which also reports RASM estimates, as does Continental, reported on Wednesday that its mainline traffic declined 5.2% on a 5.8% cut in capacity. As a result, the airline actually posted a .5 point increase in load factor.

However, as Bill Greene mentioned in his note on Friday, the airline also said that its consolidated PRASM fell between 18% and 20% during the month.

Also note that American Airlines saw traffic fall much more than the airline's capacity cuts -- as the airline reported that mainline traffic declined 11.7% in May, on a capacity decline of only 8.8% This resulted in a 2.6 point drop in load factor for the month. Ouch.

Posted by Holly at 10:40 AM | Permalink | Comments (0)

I've admitted my unabashed admiration for the Dallas Morning News airline reporter and columnist Terry Maxon in the past.

Today, a number of you have already sent me notes pointing me to his column from today. The nice thing about it? It has nothing to do with airlines. It has to do with life.

Terry's daughter, an excellent writer in her own write (intended) graduated from high school this week. In honor of that occasion, Terry decided to pen a few more of his Friday "Idle Thoughts" than usual. Thirty-three of them to be exact.

Check it out. It's a great way to end a week.

Posted by Holly at 9:53 AM | Permalink | Comments (0)

Heard back from some more of our longtime Southwest Airlines' pilot subscribers this morning, who wrote today about the pilots voting down their tentative agreement.

"I think you nailed it. My way to explain it is this. It was like when people vote for Ralph Nader. They don't think he stands a chance in hell of winning, but they use their vote as a vote of protest against the system. I don't think any of the pilots I know thought this thing would be defeated. Rather, they did see an opportunity to send a message to management and/or union leadership by voting no. Unfortunately, that message was stronger than many people thought. Rut-ro. Now things are going to get reallllly interesting."

Another reader commented, "Holly, you have been on this from the beginning when Carl (Kuwitzky, President of SWAPA) announced that there was a tentative agreement with the company last fall. But, as you said at the time, there really wasn't an agreement. I think Carl has a lot of 'splainin' to do. You think there might be some Texas Two-Steps going on here?"

Another pilot wrote me, saying that no, he voted against the deal because it was a bad deal. Period. How could I take the word of one pilot who said it was "too lucrative?" As he put it,

"I'm sure you'll talk to more of them than me, but there is not one SWA guy I talked to that said he voted against the contract because it was too lucrative.

In no particular order:

1) Not enough pay.

2) Lance Captain program curtailed

3) Scope

4) Complexity of the new scheduling system."

So, reading through the feedbag this morning it would appear that some guys voted against it because it was not lucrative enough, while others voted against it because they thought it was too expensive for the company. Then there is the scope problem.

Go figure. I think the only thing anyone knows for sure at this point is that the next round of negotiations are going to be tougher. I'd bet the farm on that one. (And the cows too.)

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

Three weeks ago I published a letter from a concerned Southwest Airlines' pilot in PlaneBusiness Banter. This particular subscriber is one of the Southwest pilots we go to on a regular basis to get a "read" on just what the group is thinking at any given time. The substance of his letter?

He gave readers a head's up about the fact that if the pilots' tentative agreement passed -- it was not going to be by much. That more and more pilots he was talking to were going to vote "no" as a protest vote against what the pilots now perceive as a "lack of leadership" or a "lack of direction" both at the airline -- and within the union's leadership.

Or maybe a bit of "misdirection" would be a better term.

To put it more bluntly -- why should the pilots at the airline vote for a contract that was going to put even more financial pressure on the airline that has seen its operating margins erode, its costs continue to rise, and its revenues continues to slump?

You got that? In other words, the pilots at the airline were going to vote against the contract because it was too good.

Today, the final vote tally on what would have easily been the most lucrative pilot contract in the U.S. was announced.

The TA did *not* pass. But it was close. Very close.

A little less than 51% of the pilots voted against the contract.

Our last call on the contract? I still thought it would pass -- but not by much.

This is a major piece of news for those of us who are airline labor/management watchers, because I'm not sure where this one goes now -- but one thing is for sure. This vote was clearly a "protest" vote.

The question now is -- how do both sides go back to the table and renegotiate a contract that is NOT as lucrative or financially draining on the airline?

Yes, you read that correctly. NOT as lucrative.

And how much more aggressive will the pilots' union leadership be (or new leadership) in pressing management for better financial performance at the airline?

Whew.

I said at the beginning of 2009 that Southwest Airlines was going to be the biggest newsmaker of the year -- on the domestic airline front. Nothing has changed with that prediction.

And ...it's only June.

Posted by Holly at 2:08 PM | Permalink | Comments (0)

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

Monday the Bureau of Transportation Statistics of the DOT issued the latest Form 41 data for the industry. The information covered the fourth quarter 2008 numbers.

Needless to say, for airline geek types, the release of Form 41 data is like a huge box of goodies, all wrapped up with a nice big bow. The only problem is -- you have to take the time to get in the box and carefully unwrap all the nuggets.

This morning analyst Gary Chase with Barclays issued a research note on Virgin America's financial situation -- a note that was clearly based on Gary and fellow analyst Dave Fintzen's careful unwrapping of the Virgin America nuggets.

But wait -- Gary doesn't even cover Virgin America. The airline is not publicly traded.

Oh, but he does cover airlines that are currently affected by the airline's presence. Most notably JetBlue and Alaska Air Group. Of all the major airlines Virgin overlaps about 25% of JetBlue's capacity, while it overlaps about 17% of Alaska's.

In his note this morning, Gary noted that while Virgin has been in the news a good deal lately because of questions concerning its ownership structure -- "we cannot know the details of the company's ownership structure." But Gary and company can, and did, analyze the airline's operating performance for the fourth quarter as reported to the DOT.

The verdict?

"The airline is now beyond the point in its development where JBLU turned profitable; Virgin America's results would show losses in late 2008 even at sub-$1.00 fuel prices.

DOT filings point to substantial losses that go well beyond high fuel prices.  We estimate that to break even in 2009 (similar to the rest of the industry on an un-hedged basis), the airline would need to drive significant improvement in revenue or cost performance, or both.  For example, one path to break-even would be to achieve a roughly 20% higher unit passenger revenue (in an environment where industry RASM is declining by nearly 10%) and reduce non-fuel costs by almost 10% while fuel prices remain at the $1.49 level."

He continued, "Virgin America's premium strategy, including its First Class and Main Cabin Select products, does not appear to be generating a meaningful revenue premium.  Rather, unit revenue performance lags JBLU and the industry at-large.  Virgin America's unit revenue performance has shown relative improvement as the airline spools-up, but still lags a typical new JBLU markets despite having a first class option and fewer seats on an equivalent aircraft (which should translate into both higher RASM and CASM).  While Virgin America has found some relative success in short-haul West Coast markets, revenue performance in Transcon and longer-haul West Coast (i.e. Seattle) lags the industry by a wide margin."

In addition, Gary said, "The premium strategy likely contributes to the airline's relative cost problem, with non-fuel unit costs that are 40% higher than JBLU today and ~30% higher than JBLU at the same point in its life cycle.  Unit cost tends to improve dramatically during the first year of an airline's operations, but Virgin America is now beyond the point where JBLU's cost structure stabilized.  The cost structure remains significantly higher than JBLU, not to mention other low-fare airlines."   

In typical carefully worded "analyst-speak" he concludes: "We believe the Virgin situation represents a potential opportunity for the industry generally, but for JBLU and ALK in particular.  Even if the press surrounding the ownership structure proves inaccurate, operating losses could also prompt a move away from its Transcon and long-haul West Coast routes, where performance has been the weakest."

So how bad were the numbers themselves?

Virgin America’s recent DOT filings show the airline posted significant losses through its first year of operations. In total, the airline posted a 2008 pre-tax loss of ~$207mm on revenue of ~$370mm, for a pre-tax margin of negative 56%. While margins did improve, DOT reports show 4Q08 pre-tax margin was a negative 29% with a pre-tax loss of $32 million.

Now, is there anyone out there who still wonders why it was that Virgin America fought for so long to keep from reporting its results to the DOT?

I didn't think so.

Posted by Holly at 8:59 AM | Permalink | Comments (0)

In the midst of all the giddy sentiment that is starting to take hold in the industry concerning the "stabilization" in demand decline -- a fact that April RASM estimates issued by some airlines have fueled this week -- a new ugly problem is starting to make itself known. That ugly problem? Higher fuel prices.

As they say, if it's not one thing, it's another in this industry.

The big question concerning the recent relatively calm period of lower oil prices was this one -- how fast would they start to ratchet up when the economy began to shows signs of recovery?

We, unfortunately, are starting to see that apparently the answer to that question is -- pretty fast.

If you have not looked at the oil futures market lately, here is the bad news. As I post this (at about 1:30 PM CDT), the price of a barrel of crude is now sitting at 58.55, up almost $2 bucks for the day. Just two weeks ago, the price of crude closed at 50.80. Last Friday, it closed at 53.20.

Today's price is the highest price that crude has posted since November.

What is fueling the push?

A combination of some encouraging signs on the economic front, U.S. equity markets that seem to believe the worst is over (whether it is or not) and a weaker U.S. dollar.

As most of you know, a declining US dollar makes dollar-priced oil cheaper for foreign buyers and tends to encourage demand, leading to higher prices.

Yes, it is indeed a vicious circle.

And one damn frustrating one if you are an airline. Do you hedge or not? At what price levels? With what hedging instruments?

Remember that many airlines were still paying the price (and dearly) in the first quarter for making the wrong move on oil futures last year.

What makes this rapid rise in the price of oil potentially more troubling for the industry than the record-breaking rise last summer is that it is rearing its ugly head at a time when the level of demand, i.e., revenue, has fallen through the floor.

Posted by Holly at 12:33 PM | Permalink | Comments (0)

It's that time of the month once again. That time when the airlines report their traffic (and in some cases estimated revenue per available seat mile (RASM) performance) for the previous month.

Remember, while higher load factors are nice, what's even better is knowing those butts in seats paid more, not less, for the privilege.

The reporting kicked off with Continental Airlines, as always, which issued their numbers late last Friday. The result there?

The airline estimated that its April consolidated RASM was down 12.5-13.5%. While these numbers might look ominous, the results are actually on the high side of the range last given by the airline.

The airline had originally said that it expected RASM to be down between 13-15%.  

