It’s not been a good day for AMR on Wall Street.
It’s not been a good day for AMR on Wall Street.
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.
Hello to all on this rather sunny Sunday here at the Worldwide Headquarters.
PlaneBusiness Banter is posted a bit early this week, as yours truly is headed West to the Valley of the Sun later today. It’s time for the 28th Annual ISTAT Conference and this year it is being held in Scottsdale, AZ. What is ISTAT you ask? It is the trade association for those who make their living leasing, buying, and selling airplanes. You know, those metal things we voluntarily put ourselves into from time to time.
I heard last week that there were already 1600+ attendees registered for the event this year. Amazing. I remember when I was on a panel discussion at the event in 1998 and they thought it was good when they had about 400 folks show up in Boca Raton.
It’s always one of our favorite industry events to attend. I’m looking forward to it.
Yes, there was an earthquake that hit Japan last week. We talk this week a bit about how that has affected not only the Japanese airline industry, but how major international airlines who fly to Japan have been affected as well.
We’re also talking about the latest DOT Air Travel Consumer numbers. January was a very good month for the airlines — and their passengers. Except for one glaring category. Guess which one that was. And yes, it’s directly related to the DOT’s Three-Hour Rule.
Airline stocks had a very good week last week, as investors shrugged off concerns over higher fuel prices — but yet another fare increase that American Airlines tried to put into place failed as the week ended.
Spirit Airlines is up to no good again — as the airline rolled out a “Charlie Sheen” inspired ad. Meanwhile Allegiant Air is proposing a “variable rate” fare which would be finalized on the day of departure — based on that day’s fuel cost.
We talk a lot about airplanes and Wi-Fi this week. Will Boeing announce a new twin-aisle narrow body at the Paris Air Show this year? Is Wi-Fi making some Honeywell instruments go haywire in Boeing 737s? Did Aircell just blow up Row 44’s chance at long-term survival?
Never a dull moment around here.
All that — and more — in this week’s issue of PlaneBusiness Banter.
Hello earthlings. This week in PlaneBusiness Banter we are, of course, talking fuel prices. Jet fuel prices to be exact. New York Harbor Jet closed today at $3.22/gallon. Have you filled up your Boeing 737-800 lately? Yes, well, if you have — you can understand why the airline industry is having its own equivalent of an anxiety attack.
Today American Airlines became the second major US carrier to announce a reduction in its capacity forecast for the year. (JP Morgan analyst Jamie Baker has to be sooo happy with this news — after the hard time he gave the airline about their capacity plans in the airline’s fourth quarter earnings call.) Delta already reduced its numbers in February.
Who will be next?
We also have our in-depth earnings call review this week for both SkyWest and Republic Holdings — our last two US airline industry earnings calls for the fourth quarter.
Calls for both airlines were quite interesting, but I have to say, I did not realize that ….well, I’ll keep what I was surprised about in the SkyWest call a surprise. You’ll just have to read.
We also talk about the fourth quarter numbers that a number of Asian carriers posted last week including Air Asia, Malaysia, and Tiger Airways.
We also take a look at US industry revenues for the fourth quarter this week. If you want a graphical look at how revenues in this industry are consolidating — your search has ended with this week’s issue.
Also — do you know the difference between a “weighted average” and normal average? If you frequently look at summaries about various industry metrics, it might be a good idea if you knew what the difference was. There — that’s our small effort at financial education for the week.
Airline stocks? Can we change the subject please? With crude oil prices up more than 13% on the week and jet fuel up 8% — it was a horrible week for the sector. Shares of Air Canada posted the biggest loss of the double-digit loser group.
As always, all this and more — in this week’s issue of PlaneBusiness Banter.
Subscribers can access this week’s issue here.
Good afternoon earthlings. How is everyone today?
As of right now, things here at the Worldwide Headquarters are hunky-dory. However, as you can see by this lovely graphic, that is about to change. Sigh. Enough already.
This is how the weather map looks now.
