Monthly Archives: September 2008

Picture of the Week: jetBlue Goes Swimming at O’Hare

I’m sure most of you have seen some of these pictures that are the hot item in all of our inboxes this week. I would have posted some sooner, but we had to get our upgrade bugs here at PlaneBuzz taken care of.

While Hurricane Ike and its effects to south Texas were widely disseminated this week — what a lot of people did not know is that while Ike was battering the southern coast of Louisiana and Texas, a nasty storm, unassociated with Ike, decided to batter the heck out of the Midwest. Particularly the Chicago area.

These are pics that were taken on Saturday at O’Hare and I think they give you a pretty good idea of how high the water levels were. I would give credit to the photographer, but I’ve received copies from so many people and no one seems to know exactly who took them.

My only question is this. Who was the bright guy who thought that putting snow removal equipment out there was going to help?

From what we understand, the move didn’t do much more than create waves that of course made the water levels even higher as they moved to the gate areas.

Good thinking guys.

Needless to say, these kinds of water levels are not good for equipment — brakes, rims, not to mention the bottom halves of engine cowlings. That water was way too close to those engines for me.

As one pilot wrote me today, “There’s no way I would want to taxi through that kind of water.”

Tell you what. I’m not a pilot, but I wouldn’t want to taxi through it either.

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Continental Issues First Ike Damage Estimates: $50 Million

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Yesterday Continental Airlines said in an SEC filing that it now estimates that Hurricane Ike will cost the airline at least $50 million.

“This is a preliminary estimate and is subject to change depending on, among other things, insurance recoveries and how quickly traffic returns at the carrier’s Houston hub,” the airline said.

The airline added that the storm had also affected its liquidity. The airline had previously estimated that it would end the current quarter with $2.8 billion in cash and cash equivalents. The new estimate is $2.7 billion.

History Making Day on Wall Street

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We only thought that those 10 billion in shares traded on the NYSE yesterday was a big deal.

Wait until the market closes today.

The Dow Jones Industrials Index has already been up more than 400 points this morning, on the back of a plan that is just now being announced by the Feds that will basically cover the losses of those financial institutions that went way too far in the mortgage banking fiasco of the last few years.

Yes, that means that you and I — the American taxpayers — are going to be on the hook for all this ultimately.

And who is responsible for all this? I still say, as I did for years in the Market Review of PlaneBusiness Banter — former Fed Chairman Alan Greenspan and the Federal Reserve. The Fed let the housing bubble get bigger and bigger and bigger — and did nothing to rein it in.

Why?

It was pretty obvious.

The housing bubble gave the appearance that the economy was healthier than it actually was.

And now?

Now we are all going to pay the price as Secretary Paulson from the Treasury Department just formally announced a plan where the government is going to allow financial institutions to package up all those bad loans and sell them to the U.S. government. A new government entity is also going to back up money market accounts. The only good news about this? It will finally, I would assume, allow the financial markets to put a value on these problematic mortgages that brought down Lehman Brothers, Bear Stearns, and Merrill Lynch. (And had threatened Morgan Stanley and Goldman Sachs as of yesterday.)

Treasury Secretary Paulson just finished speaking — giving more details on exactly what the government plans to do to correct the “illiquid mortgage” situation. His estimate of the price tag? Hundreds of billions of dollars.

So let’s cut to the chase — what could all of this mean for the airline industry?

It means that we have only begun to see the first peek at massive write-offs that are going to continue from many of the largest financial entities. As Bank of America officials said this week when they announced the deal with Merrill Lynch, they foresee continued issues into 2010.

Remember, even though this announcement from the Feds says that they are going to buy back all this bad paper — we don’t know how that is going to be accomplished, or at what price. So that means more losses for financial institutions. We just don’t know how much at this point.

Translation? Lousy economic conditions for at least the next two years, which doesn’t bode that well for increasing numbers of high paying fliers.

Oh, and secondly, the price of oil continues to hang around $100 and change today. As of this posting, oil futures are trading at $101.01, up over $3 on the day.

Lehman Brothers Lives…Or at Least Parts of It and AIG Gets A Lifeline

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Monday morning I thought we had lost another airline analyst as Lehman Brothers filed for bankruptcy. And not just any airline analyst — Gary Chase. Gary, who is a former Institutional Investor “Star” analyst and Dave Fintzen, his trusty associate, had packed up their belongings and were waiting their turn to run the gauntlet of news hounds outside the doors of their employer the last time we heard from them.

But as Scarlett said, “Tomorrow is another day.”

Today, a deal in which Barclay’s bank will take over the more profitable chunks of the bankrupt investment bank was revealed, and voila! It looks like there was no need for Gary and Dave to pack up their belongings in banker’s boxes after all.

According to a note from Gary this morning,

“The last few days have been a roller coaster ride (not the fun kind). We knew things were fluid, but we didn’t think they’d be this fluid. As late as yesterday in the afternoon, we really thought that twelve years and, more importantly, that the collective efforts of a group of people we had tremendous pride in had come to an abrupt end. Today, we’re very excited to be back in business with Barclays behind us.

We very much appreciate all the support and concern many of you expressed. It made a very difficult situation easier to take and we can’t thank you enough.”

