Monthly Archives: March 2011

Big AMR Deal in the Works? Not Hardly

We dashed off a quick tweet about this hot topic last night, which I thought conveyed my sentiments regarding this hoopla surrounding a potential “deal” for AMR, parent of American Airlines. I made the point that I questioned any “offer” that was addressed to one “Gerald” Arpey. Not “Gerard” Arpey.

In a nutshell — I was implying that you should go back to whatever you were doing before you got sidetracked with news of this nonsense.

But, because I’ve received so many emails in the last 12 hours about it, I figured a blog post might help to quell any remaining hysteria.

So, my updated take? Same as last night.

For those of you who are in the dark, yesterday some outfit called Sterling Global Holdings sent out a number of letters to media types in which it said it was offering $9.75 a share for AMR. That amount represented about a 50% premium over AMR’s closing price on Tuesday.

The person who actually sent the letter is someone by the name of Al Weintraub. He claims he is an AMR shareholder. While we still don’t know if that is true or not, he does seem to be a man with a checkered past, as this post at stockpatrol.com details. It seems the SEC is not one of his fans.

No need to duplicate the excellent detective work by Dallas Morning News reporter and AirlineBiz blogger Terry Maxon, who has been all over this from the very beginning. You can read his various missives on this subject at his blog, particularly here.

My final comment? For those of you who remember these kinds of things, this reminds me of the “mystery” buyers with the money that was tied up in various banks who were going to do a deal for TWA.

Uh-huh. Right.

Okay, everyone can now go back to whatever it is you were doing before all of this hit the fan.

Meanwhile those of us who find this kind of stuff entertaining will try to figure out if this guy was trying to get the stock to move, was simply bored, is crazy, or just likes to stir people up for the fun of it.

PlaneBusiness Banter Now Posted!

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Hello everyone. This week’s issue of PlaneBusiness Banter is now posted. This week we talk a lot about what all the folks from the airlines were talking about last week as they made their way up to New York and the JP Morgan Transportation Conference.

All the usual suspects were there, including United/Continental, US Airways, JetBlue, American Airlines, Delta Air Lines, Alaska Airlines and Southwest Airlines.

It was a little preview of sorts of first quarter earnings, which are, in case you haven’t kept up, are right around the corner. In fact, the first quarter ends Thursday.

I know. Where did it go?

It was fun to listen to Jeff Smisek talk about the “new” United. As I tell subscribers, the more he talked, the more it simply sounded like the “old” Continental to me. But that is not necessarily a bad thing.

Gary Kelly talked a lot about what Southwest has been trying to do for the last five years, and what it hopes to accomplish in the next two years. He also uttered that positively horrible phrase when talking about the AirTran deal. Yes…he talked about “harvesting those synergies.”

Aaaaaccccck!

Meanwhile the folks at Delta Air Lines were reassuring investors that yes the revenues have been a little on the low side (speaking of those elusive synergies) but that the airline was going to concentrate this year on improving them.

As for American, the airline didn’t announce any further capacity cuts at the conference — an omission that had one Wall Street analyst fuming last week.

Then there was US Airways’ President Scott Kirby. He said in New York that he saw revenue strength during the first quarter that was stronger than he has ever seen during his career.

That’s saying something.

Aside from the presentations in New York, we take a good look this week at the cash/revenues ratio for the major US airlines we track on a regular basis. It’s interesting to see who ends up above the average line and who ends up below. And what is more remarkable is the wide variance between the airline with the worst cash/revenue performance and the airline that posted the best for 2010.

Airline stocks also had a pretty good week last week. Except for shares of Air Canada, which took the Goat of the Week award.

In other news we talk about the FAA reauthorization bill that is now set for a House vote this week, and the latest critical analysis that looks at the DOT’s three-hour rule and why it isn’t what it’s cracked up to be.

Alaska Airlines suffered a nasty computer outage Saturday. That was not good. But as we discuss at length, the airline dealt with the problem in a superb manner. Kudos to the airline for a great job in terms of keeping customers informed and in the loop.

As usual, there is all this and more in this week’s issue of PlaneBusiness Banter. Subscribers can access this week’s issue here.

PlaneBusiness Banter Now Posted!

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Hello to all on what is a rare dark and rainy night here in what is usually the Valley of the Sun.

Yes, yours truly is back in Phoenix this week, having come out for the 28th Annual ISTAT Conference last week which was held at the Westin Kierland in Scottsdale.

