Monthly Archives: October 2010

Mega-Earnings Issue of PlaneBusiness Banter Now Posted!

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This week’s 130-plus page issue of PlaneBusiness Banter is now, finally, posted!

This week we take a full in-depth look at the third quarter earnings and the recent earnings calls from American Airlines, US Airways, Southwest Airlines, United/Continental, and Delta Air Lines.

Whew.

We also have earnings summaries for JetBlue, AirTran, and Alaska Air Group. (We’ll take our more in-depth look at both JetBlue and Alaska in next week’s issue of PBB.)

Our general take on what we heard in the calls from the five airlines we talk about this week?

First of all, the fact that the airlines that have reported so far have reported such strong numbers should not have come as a surprise. I was somewhat “shocked” myself to see someone referenced in a story about the results last week talking about the “shock and awe” of the profits reported.

Hog wash.

We all knew it was going to be a great quarter. And there is no reason why the fourth quarter is not going to be a good one either.

Anyway, so much for people who don’t know that much about the industry, eh?

Speaking of, I liked some comments that US Airways CEO Doug Parker made on the topic of consolidation in that airline’s call last week. As he correctly pointed out, it’s probably time to stop asking the question of when or if. “Consolidation has happened.” Yes, it has.

And, as he pointed out, that is one reason the industry in the U.S. is doing as well as it is. With fewer players out there, it is finally allowing the players who are there to pick up some pricing power. Yes, less capacity doesn’t hurt either.

But as Avondale analyst Bob McAdoo said in a research note recently, by eliminating duplicate flying and creating new traffic flows, the United/Continental merger reminds him of why he likes mergers. He then went on to list a slew of route changes that the new combined airline has already loaded in his note.

Listening to the Delta Air Lines call, one would have to be a total dufus not to see how the merging of those two airlines has created one airline that is doing a lot of things a whole lot better. The airline especially shone on the revenue side.

As for Southwest, there’s no question the airline posted nice profit numbers for the quarter, but I talk more this week about why the airline continues to frustrate those of us who have been waiting for the airline to move forward on several key infrastructure or product items. CEO Gary Kelly and Avondale analyst Bob McAdoo had an interesting back and forth on this topic at the end of that airline’s call.

And then there is American Airlines. The good news? The airline finally posted a quarterly profit. The not-so-good news? It wasn’t that big of a profit. The airline’s earnings call was not the best in the world either this quarter. We talk more about all that this week as well.

As for the folks at US Airways — the airline posted a very strong quarter. A record-breaking quarter, as was the case with more than one of the airlines last week. While the outlook for revenue upticks is going to slow down as the airline moves into 2011 (tougher comps coming up), that is basically true for most airlines, so I don’t see that as a major deal breaker here. Operationally, the airline is running one of the most efficient airlines out there these days.

As always, all this and more, including some feedback from my column last week on the change in command at ALPA national, a brief rundown on the AirTran results, and other miscellaneous dribs and drabs.

Subscribers can access the issue here. (Just a warning. If you print this issue out, it’s going to run very, very, long.)

Airline Earnings Season Kicks Off With a Bang

It’s earnings season once again.

Technically the third quarter earnings season for the airline industry opened yesterday as Hawaiian Airlines reported its numbers. But today mere mortals were definitely made aware that the third quarter number parade had started as three of the industry’s major league hitters reported their third quarter results.

Today US Airways, AMR, parent of American Airlines, and Delta Air Lines opened up the spreadsheets to the public.

Verdict? All three airlines beat previous forecast numbers.

Let’s take AMR first.

AMR posted a 3Q profit of $0.39, excluding special items. This was a small beat over the analyst’s expected $0.32 figure. That translates to a net profit of $143 million, as opposed to the forecast $110 million figure. This is the first profit for the airline in two years.

