PlaneBuzz

Good evening everyone! This week's huge mega-earnings issue of PlaneBusiness Banter is now posted. This week we take an in-depth look at the recent earnings results and the earnings calls from Delta Air Lines, US Airways, Alaska Air Group, JetBlue, and United Continental Holdings.

But there's more.

Republic Holdings announced last week that Frontier Airlines was getting a new executive team and -- that the airline was going to become an ULCC.

You know what that is don't you?

Ultra low cost carrier. Think Spirit. Or Ryanair.

Not sure what all the animals are going to think about this. Not quite sure what we think about it yet -- as details are slim. But it appears that either Frontier will be rebranded and operated as a ULCC. Or it looks like it will be rebranded and then sold as a ULCC.

Heading up the new operation is none other than Dave Siegel. Yes, the same Dave Siegel who headed up the old US Airways during the Dark Period. Joining him is the former head of planning and pricing at Allegiant -- Robert Ashcroft as SVP Finance. Daniel Shurz, meanwhile, was promoted to SVP Commercial.

Tomorrow employees and union leaders will finally hear from American Airlines -- as the airline is slated to roll out its proposed labor contract modifications per section 1113 of the U.S. bankruptcy code. Meanwhile we'll be interested to more hear details of the airline's proposed restructuring plan.

It's going to be one difficult day for American employees.

Meanwhile the head of the Pension Benefit Guaranty Benefit Corp., the government agency that would be forced to take over the administration of employee pensions if the airline walks away from them continued his very public criticism of the airline Tuesday.

The PBGC also placed liens against assets of American on Tuesday. The agency said that it filed over 70 liens for a total of $91.7 million, on behalf of the four pension plans the airline currently has. This comes after American only paid $6.5 million of the roughly $100 million that was due earlier in the month. The airline said that it had to conserve its cash.

We'll find out more tomorrow on where the pension issue is headed. But one thing's for sure -- this PBGC is not the same as the one United Airlines rolled over when it went through its bankruptcy. Josh Gotbaum, the director of the PBGC, is not going to go down without a fight.

But the big story this week in PlaneBusiness Banter is earnings -- lots and lots and lots of earnings. This week's issue clocks in at over 150 pages as we take an in-depth look at the five airlines that reported in last week. Which airline do we think reported the strongest earnings for the fourth quarter? Delta Air Lines. And I tell subscribers why.

Also, those reports last Friday about how Delta was now possibly looking at a deal for US Airways? We give you our take on those reports and why they shouldn't surprise anyone. Who is going to do what to whom and why? We'll break down a number of the possible scenarios.

All this and a whole lot more. Now. In this week's PlaneBusiness Banter.

Posted by Holly at 2:36 AM | Permalink | Comments (0)

Good evening everyone.

This week's issue of PlaneBusiness Banter is now posted. This week we're talking a lot about the two airlines that call Dallas-Ft.Worth home -- American Airlines and Southwest Airlines.

Last week Southwest Airlines rolled out its fourth quarter earnings results -- making the airline the first to report for the quarter. Overall the airline posted numbers that were just a bit better than expected, although the "noise" from the airline's merger with AirTran will continue into 2012. The airline also updated its list of AirTran cities it is keeping and those it is putting on the "Don't fly there no mo" list.

Were there any surprises here? Yep. On both sides.

Meanwhile, the bankruptcy continues at American Airlines. Monday Human Resources SVP Jeff Brundage sent out a letter to employees trying to reassure them that even if their pensions were terminated or frozen, they would still get almost the same payment from the PGBC. Only problem -- that is not true if you are a pilot. Or a member of upper management. Why? The pension payouts for those two groups are higher -- and the payouts would exceed the maximum levels allowed by the PBGC.

Brundage's letter was issued, I believe, as a result of the airline's failure to pay the roughly $100 million it was scheduled to pay into its pension plans last week. News of the airline's minimal payment it did make was not received well with labor leaders of the airline's employee groups. The move, coupled with the publicly vocal sparring between the airline and PBGC over the last several weeks succeeded in raising the angst level of employees considerably.

Brundage's letter was followed by a missive to the troops from CEO Tom Horton. But all Horton's note said was that the airline was going to make changes in its executive ranks, its management "layers" and that it was going to be the airline it used to be -- again.

Again -- no details.

Meanwhile, out in Phoenix, US Airways' President Scott Kirby and his revenue management team are hard at work putting together a network restructuring plan for American Airlines. Or so said a report in Bloomberg last week.

Say what?

Let's just say the obvious!

Of course US Airways' President Scott Kirby has his minions working on a plan that will increase American's revenue performance.

We may not get to hear the details until much later in the year -- after American has had its chance to impress the bankruptcy court and the unsecured creditor's committee with its restructuring plan. But I assure you -- yes, US Airways is working on a proposal.

Oh my gosh. And this is just the start of this week's issue.

All this, and more in this week's edition of PlaneBusiness Banter.

Posted by Holly at 2:01 AM | Permalink | Comments (0)

Good evening everyone.

We have a busy week this week in PlaneBusiness Banter. We are talking about Southwest Airlines and its new seating configuration on its 737-700s, we're talking about WestJet's plans to start flying turboprops, we take a look at why one analyst downgraded JetBlue to a "sell" rating this last week, we talk about what a great week the airline sector enjoyed last week, and, oh yes, we talk a lot about American Airlines. And Delta Air Lines. And US Airways.

I'll tell you why and how Delta Air Lines could successfully bid on, and be allowed to purchase, a piece of AMR. (Can we say...carve outs?)

And oh yes, then there is the rest of the sector. And the DOT Airline Consumer Travel Report for November, and energy prices for the week. And airline stocks. And more.

Subscribers can access this week's issue here.

Posted by Holly at 3:16 AM | Permalink | Comments (0)

Hello everyone. It's time once again to jump into the fray. Our Holiday Hiatus is over. Time to close out the story on 2011 and start the story of 2012.

The first issue of PlaneBusiness Banter for 2012 is now posted.

This week we talk a lot about airline stocks. We look at how they performed for the last week, the last month, the last quarter and the last year.

The good news? The sector posted a huge fourth quarter. Not so good news -- yearly stock performance numbers were horrible. But hey, the quarterly numbers are much more important.

In addition, contrary to a number of wire service and financial news site headlined "end of year" airline stock stories that are floating about the Internet -- we tell you which airline stock really posted the best return to investors in 2011.

And no, it's not Alaska Air Group -- as many stories say was the case.

We also update subscribers this week on the American Airlines bankruptcy. The airline is starting to announce route changes, and has announced some fleet news. But, as Deutsche Bank analyst Michael Linenberg reminded investors in a note last week, timing for the airline's Section 1110 filing the end of this month means that we should hear a lot more from the airline in the next 2 1/2 weeks concerning which aircraft the airline wants to keep, which ones it wants to walk away from, and which ones it wants to renegotiate with lessors.

On the traffic front, December RASM estimates from those airlines that supply such things are coming in mixed. We tell you who has reported better than expected RASM performance, and who has disappointed.

Following up on traffic -- a reminder. Airline earnings reports for the fourth quarter and year-end will begin to roll out in a little over a week.

Both JAL and Hong Kong Airlines are talking about potential IPOs in 2012, while Lufthansa was apparently just pulling Virgin Atlantic's strings over bmi. The German airline finalized a deal with IAG, parent of British Airways for the airline, er, slots over the Christmas holiday. Not surprisingly Sir Richard says he is going to continue the fight to keep BA from getting its hands on bmi's slots.

Unfortunately I don't think his screams are going to matter to UK regulators.

On this side of the Atlantic, flight attendants for AirTran and Southwest announced a seniority agreement right before Christmas -- good news for the airline.

Did Boeing meet its 2011 delivery goal? No.

How many more aircraft did Airbus deliver in 2011 than Boeing?

Are those "tiny" hairline cracks that have been found in the wing assembly of the A380s really a safety issue?

All of this, and a lot more in our first issue of the year.

If you aren't yet a subscriber to PlaneBusiness Banter -- why not? Find out how you can become one here.

Posted by Holly at 1:47 AM | Permalink | Comments (0)

Hello everyone! I hope all of you are not crazed today. It's that time of year. It's a good time. But it can also be very stressful. So try to concentrate, leave those cookies alone and get your work done so you can push all the papers aside later in the week and just breathe. And enjoy.

And eat chocolate.

This week's two-for-one issue of PlaneBusiness Banter is now posted. I told subscribers last week that I was going to delay the publishing of our last issue for the year by a week -- so that I could talk about my trip to New York last week.

But that was not the only reason to wait until this week to write.

Delta Air Lines took Manhattan last week. And Brooklyn. And Queens. And the Bronx. And Staten Island.

In addition to the airline's new route announcements out of LaGuardia, the airline also held its investor conference in New York last week.

We let you know what the airline had to say.

Meanwhile, yours truly presented at the Business Travel News Group's Corporate Travel Management 2012 Conference in New York last week along with Kevin Crissey, airline analyst for UBS.

It was a packed house and I'll give you one piece of intel from our session. When surveyed, the group of top corporate buyers overwhelmingly said they see increased spending on air travel in 2012.

I also attended the BTN Travel Hall of Fame dinner later that evening. What a rollicking event that turned out to be, as some of the other inductees decided to turn it into a roast of former AMR Chairman and CEO Robert Crandall.

Meanwhile, while all of this was going on, airline stocks enjoyed a second week of strong gains. Big winners included JetBlue and US Airways.

But Pinnacle Airlines was not as lucky. The airline warned the week before last that it was attempting to restructure contracts with vendors, customers, and employee contracts.

The stock is now trading at about a buck.

It's a jam-packed issue this week including our yearly column in which we divulge what airline CEOs are asking for from Santa, we look at the October DOT operational numbers, and much, much more.

Subscribers can access this week's issue -- the last issue for 2011-- here!

Posted by Holly at 5:17 PM | Permalink | Comments (0)

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

No surprise, we're talking a lot about American Airlines again this week.

First, the airline's labor unions have been given a strong position on the airline's creditors committee. This is no small deal, as the members of the airline's creditors committee pretty much dictate how the airline is operated and what the airline will look like when it finally escapes from the grasp of bankruptcy.

In addition, Tuesday the airline announced the first round of upper level executive departures. We expected this -- and we hope the departures announced Tuesday are just the beginning.

American's filing has begun to have ripple effects across the industry. One such effect: JetBlue announced Tuesday night that it was starting (FINALLY) BOS-DFW service in May 2012.

A different effect? Southwest Airlines' CEO Gary Kelly's letter he posted to employees about the American bankruptcy. Essentially Kelly took a hardline with employees -- making the point that Southwest Airlines is now, for all practical purposes, the airline in the crosshairs -- having never filed for bankruptcy, and now forced to compete with an aggressively managed group of "new" airlines including United, US Airways, and Delta Air Lines.

In other news, we're sad to see FAA Administrator Randy Babbitt have to resign from the agency. But someone in his position cannot be arrested for DUI. Even worse, you can't be arrested for DUI and then not tell your boss about it. Reportedly DOT Secretary LeHood found out about Babbitt's arrest only after the Fairfax City police issued a press release on Monday.

Worse, if Babbitt is convicted, he will lose his commercial pilot's license.

An extremely unfortunate situation -- both for Babbitt, and for the FAA. The last thing the agency needs right now is a distracting search for his replacement.

On Wall Street, airline stocks posted a great week last week. Well, there was one exception. But AMR was just that -- an exception. Shares of JetBlue soared, leading a number of airline stocks to hefty double-digit gains on the week.

All this and more in this week's issue of PlaneBusiness Banter!

Posted by Holly at 3:57 AM | Permalink | Comments (0)

Good evening to all.

It's a late night tonight here at the Worldwide Headquarters. Three guesses why. That's what happens when a U.S. airline files for Chapter 11 bankruptcy protection at 6 AM in the morning.

Not surprisingly, I spend a lot of time this week talking about AMR and American Airlines. The airline's bankruptcy filing, why it finally pulled the trigger, why the move was inevitable years ago, why it was not a "moral failure," and more.

And yes, don't even start with the AMR merger rumors. Long way between here and there.

In addition, I also take a time this week to talk about the recent DOT slot auction for slots at both LGA and DCA. While the DOT won't make the "formal" announcement concerning who won what until Thursday, the winners have either confessed or been outed by process of elimination. ;-)

The results of the auction were somewhat intriguing -- both because of what airlines were successful in nabbing slots and because of the one big airline that came away empty-handed.

Then there is the continuing mess that is the Indian aviation industry. We talked a great deal about this last week, but this week it's back on the radar as both Jet Airways and Kingfisher continue to struggle. Jet announced a new lease-back plan that should generate at least $300 million for the airline in the coming months, but Kingfisher is still looking for an investor. Meanwhile, employees haven't been paid in weeks, and the airline's pilots are beginning to leave for better opportunities. Oh, and AerCap is taking two of its planes back.

The Air Transport Association is ready to roll out its new "branding" Wednesday. Not sure I like the new name, but I am a fan of the idea behind the extreme makeover. For too long the ATA has been a wet noodle in a sea of sharks -- a totally ineffective trade organization.

So here's to a new gorilla on the block.

Meanwhile, last week was a horrible week for airline stocks. We'll go over the details of the carnage.

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

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

Good evening everyone. It's time once again for this week's issue of PlaneBusiness Banter. Or rather, this week's "Turkey Trot" edition of PBB.

Yours truly got hit by a nasty upper respiratory infection this last weekend, so I have to tell you -- the "Turkey Trot" edition almost didn't make it to the table.

But I couldn't have all our subscribers venturing out over the river and through the woods without some good reading material.

This week we're talking about a hodge-podge of things -- lunatic legislation introduced just in time for Thanksgiving travelers that seeks to either prevent airlines from charging for fees, or then taxing airlines more that do charge for fees; a USB investment research report that pretty much calls the EU's Emissions Trading Scheme worthless; American Airlines' withering market cap; American Airline's withered state in general; SkyWest's new flying for US Airways; Travelport and American's latest court news; one analyst's take on the latest Southwest Airlines' schedule uploads for 2Q2012, and what these changes mean for competitors; Hawaiian Airlines' decision to take Manhattan; the DOT's September Airline Consumer Travel Report; and oh, a whole lot more.

Subscribers can access this week's issue here.

Posted by Holly at 1:51 AM | Permalink | Comments (0)

Hello everyone. It's that time again. PlaneBusiness Banter is now posted. This week we are talking airplanes, pilot contracts and we wrap up the third quarter earnings season with our in-depth look at the recent earnings calls from WestJet, Air Canada and Republic Holdings.

American Airlines had clearly wanted a contract with its pilots in place before the AMR board meetings began Wednesday of this week. Does not look like that is going to happen.

The lack of a contract continues to drag down shares of the airline. Tuesday shares slid 1%, closing at 1.92. Shares dropped 5% on Monday.

Looking at what the company has proposed, I think it's going to be hard for the APA Board to sell the deal to its membership given the wide disparity between the numbers its members had proposed and numbers the airline has proposed.

We look at the 101 page position paper the pilots at United Airlines distributed last week regarding their concerns over training and integration procedures with the merged airline. Who knew the FAA inspector who was fined for his involvement with the Southwest Airlines fiasco a few years ago is the same FAA inspector involved in the FAA SOC [single operating certificate] process at United Airlines?

Of course we also wrap up the third quarter earnings season as we take our in-depth view at the recent earnings call from Republic Holdings, Air Canada, and WestJet.

Then there is the Dubai Airshow. We give you all the top news from the event that passed $55 billion in orders as of Tuesday.

As usual, all this and much, much, more in this week's issue of PlaneBusiness Banter .

Posted by Holly at 12:21 AM | Permalink | Comments (0)

Hello everyone.

It's that time once again. This week's edition of PlaneBusiness Banter is now posted.

This week we have yet more third quarter earnings to discuss, as we take in-depth looks at the results posted by Allegiant, SkyWest and Pinnacle.

Next week, we wrap up our third quarter earnings call coverage as we look at Republic Holdings, Air Canada and WestJet.

Speaking of WestJet, our moles tell us that we should expect to hear another "important" announcement along with the airline's third quarter numbers this week. That would make sense. It would also explain why the airline is late in reporting their numbers for the quarter.

Speaking of Republic -- did you see what happened to shares of Republic Tuesday? That's right. Shares picked up a whopping 61% on the day on incredibly heavy volume. The airline reported better than expected numbers and also gave clear guidance on how it plans to divest itself of Frontier Airlines. Investors liked what they heard. Obviously.

Late Tuesday there was an update posted on the AMR negotiations website concerning the negotiations between American and its pilots. This follows a week in which all indications continue to point to news of a new tentative agreement between American Airlines and its pilots being announced in the not-too-distant future.

Meanwhile, pilots at Southwest Airlines and AirTran overwhelmingly okayed their proposed seniority agreement. No surprise there.

Internationally, Singapore Airlines, IAG Group and Emirates all reported sharp declines in earnings for the quarter last week -- as higher fuel prices took their toll.

Meanwhile, does IAG have a deal to buy bmi from Lufthansa or not? Depends on who you are asking. If you are asking Willie Walsh, the answer is yes. But if you are asking Richard Branson, the answer is apparently no.

Question of the week -- How many weeks does it take to train new Boeing 787 pilots? Answer: Five weeks.

No, that's not a joke. That's what ANA is doing. Five weeks?

As usual, all of this, and much more -- in this week's issue of PlaneBusiness Banter.

Posted by Holly at 2:11 AM | Permalink | Comments (0)

Hello everyone. This week we feel like we've been trapped on a tarmac for 7 hours. Or maybe 36 hours. Or maybe longer.

Yes, it's the biggest earnings issue of the quarter, as we take the microscope to the third quarter earnings calls this week from Delta Air Lines, US Airways, United Continental, Spirit Airlines, and JetBlue.

How long is this week's issue. Oh, I don't know. 150 pages more or less.

Needless to say, there is certainly not a lack of things to talk about in this week's issue, and some of the topics are not even earnings related.

Take for instance, last weekend's freak snowstorm in the Northeast. I'm sure the folks at JetBlue would love to give it to you.

Once again, the airline found itself the brunt of headlines far and wide after passengers on a number of the airline's aircraft were forced to sit on said aircraft for hours, and hours, and hours after landing in Hartford.  American Airlines also saw one of its international flights diverted there, and all in all, a horrible time was had by all.

Although the governor of Connecticut seemed to think passengers weren't looking at the situation in the right light. He reminded those who finally did make it inside Bradley International that hey, they landed safely, didn't they?

We also talk a lot this week about the subject of fuel hedging.

I am convinced that airlines need to stop doing it.

Why?

