Tag Archives: United Airlines

This Week in PlaneBusiness Banter

You want to know how much money the airline industry had to shell out in additional GDS fees in 2009 as a result of the OTAs dropping their online booking fees?

We know the answer. At least we know how much Forrester Research estimates the airlines lost.

This week in PlaneBusiness Banter I sit down with Henry Harteveldt, VP and Principal Analyst with Forrester Research. We not only talk about the airlines and their additional GDS costs, we talk about onboard Wi-Fi and why AirCell’s pricing is too expensive, American’s lousy business class seats, Braniff, the shift that Forrester sees happening from legacy carriers to LCCs by corporate travel managers, and, of course, United’s decrepit onboard entertainment systems.

In other news, we look at the surprise Continental Airlines pulled on its pilot group last week. Hey, if the pilot group is going to keep waving the Delta Air Lines‘ pilot contract around — why not just give it to them? With a few minor revisions. That is exactly what the company has offered as a counter-proposal to what the pilots offered up in December.

Is this a good deal for the airline? For the pilots?

Meanwhile, Unite, the union that represents the cabin crew at British Airways made good on their promise to strike the airline this weekend. The airline estimates it has lost £7 million ($10.6 million) for each of the three days. It also says it will take the rest of the week to get itself re-positioned. Then– on Saturday, Unite has scheduled to begin a four-day strike against the airline.

Not to be outdone by the British Airways‘ cabin crew members, pilots at Germanwings and Lufthansa Cargo are now set to join Lufthansa pilots in a strike against that airline in April. After Easter. (That was considerate of them.)

This last week ISTAT held its annual conference in Orlando. We talk about the feedback we received from several subscribers who were in attendance — and yes, ILFC’s Steve Hazy was there talking up his new airline leasing venture.

Meanwhile, lots of regulatory news last week from the FAA, the NTSB, and the Office of the Special Counsel. We talk about all that — and yep, then there was that “Flight from Hell” on Virgin America last week. JetBlue saved the day. Ouch.

On the analyst front — Dan McKenzie with Hudson Securities issued an informative research note last week that looks at the changes in the competitive capacity game. We always like those.

All this — and a lot more. In this week’s issue.

PlaneBusiness Banter Now Posted!

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Hello everyone.

The latest issue of PlaneBusiness Banter is now posted. Subscribers can access this week’s issue here.

So who do we dissect this week?

Republic Holdings.

I’ll be honest. I’m still on the fence with this attempt by Bryan Bedford and the Republic management team to cobble together a new airline out of discarded parts of Midwest and Frontier Airlines.

I was hoping that this quarter we could get more visibility from the airline’s earnings results as to how the grand experiment is faring — but while Wall Street apparently liked the airline’s results (the airline’s stock led the sector this last week picking up a cool 14%), I didn’t hear anything that really won me over.

So — call me “continued skeptical.”

Had to snicker when the airline talked about how it was “harvesting synergies” of the Midwest/Frontier combo. “Harvesting synergies”…..fine example of corporate speak.

That kind of stuff makes me break out in hives.

We had one other regional airline report earnings this last week and that airline was ExpressJet. If you look only at the airline’s net profit numbers, it would appear that the airline did pretty well for the quarter. But no — the reason the airline posted a profit was because of a huge both cash and non-cash tax issue. The airline posted a $17 million operating loss — that was also a clear indicator that no, this was not that good of a quarter.

Meanwhile, the airline remains without a permanent CEO. You may recall that the airline’s CEO Jim Ream left the airline effective Jan. 1 — as he took the SVP of Maintenance and Engineering gig at American Airlines.

The weather certainly created a whole slew of new cancellations last week for many of the U.S. carriers. Adding to the pain of the New York area airspace – the longest runway at JFK International was officially shut down today — as the airport prepares to rebuild and widen it. It will be closed for four months.

I know. Let the fun begin.

On the economic front, it was another yin-yang week for economic tea leaf reading, but on the airline economic/RASM front, analysts continue to fall all over themselves about just how great year-over-year RASM numbers are going to be for the next 3-4 months.

Or as JP Morgan analyst Jamie Baker said at one point, “If it flies, buy it!” Actually Jamie acknowledged last week that he is not quite that bullish now — but tonight we should get our first glimpse of higher RASM numbers — as Continental rolls out its February traffic report.

