Monthly Archives: August 2006

Terror Plots: The Financial Perspective

Airlines Down.03 Gary Chase, analyst with Lehman Brothers issued a note this morning on the news out of London. Gary gives us his take on possible effects the news could have on particular airline stocks in the short-term. Chase said in this note, “Some flights have been canceled as a result of these threats, but the larger issue is the threat of demand destruction in the near-term. Below, we review what we believe to be the relevant facts of this situation and offer our quick takeaways.”

“The quick facts:

* In overall exposure to European revenue, Continental is the largest,

followed by Delta, Northwest, and American Airlines

* Of the European exposure, American is most exposed to the UK,

followed by Continental, United, and US Airways

* Most exposed to the UK on a percentage of revenue basis is American Airlines

(6%), followed by Continental (6%), and United” (4%)

Our Takeaways:

* This is obviously an incredibly unfortunate situation with

unpredictable ramifications. However, in the past, these types of

circumstances have created buying opportunities in the group, and that

is our bias for today.

* We believe it entirely plausible that these events will have

some measurable near-term impact on demand, but we are almost through

the peak season for European travel and we do not expect an enduring

impact on demand. Therefore, we do not expect a long-term impact from

these events on airline fundamentals or valuation.”

Photo Credit: CNN.com

Breaking: Chertoff confirms plot using ‘liquid explosives’

TOKYO — Suspects in the terror plot uncovered in the United Kingdom were planning on destroying multiple flights using liquid explosives and electronic devices, Michael Chertoff, secretary of the Dept. of Homeland Security, confirmed in a press conference.

remote key fobSources have told CNN and other news outlets that electronic detonators may have been disguised as automobile remote control key fobs.

Chertoff also said that additional sky marshals are being sent to the U.K. to provide additional protection on flights between the U.K. and United States.

Interesting advice from TSA Administrator Kip Hawley:

1. “De-clutter your bag” so that TSA screeners have a clear view through the X-ray machine.

2. “Enjoy your trip.”

Update: Chertoff confirmed U.S.-flagged carriers were the target in the late-stage planning by the suspects, but did not name specific airlines.

Breaking: Three U.S. airlines targeted

TOKYO — Counter-terrorism officials in Washington, D.C. have told The Associated Press that the bombing plot uncovered by British authorities targeted three U.S. airlines, American Airlines, United Airlines, and Continental Airlines.

Update: British Home Secretary John Reid said that the loss of life would have been “unprecedented” had the suspects carried out their attacks and destroyed the targeted flights. According to Reid, 21 people are now in custody in Britain.

Breaking: DHS raises threat level for airlines

high threat TOKYO — The United States Department of Homeland Security has raised the terrorism threat level to red, its highest level, for all flights departing airports in the United Kingdom and bound for the U.S., the AP reports.

The remainder of commercial aviation has been elevated to the orange, or “high” risk, level.

A statement from DHS includes additional information on prohibited items.

“Due to the nature of the threat revealed by this investigation, we are prohibiting any liquids, including beverages, hair gels, and lotions from being carried on the airplane. This determination will be constantly evaluated and updated when circumstances warrant. These changes will take effect at 4:00 AM local time across the country.”

The change follows the uncovering of a bomb plot in the United Kingdom.

DHS plans an 8 AM EDT press conference to discuss the threat level change. In the mean time, the press release indicates there is no imminent threat domestically.

“Currently, there is no indication, however, of plotting within the United States. We believe that these arrests have significantly disrupted the threat, but we cannot be sure that the threat has been entirely eliminated or the plot completely thwarted.”

