Category Archives: Breaking News

AMR Guidance Disappoints; UBS Cuts Estimates

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Just taking a look here tonight at a note from Kevin Crissey, analyst with UBS.

It seems that American Airlines tried the old, “issue the news late on Friday and maybe no one will notice ” trick last Friday.

After the close, American issued updated third quarter and full year guidance.

The skinny?

The airline’s revenue performance is looking weak, compared to American’s peers and costs are going up.

Consolidated passenger revenue per available seat mile (RASM) is expected to be up 3.7-4.7% and mainline passenger RASM up 4-5% in Q3. “These figures are in line with our forecast but are disappointing relative to recent competitor results,” Crissey noted.

American management also guided non-fuel unit cost (CASM ex-fuel) upward by roughly 1%. Put this together with a higher fuel cost estimate for Q4 and you get lower Q3 and Q4 EPS estimates.  Crissey said, “Our Q3 EPS falls to $0.78 from $1.03 and Q4 moves to -$0.06 from $0.26.”

Pretty significant drops. And yes, that translates into a loss for the fourth quarter.

What did we say last quarter — that we didn’t think all the negative numbers the airline posted were because of “bad weather?”

Looking more and more like that was the case.

Ticker: (NYSE:AMR)

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Breaking News: AirTran Pilots Turn Thumbs Down on New Contract

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You may recall that after AirTran and its pilots came to terms on a tentative agreement this year — union officials went back to the airline after beginning their road shows and told management  essentially that the agreement was not going to fly.

So back to the table both sides went.

Today, it was just announced that the pilots at AirTran have voted down the successor to that TA — and by a resounding margin.

Pilots voted voted down the proposed agreement by a margin of 61.37% to 38.63%.  87% of the pilot group voted.

There were 1,477 eligible pilots and 1,284 voted.

After being informed of these results the National Mediation Board, which has been overseeing negotiations since September 2005, put  talks in recess until after the New Year.

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American Airlines Offers Extension Deal with Mechanics and Ground Workers

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Last Friday we noted here that we had heard of a potential contract extension deal in the works between TWU and American.

Today Trebor Banstetter at the Ft. Worth Star-Telegram confirms that information, citing letters the TWU has posted on the union’s website which detail a contract extension proposal that would link pay raises for mechanics and other ground workers to company performance.

According to Trebor:

“The proposal, made late last week, stems from an August meeting between Gerard Arpey, American’s chief executive, and Jim Little, the TWU’s international president. At the meeting, Little told Arpey that union members are willing to continue collaborating with management, but only for some type of additional compensation, according to sources familiar with the negotiations.

Little followed up with a letter to Arpey outlining his concerns, and Arpey responded with a letter in which he said he is committed to maintaining their collaboration.

“As a result of a letter from Little to Arpey, the company approached the negotiating committee with a proposal to explore the possibility of seeking non-traditional compensation, and a possible contract extension,” union officials told members in a message. Labor leaders said they have appointed a committee to examine the proposal during the next two weeks.”

Ticker: (NYSE:AMR)

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Fed Slashes Interest Rates

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The Federal Reserve announced a little while ago that it was cutting its overnight interest rate by a half of a percentage point — the first cut in that rate in more than four years. The rate is now at 4.75%.

The result on Wall Street was dramatic.

At last look, the Dow Industrials were up about 326 points.

The Fed also cut what is called the discount rate by half a percentage point — down to 5.25%.

Put it all together and you have the reason why the Dow Jones Industrials were up about 326 points the last time I looked. These moves by the Fed were broader than what most folks had anticipated.

Of course these moves are nice for some people, but the bigger picture here is that the Fed must feel that the threat of recession is bigger than that of inflation.

We’ll see how the rate happy hangover affects the Street tomorrow.

Next up? Oil prices.

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Bombardier Grounds Q400s Following Landing Gear Failures

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Today Bombardier told airlines to ground 60 of its Q400s after two of the planemaker’s aircraft experienced landing gear failures in one week.

According to Bloomberg, “All Q400s with more than 10,000 cycles — comprising a takeoff and landing — should be grounded until they’re inspected, Montreal-based Bombardier said today.” The landing gear was made by Goodrich Corp. of the U.S., Bombardier added.

The grounding does include aircraft flown by Alaska Airlines regional airline, Horizon Air, as well as a number of international airlines.

Apparently both landing gear incidents occurred in Europe and neither incident involved any fatalities.

You can read the article here.