Because it's not necessary.

Airlines now have the resources and the planning tools they need to weather the ups and downs of fuel prices. Hedging has become a complicated unnecessary expense.

At least that's how I see it.

And hey, how 'bout the management team at Qantas? CEO Alan Joyce finally had it last week with the ongoing "mini strikes" and other various efforts by three different employee groups to disrupt the airline's operations. Saturday, the airline simply shut down.

Brilliant move on the part of Joyce in my opinion.

He knew if he did it, the Australian government would be forced to step in, which it did, and the arbitration court in Australia on Sunday ordered the employees at Qantas back to work -- but only after it was made clear that employees were forbidden to participate in any more "mini-strike" job actions.

I can't recall any airline ever doing anything like this. Ever.

As usual, this is just the tip of the iceberg. This week's issue is huge, and we're talking about a lotta stuff.

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

Posted by Holly at 12:10 AM | Permalink | Comments (0)

Hello everyone. This week in PlaneBusiness Banter we are talking earnings. And more earnings. And more earnings.

This week's 150-plus page issue contains our earnings call reviews for American Airlines, Hawaiian Airlines, Alaska Air Group and Southwest Airlines.

To sum up? We now know American has no more unencumbered aircraft (all the furniture has now, officially, been burned), one analyst believes the company is pushing pilots to agree to an expanded domestic codesharing agreement so that American can enter into such an agreement with US Airways, and yet another analyst thinks the airline's liquidity situation is inevitably going to lead to a bankruptcy filing -- probably in 2012.

Meanwhile, American Eagle and its pilots came to terms on a new eight-year tentative agreement last week.

Southwest Airlines' earnings call was ...long. The airline's financial results are...confusing. They are going to be that way for probably another couple of quarters -- until the merger with AirTran passes the year-over-year comp mark. Meanwhile the airline's costs are higher than we'd like to see but revenues were good.

Many of you still appear to be confused as to whether the airline lost money or made money. We explain all of that, and we give you CFO Laura Wright's dissertation on the airline's hedge situation. In full.

Laura deserves a medal for that performance.

Alaska Air Group had another strong quarter. The airline now does appear to be that very rare breed. Quarter in, quarter out, the airline continues to produce exceptional margins while running a very well managed operation.

Pinch me. Is this company really operating an airline?

Hawaiian Airlines also had a very good third quarter. The airline has taken a number of risks over the last couple of years, in an attempt to diversify its flying mix. This quarter's results prove the airline's strategic plan is working.

A heads up for institutional investors -- management members from both Alaska Air Group and Hawaiian Airlines will be in New York in November for investor days. I'd recommend you go and talk to the teams from both airlines.

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

Continue reading "PlaneBusiness Banter Now Posted!" »

Posted by Holly at 12:23 AM | Permalink | Comments (0)

Let's try this again. It seems that our blog editor chose to eat my earlier post this evening. You guys know the drill. This week's issue of PlaneBusiness Banter is now posted.

This week we talk a lot about American Airlines. Again. We also talk about the craziness going on in Europe where it truly is "Let's Make a Deal" season. Aer Lingus, British Airways, Etihad, Virgin Atlantic, bmi. It's a mad, mad, mad world out there.

Airline stocks had a great week last week -- and one stock in particular shone the brightest. That stock was Spirit Airlines. The airline announced killer traffic numbers last week and shares took off in the low fare carrier as a result.

JetBlue announced its CFO, Ed Barnes, had resigned, effective immediately, after the close of trading Tuesday. We never like to hear that a CFO has resigned, effective immediately. In addition, given the timing of the news, just one week before the airline announces third quarter earnings, you have to believe this was a board of directors decision.

The DOT reported its August Airline Consumer Travel Report last week. We dissect the numbers and let you know who had a good month and who didn't. Hint: JetBlue had an awful month -- the result of the August storms that raked the East Coast. But US Airways and Continental Airlines both saw their performances slip for the month as well.

Of course the big news this week is earnings. Hawaiian Airlines kicked off the third quarter earnings season Tuesday with better than expected numbers, and Wednesday, American Airlines will report its third quarter loss. As has been the case for more quarters than we can remember, American should be the only major U.S. airline to post a loss for the quarter.

Thursday we hear the profit news from Alaska Air Group and Southwest Airlines.

As always, we talk about all of this -- and much more -- in this week's issue of PlaneBusiness Banter.

Posted by Holly at 11:50 PM | Permalink | Comments (0)

Hello earthlings. This week's issue of PlaneBusiness Banter is now posted. In this week's issue we take a follow-up look at the problem known as AMR. After our look at the airline's Monday Meltdown last week, this week we give you more insight from an assortment of Wall Street analysts. The upshot? Bankruptcy is not going to save the airline, but at the same time, the airline does not appear to be anywhere near a filing.

The airline also announced cuts in capacity for the late fall and winter months. This news was probably the best news American Airlines could have uttered. Analysts liked the reductions. The airline says they are not a result of falling demand -- but of higher fuel prices. Not certain, but the airline's continued exodus of top-tier pilots just might have something to do with the airline pulling back on the reins as well.

Other airline stocks suffered as a result of AMR's drop last week. US airline stocks were clearly the laggards in a week that saw the the rest of the markets do fairly well.

NextGen. FAA. Congress. Department of Transportation Inspector General.

Send chills up your spine yet? It should.

Last week the FAA and its project management of the NextGen project got raked over the coals by the DOT IG. But as we talk about this week in PBB, how can the FAA be expected to manage such a complex project when it can't even count on having money to pay for paper clips from day to day -- a result of how the agency is funded (or is not funded) by Congress?

Meanwhile, the European Court of Justice gave the EU a huge thumbs up last week on its plan to charge airlines around the world for their greenhouse gas emissions. Needless to say the airline industry is not happy about this.

Southwest Airlines' CEO Gary Kelly talked to Bloomberg last week and he started throwing around some huge revenue numbers that he says the airline can produce -- as a result of its AirTran acquisition. Only one problem. I've been talking to a number of industry people who don't think he can.

What do you think?

Which reminds me. This week you, our subscribers, get a chance to tell me what the next airline merger will be. That's right. Sharpen up those pencils and send me your two cents on just which merger could be next on our radar. And why.

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

Posted by Holly at 12:30 AM | Permalink | Comments (0)

Hello everyone.

This week's issue of PlaneBusiness Banter is now posted. No surprise that this week's issue is headlined by the events from Monday. We talk a lot about the AMR Monday Meltdown. We give you the facts. Then we give you our opinion.

Before shares of AMR went on their freefall Monday, there was good news for another airline last week. A US District Court Judge awarded US Airways a preliminary injunction against its pilot union, USAPA. You may recall the airline asked for the injunction the end of July, as it claimed the pilots were engaged in an organized attempt to "slow down" or disrupt the airline. Apparently Judge Conrad agreed.

We also talk a bit more about Stelios and his plans to start up a new airline. Last week we quoted one European airline analyst who said he thought the rumblings were merely Stelios' latest attempt to extract more funds from the easyJet management.

That's not what we heard this week. We let you in on all the details as to why the founder of easyJet may just be serious about a new start-up.

Travelport narrowly avoided a trip to bankruptcy court last week, as parent company Blackstone managed to convince debt holders to accept an extension. However that extension came at a price. Blackstone was forced to pay the highest interest rate paid so far this year for a debt restructuring, according to Bloomberg.

It's hell when a scheduled IPO never happens and a company has a horrific LBO overhang. And that is exactly where Travelport is, as parent company Blackstone was forced last spring to pull Travelport's expected IPO. Meanwhile, Travelport's market share of the GDS market continues to shrink.

Emirates is coming to town. The airline announced two new U.S. destinations last week, and outlined a list of other U.S. destinations that are on the airline's hit list.

Allegiant Airlines announced a couple of strange moves last week as the airline announced it was going to start flying between Phoenix (Mesa) and Las Vegas, and it announced it was pulling out of Long Beach completely. Wait, wasn't the reason they were in Long Beach in the first place because the airline wanted to launch its Hawaii flights from there?

We talk about third quarter airline stock performance this week as well. A hint -- we don't have a lot to talk about as only one airline stock posted a gain for the quarter. One.

As for last week, the results on Wall Street weren't quite that bad, but it wasn't anything to get excited about.

As usual, all this and more -- in this week's issue of PlaneBusiness Banter .

Posted by Holly at 10:42 PM | Permalink | Comments (0)

A couple of observations on today's black day for airline stocks.

One, the markets are in panic mode in general today -- as fears of a continued economic slowdown shake the Street. This is not just an airline sector sell-off, it's a general market fear-driven sell-off fueled by continuing concerns over the situation in Europe.

Two, the general market assumption is that if the economy goes south, so will airline revenues.

Three, in the case of AMR, the situation is particularly acute, because investors know the airline has lagged in revenue performance, and the airline is the most cash restrained of all the major airlines.

Four, fears of an impending AMR bankruptcy have been rumbling around and picking up traction for the last 30-45 days. Increasing numbers of retiring pilots do not help the situation, nor do continued analyst concerns over the airline's long-term liquidity health.

Looking at the latest sector numbers for today, it looks as if shares of other airline stocks that were hammered earlier in the day into double-digit declines have bounced back a bit, while the volume of AMR shares traded continues to boggle the mind. Shares of AMR have climbed back a little bit since trading was resumed. Now shares are only down 30%, trading at around 2.07. Earlier in the day shares were down to 1.75.

Not 35%.

The current trend is up, not down.

Posted by Holly at 12:21 PM | Permalink | Comments (0)

It's not been a good day for AMR on Wall Street.

Posted by Holly at 11:59 AM | Permalink | Comments (0)

As I wrote recently in PlaneBusiness Banter, a funny thing happens when a company begins to show signs of failing. Often times, the state of the company may not be as bad as outsiders perceive, but one but one, things can begin to happen that accelerate the perception that the company is in trouble.

Once that process begins, it can be very difficult to reverse course.

I think that is what we have going on with AMR, parent of American Airlines.

Late last Friday the company announced that another 129 pilots had opted to retire, effective Oct. 1. While that data point in and of itself is not indicative of anything, other than the fact the pilots want to lock in their benefit levels at stock prices that are higher than they are now -- that is not how Wall Street is interpreting the news. Wall Street thinks this much-higher-than-normal exodus is a negative "insider sentiment" as to the airline's financial situation.

This morning, while the entire industry has taken a dive across the board, Wall Street investors have dumped shares of AMR much harder and much faster.

So hard and fast that trading had to be halted in shares of the stock.

Prior to the halt, shares had slipped down more than 20%. After trading was resumed, the sell-off continued at an even faster clip. Shares have been down as much as 38%.

As of this posting (12:48 CDT) almost three times the average daily volume of AMR shares have already been traded, and the stock is sitting at $1.92, down 35% on the day.

Posted by Holly at 11:47 AM | Permalink | Comments (0)

As per U.S. District Court Judge Conrad's order that was issued earlier this week, the US Airlines Pilots Association (USAPA), which represents the pilots at US Airways, posted the following letter to its members on its website today.

Funny thing is -- it is not posted on the public part of the site. You have to use a member user name and password to access it behind the firewall, or be on the union's email list. Or, as in my case, have a copy forwarded to me by an American Airlines' pilot.

Interestingly, the last publicly posted piece on the union's website is an article dated May 25, 2011, headlined, "US Airways Pilots Protest Slow Pace of Contract Talks."

Methinks there has been one heck of a lot of news that has involved the union since then. Perhaps a news update might be in order.

______________________________________________

USAPA Update on Injunction Order

In compliance with Section IV of Judge Conrad's ruling in the United States District Court, Western District of North Carolina, USAPA is distributing the following notice to all US Airways pilots by the most expeditious means possible. USAPA will provide more information as soon as it becomes available. Thank you for your prompt and thorough review of the following:

NOTICE TO ALL US AIRWAYS PILOTS

In July 2011, US Airways filed a complaint against USAPA alleging USAPA had violated and was violating the Railway Labor Act ("RLA") by, among other things, engaging in a concerted effort to interfere with US Airways’ airline operations, including but not limited to a slowdown, work stoppage, strike, sick-out, work to rule campaign, and other concerted refusals to perform normal pilot operations. At the time it filed the complaint, US Airways sought a preliminary injunction to prevent USAPA from engaging in the acts and conduct alleged in the complaint. After a full evidentiary hearing conducted on August 19 and 22, 2011, by decision and order dated September 28, 2011, the Court found there was evidence sufficient to meet the legal burden that USAPA had engaged in actions that violated the RLA.

The September 28, 2011 order specifically enjoins USAPA and its members, agents, and employees, and any persons and organizations acting in concert with, through, or under it, or by and through its order, from violating the status quo provisions of the Railway Labor Act and from permitting, instigating, authorizing, encouraging, participating in, approving, or continuing any interference with Plaintiff's airline operations, including, but not limited to, any slowdown, strike, work stoppage, sick-out, work to rule campaign, or any concerted refusal to perform normal pilot operations in violation of the RLA. This order continues in effect unless and until modified by the Court.

All US Airways pilots are instructed to fully perform their normal working schedules and practices.

All US Airways pilots who are engaging in a concerted refusal to perform normal pilot operations are directed to cease and desist from any concerted refusal to perform normal pilot operations, by engaging in acts including but not limited to slow taxiing, writing up all maintenance items, calling in fatigued, delaying flights, refusing to answer a call from the scheduling, refusing to fly an aircraft that meets the requirements for flight, or refusing to accept voluntary or overtime flying, and to cease and desist all exhortations or communications encouraging same.

USAPA will take all steps and measures to comply with the letter and spirit of the Court's order and instructs and directs all US Airways pilots to do the same. Any and all acts and conduct in violation of this Order may subject individuals and those acting in concert with them to punishment under the contempt powers of the Court.

A copy of the order issued by the Court is shown below.

US AIRLINE PILOTS ASSOCIATION

________________________________

ORDER ISSUED BY THE COURT

September 28, 2011

The Court . . . HEREBY ORDERS:

1. USAPA and its members, agents, and employees, and all persons and organizations acting by, in concert with, through, or under it, or by and through its order, are enjoined from permitting, instigating, authorizing, encouraging, participating in, approving, or continuing any interference with Plaintiff's airline operations, including, but not limited to, any slowdown, strike, work stoppage, sick-out, work to rule campaign, or any concerted refusal to perform normal pilot operations in violation of the RLA, pending a hearing on the permanent injunction.

2. USAPA shall take all reasonable steps within its power to prevent the aforesaid actions and to refrain from continuing the aforesaid actions if commenced, including, but not limited to, the following:

a. Instructing all pilots represented by USAPA and employed by Plaintiff to resume their normal working schedule and practices and providing Plaintiff a copy of all such instructions;

b. Notifying all pilots represented by USAPA and employed by Plaintiff, by the most expeditious means possible, of the issuance, contents, and meaning of this Preliminary Injunction and providing Plaintiff a copy of all such notices;

c. Including in such notice a directive from USAPA to US Airways’s pilots who are engaging in a concerted refusal to perform normal pilot operations, including but not limited to, slow taxiing, writing up all maintenance items, calling in fatigued, delaying flights, refusing to answer a call from the scheduling, refusing to fly an aircraft that meets the requirements for flight, or refusing to accept voluntary or overtime flying, to cease and desist all such activity and to cease and desist all exhortations or communications encouraging same.

d. Posting the notice described above on Defendant USAPA’s internet websites and providing Plaintiff a copy of the notices;

e. Including the contents of such notice on any and all recorded telephone hotlines under control of USAPA, until such time as the Court has acted on Plaintiff's Motion for a Permanent Injunction, and providing Plaintiff a copy of all such messages; and

f. Distributing the contents of such notice through all non-public communication systems maintained by USAPA, including any telephone trees, text message lists, pilot-to-pilot communication systems, or similar systems, and providing Plaintiff a copy of the notices.

3. USAPA is prohibited from including in such notices (or distributing contemporaneously with such notices) any statements that are intended or could reasonably be interpreted to mean that pilots should continue to engage in the previously-described conduct notwithstanding the Preliminary Injunction.

4. USAPA shall report to the Court by 5 p.m. on October 4, 2011, by sworn affidavit, the methods used to effect the notice described above to all USAPA-represented pilots, and furnish to the Court copies of all notices required to be furnished to the Plaintiff under the Court's Order.

Posted by Holly at 10:56 AM | Permalink | Comments (0)

It took a little longer than some people had anticipated, but this afternoon U.S. District Court Judge Robert Conrad granted US Airways a preliminary injunction against the airline's pilot union, US Airlines Pilot Association (USAPA).

As you may recall, US Airways sought the injunction in August, when it claimed that the pilot union had been involved in actions to deliberately slow down and/or disrupt the airline's operations.

Judge Conrad apparently agrees.

In his ruling, USAPA and its members are now prevented from "permitting, instigating, authorizing, encouraging, participating in, approving, or continuing any interference with Plaintiff’s airline operations, including, but not limited to, any slowdown, strike, work stoppage, sick-out, work to rule campaign, or any concerted refusal toperform normal pilot operations in violation of the RLA, pending a hearing on the permanent injunction."

Conrad instructed the organization very clearly as to how and what they now need to communicate to its members.

USAPA was ordered to report to court no later than 5 p.m., on Oct. 4, what methods it has used to comply with the court order.

For those of you who are legal eagles like I am, click here for a .pdf of the complete TRO document.

I think you will agree that Conrad has read the union the proverbial "riot act." Not a whole lot of positives in this order for the union. Not surprisingly, however, given how strong the airline's initial complaint was, as we noted last month in PlaneBusiness Banter.

Posted by Holly at 3:28 PM | Permalink | Comments (0)

This week's issue of PlaneBusiness Banter is now posted. We are all over the place this week as first, I tell you what you missed at The BeatLive Conference last week. The conference usually attracts an assortment of corporate travel heavyweights. This year was no exception.

Then of course we have to talk a bit about that certain airplane that was finally delivered to its new owners in Everett, WA on Monday. You know. The one that was just a tad late and, apparently, a tad overweight.

Yes, Boeing finally delivered its first 787 to All Nippon Airways (ANA) on Monday.

We also have lots of union labor news to talk about. How many American Airlines' pilots are now expected to retire on Oct. 1? We hear the number could be almost four times as many who retired at the beginning of September.

American Airlines was also in the news last week as Moody's lowered its outlook on the airline's debt to "negative." Tuesday, the airline announced an EETC debt refinancing deal. We let you know what JP Morgan analyst Mark Streeter thinks of the debt deal.

One thing's for sure. The airline is certainly paying more than it did back in January for the deal. Yield on this one is in the 8% range. In January the airline did a financing deal at about 5.25%. That's what rumors of bankruptcy, impending debt bills, and a continued inability to make a profit and throw off cash does.

