Monthly Archives: April 2012

PlaneBusiness Banter is Now Posted!

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Good evening Earthlings.

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

The last week has been brutal. I’m not kidding. First, we had two airlines report earnings last week, and we have the full review of the earnings call this week from Southwest Airlines and Alaska Air Group.

Our short take? Alaska turned in a respectable quarter — especially considering the airline used to simply assume it would post a loss in the first quarter. Not anymore.

This was also Alaska CEO Bill Ayer’s last earnings call. Ayer, one of the best CEOs in the business — will remain as Chairman. Should investors be worried about this change at the top of one of the most well-run (and profitable) U.S. airlines? No. I’ll tell you why.

As for Southwest, the airline has us totally confused.

It keeps pushing back dates for various merger-related integrations with AirTran. That we get. The airline clearly, as many of us said at the time the deal was announced, did not and still does not have the technology underfoot to make this deal work.

That includes the technology necessary to enable Southwest to fly internationally. Or to merge fully with AirTran. And then there are the fees that AirTran charges as part of their operation. An operation that, in a number of ways, performed better than Southwest in the first quarter.

Now they say they are going to keep all fees that are currently a part of the AirTran model in place. For at least 2-3 years.

Say what?

So now the “we’re going to migrate the AirTran operation into that of Southwest as quickly as possible” mantra has changed.

But why? The airline could switch off the fees at AirTran overnight.

Could it be Southwest is finally beginning to understand the value of “the upsell?”

No. Otherwise they wouldn’t be putting more seats in its 737-700s.

See what I mean about confusing?

About the best news out of Denton Drive last week was the news that the airline has finally made a decision about upgrading at least some of its IT incapability.

The airline announced it was going with Amadeus — and will use that company’s res product to enable it to start international operations. But not until 2014.

(Actually I think we’ll see Amadeus take both the international and the domestic PSS projects on at Southwest before this is all over.)

But clearly the major news last week was the announcement Friday that the three major unions at American Airlines had signed term sheets with US Airways — in effect telling management at AMR they want no part of a standalone airline — and pretty much throwing out a vote of “No Confidence” towards the current AMR management.

Needless to say, the fact the pilots did this pretty much confirms what we had said here last week — that the “Hale Memo” was a farce. Clearly Mr. Hale just signed his name to something that had no truth attached to it whatsoever.

And then the powers that be at AMR wonder why it is that their employees don’t trust them. Funny how that works.

We talk a lot about what happened last week, tell you what you can expect to see happen in the next weeks and months, and why you shouldn’t think that things have stopped happening just because they aren’t happening in public.

No question about it — the actions of the three union leaders and their boards last week was amazing. Something we’ve certainly never seen in this industry before.

No surprise — shares of US Airways climbed sharply last week on the news of the union agreements.

In addition, did you hear about the lawsuit that AIG, parent of ILFC has filed against Steve Hazy, the founder of ILFC, and currently the CEO of Air Lease Corp.?

The really bizarre part of the story — all the major players were in New York at the Plaza Hotel for the Air Finance Conference this week when the news hit.

I would think that might have made things just a tad uncomfortable.

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

PlaneBusiness Banter Publishing Update

Hello everyone. Just wanted to post a note to let you know that yes, there will be an issue of PlaneBusiness Banter posted this week. We will publish later today. (Wednesday)

My excuse for our tardiness is the same as it was last week — 92-year old PlaneDad. (He’s not here, so he’s an easy mark.)

Thank you to all of you who have sent me emails and tweets. PlaneDad is doing just fine — as long as he does not try and walk on his own. He leaves the hospital today, after which he will be admitted to a skilled rehab facility.

Our PBB publishing schedule will be back to normal with next week’s issue.

Talk to you later!

American Airlines Bankruptcy Proceeding Begins

It’s a packed house in Manhattan this morning as U.S. Bankruptcy Judge Sean Lane opens up the airline’s Section 1113c hearing.

Apparently the crowd is so large, they have opened up two “overflow” rooms.