This is what is forecast for tomorrow morning.
However, before the ice and snow arrives once again and we have to perhaps endure more rolling blackouts, it’s time to talk about this week’s issue of …PlaneBusiness Banter! Subscribers can access this week’s issue here.
This week we take our usual in-depth look at the recent earnings calls and results from both Hawaiian Airlines and Allegiant Travel Co. Our overall assessment of both carrier’s results? Both airlines are in “transition” modes. Translation? I wouldn’t jump into either stock right now. Too many costs on the horizon.
We also talk about the Raymond James Growth Airline Conference, which was held last week in New York. The conference welcomed two newcomers to the fray — Delta Air Lines and Alaska Air Group.
As most of you know by now, Delta Air Lines took the opportunity to talk about its decision to reduce its capacity — a decision that was universally cheered by the Wall Street community.
However, as of today, we have not heard any news from any other airlines in regard to them doing the same — a situation that one airline analyst finds quite frustrating. So much so that he slashed his estimates on most of the legacy airlines last week as a result.
As Jamie Baker, analyst with JP Morgan wrote, given the rise in the price of fuel and the apparent “push back” that airlines may now be feeling as a result of a fare increase that fell apart last week, reductions in capacity are the answer. Sooner rather than later.
Speaking of those fare increases, while the across the board fare increase attempt sputtered last week, this morning United/Continental decided to stop abusing the leisure class, and instead they announced fare increases for both first class and business class passengers. The increases were matched almost immediately by competitors American and Delta Air Lines.
This fare increase has a much better chance of “sticking” because Southwest does not compete with the first class and business class fare buckets — so unlike last week when Southwest proved to be the spoiler, this increase will probably hold.
In other news, Senator John McCain (R-Ariz) tacked on an amendment to the FAA reauthorization bill last week that would effectively kill the Essential Air Services program. Was this just a political play for headlines? Or is he serious?
On another front, the American Eagle ALPA MEC Chairman, Tony Gutierrez, issued a letter last week outlining where the regional carrier is in terms of its relationship to AMR. We had a number of AE-related emails this week and this is why. We talk about this a bit this week, and oh yes, public kudos to Tony. This letter that he wrote to the AE pilots was one of the most thorough letters of its type I’ve ever read from a union leader to his troops.
All this and more…in this week’s issue of PlaneBusiness Banter.
This week’s issue of PlaneBusiness Banter is now posted. Subscribers can access it here.
This week we have a pretty good issue. Always takes us a week to get back in the groove after the holidays, and this week I think we have a little bit of something for everybody.
No question that the thrill of new metal hung over the industry last week as Delta Air Lines told its employees it is looking at new aircraft options. While Continental/United did not tell its employees that it too has been checking its bank balances and kicking some tires, industry sources confirm that yes, this is also the case.
Then there was that obscene order placed by IndiGo Airlines — based in India. It was, according to Airbus, the largest commercial aircraft order ever place. A whole slew of A320s, including a nice stable of the new “neo” flavor A320. You know, the ones with the more efficient engine.
But Airbus didn’t stop there. Oh no, they are clearly in their “Let’s Hammer The Boys at Boeing” mode as they also announced a new A320 order from Virgin America. One that also, conveniently, was signed at the stroke of midnight on Dec. 29. (I’m making up the part about the stroke of midnight, but I’m probably not that far off.)
The result of all this? Airbus looks to now have a nice solid start to its “neo” program, and oh yes, the Virgin order pushed Airbus past Boeing in the all-important testosterone-fueled exercise called, “Who sold more airplanes in “________.” Fill in the year.
For 2010, it looks like Airbus nosed out Boeing, 644 to 625.
Not surprisingly, given all this hoopla about new metal, Steve Hazy’s Air Lease Corp. filed its S-1 with the SEC last week. Translation: They are going to do an IPO.
Of course the American Airlines/GDS cat fight continued last week, with one very interesting new tidbit. In last week’s PlaneBusiness Banter I talked with subscribers about how I wondered if there was not more going on between American and ITA than met the eye.
