Category Archives: Breaking News

Ho, Ho, Ho: Now THIS is an Airline CEO with a Really Serious Problem

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Thanks to a PBB subscriber who took the time yesterday to alert us to this interesting piece of news, tagged with a subject line entitled, “Holy Crap!”

Subject lines like that usually pique my interest.

According to media reports out of Vancouver late yesterday, Dr. David Ho, heir to the Hong Kong tobacco fortune and head honcho of Vancouver – based Harmony Airways was pulled over by Vancouver Police at 5:30 a.m. a couple of days ago in Vancouver’s seedy east side for erratic driving.

With Dr. Ho in his Porsche Cayenne were apparently two, er, ladies of the evening and, oh yes, a bag of “what was believed to be” crack cocaine was found on the rear seat.

Dr Ho, who has, according to the media report, made numerous donations to the Vancouver Police Dept. over the years, was overheard by the officer involved calling the VPD Chief and asking him” to do something” about the issue.

Harmony currently has four 757’s, but is dropping back to three in April. The airline is pretty much getting hammered financially.

Conventional wisdom in the Canadian market has been that Ho wants out but does not want to incur loss of face in the very large Vancouver Chinese community.

As our subscriber said, “You gotta believe getting caught on the east side of downtown Vancouver at 5:30 a.m. with some lovely ladies and a bag of rock pretty much ensures loss of face.”

If not more.

AMR Said to be Target of Buyout Deal

Makeadeal

Oh boy. Here we go again.

Business Week in its Feb. 26 issue, reports that AMR, parent of American Airlines, may be a buyout target of a group including Goldman Sachs and British Airways.

The proposed bid is said to be between $9.8 billion, or $46 a share, and $11.1 billion, or $52 a share, according to the magazine.

Sources say it is uncertain that a bid for the company will materialize.

Neither Goldman nor British Airways would comment on the matter to BusinessWeek. AMR told the magazine that while it has lots of conversations, it doesn’t comment until discussions result in substantial outcomes.

Sounds familiar.

Just an aside. Earlier today, Goldman Sachs analyst Robert Barry cut his rating on AMR to “neutral” from “buy” saying the stock is now up about 20% since he began coverage of the stock in November.

Barry said he doesn’t anticipate shares to rise much further ahead, especially given expected labor talks and costly plane replacements ahead.

Heh. Wonder if this means the investment banking department at Goldman doesn’t talk to its analyst — or does this mean the deal is now dead, so Robert decided it was time to lower his rating on the stock?

I know. I’m so jaded.

Can’t help it.

On another front, over the years Business Week has published a couple of “rumors” concerning this industry that were simply that. And nothing more.

So I’d say, “Don’t get excited — yet.”

Southwest Airlines Founder Lamar Muse Dead at 86

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Lamar Muse, the feisty, controversial, egotistical, and always opinionated co-founder of Southwest Airlines, died late Monday in Dallas after a battle with lung cancer.

Muse, who was still feisty until the end — contributing regularly to an airline industry email list from a rehabilitation facility in Dallas after having undergone treatment for the cancer — was, along with Herb Kelleher and Rollin King, one of the three founders of Southwest Airlines. Or Air Southwest as it was originally dubbed.

As Terry Maxon mentioned in his article on him today in the Dallas Morning-News,

“In early 1973, Braniff began offering $13 fares on Southwest’s routes, a half-price fare that threatened to steal many of Southwest’s customers. Southwest and Mr. Muse responded with large newspaper ads proclaiming: “Nobody is going to shoot Southwest Airlines out of the sky for a lousy $13.”



Southwest gave travelers a choice: They could fly on a full $26 fare and get a free bottle of liquor, or get the $13 fare. The offer boosted ridership so much that Mr. Muse later credited the Braniff offer for Southwest’s eventual financial success.”

Just one of many, many stories out there.

But, as Southwest grew in the 70s, so did tensions between King and Muse. Not surprising — given the egos involved. Finally, in March 1978, Muse thought he would force a showdown with King, after which the board of directors would choose Muse over King. Muse submitted his resignation.

Big mistake, as Muse admitted later.

The board accepted his resignation and named Herb Chairman of the Board. Bye bye Lamar.

What many people may not remember is that later that same year, Southwest named Howard Putnam (yes, the same Howard Putnam who starred in the infamous Bob Crandall recorded telephone conversation) the airline’s President and CEO.

Putnam would leave for Braniff and his date with airline anti-trust history in 1981. It was then that Herb became CEO of Southwest.

Muse, meanwhile, along with his son, started Muse Air in 1981. Given the circumstances, it was nicknamed, “Revenge Air” at the time. The airline was eventually sold to Southwest, which shut down the remains of the carrier in August 1987.

US Airways/Delta Deal Apparently Dead

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Oh, boy. I can upload graphics again. Yes, we had some kind of little technical glitch with the program we use to upload stuff yesterday. Hence, we were graphic-less.

