Tag Archives: Southwest Airlines

PlaneBusiness Banter Posted

home-typewriter copy 1.jpg

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

Last week was one huge week in Airlineland as not only did it mark the end of the third quarter, but the United/Continental deal closed on Friday. All of this came on top of the big news from Monday — Southwest Airlines was buying AirTran for $1.4 billion in stock and cash.

Not surprisingly this week’s issue of PBB is very heavy on U.S. domestic airline analysis. Who could be hurt by the Southwest news? Who could be helped? We go down all the scenarios.

And no, unlike a lot of industry observers and at least one analyst, I don’t think Delta Air Lines is going to take a huge hit as a result of the move by Southwest into Atlanta. More on why I think that is the case in this week’s issue.

Continental reported its traffic and RASM estimates after the close of trading Friday. The airline’s RASM estimate for September came in much higher than analysts had forecast. Will United’s follow suit? Yes, this marked Continental’s final traffic report as a swinging single.

The feeling before this announcement was that the U.S. domestic industry has experienced a drop-off in revenue during September. But now we know that at least one airline didn’t see a drop-off.

Thursday marked the end of the third quarter. And wow — was it a great one for the airline sector. So great in fact that we even had one airline stock post a triple-digit gain for the quarter. A gold star if you can guess what stock I am talking about.

But even without that stellar performance (which was, arguably merger-driven), the rest of the group enjoyed an extremely strong quarter. We run down the winners and the handful of losers.

For that matter, last week was a good week for the sector as well — as the Southwest/AirTran merger moved stocks higher. Especially shares of AirTran, which took the weekly honors for the group.

All this and more in this week’s issue of PlaneBusiness Banter.

Subscribers can access this week’s issue of PBB here.

Southwest Airlines To Buy AirTran

Funny thing about the recent push by Southwest Airlines to get their flight attendants and pilots to agree to contracts that will allow 737-800 flying. As I told an audience in Chicago last week — I seriously doubted the airline was only interested in getting their employees’ okay so that they could order new airplanes.

Bingo.

Today the reason became clear as the airline announced it is purchasing AIrTran.

This morning Southwest announced its intention to purchase AirTran for a combination of cash and Southwest stock. Each share of AAI will be exchanged for $3.75 cash and 0.321 shares of LUV with an adjustment mechanism to provide $7.25 to $7.75 in value for each share of AAI.

Are we surprised? No.

Atlanta has long been the big gaping hole in Southwest’s business model. In addition, Southwest now realizes that with a mature (i.e., flat) market in the domestic U.S., the only way to grow is through the acquisition of a new livery as the opportunity for organic growth is practically non-existent.

PlaneBusiness Banter Now Posted!

home-typewriter copy 1.jpg

Hello all.

Live and direct from the PlaneBusiness Worldwide Steaming Hot Headquarters, we bring you a 150 plus-page issue of PlaneBusiness Banter.

Yes, this is, without a doubt, the mother of all earnings issues.

We have full transcripts and PlaneBusiness Banter earnings summaries for Southwest Airlines, AirTran, JetBlue, Alaska Air Group and Allegiant Travel this week.

Not only that but we give you the numbers that were just reported from Air France/KLM, Lufthansa, British Airways, ANA and Singapore Airlines.

Whew.

All of this plus our take on the more “newsworthy” topics from the past week including the meltdown at Mexicana (and no, we’re not talking about the FAA’s downgrade of the Mexican aviation safety rating) and the showdown between the pilots and management at Philippine Airlines.

So what do you think? Do you think the pilots and flight attendants at Mexicana should have taken up management’s offer to buy the airline?

Or — should they have cut their pay and benefits essentially in half?

As we were posting this issue, the news came down: Mexicana has filed for bankruptcy.

One thing that will do — it will stop airline leasing companies from taking their aircraft back. Apparently at least three of the airline’s aircraft had already been snatched back by their owners.

Aside from all this turmoil, we then have the latest attempt by the U.S. government to “make the airline industry a better and safer place.”

Yes, from the same folks who brought us the Three-Hour Tarmac rule, the Senate and the House passed a bill last week that will see the minimum number of flight hours required for a regional airline pilot position jump to 1500.