While only a small improvement over what had been expected -- the key word here is "improvement." Not unexpected "decline."

US Airways also gives monthly RASM guidance, as does JetBlue. So Tuesday it was time to parse through the US Airways numbers.

US Airways said Tuesday that its total April mainline traffic fell 3% from a year ago to 5 billion revenue passenger miles. Capacity fell 4.8% to 5.9 billion available seat miles, while its load factor rose 1.6 points to 84.8%.

More importantly, the airline said that consolidated passenger revenue per available seat mile (PRASM) was down approximately 8% to 10% versus the same period last year while total revenue per available seat mile decreased between 4% and 6%on a year-over-year basis.

Again, these numbers were just a tad better than previously forecast, as the airline had said it expected April RASM to come in down around 10%.

Yes, it does look like the declines in revenue have begun to level out.

Okay, so who's going to pick up the tab for the cold beers this afternoon? Yee haw.

Posted by Holly at 11:26 AM | Permalink | Comments (0)

Thursday morning Vice-President Joe Biden said on NBC's Today Show, "I wouldn't go anywhere in confined places now. It's not that it's going to Mexico, it's [that] you're in a confined aircraft; when one person sneezes it goes all the way through the aircraft. . .If you're out in the middle of a field and someone sneezes that's one thing. If you're in a closed aircraft. . .it's a different thing."

Thank you Joe.

Unfortunately, we all know he's right. Then again, the same could be said for riding in an elevator.

However, knowing that being in a small confined space with recirculated air for hours is probably not the best place in the world to be if someone in that space has something contagious is not what the airline industry needs to have said by a top government official on television. Not right now.

The Air Transport Association immediately blasted the comments, with CEO Jim May expressing "extreme disappointment at your suggestion that people should avoid air travel."

The rest of the day, and even this morning, the fallout continued, with other government officials stepping up in an attempt to mitigate the damage, as did Transportation Secretary Ray LaHood late yesterday. LaHood said in a speech that "flying is safe and flying is healthy, and flying to Mexico is safe."

Meanwhile, this morning the World Health Organization said that it was not recommending travel restrictions related to the outbreak of the virus. "Limiting travel and imposing travel restrictions would have very little effect on stopping the virus from spreading, but would be highly disruptive to the global community," WHO said in a statement.

One of the reasons behind this statement? The lessons learned from the hysteria surrounding the SARS encounter. As WHO said in its statement, "Furthermore, although identifying the signs and symptoms of influenza in travellers can be an effective monitoring technique, it is not effective in reducing the spread of influenza as the virus can be transmitted from person to person before the onset of symptoms. Scientific research based on mathematical modelling indicates that restricting travel will be of limited or no benefit in stopping the spread of disease. Historical records of previous influenza pandemics, as well as experience with SARS, have validated this point."

Posted by Holly at 10:19 AM | Permalink | Comments (0)

Gary Chase, airline analyst with Barclays, issued a note this morning in which he listed the exposure of different airlines to the potential short-term risk of passengers curtailing travel to Mexico.

Gary also took a look at the effect that the SARS scare had on the Asian carriers in 2003, and then extrapolated a kind of "worst case" scenario for our carriers -- in terms of their Mexican exposure.

Of course, all of this is just conjecture at this point. This analysis is only looking at one part of the puzzle -- the US carriers current exposure to Mexican flying. This assumes, which Gary pointed out, that the flu is able to be contained in Mexico.

And right now, that looks like a big assumption.

But let's say that is the case. If that is the case, Alaska Airlines, Continental Airlines, US Airways and American Airlines are the four airlines that have the biggest percentage of their passenger revenue tied up on Mexican routes. Note that even though Alaska's total O&D revenue tied to Mexico puts it fifth on the list, those flights make up 8% of the airline's passenger revenues. A huge amount.

Posted by Holly at 10:56 AM | Permalink | Comments (0)

A publishing update for PlaneBusiness Banter subscribers. We will be posting the latest issue of PlaneBusiness Banter later today. It is a huge issue, as we take a long look at not one, not three, but five airlines and their earnings. Delta Air Lines, Allegiant, AirTran, US Airways, and Continental Airlines.

I'll post a note here, as always, when the mammoth issue is ready to be digested.

Posted by Holly at 10:08 AM | Permalink | Comments (0)

Talk about bad timing.

The Associated Press headline reads, "Southwest Airlines to add link to Mexico's Volaris."

This morning Southwest Airlines issued a press release in which it announced that it was putting a link on its website which will allow customers to buy tickets on Mexican airline Volaris. The two had already announced plans for a marketing/codeshare agreement last year.

Just what I want to do today. Fly to Mexico.

Just what an airline wants today -- have their name in the headlines along with the word, "Mexico."

Posted by Holly at 9:04 AM | Permalink | Comments (0)

Photo: Health officials use heat-sensing cameras to scan arriving passengers at Tokyo's Narita airport.

The initial repercussion will be on those international airline passengers traveling to Mexico, but how far will the virus -- or simply the fear of the virus -- spread? Despite the milder cases of flu in the United States and Canada, compared to the nearly 70 deaths in Mexico, the declaration of a public health emergency by the Dept. of Homeland Security and World Health Organization will do little to encourage travelers to make short term plans to visit any affected areas of North America.

The full economic hit won't be known until after the medical crisis has passed and travel companies have reported traffic numbers. Just like SARS and other health outbreaks, airlines are in the trenches and have to respond fast to these threats. How much more can airlines and public health officials do to curtail the spread of swine flu and future disease outbreaks?

Posted by Jonathan at 7:02 PM | Permalink | Comments (0)

Good morning earthlings. We are putting the final touches on this week's long issue of PlaneBusiness Banter. Yes, it's our first official earnings issue of the first quarter earnings season, and both American Airlines and Southwest Airlines get a very long look in this week's issue.

I'll post a note here when it is finished and posted for subscribers to read.

But in the meantime, I just wanted to mention an extremely impressive metric that was posted by Allegiant Travel in the first quarter.

While it is impressive enough that the airline posted better than expected profits for the quarter late on Sunday -- as the company reported earnings of $28.2 million or $1.37 a share -- that is only the tip of the impressive news.

The really impressive statistic in these results?

The airline posted a 31.3% operating margin.

Got that?

If that mind-numbing number doesn't get your attention, I don't know what will.

More later. Have to go finish this week's PBB.

Posted by Holly at 8:09 AM | Permalink | Comments (0)

[Editor's Note: Talk about technology crapping out. It wasn't until I went to post the note about the Banter being posted that I realized this was NEVER posted on Sunday!

I finally found it -- posted on March 23.

Can I just tear the rest of my hair out now?

Then again, I have been so absorbed with techo issues for four days straight that until someone called me last night, I had forgotten the NCAA finals were on television.

I know. It's sad. Very sad. ;-)

But there's hope. I'm off to get my new logic board!]

How many of you have ever found yourself in a position where some form of technology failed you? A piece of software....a computer.... A gadget of some sort?

If you've ever been in that situation you'll understand when I ask the question,"Why is it that they always decide to quit, break, or stop working just when you need to use it the most?"

It's Sunday and as usual I should be wrapping up this week's issue of PlaneBusiness Banter. One problem. My laptop's display unit died last night. No see. No write. No nothing.

The good part? The friendly folks at the Apple Genius Bar were able to determine the problem this morning. Even better, Apple is picking up the tab to fix it.

The bad part? I was told to come home and clone my hard drive and bring the computer back in ... TOMORROW. And the new display unit won't be in stock until TUESDAY.

So here I sit with external drives daisy chained and two laptops chugging away ( had to use target disk mode to boot up the MacBook Pro because... Well.....there is no display!)

Meanwhile I sit and twiddle my thumbs and contemplate what kind of happy pills Apple must give those guys who work the Genius Bars. I don't see how they do it. And how I'm going to try and get an issue written.

And....how am I going to get all this done and be back to the Swamp to take my Dad for eye surgery at 6 a.m on Tuesday?

As the guy at the Apple Store said..."There are always Margaritas."

Posted by Holly at 3:30 PM | Permalink | Comments (0)

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

My apologies. This week's issue was delayed because the logic board failed in my laptop Saturday night. Sigh. However, the Apple Store just called, the logic board is in, as promised, and hopefully this means all techo issues will be resolved soon.

Posted by Holly at 3:18 PM | Permalink | Comments (0)

Wow. Thanks to all of you who have written me about your experiences with cable/satellite/fiber choices in the DFW metro area. The clear choice of my American Airlines' pilot readers who wrote me is FIOS. The clear choice of everybody else is ....FIOS. So no need for a vote of no confidence here.

There were also a few U-Verse fans thrown in here and there, along with those fanatics (and I admit, I'm on that border as well) who have a combination of satellite and cable. But those folks usually are in areas where the new fiber options are not available. In case you don't understand why someone would do this -- you'd have the cable for the fast internet capabilities, and back-up television viewing for when the hail starts to beat the crap out of the satellite dish.

And yes, I now am very well versed in the difference in technology between U-Verse and FIOS. With U-Verse, ATT brings new fiber to a switching location, and then the information is sent into the house using the old copper. But with Verizon FIOS, they bring all new fiber right to the house.

Technologically speaking, that seems the better way to go -- especially as all of us are only going to want more and more bandwidth going forward.

Thanks again!

Posted by Holly at 10:08 AM | Permalink | Comments (0)

It's official.

The Worldwide Headquarters of PlaneBusiness is moving to Texas, effective May 18th.

I guess I should say moving back, as Dallas is where PlaneBusiness was born in 1997.

As Delta Air Lines ALPA MEC Chairman Lee Moak and I talked about in Phoenix recently, I will always love New Orleans. And just as much as I love it, I hate it. Anyone who has lived there knows what I mean. A love/hate relationship with the city is normal. (Lee and his wife also live in New Orleans.) And yes, he chastised me severely for leaving. He also shared his Katrina stories.

But enough of my New Orleans angst. It will always be with me. Besides, PlaneDad is still over there. It's not like I won't be returning on a regular basis, thanks to those canyon blue birds that fly between here and there with the frequency of a shuttle operation.

So here is my question for those of you who live in the Grapevine area of DFW. What internet/cable/satellite combination are you using and what would you recommend?

