Monthly Archives: April 2008

ExpressJet Turns the Other Cheek to SkyWest’s Advances

Okay, so I lied. I’m back.

I guess I need to talk about the SkyWest/ExpressJet deal. Or no deal as it stands right now.

ExpressJet said less than an hour ago that its board had unanimously rejected an offer by SkyWest to purchase the company for $3.50 a share.

ExpressJet said that the committee believes that the fair value of the company’s stock is “substantially higher” than SkyWest’s proposal and does not reflect the inherent value of ExpressJet or its prospects.

The offer would represent a 68% premium over the company’s closing stock price Thursday of $2.09, and would values the company at about $181.5 million.

Jerry Atkin, SkyWest’s CEO, said in a letter to ExpressJet officials that the offer constituted a “full and fair price” for the ExpressJet shares.

Meanwhile, ExpressJet says that it has set up a special committee of its board to look at perhaps a better deal with SkyWest. The committee will also assess the potential for a new capacity agreement with Continental, and it will talk to “other potentially interested parties about a potential acquisition of the company at a higher price.”

Not surprisingly, shares of ExpressJet have soared on the news, and are now trading about 40% up for the day.

Ticker: (NYSE:XJT)

Technorati Tags: Continental Airlines, ExpressJet, SkyWest

Southwest Fare Name Change: We Told ‘Em

“They listened to you Holly. Our company newsletter says that “Business” fares will be renamed “Anytime” fares starting today. The BS 🙂 will remain the same.”

A PlaneBusiness Banter subscriber wrote me this morning to alert me to the fact that effective today, Southwest Airlines has changed the name of its fare classes.

You may recall that yours truly has gone on a rant more than once over the fact the airline changed its three major fare classifications that potential customers see when they go to purchase a ticket to “Business Select, Business and Wanna Get Away” when they rolled out BS in November.

Not a good thing — as customers were then assaulted with two columns of expensive fares, each labeled with a “business” moniker when they went to purchase a ticket.

As our subscriber noted and this screenshot shows, the airline has apparently come to its senses. Well, at least on the concept of labeling that second fare class as “Business” fares. They have now been tagged “Anytime” fares.

Very good. I approve.

You folks at Southwest can send my marketing consulting check to me here c/o PlaneBuzz — or I can just pick it up at the Southwest annual meeting next month.

🙂

On that note, you probably won’t see much of me today as this week’s issue of PBB is very long and I anticipate that I will still be working on it tomorrow. That’s what happens when you have a huge news week coupled with a huge earnings week.

Behave yourself in the meantime.

Ticker: (NYSE:LUV)

Technorati Tags: Southwest Airlines

Additional Info on the Mesa Lawsuit Against Delta Air Lines

My earlier post might have been a bit confusing. It’s been a bit busy around here this week! My apologies if it was not clear.

In answer to some emails I’ve received this afternoon in regard to the Mesa/Delta litigation, the original suit was apparently filed by Mesa Air Group and Freedom Airlines on April 7, as they stated in an SEC filing.

The most recent filing, as of a check of the case files this morning, was a motion by Mesa for a preliminary injunction against Delta. Both sides will now have time to respond to that in the next 20 days or so, and the court has scheduled a hearing on Mesa’s request on May 27-29. So I doubt we are going to hear anything of note out of this situation until that point.

The case number, for those of you who would like to track it for yourselves, is 1:08-cv-01334-CC. The suit was filed in U.S. District Court, Northern District of Georgia.

Now, excuse me, I have one last earnings call to listen to. Talk to you guys later.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Mesa Air Group/Freedom Air Lawsuit Against Delta Air Lines Update

In last week’s PlaneBusiness Banter I mentioned that the lawsuit Mesa Air Group said had been filed against Delta Air Lines in regard to Delta’s canceling Mesa’s Freedom Air contract flying had not been able to be found on the PACER system. (A public database of bankruptcy and Federal District courts in the U.S.)

That is no longer the case.

I suspect that because there was an initial motion entitled “Motion to Seal Case” this was the reason the case was not immediately available in the database. However, the judge agreed only to seal the complaint in the case — not the entire case.

So the case is there now.

Unfortunately because the complaint itself was sealed, we can’t read any of the nitty gritty details. Not surprising, as the complaint no doubt contains a great deal of Delta-Freedom contract information that competitors would love to read. (Yes, we’ve already had folks from three airlines ask us if we have copies of the complaint.)

According to the PACER documentation, Mesa Air Group and Freedom Air did file this week for a preliminary injunction against Delta Air Lines — but the hearing on that request has not been scheduled until the end of May. May 27-29 to be exact.