Horrible state to be in.

How is everyone today, on this, the 31st day of January?

This date is significant, in that tomorrow had been the deadline US Airways had given Delta’s creditor’s committee to get its act together and either allow US Airways to move forward on its merger proposal or not.

According to reports this morning, and confirmed by a US Airways’ official statement about 10 minutes ago, the deal from US Airways is now off the table.

From that release:

“We received word earlier today that Delta’s Official Unsecured Creditors’ Committee would not be able to meet our demands by the Feb. 1, 2007 deadline. As a result, we have withdrawn our offer to merge with Delta Air Lines. While we are disappointed that the Committee has chosen to ignore its fiduciary obligation to Delta’s creditors, we are excited about our future and proud of our team’s performance during this process.

Ticker: (NYSE:LCC)

Pinnacle Snatches Up Colgan Air

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Just never know what a Thursday is going to bring, do you?

Today it was reported that Pinnacle, the Northwest Airlines’ regional with a newly rejuvenated life — thanks to Northwest — is buying smaller fry Colgan Air.

Heh. I flew on Colgan Air twice. And you know, nothing personal to the fine folks at Colgan, but that was enough for me.

The most interesting thing about this news is that Colgan currently flies for United, US Airways and Continental.

So what does all this mean? Hmmm. The twisted turbine is in high gear over this move.

You can read about it here.

Delta Creditors Urge Delta to Consider US Airways Offer

No surprise here.



MarketWatch
reports tonight that the Unofficial Committee of Unsecured Claimholders of Delta Air Lines has officially urged the airline to “provide thoughtful and unbiased consideration” to the new bid from US Airways.

The committee said it believes the best interests of shareholders will be served if Delta takes steps such as providing “reasonable and customary access” for US Airways to perform due diligence, and postponing Delta’s Disclosure Statement hearing scheduled for Feb. 7 to allow Delta to fully evaluate US Airways’ proposal.

Northwest-Delta Rumors Go Public

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Before we left on our holiday hiatus, we mentioned in PBB that we thought the next “major” news we would hear concerning a potential merger link-up would involve Northwest.

Well, sometimes things take time to come to fruition.

Today the Wall Street Journal is reporting that the two airlines are discussing a potential merger, perhaps “after bankruptcy.”

Not sure why they would want to wait — but that is the word this afternoon.

As for the logistics of such a deal, analyst David Strine with Bear Stearns wrote in November,

“All told, the combination would create a massive airline with global reach, better able to harness the power of the SkyTeam alliance as both DAL-Air France and Northwest-KLM separately have transatlantic anti-trust immunity., While the international networks are reasonably complementary, there is no domestic overlap between the carriers’ top 20 city pairs. Further, the fleets have one plane type in common and nine that differ. Finally, the pilots are both represented by ALPA, and none of Delta’s other major [employee groups] is unionized, a potential boon for Northwest.

Just As We Expected: LCC Rolls Out the Heavy Artillery

061115 Us Airwaves Delta Merger

Monday we wrote about the additional financial heft US Airways had put in place as it was announced Morgan Stanley had been added to its merger finance team. Today, as expected, that increased financial heft manifested itself in a “sweetened” deal for Delta Air Lines.

US Airways this morning raised its bid for Delta from $4 billion and 78 million shares to $5 billion and 89.5 million shares. Terms of the deal? The new offer will expire on Feb 1 unless US Airways receives creditor support for the commencement of due diligence, there is an HSR filing, and the currently scheduled Feb. 7 hearing on Delta’s disclosure statement is postponed.

Gary Chase, analyst at Lehman Brothers wrote this morning, the “new deal terms [are] very much in line with current bond prices which had advanced well beyond initial LCC deal terms. Offer value is $10.2 billion based on last night’s close to a comparable Delta stand-alone valuation, in our view, of $8-9.5 billion.”

Ticker: LCC:NYSE

Judge Tells Comair It Can Impose Wage Cuts on Pilots

Comair

From MarketWatch:

“A federal bankruptcy judge has ruled that Comair can impose wage cuts and other changes in work rules on its 1,500 pilots, according to a report after Thursday’s closing bell. Judge Adlai Hardin gave the regional airline permission to throw out its contract with the pilots, the Associated Press reported. Comair is a subsidiary of Delta Air Lines Inc. Earlier this month, the pilots, represented by the Air Line Pilots Association, voted to authorize a strike if their contract was rejected by the court.”

Oops. Forget DFW Too

Electric Plug

Yesterday bad weather was the name of the game at DFW, before the storm that is now socking Chicago moved East.

Needless to say, for American, considering that both St. Louis and Chicago are now out of the mix, DFW has been pretty much a nuthouse this morning.

And that was before the power went out.

Yep. Just had two confirmations that most of the DFW Airport now has no power.

The outage apparently includes the control tower.

Oh boy.