Well, looks like I was right, as American announced a new deal with ITA (American is already a client) for a nice chunk of work with American’s new IT overhaul — which is being spearheaded by HP.
We update subscribers on all the latest GDS related news, and we also share a guest column this week from Montie Brewer, ex-Air Canada CEO. He gives us his take on the GDS/airline situation. (Yeah, I know. Bet you can’t guess which side of the fence he’s on.)
We also have a longish Market Review this week. We bring subscribers up to speed with the latest research reports from three analysts — Jamie Baker and Mark Streeter with JP Morgan; Glenn Engel with Bank of America and Dan McKenzie with Hudson Securities.
All three have different takes — and different things to say — and in the case of Glenn, he gives us part three of his ongoing research series in which he compares airlines on the basis of revenue and cost per plane. None of the usual RASM, CASM stuff. His first two reports last year covered revenues of the major and regional carriers. This latest report covers the costs of the major carriers.
Interesting way to look at the same numbers.
All this and more in this week’s issue of PlaneBusiness Banter.
Greetings earthlings. Gotten a text message from Brett Favre lately?
Okay, I’ll behave.
Which is more than I can say for Mr. Favre.
The latest edition of PlaneBusiness Banter is now posted.
This week we take a look at, what else? The Southwest/AirTran deal. Lots of chatter going on about just why it was that AirTran decided to sell. We talk about that, and I answer a lot of email questions about my comments from last week concerning the deal as well.
American Airlines was all over the newswires this past week. We talk about all the airline’s news, the latest missive from the Allied Pilots Association, and we wonder just where the airline is going to get all the metal to fly all this new flying it is talking about.
Oh, and yes, the airline also recalled 800 employees. Wonder how many of those former TWA flight attendants will come back and fly? I’d be interested to know.
Meanwhile, over at United Airlines (under new management), the pilots on both sides there said this last week that they have decided to keep direct negotiations going for at least another two months — rather than ask the National Mediation Board to step in. Good. If they asked the NMB to step in it would be months before anything got done.
Five years from now — how will the industry look? What will be different? I do my best Karnac imitation this week. Complete with turban.
Then there is the strange tale of British Airways’ Captain Peter Burkill. Burkill was Captain of British Airways flight 38, the Boeing 777 aircraft that lost power in both Rolls-Royce engines during final approach to Heathrow. He and his co-pilot were hailed as heroes after they managed to land the plane safely just short of the runway.
But things turned awry for Burkill pretty quickly. When all was said and done, he quit the airline, was unable to find another job as a pilot, and found himself on welfare.
We talk about his journey this week, and the strange twist to it that just occurred.
We have all kinds of other goodies, including a rather nifty way to look at regional airline profitability that was published in a research note last week by Bank of America/Merrill Lynch analyst Glenn Engel, and the usual hot YouTube videos that made their appearance this week. We’ve got foul-mouthed furry puppets, more cartoon union negotiation stories and dancing flight attendants.
It’s just a never ending party.
All this and more in this week’s issue of PlaneBusiness Banter. Subscribers can access this week’s issue here.
Hand in hand with the news about the new cash filling the coffers over at American today, the airline also announced that it is further cutting back on its routes into Raleigh and St. Louis.
Those assets are being redistributed to Dallas, Chicago, Miami, and New York (both JFK and LGA) and Los Angeles.
For 2010, mainline and consolidated capacity are now expected to be up only 1% (after 3.8% and 7.5% mainline capacity reductions in 2008 and 2009 respectively). However, excluding this year’s impact of H1N1 and the 2010 launch of Chicago-Beijing, mainline capacity will be flat in 2010, versus 2009.