Ticker: (NYSE:ALK)

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Troubling News Regarding Steve Fossett

Major news sources are reporting that an air search is under way for air adventurer Steve Fossett, who was last seen Monday morning taking off from a private Nevada airstrip in a small, single-engine aircraft, according to the Federal Aviation Administration.

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The 63-year-old, who in 2002 became the first person to complete a solo circumnavigation of the globe by hot air balloon, was reported missing Monday night by a friend, according to the FAA. Fossett had not filed a flight plan for his Monday morning departure.

Fossett departed in a single-engine Citabria Super Decathlon, Civil Air Patrol spokeswoman Maj. Cynthia S. Ryan told the Record-Courier newspaper of Nevada, ABC News reported.

Three crews are in the air looking for Fossett’s blue and white aircraft above rural western Nevada, Ryan told the newspaper, and more are en route to help in the search. “We will be launching more shortly,” Ryan told the newspaper.

Authorities have some idea where Fossett may have been heading, according to the FAA. The search was being coordinated by the Air Force’s Rescue Coordination Center in Langley, Va.

Fossett has set a number of aviation records, including the hot air balloon trip in 2002, a 67-hour around-the-world trip without refueling on the Virgin Atlantic GlobalFlyer in 2005 and the world glider altitude record, which he set with a co-pilot more than 50,000 feet above the Andes Mountains. In July, Fossett’s flight accomplishments earned him a place in the National Aviation Hall of Fame.

“I’m hoping you didn’t give me this award because you think my career is complete, because I’m not done,” Fossett said at the July induction ceremony in San Diego, Calif., adding that he would be in Argentina in November to try to break another glider record.

Fossett, who has also broken more than 20 speed sailing records,  was reportedly in Nevada in August working on a jet racer to try to break the world land speed record.

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We Called It Months Ago: Richard Anderson Named Delta CEO

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Okay — I’m not sure if I mentioned this here in the blog or it was in PlaneBusiness Banter, but months ago as the Delta CEO derby cranked up — I said that my money was on Richard Anderson. (Anderson is, and has been a member of the Delta Board of Directors.)

I get a really gold star. Because this was months and months ago.

The news is scheduled to be announced after the end of the today’s trading.

Ed Bastian, current CFO, moves up to President — and Jim Whitehurst is out the door.

Anyone taking bets that Whitehurst shows up at Virgin America?

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Midwest Board Goes with TPG Deal

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From the press release that just hit the wires:

“Midwest Air Group (AMEX: MEH),parent  company  of  Midwest Airlines, today announced that it has signed a definitive merger agreement to be acquired by an affiliate of TPG Capital, L.P.  in  a  transaction  valued  at approximately $450 million. The merger agreement  was  unanimously  approved  by  the  Midwest  Air Group Board of Directors.

Under  the  terms  of  the  agreement,  each outstanding share of Midwest’s common  stock  will be converted into the right to receive $17.00 per share in  cash.  On  December  12,  2006,  the last trading day before the public announcement  of AirTran’s indication of interest in acquiring Midwest, the per  share  price  of  Midwest’s  common  stock  was  $9.08.  Midwest  has approximately  26.6 million shares outstanding, including shares subject to options, restricted share awards and outstanding warrants.”

$17 a share. Who would have thunk it?

More follow-up tomorrow. Meanwhile, we’ve got to do a bit of editing.

Singapore Sets Date for First A380 Flight

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It was reported today that Singapore Airlines is now set to take delivery of its first Airbus A380 on Oct. 15 and has set Oct. 25 as the date for its first commercial flight.

SIA says in a statement that the first A380 will be handed over to it by Airbus on Oct. 15 at a ceremony in Toulouse.

It says the first commercial flight, flight SQ380, will depart Singapore on Oct. 25 for Sydney in Australia. It will return to Singapore the following day.

Meanwhile, as had been earlier reported, tickets for that first flight will be sold on eBay. Those auctions, which will include seats in all three classes, are now set to begin on Aug. 27.

Asian Financial Markets Hammered; Hold On To Your Hats

Before we sign off for this evening — just a word of caution concerning tomorrow’s market activity. According to CNBC, the Asian markets are getting “hammered” in trading that is still ongoing. Japan’s Nikkei Average is down 3.5%, and the South Korean KOSPI is now down about 7% as of this posting.

The yen has also hit a five-month high against the U.S. dollar.

Methinks it’s going to be a rough one on Wall Street Thursday.

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