Monthly Archives: January 2009

Looks Like Southwest Airlines’ Pilots and the Airline Have a New Tentative Agreement

We hear from one of our Southwest Airlines‘ friends that the pilots at Southwest, who are represented by their own independent union, SWAPA, and the airline, have come to terms on a new tentative agreement.

Here is an excerpt from Carl Kuwitzky’s blog that was blasted to pilots this afternoon. Carl is the President of SWAPA.

“Last night SWAPA agreed in principle on a new five year contract with the Company through August 31, 2011. This new contract includes the following: stronger scope language as well as codeshare restrictions not previously released including no domestic codeshare, increase in pay rates including retroactive pay, increase in 401K match, improved disability program and streamlined/improved scheduling and work rule language. Additionally we have retained the Lance Captain program and ELITT albeit with changes to current language. Our Negotiating Committee (NC) is continuing to negotiate final language and when that work is completed will present a Tentative Agreement to the BoD for approval. If the BoD approves the new contract it will be sent to the membership for final ratification. I anticipate a BoD meeting in late February or early March to review the TA.”

This news comes as it was announced today that the mechanics at the airline approved their proposed TA with the airline by a 61% majority.

Gary Chase Note On Airlines Today: It’s Been A Tiring Airline Earnings Season

The headline on Gary Chase’s research wrap-up piece today was entitled, “Thoughts After A Tiring Airline Earnings Season.”

That is exactly how I feel today, after the onslaught of reports this week. Particularly yesterday’s almost non-stop roll out of reports.

Chase, airline analyst with Barclays, commented today, “Mercifully, airline earnings season is over.”

Not quite. We still have a number of regional airlines to hear from. Then there are all the international carriers who report on a very different schedule. But as far as the big guns in the U.S. are concerned, yes, the noisy din that was created from a slew of very “noisy” earnings reports this quarter has now, finally, ended.

I’m still not sure which airlines we are going to take a closer look at in this week’s issue of PBB, because we had too many report in during the week. The issue would simply be too unwieldy in terms of size if we were to go into our usual detail on all eight. But after finishing up the last earnings transcript reading this morning, I’ll pick four for this week, and the rest will get their look-see next week.

But let’s get away from the specifics for a minute and look, as Gary did today, at the overall sense we got from listening to the calls over the last two weeks.

I’d sum it up by saying this: there is a lot of fear out there concerning demand. The immediate revenue landscape looks frightening and it’s not clear where the revenue versus demand level is going to settle. And god forbid if the price of oil starts to move up again.

As Gary said in his note this morning,

“We have entered the stage of the airline story where the thesis gets tested. We all know it takes a lot of revenue erosion to offset the benefits the industry will reap from extraordinary capacity reductions and breathtaking declines in fuel (now materially more than 9/11). However, now comes the hard part. The part where we actually have to observe the revenue declines rather than analyze sensitivities in our models. With revenue fading quickly, as it always does, faith is suddenly hard to come by.

The near-term isn’t going to be easy, in our view. The next potential catalysts will likely come on the revenue front and as CAL previewed yesterday, the RASM comps are going to be negative. In fact, our largely unchanged forecasts contemplate negative RASM comps in every single month of the year, with the exception of November. We currently believe 1Q will see the toughest comparisons.”

Translation? If you thought the fourth quarter numbers looked bad — just wait until mid-April when the first quarter numbers roll out.

However, as far as we can tell — most analysts continue to hold onto the belief that the benefits that come from the drop in the price of oil will more than compensate for whatever drop in demand the airlines continue to feel.

One PlaneBusiness Banter subscriber wrote me this week, “I think these guys on Wall Street are not connected to the real world. In your last issue in December you asked your readers to tell you how they felt about 2009. And you said yourself that you were surprised at the overall level of negativity readers expressed. I wasn’t. And I think your readers were, and are, closer to the mark than these guys who make their living transposing spreadsheets and getting lost in the numbers are.”