Meanwhile, pilots from both Continental and United Airlines picketed on Wall Street Tuesday.

We update you on the status of the pilot negotiations at United, in addition we wonder why it is that pilots think Wall Street analysts really care if they picket outside the NYSE. And why it's really a bad idea -- both for United and for the industry as a whole.

Speaking of Wall Street, airline stocks did not have a good week last week. Neither did Wall Street. We give you our take on the latest economic tea leaf reads and tell you why this Thursday is a very important day for the eurozone -- and US financial markets as well.

One good side effect of continued eurozone anxiety - both crude oil and jet fuel posted large declines for the week. That is very good news for airlines.

Lots of reader mail this week -- from baseball to airlines to comments on our column from last week.

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

Posted by Holly at 1:47 AM | Permalink | Comments (0)

Hello everyone. Just a short note this week to let you know that this week's issue of PlaneBusiness Banter is now posted.

PBB is posted a bit earlier than usual this week, as yours truly is headed out to Las Vegas in a couple of hours, where I will attend The BeatLive Conference.

This will mark the fourth year I've attended this corporate travel get-together of industry heavyweights, and I look forward once again to getting my corporate travel gossip fix for the year.

Jay Campbell, the founder of The Beat, has challenged all attendees of the conference to join him in a SkyJump off the Stratosphere. (You freefall from 108 stories up.) Think I should do it? I'll keep you posted.

This week we're talking more about the great third quarter guidance we keep hearing from all the US airlines (although one major airline will still post a loss...guess who?) and of course we're talking about Boeing's 747-8 launch debacle involving Cargolux. What a mess that is.

In other news, we also break down the second quarter earnings news from Virgin America, which was released Friday by the airline. (As Virgin is not publicly traded, they report their numbers to the DOT and they are not released until much later than the rest of the sector.)

You know what they say about companies that issue press releases on Friday. That's right. It's usually an indication they'd prefer the information was somewhat ignored.

Looking at the numbers posted by Virgin, I can understand why.

How did they stack up compared to the recent second quarter results posted by the rest of the North American airline group? We'll fill you in.

Meanwhile it sounds like the mothership of the Virgin empire, Virgin Atlantic is set to announce an alliance hook-up. If it's not Star, I'll be very, very, very, surprised.

We've got the latest on jet fuel, and more importantly we tell you how well the US airline sector fared on Wall Street last week -- after all those bullish comments the various airline execs made at the Deutsche Bank Transportation Conference.

Oh, and Shoshana Hebshi? We talk about her experience flying on 9/11 as well. If you have not read her blog post in which she details what happened to her -- including being strip-searched -- after being taken off a Frontier Airlines flight in handcuffs on September 11, it's a must read.

Fear. It's not a good thing.

Meanwhile, in our column this week, I give props to the current crop of airline CEOs. You know why? They deserve it. I'll tell you why it's a good thing the industry now appears to be led by a group of adults rather than a bunch of flamboyant "characters."

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

On that note, I don't want to miss my flight to Vegas. Gotta go. Talk to you guys later!

Posted by Holly at 12:21 PM | Permalink | Comments (0)

Hello everyone. This week's issue of PlaneBusiness Banter is now posted. This week we wrap up our Q2 earnings coverage with a look at Air Canada and WestJet. Bottomline? WestJet turned in a terrific performance. For Air Canada, the airline has made good progress wading through the swamps of its myriad of labor contracts that came up this year, but the airline was close-mouthed about its efforts at pension restructuring it is trying to incorporate in the new contracts.

Meanwhile, RASM performance at Air Canada lagged, the airline still has that large overhang of debt, and oh yeah, there are those pension obligations.

Meanwhile, the airline still sounds as though it intends to go through with its idea for a new low cost carrier.

I still say that is a mistake.

In other news, we look at the DOT Air Travel Consumer Report for July. Yes, the rather obvious decline in the on-time stats of US Airways continued in July, as did the abysmal showing for American Eagle in three out of four categories.

Lots of labor follow-up this week including; Southwest pilots; AirTran pilots, United baggage handlers, mechanics at American Airlines; and Delta Air Lines' pilots.

How about this effort on the part of a group of Delta Air Lines' pilots to start their own independent union? They claim they have more than 3300 pilot members and their hot-button issue is ...scope.

Meanwhile, we'll update you on the latest in the AirTran/Southwest pilot contract activity. Last week some Southwest Airlines' pilots were upset after SWAPA sent out a letter detailing some of the terms of the proposed deal. Meanwhile, AIrTran pilots have yet to see anything, as their MEC still hasn't decided if they are even going to a copy of the deal.

[Insert the voice of the old commercial for that silly game "Operation!" Only insert "Arbitration!" instead.]

And -- then there was the ALPA representational election at JetBlue. JetBlue pilots voted no.

American put out more details about how it plans to "spin-off" Eagle last week. Apparently there are no third parties involved at this point in time.

Oh, we talk about crack spreads this week, Ryanair buying airport buildings, Tiger Airways taking to the skies again, Gol's abysmal second quarter earnings, why Spirit Airlines is sizzling hot, and more.

Subscribers can access this week's issue here.

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

Interesting follow-up research note out today from Avondale Partners analyst Bob McAdoo.

Bob decided to follow up on Southwest's second quarter comments concerning business travel. Essentially the airline said in its earnings call that revenues, particularly business fares, were weak in the second quarter. Compared to the rest of the industry, Southwest's revenue performance -- both business and leisure-- lagged.

Bob's hunch? The airline had been too aggressive on fares.

Following up on his own experience flying out of Kansas City over the last year, when he says he has repeatedly found lower fares on legacy carriers than on Southwest, Bob decided to do a broad random sample of fares in a selection of markets to see if his theory about the airline having higher prices than the competition would hold up.

As he explained in his note,

"For each itinerary, we priced out two different close-in journeys and logged in the prices.

First, we selected 8 origin cities from across the LUV network, seeking both more and less active cities. For each of these origins, we then selected the top 50 LUV destinations from each origin and then randomly selected 20%, or 10 destinations, from among the 50 largest destinations for each origin.

...Upon review of the data, it seems Southwesthas a different pricing regimen against Alaska Airlines in Seattle than in the other cities. Southwest seems to be more aggressive in pricing below Alaska. For this reason, we excluded Seattle data and reduced the study to the 70 markets out of the 7 remaining cities.

...For the 140 trips on 70 random itineraries, there was a consistent pattern on 50 of the markets. Southwest was more expensive in 40 of the 50, or 80% of the trips. The legacy airlines were more expensive on 10 or 20% of the trips. When Southwest was more expensive,it was, on average, a $134 higher fare— a 26.4% premium. We obviously don’t know whether this pattern is driving the slower business travel on Southwest. Nonetheless,there is clearly a trend that we will continue watching in coming months."

Having said all that, however, as McAdoo notes, if Southwest continues to slow down its capacity growth, not only will that help Southwest, it will help the rest of the industry. "A lid on LUV growth should be good for LUV and for all airlines," he writes.

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

No surprise that last week Southwest Airlines touted the fact that its pilots and the pilots at AirTran had already negotiated a seniority agreement as part of the airline's merger process during its quarterly earnings call.

Given the dysfunctional situation that continues with the pilot group at US Airways, after America West acquired US Airways, and the ongoing difficult talks going on with the pilot groups of both United and Continental as they try and hash out a contract and seniority agreement, the airline had a reason to be happy.

And, as best as we could tell, after a bit of initial squawking, it did appear that the pilot group at Southwest was probably onboard with the deal, as we talked about last week in PlaneBusiness Banter.

The problem is -- the AIrTran ALPA MEC was supposed to meet and give its "thumbs-up" to the deal and then push it out to members for a vote. Two weeks ago. Then it was last week. Then it was supposed to be this week.

No meeting.

Today, the AirTran MEC notified their counterparts in Dallas that the meeting of the MEC to discuss the deal has been postponed "INDEFINITELY."

The official SWAPA correspondence is included here.

Update from your Executive Team

Two weeks ago, your board of directors reviewed the contents of Side Letter 9 and voted unanimously to send it to the membership for ratification. Since that time we have been waiting for the AirTran MEC to administer their meeting and decide if their membership will be voting with ours on the agreement. Meetings on their end, which were originally to coincide with ours, have been pushed back multiple times. They were scheduled to meet this week, Wednesday through Friday, to finally make a decision at their board level on the merits of this agreement. This afternoon, however, SWAPA was notified by ATN-ALPA via email that they have postponed their scheduled meeting indefinitely.

We have given you outlines of what this deal entails for you with the final language. A much broader education plan is in the works, if this deal is approved by their MEC. We know many of you are waiting (with continued patience) for further explanation and data, but we must still hold off until a decision on their end is made. In the meantime, SWAPA will continue preparations for arbitration.

We will update you as often and as thoroughly as possible as things progress. These delays don’t help either pilot group or the Company. "

Posted by Holly at 10:51 PM | Permalink | Comments (0)

Good evening everyone. In this week's chokingly long issue, we take our magnifying glass to the recent earnings results reported by Southwest Airlines, SkyWest, Allegiant, Republic Holdings, and Pinnacle. Yes, a rather strange mix of subjects this week.

In the case of Southwest Airlines, this quarter's results were a lot noisier than expected, as a result of the way the airline is reporting its numbers --re: merger with AirTran. Revenues were also not as good as had been expected. As one analyst wondered, did the airline push fares higher too hard, too fast in the spring? Whatever -- the airline came in under expectations.

The airline was also one of the few that reported that its "business traveler" revenues showed a softening during the quarter. This was in contrast to what some other airlines reported.

As for the three regional airlines -- it continues to be a period of transition for all three. SkyWest finally admitted what we have thought for six years -- the merger with Atlantic Southeast has never really gone as well as they had anticipated. Now, they are trying to layer the ExpressJet merger on top of ASA.

With Pinnacle, the airline has a totally new executive team to work out the details of merging three airlines together. '

Then there is Republic. The fixed fee basis continues to make money. Just not as much as it used to make because of shrinking margins. Then there is Frontier Airlines. The airline lost a ton of money during the quarter. The restructuring continues.

Finally -- Allegiant Travel also reported earnings last week. Again -- another airline that finds itself in a period of transition. New aircraft types, sharp reductions in capacity as a result of higher fuel prices, new engine overhauling program, ETOPS certification fun, seating modifications to all existing aircraft -- a lot of stuff going on out in Las Vegas.

It was a horrible week for airline stocks last week -- but I agree with a couple of analysts who put out notes Monday and Tuesday. This is a great time to load up on airline stocks. If they are the right ones. Oil has tanked, demand still looks good, fare prices are still good, the airlines got a little revenue bump as a result of the FAA snafu, and well, yeah, airline stock prices have been, for the most part, beaten to a pulp.

We look at break-even load factors and operating margins for the second quarter. Question of the week -- which airline finished dead last in both important metrics?

All of this -- and more in a 160 plus page issue this week. Subscribers can access this week's issue here.

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

Hello everyone. It's that time again. Time for this week's issue of PlaneBusiness Banter. This week we take our in-depth view at the recent earnings calls and results from Hawaiian Holdings, Delta Air Lines, JetBlue, and the newest member of the U.S. publicly traded airline community -- Spirit Airlines.

Spirit easily blew past analyst expectations for the quarter, and I must admit, it was fun to listen to a call from an airline that has such a very different business plan. Reminds me of when Allegiant first came on the scene. And years before that, Southwest Airlines was the airline that was pushing its lower costs, its "different" business model of simply low fares, and its low cost structure. Now -- the new kid on the low cost, high-growth block is Spirit Airlines.

In addition to our earnings coverage, we spend a lot of time talking about pilots and pilot unions this week. From pilots calling in sick at Continental to ALPA severing a mutually beneficial deal with the Allied Pilots Association that had included the services of a well-respected union negotiator Seth Rosen, as a result of APA hot heads sending out anti-ALPA missives to American pilots -- it has been a very "labor-intensive" week you might say.

But all of this angst pales in comparison to the paperwork that accompanied US Airways' request for a preliminary injunction against its pilot union, USAPA, and the union's President, Michael Cleary.

The suit, which was filed last Friday accuses the pilot union of of "directly instigating the illegal slowdown by encouraging pilots to delay flight departures, not complete certain training requirements, decline to fly on the basis of fatigue, increase maintenance write-ups, and generally slow down in the performance of their duties — and also by threatening to expose and retaliate against those pilots who do not participate in the slowdown. Although USAPA is encouraging pilots to change their behavior under the guise of “safety,” USAPA's own communications confirm the true purpose of its campaign is illegally to slowdown US Airways’ operation in order to gain leverage in contract negotiations."

But it's not all unions and earnings.

Oh no.

Then there is the latest from Washington.

While the people who were elected to Congress finally managed to cobble together some kind of debt ceiling/budget compromise and both the Senate and the House managed to sign off on it, one thing that was not taken care of before both the House and Senate shut down work for the rest of the month was -- a funding authorization bill for the FAA.

That's right.

The bad news is that this means FAA-funded projects across the country will remain stopped in their tracks, more than 4000 FAA employees will remain laid off, and other FAA workers will continue to work more or less on an emergency basis.

But -- on the plus side -- (at least if you are an airline CEO or CFO) this could mean an additional $1.5 billion in revenues for the U.S. carriers -- as a result of the ticket tax not being collected. That is, unless they begin to start rolling out a series of off-the-wall fare wars.  

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

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

Hello everyone. I feel like I need to crank up the theme song from "Rocky" tonight. Yes, it's earnings week here at the Worldwide Headquarters of PlaneBusiness Banter. Or rather, the first of three heavy earnings weeks. Or is it four? Oh, they are so much fun -- who's counting?

This week Alaska, United Continental, AMR and US Airways in-depth earnings reviews are on tap for PBB readers. I know it's hard to believe, given how long some of our earnings reviews have run in the past, but I do believe we may have posted our longest earnings review ever tonight. Alaska's call attracted a lot of analyst attention and they all asked a lot of great questions.

That's what happens when you are an airline and you post a fantastic pretax margin, operating margin, and an even more impressive ROIC. (That's return on invested capital for those of you who are not financial geeks.)

Funny. I can remember quarters in the past when Alaska executives would give their presentations on the airline's earnings call and there were hardly any analysts on the calls asking questions. I used to feel sorry for them.

Things change when you begin running one of the most profitable and well-run airlines in the U.S.

American Airlines? Oh. Earnings. Did the airline report earnings last week? Kind of hard to remember what with all the hoopla the airline generated about its split Airbus/Boeing order of an entire fleet of aircraft. Actually I'm sure the airline would prefer that nobody remembered that they also reported 2Q earnings. And we'll talk about why that is the case.

No question American would much rather we talk about nice new shiny airplanes.

One thing's for sure. Wall Street was not happy with the news about all the nice new shiny airplanes. We give readers a selection of analyst comments to pour over this week -- and the gist of the feedback goes something like this: new airplanes do nothing to change the underlying problems with the current business model or the brand. Or the operational issues. Or the cost issues. Or the continued less-than-industry peer revenue performance.

Much less mounting cash flow issues.

Bu they, don't worry, be happy. I sometimes think that AMR management is convinced the airline is simply "too big to fail." That's a somewhat dangerous assumption to make. Just ask Lehman Brothers.

United Continental is, of course, still in its transition mode, but so far so good. The airline's revenue performance was good in 2Q, but I suspect we are going to see the airline's revenue performance get even better over the next 12 months. My biggest concern with United Continental remains its continuing labor negotiations. Particularly the ones involving the airline's two pilot groups.

Then there is US Airways. Even without fuel hedges, the airline still posted a profit for the quarter. All things considered, that's not a bad thing. However, US Airways also happens to have a rather dysfunctional pilot union that still can't negotiate a seniority agreement, much less a contract. Last week that same union decided to go public with its "safety" concerns at the airline. Uh-huh. Everything new is old again, isn't it?

We also talk about other things this week of course. But I won't spill the beans. That will just have to be a surprise.

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

Posted by Holly at 9:58 PM | Permalink | Comments (0)

One of our very long-time PlaneBusiness Banter subscribers who also happens to fly for AirTran tells us that "things are very hot" in Atlanta as pilots there debate the proposed agreement between AirTran and Southwest Airlines pilots.

So hot that the AirTran ALPA MEC issued this letter this afternoon:

"July 24, 2011

Fellow Pilots,

During a special meeting today, the Master Executive Council voted to temporarily suspend the union web forum. This step was not taken lightly, as the MEC feels that pilots should be free to debate the topics that impact all of us. However, the discourse has become too uncivil at times, and policing the posts too difficult.

The MEC officers and status representatives are still available to answer questions or take feedback, either through their e-mail addresses or cell phones. A complete list of contacts is available at www.airtranpilots.org<http://www.airtranpilots.org>.

Thank you for your understanding.

The AirTran Master Executive Council"

Doesn't matter what negotiation it is. Or what airline. There is no such thing as a "slam-dunk" when it comes to pilots, contracts and .... questions of seniority.

Posted by Holly at 2:31 PM | Permalink | Comments (0)

Hello everyone.

This week in PlaneBusiness Banter I sit down for a PBB Lounge Lizard Interview with one of my favorite people -- Dave Hilfman. Dave is the SVP of Global Sales at the "new" United Airlines. Prior to his current gig, Dave held the same position at Continental Airlines.

We talk corporate sales, red Mazda RX-7 convertibles, Eastern Airlines, Gordon Bethune, Larry Kellner, why some corporate clients are not happy about sharing contract performance information, the United/Continental merger, and you'll meet Dave's son Marshall too.

Tonight, we're waiting to hear the news from AMR in regard to 1) American Eagle and 2) new aircraft. The pilots at American Eagle and AMR came to terms on some sticking points regarding how the pilots would be treated if there was a change of ownership at the airline today. That points to an announcement tomorrow about what AMR intends to do with its regional subsidiary.

The AMR board of directors was meeting today in advance of the airline's second quarter earnings roll out tomorrow. If we were betting, we'd bet that Airbus/Boeing decision was probably made today at that same board meeting.

Meanwhile, over the weekend, it was announced that the Southwest Airlines and AirTran pilots had come to terms on a new seniority agreement. Still have not seen an "official" summary of that agreement. Clearly this is a big deal for the airline. More after we see the fine print.

Airline stocks? Horrible week for them last week.

In the government fun and games division, the DOT rolled out a list of 16 fees it thinks the airlines need to keep track of and report to the government last week. Of course they did this under the guise of it being "passenger friendly." Hogwash. It's so the DOT can force the airlines to account for ancillary revenues in a more clear and concise manner. The easier to tax those revenues -- down the road.

