Monthly Archives: December 2007

Analyst Bill Greene’s Take on the JetBlue/Lufthansa Reported Deal

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

I’ve Heard Everything Now: Lufthansa in Talks to Buy Piece of JetBlue

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

Airline Stocks Crater

Earlier today we pondered on just how low airline stocks were going to go today.

Well, now we know the answer and it’s not pretty.

First, to give you a hint of the extent of the carnage, the price of oil was up more than $4 a barrel today. Yep, that’s what happens when the Fed turns on the easy money spigot.

Crude closed today at 94.39.

If you think that’s bad, take a look at these stock performance numbers for the day.

US Airways — Down 13%. Closed: 15.31

American Airlines — Down 7%. Closed: 16.63

Continental Airlines — Down 10%. Closed: 24.23

Northwest Airlines — Down 9%. Closed: 16.20

JetBlue — Down 6%. Closed: 6.25

Alaska Airlines — Down 4%. Closed: 25.46

United Airlines — Down 6.5%. Closed: 36.48

Delta Air Lines — Down 8%. Closed: 15.74.

Frontier Airlines — Down 3%. Closed: 5.66.

Only a few airline stocks posted a gain today, with ABX Air taking the top honors. The beleaguered cargo carrier picked up a cool 8% today, closing at 5.11.

Ticker: (NYSE:LCC); (NYSE:AMR); (NYSE:NWA); (Nasdaq:UAUA), (Nasdaq: JBLU), (Nasdaq: FRNT); (NYSE: ALK); (NYSE: DAL);(NYSE:CAL)

Technorati Tags: airline stocks, crude oil, wall street

Airline Stocks: Carnage Continues – How Low Will They Go?

Looked at your favorite airline stock today? It’s ugly. Again.

Once again, oil goes up and airline stocks go down. As of this writing, oil is up about $2, trading at around $92/barrel.

Eye-opening stock price for the day? JetBlue. Shares, as of about 11:30 CT, were trading at $6.51.

But the biggest loser so far today? Shares of US Airways. Interesting thing here is the volume. The volume in LCC trading has already hit its daily average, and we’re not even at 1:00 ET yet. Very heavy volume, and as of this writing, shares are now down 9%, trading at around 16.05.

Interestingly, Delta Air Lines’ shares are having another rough day as well, and are also very active.

Shares here are down 7% as of this writing, hovering around the 15.91 mark. Again, as I said, very heavy volume here as well.

While volume is not as heavy in trading of Northwest Airlines’ shares, the drop is just as bad. Shares here are now running down 7%, at around 16.51.

As for that hoped-for “bump” in the share price of United Airlines — that $250 million shareholder giveaway bump was pretty short-lived. Shares here are running today down 5%, at 37.09.

Ticker: (Nasdaq:UAUA); (NYSE:NWA); (NYSE: LCC); (Nasdaq: JBLU)

Technorati Tags: airline stocks, airlines, jetBlue, Northwest Airlines, United Airlines, US Airways

You Will Never See Embedded Text Ads on PlaneBuzz

I’ve been researching the various advertising options for the Buzz of late, and basically, for small niche players like us — the mega-Google click-through advertising platform is never going to provide any serious level of revenue.

But while we may go with a very limited type of sponsorship at some point – one thing I am never, never, NEVER, going to do is embed advertising in the text of this blog. If you ever see advertising hyperlinks embedded in the words of this blog, you can be assured that something drastic has happened. Like — I have nothing to do with it anymore.

Now, I have seen tasteful inserts of the oh-so-present Google code. You know, inserts that don’t look like orphaned white text blocks of obvious advertising links plopped down on a page.

But I’m talking about trying to read a post online where words are highlighted in the actual copy — and those hyperlinks open up little advertising windows.

I just went over to TheStreet.com, and that may be the last time I do.

Been over there lately? Think those highlighted underlined words that populate a story are links? No. Oh, they are links. But they are links to pop-up advertisements. And just an errant mouse movement on the part of you, the reader, causes these things to mushroom all over your screen.

What an annoying new bright idea this is.

I’ve already come to the point where I will only visit Forbes.com if it is absolutely necessary — as a result of the jam-packed code heavy in-your-face advertising onslaught you hit every time you try and access a story — usually highlighted by those oh-so-obnoxious Ken Fisher video advertisements.

Almost as annoying as the thought of cellphone use on airplanes.

Well — maybe not that bad. But close.

Tuesday Tidbits: Beta Blue, Winter’s Wrath, the Fed’s Undaunting Attempts to Right the Ship, Airline Stocks Pay the Price

Hi guys.

Just a little bit of this and a little bit of that going on today at the Worldwide Headquarters.

Just received an email that was sent by Henry Harteveldt, big cheese travel analyst over at Forrester Research. Now, you might ask, so what? Well, Henry was on JetBlue’s Beta Blue flight today. He sent the message from the airplane. The airline is rolling out a somewhat limited wireless connectivity offering for passengers today. I say limited in that you won’t be able to surf the web or open attachments in your email. And, you will be limited in the types of email accounts you can access.

But hey, give them an “A” for being the first ones out of the gate. In this week’s PBB, I said I wasn’t going to get excited until they rolled out the Version 2.0. But as long as the airline is making it clear that this is a “beta” test — then more power to them.

I am all for being able to message and check email while crossing the country. I think that would be great.

I just don’t want to hear anyone yaking into a cell phone. No. Never. No way.