Meanwhile, today Wall Street had a lot to digest. The biggest piece of news was, of course, the fact that the Federal Government — yes, that means you and me — has loaned mega-insurance behemoth AIG $85 billion in an attempt to give the company some time to get its affairs in order.

As I wrote this weekend in PBB, one of the things the company will probably try to do is divest itself of a number of its subsidiaries, and one of those companies is airline leasing giant ILFC.

The problem with this is that it’s going to have to be one heck of a huge company.

One of the reasons that ILFC thrived as a part of AIG is that the company could lean on AIG’s massive financial clout in getting much better than market rates on financing deals.

This is the same business model that GECAS uses — as it depends on Daddy General Electric to serve basically the same purpose.

But those days are now gone. Today, the financial arm of GE is the part of the company that is dragging the rest of the company down, and in the case of AIG, the company is now being forced to look at its assets from a “what ones can we extract the most premium from” perspective.

And clearly ILFC is one of those potential jewels in the sell-off bag.

The Case of the Missing Index Templates?

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Never fails.

An upgrade to the latest version of Movable Type (which we did in hopes of stopping the mysterious “old” posts problem) has turned a bit ugly. As you can see.

It’s always something.

Our crack PBB engineering department tells me,

“It looks like the update process wiped out the main index templates, which makes it impossible to publish the blog index page. Sigh. I’m trying to find them in the backup, but I don’t really know where they are stored… possibly they exist in the database, which will be fun to crack in to.”

And those guys at Lehman Brothers think they have problems.

Heh.

More later — after we find the main index templates.

Three Things I am Glad I Am Not Today

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1. A flight dispatcher for any airline. (Look at the weather maps for the country — not just Texas and Louisiana. It’s enough to want to crawl back into bed and pull up the covers.)

2. Anyone working in operations for Southwest Airlines. Especially those poor souls given the task of reworking flights around a network without Houston in it. Or those employees who live in the Houston area. And if that wasn’t bad enough, flights to DAL will probably become more problematic as the day goes forward.

3. Ditto Continental Airlines. Except for the DAL part.

Take a Hike Ike

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Houston, we have a problem.

Here is the latest satellite image of Mr. Ike. A couple of observations. One, while he is not that high in the “category level,” (he will probably come ashore as a Cat 2 storm), he is a huge storm in terms of physical size. This does make a difference. This will mean higher waves and more flooding as the storm throws much more water to the northwest and north. Many parts of Louisiana have already experienced higher water levels and more flooding than from Hurricane Gustav.

Second, for those people who decided not to evacuate Galveston — I have one thing to say. I hope you wrote your social security number on your arm in indelible marker.

(Just one of the lessons learned from Hurricane Katrina.)

As for why Ike did not get as strong as many had predicted — my guess is water temperatures. When Katrina rolled across the Gulf of Mexico, temperatures in the Gulf were as high as the low 90s. Ike, on the other hand has had an average of only 82 degree temps to feast upon. Lower temperatures means less fuel for the machine.

But, like I say, while he may not be as intense as some storms, he makes up for it in sheer size.

Those of you in the Dallas Ft. Worth Metroplex may have a rough day tomorrow as well — depending upon how sharply Ike turns to the Northeast after hitting the coast. The good thing is that the Dallas area, for now, would be on the weaker side of the storm.

But — we’ll all know more tomorrow.

In the meantime — I’m back at the PlaneBusiness Worldwide Headquarters today, after a three-week stay in the Lone Star State. We’ve had intermittent heavy bands of rain and wind come rolling through all day as we continue to experience the “outer bands” of the storm on the Northeast side.

For all you folks who call the Houston area home, we’re thinking about you. May a pine tree not slice your house in two or crush your car, and may water not come within 6 inches of your back door. Much less inside the door.

jus sayin’.

Shares of SAS Surge on Talk of Potential Lufthansa Deal

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Interesting news from across the pond today as Scandinavian carrier SAS said in a statement that the airline is conducting “talks about a possible structural solution.” That’s an interesting way to put it.

News reports say that Lufthansa is apparently about ready to make a takeover offer for the airline.

Shares of SAS were up 18% on the news, ending the day with a 16% increase, up to 55.25 kronor or $8.09.

According to Reuters, Lufthansa is mulling a bid for the airline after SAS approached Lufthansa. This news comes as Lufthansa is already in talks to buy Brussels Airlines. A bid by Lufthansa for Austrian Airlines also appears to be in the wings as well.

Bloomberg quoted Exane BNP Paribas analyst Geoff van Klaveren today, as he outlined the current position of SAS. “SAS is not in a financially strong position. SAS can’t be a standalone airline, so something will happen, whether it’ll be a complete takeover or a joint venture on something like long-haul flights.”

Meanwhile, Glitnir analyst Mats Hyttinge told the Associated Press that investors had speculated for a long time about SAS being a possible takeover target for Lufthansa, which has been looking at possible acquisitions for some time.

“I think it would be a good solution for SAS. They need financial backing,” Hyttinge said.

However, he noted that SAS’ complicated ownership structure could be an obstacle. “Considering there are several different states among the owners it would turn into a political process,” he said.

The Swedish government has been considering selling its 21.4 percent stake in SAS, while the Norwegian government, which owns 14.3 percent, has said it would rather buy more shares in the company, he said.

In Denmark, which also owns 14.3 percent, the signals have been mixed and a decision would probably depend on the price offered, Hyttinge said.