Breaking: UK arrests 18 in bomb plot; bans carry-on bags

British AirwaysTOKYO — Authorities in the United Kingdom have arrested 18 and airlines there have banned carry-on luggage following a bomb plot that would have targeted U.S.-bound flights from the U.K., Reuters and The Associated Press are reporting.
“A major terrorist plot to allegedly blow up aircraft in mid-flight has been disrupted in a joint, pre-planned, intelligence-led operation by the Metropolitan Police anti-terrorist branch and security services,” a London police spokesman said, according to Reuters.
In an press release, British Airways cited an official advisory:
“British Airways, acting on instruction from the UK Government, wishes to advise passengers that no items of hand baggage can be carried on board any aircraft departing any UK airport.
“The UK Government has advised that this instruction will apply to all airlines operating from UK airports.”
No information has been posted to the web sites of Ryanair or bmi British Midland. An advisory on EasyJet’s site gives additional details.
“[W]ith immediate effect NO hand-baggage will be allowed on aircraft. Only certain essential items will be allowed into the cabin – provided they are contained in transparent plastic bags, which will be issued at airports. All other items are required to be packed into hold baggage and checked-in on arrival at the airport.”
British Airways specifically mentions all battery-operated devices, noting that cell phones and laptop computers are not allowed in the cabin.
Virgin Atlantic posted a list of permitted items that could be carried on board, but noting that no items may be carried in a passenger’s pockets.
There was no information released on how long the ban would last.
Update: A spokesman from United Airlines says the U.S. airline is complying with the order and has restricted passengers from carrying any bags on board flights leaving the U.K.
Other European airlines are canceling flights to the U.K. in the wake of the bomb plot, including Air France and Spain’s Iberia. Both airlines cited the lengthy delays at London Heathrow as reasons for their cancellations of flights to the airport through 10 AM GMT. (Reports from Reuters.)
The BBC reports that Heathrow has been closed to all incoming flights not already in the air at the request of airport operator BAA. Passengers at Manchester and Glasgow airports are also experiencing lengthy delays.

Those Poor Dead Trees: AA Credit Union Press Release

BoredomTOKYO — Today I present the first installment of “Creating Boredom Around Our Airline” — not as exciting sounding as CHAOS, but it still has a fun ring to it — OK, we’ll work on a better name. Anyway, this could be a regular feature here on PlaneBuzz that highlights the boring and silly press releases that airlines are apt to distribute to the masses.

Our first inductee is the American Airlines Credit Union, who proudly informs us of its newest branch opening in (drum roll, please) Hurst, Texas, though a PR Newswire/NewsCom photo release.

AA credit unionPictured are, left to right: John Mcintyre, Member-Owner, AA Credit Union, Teresa Meyer, Hurst Branch manager, AA Credit Union, John Tippets, president and CEO, AA Credit Union, Kenny Marchant, U.S. Congressman, and Kent Ash, regional director, AA Credit Union. (Photo courtesy of PRNewsFoto/American Airlines Federal Credit Union.)

We are now awaiting the press release letting us know that the Southwest Airlines’ Credit Union is going to open a competing location, but that regulators will only let them make loans to customers from the states immediately surrounding Texas.

On second thought, maybe this isn’t such a great idea for a regular feature, we might have to rename PlaneBuzz to PlaneZzzz.

I think I’m going to need another cup of coffee…

If you find a press release worthy of mention here, please send Jonathan an e-mail at jonathan at planebusiness dot com.

Judge Listens, Expected to Rule Monday on Northwest Injunction Request

Arguing-1

Talk about going down to the wire.

Today both sides showed up in U.S. Bankruptcy Judge Allan Gropper’s courtroom to present their sides of the “A strike is legal, strike is not legal” argument.

The verdict?

Come back Monday. Yes, that is Monday, as in August 14. One day before the AFA says it will begin CHAOS, or targeted work stoppages, against the airline in protest over the contract Northwest recently imposed on the group.

The judge listened to arguments presented by Northwest Airlines and attorneys representing the airline’s flight attendants, and correctly assessed his situation in our opinion, as he said, “The question before me today is a fairly narrow one of the intersection between the bankruptcy code and the Railway Labor Act.”

Exactly right.

Breaking: Delta Talking to Republic After Mesa Can’t Provide Aircraft

Delta Airlines

Sources tell us today that Delta Air Lines has asked Republic Holdings to backstop for competitor Mesa Airlines — because of Mesa’s inability to provide aircraft as provided for in its contract with Delta for part of its expanded JFK service.

Under an agreement between Delta and Mesa, Mesa, under its Freedom Airlines operation, is slated to fly 12 37-seat De Havilland Dash 8 aircraft in support of Delta’s expanding hub operations out of JFK.

