Monthly Archives: December 2008

Happy New Year ……We Think

Is it the residual after-effects of having dealt with the mess that was 2008 that make the phrase “Happy New Year” sound particularly cynical this year?

I’m not sure, but I think maybe that is the case.

Then again I’ve never been a fan of this particular evening, which I like to call, “Amateur Drunk Night.”

The good news for PlaneBusiness Banter subscribers is that if it’s New Year’s — a new issue of PBB can’t be far off. And it isn’t. We’ll be back in our usual weekly schedule of publishing again starting this weekend — after having enjoyed our usual two week holiday publishing hiatus.

With that — here’s to a much better 2009 for everyone.


Merry Christmas, Happy Holidays From PlaneBusiness to You


Hello to all. It’s Christmas. However, for those of you trying to fly into or out of Seattle — it’s not Christmas. It’s just another day in a continuing snow and ice event.

I am back at the unseasonably balmy Worldwide Headquarters in New Orleans today, where I am currently working on a Paula Deen recipe for pumpkin pie that I first tried at Thanksgiving. It got rave reviews from the folks at the table then — and was requested again. So yours truly is hard at work on that endeavor. Or will be after I finish this post.

Then there is the ham. You know the good thing about hams is that they are effortless. You don’t have to do anything except heat them up. And you don’t even have to do that if you don’t want to.

Meanwhile the tree still needs to be finished, a couple of presents wrapped, and the silver polished.

Good thing we don’t sit down to eat until 4!

Here’s hoping that your have a great day today with family and friends — no matter where you are. Even if those “friends” happen to be strangers in some airport or on an airplane. Or coworkers behind a ticket counter.

On Christmas, we’re all family.


Not a Good Day For A Computer Failure

image2135475845.jpgHolly here. Sitting at Phoenix Sky Harbor, gate D7. Lines are long in Southwest’s concourse….an announcement just notified everone that the airline’s “computers are down.” Yes, there was also a request for patience.

Before I made my way through the TSA maze… I did glance at the departures board. Very glad I am not flying to the Midwest,Northwest, or West.

Speaking of security….as some of you know I am always subjected to additional screening — the result of a big hunk of titanium that masquerades as my hip. Today… Instead of the usual pat down and wanding…. I was subjected to … radiation!

Helped tremendously to put me in a holiday mood….just gave me a little jingle tingle.

All for now.

Happy Friday: Gary Kelly’s Financial Stewardship Dinged By Chief Executive Magazine

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?

10 Best Wealth Creators



1. J. Christopher Donahue

Federated Investors

2. Jeffrey P. Bezos

3. Robert W. Selander


4. Mark Donegan

Precision Castparts

5. Hugh Grant


6. John W. Rowe


7. John C. Martin, Ph.D.

Gilead Sciences

8. Daniel P. Amos


9. Andrea Jung


10. Clayton M. Jones

Rockwell Collins

And which CEOs were the best “wealth destroyers?”

10 Best Wealth Destroyers



1. James R. Tobin

Boston Scientific

2. Robert J. Coury


3. Gary C. Kelly

Southwest Airlines

4. Herb M. Allison, Jr.

Fannie Mae

5. Eli Harari, Ph.D.


6. Glen F. Post, III


7. Larry L. Weyers

Integrys Energy

8. Steven R. Appleton

Micron Technology

9. John A. Luke, Jr.


10. Lynn Laverty Elsenhans


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.

Before You Make That Long-Haul Flight…


Be sure and do what publishing mogul Rupert Murdoch supposedly does before every long-haul flight.

Take an enema.

Michael Wolff, whose biography of the billionaire, “The Man Who Owns the News” is out now in stores told last week that the Fox News boss always “takes an enema before a long-haul flight.”

Now if that recipe for arriving fresh at your destination doesn’t make you want to make a beeline to the holiday punch bowl, I don’t know what will.

Oh, and make sure that punch is spiked.

Oh to Be in Boston

Now this is my idea of a must-see holiday event. The annual Santa Speedo Run was held Saturday in Boston.


I think PlaneBusiness needs to sponsor one of these for airline employees. Any of you out there game? Okay, maybe airline employees and airline junkies. And geeks. And whoever else wants to participate.

Now — who would be willing to participate?

Let it Snow!


My timing is lousy this week.

I flew to the branch office of the Worldwide empire in Dallas yesterday — and what happened last night and this morning? It snowed in the Swamp. Yes, I missed all the excitement.

I mean real snow. Not just a few flakes.


The PlaneBusiness subscription manager, earnings tabulator and all-around go-to guy David grabbed this shot of Esther — one of our wonderful and lovely pound puppies we adopted this year — taken as she clearly was trying to determine just what all that white stuff was falling down around her in the back yard.


Anyone Interested in an Airline ETF?

stock_trading_250x251.jpg 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.