I'm using the Time-Warner combination at the WWH branch office in Las Colinas now, but only because it's my only choice.

Clearly reliable high speed broadband connectivity is top priority, with a good HD selection second.

FIOS? Time-Warner? DISH and a DSL line? Direct and a DSL line? ATT Uverse?

Either drop me a line personally (hhegeman at planebusiness.com) or post your recommendations below.

Thanks!

Posted by Holly at 12:19 PM | Permalink | Comments (0)

Continental Airlines released their traffic report last night and the result was more or less what had been expected -- in terms of what analysts had expected the airline would post in terms of its estimated RASM figures.

The airline said that it estimates RASM was down, year-over-year, by between 18.5% and 19.5%.

This was just a hair worse than the estimate of both analysts Jamie Baker with JP Morgan and Bill Greene with Morgan Stanley.

As for basic traffic, the airline said that its domestic traffic levels were down 12.4%, while international was down 7.5%. Total traffic was down 10%. Capacity, meanwhile, was down 7% overall. This resulted in a decline in load factor of 2.7 points, down to 79.9%.

The rest of the sector will begin to roll out their bad traffic news today.

One thing to remember, however. As bad as these numbers are -- remember that Easter came very early last year, and all the revenue bump associated with Easter was in March last year. So comps were going to be difficult regardless.

Not to say that this makes these abysmal numbers any easier to swallow in the big picture, but jus' sayin.

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

It's Monday and this is our last day in the desert. Tomorrow, it's back to Dallas.

A couple of things. One, Terry Maxon posted a great summary of the proposed Southwest Airlines' pilot contract on his Dallas Morning News blog this morning. If you would like to read a copy of the entire summary of the tentative agreement that has been distributed to Southwest pilots, you can access one of those here.

Two, I am still working on this week's issue of PlaneBusiness Banter today -- as a result of my being involved with the Phoenix International Airline Symposium last week. I will post an update here later today when it is ready for subscribers to access.

In the meantime, a quick look at airline stocks this morning was not particularly pleasant, as the sector is down across the board. It would appear that Wall Street is a bit shaken this morning at the hard line the Obama administration has laid out for the U.S. automakers to follow. Airline stocks seem to be caught up in the downdraft.

Have to go finish this week's issue. More later.

Posted by Holly at 9:42 AM | Permalink | Comments (0)

This morning it was announced that Southwest Airlines and its flight attendants have come to terms on a new four-year tentative agreement.

In its announcement, the TWU said the deal "includes raises, a boost in the 401k contributions and improvements in leave, flexibility, and job security among other areas. The tentative agreement contained no economic concessions."

Posted by Holly at 5:28 PM | Permalink | Comments (0)

Today is the first day of the 2009 Phoenix Sky Harbor International Airline Symposium. Yours truly is sitting on the back row of what is a gorgeous meeting room at the Arizona Biltmore Hotel with Dan Reed from USA Today and Brett Snyder, aka Cranky Flyer. Susan Carey from the Wall Street Journal is sitting a few rows in front of us, and there are a few other media types floating around.

Today has been a good start to what is always one of my favorite industry get-togethers. There are no power point presentations, the dress is casual, and the company is great.

DOT secretary Ray LaHood spoke to a packed house at lunch. John Byerly, deputy assistant secretary for Transportation Affairs at the State Department seemed to be more excited than most at comments that LaHood made, as, according to Byerly, it was the first public confirmation that the new administration is firmly (and trust me, LaHood was VERY direct and forceful about the fact) behind two major items. One -- the new NextGen navigation system and two, the concept of "Open Skies."

According to John, who came over and talked to me after the speech, this was the first time there had been public confirmation of the "Open Skies" support. Not that there was that much danger this would not the case. But I can understand why he was happy. As he said, "Whew, that's going to make my job much easier!"

John, of course, is preparing to start work on stage two of the EU/U.S. air liberalization agreement.

Some people wondered whether or not DOT Secretary LaHood would fomally announce the symposium moderator Randy Babbitt's nomination as the new FAA administrator at the conference, but there was no official announcement today.

However, that's not to say that LaHood did not discuss the topic. He made a point to discuss the extensive and grueling "vetting" process that nominees have to endure. My take on his comments at lunch were that this was why Babbitt was not announced formally -- the process has simply not been completed.

For those fans of old line airline types, Bill Franke was on the panel before the one that is speaking now. Yes, a real live recipient of the PlaneBusiness Ron Allen Airline (Mis) Management Award. That's okay. United's Glenn Tilton is our luncheon speaker tomorrow. As most of you know, he received a special PlaneBusiness Greed Award the year United came out of bankruptcy.

Meanwhile yours truly will participate on the labor management panel tomorrow afternoon.

Ye haw!

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

Just a friendly bit of self-promotion here today. In last weekend's issue of PlaneBusiness Banter I talked about how I wondered if the formal announcement of former ALPA President Randy Babbitt being tapped for the FAA Administrator's position would be made public during this week's Phoenix International Airline Symposium.

Babbitt has been involved with the event for many years. With many different companies.

Yesterday, readers of the Wall Street Journal found out that Babbitt was now apparently the administration's choice to lead the agency.

Score another one for us.

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

Yesterday was Media Day at US Airways. And a fine time was had by all.

Really.

Considering that the airline did not have any major news to release, the day was nonetheless helpful. Or as one newbie to the event told me late yesterday afternoon, "I'm glad I came. It helped me to understand where the airline sees itself and the niche it occupies much better."

The format of the day was much the same as it always is. The day opens with remarks by CEO Doug Parker, which are then followed by presentations by Scott Kirby, President, Robert Isom, COO, Derek Kerr, CFO and C.A. Howlett, the airline's government affairs VP. During lunch, all the top execs of the company then make themselves available for questions and answers from the floor.

After this -- the airline had a panel of those staffers who were most directly associated with the airline's response to the Flight 1549 crash landing into the Hudson River on January 15th. It was the perfect way to end the day as everyone involved, including Parker, gave their accounts of where they were and what they did after the news hit that the aircraft was in the water. Most interesting were the stories that we had not heard before -- such as the fact that Captain Sullenberger was initially told by the company's representative at the ops center when he called in that he would have to call back -- the operations center was really busy because there was a plane down. Sully managed to convince them that he was well aware of that fact.

I'll talk more about Doug Parker's opening comments in this week's PBB, but the Cliff's Notes version would be that airline managements need to stop comparing the financial performance of their respective airline to industry peers and start managing airlines like any other profitable business.

Of course, the fact that Congress tends to look at the airline industry as a type of "public good" and not an industry that is run for the benefit of shareholders is a big problem. He talked a great deal about this, and I agree, if the airlines are going to be deregulated, then they need to be truly deregulated. They still aren't, in a lot of ways.

As for the airline itself, it estimates that it will make between $400 and $500 million this year in ancillary revenues, and no, it has not been able to detect any type of "booking away" as a result of their additional baggage fees. The airline also said that this year, any new ancillary revenue changes will probably only be made in the area of seat selection -- as the airline continues to work on new technology that will allow passengers even more choice, in terms of price and seat selection.

The big story of the day was the airline's quite remarkable turnaround in operations in 2008. We're talking time of departure, time of arrival, lost bags, all those things. We told you guys last year that we liked this guy Robert Isom. And this year the numbers proved that the new COO of the company knows his stuff.

For 2009, the plan is to keep improving these operational aspects of the airline -- with more focus being put on those aspects of the customer experience that are direct -- web site ease of use, ease of rebooking, those types of things.

The most interesting thing I took from Isom's talk this year? I remember at one point in 2008, there was some grousing from other carriers that the only reason US Airways was doing so much better in the DOT statistics was because the airline had padded their block hours. Even US Airways' pilots jumped on the bandwagon, accusing the airline of being "inefficient."

Yesterday, as Robert showed us graphically, while yes, the airline did initially pad the block hours a bit earlier in the year -- the airline actually not only went back to the "pre-padded" schedule in the last part of 2008, but it even cut block hours to a level lower than when the airline started 2008. And the airline still managed to post very respectable operational numbers.

Oh, and finally -- the really important news.

Monday night the airline held a dinner for those of us in town for the event at Cadillac Ranch in Tempe. Cadillac Ranch has a mechanical bull. As I forecast in this week's PBB, yes, Elise Eberwein, SVP of Communications and People at the airline rode the bull. Yes, Scott Kirby, President, rode the bull.

But surprisingly, neither won the contest.

Al Hemenway -- the airline's VP of Labor Relations took the prize. In belted khaki chinos no less.

I was impressed.

Even after repeated second and third attempts by Elise and Scott, and other attempts by media folks and US employees, Al hung on to win the prize.

Only appropriate that he persevered, considering he deals with labor relations, right?

I'll post some pictures later. Need to get out of here. Have to go check in over at the Biltmore for the Symposium. Talk to you later.

Posted by Holly at 12:20 PM | Permalink | Comments (0)

As UBS analyst Kevin Crissey said in a research note this evening, "The headline figure is bad."

Ah, yeah. I think you could say that.

Tonight Continental Airlines issued an update to its guidance. The company now expects March passenger unit revenue (RASM) to be down more than 18% year over year. This -- despite the airline's capacity cuts. And everybody's else's capacity cuts as well.

Continental also said that it is not yet seeing any kind of "stabilization in demand" that some other carriers have indicated of late they are experiencing.

On the plus side, the airline did say that they should beat their own cost guidance for the first quarter.

Woo hoo.

Posted by Holly at 8:58 PM | Permalink | Comments (0)

One of the best airline industry conferences around is the International Society of Transport Aircraft Trading. ISTAT for short.

Don't let the long name confuse you. This is the group you join if you sell airplanes, lease airplanes, want to lease airplanes, appraise airplanes, you name it.

As I have told PBB subscribers for years, it never matters what the U.S. airline industry is doing at any given point in time -- you come to one of these conferences and these are the guys who make money whether the economy is up or down. Most recently, the downturn after 2001 didn't particularly hurt their pockets either -- as aircraft sales continued to soar internationally, even if U.S. airlines more or less stopped ordering aircraft.

But this year, for the first year that I have ever experienced --and I have been coming to these for more than 10 years -- the tone is definitely different. Scottsdale is still gorgeous, but the mood here this week is definitely not what one usually encounters at an ISTAT function.

This year, as one person told me this morning, "It's scary."