I am not in New York. I am in the lovely confines of Slidell, LA, just outside of New Orleans, where my Dad is now in the hospital, awaiting transfer into a physical rehabilitation program, after suffering three falls in one week.

But fear not.

The intrepid Terry Maxon, reporter for the Dallas Morning News is on the ground there, as is Scott Mayerowitz with the Associated Press.

Scott is the more prolific tweeter of the two. Terry — he’s still getting used to the Tweetie thing.

Scott can be followed at @globetrotScott

But I would strongly recommend you follow Terry’s blog posts. You can find them here.

We also have a couple of folks on the scene (our stellar cast of PlaneBusiness undercover correspondents) and if we hear any particular tidbits of note, we will tweet them. If you don’t follow us on the Tweetie yet, our account is @planebusiness.

Speaking of, what do you think Captain Dave Bates, president of the Allied Pilots Association, thought, when he realized Terry was on the same plane to New York as he was on Sunday?

Surprise!

You can read Terry’s comments about their short “leaving the aircraft” interview here.

Good read. I continue to be impressed with Dave Bates and the way in which the APA has handled themselves over the last few weeks. No histrionics. No union/management posturing. No “looking toward the past.” Just a very methodical and business-like way of approaching the options in front of them.

What a refreshing and, I would add, much needed change.

Captain Bates and I spent some time together when we were both at the recent Phoenix Sky Harbor Airline Symposium . I came away impressed with his take on the situation then. I remain impressed.

Breaking: Three American Airlines Unions Sign Term Sheets with US Airways

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Here we go.
Just minutes ago, a joint statement was issued by the three unions that represent more than 55,000 American Airlines’ employees. Concurrent with that, US Airways issued an 8-K with the SEC.
The situation we have is this: All three unions have signed term sheet agreements with US Airways, and have now publicly thrown their support behind a merger between US Airways and American Airlines.
See below for the union statement:

_____________________________________________

ALLIED PILOTS ASSOCIATION, ASSOCIATION OF PROFESSIONAL

FLIGHT ATTENDANTS AND TRANSPORT WORKERS UNION JOIN IN

SUPPORT OF AMERICAN AIRLINES-US AIRWAYS MERGER

Union Leaders Pursue Best Path to Restore American Airlines to Preeminence

Fort Worth, Texas (April 20, 2012) — The Transport Workers Union (TWU), the

Association of Professional Flight Attendants (APFA) and the Allied Pilots Association

(APA) issued the following joint statement today:

“On behalf of nearly 55,000 American Airlines front-line employees—including

the 17,000 members of the Association of Professional Flight Attendants, the 10,000

members of the Allied Pilots Association and the 26,000 members of the Transport

Workers Union—we are pleased to confirm our support of a possible merger between our

airline and US Airways. We have reached agreements on terms sheets for collective

bargaining agreements that would govern the American Airlines employees of the

merged airline with US Airways.

“This significant step represents our shared recognition that a merger between

American Airlines and US Airways is the best strategy and fastest option to complete the

restructuring of American Airlines, enabling it to exit the Chapter 11 bankruptcy process

and restore American Airlines to a preeminent position in the airline industry.

“As envisioned, a merger of US Airways and American Airlines provides the best

path for all constituencies, including employees of both American Airlines and US

Airways. The contemplated merger would be based on growth, preserve at least 6,200

American Airlines jobs that would be furloughed under the company’s standalone

strategy, and provide employees of both American and US Airways with competitive,

industry-standard compensation and benefits. Over the long term, the combined new

airline would support greater job security and advancement opportunities for both

American Airlines’ and US Airways’ employees that are far superior to those available to

employees at either airline on a stand-alone basis. Importantly, by avoiding a lengthy and

contentious 1113 process, the new carrier would be able to emerge from bankruptcy more

quickly.

“A merger would create a foundation to establish American Airlines as a vigorous

competitor of the two larger network carriers and the industry at large. Customers of both

airlines and air travelers in general will benefit greatly from a viable third network carrier

and significantly enhanced travel choices.”

That is the full text of the unions’ joint statement.