All this and more, including Japan Air Line’s horrendous loss, Air New Zealand’s nice profit, Aircell’s win at Alaska Air Group, fighting flight attendants, a new high-end, but reasonably priced crash pad for pilots in Houston, and more in this week’s issue of PlaneBusiness Banter .

United Airlines Blows Doors Off With January RASM Estimate

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I’m sitting here waiting for final edits to be done on this week’s issue of PBB, and was just looking at the wild party going on with airline stocks today.

In case some of you are wondering what is going on with the sector today — which is up significantly across the board — United Airlines issued the first of its revised format traffic reports after the close of the market yesterday.

As CFO Kathy Mikells discussed in the airline’s recent earnings call — and we talked about in PlaneBusiness Banter — she is attempting to increase the level of transparency in the airline’s financial reporting. As a result, the airline is now going to provide a RASM estimate, along with the usual traffic information in its monthly traffic release. The airline is also going to provide an update as to its current fuel costs.

Airlines like Continental, JetBlue, and US Airways already provide RASM estimates when they report their monthly traffic numbers.

When the new-look United Airlines release hit the wires last night — all of us received quite a shock.

The airline easily blew past analyst forecast RASM numbers — as the airline estimated that its RASM in January was up between 9.5% and 11.5%. Analysts had forecast a figure somewhere between 3% and 6% — depending on the analyst.

So — there you go. That is why airline stocks are frolicking today.

At last check, shares of United were up 17% for the day, trading at about 15.28.

The Earnings Just Keep on Coming…

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During weeks like this, I’m not really sure if I should even get out of bed in the morning.

Considering we are enjoying a nice gentle Fall rain here in the DFW Metroplex this morning, that’s even more incentive not to get up.

Alas — duty calls.

Two days, and we have now had six airlines have report earnings so far this week — with more to come. The rundown goes like this: Continental, UAL, parent of United Airlines, AirTran, Allegiant, Hawaiian, and AMR, parent of American Airlines.

Any surprises in the results that have rolled out so far this week?

No real “surprises” but a few things that do warrant some discussion.

One — United Airlines posted pretty good numbers for the quarter. Excluding special items, the airline posted a loss of $0.43 a share. This was much better than the consensus forecast of loss of $0.94. The airline posted better than expected results both on the revenue and the cost side. The airline posted a 2.8% operating margin. Granted, that kind of margin would make people in other industries weep. But in this industry, it might end up being one of the better performances for the quarter — compared to its peers.

AirTran? No real surprises here. The airline posted a good quarter. Forecast was for the airline to post a profit of 8 cents a share. That’s what the airline did. It also posted a very nice 5.1% operating margin — 13.5 points better than third quarter 2008.

Dovetailing with the upgrade note on AirTran issued by JP Morgan analysts Jamie Baker and Mark Streeter late Sunday, the airline did, in fact, post a better operating margin than Southwest this quarter. Southwest posted a 4.8 operating margin (excluding special items.)

Allegiant? Another great quarter by the airline. The airline reported a profit of $0.68, which was better than the Street estimate of $0.63. The best news from the airline’s call to me was the fact that the airline’s new service in Los Angeles seems to be off to a tremendous start. The airline said that July operating margins for the new service, which just started in May, were already pretty much up to the airline’s system average. This compares to other markets, which have usually taken as long as two years to hit the same levels.

Continental reported this morning, as did AMR.

Continental reported a net loss of $18 million or $0.14. Excluding $20 million in special charges, the airline posted a profit of 2 cents a share.

Analysts had expected the airline to post a loss of 6 cents a share.

As for AMR, parent of American Airlines — the news wasn’t nearly as positive. The airline didn’t come anywhere near a profit for the third quarter.

The airline posted a net loss this morning of $359 million or $1.26. Excluding special items, the airline posted a loss of $265 million or $0.93. Consensus had the airline expected to post a loss of $0.95. Operating margin? Excluding special items, a negative 2.5%.

We’re off to listen to the calls from both CAL and AMR. Behave yourself while I’m gone.

Glenn Tilton Just Lost His Next Job

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It was not much of a secret that United Airlines Chairman and CEO Glenn Tilton had been treading water for much of the last year, while he awaited the opportunity to be handed his next dream job — the CEO of the 2016 Summer Olympics in Chicago.

That is, if the city were awarded the Summer Olympics.