In a special JetWire sent to employees today, CEO Gerard Arpey said the following:
“The biggest growth will take place in Chicago, where we?ll add over 50 daily flights. Our Chicago customers will gain access to 12 new cities in the U.S., and three new international destinations. We are committed to making Chicago a major gateway to Asia, and are looking forward to the launch of our new service to Beijing in the spring. Other new AA destinations will include Honolulu, Anchorage, and Vancouver. Eagle will also offer new service to a number of cities, and customer service will be enhanced as Eagle deploys most of its 25 CRJ-700 aircraft – which will be reconfigured to offer a competitive First Class cabin – in the Chicago market. Eagle has also signed a letter of intent with Bombardier to exercise options for the purchase of 22 additional CRJ-700s for delivery beginning in the middle of 2010. These new planes will complement the 126 aircraft (84 737s and 42 787s) American has ordered from Boeing. The new CRJs will be fully financed, with no impact on American’s cash balance.
In Miami, American and Eagle together will add 23 daily flights. Including changes that will take place by the end of 2009, Miami will serve four new domestic and three new international destinations. At DFW, overall capacity will increase modestly as 17 new daily departures at AA offset some Eagle CRJ flying that is being shifted to Chicago. Service to San Salvador will be reinstated after a two-year hiatus.
In New York, our JFK service will grow by seven flights a day and include six new destinations, three domestic and three international (Madrid, Manchester, U.K., and San Jose, Costa Rica). Two daily flights will also be added at LaGuardia Airport. In Los Angeles, American and Eagle will add two daily flights.
The growth at our hubs and Los Angeles will be offset by reductions in St. Louis and Raleigh/Durham. I realize these will be difficult changes for some of our colleagues at those stations. But as flying shifts from one part of the network to another, so will job opportunities, and we will work with our people in areas impacted by a decrease in flying to make new jobs available in the parts of the network that will be growing.”
Today AMR, parent of American Airlines reported their first quarter results.
What is it they say — it’s all about managing expectations.
And in the case of American’s first quarter numbers that were released today, that is exactly what management did — as the airline had just recently warned Wall Street that its first quarter numbers might not be as strong as first expected.
As a result of that guidance, analyst forecasts were then lowered.
Previous to the airline’s announcement today, the analysts’ consensus forecast a loss of $1.62 a share.
So today, when the airline reported a loss of $375 million or $1.35 a share — the shares of the airline took a nice bounce, gaining 19% on the day, closing at $5.01.
The reason for the better-than-expected numbers? Operating costs were down a bit more than forecast and RASM declines were not as sharp as previously indicated.
American’s stock was not the only airline stock that picked up some ground today — comments the airline made in its earnings call helped push up other airline stocks as well, as CEO Gerard Arpey indicated that the airline is not seeing any “further deterioration” as those in the revenue world like to put it. But, just as Alaska Airlines indicated in an SEC filing last week, Arpey said that American is also looking at May and June bookings that are off noticeably from this same time last year. He said that May and June bookings are off by about 2 percentage points.
This percentage drop is more or less in line with what Alaska reported last week.
AMR ended the quarter with $3.3 billion in cash and short- term investments, including $462 million that is restricted.
More good news today on the airline union front.
It was announced this afternoon that the pilots at American have come to terms with the company on a new Aviation Safety Action Program (ASAP) participation agreement.
As readers know, this issue has been a burr in my side. The ASAP program, which encourages pilots to self-report safety problems without fear of retaliation, knowledge of which can benefit pilots from all airlines, had become a “leverage” tool used by a number of airline pilot unions over the last couple of years.
As a result, pilots at American, Delta, and US Airways had stopped participating in their respective programs, citing a fear of lack of confidentiality — or potential efforts to “get back” at those employees who participated in the program.
But after pilots at Delta Air Lines rejoined the program earlier this year, following the lead of the pilots at Northwest Airlines, the FAA took a hard line stand — telling airlines and their pilot unions that were still not participating that they needed to rejoin the program, sooner rather than later.
With this news, all the major airline pilot groups are now once again participating in what is, no question, an excellent safety program that is run in conjunction with the FAA.
The pilots at US Airways had already agreed to participate in their company’s program again about two weeks ago.