Then we had the bipolar fare increase/fare sale activity over the last couple of days. First United and Delta began an attempt to raise fares last week. It continued through the weekend -- and then Southwest balked.

Then this week Southwest and its new subsidiary AirTran rolled out a new fare sale!

Just another wacky week in the industry we all know and love.

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

Posted by Holly at 10:25 PM | Permalink | Comments (0)

According to a representative of SWAPA, the union that represents the Southwest Airlines' pilot union, the top half of the letter that was posted earlier this afternoon is authentic. The bottom part that was posted earlier with supposed agreement "details" was not. Therefore I have removed the post entirely to prevent any further misinformation from being distributed.

Thank goodness. I was trying to figure out how in the world Southwest Airlines was going to order that many planes.

I have asked the SWAPA union representative who contacted me to please forward me an accurate summary of the tentative agreement.

_____________________

July 16, 2011


Fellow Pilots,

This afternoon, the AirTran Merger Committee (MC) reached an agreement-in-principle with SWAPA and Southwest Airlines on a seniority list integration and transition agreement.

This agreement will be presented to the ATN ALPA Master Executive Council for their consideration in the near future. If this agreement is approved by the MEC, it will be presented to the membership for ratification.

The MC will be working in the coming days to translate the current agreement into a full-language document. This will require a great deal of work, and your patience is appreciated as they develop a comprehensive presentation for the MEC and the pilots of AirTran Airways.

The Merger Committee believes that this a fair agreement that provides career protection for AirTran pilots, as well as significant economic gains.

In unity,

Your ATN Master Executive Council

______________________

Posted by Holly at 2:35 PM | Permalink | Comments (0)

Atlantic Southeast Airlines sent me an email this afternoon in which the airline admits that perhaps the name "SureJet" was not such a good idea after all.

"Since we value the feedback we’ve received to date, we have put a ground stop on the SureJet name," the airline said.

Yesterday the subsidiary of SkyWest, which is merging with ExpressJet, announced the new name of the combined airline was going to be "SureJet."

To say that the news was met with an unfavorable response from both industry observers and employees alike would be an understatement.

Here's the statement I received this afternoon from Kate Modolo, spokesperson for the airline.

"Atlantic Southeast and ExpressJet on July 13 announced that SureJet would be the new name of our combined airline, once our merger is complete later this year.

We’ve heard our team members’ significant concerns about the new name, and it appears we’ve missed our mark. The No. 1 goal with our new name was to create an identity that represented our people, and that our people would be proud of. Since we value the feedback we’ve received to date, we have put a ground stop on the SureJet name so we can solicit further input from our people, and get this important merger milestone right."

Posted by Holly at 3:41 PM | Permalink | Comments (0)

Yesterday I received a press release from the nice folks at Atlantic Southeast Airlines, letting me know that after it completes its merger with ExpressJet, the two airlines will be branded and marketing under one -- new-- name for parent company SkyWest.

That name?

SureJet.

Yeah. Sure.

No, I'm not kidding.

I tweeted my disbelief over this horrible god-awful choice yesterday, but the emails kept coming in today, so I figured I'd go ahead and weigh in here on PlaneBuzz, since this platform has a bigger audience of both PlaneBusiness Banter subscribers and non-subscribers.

People I've talked to have, overwhelmingly, and without exception, reacted by shaking their heads, asking me to repeat myself, or simply saying things like 1) it sounds like a household cleaner 2) it sounds like a new maxi-pad 3) it sounds horrible coming off the tongue 3) it sounds like a cynical joke.

I tweeted yesterday that I thought it sounded like something from a Saturday Night Live skit.

One of our PBB subscribers wrote me today and shared this comment,

"SureJet.. . REALLY?! We actually paid someone to come up with this?!

I'm no branding expert, but a name like that doesn't really give me the warm and fuzzies when thinking about, oh I don't know, reliability, completion, prospects, the future... shall I go on?
And oh the possibilities for puns... 'Surely you can't be serious...?'

Word from the presentation was there were audible gasps followed by silence. Brad Holt then bolted up to the mike to declare the name "grows on you." Not quite.

Rumor today is the new brand is quietly being shelved. Wish I could log on to the company website to check, but it's been down all afternoon.... I'm SURE they're working on it. "

Trust me. You don't need to be a marketing or branding expert to know this name needs to be tossed.

"The name grows on you?" Ah. No. Surely Brad Holt, you jest.

Posted by Holly at 1:24 PM | Permalink | Comments (0)

Hello everyone. This week in PlaneBusiness Banter we're talking about the second quarter earnings season that begins next week. We also give you the complete rundown of the current airline stock target prices -- compliments of the usual airline industry analyst contingent.

We also look at the most recent DOT Airline Consumer Travel Report for May. This month was a real grab bag of results -- with airlines the usually doing well not doing well in certain measures, other doing better than expected -- and then there was American Airlines. And American Eagle. The not-so-dynamic duo were clearly the worst performing airlines of the group. We were so impressed, we were moved to unanimously award the two airlines a tandem "Goat" award for their industry-lagging performance.

That reminds me. You know how airline executives always pepper their comments about how their particular airline has such "industry-leading" performance in this and that? When was the last time you heard someone say their airline is an industry laggard?

The EU is convinced that all the airlines of the rest of the world need to participate in its Emissions Trading Scheme. Needless to say the Air Transport Association, the IATA, and U.S. airlines don't agree. The shrill cry against adding airlines to the list of ETS participating companies rose sharply last week -- along with threats of an all-out trade war.

Last week airline analysts lined up to initiate coverage on shares of Spirit Airlines. Without exception they were all bullish on the shares. Their enthusiasm helped push shares of Spirit up 11% for the week.

Speaking of Wall Street, jet fuel posted a sharp uptick of more than 6% last week, even though the price of crude oil was only up a little more than 1%.

United Airlines pulled out the stops last week as it feted its most traveled frequent flyer. They even named a 747 after him.

On the merger front the proposed LAN/TAM deal is on hold as government regulators take more time to look at possible antitrust implications. I find this rather amusing, since LAN basically owns the Chilean market.

Pinnacle's new CFO used to work for Pinnacle's CEO when he was CEO at Frontier Airlines, Lufthansa is going to start flying passengers on biofuel on Friday, and more.

All in this week's issue of PlaneBusiness Banter .

Posted by Holly at 10:38 PM | Permalink | Comments (0)

Hello everyone. This week's holiday week issue of PlaneBusiness Banter is now posted. Since yesterday was July 4th, you know what that means. That's right --this week's issue includes the legendary 2011 "Ode to a Hot Dog" column.

Aside from our usual July 4th fun and frivolity, we do have some serious business to talk about this week in addition to our yearly review of weenies.

Four major U.S. airlines are now talking to aircraft manufacturers about potential new aircraft orders. We look at what some of the industry's more knowledgeable observers think we could see in terms of new orders.

In Australia, aviation regulators grounded Tiger Airways Australia last week. We talk at length about the reasons for the ruling, the fact that most of the major investors in the airline have essentially cashed out, and why the move by CASA should not have come as a surprise to the airline.

Another week, news of another low-cost airline in Asia. Last week Qantas and Japan Airlines announced that they are forming a joint venture -- the purpose of which is to start a new low-cost Asian airline.

Meanwhile, across the pond, Flybe and Finnair have combined forces purchasing Finnish regional carrier, Finnish Commuter Airlines.

On the labor front, we had two major union representational votes last week. The flight attendants at United Airlines and Continental Airlines went to the ballot box to pick a union representative for their combined group in June. Last week the National Mediation Board announced that the Association of Flight Attendants won the election -- but by a closer vote than I think the AFA had expected.

While over at Republic Holdings, pilots for all of the holding company member airlines voted in favor of one union representative. And which union was that?

In terms of airline stocks, last Thursday marked the end of the second quarter. Which airline stocks performed like champs during the second quarter -- and which ones lagged behind?

We also take a look at the current mean estimates for the usual suspects heading into the second quarter. How has analyst sentiment changed since the end of the first quarter?

Lots of letters to the editor this week, including one of the most unusual notes I've ever received. Hint: It has nothing to do with airlines.

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

Subscribers can access this week's issue here.

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

Hello all. Is everyone ready for the Fourth of July Weekend? Not before you read this week's issue of PlaneBusiness Banter.

This week we are talking a lot about what happens when airlines have to deal with stories that go viral with a vengeance.

Last week three airlines had to face situations that forced them to call upon every piece of social media/internet knowledge and expertise they had. US Airways, Southwest, and Delta Air Lines all handled difficult situations differently. What did they do right, what could they have done better?

AMR, UAL, and Delta filed updated second quarter guidance with the SEC. Looks like Delta Air Lines will meet its 10% RASM goal for the quarter, but maintenance costs are running higher than anticipated. Both UAL and AMR said that RASM numbers will come in lower than expected. AMR looks like it will have another sub-peer quarter -- or so says Bank of America/Merrill Lynch analyst Glenn Engel.

The decision by the U.S. and key allies to release 60 million gallons of crude oil announced last week had a huge effect on oil prices and jet fuel last week. That news was responsible for a huge uptick in airline stocks on Thursday. But Friday the second quarter updated guidance sent stocks plummeting. Up down, up down.

It's always something, isn't it?

There was an Air Show last week. In Paris. We'll take a look at the final tallies....but more importantly, has Boeing received the message yet? You know. The message that says, "Airlines want to fly aircraft that save them money."

We talk about Air France/KLM flights that will fly using biofuel this fall, Sir Richard Branson's personal letter to his pilots in which he essentially begs them not to strike, and we wonder whether all the flak concerning American Airlines' new boarding policy is on target or not.

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

Posted by Holly at 9:45 PM | Permalink | Comments (0)

Hello earthlings.

Another rough night of weather here in the DFW Metromess. But have no fear. This week's issue of PBB is now posted and a great issue it is. This week we announce the 2011 PlaneBusiness Wild Turkey Award recipient. Drum roll please.

This year the award goes to Bill Ayer, Chairman and CEO of Alaska Air Group.

While PlaneBusiness Banter subscribers are all too aware of the excellent job Alaska is doing on the financial side of the house, very few people know that much about the airline's Chairman and CEO. That's because Bill Ayer wants it that way. He is not one to bask in the spotlight. He prefers his employees do that -- in recognition of their work.

But this week Bill has best be prepared to bask in the spotlight, or at the very least he had best prepare for the delivery of a case of Wild Turkey Rare Breed, compliments of the man for whom this award is named. That's right. Herbert D. Kelleher.

Better known in most circles simply as... Herb.

In addition to our Wild Turkey award column, we have a very active letters section this week in which our subscribers talk about everything from Steve Hazy's business model at ILFC to the TWA pilots lawsuit against ALPA. Oh, and yes, my rant last week on airline marketing and branding, or in most cases, the lack thereof. I post a few of the comments I received this last week on that column, but there are still more coming in. We might have to revisit the topic.

There was some chatter this week concerning the United/Continental pilot negotiations, but as I report tonight, I don't see any positive progress on this front. Later this week ALPA President Lee Moak will be meeting with a joint meeting of the MEC's from both airline pilot groups. How I would love to be a fly on the wall of that session.

On the American Airlines labor front, some good news this week. It sounds like the negotiators for the TWU, which represents the mechanics, and the airline, had a productive mediated session last week, and they have scheduled another meeting for two weeks from now in Dallas.

American and the Allied Pilots Association, also appear to be finally making some headway in their unmediated discussions. Again, good news.

Shares of Air Canada led the airline sector to its first positive week in a long time last week, as shares shot up 15% after the strike against the airline by its customer service employee group came to an end.

Oh. Yeah. There is an air show in Paris this week.

We give you our four quick takes this week on some of the more interesting tidbits we've heard coming out of Paris, and next week we'll wrap up with a full rundown of who announced what. And maybe even...why.

One thing that is certainly clear -- Boeing has best get off its you-know-what and come up with either a replacement aircraft design or an upgrade to its existing 737 product. Airbus now has banked almost 600 orders for its A320neo. Ryanair announced this week it has signed a "design" agreement with Chinese aircraft manufacturer Comac, to help the company design a Boeing 737 replacement aircraft.

As I reported in PBB after the recent Southwest Airlines annual meeting press conference, I don't think I've seen Southwest CEO Gary Kelly respond as tersely as he did that day in answer to the inevitable "any news from Boeing about a 737 replacement aircraft" question.

Earth to Boeing....come in.

Finally, a big thank you to Brett Snyder, aka CrankyFlier . Brett gave us a very nice shoutout this week in his blog about the rant I went on last week concerning the importance of brand, and how some airlines get it, but most do not.

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

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

Next week -- for only the third time in 14 years -- I will award an airline CEO with the PlaneBusiness Wild Turkey Award. This award is given to an airline CEO in recognition of their excellence in airline management.

Yes, the award is named in honor of Herb Kelleher, former Chairman and CEO of Southwest Airlines.

What does it take to grab one of these (and the case of Wild Turkey Rare Breed whiskey personally delivered compliments of the award's namesake?)

*A dedication to a strong balance sheet.

*An emphasis on a company's employees and the importance of their contribution to the company.

*A position of leadership within the airline community.

*A willingness to take risks -- in an effort to improve an airline's financial and operational success.

*Above all -- a commitment to "do the right thing" in regards to the airline, employees, shareholders, and customers.

That's next week -- in PlaneBusiness Banter.

Posted by Holly at 11:10 AM | Permalink | Comments (1)

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

A heads-up for all DFW based readers who might want to do something different, yet still airline-related Wednesday morning.

On the agenda tomorrow morning at the Dallas City Council Meeting is a proposal that would see the council rename Cedar Springs Road from Mockingbird Lane to the Dallas Love Field Terminal.

The new name that is going to be proposed? Herb Kelleher Way.

We hear that Mr. Kelleher, the irrepressible ex-CEO of Southwest Airlines, is expected to attend the meeting, which starts at 9 A.M. Location? Council Chambers, City Hall.

No word on whether or not Wild Turkey will be served at the event.

Posted by Holly at 8:32 PM | Permalink | Comments (0)

Hello everyone. It's Tuesday night. That means two things. One -- this week's issue of PBB is now posted. Two -- the Mavericks and the Heat are on television. Now. Consequently my summary comments about this week's issue are going to be mercifully brief!

In this week's issue we talk a great deal about lawsuits. Yes, that means we are talking about American Airlines and its escalating legal fight(s) involving Sabre, Travelport, and Orbitz.

Speaking of Orbitz, American Airlines got a rude awakening last week when a court informed the airline that it once again had to provide fare inventory to Orbitz. I somehow don't think American Airlines expected this -- especially considering the airline had just rolled out a new television advertising campaign in which the airline touted the fact that AA.com had American Airlines fares -- and Orbitz did not.

BZZZZT. Surprise!

Another surprise last week? The mechanics at United Airlines turned thumbs down on their highly touted tentative agreement. When I say "highly touted," both the Teamsters and the airline had publicly lauded the deal in March.

So much for that.

We talk about why the deal failed. And why we think the Teamsters probably shoulder a lot of the blame. We also check in with the ongoing pilot negotiations at United.

Airline stocks had another rough week last week, as both employment and housing numbers released last week were nothing short of grim.

Oil prices remained flat last week, as did jet fuel, but fears the U.S. economy could be slowing down took their toll on the sector.

In the good news department, the traffic reports from May that have rolled across the transom already have, for the most part, looked good. Looks like May was a good month overall -- just as those wily airline executives had indicated at the recent Bank of America/Merrill Lynch Global Transportation Conference.

We have a lot of subscriber letters this week, and we also take a retro look back at the offer Donald Trump made for American Airlines in 1989.

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

Posted by Holly at 7:47 PM | Permalink | Comments (0)

Hello everyone. This week's issue of PlaneBusiness Banter is now posted. This week I chat with Avondale Partners analyst Bob McAdoo. As you may recall McAdoo recently issued a research report on American Airlines in which he claims the airline is losing more than $10 million annually in revenues in more than 50 different markets.

After I talked extensively about the report in PBB two weeks ago, I received a slew of emails concerning Bob's methodology. This week, I talk to Bob about all this -- and more.

Spirit Airlines finally rolled out the IPO it has been trying to roll out for more than 14 years last week. The result? Not good. Not only could the airline's underwriters not sell all the shares that were available, the price of the deal was marked down as well.

News of the poor showing by Spirit apparently has not deterred yet another low fare North American carrier from moving forward on its plans for an IPO. Can you guess who that is?

We also check in with Bill Greene, analyst at Morgan Stanley. We have the latest results from the last two institutional investor polls that Bill has pushed out. Bill uses the responses to his polls to gauge the views of his investor readership on various topics. What are his readers telling him now about airline stock prices in the next three months?

In other news, we discuss the first official review of the material found on the two recorders that were recovered from the ocean-floor resting place of Air France Flight 447. Contrary to what has been said in a number of media sources, I don't think we've heard all the information there is to be shared, and it is still premature to determine exactly what the sequence of events were that took the plane down. But we certainly knew more than we knew before.

We could have a pilot strike in place against Virgin Atlantic before the end of June. Pilots are voting now on a strike ballot. I would be very, very, surprised if the pilots don't vote to strike the airline. Tentative first dates the airline could be affected: Last week of June.

Oil prices remained stubbornly high last week, a fact that weighed heavily on the airline sector. It was a perfectly horrible week for airline stocks.

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

Posted by Holly at 11:37 PM | Permalink | Comments (1)

Hello everyone!

We are a bit late posting our blog post tonight. PlaneBusiness Banter has actually been posted for awhile. But it's been a rather nasty night here at the Worldwide Headquarters. Had to go offline for a bit. Tornado warnings, tornado sirens, baseball sized hail, rain. Just a lovely evening.

That's okay. It's not Joplin and it's not Tuscaloosa. Still very unsettling though.

Speaking of unsettling, we didn't hear many unsettling comments spoken at the Bank of America/Merrill Lynch Global Transportation Conference last week. Airlines made their way to Boston where analyst Glenn Engel held court. This week I give you a summary of the high points from the Conference and talk a bit about why, even though airline execs continued to sing the praises of continued revenue strength, a number of analysts are convinced the airlines have hit the wall in terms of fare increases and passenger demand pushback.

I was over at Southwest Airlines last week, as the airline held their annual shareholder meeting. After the meeting Chairman, President and CEO Gary Kelly held a press conference. Our take? I think the airline is now fully aware of the challenge it faces with the AirTran merger. It's time to get to work.

In other news, Delta Air Lines and US Airways announced a newly revised slot swap proposal late Monday. Our take on the revised deal? We still like it just as much as we did when the two airlines first proposed the deal almost two years ago.

