Monthly Archives: April 2009

Air Force VC-25 and F-16s: What were they thinking?

Photo: A U.S. Air Force VC-25 and F-16 escort in the skies near New York on Monday morning.

A video from The Wall Street Journal reports on the secretive VC-25 (Air Force One) and F-16 flights over New York City this morning.
The FAA has said the flights were planned and that all agencies were notified. However, someone seems to have forgotten to tell the people living and working nearby, including New York Mayor Michael Bloomberg.
The NYPD issued this statement, according to The New York Times: “The flight of a VC-25 aircraft and F-16 fighters this morning was authorized by the F.A.A. for the vicinity of the Statue of Liberty with directives to local authorities not to disclose information about it but to direct any inquiries to the F.A.A. Air Traffic Security Coordinator.”
Another video uploaded to YouTube illustrates one New York resident’s fears about the low-flying planes. “That’s not normal,” says the woman in a concerned tone. No, it’s not.
Why the secrecy? What were they thinking? My bet is that they weren’t thinking at all. Still, I’m sure the resulting photos of the jet passing by the Statue of Liberty will be very provocative for future Air Force enlistment materials. Never mind the frayed nerves and panic induced by the photo shoot, right?
Update: Late this afternoon, Louis Caldera, Director of the White House Military Office, issued the following statement:

“Last week, I approved a mission over New York. I take responsibility for that decision. While federal authorities took the proper steps to notify state and local authorities in New York and New Jersey, it’s clear that the mission created confusion and disruption. I apologize and take responsibility for any distress that flight caused.”

Which Airlines Are Potentially Exposed the Most to Mexico Risk?

pig.jpg.jpeg

Gary Chase, airline analyst with Barclays, issued a note this morning in which he listed the exposure of different airlines to the potential short-term risk of passengers curtailing travel to Mexico.

Gary also took a look at the effect that the SARS scare had on the Asian carriers in 2003, and then extrapolated a kind of “worst case” scenario for our carriers — in terms of their Mexican exposure.

Of course, all of this is just conjecture at this point. This analysis is only looking at one part of the puzzle — the US carriers current exposure to Mexican flying. This assumes, which Gary pointed out, that the flu is able to be contained in Mexico.

And right now, that looks like a big assumption.

But let’s say that is the case. If that is the case, Alaska Airlines, Continental Airlines, US Airways and American Airlines are the four airlines that have the biggest percentage of their passenger revenue tied up on Mexican routes. Note that even though Alaska’s total O&D revenue tied to Mexico puts it fifth on the list, those flights make up 8% of the airline’s passenger revenues. A huge amount.

Airline Sector Hit Hard By Flu Concerns

Just in case you were so wrapped up with the NBA playoffs or the NFL draft that you didn’t watch much news over the weekend, or you didn’t read Jonathan’s note here that was posted last night — the reason your favorite airline stock is posting a loss this morning is directly attributable to one thing. Swine flu.

Or rather, fears that the flu, which has, up to now, been concentrated in areas of Mexico, but has already crossed the border to the U.S., has gone beyond the stage where cases that have been confirmed can be ‘contained.’

As a result, memories of the SARS epidemic of a few years ago, and what it did to the industry, (the Asian carriers were particularly hard hit) has investors selling off shares of airline stocks faster than you can buy a box of Kleenex.

The major airlines are taking the brunt of the selloff this morning, with shares of Continental, Delta, US Airways, United, Southwest, and American all down by double digits. Or very close to double digits.

PlaneBusiness Banter Later Today

A publishing update for PlaneBusiness Banter subscribers. We will be posting the latest issue of PlaneBusiness Banter later today. It is a huge issue, as we take a long look at not one, not three, but five airlines and their earnings. Delta Air Lines, Allegiant, AirTran, US Airways, and Continental Airlines.

I’ll post a note here, as always, when the mammoth issue is ready to be digested.

Southwest Airlines Picks the Wrong Day to Trumpet Their LinkUp With Volaris

Talk about bad timing.

The Associated Press headline reads, “Southwest Airlines to add link to Mexico’s Volaris.”

This morning Southwest Airlines issued a press release in which it announced that it was putting a link on its website which will allow customers to buy tickets on Mexican airline Volaris. The two had already announced plans for a marketing/codeshare agreement last year.

Just what I want to do today. Fly to Mexico.

Just what an airline wants today — have their name in the headlines along with the word, “Mexico.”

Flu outbreak scare will hurt travel, but how badly?

Photo: Health officials use heat-sensing cameras to scan arriving passengers at Tokyo’s Narita airport.

There’s no doubt that outbreaks of swine flu will impact airlines and the entire travel industry. US Airways and United Airlines have already issued travel advisories and are giving passengers to Mexico City options for rescheduling their travel. Asian and European nations are implementing passenger screening. Other governments are looking to ban pork imports, despite few links between the flu and eating any meat products.
The initial repercussion will be on those international airline passengers traveling to Mexico, but how far will the virus — or simply the fear of the virus — spread? Despite the milder cases of flu in the United States and Canada, compared to the nearly 70 deaths in Mexico, the declaration of a public health emergency by the Dept. of Homeland Security and World Health Organization will do little to encourage travelers to make short term plans to visit any affected areas of North America.
The full economic hit won’t be known until after the medical crisis has passed and travel companies have reported traffic numbers. Just like SARS and other health outbreaks, airlines are in the trenches and have to respond fast to these threats. How much more can airlines and public health officials do to curtail the spread of swine flu and future disease outbreaks?

