Tag Archives: AMR bankruptcy

PlaneBusiness Banter Posted!

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Hello all.

This week’s issue of PlaneBusiness Banter is now posted.

This week we have a little bit of this and a little bit of that. First, we look at the latest effort by American Airlines to present its view of the world, i.e., its “truthiness” regarding its future prospects as a “Standalone” airline. Now the airline has resorted to asking business partners for what amounts to a reference letter.

Amazing what a company has to do when it can’t find one independent Wall Street analyst to say they endorse the plan you say is your best option coming out of bankruptcy.

Meanwhile on the other side of the world, oneworld partner Qantas just lost $1 billion in market capitalization as investors clearly are not happy with the fact the airline is now slated to post its first annual loss since the stock went public in 1995. The stock dropped to such low levels last week that the airline has been forced to hire an advisor to help keep potentially hostile takeover bids away. But I doubt that the hiring of such a firm will be of much use. Former CEO Geoff Dixon is supposedly heading up one such group.

Meanwhile, Emirates said this week it remains on track to enter into a “commercial” agreement with the airline — but not as an equity partner.

U.S. major airlines seem poised to begin slapping $25 fees on oversized carry-on bags. We like the move — and don’t think passenger rights groups should be upset over all this. All the airlines are doing is leveling the playing field and stopping the abuse of the carry-on rules as they exist now. So everybody — just chill. The fees that are being considered are for “oversized” bags. Not normal bags.

Airline stocks had a fairly good week last week — while the rest of the markets stumbled. Again — the more fuel prices decline the better it is for airlines.

At the IATA Conference in Beijing this week the IATA set out an ambitious goal — to bring peace to the fight between airlines and GDS companies. We’ll see how all this shakes out.

Meanwhile China and the EU stepped up their game of chicken over China’s unwillingness to participate in the EU’s carbon emissions scheme.

Singapore Airlines launched its low fare long-haul “Scoot” last week. Not a product I am jumping up and down to fly on — but it’s yet another attempt by a major Asian airline to tap into the low fare market.

All this and more, including a ton of reader mail, in this week’s PlaneBusiness Banter.

PlaneBusiness Banter Now Posted!

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Good morning earthlings!

I hope you are enjoying this holiday-shortened week. I know I am. Meanwhile, this week’s issue of PlaneBusiness Banter is now posted.

The good thing about last week? I got to travel to Chicago, where I met with a whole lot of folks at United Airlines. Including CEO Jeff Smisek. While most of my meetings with the airline’s top executives were off the record, and strictly on background, we will be doing one of our legendary Lounge Lizard Interviews with Jeff Smisek sometime later this summer — whenever his schedule and mine can come up with a day that works for both of us.

I look forward to it.

While I can’t dangle any tasty tidbits of information from my sessions publicly, I can say that they were incredibly helpful to me, and I want to thank both Dave Hilfman, SVP of Global Sales at United, and Nene Foxhall, Executive Vice President Communications and Government Affairs at United for extending the invitation to come up to Chicago and hang out. It makes a huge difference when you can sit down and talk candidly with a company’s executives.

But that is not all we are talking about this week. No, in fact, we are at a very important point in the AMR Bankruptcy 1113 process. What I write this week may surprise some of you. Essentially the faster the unions and the airline can come to terms on three contracts, the faster any and all alternatives to the airline’s “Standalone” plan can be presented and considered.

I explain all of this and why it thus behooves the union leaders to attempt and negotiate something with the airline sooner rather than later in this week’s issue. (And yes, I think this is going to be very confusing to attempt to explain to the rank and file members.)

Meanwhile, airline stocks had a fantastic week last week — mainly because of a bullish report from JP Morgan analyst Jamie Baker. We told you last week the pull back was a buying opportunity, and indeed it was.

Sad news for the SkyWest/ExpressJet family this week, as Tanner Holt, the youngest son of ExpressJet President Brad Holt was one of four men killed in the crash of a Cessna 172 at the St. George, UT airport on Saturday. Tanner was a pilot with Comair.

Not content to shake things up by buying a refinery, Delta is apparently playing some “Kill Spirit” games by offering some rock bottom fare buckets on a few routes where they compete with Spirit. We’re not sure this is such a good idea, and we’ll tell you why.

Then there is New York Senator Chuck Schumer and his claims that airlines are separating mothers and their babies. Really Chuck? Really?

As usual, all this — and more, in this week’s issue of PlaneBusiness Banter .

PlaneBusiness Banter Now Posted!

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Good evening everyone.

This week’s issue of PlaneBusiness Banter is now posted.

This week we have another mega-earnings issue, as we take a close look at the recent earnings calls from Hawaiian Airlines, Allegiant Travel Company, Spirit Airlines and Republic Holdings. Republic was the only one of the group not to post a profit for the first quarter.

Of course Spirit was in the news last week for other reasons — namely its decision to hike the charges for carry-on bags and for their initial refusal to refund a $197 ticket to a terminally-ill ex-Marine. By the time the week was over, the bag charge increases were still in place, but the airline’s CEO Ben Baldanza personally refunded the cost of the ticket and the airline contributed $5K to the Wounded Warriors organization.

For once the airline discovered that bad publicity was not better than no publicity.

In other news, Southwest Airlines and United Airlines slugged it out again in Houston Tuesday before an overflow crowd at the Houston City Council chambers.

Southwest wants to fly internationally out of Hobby Airport, and has asked the city for permission to build a new international addition to the current airport at a cost of roughly $100K.

But United is not amused. Especially since it just broke ground in January on a $700 million expansion and improvement of its facilities at IAH, which will include more international gate expansion.