PlaneBusiness Banter Now Posted!

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Hello everyone.

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

This week we are talking a lot about — what else? American Airlines and whether the airline should continue in its attempt to come out of bankruptcy as a standalone carrier. Or if, perhaps, it should listen to what many Wall Street analysts are saying, what we are saying, and what a lot of employees believe — that a merged entity would provide a better opportunity for the airline.

Not only that, but an agreement pertaining to a merged entity would then allow the airline to use bankruptcy to tailor the airline more effectively. And efficiently — taking into account the much larger airline that would be created.

This last week the airline and its handlers definitely went on the offensive as it attempted to sway opinion using old-school PR tactics. The attempts didn’t gain much traction, and we talk about why they didn’t. Short reason: you just can’t do that kind of stuff today and expect it to hold up. Times have changed.

In addition, the unions at American came out with their own missives last week, including one in which it implored politicians who don’t know what they are talking about to not comment on anything to do with the bankruptcy. Until all the facts are known.

I have never seen all three major unions at a bankrupt airline appear to be so in synch in a situation like this. Not a good thing if you are Tom Horton. I don’t think his recent exhortations to the pilots to “put the war paint on” had its intended result. In fact, I think it backfired.

Monday, all interested parties will be in bankruptcy court in Manhattan. From that point on, the timing is a bit nebulous, but if I were to guess, I would guess that US Airways will need to come forth in some fashion next week, if it is indeed serious in making an attempt at a merger.

American is slated to open up the hearing Monday with their side of the story, followed by presentations from the airline’s three unions. But that schedule may not be followed. Stay tuned.

But there was a lot of other news last week, including a standing-room only crowd down in Houston, where the Houston City Council took their first stab at a decision on whether or not Southwest Airlines should be allowed to fly internationally out of Hobby Airport.

As I say in this week’s issue, you rarely see consultants’ work so publicly ripped to pieces as members of the Council did this week. But that’s exactly what happened. They’ll be a rematch in about two weeks, at which time United Airlines will present its side of the story, and its study.

Speaking of Southwest Airlines, we hear that the airline should announce a new IT deal on Thursday. Or as one of our SWA friends put it in an email, “The ranking of the airline’s priorities has apparently changed.”

PBB subscribers will get the joke.

We had news this last week of yet another CFO departure, and late today, we heard that there will be another CEO departure in the next couple of months.

We also had an analyst change addresses.

Change, change, and more change.

That was certainly true with this month’s DOT Air Travel Consumer Report. The March numbers had a brand new denizen at the top of the on-time departure and lost bags rankings — Virgin America.

Meanwhile, on Wall Street, airline stocks were a bit down for the week, as was the market as a whole. Jet fuel rose modestly for the week.

Finally, my apologies for the delay in publishing this week, but we had an incident involving PlaneDad that kept us more or less occupied all day Monday and somewhat on Tuesday. He fell. No phone was accessible. He lives alone. He’s 92. Seventeen hours on the floor. He’s now in the hospital. Yours truly will be returning to New Orleans later tomorrow. You get the picture.

And yeah, it’s not a particularly pretty one.

Sigh.

On that note — go read this week’s issue of PBB. And if you are not a subscriber — why not?

PlaneBusiness Banter Now Posted!

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Hello earthlings. I would say good morning, but I’m not ready to concede that fact yet.

This week’s issue of PlaneBusiness Banter is now posted. This week we’re talking about airlines that are bankrupt, airlines that want to merge with airlines that are bankrupt, airlines that are trying to figure out how to merge with their partners who used to be bankrupt, and then there is the airline that wants to buy a refinery and produce its own jet fuel.

Never a dull moment in this industry.

This week we take a break from our American Airlines’ Bankruptcy Follies as we give you instead a summary from a panel discussion we participated in on Monday. The subject? “The Future of American Airlines.”

PBB subscribers are pretty familiar with most of what was discussed, which is more than I think was the case for most of the folks assembled at the Neeley School of Business at Texas Christian University in Ft. Worth.