Adam Pilarski, Senior Vice President with Avitas summed it up by saying, "It sucks. That's an industry technical term by the way."

Fred Klein, President of Aviation Specialists told me before his stint on the ISTAT Appraiser's Forum, "I can't believe that a handful of U.S. financial entities have managed to bring down the whole fucking worldwide financial system."

I asked, "Fred, can I quote you on that?" Fred, "Yes, damn it."

That kind of gives you a feel for the mood of the crowd. Deals are not getting done. Financing has dried up. Many aircraft values are down 20% since this time last year.

I have to hand it to the guys who put on the conference this year though. Is that an off-the-wall backdrop on stage or what? Doug Runte, Managing Partner with Piper Jaffray did look a bit uncomfortable when he was asked to come through the center of the turbine to the sounds of Coldplay's "Viva la Vida" though. Doug moderated the Appraiser's Panel. Doug's a good guy. And an art history major to boot.

Big Catch for Tomorrow: The Leeham Report's Scott Hamilton will be interviewing ILFC's Steve Hazy tomorrow on stage. Will not want to miss that.

Tuesday Night: Robert Crandall, former Chairman and CEO of American Airlines will be honored by ISTAT with a lifetime achievement award. And guess who else is supposed to be in the house? Yep. Herb.

I would bet money we are going to have a little roast of Bob before the evening is over tomorrow night -- compliments of Mr. Kelleher.

Posted by Holly at 7:05 PM | Permalink | Comments (0)

This just in fromMediaBistro.com's "Revolving Door" Email Blast:

HarperCollins imprint William Morrow will give [US Airways Captain] Chesley "Sully" Sullenberger $3 million for two books: one memoir, one full of his "inspirational" poetry."

Guess this means he can probably stop moonlighting as an aviation consultant in an attempt to make ends meet.

Posted by Holly at 1:50 PM | Permalink | Comments (0)

Today the Wall Street Journal ran a story which seems to confirm what we had assumed was going to happen, as we had discussed in PlaneBusiness Banter a number of times over the last several months.

The two "U.S." firms that invested in Richard Branson's Virgin America operation have apparently taken advantage of the fine print in their investing agreement with the airline and headed for the hills.

These investors controlled 77% of the airline.

Since U.S. carriers must be at least 75% owned and controlled by U.S. investors, this departure would seem to place Virgin America's status as a US-owned carrier in jeopardy. Unless the airline has somehow been able to find other U.S. based investors to fill the void. But as far as we have heard, that has not happened.

Word on the street for the last several months has been that Black Canyon Capital and Cyrus Capital Partners were going to pull the trigger on their investment. Heck, in my opinion they would have been crazy not to. The two negotiated a sweet "out clause" when they put money into the venture.

By pulling the plug now, the two were entitled to receive all of their original investment back, plus 8% interest, amounting to roughly $150 million combined between the two.

Not bad, considering the airline the two "invested in" has done nothing but lose hundreds of millions of dollars since its start-up -- a fact the airline couldn't hide any longer after it was finally forced to submit its Form 41 DOT data to the DOT recently.

A normal person could conclude that if, in fact, Black Canyon and Cyrus have exited the mood-lighted building, Virgin America would now either a) have new investors already lined up or b) be in violation of DOT ownership requirements.

It is important to note that Virgin has not issued a statement or release trumpeting the corralling of any additional U.S. investors.

One would think that the airline would have been out in front of this -- announcing new money -- as a way to deflect talk of its being in violation of DOT ownership regulations or of being in danger of a possible shutdown.

But they have been noticeably mute.

Which is exactly why we are talking today about how it would appear the airline is, just as Alaska Air Group claimed in a recent complaint to the DOT, not in compliance with the DOT foreign ownership rules, and two, yes, this means the airline is in danger of being shut down.

Posted by Holly at 10:36 AM | Permalink | Comments (0)

A shout out to Hawaiian Advertiser reporter Rick Daysog today.

Because of Rick, the "behind closed doors" bankruptcy agreement that saw Yucaipa Companies be granted the intellectual property rights to Aloha Airlines, including the airline's name, was thrown out by U.S. Bankruptcy Judge Lloyd King this week.

You may recall that we talked about this questionable deal back in November and December. The deal would have resulted in Mesa Air Group taking over the Aloha Airlines name -- because Yucaipa had already struck a deal to license the name to Mesa. Yucaipa was the largest shareholder in Aloha.

Judge King, emphasizing that the auction to buy Aloha's intellectual property should have been a public process, blasted the attorneys conducting the auction for refusing to allow Honolulu Advertiser reporter Rick Daysog into the proceedings. Daysog wrote a letter to the court voicing his complaint about his being excluded from the proceedings.

King ruled that the auction must be reheld.

Mesa apparently wants to obtain the name, and rebrand its regional Hawaiian airline go! -- with the Aloha name. A fact that has not gone over very well with a lot of people in Hawaii, including former employees of Aloha, and, apparently, Judge King, who blasted the proposed deal with Mesa in the first hearing held on the deal in December, where King postponed approving the auction the first time. Many in Hawaii blame Mesa for Aloha's demise.

Kudos to Rick. Keep up the good work and keep working to keep those deals out in the open.

Posted by Holly at 3:13 PM | Permalink | Comments (0)

That huge sucking sound you hear coming from the airline industry today is the sound of airline stock prices falling off the ledge.

We only thought airline stocks had been hammered prior to this week.

When last we looked here are just a handful of the declines we were looking at: US Airways, down 16%, trading at 1.99; Alaska Air Group down 17%, trading at 15.04; Continental down 13%, trading at 7.31; Delta down 10%, trading at 4.01; Hawaiian down 13%, trading at 2.25; JetBlue down 11%, trading at 2.86; Southwest down 4.41, trading at 4.99; and United Airlines, down 11%, trading at 3.75.

Yeoww.

This week the winged ones began to report their traffic numbers for the month of February, and folks, even taking into consideration that there was one more day in the month of February last year -- it was a leap year -- the numbers coming out this week have scared the bejesus out of airline stock traders and investors.

How bad have the traffic numbers been? Here is the latest rundown.

(RPMs are revenue passenger miles, ASMs are available seat miles. RPMs represent traffic, while ASMs represent an airline's capacity.)

American Airlines RPMs down 13.5% ASMs down 10.1% Load factor down 2.9 points to 73.9%

American Eagle RPMs down 14.1% ASMs down 9.1% Load factor down 3.8% to 65.2%.

US Airways   RPMs down 9.3% ASMs down 9.3% Load factor steady at 77.2%

Delta Air Lines RPMs down 11% ASMs down 7.8% Load factor down 2.7 points to 74.3%

United Airlines RPMs down 15.2% ASMs down 14% Load factor down 1 point to 73.2%

Southwest Airlines RPMs down 6% ASMs down 6.5% Load factor was up 0.5% to 69.1%

Continental Airlines   RPMs down 13.2% ASMs down 8.9% Load factor fell 3.5 points to 72.9%

AirTran RPMs down 13.6% ASMs down 9.1% Load Factor down 3.9 points to 74.2%

JetBlue   RPMs down 8.3% ASMs down 5.5% Load Factor down 2.3 points to 74.5%

Then of course there is PlaneBusiness favorite Allegiant Air. The airline continues to buck the trend, as it reported that its RPMs increased 9.8% in February, while the airline increased capacity by only 5.2%. This resulted in a nice 3.8 point increase in load factor to 90.2%.

Other than renegade Allegiant -- the two airlines that clearly did the best job in February at managing capacity reductions with declines in traffic were Southwest and US Airways.

But as we see today, that has clearly not helped the stock price of either airline.

Posted by Holly at 2:43 PM | Permalink | Comments (0)

Yikes. It wasn't the bad weather up and down the East Coast today that made investors shiver.

The folks on Wall Street did a find job of doing that on their own.

And not just for airline stocks.

When all the shouting was over, the Dow Jones Industrials ended the day down 299.64 points, or 4.2%. This brought the Dow down to 6763.29. This was the first time the Dow has closed below 7000 since May 1, 1997.

Meanwhile, the S&P 500 fell 4.7% or 34.27 points, while the Nasdaq lost 4% or 54.99 points, closing at 1322.85.

The big news pushing stocks lower today concerned insurance giant AIG. The federal government announced that it was increasing its stake in the company by some $30 billion. The total for both U.S. Treasury and Federal Reserve investments in the cratering financial giant is now about $163 billion.

The market was in no mood to hear this today, and stocks took the brunt of investors angst as a result.

In the airline sector, the carnage was deep, and it ran pretty much across the board.

Of all the stocks we track at PlaneBusiness, none, not one, was up for the day.

The biggest losers for the day included: AirTran, which lost 15%, closing at 2.54; Hawaiian Airlines, which also dropped back 15% to close at 2.68; US Airways which lost 13%, closing at 2.47; JetBlue, which was down 14% to close at 3.29; Pinnacle, which lost a whopping 20%, closing at 1.12; ExpressJet, which was down 10%, closing at 1.22; and United Airlines, which lost 13% to close at 4.26.

Whew.

That's all I can say.

Oh, and Southwest shares, which are plumbing unbefore seen depths of late, closed at 5.52, down 6% for the day.

Posted by Holly at 6:45 PM | Permalink | Comments (0)

"In 1999, there was evidence of scale economies for connecting flights. Conditioning on other variables, the marginal cost of serving a connecting passenger on a long route was $18 less than that of a direct passenger, or roughly 12 percent of the average marginal cost.

The cost advantage of connecting flights disappeared in 2006. Conditioning on other cost shifters, the marginal cost of a connecting flight was $12 more expensive than that of a direct flight. The change is probably driven by the increasing fuel cost in the sample period. Since the fraction of fuel consumed at the takeoffs and landings could be as high as 40 percent, rising fuel costs offset the benefit of denser traffic created by connecting flights."

So says researchers Steven Berry at Yale and Panle Jia at M.I.T.

In a new working paper the two have published entitled, "Tracing the Woes: An Empirical Analysis of the Airline Industry, " they confirm that it used to be cheaper for an airline to place a passenger on a connecting flight -- rather than a direct one. But by 2006, that advantage had gone away. Why? One simple answer: the increasing cost of fuel.