But I doubt American Airlines likes the deal very much. If the Feds approve the deal, it will give Delta Air Lines a huge leg up on its New York expansion -- as US Airways will hand over 132 slot pairs at LGA to the Atlanta-based airline. In return, US Airways will get $66.5 million in cash and 42 new slot pairs at Washington's DCA. Oh, and rights to fly to Sao Paulo.

The deal will strengthen the network of both airlines. For very little money.

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

Subscribers can access this week's issue here.

Okay. I'm going back to the closet.

Posted by Holly at 9:39 PM | Permalink | Comments (0)

Good evening earthlings! This week's last mega-earnings issue of PlaneBusiness Banter is now posted. This week we dig our way through the recent earnings results and calls from Pinnacle, SkyWest and Republic Holdings. Let me put it this way. This is not an easy time for regional airline operators. Three different stories, three losses.

In other news, we talk a lot this week about why it is I am concerned about the negotiations between the United Airlines and Continental Airlines pilots. This situation has gone on far too long. These negotiations should have been wrapped up in no more than 60 days.

But now negotiations have become centered around the big "S" word. Union squabbling, turf wars, and intra-union power struggles that all go back to ....seniority.

These two groups had a choice going into these negotiations: follow the blueprint set at Delta/Northwest or the blueprint set with America West/US Airways. Every day that passes -- it appears both groups are following the wrong set of plans.

I tell subscribers this week why I believe these negotiations are now at the tipping point.

In other news, we talk this week about two analysts and their respective research reports. First, we talk about Avondale Partners analyst Bob McAdoo's research note on AMR. It was, without a doubt, the most scathing review of the inability of management at the airline to do what it needs to do that I have read from any Wall Street analyst. As he points out -- the airline continues to lose at least $1 billion in revenues as a result of bad decisions.

So -- what are they going to do about it?

Gary Chase, analyst with Barclays, issued a nice preliminary review of what he thinks the Southwest/AirTran deal is going to mean to Southwest. Both short-term and longer-term. We've admired Chase's take on Southwest for years -- and his piece last week was no exception. Opportunity? Yes. But with risks.

We've got the March DOT Air Travel Consumer Report, we'll go over how the airline sector did last week (I'll give you a clue -- jet fuel rose again) and we talk a bit about the upcoming IPO from Spirit Airlines, as well as the results issued Monday from Steve Hazy's new Air Lease Corp.

And more!

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

Posted by Holly at 10:26 PM | Permalink | Comments (0)

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

Hello everyone. It's that time again. This week's mega 100-plus page issue of PlaneBusiness Banter is now posted. This week we take an in-depth look at first quarter earnings and earnings calls from Delta Air Lines, US Airways, JetBlue and Hawaiian Holdings.

Best quote from the earnings calls this week came from Delta CEO Richard Anderson, as he tried to stress to analyst Dan McKenzie with Rodman and Renshaw that the airline is not interested, as are some competitors, in chasing market share. (Wonder who he was talking about?)

No, the airline is very serious about "keeping our capital commitments in check, generating free cash flow, putting that cash flow back on the balance sheet and keeping our capacity in line with what will produce an operating margin."

Richard's follow-up comment: "This isn't a hobby."

Love it.

US Airways posted a good first quarter -- even though the airline has no fuel hedges in place. That's right. None. I love that as well. I think the airline is onto something, i.e., screw fuel hedging. If you run an airline as a well-managed business, you should be able to manage your expenses and revenue through capacity changes.

That goes back to the Delta mantra they kept emphasizing throughout its call as well. Essentially, if a route is not making money -- it's going to go away. Chasing market share is stupid. Managing for profits and margins is smart.

We also take an extended look at the recent results from both JetBlue and Hawaiian Holdings. Two very different airlines -- two very different business plans. JetBlue continues to grow -- and its dominant-carrier Boston presence speaks to that point. Hawaiian has decided to grow long-haul to the West, including new routes to Japan. How are the new routes faring? Hint: The airline will probably post a loss in the second quarter.

We talk about all of this, we muse about whether or not the death of Osama Bin Laden will eventually let us walk away from TSA Security Theatre, and well, of course we talk about Kate's dress as well!

All this and more -- in this week's jam-packed issue of PlaneBusiness Banter.

Subscribers can access this week's issue here.

Posted by Holly at 8:40 PM | Permalink | Comments (0)

Hello everyone.

This week's 120-plus page earnings issue of PlaneBusiness Banter is now posted. Yes, it's that time again. This week we have our in-depth analysis of the first quarter earnings results and earnings calls from American Airlines, Alaska Air Group, Southwest Airlines and United/Continental. Oh, and we have a PlaneBusiness Earnings Summary for JetBlue as well. We'll do our in-depth look at them next week -- along with US Airways, Delta Air Lines and Hawaiian Airlines.

Short and sweet? The worst performance last week was clearly posted by AMR. Best overall performance was turned in by Alaska Air Group.

No wonder AMR announced it was going to hold its annual shareholder meeting in Los Angeles next month. That's right. The airline doesn't want to hold it in Dallas -- because they know there will be a huge turnout of unhappy employees.

I bet there are a fair number of unhappy employees who turn up in L.A. anyway. But let's face it -- LAX is not a huge American Airlines operation. The turnout will undoubtedly be much smaller than if they held it here in the DFW Metroplex.

But we talk about other stuff this week as well. The NTSB issued an update on its investigation of the Southwest Airlines' aircraft that popped its top. Interesting reading that was. Are misshapen rivet holes a production issue, or some kind of metal fatigue problem? Either way -- it looks like Boeing has some problems here.

Then there is the ongoing air traffic control mess with the FAA. As expected the agency has responded to a spate of recent sleeping controller incidents by issuing some typical knee-jerk reaction responses. This is not a knee-jerk problem.

The deep-seated FAA/air traffic controller problems have been there for years. This is not about naps.

Can FAA Administrator Randy Babbitt finally do the hard work and solve the problems? We know he can. He's got the labor negotiation background to pull it off. But does he want to?

US Airways filed a lawsuit against Sabre last week -- the latest salvo in the airline/GDS wars. We have a copy of the actual filing for subscribers to peruse. Interesting reading.

In our "Retro Moment of the Week" we take a look at comments former airline analyst Sam Buttrick made about consolidation in 2000. How do they stack up in hindsight?

We also look at Rodman and Renshaw analyst Dan McKenzie's latest capacity analysis. Which airlines are moving capacity out of what markets -- and which airlines are looking at more competitive capacity moves in the second quarter?

Oh, and what airline merger does Dan think is a strong possibility?

All of this and more in this week's large and unwieldy issue of PlaneBusiness Banter. Subscribers can access the issue here.

Posted by Holly at 8:13 PM | Permalink | Comments (0)

This week's issue of PlaneBusiness Banter is now posted. This week's issue is one of those "kitchen sink" issues. First we peer into the financial reports of the four largest airline pilot unions -- ALPA, APA, SWAPA and USAPA -- spurred by my wonderings about just how much the US Airways' pilot union, USAPA, is paying out in legal fees. Boy, did I open a nice big Pandora's box. Who says we only have to dissect the financial statements of the airlines?

Then there is American Airlines. No, the airline is apparently not in talks to do a deal with Mexicana, even though press reports south of the border indicated otherwise over the weekend.

Meanwhile, tomorrow is not only the day that American Airlines announces its first quarter loss. It is also protest day for American employees. Concurrent with the airline's executive level bonus allocations, the Association of Professional Flight Attendants are going to be protesting -- and I would bet there will be some other airline employees contributing to the effort.

On the corporate travel front, American filed suit against Travelport and Orbitz last week. They even dropped the "Sherman" antitrust bomb in their filing. Yep, American thinks there is some anti-trust issues here. Travelport and Orbitz, not surprisingly, think this is merely a play for leverage.

Speaking of earnings, we have a line-up of heavyweights on Thursday, followed by another heavy day next Tuesday. We get you up to date on analyst expectations and reporting dates.

If it is time for first quarter earnings, then Proxy Statements are also in the mix. Those are those horribly confusing and hard-to-figure out SEC filings that tell us just how much the top executives at the airlines took home in compensation during 2010.

Southwest Airlines filed their proxy statement last week, and, well, let's just put it this way. Remember when the airline used to have the lowest top-tier compensation levels in the industry -- and they made a big deal about the fact this was the case? And they were proud of the fact? It's not the case anymore.

Oh, we talk about that, we talk about how airline stocks did last week, we talk about the TSA's patdown of the six-year-old, we alert you to a museum collection of air sickness bags, and we talk about a lot more -- in this week's issue of PlaneBusiness Banter.

Subscribers can access this week's issue here.

Posted by Holly at 7:34 PM | Permalink | Comments (0)

Good evening earthlings! This week's issue of PlaneBusiness Banter is now posted.

This week I talk a lot about US Airways. For good reason. I attended the airline's "Unplugged" Media Day last week. The airline used the occasion to announce it is upgrading its regional airline fleet with first class cabins. But that was not the only news to come out of Tempe. We'll give you the low down.

That doesn't mean we're done talking about Southwest Airlines and its recent fuselage problem. Nor have the late night talk show hosts.

Last week Southwest Airlines CEO Gary Kelly and American Airlines CEO Gerard Arpey both sat down with Terry Maxon from the Dallas Morning News at the SABEW Conference in Dallas. Gary talked about the Southwest incident and Gerard talked about the recent bogus offer to buy the airline from that outfit in Florida. Yes, as we assumed, the SEC is looking into it.

Speaking of Dallas, the DOT reported its February Air Travel Consumer Report last week. As expected, it was not a good month for airlines based in Dallas. (February ....ice...snow...Superbowl on ice.)

Expedia and American Airlines kissed and made up this week. But this news leaves a lot of very ragged and messy things to clean up on the corporate travel terrain. We like TheBeat's Jay Campbell's take on the news. We'll share his take with you.

While pilots for United and Continental Airlines keep working on a new contract, all is not apparently warm and fuzzy on the United Airlines pilot side of the house. Reports say that there was a recall vote originally scheduled for Monday's UAL ALPA MEC meeting. The intended victim? The pilot's current MEC Chairwoman, Captain Wendy Morse.

Meanwhile the flight attendants at American Airlines offered up a deal for the airline. An immediate 6% raise for its members -- and the rest of the contract details would be tabled for 18 months. The airline said no.

Speaking of American -- April 20 is just around the corner. That's the day you can expect to see protests from airline employees over the airline's latest PUP bonus distributions.

We talk also take a look this week at just how much additional revenue and/or capacity cuts the airlines would need to make -- in order to cover the current price of fuel for the remainder of the year. That's a sobering chart. Thanks to Dahlman Rose analyst Helane Becker for the analysis.

As always, all this, and more in this week's issue.

Subscribers can access the issue here.

Posted by Holly at 9:07 PM | Permalink | Comments (0)

Hello all. This week's issue of PlaneBusiness Banter is now posted. As I write this, I am literally throwing things into my bag, on my way to Phoenix for this year's Media Day event at US Airways, so I am going to be a bit shorter than usual with our weekly summary.

This week I wrap up coverage of the recent JP Morgan Transportation Conference with a look at the presentations from JetBlue and Alaska Air Group. Did you realize that Alaska does not finance its Boeing 737 aircraft? It pays cash for them. And hey, we aren't talking about cheap MD-90s like Allegiant buys either.

Of course we talk a lot this week about the latest "hole in the roof" problem that Southwest Airlines experienced last week. Thankfully, after a one foot by five foot gash opened up in the roof of one of its flights, the pilots were able to land the airplane safely in Yuma, AZ.

While the airline was quick to say the issue was not related to the problem the airline identified as a result of the last fuselage skin rupture, it does now appear that the two aircraft do have something in common. They are both "older process" 737-300s that also happen to have more than 30,000 cycles.

That "older process" is the interesting part, because apparently Boeing changed the way the airplanes were built at some point along the line -- and specifically in regard to a part of the aircraft's structure that is now in the spotlight.

On the financial side, this week I had a chance to talk to Paul Jacobson, SVP of Finance, Treasurer, at Delta Air Lines. I appreciated him taking the time to talk to me. The subject of our discussion? How Delta Air Lines manages its cash. Inexpensively. Last week we posted a graph that looked at revenues/cash on hand at the end of the year, and Delta looked a bit, well, weak in that particular comparison. We knew the airline's revenues were not what they should be, and that was part of the problem. But what else was going on?

Now we know. And we also know that Delta uses a cash management strategy that only one other airline uses. Know what it is? We do. And we share that with subscribers this week.

We talk a bit about British Airways this week. The airline's flight attendants look like they are going to strike the airline again, former CEO Willie Walsh received a nice bonus prior to moving into his new digs as head of IAG, and the airline is considering an equity investment in JAL.

April Fools Day was Friday and a slew of airlines jumped into the foolish fray. Which airline's efforts were genuinely funny and which were, well, just plane lame?

We also have our review of the first quarter airline stock performance. Short and sweet? Pretty ugly reading.

All this and more in this week's issue of PBB. Subscribers can access this week's issue here.

Bye!

Posted by Holly at 10:38 AM | Permalink | Comments (0)

We dashed off a quick tweet about this hot topic last night, which I thought conveyed my sentiments regarding this hoopla surrounding a potential "deal" for AMR, parent of American Airlines. I made the point that I questioned any "offer" that was addressed to one "Gerald" Arpey. Not "Gerard" Arpey.

In a nutshell -- I was implying that you should go back to whatever you were doing before you got sidetracked with news of this nonsense.

But, because I've received so many emails in the last 12 hours about it, I figured a blog post might help to quell any remaining hysteria.

So, my updated take? Same as last night.

For those of you who are in the dark, yesterday some outfit called Sterling Global Holdings sent out a number of letters to media types in which it said it was offering $9.75 a share for AMR. That amount represented about a 50% premium over AMR's closing price on Tuesday.

The person who actually sent the letter is someone by the name of Al Weintraub. He claims he is an AMR shareholder. While we still don't know if that is true or not, he does seem to be a man with a checkered past, as this post at stockpatrol.com details. It seems the SEC is not one of his fans.

No need to duplicate the excellent detective work by Dallas Morning News reporter and AirlineBiz blogger Terry Maxon, who has been all over this from the very beginning. You can read his various missives on this subject at his blog, particularly here.

My final comment? For those of you who remember these kinds of things, this reminds me of the "mystery" buyers with the money that was tied up in various banks who were going to do a deal for TWA.

Uh-huh. Right.

Okay, everyone can now go back to whatever it is you were doing before all of this hit the fan.

Meanwhile those of us who find this kind of stuff entertaining will try to figure out if this guy was trying to get the stock to move, was simply bored, is crazy, or just likes to stir people up for the fun of it.

Posted by Holly at 9:40 AM | Permalink | Comments (0)

Hello everyone. This week's issue of PlaneBusiness Banter is now posted. This week we talk a lot about what all the folks from the airlines were talking about last week as they made their way up to New York and the JP Morgan Transportation Conference.

All the usual suspects were there, including United/Continental, US Airways, JetBlue, American Airlines, Delta Air Lines, Alaska Airlines and Southwest Airlines.

It was a little preview of sorts of first quarter earnings, which are, in case you haven't kept up, are right around the corner. In fact, the first quarter ends Thursday.

I know. Where did it go?

It was fun to listen to Jeff Smisek talk about the "new" United. As I tell subscribers, the more he talked, the more it simply sounded like the "old" Continental to me. But that is not necessarily a bad thing.

Gary Kelly talked a lot about what Southwest has been trying to do for the last five years, and what it hopes to accomplish in the next two years. He also uttered that positively horrible phrase when talking about the AirTran deal. Yes...he talked about "harvesting those synergies."

Aaaaaccccck!

Meanwhile the folks at Delta Air Lines were reassuring investors that yes the revenues have been a little on the low side (speaking of those elusive synergies) but that the airline was going to concentrate this year on improving them.

As for American, the airline didn't announce any further capacity cuts at the conference -- an omission that had one Wall Street analyst fuming last week.

Then there was US Airways' President Scott Kirby. He said in New York that he saw revenue strength during the first quarter that was stronger than he has ever seen during his career.

That's saying something.

Aside from the presentations in New York, we take a good look this week at the cash/revenues ratio for the major US airlines we track on a regular basis. It's interesting to see who ends up above the average line and who ends up below. And what is more remarkable is the wide variance between the airline with the worst cash/revenue performance and the airline that posted the best for 2010.

Airline stocks also had a pretty good week last week. Except for shares of Air Canada, which took the Goat of the Week award.

In other news we talk about the FAA reauthorization bill that is now set for a House vote this week, and the latest critical analysis that looks at the DOT's three-hour rule and why it isn't what it's cracked up to be.

Alaska Airlines suffered a nasty computer outage Saturday. That was not good. But as we discuss at length, the airline dealt with the problem in a superb manner. Kudos to the airline for a great job in terms of keeping customers informed and in the loop.

As usual, there is all this and more in this week's issue of PlaneBusiness Banter. Subscribers can access this week's issue here.

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

Hello to all on what is a rare dark and rainy night here in what is usually the Valley of the Sun.

Yes, yours truly is back in Phoenix this week, having come out for the 28th Annual ISTAT Conference last week which was held at the Westin Kierland in Scottsdale.

No surprise then that this week we are talking a lot about airlines, airplanes, how to finance those airplanes, the people who finance those airplanes, the people who sell the airplanes, and the people who lease airplanes.

You want a primer on airline EETCs and why they are one of the best investments on the planet? We sit down and talk to JP Morgan's Mark Streeter -- who gives us the skinny on why airline EETCs deserve more respect. (Especially from rating agencies.)

But we also update you on the industry impact from the situation in Japan. There has been a lot of news since last time we updated subscribers, including updated impact statistics from IATA.

No surprise either that with all that was going on last week, jet fuel prices continued to rise.

In the midst of Japanese angst and aircraft design drama, Phil Trenary, CEO of Pinnacle Airlines, announced his departure from the airline last week -- effective the end of this week. Hello?

In this week's Market Review, we update you on the short interest situation with the airline stocks. We give you a snapshot look as well as a trailing 12 month view. Doesn't matter how you slice and dice it though, one airline stock continues to get hammered by the shorts.

Know which one it is?

As many of you know, the level of stock shorting is what we call a "sentiment indicator." While it's nothing official, an airline CFO or CEO certainly doesn't like it when the investor community begins to increase their short positions in your stock. Kind of like being tracked by the grim reaper. "Who are these guys and what do they know?"

As I said, we'll update you on all that in this week's issue as well as a whole lot more.

Subscribers can access this week's issue here.

