Monthly Archives: May 2011

PlaneBusinessBanter Now Posted!

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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.

PlaneBusiness Banter Now Posted!

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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.

PlaneBusiness Banter Now Posted!

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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.

PlaneBusiness Banter Now Posted!

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It’s that time again. This week’s issue of PlaneBusiness Banter is now posted. This week we talk about WestJet’s great first quarter results, and Air Canada’s forever flawed business model. We also take a look at Allegiant Travel Company’s first quarter numbers, along with the “maintenance hairball” it coughed up.

My thanks to analyst Dan McKenzie with Rodman and Renshaw who came up with that great visualization.

Meanwhile, the market did not respond well to Republic’s first quarter numbers — and for good reason. Pinnacle and SkyWest? They are fully in the throes of regional airline hell. 2011 is not going to be a great year for either airline.

We also talk a lot about airline passenger security this week as the TSA now seems to be pushing forward with a modified “trusted traveler” plan. As outlined last week by the TSA administrator, it would use airline frequent flyer databases to check passenger identity.

All well and good — but remember — Mohammed Atta was an American Airlines AAdvantage Gold member.

That being said, we’re all for revamping the current TSA Theater of the Absurd.
Airline stocks had a reasonably good week last week — thanks to the sharp drop in oil prices. Nothing inherently connected with the ability of the denizens to generate the revenues necessary to offset higher oil prices.

An interesting tidibit crossed our desk late this afternoon that could provide a marker for the health of the airline leasing business. ILFC reported to the SEC that the number of delinquent aircraft lessees doubled in the first quarter. We have more information on this filing. Have to wonder about this. I’m somewhat surprised at this news, given all the glad-handing that was going on at this year’s ISTAT Conference, and the over-subscription of the recent Air Lease Corp. IPO.

It’s another jam-packed earnings season issue. Subscribers can access it here. Now.

PlaneBusiness Banter Now Posted!

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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.