Needless to say, I can understand why members of Congress want to look like they are making the industry a safer place — but is a 1500 hour flight time minimum the way to do it?

One of our regular contributors gives us his take on the potential ramifications of this legislation in this week’s issue.

One thing that is a constant in this industry is that it always has a lot of debt.

But while most of the airline’s debt ratings are in the “junk” category, shrewd investors know that investing in airline debt can be quite profitable.

This week I assemble the latest credit and debt comments on the major airlines from Mark Streeter — the man who does this for a living for JPMorgan Chase. I think Mark is the sharpest guy on the Street when it comes to airline debt.

As for airline stocks — a Foreign Flyer took the first place nod last week in terms of gains. Overall, it was a good strong week for the sector.

All of this — and much, much, more in this week’s issue of PlaneBusiness Banter.

Subscribers can access this week’s issue here.

PlaneBusiness Banter Posted!

Greetings to all on what was a very hot Memorial Day here in the Dallas-Ft.Worth Metromess.

I hope all of you had a good Memorial Day holiday and most importantly, I hope all of you took a minute between bites of your grilled hamburgers to thank those who serve this country in our Armed Forces. Or who have served.

The latest issue of PlaneBusiness Banter is now posted. Subscribers can access the newly posted issue here.

This week I talk about the new “ugly girl” in the industry. Yep, I’m talking about American Airlines and that airline’s merger options.

But American is in the news for other things — including yet another TA with a TWU-represented employee group. However, to say the union leadership gave the deal a lukewarm endorsement would be an understatement.

British Airways saw itself in the middle of yet another strike by its cabin crew members today. This one started on Sunday and as today is a Bank Holiday in the U.K, the work slowdown will probably hit the airline a bit more than the last one. Which just ended on Friday of last week.

I know. It’s pure insanity.

This last week airline stocks had a great week with shares of US Airways leading the pack. Handily. The main reason for this sudden burst of vitality? Two bullish analyst notes. JP Morgan analyst Jamie Baker upgraded the entire sector, and had very positive things to say about US Airways in particular. His comments were then followed by a bullish American Airlines/US Airways research note issued by Bob McAdoo with Avondale Partners just a few hours later.

The combined one-two punch was clearly felt across the sector, but especially in shares of US Airways.

Is the Porter Airlines IPO in trouble? First quarter numbers sure didn’t help it much.

Virgin Blue had a surprise for its investors this week, and in our Market Review this week we talk about the resurgence of private equity support for the aircraft leasing sector.

All this and more in this week’s edition of PlaneBusiness Banter.

Southwest Announces New Service to Charleston and Greenville-Spartanburg

Well, one out of two ain’t bad.

Three weeks ago, after returning from my BMW Performance Driving School experience in Greenville, S.C. with the folks from Travelport , I told PlaneBusiness Banter subscribers that it appeared that Southwest Airlines was coming to town.

Ding. I am now free to accept heaps of praise that I called the new city correctly.

However, the airline one-upped me today as it announced it was not only starting service to Greenville-Spartanburg, but to Charleston as well.

Oh well. I didn’t go to Charleston. Maybe if I had I would have been able to out them on that announcement as well. Heh.

Interesting that in the press release noting the new service, the airline bent over backwards to note that service to both cities is *without subsidies.* It is even in the sub-head of the press release headline.

Hmmmm.

According to the release, “The airline’s service will not be dependent on pending legislation to provide air service subsidies.”

Guess that’s a little sideways jab at AirTran — the subsidy kings?

Yes, well, Southwest received its own basket of goodies in return for flying into Northwest Florida.

Boys, boys, boys. Let’s just play nice.

With or without subsidy, I like both choices.

This Week in PlaneBusiness Banter

Terry Maxon with the Dallas Morning News dropped me a friendly note today and asked me if I had forgotten to finish my thought from last night.

No, just had to get my hard drive upgraded in the laptop today. And I simply forgot to update the post-in- progress from last night. My bad.

I could have used the excuse that I was trying to recover from what had to be one of the best sporting events I’ve ever watched last night — but no, I had a much more pedestrian excuse.

So what are we talking about in this week’s issue?