No surprise then that this week we are talking a lot about airlines, airplanes, how to finance those airplanes, the people who finance those airplanes, the people who sell the airplanes, and the people who lease airplanes.

You want a primer on airline EETCs and why they are one of the best investments on the planet? We sit down and talk to JP Morgan’s Mark Streeter — who gives us the skinny on why airline EETCs deserve more respect. (Especially from rating agencies.)

But we also update you on the industry impact from the situation in Japan. There has been a lot of news since last time we updated subscribers, including updated impact statistics from IATA.

No surprise either that with all that was going on last week, jet fuel prices continued to rise.

In the midst of Japanese angst and aircraft design drama, Phil Trenary, CEO of Pinnacle Airlines, announced his departure from the airline last week — effective the end of this week. Hello?

In this week’s Market Review, we update you on the short interest situation with the airline stocks. We give you a snapshot look as well as a trailing 12 month view. Doesn’t matter how you slice and dice it though, one airline stock continues to get hammered by the shorts.

Know which one it is?

As many of you know, the level of stock shorting is what we call a “sentiment indicator.” While it’s nothing official, an airline CFO or CEO certainly doesn’t like it when the investor community begins to increase their short positions in your stock. Kind of like being tracked by the grim reaper. “Who are these guys and what do they know?”

As I said, we’ll update you on all that in this week’s issue as well as a whole lot more.

Subscribers can access this week’s issue here.

PlaneBusiness Banter Now Posted!

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Hello to all on this rather sunny Sunday here at the Worldwide Headquarters.

PlaneBusiness Banter is posted a bit early this week, as yours truly is headed West to the Valley of the Sun later today. It’s time for the 28th Annual ISTAT Conference and this year it is being held in Scottsdale, AZ. What is ISTAT you ask? It is the trade association for those who make their living leasing, buying, and selling airplanes. You know, those metal things we voluntarily put ourselves into from time to time.

I heard last week that there were already 1600+ attendees registered for the event this year. Amazing. I remember when I was on a panel discussion at the event in 1998 and they thought it was good when they had about 400 folks show up in Boca Raton.

It’s always one of our favorite industry events to attend. I’m looking forward to it.

Yes, there was an earthquake that hit Japan last week. We talk this week a bit about how that has affected not only the Japanese airline industry, but how major international airlines who fly to Japan have been affected as well.

We’re also talking about the latest DOT Air Travel Consumer numbers. January was a very good month for the airlines — and their passengers. Except for one glaring category. Guess which one that was. And yes, it’s directly related to the DOT’s Three-Hour Rule.

Airline stocks had a very good week last week, as investors shrugged off concerns over higher fuel prices — but yet another fare increase that American Airlines tried to put into place failed as the week ended.

Spirit Airlines is up to no good again — as the airline rolled out a “Charlie Sheen” inspired ad. Meanwhile Allegiant Air is proposing a “variable rate” fare which would be finalized on the day of departure — based on that day’s fuel cost.

We talk a lot about airplanes and Wi-Fi this week. Will Boeing announce a new twin-aisle narrow body at the Paris Air Show this year? Is Wi-Fi making some Honeywell instruments go haywire in Boeing 737s? Did Aircell just blow up Row 44’s chance at long-term survival?

Never a dull moment around here.

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

PlaneBusiness Banter Now Posted!

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The price of jet fuel continues to rise, airlines continue to announce capacity pullbacks, American announces a $1 billion debt deal, and Southwest Airlines’ Rapid Rewards members still can’t figure out why their accounts show zero credits.

Just another lovely and enchanting week with the Things with Wings.

This week we’re talking about the IT misery at Southwest, as well as the airline’s strange silence concerning the issue when it hit last week. Why did the airline wait so long to publicly acknowledge the problems? And whose bright idea was it to zero out customer’s RR balances — until a customer uses their account?

It was not a pretty sight, and if the usual online travel haunts are to be believed, the angst has still not been squelched.

Then we had the big announcement from American Airlines this morning. The airline is going to the debt trough — to the tune of $1 billion. Hey, the airline has a slew of debt coming due this year — not to mention a lot of new shiny metal that has to be paid for. The airline had to do something. It certainly wasn’t going to generate it through earnings.

United Airlines became the latest airline to announce a pull back in capacity Monday, while then there is the goofy lawsuit that a group of former Northwest Airlines’ flight attendants filed against Delta Air Lines last week.