Too bad for Glenn.

It was just announced that the International Olympic Committee has chose Rio de Janeiro for the site of the 2016 Summer games.

By popular demand, I repost what has to be one our favorite shots of Mr. Tilton from the archives, as he explains, well, I’m not sure what he is trying to explain. Make up your own caption.

PlaneBusiness Banter Now Posted

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This week’s issue of PlaneBusiness Banter is now posted. Subscribers can access this week’s issue here.

What are we talking about this week?

Obviously we’re talking about the huge financial deal that American Airlines announced last week. We have all the details of the liquidity boost — but in my column this week I ask the question — why did the airline wait so long to go public with the deal? I think the answer is obvious — union/management politics.

And that is not a good thing for shareholders.

Southwest CEO Gary Kelly said Friday that it now looks like Southwest may post a profit for the year. 60 days ago that was not the case.

Oh, and all those headlines last week about Southwest targeting international destinations? Take a deep breath and a huge dose of reality.

Airline stocks had another good week last week, led by AMR, which picked up almost 30% on its liquidity news.

On the not-so-good news front, jet fuel prices were up last week as the crack spread jumped up almost 70%. Yikes.

Spirit got whacked by a record-breaking DOT fine last week. Just exactly did the airline do? Or not do?

And the der Fuhrer is back! This week’s Hitler YouTube parody takes on American Airlines’ management. Who’s next? United?

All this and more — in this week’s issue of PBB.

September 11, 2009

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Eight years ago today we all awoke to the horrific events of September 11 as they began to unfold — events that began and ended with the destruction of four aircraft, the death of hundreds of innocent passengers, and many innocent airline crew members.

While the world takes a moment today to commemorate the events that happened that day in a much larger sense — as we have since that awful day, focus on our departed airline family members. Those crew members who just went to work on what was a beautiful day in the Northeast that day — but never came home.

We will never forget them.

This is our corner of the world. And as I see it, the courage and bravery of these crewmembers deserve our heartfelt acknowledgment. And remembrance.

American Airlines Flight 11, Boston to Los Angeles, crashed into the World Trade Center.

CREW: John Ogonowski, Dracut, Mass., Captain; Thomas McGuinness, Portsmouth, N.H., First Officer; Barbara Arestegui, flight attendant; Jeffrey Collman, flight attendant; Sara Low, flight attendant; Karen Martin, flight attendant; Kathleen Nicosia, flight attendant; Betty Ong, flight attendant; Jean Roger, flight attendant; Dianne Snyder, flight attendant; Madeline Sweeney, flight attendant.

United Airlines Flight 175, Boston to Los Angeles, crashed into the World Trade Center.

CREW: Victor J. Saracini, Lower Makefield Township, Pa., Captain; Michael Horrocks, First Officer; Amy Jarret, flight attendant; Al Marchand, flight attendant; Amy King, flight attendant; Kathryn Laborie, flight attendant; Michael Tarrou, flight attendant; Alicia Titus, flight attendant.

American Airlines Flight 77, Washington to Los Angeles, crashed into the Pentagon.

CREW: Charles Burlingame, Captain; David Charlebois, First Officer; Michele Heidenberger, flight attendant; Jennifer Lewis, flight attendant; Kenneth Lewis, flight attendant; and Renee May, flight attendant.

United Airlines Flight 93, Newark, N.J., to San Francisco, crashed in Shanksville, Pa.

CREW: Jason Dahl, Colorado, Captain; Leroy Homer, Marlton, N.J., First Officer; Sandy Bradshaw, flight attendant; CeeCee Lyles, flight attendant; Lorraine Bay, flight attendant; Wanda Green, flight attendant; Deborah Welsh, flight attendant.

May they all be at peace in a much better place.

Dave Carroll’s “Truly Inspired” ‘United Breaks Guitars’ Sequel

As one of our readers said in a note to me today, “A truly inspired sequel, with higher production values!”

Yes, Dave Carroll is back.

You know Dave. The man who grabbed more than five million sets of eyeballs to YouTube with his original hit, “United Breaks Guitars.”

Yes, well, Dave’s back.

This time with the promised part two of this his three part trilogy thrashing United Airlines for first, damaging his beloved guitar, 2) the airline’s subsequent refusal to pay for the damage.

This second effort takes a pot shot directly at the United Airlines employee who Dave dealt directly with as he tried to get the airline to do the right thing — Ms. Irlweg.