Happy Birthday Barbara Jean Austin!

s1547336262_67857_4351.jpg.jpeg

I can’t resist. Today is the birthday of one of my favorite people. Some of you in the DFW Metroplex media market know her as Barbara Austin. Some of you in the New Orleans media market know her as BJ Austin. Some of you just know her as the eternally optimistic child-like small person with the red hair and maniacal laugh who asks very tough interview questions of her prey. Whoever that happens to be at the time.

BJ, who is currently working at KERA, after a long association with KRLD in Dallas, and I have known each other for 30 years. Ugh. That’s almost embarrassing to admit.

She is not only one of the most delightful people on the planet, she is one hell of a good reporter.

And she is a fantastic waitress on roller skates. Which is no doubt a side result of having been a professional dancer for many years in New York.

Another lifetime. New Orleans. My second entrepreneurial adventure. Restaurant in the Quarter. BJ was working at WGSO, the all-news station in New Orleans, reporting on the antics of the Mayor Morial administration while serving up food and drink at night to hungry tourists. And yes, one night she wore roller skates.

Then there was the night she and another employee of mine, Larry Hart, put on a performance of “The Gin Game” for our regular customers.

You get the picture. She’s one of my most creative and intelligent friends. And she is one of the best reporters anywhere. Not only that, but somehow in the midst of all this — she and husband Jack raised a most creative and intelligent son, who I was honored to hear play at the Meyerson a few years back with his award-winning high school band.

Happy Birthday Ms. Austin. The world would be a much better place if more adults were like you.

What Did This Quarter’s Earnings Tell Us?

It’s Friday. Do you know how well YOUR favorite airline did for the first quarter of 2009?

As of today, all the major airlines have reported earnings.

So what have we learned? A couple of things.

One, Allegiant Air continues to blow away everybody else on the block. The travel company, which happens to include an airline that happens to fly only MD-80s that also happens to make money hand over fist had a spectacular first quarter. As I mentioned earlier this week, a 31.3% operating margin was posted by the airline.

You just don’t see margins like that in this industry.

I told you guys not to believe that anti-Allegiant rant that CNBC’s Jim Cramer spewed out not too long ago. Cramer, by lumping ALGT with Las Vegas “casino stocks,” proved that his research is lacking.

We also learned this week that AirTran had a great first quarter. No, the results were not as stratospheric as those of Allegiant, but they were pretty damn good. Nice fat profit, and nice big declines in costs. Excellent job.

We also learned that while we may have hit a point where declines in demand have more or less leveled out — nobody, and I mean, NOBODY, (well, except for Allegiant) is ready to call what is going to happen in May and June.

Preliminary bookings are down — but will they recover, as more and more passengers continue to book tickets closer in? Then again, at the heart of the demand decline here in the U.S. is the declining number of premium passengers. That is only going to improve when the economy improves.

What I might have concerns about if I were an airline other than Allegiant is just how much of that previous business travel my airline had before does return. Even if the economy picks up.

You don’t have to look very far to see what is happening in companies both big and small these days. Companies are cutting back on travel and are using video conferencing more and more. Heck, today anyone with a laptop can connect via video to a small one-on-one meeting or to a meeting with many more participants. There is no question that the quality and ease, not to mention the low to no-cost of such efforts — has changed dramatically just in the last couple of years.

So yes, I am concerned that going forward — if a company gets used to using video conferencing as a result of the current belt-tightening — is that same company going to be anxious to start spending money on sending their employees to far-flung regions of the country? Much less the rest of the world? Just because they now have a little extra money to spend?

I’m not so sure.

And, if this is the case — which airlines stand the best chance of inheriting the earth? Or at least the bulk of the shorter-term profit kitty? Those airlines that cater to the leisure traveler and have the low fares and low cost structure to make money doing so.

Which is one of the reasons why Morgan Stanley analyst Bill Greene recently advised airline stock investors to move out of U.S. legacy carriers and into low cost, low fare airlines such as Allegiant, AirTran and JetBlue. US Airways kind of sneaks in there as well, as it has the lower fares and the lower cost structure and a bigger domestic market than that of American, United, Delta, or Continental.

Earnings Overload

Hello everybody. It’s earnings overload week in the airline sector this week, and my head is buried under the avalanche.

I’ll be back later with some observations from the airlines that have reported in so far this week.

For now, it’s time to listen to another call.

Talk to you later.

Good Morning! PBB On Its Way; ALGT Keeps Piling On The Good News

AllegiantPlanePhoto.jpg.jpeg

Good morning earthlings. We are putting the final touches on this week’s long issue of PlaneBusiness Banter. Yes, it’s our first official earnings issue of the first quarter earnings season, and both American Airlines and Southwest Airlines get a very long look in this week’s issue.

I’ll post a note here when it is finished and posted for subscribers to read.

But in the meantime, I just wanted to mention an extremely impressive metric that was posted by Allegiant Travel in the first quarter.

While it is impressive enough that the airline posted better than expected profits for the quarter late on Sunday — as the company reported earnings of $28.2 million or $1.37 a share — that is only the tip of the impressive news.

The really impressive statistic in these results?

The airline posted a 31.3% operating margin.

Got that?

If that mind-numbing number doesn’t get your attention, I don’t know what will.

More later. Have to go finish this week’s PBB.