According to the two researchers, "Channeling passengers through a hub airport allows carriers to increase the load factor. But it also requires extra fuel, both for the two extra landings and the longer distances passengers have to travel. The authors estimate that in 1999, the marginal cost of servicing a connecting passenger on a long route was $18, or about 12 percent, lower than that of servicing a direct passenger. That cost advantage disappeared in 2006, probably because fuel was more expensive. In 2006, servicing a connecting passenger cost $12 more and reported inflation-adjusted operating costs increased from 11.4 cents per available seat mile to 12.5 cents."

The authors estimate that by 2006 the legacy airlines were transporting 4 percent more passengers with 9 percent less revenue and 19 percent less in profit than in 1996. And, despite the bankruptcies and mergers in the early 2000s and the sharp downturn that followed 9/11, the average revenue-passenger-miles divided by the available-seat-miles of a flight, known as the load factor, rose from 71.2 percent to 79.7 percent from 1999 to 2006. It reached a record high of 80.5 percent in 2007.

There is a summary of the paper available for free here. The entire work is available for $5. Spend the money and buy it. It is well worth the read.

Posted by Holly at 4:51 PM | Permalink | Comments (0)

Now I know the rest of the story.

This week one of our friendly airline geeks on a list I am on sent out some disturbing pictures in which it appeared someone at United AIrlines decided to take a pressure washer to one of the airline's Boeing 767s -- knocking out windows and generally making a huge expensive mess.

But that wasn't a pressure washing. It was from fire hoses.

Kieran Daly wrote on his blog, Unusual Attitude this week that he was told that United took a Boeing 767-300, and gave it the full customer-facing treatment. New seats, interior fittings, and best of all,"Panasonic's all-singing, all-dancing in-flight entertainment." All of this was done at its Chicago maintenance base.

That's when all hell broke loose.

If you would like to read the official MX write-up of the damage, you can access it at Kieran's blog. It runs for pages and pages. And pages.

Posted by Holly at 5:18 PM | Permalink | Comments (0)

Poking our head around the damage from today's Wall Street activities, it was not a good day for the airline stocks, as almost every one of them ended lower for the day.

While the Dow Jones Industrials were down as much as 200 points earlier in the day, the Dow ended the day down 80.05 points, or 1.09% for the day.

However, the Dow Transports and the AMEX Airline Index both had a more miserable run of it. The AMEX Airline Index ended the day down a little more than 4%, closing at 16.43, while the Dow Jones Transportation Index ended down 4%, closing at 2602.06.

The top losers for the day included: AirTran, which lost 9%, closing at 3.27; Alaska, which lost 7%, closing at 22.27; JetBlue which lost 7%, closing at 4.26; US Airways, which lost 10%, closing at 3.30; Southwest Airlines, which dropped another 7%, closing at 6.07; and Continental, which ended the day down 6%, closing at 11.15.

Ugly day.

Posted by Holly at 3:59 PM | Permalink | Comments (0)

Ahhh, it's that time of week again. This week's issue of PlaneBusiness Banter is now posted. Subscribers can access this week's issue here.

Posted by Holly at 1:27 AM | Permalink | Comments (0)

Posted by Holly at 4:17 PM | Permalink | Comments (0)

It's official. For those Allegiant fans out there, you know the airline talked on its recent earnings call about setting up a new base city. Last week Cranky Flier went public with his guess -- and his guess wasn't really much of a guess after the airport manager in Sioux Falls went public about it being Los Angeles. Duh.

So why was the airport manager in Sioux Falls talking about it anyway?

Because on Allegiant's website the airline had asked folks to guess what their new base city was going to be. The only information they were giving out last week is that the airline was going to start service out of the new base city to 12 destinations. And yes, one of those destinations just happened to be ....Sioux Falls.

Here are the 12 cities that Allegiant will begin operating to out of LAX:

1, Bellingham

2. Billings

3. Des Moines

4. Fargo

5. Grand Junction

6. McAllen

7. Medford

8. Missoula

9. Monterey

10. Sioux Falls

11. Springfield

12. Wichita

Hmmmm. This should be interesting.

Posted by Holly at 12:06 AM | Permalink | Comments (2)

I wrote this week in PBB that the last week or so has been one where we've been focused on the regional sector. First, we saw again how poorly most of the regionals performed in the recent DOT Airline Consumer Travel Report. Particularly Comair, Atlantic Southeast and American Eagle.

Then we had the less than positive numbers reported by the regional airline that used to outperform all the other regionals -- hands down. While SkyWest reported a profit for the fourth quarter last week -- the future looks murky for the regional powerhouse in terms of growth, as Delta AIr Lines continues to pull back on its contract flying. Even, as we learned in the airline's call, below contract minimums.

Top this off with Mesa's share free fall last week, in which shares of the airline dropped to 4 cents a share -- and Pinnacle suffered a crash involving its Colgan operation, and well, it was a week when the regionals were continually in the forefront, but not for very positive reasons.

Today the regional airline that has been consistently posting the strongest results in the sector for the last year or so, Republic Holdings, reported its earnings for the fourth quarter.

So how did the airline do?

The good news is the airline posted a profit. It also posted a 9.1% operating margin. Excellent. (Although that margin was 1.3 points lower than the fourth quarter of 2007).

The bad news is that this profit was much less than the one the airline reported for the same period in 2007, and that growth prospects are, well, you know.

Republic reported today that net income slipped 21.7% for the fourth quarter, to $18.9 million or $0.56 a share.

This compares to the fourth quarter of 2007, when the airline posted a profit of $24.27 million, or $0.65 per share.

However, on the positive side, the results were better than what analysts had forecast. Consensus had the airline coming in at around a $0.47 a share profit.

The company took delivery of eight new E175s during the fourth quarter, while it removed seven CRJ200s and the last two E135s from service. As of Dec. 31 Republic operated 221 aircraft, only two more than at the end of 2007.

Overall, in listening to the call, we were once more reminded of just how difficult it is to run a regional airline these days. There really is no script beyond 30 days, it seems, and your major partners are concerned with one thing -- trying to squeeze as much profit out of their operations as possible. If that means putting more pressure on their regional partners, then so be it. The same was true with Republic in the fourth quarter. And as utilization levels drop, costs are going to go up.In the case of Republic it also got hit with Frontier's bankruptcy this year. All of a sudden there were a lot of planes coming back to them -- what were they going to do with them? How much were the carrying costs going to be on these aircraft?

But having said all that -- the airline really did do an excellent job of navigating a rough quarter.

The problem now is -- what about 2009?

For those of you with really inquiring minds, you can read the public posting of the airline's earnings call transcript here.

Posted by Holly at 11:51 PM | Permalink | Comments (0)

Hi all. Whew. It's been a busy week or so for me. Tiring one too. As most of you know, earnings continue to roll out in the sector. Today we heard from Republic Holdings. I'll talk about their numbers in the next post.

In addition, yours truly flew home to the Worldwide Headquarters last week, and within 12 hours was sick as a dog. Head, eyes, ears, nose. Ugh. My head's still killing me today.

Yesterday morning it was clear something was not right as PlaneBusiness Banter subscribers went to pull this week's issue and saw the "tease" page for last week's issue. Duh.

Two of the reasons I had to come home this week are teeth-related. As in, dentist and orthodontist. Yes, it's those damn braces again.

So here I am, at the orthodontist's office, with wires sticking out of my mouth, newly tightened coils stretching across my front teeth, and an assistant hovering over me with pliers that looked like they came from Home Depot, and my phone goes off. Then it goes off again. Then it goes off again.

I immediately said to myself, "Self, what didn't I do before I left the house in a tizzy?" Self knew immediately. I had failed to update the front page of the main website with this week's issue information, and I had forgotten to update the "tease" page that subscribers see when they log in.

Wasn't much I could do about it at that point.

So I let the doctor and his assistant finish their torture and finally I was able to get up and call back to the office and walk David, our subscription manager, through what he needed to do. But not before a SLEW of subscribers had sent me notes of woe at being locked out from this week's issue.

Sorry. My fault.

But see, I was sick. That's my excuse.

Okay smart guys. I know. Some of you out there are saying, "So what's new?"

Anyway, this week I should be more visible here on the blog. Last week was spent working with a number of folks on our new PlaneBusiness.com site. And yes, you'll notice that we're starting to move the furniture around here on the PlaneBuzz page just a little bit as well. We're now a three column format -- not a two column one.

More tinkering to come.

Posted by Holly at 3:01 PM | Permalink | Comments (0)

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

Posted by Holly at 10:17 AM | Permalink | Comments (0)

Hi guys. The last earnings-filled issue of PlaneBusiness Banter for the quarter will be posted this morning. We're going through the final editing process now.

Next week we'll be back on our usual weekend publishing schedule.

Surprise of the week? Vegas? What problems with Vegas? Who's having problems with Vegas? WestJet said in their call last week that they are still doing very well with their Las Vegas routes.

Go figure.

Be back here soon.

Posted by Holly at 8:08 AM | Permalink | Comments (0)

The industry suffered yet another crash last night, as a Continental commuter aircraft operated by Colgan Air apparently dove into a house shortly before it was scheduled to land in Buffalo. All 49 crew members and passengers on the aircraft were killed, as was one person who was in the house.

The aircraft involved was a Bombardier Q400.

Bloomberg reports this morning that the aircraft, registration number N200WQ, was ordered by Pinnacle Airlines in 2007 and handed over to the carrier’s Colgan Air unit on April 16 last year. Colgan was operating it on behalf of Continental Airlines, Inc.

Posted by Holly at 8:39 AM | Permalink | Comments (0)

Hello everyone. It's Friday the 13th.

I had a note yesterday from a reader who asked simply, "What are you doing?"

I don't think he was suggesting that I put a webcam on the blog, but I can understand his question, considering I haven't been around here much this week.

Well, here is what I have been doing.

MySQL, PHP, response templates, subscriber list merges.

Yes, we're getting down to crunch time on some major upgrades to our site, and because I have been so caught up with earnings as of late, this week was the week devoted to spending a lot of time on the website project.

And yes, you'll start to see a couple of changes here on PlaneBuzz as well. Woo hoo. We'll finally do something more than the out of the box template. I know. I don't know what's gotten into me either.

Must be the fact all our major banks in this country are probably insolvent.

Or something like that.

More in a bit.

