Category Archives: Uncategorized

Justice Department Okays Delta/Northwest Deal

The Department of Justice issued its Good Housekeeping Seal of Approval this afternoon for the proposed Delta/Northwest merger. Yawn.

I don’t think anyone really thought this okay was in doubt — although obviously because Delta cancelled their Media Day that was originally scheduled for tomorrow, I guess it came just a tad later than had been expected.

On with DelWest. Or would that be Norta?

Speaking of Norta….or DelWest there was a laundry list circulated earlier this week of some of the execs at Delta who are going to stay with the new entity.

And a bit of HR news from out of the two airlines’ current sphere of influence.

Ned Walker, who has headed up the PR and Communications function at Continental for a very long time — has moved to Norta. Or DelWest. Yes, Yes, Ned, I know. It’s going to be Delta. I’m just yankin’ you guys’ chain over there.

If you have ever questioned the power of relationships — when it comes to business — look at this move. If I am not mistaken Ned and Delta CEO Richard Anderson were both at Continental (back there in the dark ages) together.

PlaneBusiness Banter Now Posted

PlaneBusiness Banter subscribers can access this week’s issue here.

Three Things I am Glad I Am Not Today

1. A flight dispatcher for any airline. (Look at the weather maps for the country — not just Texas and Louisiana. It’s enough to want to crawl back into bed and pull up the covers.)

2. Anyone working in operations for Southwest Airlines. Especially those poor souls given the task of reworking flights around a network without Houston in it. Or those employees who live in the Houston area. And if that wasn’t bad enough, flights to DAL will probably become more problematic as the day goes forward.

3. Ditto Continental Airlines. Except for the DAL part.

My Own “United Airlines Bankruptcy” Old News Experience

Every week as I sit down and begin to gather my mental notes for the next issue of PlaneBusiness Banter, I begin a process of routine news searches — looking for articles dealing with some aspect of the industry.

Sometimes I do this looking for more information on a story that most people already know something about. But oftentimes the payoff comes when a story that I was not aware of pops up on the computer screen.

And so it was last week when I came upon a story that talked about how American Airlines had been forced to cancel hundreds of flights flown by MD-80s as the FAA issued new inspections be done on the aircraft.

The headline on the story, “FAA Crackdown Could Lead to More Delays.”

I hadn’t heard a word about this.

No one had sent me a note about it.

I looked at the date on the top of the story. September 3, 2008.

The article began:

“FAA Crackdown Could Lead to More Delays

Posted on: Wednesday, 3 September 2008, 21:00 CDT

By Michael Sean Comerford Daily Herald Business Writer

mcomerford@dailyherald.com

Three airline fleet related actions in three weeks by the Federal Aviation Administration may indicate more inspection- related flight delays ahead, airline analysts said Wednesday.

The latest U.S. airline to ground its own planes Wednesday was American Airlines, the world’s largest carrier.

The airline canceled 300 flights to re-inspect wiring in Boeing Co. MD-80s after federal regulators raised questions during a maintenance audit.

Southwest Airlines and United Airlines have also recently been subject to FAA actions.

American Airline’s cancellations represented about 13 percent of its Wednesday flights. American Airlines is checking whether a sleeve covering a bundle of wires was installed according to a FAA directive, spokesman Tim Wagner said.

About 80 flights were canceled at the carrier’s Dallas-Fort Worth hub, and about 68 more at O’Hare International Airport. The rest were scattered across the U.S.

Most passengers had been booked on other flights, according to spokesman Tim Wagner, but some may have been delayed until this morning.

As of Wednesday evening, no further flight delays at O’Hare had been announced for today, Wagner said.

I then re-read the article one more time — this time looking to see if I could determine if, in fact, this story had been written in April — not last week — when American was forced to cancel thousands of flights because of an FAA crackdown.

And sure enough, with that second reading it was clear that the story that while the story had been tagged as current, it was, in fact, six months old.

How does this happen?

I’m not sure how it happened in the case of the United Airlines bankruptcy news story that went public Monday that was 6 years old.

Nor am I sure how it happened that this particular story about “FAA Crackdown causing more delays” was posted with a current date and then picked up by the usual news aggregators — when it was, in fact, 6 months old.

But what I do know is that every once in a while, when I post a new post to Movable Type, which is the blog software program that powers this blog — the software will, for some unexplained reason — arbitrarily pull a post from 2006 and post it, along with the right one — with both dated with the current date.

Actually, It happened yesterday. When it happens I have to go in, unpublish the older post, and then republish it — using my best guess as to its original date.

So while I, along with a lot of other people, wait for more details concerning the alleged “reposting” of the six-year old bankruptcy news story — I’m here to vouch that yes, content management systems can be flaky. It can happen. And it does.

Now whether this was an intentional posting is another matter. And I’m sure we’ll find out if it was or not in the coming weeks as the SEC tracks down who posted what and when — and why.