But this week it was announced that Delta was replacing Dash-8 aircraft with Beech 1900s on several Delta Connection flights that are slated to begin next week. Additional new service is slated to begin in September.

Yeah. That’s right. Beech 1900s. Goes right along with Delta’s latest advertising image of a “sanctuary in the sky” doesn’t it?

Today we were told by sources that the problem appears to be that Mesa apparently leased Dash 8 100s from a Canadian lessor. Fine, but one big problem. The aircraft did not have GPWS kits installed.

We understand that Mesa now has one aircraft equipped with the necessary GPWS, but that availability of additional GPWS systems for the aircraft is nil. None to be had. Maybe for months.

As a result, Mesa apparently has only one Dash 8 and 2 1900s available to start the new Delta Connection service out of JFK next week.

Not surprisingly, we understand the folks at Delta are none too happy about this situation. They are so unhappy, in fact, that we understand they have contacted Republic Holdings about providing aircraft.

As one of our sources told us, Republic would certainly have no problem getting 10-12 Embraer 135s up and running to provide feed — if that is what Delta chooses to do. Tuesday, Republic folks were told, according to one source, “to ramp up.”

Not sure how all of this is going to work out — but it’s clear Delta does not want to run its new highly-touted JFK service utilizing Beech 1900s.

As for Mesa, it’s clearly not a good week.

This news comes the same week load factors for its new “go!” Hawaiian operation came in lower than what the company had previously indicated. Load factor for July was 73.9%. Not surprisingly the airline promptly announced yet another fare sale for its Hawaiian operation after the traffic numbers were released — with select $29 one-way fares through the end of the year on sale through the end of this week.

Finally, Mesa posted poor numbers in the DOT Air Travel Consumer Report for June that was released this week. Not only did the airline post a 5% cancellation rate in June, it also posted the most complaints of any airline. On-time performance for the airline was 66.7%.

Wednesday Watch: Northwest and Flight Attendants Have Hot Date with the Judge

Arguing

Just a reminder.

Tomorrow is a big day for Northwest Airlines and its flight attendants. Not to mention airline executives and labor union leaders. And airline industry history buffs like us.

Wednesday, attorneys for Northwest will be in U.S. Bankruptcy Judge Allan Gropper’s courtroom — attempting to convince the judge to block a potential strike or strike actions by the Association of Flight Attendants/CWA, which represents the flight attendants.

For its part, AFA has said publicly this week that it is prepared to continued to fight — whether the judge awards the airline an injunction or not.

This is not an easy one to bet on folks.

Both sides have way too much at stake here to walk away. And I can’t see the airline backing down on its concessions it just imposed on the flight attendant group. That wouldn’t sit well with other employee groups.

But the fact of the matter is, at this point in time, if AFA wants to continue to fight, there’s not much the airline can do about it. Meanwhile, progress towards the airline’s exit from bankruptcy is on hold.

Keep your antennas up and your ears open. Even if the Judge agrees with the airline and rules to block strike action by AFA, AFA has said it will appeal the ruling.

Meanwhile, as far as chit-chattin’ across the negotiation table is concerned, as far as we can tell, ain’t nobody been chattin’ from either side since the flight attendants voted down the last TA.

Off Topic: AOL’s Abject Stupidity

Aollogo

Yes, while those of us who tend to hang out here have an incurable (and some might say unhealthy) fascination with airlines — we also have to be fairly computer literate to get here in the first place.

Taking that into consideration, I couldn’t help but pass along this tidbit about AOL.

It seems that, for whatever reason, AOL this weekend posted to a publicly available website a list of every user who accessed the web during a 3-month period and every website they visited.

Think about this. This gives spammers a list of every actively used AOL address. It also reveals to friends, employers, etc. the private web browsing habits of every active AOL member.

You can catch the details here at Michael Arrington’s TechCrunch blog.

Interestingly, as of this posting, the mainstream press seems to be too preoccupied with AOL’s financial problems and its move to a “free” access option for those with broadband access to pay any attention to the company’s blatant invasion of user’s privacy.