Thoughts? I think it’s time we open this up to PlaneBuzz readers for their take. Is 2009 still going to be the blockbuster earnings year for the airline industry that every Wall Street analyst on the planet said was going to be the case?

As always, you can comment here on Buzz — or you can send your notes to me directly.

Virgin America, Republic Holdings and Shuttle America DOT Reports Are Finally Public

Eureka. It’s about time.

“The Department of Transportation’s Bureau of Transportation Statistics today upheld its June 2008 decision to release to the public traffic, financial and origin and destination survey data filed by Virgin America.

            BTS denied an appeal by Virgin America of the June 26, 2008 decision by BTS’ Office of Airline Information on the airline’s request to keep the data confidential.

            All filings on the docket DOT-OST-2008-0107 can be found on Regulations.gov: http://www.regulations.gov/search/index.jsp

            BTS also denied appeals from Republic Airlines and Shuttle America.  The two airlines appealed a previous denial of their confidentiality requests.  Documents for these cases can be found on Regulations.gov:

Shuttle America: DOT-OST-2005-23354

Republic Airlines: DOT-OST-2005-23355″

Readers will recall that Virgin America has refused to make its DOT financial and O&D information available ever since it began operation. The reason? We can only assume that it didn’t want us all to know how much money it was losing. And on what routes.

So the airline played the legal “wait it out” game by first refusing to do so, saying that it would be forced to “reveal confidential information” if it did so. That set in place a legal process that took time. In June the DOT ruled against the airline, but again, an appeal was filed.

So now, finally, we will all get to see the numbers that we should have had access to all along. On February 3. At 10:00 AM EST to be exact.

Oh, and yes, Republic and Shuttle America have been playing the same game. Their gig is up as well. Their numbers will also be available as of Feb. 3.

This whole thing is ridiculous. There should be changes made immediately to the process that prevents airlines from “opting” out of the reporting process. If they don’t report — their right to fly is yanked. Period.

The Mighty Allegiant Air Trundles On — Profitably

Delta Air Lines was not the only airline that reported earnings yesterday.

One of our PlaneBusiness Banter stock faves, Allegiant, took its turn at the 2008 Fourth Quarter Confessional. The big difference with Allegiant? There were no “Hail Marys” proscribed as penance for their less-than-satisfactory performance.

Quite the opposite.

The airline with the screwy business plan once again posted what I thought were very strong earnings. Allegiant Travel Co., the parent of Allegiant Air, reported that earnings nearly quadrupled for the quarter, on 21% higher revenue.

The company posted earnings of $18.2 million, or $0.88 a share. This was up from $4.8 million or $0.23 a share the year before.

Operating revenues were up 21.3% while operating expenses were down 1.2%. The airline saw operating income soar 373.6%.

And remember what the price of oil was doing during the fourth quarter. Then remember that yes, these are the guys who fly those gas-guzzling Maddogs. (MD-80s).

Load factor? Up a sizzling 8.8 points over the fourth quarter of 2007 — to 86.5%.

And the astonishing results just continue to go on and on and on.

I’ll take a full look at the airline’s results and talk about their earnings call in this week’s PBB.

In the meantime, kudos to the management at Allegiant. I’ve said this before, and I’ll say it again — this is one of the few management teams in this industry that knows who they are, what their business model is, and how their airline makes money. Or doesn’t.

Delta Air Lines And Pilots Agree to Reinstate ASAP Program

This is great news.

As I had written in PlaneBusiness Banter in December, it did appear that Delta Air Lines and its pilot union were close to coming to an agreement which would see the airline reinstate its Aviation Safety Action Program.

This morning the airline announced just that.

From the airline’s release:

“Delta Air Lines (NYSE: DAL) has signed a memorandum of understanding with the Air Line Pilots Association (ALPA) and the Federal Aviation Administration (FAA) to reinstate its Aviation Safety Action Program (ASAP) covering pre-merger Delta pilots. The revised program mirrors an existing Northwest Airlines pilot ASAP program.”