Posted by Holly at 8:29 AM | Permalink | Comments (0)

This week's 70-plus page issue of PlaneBusiness Banter is now posted. Come and get it while it's hot. This week we take a closer look at the recent fourth quarter earnings results reported by JetBlue, AirTran and Alaska Air Group. Two of the three got a thumbs up from us for the quarter. Which two were they?

We'll also let you know which banks have the biggest exposure to ILFC.

We'll also talk about the case of the mysteriously missing Southwest Airlines' pilot TA.

All this, and more.

Subscribers you know the drill. You can access this week's issue here.

Aren't a subscriber? Tired of being laughed at because you don't know what's going on in the airline industry? Click here to become a subscriber. You'll instantly amaze your co-workers with you knowledge. And hey, you'll find out some of our secrets. Like -- how come some airline CEOs get PlaneBusiness Brownie Points and some don't? Or......Who was seen drinking down in the PlaneBusiness Double-Digit Losers Basement Friday night?

Send us a Valentine -- airline style. Subscribe to PlaneBusiness Banter.

Posted by Holly at 11:38 PM | Permalink | Comments (0)

Somehow I think there are a few of you out there who are. If you aren't, turn on "60 Minutes" on CBS.

Posted by Holly at 6:30 PM | Permalink | Comments (0)

I know. I know. I was AWOL Tuesday. I had a good excuse. I was recovering from writing 74 pages of copy in three days. I also was lucky enough to share my breakfast and his lunch with Terry Maxon, airline reporter for the Dallas Morning News. He and I commiserated about the sad state of the media business, airline union/management relations, the airline business in general, and well, just the sad state of the world in general. Heh.

Not really. It's always good to sit down and talk with Terry. He makes me laugh. After my marathon writing session this weekend (which was interrupted only by the Super Bowl), I needed a good laugh.

Terry and I agreed that this quarter's earnings calls for the airline industry, as a group, were one of the most mind-numbing that we could remember. Last week analyst Gary Chase with Barclays said it had been a "tiring" earnings season.

That was being kind.

Thank god for Allegiant's earnings call. That's all I can say.

As for the rest of the pack, it was a quarter to forget. For the most part. Enough tap dancing about how bad demand is, but you don't want to admit. Enough talk about hedging. Enough talk about liquidity. Enough talk about how well you would have done, if it hadn't been for ______________. (Fill in the blank.)

Or as Terry so eloquently put it in his Idle Thoughts for Friday last week, "After listening to all the airline earnings reports, I've decided that I'm rich, excluding special charges and one-time items."

Back to business in our next post.

Posted by Holly at 1:13 PM | Permalink | Comments (0)

This week's PlaneBusiness Banter -- all 70 plus pages of it -- can now be accessed here. Subscribers know the drill.

Me? I'm going for a long walk. If I hear the word "hedging" one more time, I'm going to scream.

Posted by Holly at 9:05 PM | Permalink | Comments (0)

Just a publishing note for PlaneBusiness Banter subscribers. This week's issue will be posted later today. Yep, it's one of those really extended issues -- with our usual full earnings call coverage.

in the meantime, continue to discuss the game last night amongst yourselves. It wasn't pretty was it? No, this one was more like a heavyweight fight. All the way to the end. Congrats to the Steelers. Kudos also to the Arizona Cardinals, who more than proved the point that they deserved a spot in the final dance.

More later folks. I've got to get back to work and get this week's issue out the door.

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

We hear from one of our Southwest Airlines' friends that the pilots at Southwest, who are represented by their own independent union, SWAPA, and the airline, have come to terms on a new tentative agreement.

Here is an excerpt from Carl Kuwitzky's blog that was blasted to pilots this afternoon. Carl is the President of SWAPA.

"Last night SWAPA agreed in principle on a new five year contract with the Company through August 31, 2011. This new contract includes the following: stronger scope language as well as codeshare restrictions not previously released including no domestic codeshare, increase in pay rates including retroactive pay, increase in 401K match, improved disability program and streamlined/improved scheduling and work rule language. Additionally we have retained the Lance Captain program and ELITT albeit with changes to current language. Our Negotiating Committee (NC) is continuing to negotiate final language and when that work is completed will present a Tentative Agreement to the BoD for approval. If the BoD approves the new contract it will be sent to the membership for final ratification. I anticipate a BoD meeting in late February or early March to review the TA."

This news comes as it was announced today that the mechanics at the airline approved their proposed TA with the airline by a 61% majority.

Posted by Holly at 3:04 PM | Permalink | Comments (0)

The headline on Gary Chase's research wrap-up piece today was entitled, "Thoughts After A Tiring Airline Earnings Season."

That is exactly how I feel today, after the onslaught of reports this week. Particularly yesterday's almost non-stop roll out of reports.

Chase, airline analyst with Barclays, commented today, "Mercifully, airline earnings season is over."

Not quite. We still have a number of regional airlines to hear from. Then there are all the international carriers who report on a very different schedule. But as far as the big guns in the U.S. are concerned, yes, the noisy din that was created from a slew of very "noisy" earnings reports this quarter has now, finally, ended.

I'm still not sure which airlines we are going to take a closer look at in this week's issue of PBB, because we had too many report in during the week. The issue would simply be too unwieldy in terms of size if we were to go into our usual detail on all eight. But after finishing up the last earnings transcript reading this morning, I'll pick four for this week, and the rest will get their look-see next week.

But let's get away from the specifics for a minute and look, as Gary did today, at the overall sense we got from listening to the calls over the last two weeks.

I'd sum it up by saying this: there is a lot of fear out there concerning demand. The immediate revenue landscape looks frightening and it's not clear where the revenue versus demand level is going to settle. And god forbid if the price of oil starts to move up again.

As Gary said in his note this morning,

"We have entered the stage of the airline story where the thesis gets tested. We all know it takes a lot of revenue erosion to offset the benefits the industry will reap from extraordinary capacity reductions and breathtaking declines in fuel (now materially more than 9/11). However, now comes the hard part. The part where we actually have to observe the revenue declines rather than analyze sensitivities in our models. With revenue fading quickly, as it always does, faith is suddenly hard to come by.

The near-term isn’t going to be easy, in our view. The next potential catalysts will likely come on the revenue front and as CAL previewed yesterday, the RASM comps are going to be negative. In fact, our largely unchanged forecasts contemplate negative RASM comps in every single month of the year, with the exception of November. We currently believe 1Q will see the toughest comparisons."

Translation? If you thought the fourth quarter numbers looked bad -- just wait until mid-April when the first quarter numbers roll out.

However, as far as we can tell -- most analysts continue to hold onto the belief that the benefits that come from the drop in the price of oil will more than compensate for whatever drop in demand the airlines continue to feel.

One PlaneBusiness Banter subscriber wrote me this week, "I think these guys on Wall Street are not connected to the real world. In your last issue in December you asked your readers to tell you how they felt about 2009. And you said yourself that you were surprised at the overall level of negativity readers expressed. I wasn't. And I think your readers were, and are, closer to the mark than these guys who make their living transposing spreadsheets and getting lost in the numbers are."

Thoughts? I think it's time we open this up to PlaneBuzz readers for their take. Is 2009 still going to be the blockbuster earnings year for the airline industry that every Wall Street analyst on the planet said was going to be the case?

As always, you can comment here on Buzz -- or you can send your notes to me directly.

Posted by Holly at 11:34 AM | Permalink | Comments (0)

Delta Air Lines was not the only airline that reported earnings yesterday.

One of our PlaneBusiness Banter stock faves, Allegiant, took its turn at the 2008 Fourth Quarter Confessional. The big difference with Allegiant? There were no "Hail Marys" proscribed as penance for their less-than-satisfactory performance.

Quite the opposite.

The airline with the screwy business plan once again posted what I thought were very strong earnings. Allegiant Travel Co., the parent of Allegiant Air, reported that earnings nearly quadrupled for the quarter, on 21% higher revenue.

The company posted earnings of $18.2 million, or $0.88 a share. This was up from $4.8 million or $0.23 a share the year before.

Operating revenues were up 21.3% while operating expenses were down 1.2%. The airline saw operating income soar 373.6%.

And remember what the price of oil was doing during the fourth quarter. Then remember that yes, these are the guys who fly those gas-guzzling Maddogs. (MD-80s).

Load factor? Up a sizzling 8.8 points over the fourth quarter of 2007 -- to 86.5%.

And the astonishing results just continue to go on and on and on.

I'll take a full look at the airline's results and talk about their earnings call in this week's PBB.

In the meantime, kudos to the management at Allegiant. I've said this before, and I'll say it again -- this is one of the few management teams in this industry that knows who they are, what their business model is, and how their airline makes money. Or doesn't.

Posted by Holly at 1:56 PM | Permalink | Comments (0)

While analysts continue to wax poetic about revenue forecasts for the industry in 2009, the market took a baseball bat to many of the major airline stocks today -- after Delta Air Lines rolled out its disappointing numbers for the fourth quarter.

This morning Delta reported it lost $1.4 billion in the fourth quarter or $2.11 a share. This compared to a loss of $70 million or $0.18 a share for the previous year. This number included $904 million in charges related to employee equity awards that were a part of the Delta/Northwest deal.

Excluding special items, Delta lost $340 million or $0.50 a share. This was much worse that the $0.34 figure that had been forecast in the analyst consensus. However, Delta said that the analyst consensus figure did not take into consideration a 12 cent per share loss related to the "non-cash impact of purchase accounting."

Okay.

But as bad as these numbers were, this was not the news that has pushed shares of Delta, and other airline stocks to the floor today.

The news that is doing that is the "forward guidance" comments the airline made today.

You know .. little things like...."unit revenue projection is much worse than what had been previously suggested." When it was "previously suggested" ...in December.

Traders don't like to hear things like that. If those forecasts are that far off after only one month, that is not a good omen.

As a result, shares of Delta are taking a sharp dive today, down 20% as I write this, trading at around 7.95.

And because what affects one major airline is assumed to affect all of them to one degree or another, shares of US Airways are also getting punished, as they are down 17%, trading at 6.36. Shares of AMR are not exempt, as they are now trading down 13%, hovering around the 6.27 mark.

Shares of Continental are not being left out of the carnage today either. Shares here are now trading down about 16%, at 14.17, while shares of United are trading down 11%, around 10.85.