Judging from the email box today, the most talked-out piece is our PlaneBusiness Brown Bag Analyst guest column. In this column, a subscriber of ours who also just happens to be an expert in the confusing subject known as the Canadian aviation market, pens his take on the Southwest Airlines-WestJet codeshare “disagreement.”

Our guy knows his stuff.

And yes, of course I weigh in again on the American Airlines/JetBlue announcement from last week — following up on the blog post that first appeared here.

I still like the deal.

Then there is the story of the ALPA poster boy for ethics.

If you’ve read this month’s issue of Airline Pilot, the in-house mouthpiece of the Air Line Pilots Association, you know that, unfortunately, ALPA decided recently to parade out a particular ALPA member each month who it had determined exemplified the “best” of ALPA.

Yes, well, this month’s ALPA poster boy for ethics, Tim Martins, who we think has most recently been employed as a pilot for American Eagle, apparently has a problem with putting things on his Facebook page that aren’t true, much less telling the publication other, er, “facts” that now, apparently we find out, are not quite true.

A complete and total PR disaster for ALPA.

More on all this in this week’s issue.

We talk about the disappointing “agreement” that the EU and the U.S. recently trumpeted in the ongoing Open Skies negotiations. I’d argue, “What agreement?”

On the Wall Street front, one of the most well-respected airline analysts is coming back for more fun and frolic. He is going to take over for Mike Linenberg, who is getting ready to flee Bank of America/Merrill Lynch for Deutsche.

Who is the analyst that proves “everything new is old again?”

We also talk about Hudson Securities analyst Dan McKenzie’s latest competitive analysis notes. We always like to read these as they give us such a great insight as to how the major players are moving the chess men about the playing field.

We also have a couple of good letters this week, and a whole lot more.

If you are not already a subscriber to PlaneBusiness Banter — you should be. You can find out more here!

Southwest Airlines Dissed by Tiger’s Mistress

Okay, so only one of his women dissed Southwest Airlines.

I admit it. I had to go read the excerpts online in the New York Post this afternoon concerning the upcoming Vanity Fair article on Tiger and his women.

And in the midst of the article, where it talks about how cheap he supposedly is — was this priceless airline-related nugget attributed to Las Vegas nightclub waitress Jamie Jungers.

“Jungers said Tiger’s cheapness always bugged her. She recalled how Team Tiger always flew her on discount carrier Southwest Airlines and never in first class.”

Well, yes, I guess it’s a pretty safe bet that she never flew in first class if they made her fly Southwest.

Ya think?

Clearly intelligence was not a priority item in the selection of these women. But then, we already knew that.

PlaneBusiness Banter Now Posted!

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

home-typewriter copy 1.jpg

This week we talk about round two of the British Airways strike — and about how we think Unite’s efforts are — or are not having — an effect on the airline’s operations.

Meanwhile, there is a pilot strike now scheduled against Lufthansa in two weeks. Not only are the pilots there picking up verbal support from other pilots groups worldwide, but now another airline employee group may join them on the picket line.

Did we just have an outbreak of Norovirus on an airline flight? Yuck.

WestJet’s new CEO dropped a bomb in an interview Friday with the Financial Post. Looks like WestJet isn’t going to wait on Southwest to get it’s IT act together. It’s apparently considering a codesharing agreement with Delta. Is this a good move for WestJet? We talk about it — as well as one of our subscribers who has been taking a closer look at the airline and its market opportunities.

Then there is the slot swap deal involving US Airways and Delta Air Lines. The two airlines don’t think the FAA should be involved in the deal at all. Or the DOT.

Want to take a guess as to who they think should make the decision on this proposed deal?

We have a guest columnist this week in PBB. I’m not tellin.’

Airline stocks had a great week again this week, we have the latest “Airline Question of the Week” from Morgan Stanley, and we talk about why it is Barclays is bullish on JetBlue in Beantown.

All this and more – as we all eagerly await the arrival of the Easter Bunny here at the PlaneBusiness Worldwide Headquarters later this week.

Subscribers can access this week’s issue here.

Airline Execs: Pretty Scary Stuff

It’s Halloween. BOO!