Stand alone? Go belly up? Enter into a merger with another airline? Stand on the sidelines while their last chance at a major airline merger is snatched out from under their nose?

Trust me — there are a lot of scenarios here.

Twelve months out, those of us who participated on the panel will be able to see if our suggested thesis for the business case study –“Missed Opportunities” is still the case. Or if the long-term trend changes.

In other news, we talked to the folks at United Airlines last week about their continued cutover hangover. There does seem to be progress being made — and we’ll talk about that. We also talked to them about why the cutover had to be done on March 3 — and not after the new SHARES GUI was completed in nine months. We also ask the question that we were pushed to ask by subscribers — namely — was the airline motivated to do the cutover because there were management incentive payments in play?

We got answers to most of our questions. By next week, hopefully we’ll have the rest.

Meanwhile, down in Houston, Southwest Airlines wants to start flying internationally out of Hobby Airport. Needless to say, United, which is in the middle of a $700 million international terminal upgrade at IAH is not too happy about this idea. But it sounds like Houston is very happy about the thought of increased service, more money, and more jobs.

Let the fight begin.

Airline stocks had a pretty benign week last week — with one glaring exception. That of course was Pinnacle. Shares of the airline sank 60% after the airline filed for Chapter 11 protection.

And of course, we preview first quarter results, as they are just around the quarter. Long and short — we will have more airlines lose money for the quarter than post a profit.

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

PlaneBusiness Banter Now Posted!

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Hello everyone. It was indeed a dark and stormy day today in the DFW Metromess. Which is why I am glad I was not there.

Thanks for all the updates you sent to me. Many of you had windshields cracked, skylights smashed, and some of the videos from DFW International I’ve seen are downright frightening.

After it was all over, 110 aircraft at DFW International were determined to have hail damage, hundreds of passengers are no doubt spending the night there tonight, multiple tornadoes touched down in the DFW metropolitan area, and all in all, I was glad I was in Phoenix.

In addition, yes, in answer to a number of your emails, the Worldwide Headquarters made it through the event just fine. No hail. No damage of any kind.

Now that we’ve finished with all that — what else are we talking about in this week’s PlaneBusiness Banter?

Oh, you know. Bankruptcies, bankruptcies and more bankruptcies.

This week not only do we update you on the latest with the American Airlines’ bankruptcy, but Pinnacle Airlines filed for Chapter 11 protection Sunday night. And surprise, surprise, guess who put up the $74 million plus DIP money for Pinnacle? That’s right. Delta Air Lines.

Pinnacle also announced that it was ceasing its flying for United Airlines — later this year.

Which begs the question — what eventually becomes of Pinnacle? Will Delta Air Lines force a shotgun wedding between it and Comair? Or will Pinnacle simply become part of the SkyWest empire?

Then there is the matter of 30 Bombardier Q400s. Who is going to fly these aircraft after Pinnacle stops flying them for United?

It was April Fools Day Sunday. We’ll give you our take on which airline we think produced the best April Fools effort.

Last week we had a guest columnist tell us why he thinks Air Canada is not too big to fail. This week another subscriber argues that the Canadian government would never let that happen. And our PBB Brown Bag Analyst comes back and argues some more.

Just what we like — healthy debate.

Friday was also the end of the first quarter. We give you the full rundown on how the airline sector fared for the quarter, as well as for the last week. The top performing major airline stock for the first quarter? US AIrways. (Something about merger chatter that tends to run up the price of a stock.) In the case of US Airways, the stock rose 50% during the quarter.

This week in the latest edition of the American Airlines’ Bankruptcy Filing Follies, we talk about why it is we think labor has leverage in this bankruptcy; we talk a lot about “convergence” and we we update you on why WolfeTrahan analyst Hunter Keay still doesn’t think American Airlines will exit bankruptcy on its own.

We update you on easyJet’s updated fiscal year first half numbers, we sneak a look at Delta Air Lines’ RASM estimate for March it issued Tuesday morning, and oh gosh, we talk about a whole lot more.

Subscribers can access this week’s issue of PlaneBusiness Banter here.