Clarence E. Cooper, United States District Court Judge is presiding over the case in U.S. District Court for the Northern District of Georgia.

Ticker: (Nasdaq:MESA), (NYSE:DAL)

Technorati Tags: Delta Air Lines, Mesa Air Group

Crude closes at $118.30/barrel

For those of you with enquiring minds.

Republic Airways Contract Canceled by Frontier Airlines

It’s not easy in the regional airline industry these days, as Mesa found out a couple of weeks ago when Delta Air Lines notified the airline that it was canceling its contract for more than 35 EMB-145 aircraft.

Today — it appears that Frontier Airlines has severed its regional flying contract with Republic Airways Holdings.

This contract was not for fifty-seaters, however. This contract included 12 76-seat E170 aircraft — an airplane that is in much higher demand.

The agreement provides for an orderly wind-down under which Republic will remove four aircraft on May 1, an additional six aircraft on June 2 and the final two aircraft on June 23, 2008. Immediately prior to Frontier’s filing, Republic was generating approximately $6 million in gross monthly revenues under the agreement.

There are also another five E170 aircraft that were slated to go to Frontier that will now have to be placed with another airline or sold.

As a result of Frontier canceling the agreement, Republic says that it will seek a payment of $260 million. I guess this means Republic will now get at the back of the line in bankruptcy court.

Republic said in a press release that it will discuss all of this on its earnings call tomorrow.

The most troubling comment in the Republic press release? Republic’s CEO Bryan Bedford’s comment, “It’s unfortunate that despite their [Frontier’s] many efforts to reorganize their business outside of Chapter 11, factors beyond their control conspired to force a deeper reorganization.”

Even more unfortunate is that this particular part of Frontier’s business plan was the one that was supposed to be the “Southwest Buffer” — an attempt to grow service to markets that Southwest Airlines could not duplicate out of Denver.

Not a good sign for the fine folks at Frontier, who recently filed for Chapter 11 protection after its credit card processor increased the airline’s holdback allowance.

Technorati Tags: Delta Air Lines, Frontier Airlines, regional airlines, Republic Airways

Delta Air Lines, Northwest Report In: Don’t Believe Those Scary Headline Numbers

Look, granted the airline industry is, with the exception of Southwest Airlines, losing money hand over fist this quarter. But it’s not losing THAT much.

Perusing the usual headlines online, one would think that Delta Air Lines and Northwest Airlines posted a combined loss of more than $10 billion dollars for the first quarter.

No, they lost money, but not quite that much.

Those totals include some accounting hocus pocus “goodwill” write-offs. More on all that in a minute.

But first — here is a rundown on the numbers that matter.

Excluding reorganization and special items, Delta Air Lines posted a loss of $274 million, or $0.69 today. Northwest posted a loss of $191 million or $0.78.

Both losses were larger than what analysts had expected. Analysts’ forecasted EPS for Delta was a loss of $0.51, while they had Northwest pegged for a 34 cent loss.

So no, neither airline posted good numbers.

As for those big billion dollar write offs — Delta took a $6.1 billion non-cash charge and Northwest took a $3.9 billion non-cash charge. These are paper losses that are related to the drop in market caps for each stock, and are related to each airline’s Fresh Start accounting that both began this spring, as a result of their exiting bankruptcy protection. Essentially we’re talking about Monopoly money. Not important in the big scheme of things.

Technorati Tags: airline earnings, airline stocks, Delta Air Lines, Northwest Airlines

We Only Thought United’s Glenn Tilton Had Cleaned Up His Act: Tortured Triangulation Returns

PlaneBusiness Banter readers know that yours truly always looks forward to the airline industry earnings season for one big reason.

We just love to listen to United’s CEO Glenn Tilton. His use of corporate double-speak and lexacon overuse (abuse?) has given readers and myself many well-deserved chuckles over the last couple of years.

I threatened to put together a book of Glenn’s observations at one time. Maybe I need to revisit that plan.

Anyway, last quarter Glenn was not his usual self. I dunno. Maybe he was feeling a bit under the weather. But the old triangulation of synergistic applications working towards a mutual goal of corporate convergence just wasn’t there.

However, I am happy to report, after checking in with the United call yesterday that Glenn is back to his old tricks again.

So much so that Dallas Morning News Aviation blog reporter Terry Maxon had to give him a shout out today. Hey, Terry, welcome to the Tilton Triangulation fan club.

There were a couple of good ones in this quarter’s call, which we’ll talk about in more detail in this week’s PBB of course, but I think Terry did pick the most outstanding one to feature today in his blog.