Most interesting factoid from Tuesday’s testimony and questioning — on the day United Airlines broke ground on its new IAH expansion in January, Southwest’s Gary Kelly was talking to the Houston mayor about its desire to fly internationally out of Hobby.

Oh, this is such a cruel dog-eat-dog business.

This week we also have our latest AMR Bankruptcy Follies column. This week we look at the position of the bondholders in the bankruptcy process — why they want to get as much as possible back from the airline and how this return could be maximized as a result of a US Airways merger with American while it is still in bankruptcy protection.

Last week shares of Republic and Spirit were the laggards for the airline sector, but the price of oil plunged. That’s good news. So far this week — oil prices have continued to move downward.

As always — all this and more — in this week’s issue of PlaneBusiness Banter.

PlaneBusiness Banter Now Posted!

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Good evening everyone! This week’s huge mega-earnings issue of PlaneBusiness Banter is now posted. This week we take an in-depth look at the recent earnings results and the earnings calls from Delta Air Lines, US Airways, Alaska Air Group, JetBlue, and United Continental Holdings.

But there’s more.

Republic Holdings announced last week that Frontier Airlines was getting a new executive team and — that the airline was going to become an ULCC.

You know what that is don’t you?

Ultra low cost carrier. Think Spirit. Or Ryanair.

Not sure what all the animals are going to think about this. Not quite sure what we think about it yet — as details are slim. But it appears that either Frontier will be rebranded and operated as a ULCC. Or it looks like it will be rebranded and then sold as a ULCC.

Heading up the new operation is none other than Dave Siegel. Yes, the same Dave Siegel who headed up the old US Airways during the Dark Period. Joining him is the former head of planning and pricing at Allegiant — Robert Ashcroft as SVP Finance. Daniel Shurz, meanwhile, was promoted to SVP Commercial.

Tomorrow employees and union leaders will finally hear from American Airlines — as the airline is slated to roll out its proposed labor contract modifications per section 1113 of the U.S. bankruptcy code. Meanwhile we’ll be interested to more hear details of the airline’s proposed restructuring plan.

It’s going to be one difficult day for American employees.

Meanwhile the head of the Pension Benefit Guaranty Benefit Corp., the government agency that would be forced to take over the administration of employee pensions if the airline walks away from them continued his very public criticism of the airline Tuesday.

The PBGC also placed liens against assets of American on Tuesday. The agency said that it filed over 70 liens for a total of $91.7 million, on behalf of the four pension plans the airline currently has. This comes after American only paid $6.5 million of the roughly $100 million that was due earlier in the month. The airline said that it had to conserve its cash.

We’ll find out more tomorrow on where the pension issue is headed. But one thing’s for sure — this PBGC is not the same as the one United Airlines rolled over when it went through its bankruptcy. Josh Gotbaum, the director of the PBGC, is not going to go down without a fight.

But the big story this week in PlaneBusiness Banter is earnings — lots and lots and lots of earnings. This week’s issue clocks in at over 150 pages as we take an in-depth look at the five airlines that reported in last week. Which airline do we think reported the strongest earnings for the fourth quarter? Delta Air Lines. And I tell subscribers why.

Also, those reports last Friday about how Delta was now possibly looking at a deal for US Airways? We give you our take on those reports and why they shouldn’t surprise anyone. Who is going to do what to whom and why? We’ll break down a number of the possible scenarios.

All this and a whole lot more. Now. In this week’s PlaneBusiness Banter.

Today’s Market Sell-Off of Airline Sector

A couple of observations on today’s black day for airline stocks.

One, the markets are in panic mode in general today — as fears of a continued economic slowdown shake the Street. This is not just an airline sector sell-off, it’s a general market fear-driven sell-off fueled by continuing concerns over the situation in Europe.

Two, the general market assumption is that if the economy goes south, so will airline revenues.

Three, in the case of AMR, the situation is particularly acute, because investors know the airline has lagged in revenue performance, and the airline is the most cash restrained of all the major airlines.

Four, fears of an impending AMR bankruptcy have been rumbling around and picking up traction for the last 30-45 days. Increasing numbers of retiring pilots do not help the situation, nor do continued analyst concerns over the airline’s long-term liquidity health.

Looking at the latest sector numbers for today, it looks as if shares of other airline stocks that were hammered earlier in the day into double-digit declines have bounced back a bit, while the volume of AMR shares traded continues to boggle the mind. Shares of AMR have climbed back a little bit since trading was resumed. Now shares are only down 30%, trading at around 2.07. Earlier in the day shares were down to 1.75.

Not 35%.

The current trend is up, not down.

AMR Bankruptcy Fears Take Shares of American Airlines Hostage

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As I wrote recently in PlaneBusiness Banter, a funny thing happens when a company begins to show signs of failing. Often times, the state of the company may not be as bad as outsiders perceive, but one but one, things can begin to happen that accelerate the perception that the company is in trouble.

Once that process begins, it can be very difficult to reverse course.

I think that is what we have going on with AMR, parent of American Airlines.

Late last Friday the company announced that another 129 pilots had opted to retire, effective Oct. 1. While that data point in and of itself is not indicative of anything, other than the fact the pilots want to lock in their benefit levels at stock prices that are higher than they are now — that is not how Wall Street is interpreting the news. Wall Street thinks this much-higher-than-normal exodus is a negative “insider sentiment” as to the airline’s financial situation.

This morning, while the entire industry has taken a dive across the board, Wall Street investors have dumped shares of AMR much harder and much faster.

So hard and fast that trading had to be halted in shares of the stock.

Prior to the halt, shares had slipped down more than 20%. After trading was resumed, the sell-off continued at an even faster clip. Shares have been down as much as 38%.

As of this posting (12:48 CDT) almost three times the average daily volume of AMR shares have already been traded, and the stock is sitting at $1.92, down 35% on the day.