Best 60-second analysis of the AMR numbers we’ve read so far come from Jamie Baker and Mark Streeter, analysts with JP Morgan who wrote,

Does labor & lack of alliance immunity fully explain AMR’s margin woes? AMR management routinely cites lack of alliance immunity (no longer the case starting this month) and its labor cost disadvantage (gradually diminishing) as key factors of its relative underperformance. But is that all? To wit: AMR’s 3Q 670 bps EBIT deficiency to its Legacy peers (based on UAL expectations) hasn’t been this bad since 3Q02, and in fact has worsened in recent years…despite higher labor costs at DAL/NWA and no apparent immunized alliance momentum at SkyTeam and Star. We would suggest diminished corporate momentum versus a bulked-up Delta (and soon, United) as possible causes…suggesting AMR may choose to rethink its role in ongoing industry consolidation.”

US Airways reported earnings of $1.23 a share, excluding special items, or $243 million. This was just a bit better than the analyst consensus forecast of $1.17 a share.

Trivia note of the day? This quarter US Airways posted a 10% operating margin. As Jamie Baker with JP Morgan noted in his note about the results, this represents a third quarter record margin performance for the airline. And not just “the current version” of US Airways. Jamie noted that they went back through all the predecessor companies, or at least as far as they could go back, and they couldn’t find a better third quarter performance posted by the company — ever. (He did admit that they could not find the financial records for Piedmont or PSA though.)

Finally, Delta Air Lines reported a profit of $929 million, or $1.10 a share, excluding one-time items. This was just above the forecasted consensus figure of $0.94. The reason for the upside here? Better than expected revenues.

Tomorrow? Four more big guns strut their third quarter stuff as we’ll hear the third quarter numbers from Southwest Airlines, Continental/United, JetBlue and Alaska.

Don’t be surprised if we hear of more upside surprises tomorrow, especially after the Air Transport Association issued much better than expected September RASM performance numbers last night. The ATA announced that September RASM for those airlines that report to the ATA rose 14.6%, topping most analyst forecasts. That better than expected result clearly helped give a little last minute boost to the industry’s third quarter performance — as the results from these three airlines today confirmed.

PlaneBusiness Banter Now Posted!

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Hello all. It’s that time again. This week’s issue of PlaneBusiness Banter is now posted. Yes, this is the pre-earnings issue. Before the madness begins later today as Hawaiian Airlines starts off the third quarter earnings parade with its earnings release. By the time the week is over, we will have heard from all the major U.S. domestic players.

It’s going to be a strong quarter for the industry. We could even see some record profits posted by a number of denizens. And, yes, for the first time in two years, American Airlines will, finally, post a quarterly profit, although most analysts don’t expect the profit to be much more than $110 million.

On the other side of the cha-ching-o-meter Delta Air Lines is forecast to post the largest profit for the major airline group, as it should post a profit in excess of $730 million dollars for the quarter. Not bad. Not bad at all.

But before all those big numbers start to roll in later this week, we are talking this week about the recent ALPA national election of officers. To say that the largest pilot union in the U.S. just made a rather notable change in its leadership would be an understatement. We talk this week about why I like the fact that Lee Moak is the organization’s new President and why his outlook and approach to labor/management negotiations is so different from what we have seen historically from other labor leaders, not just at ALPA.

And yes, we think this is a good thing.

For those of you who are not familiar with Lee, you can catch a public posting of a PBB Lounge Lizard interview we did with him last January over on our Planebusiness.com site.

The DOT issued its latest Airline Consumer Travel Report numbers last week. Which airlines performed well and which ones didn’t? We talk about all that, and we take another look at the number of reported tarmac delays and cancellations. Is there a discernible trend here or not? It depends on how you interpret the numbers.

We also talk about the situation in France this week. To put it simply, if you don’t have to fly there, don’t. Why? Unhappy French workers. Everywhere. Including airports and air traffic control towers.

We had two new airline marketing campaigns hit the airwaves last week. What do we think of those? We’ll let you know.

Lots of mail in this week’s email bag too.

All this and more in this week’s edition of PlaneBusiness Banter. Subscribers can access the issue here.

PlaneBusiness Banter Posted!

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Greetings earthlings. Gotten a text message from Brett Favre lately?

Okay, I’ll behave.

Which is more than I can say for Mr. Favre.

The latest edition of PlaneBusiness Banter is now posted.

