Monthly Archives: June 2008

Federal Express Absolutely Positively Scares the Market

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Forget airlines. We all know what the problems are with this industry and with its stocks.

But for years haven’t we also heard how the airfreight/cargo boys would always be able to prop up their profits by simply adding fuel surcharges to the mix — something their passenger-flying cousins were not able to do as easily?

Well, something funny has happened to that old “rule of thumb” thinking.

It doesn’t appear to be working anymore.

When FedEx last announced earnings, the company was not particularly bullish on the quarter coming up.

Today, the company took it a step further — and as expected, Wall Street was not happy.

Alan B. Graf, Jr., FedEx’s executive vice president and chief financial officer said in a statement that the next year is expected to be “very difficult due to the weak U.S. economy and extremely high fuel prices.” (The FedEx fiscal year ends May 31, 09.)

If one is an economic observer like me, this news says a couple of things. One — obviously FedEx, even with fuel surcharges, is now seeing a “significant” slowdown in their trending. So much for the recession-proof surcharge idea. Secondly, if FedEx is saying this, and we already know the trucking industry as a whole is getting killed with high fuel prices, there is going to have to be a tipping point here in terms of additional transportation costs being absorbed into higher prices for all manner of goods. But if the economy is as sluggish and consumers are as tapped out as they seem — there does not seem to be a lot of room for any higher prices.

As of this posting, shares of FedEx are down about 2.5% on the day, as shares are trading around 82.27. Shares of UPS are down about 2%, trading around 66.01.

Wounded Warriors

Hello there, Godzilla here. It’s been a while since I’ve posted on PlaneBuzz, and not for a lack of subjects available considering the current state of the airline industry. To be honest, sometimes writing about the gloom and doom out there is physically draining. I think Holly would agree with that.
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So here is a little diversion; a little side trip away from tracking the daily increase in the price of a gallon of gas, or the calculation of reduced ASM’s from the latest announcement of air service cutbacks. As some of you may know, I am a pilot and a Certified Flight Instructor (FAA code named CFI/A/I/ME) and I own an airplane. Late last year I learned about a group called Veteran’s Airlift Command, a group of over 700 volunteer pilots who fly wounded soldiers and their familes to and from treatment facilities, at no charge. Soldiers receiving treatment for their injuries receive first rate care, but that care is often at a facility far from their family. Having family members close by during recovery is an important, some would say the most important, factor in a speedy recovery. The mission of the Veteran’s Airlift Command is to “……provide free air transportation to wounded warriors, veterans and their families for medical and other compassionate purposes through a national network of volunteer aircraft owners and pilots.”
I flew to San Diego this week and visited the Naval Medical Center San Diego (NMCSD), also known as Balboa Naval Hospital. While visiting several facilities co-located on the hospital grounds I had an opportunity to talk with the most impressive group of people I’ve ever had the pleasure of meeting. Located in the same area as NMCSD is Fisher House Balboa, an amazing facility that houses families of recovering military personnel free of charge.
Down the street from Fisher House I met with both the Army and Marine staff in charge of their respective programs. The Army program is called the Warrior Transition Company, and the Marines call it the Wounded Warrior Battalion.
The purpose of my visit was to make the staff aware of the service available, and as I said, they were an amazing group of folks.
But that wasn’t the really impressive part. The really impressive part, or maybe the most humbling part of the trip was talking to the Soldiers and Marines.
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Like Army Specialist Joe who had come in for a haircut. He’s only been married for two months and is a bit new at the Husband occupation. Joe selected a couch for their new place without soliciting the approval of his new wife, with the expected result (take it back). I told him I thought red was a great color for a couch (!), and although I am not the person to give advice about either marriage or haircuts, I was pretty sure that anything going into a living room needs wife approval. Joe is a bilateral amputee and because of the severity of his injuries, using prosthetic legs is very painful and he can’t use them for long periods of time. But as he walked off the elevator and extended his hand to me you couldn’t tell he was feeling any pain at all from the legs. What a tough kid.
As I was waiting in the reception area for the Wounded Warriors Battalion I had the opportunity to observe the interaction between Marines who seem to continually come, go, and wait. These were young people who had some terrible injuries, but they were still wising off and busting chops.
I watched as two Marines walked by each other in the hallway, one raising his hand over his head and saying “Give me four” to the other, who was missing a finger on his right hand. Another Marine walked by his friend who was wearing a new prosthetic leg and said “Dude, that’s a F#$%@d up lookin’ leg!”
One Marine came in to the waiting area wearing shorts and a T-shirt that said “Please tell your boobs to stop staring at my eyes”, which made me laugh out loud. As he hoisted himself from the wheelchair to the couch (he was also a bilateral amputee) with ease I also noticed he was missing a finger on his right hand and his right eye was glass. He struck up a conversation with another Marine waiting there, who was missing his right leg below the knee, his left leg was in a brace, and his right arm was in a type of cast from wrist to shoulder. They talked about stuff guys their age talk about, and I after a while I felt at ease enough to add my opinion on the subject (which was about the ridiculous salaries of Major League Baseball Players).
My point in describing the injuries is not to overshadow who these young people are; on the contrary. Although they have permanent injuries they still have lives to live. They still want to do the things that young people do as they grow up (although I did point out that the Boobs T-shirt was probably not the best way for him to accomplish his current goal). They are alive and they will live (hopefully) long fruitful lives. But as a society we owe these people something. A lot, actually.
It is not my purpose to have a political discussion on the war against terrorism. For the young people I met in San Diego it was a simple matter of doing their duty as they were asked. Now it is our duty to make sure these lives are not wasted. There are a lot of groups who need help providing assistance to wounded warriors and you can certainly donate to the Veteran’s Airlift Command and click on “Ground Support….Make a Donation”. Also, Fisher House is building another facility at the Balboa Naval Hospital and you can contribute to that endeavor through this link.
We now return to our regularly scheduled airline blogging.
Thanks for reading.