In addition to the reinstated pilot ASAP, Delta has formal ASAP programs in place for its dispatchers and Technical Operations employees, and other safety reporting programs for flight attendants and ground employees. Delta also will continue ASAP programs currently covering pre-merger Northwest pilots, dispatchers and load planners, and other safety reporting programs for its other workgroups.

This means that almost 17,000 employees of the airline are now covered by some form of voluntary safety reporting system at Delta.

Excellent news. Just makes me want to do a little happy dance outside. Only problem is that if I did, I’d probably fall on the ice and break a limb. So — happy dance will be postponed until it’s a little warmer. (Yes, I’m at the Dallas-Ft.Worth branch office this week.)

We have two more major airlines and their pilots groups to beat into submission in regard to ASAP participation. And we all know which two airlines I am talking about. American Airlines and US Airways.

And no, as I told my PBB subscribers not too long ago, I’m not going to shut up until the last two stragglers are back in the fold. ASAP program participation is too valuable to all concerned.

Delta Air Lines’ Shares Go Boom On Negative Guidance

While analysts continue to wax poetic about revenue forecasts for the industry in 2009, the market took a baseball bat to many of the major airline stocks today — after Delta Air Lines rolled out its disappointing numbers for the fourth quarter.

This morning Delta reported it lost $1.4 billion in the fourth quarter or $2.11 a share. This compared to a loss of $70 million or $0.18 a share for the previous year. This number included $904 million in charges related to employee equity awards that were a part of the Delta/Northwest deal.

Excluding special items, Delta lost $340 million or $0.50 a share. This was much worse that the $0.34 figure that had been forecast in the analyst consensus. However, Delta said that the analyst consensus figure did not take into consideration a 12 cent per share loss related to the “non-cash impact of purchase accounting.”

Okay.

But as bad as these numbers were, this was not the news that has pushed shares of Delta, and other airline stocks to the floor today.

The news that is doing that is the “forward guidance” comments the airline made today.

You know .. little things like….”unit revenue projection is much worse than what had been previously suggested.” When it was “previously suggested” …in December.

Traders don’t like to hear things like that. If those forecasts are that far off after only one month, that is not a good omen.

As a result, shares of Delta are taking a sharp dive today, down 20% as I write this, trading at around 7.95.

And because what affects one major airline is assumed to affect all of them to one degree or another, shares of US Airways are also getting punished, as they are down 17%, trading at 6.36. Shares of AMR are not exempt, as they are now trading down 13%, hovering around the 6.27 mark.

Shares of Continental are not being left out of the carnage today either. Shares here are now trading down about 16%, at 14.17, while shares of United are trading down 11%, around 10.85.

PlaneBusinessBanter Now Posted

PlaneBusiness Banter Subscribers can now access this week’s mega-earnings issue here.

Biggest Airline Stock Loser for the Week: American Airlines

I’m working on this week’s PBB. This week’s Market Review section to be more specific.

Just thought that it was worth noting that while shares of Southwest Airlines bounced around all over the place this week — when all the shouting was over, shares of the Dallas-based airline ended down 7% for the week, closing today at 8 bucks even.

They were not even a member of the select PlaneBusiness Basement Double-Digit Loser Group for the week.

No, the airline stock that took the award for posting the biggest loss for the week was AMR, parent of American Airlines, which saw shares drop a hefty 33% for the week, ending the week at 7.62.

This was far and away the worst performance notched by an airline this week, although Continental Airlines was down 17% for the week, closing at 17.22, as it took second place honors at the bar in the basement.

Other major airlines to post a double-digit decline for the week were Alaska Air Group, which was down 11%, closing at 26.56, and Delta Air Lines, which lost 10% to close at 10.26.

The vast majority of stocks we track at PlaneBusiness finished down for the week. The reason? The price of oil once again raised its ugly head as the week came to an end.

Oil futures closed Friday at 44.65/barrel — up 22% for the week.

Ouch.

I told you guys OPEC was going to get serious about cutting production this time. And….they seem to be doing just that.