For at least two airlines — that means it is time to get scary.

Especially for some of the airlines’ top executives.

Friday over on Denton Drive here in Dallas, it appears that Southwest Airlines‘ former Chairman and CEO Herb Kelleher decided to go with the Willie Nelson/Biker combo look, while current Chairman, President and CEO Gary Kelly pranced down the Yellow Brick Road as Dorothy.

I don’t know what it is with Gary and his cross-dressing tendencies, but ever since he turned out as Edna Turnblad a couple of years ago — we’re almost afraid to look. (Last year Gary and two associates were attired as ZZ Top.) Early betting this year had Gary dressing as Julia Child.

But here’s the one that got me. Anyone know who that is?

That’s US Airways’ COO Robert Isom. I tell you what — that boy has the Barry Gibb thing going, doesn’t he? I hear he hit some pretty high notes Friday as well — as the US Airways’ executive team, aka the Bee Gees, entertained airline employees at the airline’s headquarters in Tempe.

Gotta love that hair.

Reading the Fine Print: Southwest Taking a Page from the AirTran Playbook

Wanna get Southwest to begin service to your city? Wanna write a check?

If some of you are scratching your heads over the news that Southwest Airlines is going to start service from “Northwest Florida’s New International Airport near Panama City, Florida” in May 2010, all one needs to do is take a look at the fine print in an SEC filing from the St. Joe Company — a major land developer in the Florida panhandle.

According to St. Joe’s SEC filing dated today, $14 million in revenue guarantees, profit sharing, and a no-compete agreement are just some of the “enticements” being put on the table for Southwest.

Is this AirTran or Southwest we’re talking about?

“St. Joe has agreed, to the extent that Southwest operates at a loss, to make quarterly cash payments to Southwest to cover shortfalls in the results of Southwest’s operations at the new airport during the first three years of service. For purposes of the break even calculation, the agreement establishes fixed amounts for Southwest’s non-fuel expenses and the minimum revenues that will be attributable to the air service. It also provides that Southwest’s profits from the air service during the term of the agreement will be shared with St. Joe up to the maximum amount of St. Joe’s prior break even payments.

The term of the agreement extends for a period of three years after the commencement of Southwest’s air service at the new airport. The agreement may be terminated by St. Joe if the payments to Southwest exceed $14 million in the first year of air service, or $12 million in the second year of air service. St. Joe may also terminate the agreement if Southwest has not commenced air service to the new airport within 90 days of its opening. Southwest may terminate the agreement if its actual annual revenues attributable to the air service at the new airport are less than certain minimum annual amounts established in the agreement.
Southwest’s obligation to commence air service to the new airport is conditioned upon: (1) the certification of the new airport by the Federal Aviation Administration and the Transportation Security Administration on or before April 15, 2010; (2) receipt by the local Airport Authority of a certificate of occupancy for the new airport on or before April 15, 2010; (3) the execution of satisfactory agreements between Southwest and the Airport Authority authorizing Southwest to use and lease space at the new airport and to receive any cost mitigation measures that may be available from the Airport Authority; (4) the execution of an agreement between Southwest, the Bay County Tourist Development Council, the Panama City Beach Convention and Visitors Bureau and the Beaches of South Walton Tourist Development Council, no later than 30 days from the date of the agreement, regarding the coordination of marketing resources and efforts for the air service; (5) the execution of an agreement between Southwest and Coastal Vision 3000, no later than 60 days from the date of the agreement, regarding the establishment of a program through which Southwest would receive available room nights free of charge at various rental properties in Northwest Florida for use in the marketing efforts for the air service; and (6) the execution of any other agreement that Southwest deems necessary or appropriate prior to the commencement of the air service.

Southwest has agreed that it will not commence air service to any airport within 80 statute miles of the new airport during the term of the agreement. In the event Southwest starts service to any airport that is more than 80 statute miles but within 120 statute miles from the new airport during the term, Southwest and St. Joe will either negotiate a modification to the terms of the agreement to accommodate the impact of such service or the minimum revenues used in the annual break even calculations under the agreement will automatically be increased by 10%. In such event, Southwest has agreed that the air service to the new airport in Bay County would not be diminished.”