You know — if you are going to fight the airline on the union representational vote — thus holding up the results of the election — why then is the AFA supporting a suit alleging the airline has “withheld” benefits from the former Northwest FA’s? If AFA wants its former members to get the same salaries and benefits as their original Delta counterparts, drop the representational lawsuit.

Whew.

We also have an interview this week with Brett Snyder. Many of you know Brett, AKA Cranky Flier. Well, it seems that Brett recently traveled to Washington, where he participated in an American Bar Association panel discussion concerning passenger rights. Not surprisingly the three-hour tarmac rule was discussed heavily, as there was a representative of the DOT on the panel. Read our interview with Brett and see how it went when Brett and others on the panel challenged the DOT’s contention that the three-hour rule is, overall, a win-win.

Hint: It has something to do with increased numbers of flight cancellations. And the total number of inconvenienced passengers just one airline has experienced as a result of increased cancellations.

On the financial analysis side, we take a look at the new hot metric being thrown around the industry — ROIC. Which airlines outperformed their peers in 2010 and which ones lagged?

As usual, we have a whole lot more. So what are you waiting for? Subscribers can access this week’s issue here.

PlaneBusiness Banter Now Posted!

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Hello earthlings. This week in PlaneBusiness Banter we are, of course, talking fuel prices. Jet fuel prices to be exact. New York Harbor Jet closed today at $3.22/gallon. Have you filled up your Boeing 737-800 lately? Yes, well, if you have — you can understand why the airline industry is having its own equivalent of an anxiety attack.

Today American Airlines became the second major US carrier to announce a reduction in its capacity forecast for the year. (JP Morgan analyst Jamie Baker has to be sooo happy with this news — after the hard time he gave the airline about their capacity plans in the airline’s fourth quarter earnings call.) Delta already reduced its numbers in February.

Who will be next?

We also have our in-depth earnings call review this week for both SkyWest and Republic Holdings — our last two US airline industry earnings calls for the fourth quarter.

Calls for both airlines were quite interesting, but I have to say, I did not realize that ….well, I’ll keep what I was surprised about in the SkyWest call a surprise. You’ll just have to read.

We also talk about the fourth quarter numbers that a number of Asian carriers posted last week including Air Asia, Malaysia, and Tiger Airways.

We also take a look at US industry revenues for the fourth quarter this week. If you want a graphical look at how revenues in this industry are consolidating — your search has ended with this week’s issue.

Also — do you know the difference between a “weighted average” and normal average? If you frequently look at summaries about various industry metrics, it might be a good idea if you knew what the difference was. There — that’s our small effort at financial education for the week.

Airline stocks? Can we change the subject please? With crude oil prices up more than 13% on the week and jet fuel up 8% — it was a horrible week for the sector. Shares of Air Canada posted the biggest loss of the double-digit loser group.

As always, all this and more — in this week’s issue of PlaneBusiness Banter.

Subscribers can access this week’s issue here.

AMR Board Member Charged by SEC With Insider Trading

The Securities and Exchange Commission today charged Rajat Gupta, former head of McKinsey and Co., and former Goldman Sachs board member, with insider trading. The charges were filed in a civil administrative proceeding filed by the SEC’s Division of Enforcement.

What does this have to do with airlines? Gupta is a member of the AMR Board of Directors. AMR is the parent of American Airlines.

After the news broke today, Gupta voluntarily resigned from the Proctor and Gamble BOD.

According to the complaint, Gupta provided insider knowledge to Galleon Group founder Raj Rajaratnam “about companies in which he was a board member,” according to the Wall Street Journal.

The Journal says that specifically mentioned in the complaint are tips Gupta provided about upcoming earnings results for Proctor and Gamble and Goldman Sachs. He is also accused of also tipping off Raj Rajaratnam about a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway company.

Jet Fuel Closes Up 13 Cents on the Day: $3.22/gallon

New York Harbor Jet picked up another 13 cents in trading today. Closed at $3.22/gallon.

Last week Southwest Airlines CEO Gary Kelly said the airline would not reassess its capacity plans unless fuel hit $3.30 a gallon. Looks like that day could come sooner than he had anticipated.

Meanwhile, American Airlines became the second major US carrier (behind Delta who did so in February) to announce a cutback in 2011 capacity as a result of higher fuel prices.