He serenades the caustic United supervisor who denied his claim back in 2008 by singing, “Oh, Ms. Irlweg, we don’t need to fight. We could be best buddies, but our relationship has been muddied by a flawed United Airlines policy.”

Dave’s second effort is not as catchy as the first, but as our reader noted, “Be sure to watch for special guests Glenn Tilton, Miss Almighty Dollar and their body guards. Also, watch to the very end (after the song ends)!”

I think the tuba is the best part.

Here you go!

Good Morning Earthlings: US Airways Looking to Remove E-190s, Southwest Airlines Continues to Do the Revenue Two-Step; Liquidity Is THE Story For the Quarter

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Holly here. Reporting from the airline earnings bunker where I have been toiling since last week.

This week’s PlaneBusiness Banter will be posted later today. It’s one of those monster issues. Next week’s issue will be just as packed, as we finish up from the group that reported last week. Just way too many earnings reports compressed in too short a period of time last week. Whew.

Having said that, it was an interesting group of calls last week. Just a couple of tidbits from what we heard.

One, US Airways, which has flirted with the idea of grounding its Embraer 190 fleet in the past — in an effort to cut capacity further at the airline — sounds like it is now looking at the possibility in a much more serious way. Because of the airline’s contract with its pilots — the airline is constrained in terms of how much flying it can remove. But it could remove the 25 Embraer 190 fleet in one fell swoop — thus cutting their capacity by 2.5%. It’s really the only option the airline has left if it wants to cut capacity further and in listening to the airline’s call last week, it sounds like the airline is very close to pulling the trigger on the move.

Two, I’m getting pretty tired of hearing the folks at Southwest Airlines keep talking about all these revenue initiatives they are going to do in the …future. Third quarter, fourth quarter. First quarter 2010. Who knows.

I am assuming the reason the airline keeps talking about all these things we are going to see — someday — is because the airline does not have the technological backbone in place to do them ..NOW.

Meanwhile the airline still does not charge for passenger bags. And revenues generated from their Business Select program continue to be under original forecast.

I think there is way too much money being left on the table here.

Three, the whole question of liquidity and who has it and who doesn’t permeated the calls last week.

Jamie Baker and Mark Streeter, analysts at JP Morgan Chase found themselves right in the middle of the fray after they published a note on where they saw United, American Airlines, and US Airways in the “Dance of the Cash Constrained.”

Hoping to clear up any confusion they had caused with their note, they issued another note later in the week in which they wrote:

Did We Not Make Ourselves Clear? – We are surprised by the volume of incoming calls from people who believe that our view is that LCC [US Airways] somehow disappears.

As noted earlier this week, “assuming LCC or UAUA die off, as we believe some do, is a mistake, in our opinion.” What we do take issue with is US Airways’ ability to raise incremental capital should industry fundamentals deteriorate further or even remain stuck here in neutral. There has been very little dialogue, as near as we can tell, as to the potential that 2010 demand may prove as bad as 2009’s. Alternatively, bump up your RASM and fuel by similar amounts and one’s industry models probably won’t show any meaningful improvement. It is against this backdrop that we continue to believe that borrowing power (as well as the need for incremental borrowing) at AMR & UAUA significantly exceeds that of LCC. Put another way, AMR needs to borrow a lot of money, and we think it has plenty of ways to do so. United needs to borrow less, and we think it also has a few bullets left to fire in the capital-raising gun. However, our view on LCC is that while its near-term needs are arguably low, its capital-raising options appear largely nonexistent if demand trends simply bump along from here or in fact worsen. We therefore believe that some form of Washington-mandated combination might potentially occur. Nothing this earnings season changed our view in this regard, nor our opinion that risk/reward in LCC shares remains weak assuming most scenarios short of quick recovery (though LCC’s peer-leading 54% decline since May 6th obviously tempers our negativity).

I’d suggest you tread very softly when discussing liquidity with US Airways‘ CEO Doug Parker however. Doug went on another one of his “liquidity rants” in the airline’s call last week. Deja vu all over again. It was just last year at about the same time that analysts were saying US Airways didn’t have enough cash to get through the winter. Then they pulled off that slick $1 billion financing deal out of nowhere.

As someone observed about this industry — don’t underestimate the ability of an airline to find cash.

No matter how bad the business environment.