Analyst Bill Greene with Morgan Stanley just issued a research note on the JetBlue/Lufthansa report.

Here is some of what he said.

“JetBlue needs liquidity: If this story is correct, the deal would help JetBlue’s balance sheet. As we noted in our report on 12/12/07, JetBlue has $433M in current debt payable, but will be hard-pressed to fund from cash flow from operations or cash on hand.

However, such a deal would likely substantially dilute current shareholders. We assume that to raise this cash Lufthansa would be buying a stake at some discount to the recently-quoted prices.

It’s not clear to us what Lufthansa gains from such a transaction. It may be that Lufthansa wishes to ensure access to JFK and by taking a stake in JetBlue, Lufthansa ensures that it will have slots if the FAA reimposes them at JFK. Lufthansa has a similar small stake in British Midland, which has helped ensure Lufthansa access to London’s Heathrow.

This possible investment doesn’t change the fundamental story, but clearly helps near-term liquidity. As we noted yesterday, JetBlue faces growing revenue and cost pressures and at $90/bbl will have difficult generating sufficient cash flow to fund its growth plan – even with an investment from Lufthansa. Growth opportunities are diminishing, in our view. We remain Underweight. In fact, such a deal could make JBLU a less plausible participant in US consolidation.”

Ticker: (Nasdaq: JBLU)

Technorati Tags: airline analysts, airlines, jetBlue, Lufthansa

And I quote, from the New York Times:

“Lufthansa is in talks to buy a stake of just under 25 percent in JetBlue Airways, the discount airline, people briefed on the matter told DealBook on Thursday.

An announcement could be made as early as Thursday after the markets close.

The interest from Lufthansa, which is based in Germany, is the latest example of foreign investors leveraging the strength of the euro against the dollar. By limiting its stake to 20%, Lufthansa would remain below federal limits on foreign ownership of a domestic airline. Though the investment will be passive, these people told DealBook, it opens up an opportunity for Lufthansa to make a bigger deal down the road, possibly some kind of partnership.”

Excuse me while I shake my head.

Now, unless I’ve missed something, aren’t United Airlines and Lufthansa still the big founding partners of the Star Alliance? Yep, I do believe that is the case.

Can United be happy about this?

Ticker: (Nasdaq:JBLU)

Technorati Tags: airlines, jetBlue, Lufthansa

Proving once again just how wacky Wall Street can be, almost at the same time we posted this week’s issue of PlaneBusiness Banter, the news came over the wires that the FL Group — the hedge fund that is, er, was AMR’s largest shareholder, and the one that has been making all the noise about how AMR needs to “maximize shareholder value” issued a release today — saying it had slashed its position in the airline from 9.1% to 1.1%.

The fund said in a statement this afternoon that while the divestiture of Eagle is a move in the right direction,  AMR’s “lack of clarity over timing, terms and valuation” of shedding Eagle “has done little to enhance value.”

First, I agree with what the FL Group said.

But secondly, I’m glad they have taken their monopoly money and gone elsewhere.

Ticker: (NYSE:AMR)

Technorati Tags: airline stocks, American Airlines

This is one behemoth to try and get one’s arms wrapped around.

1. If the Delta Air Lines management team is the surviving team, fine. If not, no. (Just think, this will mean that Jake Brace and Glenn Tilton will get yet another stratospheric payout.)

2. As I told Barney Gimble with Fortune today, “As I’ve said in the past, the money guys will dictate who goes after whom. Not the players themselves.”

That was true last year. Same now.

If this hedge fund can convince other major players on the Street to support the deal — that is what will make or break it.

Employees and shareholders will have little to say in this type of situation. Delta ALPA MEC Chairman Lee Moak can say whatever he wants to say about how the pilots at Delta have to be involved from the get-go with any “merger discussions,” but indications this afternoon are that this one is already pretty far along.

As I write this, reports are flying all over the place, no pun intended, with some reports suggesting that the headquarters of the airline would remain in Chicago, but that Delta AIr Lines’ CEO Richard Anderson would be named CEO of the new airline.

Atlanta would be used primarily as an “operations” center.

Again — just one set of rumors that are flying this afternoon in regard to the potential deal.

Ticker: (UAL:NYSE), (DAL:NYSE)

Technorati Tags: airline CEOs, airline industry news, airlines, Delta Air Lines, United Airlines

Jeff Bailey at the New York Times has a story today that says:

“Pardus Capital Management, a New York hedge fund, has sent a letter to management of Delta Air Lines asking it to seek a stock-for-stock merger with UAL, the parent of United Airlines, in a deal that would create the world’s largest airline and could prompt sweeping consolidation in the airline industry.

Gordon M. Bethune, former chief executive officer of Continental Airlines, is working with Pardus, the hedge fund said in the letter. And consultants have identified $585 million in savings the two big airlines — currently Nos. 2 and 3 in the country — could realize by combining operations.

Pardus said in its letter, sent Tuesday night, that it owns seven million Delta shares, about a 2.6 percent stake.”

Well, well, on that note, I think I’m off to get some lunch. This is too much to take on an empty stomach. You can access the entire story at the above link, although it does require you to register at the New York Times.



Ticker: (UAL:NYSE), (DAL:NYSE)

Technorati Tags: Delta Air Lines, United Airlines

I wonder if Gary Chase got any sleep last night?

This morning, the Lehman Brothers analyst was out with another interesting research note. Every Friday Gary updates investors on the industry’s capacity moves. Today? He had some interesting news concerning Virgin America’s trans-cons in his pre-update capacity note.

Gary reports that Virgin in pulling down capacity in its trans-con routes.

Clearly, this is primarily good news for JetBlue. But it also is good news for other airlines that fly a notable portion of their RASMs in trans-cons as well, including American, United, Delta, and Continental.

According to Gary, Virgin  today pulled about 14% out of its JFK-SFO schedule and 6% out of its JFK-LAX schedule for Nov, Dec, and Jan period (deepest reductions come in Dec).  JFK-SFO went from 4x daily to 3x daily and JFK-LAX went from 4x to 3x (in the off-peak parts of the month) in the schedule tapes.  The adjustments begin in late November. As Gary noted, “It may be only for the off-peak period, but it sure is better than the previous schedule.”

So is Virgin merely moving the capacity elsewhere? Nope. Gary reports that there does not appear to be any offsetting additions by the airline.

Gary’s overall take on the news? “We don’t think Virgin would be drawing down capacity if they were eating everyone’s lunch in these markets and shifting large market share.”

Tickers: (UAUA:Nasdaq); (CAL:NYSE), (AMR:NYSE), (JBLU:Nasdaq)

Technorati Tags: airline analysts, airline industry news, airlines, jetBlue, virgin america