Here you go. Way to go Glenn. In this quote he is responding to Credit Suisse analyst Dan McKenzie about whether or not there would be money available to back United — if the airline were to become involved in a potential merger.

I would suggest that back to the earlier discussion, that if you take the plans that we’re discussing today, capacity discipline as a principle rather than a synergy, take the focus on cost management that we are discussing today, again, the plan with respect to the value of each one of the businesses within the two portfolios that might consolidate, and if you took our plan and our discussion relative to that value that needs to be identified and unlocked, and you layered it over a consolidating scenario, I think you have an attractive investment proposition seen through the lens of a discussion that we’re having about our own opportunities, which I don’t think has yet made it to the back of the proverbial envelope.

Hey, this one’s a keeper.

Ticker: (Nasdaq:UAUA)

Technorati Tags: airline analysts, airline CEOs, United Airlines

United Posts Huge Loss; AirTran Makes Investors Nervous; JetBlue Does Okay; Oil Prices Up Again

Holy $%(@ Batman.

What a morning.

It took me more than an hour just to get through the emails. Then almost another hour reading all the great earnings news. NOT.

Wow, where do we start?

First, let’s take a look at the price of oil. It’s on the march again — and looks like we are going to hit yet another record today unless something major changes between now and the close of trading.

Right now a barrel of crude is trading at about $119.50.

$120/barrel here we come.

But that may not be the worst news out there for the airline industry this morning.

No, United Airlines looks like it took care of that. Then again, AirTran is not too far behind.

First — United Airlines posted a horrible set of first quarter numbers today. Horrible.

The airline reported a loss of $537 million or $4.45 a share. This did not compare favorably, as they say, to last year, when the airline reported a loss of $152 million or $1.32. Analyst consensus here had been for the airline to post a loss of $3.41 a share — so it is no wonder why shares are now down about 32% ON THE DAY.

Shares in United, as we post this, are down 34% to 14.24.

Meanwhile, shares of AirTran are being beaten up as well. Shares here are presently down 23%, trading at 3.50.

Kind of strange thing with AirTran. The airline moved up its earnings call on very short notice to today. It was originally scheduled for Thursday.

I figured it was so the airline could come out and reassure investors about its credit card processing hold back situation, cash levels, etc.

No.

Instead, the airline announced this morning that it was going to do a $65 million convertible note offering — an acknowledgment that yes, it is short on cash. Oh, and the airline didn’t post very encouraging first quarter numbers either.

The airline reported a first- quarter loss of $34.8 million or $0.38. This compares to last year, when the airline posted a profit of $2.16 million, or $0.02.

Analyst consensus here had been for the airline to post a loss of 32 cents, so while the airline missed, it wasn’t as big a miss as United. But the results, along with the airline’s liquidity issue, was still enough to spook the street.

Finally, JetBlue also reported earnings today, and considering the results posted by its two competitors — the airline did pretty well.

JetBlue posted a loss of $8 million or $0.04 in the quarter. That is an improvement from a loss of $22 million or $0.12 in the first quarter of 2007, and was three cents better than the analysts’ consensus figure of a loss of 7 cents.

Remember though that comps here were relatively easy for the airline — the result of last year’s St. Valentine’s Day Meltdown.

If you haven’t looked at your favorite airline stock today, I’d recommend caution. As of this posting, every airline stock is down for the day — with some stocks posing very large declines. Throwing out the aforementioned selloffs in United and AirTran, it’s clear that investors are not looking at the proposed Delta-Northwest deal as a trip to nirvana, as shares of Delta are now down 13% to 7.12, and shares of Northwest Airlines are down 15% to 7.74.

Even shares of Continental are not immune to the pressure this morning, as they are now down 12% to 18.30, while shares of AMR are down 11%, trading at 7.30.

Yikes.

Technorati Tags: airline earnings, airline mergers, airlines, AirTran, American Airlines, Continental Airlines, Delta Air Lines, jetBlue, Northwest Airlines, United Airlines

PlaneBusiness Banter Now Posted

Okay all you airline fans.

This week’s issue of PlaneBusiness Banter is now posted.

I note that the boys at JP Morgan were hard at work today as well. Received their always informative Monthly Airline/Aircraft/EETC Reference note in the wee hours this morning. Guess I’m not the only one working overtime this week.

Earnings. That’s the reason.

Next week is going to be a real killer. Get ready. We’ll have the biggest week of the quarter next week in terms of airlines posting first quarter numbers.

In the meantime, subscribers can now access this week’s issue of PBB here.