Posted by Holly at 1:18 PM | Permalink | Comments (0)

PlaneBusiness Banter Subscribers can now access this week's mega-earnings issue here.

Posted by Holly at 9:47 PM | Permalink | Comments (0)

I'm working on this week's PBB. This week's Market Review section to be more specific.

Just thought that it was worth noting that while shares of Southwest Airlines bounced around all over the place this week -- when all the shouting was over, shares of the Dallas-based airline ended down 7% for the week, closing today at 8 bucks even.

They were not even a member of the select PlaneBusiness Basement Double-Digit Loser Group for the week.

No, the airline stock that took the award for posting the biggest loss for the week was AMR, parent of American Airlines, which saw shares drop a hefty 33% for the week, ending the week at 7.62.

This was far and away the worst performance notched by an airline this week, although Continental Airlines was down 17% for the week, closing at 17.22, as it took second place honors at the bar in the basement.

Other major airlines to post a double-digit decline for the week were Alaska Air Group, which was down 11%, closing at 26.56, and Delta Air Lines, which lost 10% to close at 10.26.

The vast majority of stocks we track at PlaneBusiness finished down for the week. The reason? The price of oil once again raised its ugly head as the week came to an end.

Oil futures closed Friday at 44.65/barrel -- up 22% for the week.

Ouch.

I told you guys OPEC was going to get serious about cutting production this time. And....they seem to be doing just that.

Posted by Holly at 6:14 PM | Permalink | Comments (0)

Tough crowd out there today.

From the inbox:

"You are not serious about this whiny crap from UA pilots are you?"

Heh.

Let me put it this way. Given what is going on at the airline -- I would have expected the airline to have at least discussed this "innovative agreement" with its pilot union before it was announced. At least.

Actually, I'm more interested in an arm-wrestling contest between Ryanair's Michael O'Leary and United's Glenn Tilton.

I'd pay big bucks for that ticket.

Posted by Holly at 3:30 PM | Permalink | Comments (0)

Take one major airline.

Have that major airline use bankruptcy as an excuse to destroy its employee pension plans.

Have same airline continue to enjoy some of the most adversarial management/employee relations in the industry.

Add just one more objectionable move on the part of said airline's management to the almost-boiling pot.

Stir.

Back off and watch as the pot boils over.

Today that is exactly what has happened, as United Airlines' pilots are reacting to the news that the airline plans to link-up with Irish airline Aer Lingus to offer flights between the U.S. and Madrid. Say what?

Starting next year, both airlines will market the flights and each airline will have their own flight numbers on the route.

But United Airlines' employees will have nothing to do with the actual operation of the flights.

No, Aer Lingus will fly the planes with their crews. And provide the planes. United will handle the marketing for the flights.

According to a report in Bloomberg, "Aer Lingus and UAL will review the partnership after two years and may turn it into a 'full-blown joint venture,' with the Irish carrier owning 51%."

Not surprising that the United pilots are not happy about this news. Looking at the details of the deal this looks like nothing more than a glorified wet lease.

Meanwhile, United Airlines continues to sit on a stagnant-to-declining fleet, and continues to announce furloughs for its own pilots and flight attendants.

In a message from the Chairman of the airline's ALPA MEC, Steve Wallach told the troops,

By the way, we all should have known that Ryanair's CEO Michael O'Leary wouldn't sit around and be quiet on this development. As most of you know, Ryanair is in the middle of yet another hostile takeover run at Aer Lingus.

Today Ryanair issued a statement in which O'Leary said, "

"Aer Lingus and United Airways share many similar traits. They both used to be big in the 1950's and 1960's, but sadly today they are just shadows of their former glory. Both have recently announced losses, job cuts and pay cuts. After months of trawling around looking for partners, it is a sad reflection on Aer Lingus that the best they could come up with is one of the weakest and biggest loss makers in the U.S. airline industry. Given the scale of United's losses there is no guarantee that they will even be around in March 2010 to operate this "partnership".

"It is hard to think of any transatlantic airline losing any sleep at the thought of being faced with the combined weakness of Aer Lingus and United Airlines on the Madrid-Washington route. Today's announcement shows just how desperate Aer Lingus is to find a partner, any partner it can, even if the flights don't start until March 2010. This so called "partnership" with another "loser" like United shows that Aer Lingus has no independent strategy, and no prospect of remaining independent."

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

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."

..."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?

Posted by Holly at 11:59 AM | Permalink | Comments (0)

Southwest Airlines was the third major airline to report earnings this quarter, as the airline rolled out their results this morning.

The verdict?

The airline posted its second quarterly loss in a row.

The reason? Just as we saw with American and United yesterday -- getting caught on the wrong side of the hedges. Fuel hedges that is.

Including special items, the airline posted a loss of $56 million or $0.08 per share. Last year the airline posted a profit of $111 million or $0.15 a share. Excluding special items, the airline posted a profit of $61 million or $0.08 a share. This compares to last year when the airline posted a profit of $87 million or $0.12 a share.

For the year, the airline posted net income of $178 million. This compares to 2007, when the airline posted net profit of $645 million or $0.84 a share. Excluding special items, full year 2008 net income was $294 million or $0.40 per diluted share, compared to $471 million, or $0.61 per share in 2007.

While these numbers would not look like numbers that would push shares higher -- shares in the airline are now up about 17% on the day. Why?

The quarterly numbers are not what is pushing the shares higher.

The fact that CEO Gary Kelly came out and said that growth at the airline has been "suspended indefinitely" is the reason the shares are up.

I know, it's convoluted.

But in the world of Wall Street -- the biggest fear was that Southwest would NOT make a serious attempt to cut back on growth. Since the airline now seems determined to do so -- that is seen as a positive. It is anticipated that fewer ASMs will result in higher loads and better revenues in 2009.

"I definitely want Southwest Airlinesto grow," CEO Gary Kelly said on the airline's conference call today. "I believe we will be able to grow, but that is certainly a secondary objective in this kind of an economic environment."

The airline has now reduced its 2010 Boeing delivery schedule of new aircraft down to 10. The airline previously had 16 aircraft on firm order and six options for the year.

Southwest ended December with 537 aircraft. It expects to end 2009 with 535 -- as lease expirations and retirements cancel out the 13 new Boeing 737-700s now expected to be delivered during the year.

Posted by Holly at 3:04 PM | Permalink | Comments (0)

The future does not bode well on the cost side.

We wrote earlier today that while we thought United Airline's numbers today were worse at first blush, that investors were punishing shares of AMR much more severely.

Here's why.

The airline gave what could at best be called less than encouraging cost guidance for 2009.

Analysts Jamie Baker and Mark Streeter with JP Morgan issued a note today concerning the results in which they said,

"Unlike UAUA, We’re Discouraged By AMR Cost Guidance – Pension expense appears to lie at the heart of what we consider to be discouraging 2009 ex-fuel cost guidance from AMR, a phenomenon that may have implications for CAL & DAL, though not LCC or JBLU. Specifically, AMR is guiding to a 2009, consolidated ex-fuel CASM increase of 7.6%, materially higher than our ambitious +4.1% forecast and representing over an untaxed dollar in negative earnings variance – holding other inputs constant. On the fuel side, Q109 $2.04/gallon all-in guidance is consistent with our $2.10, as is AMR’s full-year $2.06 all-in (identical to our forecast)."

And while United Airlines has garnered the most negative publicity over the last month or so concerning the high cost of its ill-placed fourth quarter fuel hedges, AMR got hit in the fourth quarter as well.

As Jamie explained,

"Similar to UAUA's release this morning (and to what we expect to hear from those who have yet to report), AMR's liquidity was clearly hurt by incremental cash collateral deposits posted with fuel hedging counterparties. AMR ended 4Q08 with an unrestricted cash balance of $3.1 billion, compared to $4.6 billion as of 3Q08. The implied $1.5 billion sequential net cash burn was driven by the company's cash collateral postings on under-water fuel hedges ($575 million in cash collateral with counterparties at the end of 4Q08), debt and capital lease principal payments, capital expenditures, and changes in working capital (exact figures for debt amortization, capex, and change in working capital were not disclosed in the press release). At the end of 3Q08, AMR held $240 million in cash deposits from fuel hedge counterparties, but with falling oil prices during 4Q08, the company saw a reversal of approximately $815 million, resulting in the $575 million figure mentioned above. The worse than expected pension cost guidance is worth monitoring. Nevertheless, we expect AMR's liquidity profile to improve significantly in 2009 as under-water hedges roll-off and the airline is able to benefit from much lower y/y oil prices."

Posted by Holly at 9:06 PM | Permalink | Comments (0)

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.

Posted by Holly at 9:14 AM | Permalink | Comments (0)

Subscribers can read this week's issue of PlaneBusiness Banter here.

Posted by Holly at 6:38 PM | Permalink | Comments (0)

Click here to see a great Coast Guard video of the US Airways flight touching down in the Hudson, the speedy evacuation and the equally speedy first tug boat arriving to help.

Unbelievable.

The plane touches down on the water at about 2:02 into the tape. She will be coming in on the left hand side of the screen.

It's amazing how fast everyone got out and onto the wings and how fast help arrived.

Posted by Holly at 10:17 AM | Permalink | Comments (0)

As of this posting, airline stocks are mixed in trading today as the market has turned downward as a result of more bad banking news.

Why anyone in the market would think that all the bad news about banks was already "out there" is beyond me.

Today Citibank and Bank of America are the two hot topics du jour.

But for the airlines -- there is a bit of very good news.

As more estimates of energy demand continue to trickle in -- and as the numbers continue to show a growing drop in that demand being forecast -- the price of crude oil continues to drop.

As of this posting the price of crude is trading at around 34.64/barrel. Can you believe it? Yep, it's true. Happy days are here again folks!

Well, maybe not. But in terms of airline economics -- this is very good news.

Biggest loser as for the airline sector as of this posting is Mesa Air Group. The stock is down about 11% for the day as we post this -- hovering around 18 cents and change.

Posted by Holly at 11:54 AM | Permalink | Comments (0)

A number of news sources are reporting tonight that Chesley B. "Sully" Sullenberger, III, was Captain of the US Airways' flight that was successfully ditched today in the Hudson River.

It seems that Captain Sullenberger has a website. Actually the website is for his consulting business -- Safety Reliability Methods, Inc.

It would appear the guy knows his stuff.

