Monthly Archives: August 2009

Pigs Flew This Weekend at the Worldwide Headquarters: We’re Now All A-Twitter

twitterbird.jpg

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

The account name is: PlaneBusiness. Creative, huh?

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

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

No, apparently I was mistaken.

It was actually “planebusiness.”

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

Whew.

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

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

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

Flea Market Open for Business: US Airways, Delta, AirTran and Continental Play “Let’s Make a Deal” With Slots

tradingpost.jpg

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.

PlaneBusiness Banter Now Posted

home-typewriter copy-1.jpg

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

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

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

Southwest Airlines Ups Bid for Frontier to $170 Million

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.

PlaneBusiness Banter Posting Later Today

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

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

More later.

This Week: Frontier Airlines Bankruptcy Auction

bwi_20060620_N939FR_1.jpg

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!

PlaneBusiness Banter Now Posted

home-typewriter copy 1.jpg

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

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

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

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

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

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

And then there is United Airlines. CFO Kathryn Mikells was hammered in the airline’s call about the “L” word — yes, that would be liquidity.

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

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

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

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

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

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


Potential Southwest Airlines/Frontier Airlines Deal: Issue of Denver Profitability

246917-600-0-1.jpg

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.