Posted by Holly at 8:12 PM | Permalink | Comments (0)

Hello to all on this rather sunny Sunday here at the Worldwide Headquarters.

PlaneBusiness Banter is posted a bit early this week, as yours truly is headed West to the Valley of the Sun later today. It's time for the 28th Annual ISTAT Conference and this year it is being held in Scottsdale, AZ. What is ISTAT you ask? It is the trade association for those who make their living leasing, buying, and selling airplanes. You know, those metal things we voluntarily put ourselves into from time to time.

It's always one of our favorite industry events to attend. I'm looking forward to it.

Yes, there was an earthquake that hit Japan last week. We talk this week a bit about how that has affected not only the Japanese airline industry, but how major international airlines who fly to Japan have been affected as well.

We're also talking about the latest DOT Air Travel Consumer numbers. January was a very good month for the airlines -- and their passengers. Except for one glaring category. Guess which one that was. And yes, it's directly related to the DOT's Three-Hour Rule.

Airline stocks had a very good week last week, as investors shrugged off concerns over higher fuel prices -- but yet another fare increase that American Airlines tried to put into place failed as the week ended.

Spirit Airlines is up to no good again -- as the airline rolled out a "Charlie Sheen" inspired ad. Meanwhile Allegiant Air is proposing a "variable rate" fare which would be finalized on the day of departure -- based on that day's fuel cost.

We talk a lot about airplanes and Wi-Fi this week. Will Boeing announce a new twin-aisle narrow body at the Paris Air Show this year? Is Wi-Fi making some Honeywell instruments go haywire in Boeing 737s? Did Aircell just blow up Row 44's chance at long-term survival?

Never a dull moment around here.

All that -- and more -- in this week's issue of PlaneBusiness Banter.

Posted by Holly at 9:43 AM | Permalink | Comments (0)

The price of jet fuel continues to rise, airlines continue to announce capacity pullbacks, American announces a $1 billion debt deal, and Southwest Airlines' Rapid Rewards members still can't figure out why their accounts show zero credits.

Just another lovely and enchanting week with the Things with Wings.

This week we're talking about the IT misery at Southwest, as well as the airline's strange silence concerning the issue when it hit last week. Why did the airline wait so long to publicly acknowledge the problems? And whose bright idea was it to zero out customer's RR balances -- until a customer uses their account?

It was not a pretty sight, and if the usual online travel haunts are to be believed, the angst has still not been squelched.

Then we had the big announcement from American Airlines this morning. The airline is going to the debt trough -- to the tune of $1 billion. Hey, the airline has a slew of debt coming due this year -- not to mention a lot of new shiny metal that has to be paid for. The airline had to do something. It certainly wasn't going to generate it through earnings.

United Airlines became the latest airline to announce a pull back in capacity Monday, while then there is the goofy lawsuit that a group of former Northwest Airlines' flight attendants filed against Delta Air Lines last week.

You know -- if you are going to fight the airline on the union representational vote -- thus holding up the results of the election -- why then is the AFA supporting a suit alleging the airline has "withheld" benefits from the former Northwest FA's? If AFA wants its former members to get the same salaries and benefits as their original Delta counterparts, drop the representational lawsuit.

Whew.

We also have an interview this week with Brett Snyder. Many of you know Brett, AKA Cranky Flier. Well, it seems that Brett recently traveled to Washington, where he participated in an American Bar Association panel discussion concerning passenger rights. Not surprisingly the three-hour tarmac rule was discussed heavily, as there was a representative of the DOT on the panel. Read our interview with Brett and see how it went when Brett and others on the panel challenged the DOT's contention that the three-hour rule is, overall, a win-win.

Hint: It has something to do with increased numbers of flight cancellations. And the total number of inconvenienced passengers just one airline has experienced as a result of increased cancellations.

On the financial analysis side, we take a look at the new hot metric being thrown around the industry -- ROIC. Which airlines outperformed their peers in 2010 and which ones lagged?

As usual, we have a whole lot more. So what are you waiting for? Subscribers can access this week's issue here.

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

Hello earthlings. This week in PlaneBusiness Banter we are, of course, talking fuel prices. Jet fuel prices to be exact. New York Harbor Jet closed today at $3.22/gallon. Have you filled up your Boeing 737-800 lately? Yes, well, if you have -- you can understand why the airline industry is having its own equivalent of an anxiety attack.

Today American Airlines became the second major US carrier to announce a reduction in its capacity forecast for the year. (JP Morgan analyst Jamie Baker has to be sooo happy with this news -- after the hard time he gave the airline about their capacity plans in the airline's fourth quarter earnings call.) Delta already reduced its numbers in February.

Who will be next?

We also have our in-depth earnings call review this week for both SkyWest and Republic Holdings -- our last two US airline industry earnings calls for the fourth quarter.

Calls for both airlines were quite interesting, but I have to say, I did not realize that ....well, I'll keep what I was surprised about in the SkyWest call a surprise. You'll just have to read.

We also talk about the fourth quarter numbers that a number of Asian carriers posted last week including Air Asia, Malaysia, and Tiger Airways.

We also take a look at US industry revenues for the fourth quarter this week. If you want a graphical look at how revenues in this industry are consolidating -- your search has ended with this week's issue.

Also -- do you know the difference between a "weighted average" and normal average? If you frequently look at summaries about various industry metrics, it might be a good idea if you knew what the difference was. There -- that's our small effort at financial education for the week.

Airline stocks? Can we change the subject please? With crude oil prices up more than 13% on the week and jet fuel up 8% -- it was a horrible week for the sector. Shares of Air Canada posted the biggest loss of the double-digit loser group.

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

Subscribers can access this week's issue here.

Posted by Holly at 9:26 PM | Permalink | Comments (0)

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

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

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

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

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

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

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

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

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

Posted by Holly at 3:25 PM | Permalink | Comments (0)

It's Tuesday. The Libyans are shooting at each other. Do you know where your favorite airline stock closed today? You don't want to know. Do you know how much the price of oil increased today? Jet fuel? Ditto.

Today was an airline industry CFO's worst nightmare.

In this week's issue of PlaneBusiness Banter I talk about the current goings-on in the Middle East and just how much of an impact these events could have on airline financial results in the short term.

Before the people in Libya began shooting at each other, though, there were a lot of other things that happened last week that we will be talking about as well.

First, we talk in-depth about the fourth quarter earnings results and the fourth quarter earnings call for Pinnacle Airlines Corp. The airline is in the middle of a major transformation of itself. First it is taking three separate airlines and ending up with only two airlines. In addition, the airline's contract with Delta Air Lines will not compensate the airline for its higher pilot contract costs (the TA was just ratified by all three pilot groups last week) until much later in the year. As a result, the numbers going forward into 2011 are going to be kind of ugly. Until all of this is sorted out.

But the business plan remains the same, the airline continues to build its Q400 fleet, and well, we'll give you the lowdown.

In other news, the FAA held its forecasting forum last week in DC. Not a whole lot of news from the forum, but the FAA does forecast very slow growth continuing in the US domestic market for years to come.

On the international side, meanwhile, the IATA said last week that it expects international airline profits to decline 40% in 2011, down from 2010's $15 billion plus figure.

We take a look at comparisons of operating margins and break-even load factors for the fourth quarter this week. Three airlines took the top three positions in each metric. Know which ones they were?

Air fare hikes? Oh yes, we talk about those too. Ones that failed, and ones that appear to have "taken." You know the rest of the industry denizens are happy when Southwest Airlines rolls out a fare increase. And that is exactly what happened on Friday.

Airline stocks were fairly quiet last week -- the calm before the storm I suppose you could say.

Anyway, as usual, all this and more -- in this week's issue of PlaneBusiness Banter.

Subscribers can access this week's issue by clicking here.

Posted by Holly at 8:02 PM | Permalink | Comments (0)

Hello everyone.

This week's issue of PlaneBusiness Banter is now posted. Subscribers can access it here.

This week we're talking in-depth about the recent earnings call from WestJet and Air Canada. Our short and sweet take? WestJet posted a great quarter, and I was glad to hear the airline has deferred six aircraft deliveries. Our biggest beef with the airline over the last year has been its reluctance to cut back on capacity.

As for Air Canada, a funny thing happened during the call. Not once did any member of the airline's management team ever talk about the airline's net income for the quarter. Never.

Oh, but they talked about EBITDAR. A lot.

A good-enough quarter for the airline, but the airline's RASM results disappointed. In addition, looking forward, the airline has a number of cost pressures on the horizon, including the fact that every one of its employee labor contracts come up for renewal in the first part of this year.

This week - Pinnacle Airlines reports on Thursday, with SkyWest and Republic bringing up the rear next week.

We talk about the December DOT Airline Consumer Report this week. JetBlue had a horrible December on-time performance. Hey, if you are based out of JFK, you pay the price when Mother Nature gets cranky.

The drama factor kicked up over at the Allied Pilots Association last week as first the new President of the APA sent out a missive in which he basically said the union has been its own worst enemy. Even though his take was spot-on, we all know what happens to union leaders who dare speak the truth. And, in no short order, various domicile reps began issuing their own take on the situation. Not surprisingly, some of them didn't exactly share the same sentiment. We've got the excerpts.

The FAA recently reported an alarming uptick in the number of "near-misses" year-over-year. Is this really as bad as it seems, or is it just due to changes in the way the FAA is reporting these incidents?

By the way, you remember what the late great George Carlin called a "near miss?" A "near-hit."

All this and a whole lot more -- including which two airline stocks just posted eyebrow-raising increases in the percentage of short interest. Anyone want to take a guess as to which two airlines we are talking about?

Ciao.

Posted by Holly at 9:12 PM | Permalink | Comments (0)

Hello everyone.

This week's 100-plus page issue of PlaneBusiness Banter is now posted. Subscribers can access it here.

This week we take a very detailed look at the earnings calls and earnings reports from US Airways, Alaska Air Group, United/Continental and JetBlue.

And yes, as far as we can tell, PBB is the only place, aside from the usual top end financial websites that charge $50-$75 a shot, that you can find earnings call transcripts for both Alaska AIr Group and United/Continental.

Not only that, but you get selected analyst comments on each airline and our take as well.

So what was our take on the results? I'll give you just a taste. I think the Five-Year plan at Alaska Air Group has been a huge success as the airline posted an outstanding quarter and a great year. US Airways also posted an excellent quarter and year -- and remember US Airways is the only major airline that does not hedge its fuel purchases. I think this is phenomenal. But when you listen to the airline's President Scott Kirby explain the decision, and how expensive it is to hedge fuel these days, and you look at the money the airline made last year and last quarter, well -- hey, I like it.

UAL/Continental had a good quarter, and guidance for January was outstanding. We expect continued revenue improvement here as the Continental folks begin to optimize the airline's network and its aircraft. But as we all know, this is now the latest industry rehabilitation and improvement project. Just as we did with Delta and Northwest, it will be awhile before we know just how those "synergies" are going to shake out.

Then there was JetBlue. Yes, the airline did not have a great fourth quarter. But I don't see this as a major indicator of any overriding problem. However, because so much of the airline's business is based out of Boston and New York -- the more snow and weather events that hit the East Coast in the first quarter -- the more the airline will be tagged.

But we have lots more to talk about than U.S. airline earnings. We also talk about Singapore's numbers which were released last week, as well as LAN Airlines' quarterly results.

Oh, and subscribers can also enter our "Retro Quote" Contest this week. Tell me what industry person said the quote and in what year they said it -- and a geeky airline-related present will wing its way to you.

For those of you in the Chicago area, please be careful out there tonight and tomorrow. We are getting subscriber reports tonight that sound rather ominous.

For us in the DFW Metroplex, ice, sleet, and snow welcomed us this morning. Tonight? We're headed to 7 degrees.

So much for all those swanky Superbowl events that have been scheduled for the outdoors. A number of the large "party tents" that various groups had put up to house events were brought down by ice and snow today, and I think the guys here for ESPN are going to go out and buy electric handwarmers, long johns and ear muffs before they go back outside to their glorifed "tent" environs in downtown Ft. Worth tomorrow.

Flight cancellations? Last check says that more than 8000 flights have now been canceled on Monday, Tuesday, and Wednesday across the U.S. But that number is going to go up tomorrow.

Yee haw. Where's that damn groundhog?

Posted by Holly at 10:49 PM | Permalink | Comments (0)

Good evening everyone.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But that's for next week.

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

Posted by Holly at 7:07 PM | Permalink | Comments (0)

Hello everyone.

This week's issue of PlaneBusiness Banter is now posted. Subscribers can access it here.

This week we have a pretty good issue. Always takes us a week to get back in the groove after the holidays, and this week I think we have a little bit of something for everybody.

No question that the thrill of new metal hung over the industry last week as Delta Air Lines told its employees it is looking at new aircraft options. While Continental/United did not tell its employees that it too has been checking its bank balances and kicking some tires, industry sources confirm that yes, this is also the case.

Then there was that obscene order placed by IndiGo Airlines -- based in India. It was, according to Airbus, the largest commercial aircraft order ever place. A whole slew of A320s, including a nice stable of the new "neo" flavor A320. You know, the ones with the more efficient engine.

But Airbus didn't stop there. Oh no, they are clearly in their "Let's Hammer The Boys at Boeing" mode as they also announced a new A320 order from Virgin America. One that also, conveniently, was signed at the stroke of midnight on Dec. 29. (I'm making up the part about the stroke of midnight, but I'm probably not that far off.)

The result of all this? Airbus looks to now have a nice solid start to its "neo" program, and oh yes, the Virgin order pushed Airbus past Boeing in the all-important testosterone-fueled exercise called, "Who sold more airplanes in "________." Fill in the year.

For 2010, it looks like Airbus nosed out Boeing, 644 to 625.

Not surprisingly, given all this hoopla about new metal, Steve Hazy's Air Lease Corp. filed its S-1 with the SEC last week. Translation: They are going to do an IPO.

Of course the American Airlines/GDS cat fight continued last week, with one very interesting new tidbit. In last week's PlaneBusiness Banter I talked with subscribers about how I wondered if there was not more going on between American and ITA than met the eye.

Well, looks like I was right, as American announced a new deal with ITA (American is already a client) for a nice chunk of work with American's new IT overhaul -- which is being spearheaded by HP.

We update subscribers on all the latest GDS related news, and we also share a guest column this week from Montie Brewer, ex-Air Canada CEO. He gives us his take on the GDS/airline situation. (Yeah, I know. Bet you can't guess which side of the fence he's on.)

We also have a longish Market Review this week. We bring subscribers up to speed with the latest research reports from three analysts -- Jamie Baker and Mark Streeter with JP Morgan; Glenn Engel with Bank of America and Dan McKenzie with Hudson Securities.

All three have different takes -- and different things to say -- and in the case of Glenn, he gives us part three of his ongoing research series in which he compares airlines on the basis of revenue and cost per plane. None of the usual RASM, CASM stuff. His first two reports last year covered revenues of the major and regional carriers. This latest report covers the costs of the major carriers.

Interesting way to look at the same numbers.

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

Posted by Holly at 2:45 PM | Permalink | Comments (0)

We're baaack!

Hello everyone. It's that time again. Time for the first issue of PlaneBusiness Banter in 2011.

What topics are front and center for our first issue of the year?

Airline stocks.

Which airline stocks outperformed the group for 2010? I'll say this -- it was a great year for those who took the plunge and invested in the sector. We had four stocks we cover post gains of more than 100%, with one almost hitting a 200% return mark. The vast majority of stocks we track posted double-digit gains for the year. Only a handful ended up in the negative category.

We also talk about fourth quarter stock performance. Looking at the quarter, we had a somewhat different picture -- as lo and behold -- a US regional airline took top honors for the quarter. Which airline pulled off that feat?

But we are not just talking stocks.

No, we are talking a lot about American Airlines and its efforts to single-handedly dismantle the distribution system that the airlines have used since, well, American Airlines and its then subsidiary Sabre, developed the first GDS system. Many years ago.

Over the Christmas holidays, there were a number of happenings on this front. We'll update you on those, and give you our take on what is eventually going to happen, and why we also think the timing of American's push to put its Direct Connect system in place might have been, well, ill-timed.

Then again, throw in the planned merger of Google and ITA -- and maybe it isn't that badly timed.

I know. It's confusing. That's what makes it so interesting to talk about. There are way too many angles to consider -- depending on whether you are an airline, a passenger, or a travel agent.

But make no mistake about it -- airlines want more control over their inventory, they want to know who is buying its inventory, and they don't want to pay a third party to facilitate the sale of that inventory.

American Airlines got its hand slapped last week by the NTSB, after someone in Tulsa apparently downloaded the contents of the flight recorder that was on the Boeing 757 that slid off the runway in Jackson Hole.

The NTSB was not happy.

Meanwhile, the airline and its flight attendants met last week with the NMB -- in an attempt to get contract negotiations back on track. Both sides left unhappy.

I don't think this union is going to be happy unless they go to a strike.

And then -- there is the weather. Airlines are already putting out estimates of how much the rotten weather in December cost them. This week? Another winter storm is causing mayhem across the South and in the Northeast.

Oh, you know. We talk about all this -- and more -- in this week's issue.

Subscribers can access this week's issue here.

Posted by Holly at 6:27 PM | Permalink | Comments (0)

Hello everyone.

This week's issue PlaneBusiness Banter is now posted. Actually, this is our last issue for the year, as we take our usual publishing hiatus through the Christmas holidays.

But not before a rather long issue this week.

And we are talking about a lot of different things this week.

In terms of meat and potatoes, we talk about the recent presentations given at the Hudson Securities Airline Investor Conference in New York. The big U.S. players were there, in addition to Pinnacle and GOL.

Two presentations stood out for us, and we talk more about those as a result. The first was the one from JetBlue's CFO Ed Barnes. One big reason this one was on the radar. The airline announced that it's previous fourth quarter revenue guidance was going to come in just a tad lower than expected. Why? And is this just an airline specific thing? A route specific thing? An industry thing?

Second, US Airways' President Scott Kirby took the opportunity to give investors a very complete and concise overview of how he sees demand and revenues shaping up. When Scott speaks, people listen. And with good reason -- Scott is seen as one of the industry's best revenue trend analysts. In fact, Dan McKenzie, analyst with Hudson pointed out at the conference that Scott "nailed" actual 2010 industry RASM performance at last year's conference.

Naturally those in attendance wanted Scott's take on 2011. We give it to you.

In our most enjoyable part of this week's issue, we talk once again to our Mole at the North Pole -- Clyde the Elf.

Every year Clyde "borrows" the letters from airline CEOs to Santa Claus, copies them, and then sends us copies via FedEx. We got the valuable package last Friday.