Posted by Holly at 6:53 PM | Permalink | Comments (0)

Okay, if you are a pilot, you already know this.

But I didn't know that the Airbus aircraft apparently have a "ditch" button in the cockpit that automatically closes any vent, air outlet, opening, whatever, to the outside, in preparation for a potential water landing.

Just listening to Greg Fieth, former NTSB investigator, on NBC talking about how this works.

Pretty interesting. I was not aware of this. Clearly today that might have been helpful, as the aircraft stayed above water long enough for everyone to get off.

All you Boeing fans out there -- do they have something similar on Boeing aircraft?

Posted by Holly at 5:51 PM | Permalink | Comments (0)

Yours truly was minding her own business this afternoon, driving back home from Ft. Worth at 75 miles an hour, when all of a sudden I start getting messages about a US Airways plane that had ditched in the Hudson on my phone.

Now, being the card-carrying airline geek that I am -- you can only imagine that it was a miracle I got home and did not run into anyone while I drove and tried to 1) get my emails 2) get online and/or 3) find out what had happened.

According to reports, US Airways' Flight 1549 took off from LaGuardia to Charlotte at 3:03 PM Eastern time. Reports say that the pilot reported a "double bird strike" and apparently the crew felt it necessary to put the aircraft down in the Hudson.

Listening to NPR just now, the reporter there interviewed one of the passengers who said the plane essentially "glided in" on the water. As you can see in this photo, the aircraft remained floating, and passengers were rescued from the wings and the top of the aircraft.

What is unbelievable is that all reports say that all passengers and crew were rescued.

We can only hope that this is the case.

If so -- well done and kudos to the flight crew.

I'm sure we'll all know more as the evening goes on.

PHOTO/NBC NEWS

Posted by Holly at 5:23 PM | Permalink | Comments (0)

Okay loyal readers. I have a task for you to do today.

Today is the last day you can vote in this year's "Weblog Awards."

Brett Snyder's blog Cranky Flier, has been nominated for best travel blog. As of this posting, he trails "My Kugelhopf" by a little more than 100 votes.

As you all know, Brett is a friend of the PlaneBusiness empire, and well, even though the whole concept behind the Weblog awards is nothing more than a glorifed beauty contest -- there's no question that if you win, it can give your site some nice added attention. And in the case of Brett, who does not have a subscriber publication to pay the rent -- but just the blog -- added attention is about the best thing you can ask for.

Go vote.

I would say vote now, vote often. But each IP is limited to one vote a day. And today is the last day.

So one vote will suffice.

But if you want to run around your office and vote from every computer, that would be fine too.

Yes, that's me and that's Brett at last fall's Southwest Airlines' Halloween festivities. Brett dressed as a Canadian Mountie, in honor of Southwest's link-up with Canadian wunderkind WestJet. He also awarded free Molsons from his backpack to deserving Halloween skit participants. A truly selfless act.

Posted by Holly at 11:50 AM | Permalink | Comments (0)

How is everyone today? I can tell that life is almost back to normal this week. The holidays, I think, are finally behind us all.

How can I tell? Because I have already received a raft of emails from readers of this week's PBB.

Last week our email total was good, but it took awhile.

Today, the email bag is busy right off the bat.

I've also received a number of interesting non-airline related emails this morning.

Such as?

One reader wants to know if I am going to be in New Orleans this upcoming weekend for Pardi-Gras.

If you are a Parrothead, you know what Pardi-Gras is. It's an excuse for Parrotheads to get together in New Orleans, drink heavily, and hope that Jimmy Buffett decides to show up.

No, not really. Everyone has a good time whether he shows up or not.

Sounds like a winner to me.

Unfortunately no, I am going to be in the DFW metroplex this weekend. No margaritas for me.

Another reader writes to ask when the official party is going to be -- to celebrate the official opening of the PlaneBusiness branch office.

I think you guys have one thing on the brain today.

Good question. It certainly can't be at the branch office. That would severely curtail the number of potential guests.

I'll have to work on this. But, as our one subscriber commented this morning, "It would be unairline-like not to have a party."

How true.

Posted by Holly at 12:27 PM | Permalink | Comments (0)

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

Posted by Holly at 12:17 AM | Permalink | Comments (0)

One of the more unfortunate news items while we were on holiday hiatus was the crash of Continental Airlines' Flight 1404, which apparently tried to take off from Denver International, but instead found itself careening off the runway, ending up in a ravine on the edge of the airport. Minus one engine and its landing gear. And on fire.

While we all saw photos of the wreckage in the days after the mishap on Dec. 20, and while I think most of us were amazed that everyone onboard had escaped -- when you look at this slide show posted by Denver Channel 7 News, you'll be even more amazed that there were not more casualties.

Warning: These are powerful images.

Posted by Holly at 3:32 PM | Permalink | Comments (0)

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%.

Posted by Holly at 1:59 PM | Permalink | Comments (0)

I received a handful of notes today from readers asking me about the sharp drop off in the price of Allegiant Travel Company shares.

As you can see by the chart the stock took a beating today on the street.

So what gives?

Nothing to worry about as far as I can tell.

This stock is proving itself to be a classic airline "trading" stock, and as such whenever the folks who have ridden the stock get the feeling that the good times may be over for the time being -- it's time to sell.

And with all the press the stock received over the weekend in regard to its stellar 2008 performance, that is a classic signal for traders to sell. And sell they did.

It's not, as far as I can tell, a fundamental issue of any kind.

Nor have we heard rumors of CEO Maury Gallagher suffering from any kind of "hormonal imbalance."

Posted by Holly at 6:57 PM | Permalink | Comments (0)

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

Subscribers can access this week's issue by clicking here.

Posted by Holly at 5:52 PM | Permalink | Comments (0)

When all was said and done, and the crystal ball descended in Times Square Wednesday night -- I know that you were, just as I was, chomping at the bit to know the answer to one burning question.

Which airline stock was the top performer in 2008?

Against all odds, including floods, snow, sleet, testy employees and the darkness of oil (prices), which airline stock still managed to shine brightly against the setting sun of demand?

I am very happy to report that the airline stock that posted the highest return to shareholders in 2008 was one of our favorite airline stocks here at PlaneBusiness.

That stock was -- Allegiant Travel Company. The company is the parent of Allegiant Airlines.

The airline, which managed to continue to post profits in 2008 -- even though it was flying fuel-guzzling MD-80s, saw its shares climb a whopping 51% for the year, ending 2008 at 48.57 a share.

Not surprisingly, this year was one of the worst on record in terms of yearly gains and losses for the things with wings, collectively speaking.

Of all the airline and airline-related stocks we track, only four managed to post a gain for the year.

Those four were:

Allegiant 51%

Hawaiian Airlines 25%

JetBlue 20.3%

Alaska Air Group 17%

*Alaska and JetBlue are also two PlaneBusiness favorite stocks.

To see how your favorite (or not-so-favorite) airline stock performed in 2008, click here.

Posted by Holly at 6:51 PM | Permalink | Comments (0)

Is it the residual after-effects of having dealt with the mess that was 2008 that make the phrase "Happy New Year" sound particularly cynical this year?

I'm not sure, but I think maybe that is the case.

Then again I've never been a fan of this particular evening, which I like to call, "Amateur Drunk Night."

The good news for PlaneBusiness Banter subscribers is that if it's New Year's -- a new issue of PBB can't be far off. And it isn't. We'll be back in our usual weekly schedule of publishing again starting this weekend -- after having enjoyed our usual two week holiday publishing hiatus.

With that -- here's to a much better 2009 for everyone.

Posted by Holly at 2:32 PM | Permalink | Comments (0)

Posted by Holly at 4:22 PM | Permalink | Comments (0)

Yours truly is in the midst of my usual two week holiday hiatus from publishing PlaneBusiness Banter this week -- and in fact I'm not at either the main Worldwide Headquarters in the swamp or at the branch office in Dallas.

Today I find myself in the lovely confines of Tucson, Arizona. The sun is out -- but it was a bit chilly here this morning. 33 degrees to be exact. Yes, we are on the back end of the same storm that dumped the almost four inches of snow on Las Vegas this week. The same storm that is now making life in much of the rest of the country more than miserable.

My condolences to those of you trying to fly out or into Chicago today -- but for those of you on the East Coast -- it's coming your way later today. Oh, boy. Just what our friends, the things with wings, need to contend with on the weekend before Christmas.

But enough of my frigid travel travails. Let's talk about some news of note involving the things with wings. Southwest Airlines to be precise.

Chief Executive Magazine Cites Southwest's CEO for "Wealth Destruction"

Chief Executive magazine used its end-of-year issue to note those CEOs who they think are both doing the best and worst jobs at creating value at their respective companies.

In its first annual Chief Executive/Applied Finance Group Wealth Creation Rankings -- the magazine partnered with Applied Finance Group -- creators of the Economic Margin (EM) value metric and Drew Morris, CEO of Great Numbers!

As the magazine noted in its introduction to its rankings,

"As we have seen with the recent meltdown in financial markets, value isn’t always what it appears to be. And traditional accounting measures do not count what really counts. Earnings per share (EPS) and price/earnings (P/E) ratios are based on accounting profit, which is prone to distortion and has no real relationship to wealth creation. Trying to grow earnings or EPS in the belief that the stock market will reward you with a higher share price no longer works, as investors really seek to understand the company’s underlying economic performance.

To state the obvious, navigating with instruments that mislead is dangerous. CEOs need to look at their businesses with the same wealth-creation measures that, for example, private equity and institutional investors use. Investors want to know how good a company and its leaders are at preserving and growing their capital.

Many companies have moved from accounting to economic approaches to measuring this. A few, such as EVA, are good because they reckon with the true cost of capital, but none are perfect. Our rankings rely on Economic Margin, a measure with which executives can readily manage wealth creation, and which is applicable at all levels of a company. EM is calculated as the difference between operating cash flow and an appropriate capital charge, all divided by invested capital. EM is suitable for both private and public companies and useful for making comparisons with competitors, as it’s an economic-profitability percentage, not a monetary amount.

The ranking method we used also considers management’s demonstrated ability to protect shareholder wealth and create truly valuable assets. Our intent is to advance the art, science and practice of creating wealth for a company’s owners and the associated results creation skills of its executive team."

So who were the top ten best "wealth creators" according to this methodology?