Most Shocking News of the Week: Frontier Airlines Keeps All The Planes

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Clearly the most shocking news in the industry this week was the fact that Frontier Airlines did not take the opportunity to get rid of its Airbus A318s as part of its bankruptcy reorganization.

The airline this week reaffirmed the leases on all of its aircraft. All of them. That’s right. Every single one of them.

As most of you know, when an airline files for Chapter 11 protection, the airline is allowed to suspend the payment of any aircraft leases or contracts for a period of 60 days.

At that point, the airline has to make a decision on which aircraft it wants to keep, and which aircraft it wants to get rid of.

Surprising to me, and a lot of other industry observers, Frontier did not take this opportunity to get rid of any aircraft. I would have bet money that they were going to take this opportunity to ditch the A318s.

The airline owns 22 of its Airbus aircraft and leases 38. The airline also flies 10 Bombardier Q-400s under its Lynx brand. The airline owns five of those aircraft and five are leased.

Delta Ups Number of Employees To Be Let Go Under Voluntary Program

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Delta Air Lines said on March 18 that it would offer voluntary severance payouts to roughly 30,000 employees. Executives said then that the airline’s goal was to cut 2,000 frontline, administrative and management jobs through the severance program, attrition and other initiatives.

The company said it would accept more job cuts, if more than 2,000 employees took voluntary severance.

Today the airline said that roughly 4,000 people took the airline up on its offer, and Delta will accept all the volunteers. The employees are from the mainline airline and Delta’s information technology subsidiary. Most will leave the company in the fall.

Silverjet Officially Kaput

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Looks like the rumors that Silverjet was about to resume flying were somewhat premature.

Today the airline said that it had laid off its entire workforce after attempts to put together a “rescue” deal for the airline fell apart.

The airline employed 370 pilots and cabin crew and 50 administrative staff.

The airline said it would continue to negotiate the sale of Silverjet’s assets for the airline’s creditors.

It’s Friday The 13th — Maybe a Bit Worse Than Usual

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It’s the dreaded Friday the 13th. Not that I have a thing about black cats or ladders or anything….

In fact there are two black cats who are cherished members of the PlaneBusiness Advisory board. The distinguished Max the Cat, and his mother, Mom Cat.

As for ladders, I’m too tall to walk under one without some difficulty, so that’s never been a problem either.

Unfortunately, however, we understand that a lot of airline employees may have another reason to fear this Friday the 13th in particular. That reason is because it appears a lot of folks are either looking at their last day today at work (at United in particular) or others are expecting to find out today if they stay or if they go — not only at United, but at other carriers as well.

Have a story to tell about your last day at work for an airline? Drop us a note.

Another Bad Day For Airline Stocks: Oil Moves Up on Weak Inventory Numbers

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As of this posting nearly every airline stock we track is down on the day.

One big reason — the price of crude is on the march again.

As of this writing, the price of crude is up more than $6/barrel, hovering around $137.60.

The main mover today is inventory news.

The Energy Information Administration reported today that crude supplies fell by 4.6 million barrels last week. Analysts were looking for a drop of only 1.4 million barrels, according to according to a poll by energy research firm Platts.

Related problem number two — the dollar was trading down today as well.

Nice Comments on Midwest Airlines Crew

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Thanks to our web editor and Apple computer consultant guru Jonathan Bare for that great post detailing his travails on his Midwest Airlines flights the other night.

As he said, with all the media emphasis on mergers, and high oil prices, and unhappy passengers, it’s important to remember the human beings, just like many of you, who work for an airline  — who go over and above in trying their best to provide good customer service.

I ran into an example yesterday when I went to check in for my Southwest Airlines’ flight in Phoenix.

As I noted here yesterday, the Southwest web site would not let me check in for my flight when I was still at home. So I just went ahead and left for the airport a bit earlier.

I got to the airport, attempted to check in using a kiosk. No go.

The kiosk told me I had to see a counter agent.

The counter agent told me I was on a cancelled flight and would have to stand in line for one particular agent — only one of a few who could, for whatever reason, reaccommodate me. Yes, Southwest was having some kind of computer problem.

Things were a bit stressful. Especially for the counter agents who had the computers that could do something.  Most of the terminals were not working correctly.

Actually even the one my agent was working on was only working so-so. She could put me on another flight to Vegas, but she could not give me a boarding pass.

She gave me some strange looking piece of paper to get through security with, and then I would have to stand in line again to get a boarding pass at the gate.

It was okay. I didn’t mind that much, especially when she got me on an earlier flight.

But “C” concourse was a bit nuts. Then again, I’m just glad it wasn’t a Friday.

But the thing I wanted to mention was that both my original counter agent and my eventual gate agent in the “C” concourse were doing the best they could, with phones ringing, computers that weren’t working, and complaining customers in front of them. Even with all this, they were still smiling, and going out of their way to be apologetic.

I don’t see how they (some of you)  do it.