Let's just say this: WikiLeaks has nothing on PlaneBusiness when it comes to classified airline industry documents.

In other news, it looks like the folks over at USAPA, the pilot union at US Airways, can't read numbers correctly again. Dunno what's with these guys, but this is not the first time we've had to call the union out for posting numbers concerning US Airways that were way out of line.

Oh gosh, we've got all kind of things we're talking about this week including: Southwest Airlines' want ad for an ETOPS manager (think this pretty much confirms those Hawaii whispers); an update on the negotiations with the flight attendants and American Airlines; a new damning report on how just easy it is to fool the TSA's backscatter machines; a great first-person account of what it was like to be in the cockpit of Qantas Flight 32; union angst at Philippine Airlines; DOT numbers from November, and a whole lot more.

Subscribers can access this week's issue of PBB here.

Posted by Holly at 3:00 PM | Permalink | Comments (0)

Hello to all on what is a drop-dead gorgeous Tuesday morning here in the DFW Metromess.

This week's issue of PlaneBusiness Banter is now posted. Subscribers can access it here.

So what are we talking about this week? Well, considering we are headquartered in that hotbed of aviation, Dallas Ft. Worth, we talk a lot this week about the recent British invasion. Oh, that's right. Virgin America is, er, an American company.

It was easy to forget that last week as Sir Richard Branson and the Virgin marketing machine touched down in DFW.

Yes, Virgin America launched its new service to DFW. We give you our take on the festivities.

In addition, in my column this week I take a long look at two similar and intertwined airlines -- JetBlue and Virgin America.

In other news, we have a copy of the Australian Transportation Safety Bureau's preliminary report on the Rolls-Royce uncontained engine failure on Qantas Flight 32. Let me put it this way -- if there were any doubts before, it's pretty clear Rolls-Royce has a big problem with the Trent 900 engine. Particularly the version Qantas is using on its aircraft. And yes, that particular flavor of 900 is a different configuration than the one Singapore and Lufthansa uses.

We include two of the photos from the report in this week's issue. Not a pretty sight.

In other news, the International Air Transport Association announced that Cathay's CEO will be taking over the helm there next year. This means we'll have two new mouthpieces at the helm of the two biggest airline trade groups in 2011.

Fallout from the national election continues to trickle down through the industry. This week we saw shares of FedEx lead the group as analysts upgraded shares. Granted, one of the reasons shares were upgraded is an increase in industrial productivity -- but the fact that proposed legislation that would have made it easier for FedEx drivers to unionize is now probably toast -- a result of the changes in Washington -- certainly is at play here as well.

Speaking of Wall Street, oil prices hit their highest point in more than two years on Friday. Monday, they were up again.

Not good news for those things with wings that drink millions of gallons of jet fuel for breakfast, lunch, and dinner.

And what about those Spanish Air Traffic controllers? Did you folks see how much these guys make on average? Trust me. It's more than 99% of what airline pilots make.

It's hell when the gravy train stops.

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

Enjoy!

Posted by Holly at 12:33 PM | Permalink | Comments (0)

Hello all.

Here's hoping that all of you had a wonderful Turkey Week. I did. Although I didn't end up with enough left-over turkey. I may have to roast another one here shortly, just so I can have leftovers to make turkey hash with.

This post-Turkey Week issue we talk about a lot of things. First, our column this week looks at Orbitz and how it got to where it is today -- and why American Airlines is trying to pull its inventory from its website. I take a look at the history of the company -- and how it has evolved from its humble beginnings. Ahem. You all remember those beginnings. The company was set up as the "Travelocity Terminator" -- the first attempt to set up a "direct connect" OTA for the airlines that created it.

My how things change.

Of course we talk about the as-yet-to-be-announced delay for the Boeing 787, the update from Qantas on its A380 operations, and yes, we even talk about how Air France is going to once again undertake recovery operations to find the black boxes and anything else it can find from its lost Airbus in the Atlantic Ocean this coming spring.

Union talk? Of course. We follow up our issue last week with a great letter to the editor from one of our subscribers in which he touches on both the Continental/united scope "problem" and the flight attendant situation at American Airlines. In a very astute manner I might add.

Airline stocks? This week we talk about the latest from Morgan Stanley analyst Bill Greene. Mr. Greene happens to believe that there is opportunity in them there shares. Airline shares that is. Right now.

Virgin America lands in Dallas this week. Yee haw! In anticipation of Virgin's arrival, American is offering their customers the usual heavy dose of frequent flier points on DFW flights to LA and SFO, but as I talk about this week -- is this tired and true tactic still relevant?

I'm not sure. At least not in this case. The Virgin product is a nice one. And there are a whole lot of folks for whom accumulating more AAdvantage miles is not nearly as important as a nice comfy seat, cool onboard entertainment and food options, and well....that whole Virgin Vibe thing.

Oh, we talk about a lot more this week -- but I need to get this posted.

Subscribers can access this week's issue here! Now!

Posted by Holly at 4:16 PM | Permalink | Comments (0)

Greetings to all you turkey lovers out there.

It's Monday. It's time for this week's issue of PlaneBusiness Banter.

Speaking of turkeys, yes, we're talking about the TSA this week. Isn't everyone?

But we're also talking about Deutsche Bank analyst Mike Linenberg's rather gushing research note on Republic Holdings. Also -- where does Mike think the industry now has too many competitors?

We're talking union stuff too. Two more thumbs down employee votes at Delta Air Lines, a thumbs up from the Southwest Airlines' flight attendants on their contract ratification and a thumbs up ratification from the AirTran pilots on their new contract.

However -- there is one part of the new AirTran pilot contract that we are curious about. Can you guess what part that is?

Then there is the picketing this week by the Continental and United pilots. Pahleez. Is this really necessary?

Not sure if you have been keeping up with the fight north of the border, but Canada and the UAE are about to go to blows over the issue of giving Emirates more access into Canada. I mean, this is getting serious.

We have a lot more information this week regarding exactly what happened when that Qantas A380 had an engine suffer an uncontained failure. The laundry list of items that were affected on the aircraft is not pretty.

Meanwhile, as has been the case since the beginning, most of the information coming out concerning the problems with the Rolls-Royce Trent 900 engine is not coming from Rolls-Royce.

Then we had Boeing running around, telling websites they had to remove photos of the damage to its 787 test aircraft. Lovely. I do so love it when a company thinks they can make a problem go away by removing the evidence in a rather heavy-handed manner.

On the GDS front, American Airlines seems more determined than ever to cause mayhem and madness in the travel agency business. More on their latest moves in this week's issue as well.

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

Subscribers can access this week's issue here.

Posted by Holly at 12:33 AM | Permalink | Comments (0)

Okay all you hungry people. This week's issue of PlaneBusiness Banter is now posted.

Whew.

This is the last earnings issue for the quarter, and that is a good thing.

Next week we can get back to our normal format and usual publishing schedule. Right before we embark on our Turkey day extravaganza.

But -- before then -- this week we have our hand's full.

First, we have an update on the Rolls-Royce Trent 900 engine failure involving the Qantas A380. All the Qantas A380s remain grounded. Rolls still isn't saying a lot. But everyone else sure is. Engines are apparently being taken off the A380 production line, Singapore Airlines has swapped out three engines already, and, well, this is a very serious situation.

It is going to make for a very serious dent in Rolls-Royce's net profits as well, as you can bet all these airlines are keeping tabs on their expenses incurred and Rolls is going to receive the final bill.

Not to be left out, Boeing had its own problem last week with one of its 787s -- as it was forced to land after a fire broke out in an aft electrical panel.

When we're not talking aircraft and engines, we're talking TSA.

As someone who is now faced with the prospect of having to go through an "extended pat down" every time I fly as a result of having a big piece of titanium in my hip, I am not happy about the new "group and grab" procedures.

Funny thing though -- we received a number of notes this week from airline crew members. It appears that the TSA has pulled back on insisting on either the AIT scanner or the "extended pat down" for crew members. Not in all locations though.

No, the TSA has not issued an official backdown. But I've received enough notes to tell me that there has been a relaxation in the previous directives.

We also wrap up third quarter earnings coverage this week with our own "extended" look at Republic and Pinnacle.

If you took a look at the stocks of either airline and how they performed for the last week -- you might have some questions.

In the case of Pinnacle, shares soared.

In the case of Republic, they did just the opposite.

We'll tell you why.

We also go over the September DOT Airline Consumer Travel Report. And the September tarmac and cancellation numbers. Very interesting "rounding" of numbers going on here. We talk about all that as well.

There was a rather bizarre Airbus A380 order announced last week, the DOT and FAA sought to assure air travelers that they are working to make sure older aircraft are safe -- only problem is that the efforts won't take effect for years -- and hey, the future King of England's wife-to-be has two parents who met while working for British Airways.

We only talk about the important things here at PlaneBusiness Banter.

Subscribers can access this week's issue here.

Posted by Holly at 4:49 PM | Permalink | Comments (0)

Hello to everyone on what is a gloriously beautiful day here in the DFW Metromess.

Today I bring you another luxuriously long issue of PlaneBusiness Banter posted for your reading pleasure. Or as someone said to me last week at a conference I was speaking at, "I LOVVEE these issues. It gives me something to read during my entire flight!"

Yes, well. I'm so happy we can be of help.

Earnings season is finally winding down. We talk about three airlines in depth this week - Air Canada, WestJet and SkyWest. We also have earnings summaries for the last two reportees for the quarter -- Republic Holdings and Pinnacle. We'll talk more about them in next week's issue.

But hey, there was a whole lot going on this last week besides earnings.

Shares of AMR, parent of American Airlines, had a great week, after Jamie Baker at JP Morgan Chase picked the stock as his current favorite. Kind of a no-brainer considering how badly beaten up the stock is -- compared to its peers. According to Jamie, the company should start to see some improvement to its lagging margin performance as the British Airways joint venture kicks into gear. He said a lot of other stuff as well. More in this week's issue.

On the labor front, the flight attendants at Delta Air Lines just said "No" to union representation last week. After 16 years and three elections, the Association of Flight Attendants couldn't get it done. The AFA said it is going to protest the election on grounds the airline interfered.

Negotiations have clearly bogged down between the pilot unions at United and Continental. Sounds like pay scales for the United Boeing 747 is a major sticking point but that sticking point runs parallel to the other bigger problem -- seniority.

As I say this week, you guys should not attempt to negotiate a contract unless the seniority agreement has been completed.

Meanwhile, in Dallas, the Allied Pilots Association has hired a professional negotiator. I think I said the union needed to do this about four years ago. Glad they finally took my advice.

The man they hired, Seth Rosen, is affiliated with the Air Line Pilots Association.

Interesting. I sense a thaw developing in relations between the two pilot unions.

Some notable tidbits from across the pond this week as well, including the fact that privately-held Virgin Atlantic confirmed it has hired Deutsche Bank to look at its "strategic opportunities." This comes as reports also say Sir Richard may be ready to sell his interest in the airline. That would make sense. He would never be able remain at the helm as he is now if the airline were to be sold. He could never accept not being in charge.

But the most disturbing things we talk about this week have nothing to do with unions or earnings.

The first one -- the uncontained failure of a Rolls-Royce engine on a Qantas A380 last week and the fact the airline says it has found other A380 Rolls engines with unacceptable levels of leaking oil.

Not good.

The second one -- my first experience with the new TSA "extended" pat-down procedure.

Not good either.

More feedback on the TSA's changed procedures from yet another pilot union this week -- and we couldn't agree more.

Speaking of "more," -- all this and more in this week's issue of PlaneBusiness Banter.

Subscribers can access this week's issue here.

Posted by Holly at 4:41 PM | Permalink | Comments (0)

This week's 130-plus page issue of PlaneBusiness Banter is now, finally, posted!

This week we take a full in-depth look at the third quarter earnings and the recent earnings calls from American Airlines, US Airways, Southwest Airlines, United/Continental, and Delta Air Lines.

Whew.

We also have earnings summaries for JetBlue, AirTran, and Alaska Air Group. (We'll take our more in-depth look at both JetBlue and Alaska in next week's issue of PBB.)

Our general take on what we heard in the calls from the five airlines we talk about this week?

First of all, the fact that the airlines that have reported so far have reported such strong numbers should not have come as a surprise. I was somewhat "shocked" myself to see someone referenced in a story about the results last week talking about the "shock and awe" of the profits reported.

Hog wash.

We all knew it was going to be a great quarter. And there is no reason why the fourth quarter is not going to be a good one either.

Anyway, so much for people who don't know that much about the industry, eh?

Speaking of, I liked some comments that US Airways CEO Doug Parker made on the topic of consolidation in that airline's call last week. As he correctly pointed out, it's probably time to stop asking the question of when or if. "Consolidation has happened." Yes, it has.

And, as he pointed out, that is one reason the industry in the U.S. is doing as well as it is. With fewer players out there, it is finally allowing the players who are there to pick up some pricing power. Yes, less capacity doesn't hurt either.

But as Avondale analyst Bob McAdoo said in a research note recently, by eliminating duplicate flying and creating new traffic flows, the United/Continental merger reminds him of why he likes mergers. He then went on to list a slew of route changes that the new combined airline has already loaded in his note.

Listening to the Delta Air Lines call, one would have to be a total dufus not to see how the merging of those two airlines has created one airline that is doing a lot of things a whole lot better. The airline especially shone on the revenue side.

As for Southwest, there's no question the airline posted nice profit numbers for the quarter, but I talk more this week about why the airline continues to frustrate those of us who have been waiting for the airline to move forward on several key infrastructure or product items. CEO Gary Kelly and Avondale analyst Bob McAdoo had an interesting back and forth on this topic at the end of that airline's call.

And then there is American Airlines. The good news? The airline finally posted a quarterly profit. The not-so-good news? It wasn't that big of a profit. The airline's earnings call was not the best in the world either this quarter. We talk more about all that this week as well.

As for the folks at US Airways -- the airline posted a very strong quarter. A record-breaking quarter, as was the case with more than one of the airlines last week. While the outlook for revenue upticks is going to slow down as the airline moves into 2011 (tougher comps coming up), that is basically true for most airlines, so I don't see that as a major deal breaker here. Operationally, the airline is running one of the most efficient airlines out there these days.

As always, all this and more, including some feedback from my column last week on the change in command at ALPA national, a brief rundown on the AirTran results, and other miscellaneous dribs and drabs.

Subscribers can access the issue here. (Just a warning. If you print this issue out, it's going to run very, very, long.)

Posted by Holly at 11:39 AM | Permalink | Comments (0)

It's earnings season once again.

Technically the third quarter earnings season for the airline industry opened yesterday as Hawaiian Airlines reported its numbers. But today mere mortals were definitely made aware that the third quarter number parade had started as three of the industry's major league hitters reported their third quarter results.

Today US Airways, AMR, parent of American Airlines, and Delta Air Lines opened up the spreadsheets to the public.

Verdict? All three airlines beat previous forecast numbers.

Let's take AMR first.

AMR posted a 3Q profit of $0.39, excluding special items. This was a small beat over the analyst's expected $0.32 figure. That translates to a net profit of $143 million, as opposed to the forecast $110 million figure. This is the first profit for the airline in two years.

Best 60-second analysis of the AMR numbers we've read so far come from Jamie Baker and Mark Streeter, analysts with JP Morgan who wrote,

Does labor & lack of alliance immunity fully explain AMR's margin woes? AMR management routinely cites lack of alliance immunity (no longer the case starting this month) and its labor cost disadvantage (gradually diminishing) as key factors of its relative underperformance. But is that all? To wit: AMR’s 3Q 670 bps EBIT deficiency to its Legacy peers (based on UAL expectations) hasn’t been this bad since 3Q02, and in fact has worsened in recent years…despite higher labor costs at DAL/NWA and no apparent immunized alliance momentum at SkyTeam and Star. We would suggest diminished corporate momentum versus a bulked-up Delta (and soon, United) as possible causes…suggesting AMR may choose to rethink its role in ongoing industry consolidation."

US Airways reported earnings of $1.23 a share, excluding special items, or $243 million. This was just a bit better than the analyst consensus forecast of $1.17 a share.

Trivia note of the day? This quarter US Airways posted a 10% operating margin. As Jamie Baker with JP Morgan noted in his note about the results, this represents a third quarter record margin performance for the airline. And not just "the current version" of US Airways. Jamie noted that they went back through all the predecessor companies, or at least as far as they could go back, and they couldn't find a better third quarter performance posted by the company -- ever. (He did admit that they could not find the financial records for Piedmont or PSA though.)

Finally, Delta Air Lines reported a profit of $929 million, or $1.10 a share, excluding one-time items. This was just above the forecasted consensus figure of $0.94. The reason for the upside here? Better than expected revenues.

Tomorrow? Four more big guns strut their third quarter stuff as we'll hear the third quarter numbers from Southwest Airlines, Continental/United, JetBlue and Alaska.

Don't be surprised if we hear of more upside surprises tomorrow, especially after the Air Transport Association issued much better than expected September RASM performance numbers last night. The ATA announced that September RASM for those airlines that report to the ATA rose 14.6%, topping most analyst forecasts. That better than expected result clearly helped give a little last minute boost to the industry's third quarter performance -- as the results from these three airlines today confirmed.

Posted by Holly at 3:31 PM | Permalink | Comments (0)

Delta Air Lines reported earnings this morning, the first airline to report earnings for the second quarter.

While the headline numbers for the airline's results look quite good on the surface -- airline stocks began to drop after the numbers were released and they have yet to get up again.

Why is this the case -- if Delta reported such a large profit?

If you are a PlaneBusiness Banter subscriber, you might have a good idea. As I said three weeks ago, I think a lot of this recent giddyness concerning the "return" of airline revenues is, I believe, on shaky ground.

Yes, no question that the second quarter numbers should be good across the board for the sector -- with one glaring exception. The only major airline that will probably post a loss for the quarter is AMR, parent of American Airlines.

But as I talk about in this week's PBB, we are now seeing a number of economic metrics that are pointing toward a recessionary recovery in the U.S. that is running out of steam.

Take those developments, coupled with the fact the airline industry is now looking at the start of a traditionally slow period in September -- throw on results from Delta that disappointed on the revenue side -- and poof. A perfect recipe for an airline sector selloff.

Now you know.

Posted by Holly at 10:45 AM | Permalink | Comments (0)

Thanks to JetBlue and American Airlines for providing us with a nice bit of April Foolery this year. Yeah, right, they are going to join in some kind of partnership, slot swap, interline agreement.

Good job guys.

Oh, wait.

That was yesterday.

Today is April 1.

Hmmmm.

So what is your take on all this news? I admit it. I was surprised at the news. I thought April Fools Day had come a day early when I first saw the headline.