We Interrupt Your Regularly Scheduled Reading…

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What A Waste of Resources: ATA Pushes Airlines To Fight the “Oil Speculation” Boogeyman

If you are a member of a U.S. airline frequent flyer group, many of you may have received a message that looks something like this in the last couple of days. This particular message was sent out by United.

____________

An Open letter to All Airline Customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.

_______________

The letter was then signed by the Chairman and CEOs of all the U.S. major airlines.

Who’s behind this effort?

The Air Transport Association.

A couple of weeks ago I took the ATA to task for whining to Congress about this issue in PlaneBusiness Banter.

But apparently somebody still thinks it is a good idea for the airline industry to play the role of “victim” and cry that “speculators” are running up the price of oil. This means that many who receive this message will now assume that if Congress would just DO SOMETHING about this — the problem will go away.

Hogwash.

I’m sorry folks, but one, even if Congress were to pass tighter restrictions on energy traders, that is not going to stop the free markets from working as they always have. Secondly, rampant speculation is NOT what is causing oil prices to rise.

Finally, as a report on NPR the other day noted, just who are these “speculators?” Evil Wall Street types who like to “prey” on defenseless industries and the American public?

Not hardly. According to their research, pension funds, yes, maybe yours if you even have one left (and considering you may work in this industry that is a big assumption) have bulked up on energy contracts big time, to the tune of a triple digit increase in the last 5 years.

Why? Maybe it is because they thought it would be profitable.

Duh.

Of all the problems affecting this industry that cry out for leadership — ATC issues, overcrowding in the skies, slot restrictions, tax issues, and of course, the ongoing saga of the FAA — the ATA has decided that this one is the one that is so dire that it has enlisted the air of their respective members — and their members have now taken the straw-man “crisis” to the traveling public.

And then the industry wonders why Congress and those in Washington don’t take the industry seriously.

Technorati Tags: airline CEOs, airlines, oil prices, Air Transport Association, United Airlines

PlaneBusiness Banter Posted

Subscribers can access this week’s issue of PlaneBusiness Banter here.

BOTBS Version 2.0: Getting Closer to the “Buy the Survivor” Call Airline Industry Investors Are Waiting For

It’s Friday, and that means yours truly is working on this week’s issue of Plane Business Banter. Actually for the last hour or so I’ve been going through the latest effort by Jamie Baker and Mark Streeter, analysts at JP Morgan. Yesterday the duo put out what they call v2.0 of their BOTBS.

Got that?

BOTBS stands for Battle of the Balance Sheets.

Yesterday the dynamic duo updated the first version of the BOTBS they put out last week — and I’m going to be taking an updated look at some of their comments in this week’s issue of PBB. The whole point of the exercise is to take a comprehensive view of the potential severity of the cash burn rates from airline operations, as well as identify capital raising options for those same airlines.

Last week’s version was probably most noteworthy for the pair’s “ranking” of what it considered to be each airline’s bankruptcy risk.

As Jamie and Mark said in the report,

“Last week’s Battle Of The Balance Sheets report generated welcome feedback from managements and investors alike. Managements, for the most part, felt our revenue inputs were too draconian. We hope that turns out to be the case, though would still argue on behalf of our methodology. We’ve generously given the industry only half- credit for a potential U.S. recession. Demand trends consistently reverse 10 – 15% during recessions, whereas we assume a gentler 5 – 6% reversion this time. And some managements (as well as investors) felt we did our liquidity analysis a disservice by not incorporating abundant capital raising progress. But of course, that was by design. Our report is deliberately intended to highlight where needs are greatest, as well as broadly identify the capital steps managements are likely to seek in hopes of bolstering rapidly declining cash balances. We readily concede that the liquidity projections in this report will likely never come to fruition – one can’t actually run an airline with a negative cash balance. But timing of cash flows is paramount in this war of attrition, where managements appear fixated on outliving one another rather than taking the requisite steps to generate acceptable returns. We continue, for example, to expect a flurry of press releases announcing European aircraft bank deals that raise cash against currently-or-soon-to-be unencumbered aircraft…and/or pre-delivery deposit facilities that free up cash being held by manufacturers…and/or convertible issues…and/or frequent flier mileage forward sales…and/or sale-leasebacks, vendor lifelines, non-core asset sales and the like. As these efforts play out, it will hopefully bring us closer to making the “buy the survivors” type call that investors increasingly appear to be clamoring for, now that the magnitude of projected losses is finally beginning to settle in.”

Were there any changes to the pair’s “bankruptcy rankings” in this version?

Yes.

Southwest, Alaska, Delta, and AirTran remain at the top of the list as those airlines having the least amount of Chapter 11 risk.

But after that, we had some moving around.

With the announcement of its debt offering, JetBlue moved up into fifth spot, behind AirTran, while Continental got knocked down to sixth place.

American moved up to seventh, from its former ninth place position, based on capacity cuts announced, while United Airlines moved up to eighth place from last place. Northwest dropped from sixth to next to last, and US Airways dropped from eighth to number ten — last on the list.

But the news for US Airways was not all bad in this week’s updated report. Like I said, more in this week’s PlaneBusiness Banter, for those of you who are subscribers.