Good thing Henry was flying coast to coast, and not into or out of the Midwest. Yes, it’s nasty out there folks. Really nasty. Ice nasty. I mean snow is one thing, but ice — not good. More than 20 people have now died as a result of this latest ice storm making its way across the country, and I don’t know how many hundreds of thousands of folks are still now without power in Oklahoma, Kansas, and Missouri. Yep, Chicago — you’ve seen the weather maps. You’re about to get hit.

Be careful flying out there. Surprisingly, delays at ORD are currently not that bad. We’ll see how things hold up as the weather deteriorates.

Speaking of deteriorating, this afternoon we’re also watching with interest the gyrations in the stock market.

The Federal Reserve did what most of us market junkies thought it was going to do today. Big Ben and his band of merry men and women announced they were cutting the its benchmark interest rate by a quarter-point. This brings the rate down to 4.25%.

But the decision doesn’t seem to have made anyone happy.

The dollar continued to lose ground this morning, in anticipation of another cut, (investors overseas are not very happy with the Fed’s continued moves, and as a result, the dollar continues to get hammered) and this afternoon Wall Street clearly took the approach that a quarter of a point was not enough — as stocks have now staged a nice protest following the news of the rate cut. Yes, many were hoping for a half of a point cut.

How is all this affecting airline stocks?

Well, that’s another problem.

The more the dollar drops, the more traders feel inclined to bid the price of oil up. Looks like the price of a barrel of crude is going to be up a little more than $2 for the day. It’s hanging around $90 and change.

This then translates into lower prices for airline stocks. Almost all of the sector is down for the day as of this writing — as the AMEX Airline Index is down about 5%.

Yes, it’s ugly out there today. In more ways than one.

Ticker: (Nasdaq:JBLU)

Technorati Tags: airline stocks, airlines, Ben Bernanke, Economy, Federal Reserve, jetBlue

United Airlines: Yet Another Slap in the Face to United Employees

It never fails to happen. I’m in the last throes of putting together an issue of PlaneBusiness Banter and a piece of news comes into the email box, or comes over the telephone that is so totally distracting that it then makes it very difficult to finish the issue at hand.

Today was one of those days.

The piece of news? That United Airlines has received the okay from some of its debt holders to essentially “give away” $250 million to shareholders in the form of a “special dividend.” But wait, it gets better.

This is just the first giveaway. The airline has authorization to “give away” another $250 million.

I really don’t have the words to describe how absolutely horrific I think this news is.

With United Airlines, you have an airline management team that enriched itself after an extended stay in bankruptcy at a level that far exceeded anything else ever seen before in this industry. Essentially the same management team that took the airline into bankruptcy in the first place.

Now that same management team — the same one that also convinced a tottering bankruptcy judge and the PBGC that it was incapable of paying its pension obligations — that same management team is going to give away $250 million to its shareholders.

And not a dime to its employees.

Oh, it is not that I am not aware of “why” the airline has chosen to do this. But I guess I just never thought they would actually do it.

All I can say tonight to the management team at United is this — good luck.

Good luck getting your employees to do anything — anything — above and beyond what is minimally required of them.

Good luck in expecting those same employees to provide the level of service that you keep saying is going to be part of your “premium product offering.”

Good luck in attracting any of the best and the brightest in this industry who might be considering a position with your company.

Good luck in your misguided efforts to “maximize shareholder value.”

Last time I looked, the airline industry is still, no matter what CEO Glenn Tilton or CFO Jake Brace, or the Board of Directors at United Airlines seem to believe — a service industry.

But if these people think that providing the best passenger service can ever be a possibility after this latest slap in the face to every United Airlines’ employee — they are solely mistaken.

United management — you’ve made your decision.

United shareholders — I hope you enjoy your $2 and change dividend.

United employees — good luck.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airline industry news, airline stocks, airline unions, airlines, United Airlines, wall street

PBB Now Posted!

This week’s issue of PlaneBusiness Banter is now posted. Subscribers can access this week’s issue here.

Good Morning!

Yes, it’s Friday, and we’ve been up and at ’em early today, as we put the finishing touches to this week’s issue of PlaneBusiness Banter. Subscribers — I’ll be back here to let you know when this week’s issue is posted.

in the meantime, for those of you who have already finished your holiday shopping, written your Christmas cards, and prepared your menu for Christmas eve, how ’bout some light reading this morning as you have your third cup of coffee?

Great.

Here’s just the thing to go along with that coffee. The Port Authority of New York and New Jersey, along with airline industry executives and various local transportation officials, unveiled 100 recommendations yesterday in a 32 page report. The Flight Delay Task Force says in the report, among other things, that if 27 of its initiatives were implemented quickly, delays at the New York area airports, which are climbing to new records, could be reduced by next summer. The entire list of suggestions, if put into practice, would create capacity for an additional 3.5 million passengers at Kennedy International Airport without additional delays.

Clearly the major difference between this report and its recommendations — and the proposals currently coming out of Washington center around the issue of reducing the number of flights into the three area airports.

According to the Task Force report, this is not necessary.

Click here to download a .pdf copy of the report.

Surprise! Air France/KLM Bids for Alitalia

After Lufthansa walked away from a potential deal to take over Italy’s long-suffering Alitalia this morning, Air France/KLM officially picked up the slack — saying that it will make an offer for the airline.

This places Air France/KLM in direct competition with Italian airline Air One.

As Reuters reported today, “An Air One takeover would keep Alitalia in Italian hands but there has been doubt over whether the smaller airline has the wherewithal to turn around an airline with a long list of woes. The Air France-KLM choice would make Alitalia part of the world’s biggest airline by sales but at a sharp discount to its share price and with potentially unpalatable job cuts.”

How long……has this been goin’ on?

Who was it that sang that song?