Reader Comment on United Pilots’ Stand on Aer Lingus Deal

Tough crowd out there today.

From the inbox:

“You are not serious about this whiny crap from UA pilots are you?”

Heh.

Let me put it this way. Given what is going on at the airline — I would have expected the airline to have at least discussed this “innovative agreement” with its pilot union before it was announced. At least.

Actually, I’m more interested in an arm-wrestling contest between Ryanair’s Michael O’Leary and United’s Glenn Tilton.

I’d pay big bucks for that ticket.

United Airlines Seems Determined to Piss Off Employees; O’Leary Tees Off on News

Take one major airline.

Have that major airline use bankruptcy as an excuse to destroy its employee pension plans.

Have same airline continue to enjoy some of the most adversarial management/employee relations in the industry.

Add just one more objectionable move on the part of said airline’s management to the almost-boiling pot.

Stir.

Back off and watch as the pot boils over.

Today that is exactly what has happened, as United Airlines’ pilots are reacting to the news that the airline plans to link-up with Irish airline Aer Lingus to offer flights between the U.S. and Madrid. Say what?

71001441SB029_Heathrow

Starting next year, both airlines will market the flights and each airline will have their own flight numbers on the route.

But United Airlines’ employees will have nothing to do with the actual operation of the flights.

No, Aer Lingus will fly the planes with their crews. And provide the planes. United will handle the marketing for the flights.

According to a report in Bloomberg, “Aer Lingus and UAL will review the partnership after two years and may turn it into a ‘full-blown joint venture,’ with the Irish carrier owning 51%.”

Not surprising that the United pilots are not happy about this news. Looking at the details of the deal this looks like nothing more than a glorified wet lease.

Meanwhile, United Airlines continues to sit on a stagnant-to-declining fleet, and continues to announce furloughs for its own pilots and flight attendants.

In a message from the Chairman of the airline’s ALPA MEC, Steve Wallach told the troops,

“The day after reporting one of its worst quarterly financial results in history and after furloughing an additional 254 pilots (bringing the total to 606 pilots), United Airlines announced today that it has entered into what it calls an “innovative” partnership with Aer Lingus”….He then added, “Aer Lingus has advised the Irish press that this joint venture will operate an Aer Lingus aircraft with neither United nor Aer Lingus employees, under a separate operating certificate and under newly established wages and working conditions. Obviously, this partnership will be accomplished at the expense of United’s and Aer Lingus’ own pilots and other employees. This development, where United attempts to establish an airline operation without the use of United aircraft or employees, is nothing less than the outsourcing of jobs to an international company, and clearly demonstrates that this management continues to make business decisions without regard to its pilots and other employees…..The United pilots are exploring every option to put an end to the company’s blatant disregard and lack of loyalty to the United Airlines brand.”

By the way, we all should have known that Ryanair’s CEO Michael O’Leary wouldn’t sit around and be quiet on this development. As most of you know, Ryanair is in the middle of yet another hostile takeover run at Aer Lingus.

Today Ryanair issued a statement in which O’Leary said, “

“Aer Lingus and United Airways share many similar traits. They both used to be big in the 1950’s and 1960’s, but sadly today they are just shadows of their former glory. Both have recently announced losses, job cuts and pay cuts. After months of trawling around looking for partners, it is a sad reflection on Aer Lingus that the best they could come up with is one of the weakest and biggest loss makers in the U.S. airline industry. Given the scale of United’s losses there is no guarantee that they will even be around in March 2010 to operate this “partnership”.

“It is hard to think of any transatlantic airline losing any sleep at the thought of being faced with the combined weakness of Aer Lingus and United Airlines on the Madrid-Washington route. Today’s announcement shows just how desperate Aer Lingus is to find a partner, any partner it can, even if the flights don’t start until March 2010. This so called “partnership” with another “loser” like United shows that Aer Lingus has no independent strategy, and no prospect of remaining independent.”

That’s what I like about Mr. O’Leary. He’s never afraid to tell us what he really thinks.