This week we take a look at, what else? The Southwest/AirTran deal. Lots of chatter going on about just why it was that AirTran decided to sell. We talk about that, and I answer a lot of email questions about my comments from last week concerning the deal as well.

American Airlines was all over the newswires this past week. We talk about all the airline’s news, the latest missive from the Allied Pilots Association, and we wonder just where the airline is going to get all the metal to fly all this new flying it is talking about.

Oh, and yes, the airline also recalled 800 employees. Wonder how many of those former TWA flight attendants will come back and fly? I’d be interested to know.

Meanwhile, over at United Airlines (under new management), the pilots on both sides there said this last week that they have decided to keep direct negotiations going for at least another two months — rather than ask the National Mediation Board to step in. Good. If they asked the NMB to step in it would be months before anything got done.

Five years from now — how will the industry look? What will be different? I do my best Karnac imitation this week. Complete with turban.

Then there is the strange tale of British Airways’ Captain Peter Burkill. Burkill was Captain of British Airways flight 38, the Boeing 777 aircraft that lost power in both Rolls-Royce engines during final approach to Heathrow. He and his co-pilot were hailed as heroes after they managed to land the plane safely just short of the runway.

But things turned awry for Burkill pretty quickly. When all was said and done, he quit the airline, was unable to find another job as a pilot, and found himself on welfare.

We talk about his journey this week, and the strange twist to it that just occurred.

We have all kinds of other goodies, including a rather nifty way to look at regional airline profitability that was published in a research note last week by Bank of America/Merrill Lynch analyst Glenn Engel, and the usual hot YouTube videos that made their appearance this week. We’ve got foul-mouthed furry puppets, more cartoon union negotiation stories and dancing flight attendants.

It’s just a never ending party.

All this and more in this week’s issue of PlaneBusiness Banter. Subscribers can access this week’s issue here.

PlaneBusiness Banter Posted

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

Last week was one huge week in Airlineland as not only did it mark the end of the third quarter, but the United/Continental deal closed on Friday. All of this came on top of the big news from Monday — Southwest Airlines was buying AirTran for $1.4 billion in stock and cash.

Not surprisingly this week’s issue of PBB is very heavy on U.S. domestic airline analysis. Who could be hurt by the Southwest news? Who could be helped? We go down all the scenarios.

And no, unlike a lot of industry observers and at least one analyst, I don’t think Delta Air Lines is going to take a huge hit as a result of the move by Southwest into Atlanta. More on why I think that is the case in this week’s issue.

Continental reported its traffic and RASM estimates after the close of trading Friday. The airline’s RASM estimate for September came in much higher than analysts had forecast. Will United’s follow suit? Yes, this marked Continental’s final traffic report as a swinging single.

The feeling before this announcement was that the U.S. domestic industry has experienced a drop-off in revenue during September. But now we know that at least one airline didn’t see a drop-off.

Thursday marked the end of the third quarter. And wow — was it a great one for the airline sector. So great in fact that we even had one airline stock post a triple-digit gain for the quarter. A gold star if you can guess what stock I am talking about.

But even without that stellar performance (which was, arguably merger-driven), the rest of the group enjoyed an extremely strong quarter. We run down the winners and the handful of losers.

For that matter, last week was a good week for the sector as well — as the Southwest/AirTran merger moved stocks higher. Especially shares of AirTran, which took the weekly honors for the group.

All this and more in this week’s issue of PlaneBusiness Banter.

Subscribers can access this week’s issue of PBB here.

It’s Official: United Airlines (Under New Management) Takes to the Skies

How do you know when an airline merger is official?

When someone you know who works at Continental Airlines sends you an email and his email address has suddenly changed to John Smith@united.com.

Yep. The deal is done. Today United and Continental officially became one entity, the largest airline in the world, with both airlines operating under the umbrella of parent United Continental Holdings, Inc. Shares of the new company also began trading this morning under United’s old ticker on the NYSE, UAL.

(I for one am very glad to see the airline stop trading on the Nasdaq exchange under that annoying UAUA ticker.)

Which reminds me. I need to go in and reconfigure our airline stock ticker widget over there to the right.

Pardon me while I go try to remember how to do this.