If you could put two airlines in front of you that exhibit totally different cultures, management attitude, brand, and product -- well, here you go.

If, on the other hand, you want to strip all that out and strictly look at the deal from a strategic viewpoint -- then I can see the merit.

From American's viewpoint, clearly this gives the airline an opportunity to strengthen its position in New York at a relatively low cost -- as opposed to Delta Air Lines, which continues to throw the kitchen sink, the garbage pail, and the baby's bath water into the market in an attempt to snatch market share.

From JetBlue's standpoint, the agreement will allow its passengers to book international flights much more easily, utilizing JetBlue on the domestic segments, and American on the international legs. In addition, JetBlue should would get eight slot pairs at Washington Reagan (which the airline has lusted after for a long time) while American would pick up 12 slot pairs at JFK.

But having said that, we have to wonder -- what does Lufthansa think about all this? Remember, the German uber carrier owns a piece of JetBlue. When the airline first wrote out the check to JetBlue, the assumption was that this was because Lufthansa was less than impressed with Star Alliance partner United Airlines' presence into New York.

What presence? Exactly.

So what happens with all this? How can JetBlue serve two alliance masters?

Aside from that niggly problem, I think this is just another example of what we are now going to continue to see more and more of in this industry -- creative deals that go against what we have seen done in the past. The reason for them? Necessity. Efficiency. This is what is motivating the Delta/US Airways slot swap request. The AirTran/Continental deal.

So, on the surface, I like it. I'd be happy to see even more of these things. (But only if the airlines' respective IT systems are up to the task!)

My only question for JetBlue would be this -- have you surveyed your passengers who fly into JFK as to whom they fly on to Europe? Is American their first choice?

I would be curious to know the answer, because my gut feeling is that someone who is going to fly on JetBlue into JFK and connect to Europe might not necessarily be someone who would fly on American.

Yep. It's that mismash of culture and expectations thing I'm thinking about.

Then again, maybe, just maybe, that might be one of the reasons American was receptive to do the deal. They knew that too.

Posted by Holly at 8:24 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)

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)

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)

Posted by Holly at 12:19 PM | 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)

Want to know why most all airline stocks sunk like they had rocks tied to their little feet today?

That's right. Give the man in the back row with the red shirt on a gold star.

It's oil. Or rather, the exploding price of oil.

Crude oil futures closed at 81.37 today -- up a hefty $2.25.

Why? One major factor-- the continued drop in the value of the dollar. The euro climbed about $1.50 today, the highest level since August 2008.

And as all bright PlaneBuzz readers know -- oil is priced in dollars. So as the dollar falls in value, international investors start bidding up the price of oil futures as a play against the weakening U.S. currency.

That's the way the markets work.

Posted by Holly at 5:25 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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

Frankly, there is usually very little that shocks me about this industry. Surprises me, yes. Piques my curiosity, yes. But shocks me -- no.

But I got caught out in left field on this one.

This afternoon Continental CEO Larry Kellner announced in a letter to employees, and in a press release, that he was leaving the company, effective the end of the year.

But wait, he's just not leaving as CEO. He's leaving his position as Chairman of the Board of the airline as well.

Gone.

Kellner is leaving the airline to head up a new private investment firm, Emerald Creek Group, LLC.

The airline announced that Jeff Smisek, President and COO of Continental, will succeed Larry as CEO and Chairman of the Board.

How about that?

Another good one bites the dust.

Posted by Holly at 7:01 PM | 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)

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)

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)

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)

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)

Just in case you were so wrapped up with the NBA playoffs or the NFL draft that you didn't watch much news over the weekend, or you didn't read Jonathan's note here that was posted last night -- the reason your favorite airline stock is posting a loss this morning is directly attributable to one thing. Swine flu.

Or rather, fears that the flu, which has, up to now, been concentrated in areas of Mexico, but has already crossed the border to the U.S., has gone beyond the stage where cases that have been confirmed can be 'contained.'

As a result, memories of the SARS epidemic of a few years ago, and what it did to the industry, (the Asian carriers were particularly hard hit) has investors selling off shares of airline stocks faster than you can buy a box of Kleenex.

The major airlines are taking the brunt of the selloff this morning, with shares of Continental, Delta, US Airways, United, Southwest, and American all down by double digits. Or very close to double digits.

Posted by Holly at 10:12 AM | 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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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?

And which CEOs were the best "wealth destroyers?"

Clearly, for our purposes here in PlaneBuzz, the only CEO of interest to us in all of this was Southwest's Gary Kelly. Particularly because when Kelly was named as CEO of the airline, the bulk of the scuttlebutt around the announcement dealt with the fact that because he had been such an excellent CFO of the airline -- that he would help shore up the airline's financial side -- and most importantly to stockholders -- its stock price.

According to Chief Executive's metric, however, Gary hasn't fared too well over the last three years. Here is what the magazine said about Southwest.

"Gary Kelly, Southwest Airlines
Score: 6

Southwest’s low score may come as a surprise considering it’s arguably among the best-managed airlines. But it’s an airline; the only one in the S&P 500. That means planes, airport fees and lots of competition. The market is far from wild about the value of its assets. In the EM sector rankings, Southwest was grouped with other transportation companies, all of which performed better. Southwest’s EM ranged between -.5 percent (-.005) and -0.9 percent (almost -1 percent) over the 2005-07 period. While its SEC filings show a profit during this time, when Southwest’s off-balance sheet leases and other adjustments are accounted for, the picture reverses. For example, applying those adjustments to Southwest’s 2007 results increases its invested capital by $5.9 billion, or 35 percent. The $1.7 billion capital charge on this amount exceeded its $1.5 billion operating cash flow, resulting in a negative Economic Margin."

The article is a very interesting read. Well worth it. And not just for its rather low opinion of Mr. Kelly's ability to create and/or protect shareholder wealth at Southwest Airlines. You can access the entire article here.

Posted by Holly at 12:38 PM | Permalink | Comments (0)

While many readers probably wish they had simply put their money under their mattress starting about 7 years ago, and left it there -- considering what has happened in the markets the last year -- there are those of you out there who are the more adventuresome types.

And some of you may have money invested not just in stocks or bonds or mutual funds, but in ETFs. ETF stands for exchange-traded fund. All-knowing Wikipedia defines them thusly:

An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value."

I like to say that it's similar to a mutual fund that can be traded -- just like a stock.

Why am I getting into this Investing 101 discussion today? Because the first airline-only ETF was announced this week.

No nasty comments please. (Like, why in the would would anyone be interested?) Personally, I think the timing is excellent.

Claymore Securitiesis set to launch the first exchange-traded fund focusing on the passenger airline industry -- the Claymore/NYSE Arca Airline ETF next month.

The ETF will hold 24 global airline stocks, 70% domestic and 30% international. The top three stocks in each category will be weighted 15% in the case of domestic, and 4.5% in the case of international airlines. That puts the remaining index weights for the 18 other stocks in the ETF at 25% for domestic and 16.5% for international. All holdings must derive at least 50% of their business from passenger airline activity.

For those of you with really inquiring minds, you can read the SEC registration docs here.

Posted by Holly at 3:36 PM | Permalink | Comments (0)

I'm sorry dear readers.

I should have posted this news yesterday. Wednesday, actually.

But I did not want to have to be forced to type the word "MESA" on my birthday. Or even 24 hours ahead of my birthday.

I'm sure you can understand.

But now it is Friday, so here it is.

As we wrote here the other day, Mesa announced last week that it had cut a deal with the major shareholder of Aloha Airlines that would see that shareholder, Yucaipa Cos. receive a rather sweet deal in return for the rights to the Aloha Airlines trademarks, names, logos, internet presence, corporate identity items, etc. Actually the extent of the deal was not made clear until Mesa posted an SEC filing on Monday, but, well, you can read our post on all of it here.

The only catch was that Yucaipa would need to be the highest bidder at the scheduled auction for the rights to these items, which was scheduled for Tuesday.

Tuesday, the auction took place, and Yucaipa did indeed beat out all comers, including Hawaiian Airlines, bidding $750,000 for the rights to the name. Hawaiian's all-cash bid was $575,000, which was the required overbid after Yucaipa had initiated the auction process as the so-called "stalking horse" with a bid of $525,000.

But then a funny thing happened on the way to Mesa getting the right to use the Aloha name. And the livery. And everything else.

The deal was temporarily blocked by the federal Bankruptcy Court judge who is presiding over the case.

Judge Lloyd King postponed the scheduled hearing on the licensing pact between Mesa and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.

"How about all the people whose lives were devastated in this case?" asked King, noting that Mesa and go! are largely blamed for Aloha's demise. "Doesn't that count? Is it just the money?"

"I don't think anyone is sensitive who's involved in this settlement," King said. "If this isn't approved, are people from Yucaipa going to lose their health benefits and their jobs? There hasn't been enough time for people to react."

He said that the extra time would give both supporters and opponents more time to respond.

You know, that's the thing about those federal bankruptcy judges. You just never know what they are going to do. And sometimes -- this turns out to be a good thing.

I guess there's a Santa Claus after all.

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

Since we started on this traffic, capacity and load factor watch this week, we might as well continue it.

Today American Airlines and US Airways reported their November numbers.

At American, RPMs fell 14.5% compared to a year earlier, but this was more than the airline's reduction in capacity of 9.3%. This resulted in a drop in load factor of 4.6 points to 76.6%.

For American Eagle, things were even worse. RPMs here were down 21.5%, while capacity was down 15.9%. This resulted in a load factor drop of 4.6 points to 67.3%.

For US Airways, consolidated RPMs dropped 6.9% for November. But this pretty much matched the airline's reduction in ASMs as the airline posted a drop in load factor of only 0.8 points. Basically flat.

For mainline only, the airline actually did quite well, as it saw RPMs down 3.6%. With capacity down 5.2%, this resulted in an increase in load factor -- up 1.4 points to 81.9%.

Posted by Holly at 3:13 PM | Permalink | Comments (0)

Last week Mesa Air Group issued a press release in which it talked about a deal the airline had cut with bankrupt Aloha Airlines' major shareholder, the Yucaipa Cos. According to the release, in return for Yucaipa dropping all claims associated with the Aloha Airlines antitrust suit that it filed against Mesa, and in anticipation of Yucaipa being the highest bidder for the various Aloha trademarks, logo, and other naming rights at today's Aloha bankruptcy auction -- Mesa said in its release that it had agreed to:

Pay Yucaipa $2 million;

Issue 2.7 million common shares of Mesa Air Group stock;

Provide inter-island travel benefits to former Aloha employees.

Note that in the release Mesa did not say it was going to issue the shares and give them to Yucaipa, a fact that a handful of you pointed out to me this last weekend. It really was stated in a very ambiguous way. But apparently this is indeed the case.

Be that as it may, as I said in this week's PlaneBusiness Banter, the fact that Mesa Air Group would think that it could simply purchase the name "Aloha Airlines" and start using it -- and that this was perceived by Mesa management as a positive marketing tactic -- given the fact that many in Hawaii still blame Mesa (rightly or wrongly) for Aloha's demise -- was nothing short of mind-boggling.

However, an alert on the company's 8-K SEC filing came sailing through in our email box late last night and it seems that there were more than a couple of details of this deal that Mesa did not talk about in its press release.

Here's the verbiage straight from the filing:

In addition, under the Settlement Agreement, Mesa and Yucaipa agreed to establish a licensing and profit sharing arrangement whereby, in the event that Yucaipa is able to acquire from Aloha in an upcoming bankruptcy court auction the rights to the names "Aloha" and "Aloha Airlines," Yucaipa will enter into a license agreement with Mesa to license such names to Mesa for ten years (the "Term") in exchange for royalty payments by Mesa and Mesa will pay to Yucaipa a set percentage of the pre-tax operating profits from Mesa's operations in the Hawaiian inter-island market. Specifically, for each year during the Term, Mesa will pay Yucaipa 1% of the passenger ticket revenue generated from all Hawaiian inter-island flight operations, subject to a minimum annual revenue payment of $600,000 (the "Revenue Payments"), and will also pay Yucaipa 30% of the pre-tax operating profits from Mesa's operations in the Hawaiian inter-island market less the Revenue Payments.

If Mesa ceases inter-island flight operations in Hawaii, Mesa has the right to terminate the licensing and profit sharing arrangement. Mesa will provide Yucaipa with a $5 million promissory note payable over five years, at LIBOR +350 basis points interest, reset quarterly, that will become payable if Mesa ceases operations in the Hawaiian inter-island market or breaches the Settlement Agreement. If, at the end of the first five years of the Term, the note has not become payable as a result of Mesa's cessation of operations or breach, the principal owing on the note will decrease automatically on a straight-line basis over the remaining five years of the Term. If Mesa ceases operations in Hawaii or breaches the Settlement Agreement during the final five years of the Term, the amount payable on the note would be the principal remaining at the time of such cessation or breach. The note will be secured by a first priority lien on certain Mesa assets with a fair market value equal to 125% of the principal amount of the note.

Yes, indeedy. It does appear that there are a lot more ifs, ands, or buts to this deal than had been publicly disclosed in the Mesa press release.

Essentially, in return for the use of the "Aloha Airlines" name, Mesa has agreed to pay Yucaipa 1% of the passenger ticket revenue generated from all Hawaiian inter-island revenue AND it will also pay Yucaipa 30% of the pre-tax operating profits from the operations. If Mesa stops flying in Hawaii, then Yucaipa gets a $5 million promissory note payable in five years at a rather hefty interest rate.

Amazing. Just simply amazing.

Wonder what Yucaipa gets if Mesa declares bankruptcy?

Posted by Holly at 2:47 PM | Permalink | Comments (0)

It seems that we have news of a merger a minute these days -- but nothing U.S. based. Yet.

This morning, hot on the heels of the news that Ryanair was once again mounting a hostile attempt to take over the 70% of Aer Lingus it does not currently control (a move which, not surprisingly the Aer Lingus management team quickly denounced) today we have news of an attempt at a true blockbuster link-up.

British Airways and Qantas are apparently in discussions to do the dastardly deed.

According to Bloomberg,

"The airlines are discussing a combination after the Australian government said today in a policy paper that it might ax a rule barring individual foreign holdings of more than 25 percent and total foreign airline holdings of more than 35 percent. Still, there are no plans to abandon the so-called "Qantas Sale Act” that says the carrier must remain 51 percent locally owned.

'Any transaction would also comply fully with Qantas’s Sale Act and Australia’s international Air Services Agreements,' Qantas said separately.

Negotiations on a merger are "advanced," the Australian Financial Review said earlier. British Airways, Europe’s third-biggest carrier after Air France-KLM group and Deutsche Lufthansa, said it issued today’s statement in response to "media speculation."

A merger of the two airlines would create an entity with annual sales of about $23 billion.

What a coincidence.AMR, parent of American Airlines also generates about $23 million in annual revenue.

And yes, you'd have to a blind person not to see why it is that the American Airlines-British Airways anti-trust piece of the pie is so important to this oneworld concept of world domination.

According to various reports out this morning, both airlines would retain their own brands. Sounds like another Air France/KLM type of set-up that is being proposed.

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

I love the airline stock sector. Just when you think it's safe to stay in the water....

<Insert the theme from "Jaws" here>

Last week the sector enjoyed one of the best week's it has had in, well, weeks, with the majority of the stocks we track here at PlaneBusiness posting nice double-digit gains.

Today? Not so much.

And tomorrow? Probably worse. Much worse.

After the close of trading late this afternoon Continental Airlines announced its traffic numbers for November, along with its RASM estimates.

The numbers were not good. Ugly might be a better way to describe them.

You can read the release here, but here's the Cliff's Notes version.

Consolidated load factor was down 2.8 points to 77.3%, while mainline posted a load factor down 2.6 points to 77.8%.

On a consolidated basis, traffic was down 10.5% while capacity declined only 7.3%.

But here's the nasty news. Consolidated passenger revenue per available seat mile is estimated to have increased only between 1% and 2% compared to November 2007. while mainline passenger RASM was up between 2% and 3%.

To put these numbers in perspective, last month the airline posted a consolidated RASM figure that was up 9.5% over October 2007, while mainline passenger RASM was up 10.4% year-over-year.

In addition, these estimates are also below recent analysts' estimates, and the airline's own recently revised guidance, which had the airline posting RASM increases of between 4% and 6%.

For those of you who don't follow the sector that closely, the RASM numbers that Continental reports are looked upon as an indicator for the rest of the industry. Sometimes the airline can be a bit above or below the rest of the pack for various reasons, but most of us airline financial types still use their "first out of the box" look at RASM as a kind of indicator as to what's on the horizon.

If this is what Continental did for the month, I'm not sure I want to see any more numbers.

Posted by Holly at 7:28 PM | Permalink | Comments (0)

It's Friday and Wall Street is up to its volatile tricks again today. Should be interesting to see where the numbers end at the close of the day.

Meanwhile, Continental Airlines and Southwest Airlines reported their third quarter earnings Thursday.

The Cliff Notes version of the results?

The numbers for both airlines -- on their face -- were very weird. Just as we saw yesterday with American and Delta. Weird in that with capacity being pulled out and oil prices through the roof for much of the third quarter, we again saw cost per ASM figures solidly in the double-digit category for both airlines.

But revenues were also up -- especially at Southwest.

Continental reported a loss of $236 million or $2.14 a share. Excluding $91 million of previously announced special items, Continental recorded a net loss of $145 million or $1.32 a share.

Southwest's numbers are a bit more complicated to break down -- as a result of the airline's fuel hedges.

Southwest reported net income excluding special items and SFAS 133 unrealized gains and losses of $69 million. Or $0.09 a share. This was two cents better than analyst consensus.

However, because of the drop in the value of crude oil, the airline had to write down the value of its fuel hedging transactions. (That is the bulk of that "SFAS 133 unrealized gains and losses" accounting mumbo jumbo up there.)

When you factor in those write-downs, the airline lost $120 million for the quarter, or $0.16.

That's right. All those great fuel hedges the airline has stocked up on aren't so great when the price of oil begins to plummet.

As for honest-to-gosh cash in the bank? The airline ended the quarter with $1.5 billion. With an incremental $200 million of a revolving credit line still available.

Four fully detailed reports on the earnings results from American, Continental, Southwest, and Delta Air Lines will be included in this week's PlaneBusiness Banter.

Posted by Holly at 11:38 AM | Permalink | Comments (0)

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

The results?

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

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

Yes, the airline DID lose that much.

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

Posted by Holly at 12:04 PM | Permalink | Comments (0)

United said in an SEC filing late Friday that Jake Brace, United Airlines' CFO, will be p