Monthly Archives: September 2007

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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Dueling Analysts on Effect of Higher Fuel Prices and Recession

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In the last two days, two major Wall Street analysts have chimed in with their take on how they see higher fuel prices and a recessionary environment affecting the airlines in 2008.

Monday, Robert Barry with Goldman Sachs said in a note to investors that he remains “unenthusiastic about most airline equities” and has “little conviction recommending that investors buy U.S. airline equities.” His top pick is Delta Air Lines, which he rates “Buy,” followed by “Neutral”-rated Northwest Airlines.

Friday, Goldman Sachs upped its oil price forecast for $80 and $90 a barrel for 2008 and 2009, up from the $68 it had previously had in place.

The investment bank also raised its refining cost estimates by $2 a barrel each year.

In Barry’s note Monday, he noted the upped estimates, saying, “If the forecast proves correct it would imply a potentially severe cost and earnings headwind for airlines.”

Tuesday, JP Morgan analyst Jamie Baker said in a note that while normally legacy carriers lose billions during recessions, if one holds fuel and supply constant (a big IF, considering the last couple of days), the sector could still be expected to post a $1.4 billion profit in 2008.

Baker also pointed out that unlike 2001, this time legacy carriers have “nearly triple the cash, half the aircraft orders, & a Legacy-Discount cost spread at its narrowest ever. Pension reform and consolidation pressures further reduce Ch11’s appeal. We view risk as far lower than any prior recessionary precipice.”

But what hasn’t changed? “Legacies remain highly leveraged to Tech and Financial sectors, and labor is soon going to make a grab at shareholder profits, potentially spurring M&A. While Aug. data confirms leisure demand is alive & well, we believe Sept/Oct will test for critical corporate resilience.”

Baker also initiated coverage on both Delta Air Lines and Northwest.



Both were rated “overweight.” Baker sees both stocks as being “equally cheap.” Delta, US Airways and Northwest are now Baker’s top picks.

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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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Tuesday in The Skies

I’m here. I was here yesterday as well. Just not online.

Alas. My adventure to install a new hard drive in my laptop turned into a more harrowing experience than I had hoped for.

Take one hard drive bracket and a stripped screw in that bracket and a hard drive that is not seated correctly and no way to remove the screw that is stripped, and well — the afflicted machine is now in the hands of an Apple certified worker bee.

And I’m working on a desktop machine from an external hard drive.

Hey at least I backed up my laptop before beginning this rather sad mess. So everything is just a bit inconvenient — and not nearly as fast. And this dorky Microsoft keyboard bugs the bejesus out of me. But….. I’ll manage.

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In the sake of full disclosure, that was not all I was doing yesterday.

What if I told you I was reading former Fed Chairman Alan Greenspan’s book, “The Age of Turbulence?”

(Economic turbulence mind you, not the kind in the sky.)

If that confession doesn’t make me a geek, I don’t know what does.

Airlines? Airplanes? Enough of my technological and economic ramblings.

A couple of comments to get this week rolling to a somewhat late start.

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One — on the Southwest Airlines PR debacle involving short skirts, tight tops and publicity-seeking passengers. In response to more than a couple of you — no, I did not like the hokey press release the airline issued last week. I thought Gary Kelly sounded foolish. I thought the press release was foolish. Yes, the airline could have used a touch of humor when it finally responded to the bruhaha, but it also needed to convey the impression that it was not making fun of its accuser.

Don’t think that happened.

I would have preferred to have heard Gary come out fairly seriously, apologize, and maybe make one humorous comment. That would have conveyed the message that the airline took the incident seriously, but would also have sent the message that it was keeping the entire mess in perspective.

Instead, the airline didn’t do itself any favors.

On the news front today, the Seattle Times is going with a story that details how a former senior aerospace engineer with Boeing is going public with concerns that the new 787 aircraft structure is unsafe.

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In the sake of full disclosure, Vince Weldon was fired last year under what the paper calls “disputed” circumstances, but I think the article is worth a read. Weldon contends that in a crash that would be survivable in a metal aircraft, the new jet’s composite materials will be more prone to shatter and/or burn, which would then release toxic fumes.

He backs up his opinion with emails from other engineering colleagues at Boeing — as he claims the company is not doing enough to test the aircraft’s “crashworthiness.”

You can read the entire article here.

More to come. I’m off to see if I can update the software for this clunky keyboard.

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Rumors on TWU/AA Deal?

In the middle of the Kyla notes from PBB subscribers and Buzz readers, I also had a couple of notes that said there are rumors out there this afternoon that TWU and American AIrlines are going to announce a contract extension late today.

I can’t find that anything has happened yet.

Anyone got anymore intel on this?

Replacing a Laptop Hardrive

Yeah, yeah, I was slow on the apology news today.

And for a very good reason.

I decided that I could replace the hard drive in my laptop.

Now, as far as I know, I managed to reconnect everything and replace all screws and other items correctly. And in the proper order. I even had a full color cheatsheet to use that took me through the process.

Yes, well, after this ordeal, I crank it up and the computer runs just fine. I’m using is now. But I’m also tethered to my firewire external drive.

Yep, you got it. No hard drive being recognized by the laptop.

Sigh.

Then I come online and am bombarded by notes concerning the Kyla saga.

That’s what I get for being offline.

From Hot Pants to Hot Flashes? Southwest Issues Apology

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Thursday night in PlaneBusiness Banter as I was bringing subscribers up to speed on where I thought the  Southwest/Cover-Up fiasco stood, I wrote,

“While traditionally airlines are loathe to go public when an employee is involved with a passenger dispute, and while clearly there is litigation involved, I think it would have been a good idea if the airline had “gotten out in front” of this one with an accounting of what went down (sorry). Part of the problem with this PR nightmare is that by not coming out publicly with a response — Southwest has left the story to be managed by its accusers.

If the flight attendant did in fact overreact and handle this situation improperly, then go ahead and admit it, and apologize.

But, if the airline believes that we’re not getting the whole story, then it’s time to get its version of the whole story out there.”

Today it appears that someone at Southwest read our latest issue, as apologize is exactly what the airline did.

But the apology came only after Southwest President Colleen Barrett told a group at Texas Christian University Thursday, where she was speaking as part of the Tandy Executive Speaker Series that she doubted the airline would apologize, saying, “I just can’t do that to the customer service supe (supervisor),” she said. “He handled the situation discreetly and with patience, and he did not deny her boarding.”

Today, the airline’s stance took a 180, and as we had suggested, the airline apologized. It also issued a release that tied “shrinking fares” to getting caught “with our pants down” — in reference to the negative publicity the situation has caused.

CEO Gary Kelly, who has apparently been out of town, told Dallas Morning News reporter Terry Maxon today, “I don’t think our people did anything wrong. I don’t think Kyla in our evaluation of the facts did anything wrong. I don’t think either party did anything wrong. But I do think we could have handled it from beginning to end this week better,” Kelly said.

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