Tag Archives: American Airlines

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 .

The Earnings Just Keep on Coming…

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.

I Now Remember Why I Hate MD-80s…

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It’s those damn seats.

I just flew on American this week to Austin and back. Short flights. Really short flights.

But even so, I was reminded of how positively uncomfortable those seats are on an MD-80. At least for someone who has had hip surgery. And hey, probably for everybody else as well.

Crowded, cramped, and a rather low seat placement with funky back support. That’s what it was like.

Ugh.

Of course the flight down to Austin was not helped at all by the fact that the airline refused to hook up the APU and the inside temperature of the aircraft had to be close to 90 degrees. Or more. My ability to put up with a hot aircraft at the gate is very limited to begin with, but this experience was brutal. Especially since, because no one wants to pay to check their bag on American, it seems that everyone drags aboard bags the size of small refrigerators and then tries to cram them in the overheads. This takes time. Lots and lots of time.

Made me think of that goofball Richard Simmons. Here I was, “Sweatin’ on an Oldie.”

Okay. I’ve re-upped my American AAdvantage miles account. Paltry as it is.

But you know what? It’s going to be a long time before I get on another one of those airplanes.

What can I say? Ever since I had that great education in “passenger space” and what makes a good airline seat and what doesn’t when I visited the Boeing Customer Experience Center with David Longridge and Kent Craver showing me the ropes (or rather all the different types of seating configurations) — I now know it’s not just seat pitch.

And boy — did that lesson come back to bite me in the butt yesterday.

Literally.

And TheBeat Goes On…

Hello earthlings. How is everyone today?

I myself am just peachy. I returned yesterday from a nice two day jaunt to Austin, TX., where I was honored to have been asked to give the luncheon keynote presentation at TheBeat Live Conference.

If you are involved in corporate travel, if you need to interact with a GDS system on a regular basis, if corporate airline contracts make you dizzy with frustration, if the thought of migrating your airline’s computer system to a new version keeps you up at night — or any combination of the above — TheBeat should be required reading for you. (This link takes you to their blog, the publication is subscription only, just like PlaneBusiness Banter.

TheBeat was begun several years ago by Jay Campbell, who was a reporter for years with Business Travel News. Jay and I go way back. Waaaaay back.

The cool thing about Jay and David Jonas and Mary Ann McNulty and the rest of the gang who now work under the Promedia umbrella is that they have the same irreverent attitude towards this lovely and oh-so-entertaining industry as I do.

As a result, a gathering of Beat subscribers is very much like what a gathering of the PlaneBusiness Banter subscriber base would be. Lots of opinions, lots of in-your-face discussions, and a really worthwhile way to spend a couple of days.

So — what was the topic of my presentation this year? “Liquidity, Leverage and Labor.” I think that is pretty much self-explanatory.

What is one thing that I learned from attending this year’s conference? Amadeus is not sparing any expense as they greatly expand their presence in the United States. On a number of different levels.

Needless to say, the question of whether the GDS systems are worth it, are becoming irrelevant, or need to change into something completely different was a major topic both officially and unofficially.

The state of corporate contracts with airlines — a hot topic. The issue of just who is going to pay for the ever-escalating cost of “look to book” ratios in terms of accessing travel information online — a hot topic. The effect of individuals now being able to control their entire travel experience in the palm of their hand, thanks to the iPhone and more than 2000 travel-related applications available for that iPhone?

The general consensus is that we really haven’t even scratched the surface on how this is going to massively change the way travel is both managed and consumed.

Oh yes, which leads to another big area of change — control of travel and its expenses from a corporation perspective. Who has it, who is losing it, and who is taking it.

Oh and the procurement method of purchasing travel? If your company is still doing it — you need a new CFO. And if your CFO is the one in charge of authorizing travel, you need a new CEO.

More in this week’s PlaneBusiness Banter on the conference.

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.

Big Liquidity News at American Airlines

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One can never have enough cash.

Especially not in these days and times.

Following this train of thought, today AMR, parent of American Airlines, announced that it has put together a deal that will bring $1.3 billion in additional liquidity to the airline. In addition, the company announced that it has negotiated a reduction in the airline’s credit card holdback total of nearly $300 million. Combined, this means an additional $1.6 billion in new liquidity by the end of they year.

According to analyst Gary Chase with Barclays, this announcement, combined with the airline’s revenue fundamentals means that, according to his estimates, the airline should end the year with about $4.3 billion in unrestricted cash or 22% of trailing revenue. Give or take.

As Gary also noted, he now expects the airline to have “ample cash to manage its upcoming debt maturities. Moreover, we suspect re-financing those maturities will now be facilitated by a stronger liquidity position.”

Gary also noted that the airline is expected to release its mid-quarter update tomorrow, which effectively is a pre-announcement of third quarter earnings.

Gary expects the airline to post a $0.75 loss for the quarter — which is right in line with consensus.

Big Operational News at American Airlines

Hand in hand with the news about the new cash filling the coffers over at American today, the airline also announced that it is further cutting back on its routes into Raleigh and St. Louis.

Those assets are being redistributed to Dallas, Chicago, Miami, and New York (both JFK and LGA) and Los Angeles.

For 2010, mainline and consolidated capacity are now expected to be up only 1% (after 3.8% and 7.5% mainline capacity reductions in 2008 and 2009 respectively). However, excluding this year’s impact of H1N1 and the 2010 launch of Chicago-Beijing, mainline capacity will be flat in 2010, versus 2009.

In a special JetWire sent to employees today, CEO Gerard Arpey said the following:

“The biggest growth will take place in Chicago, where we?ll add over 50 daily flights. Our Chicago customers will gain access to 12 new cities in the U.S., and three new international destinations. We are committed to making Chicago a major gateway to Asia, and are looking forward to the launch of our new service to Beijing in the spring. Other new AA destinations will include Honolulu, Anchorage, and Vancouver. Eagle will also offer new service to a number of cities, and customer service will be enhanced as Eagle deploys most of its 25 CRJ-700 aircraft – which will be reconfigured to offer a competitive First Class cabin – in the Chicago market. Eagle has also signed a letter of intent with Bombardier to exercise options for the purchase of 22 additional CRJ-700s for delivery beginning in the middle of 2010. These new planes will complement the 126 aircraft (84 737s and 42 787s) American has ordered from Boeing. The new CRJs will be fully financed, with no impact on American’s cash balance.

In Miami, American and Eagle together will add 23 daily flights. Including changes that will take place by the end of 2009, Miami will serve four new domestic and three new international destinations. At DFW, overall capacity will increase modestly as 17 new daily departures at AA offset some Eagle CRJ flying that is being shifted to Chicago. Service to San Salvador will be reinstated after a two-year hiatus.

In New York, our JFK service will grow by seven flights a day and include six new destinations, three domestic and three international (Madrid, Manchester, U.K., and San Jose, Costa Rica). Two daily flights will also be added at LaGuardia Airport. In Los Angeles, American and Eagle will add two daily flights.

The growth at our hubs and Los Angeles will be offset by reductions in St. Louis and Raleigh/Durham. I realize these will be difficult changes for some of our colleagues at those stations. But as flying shifts from one part of the network to another, so will job opportunities, and we will work with our people in areas impacted by a decrease in flying to make new jobs available in the parts of the network that will be growing.”

September 11, 2009

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.

Vacation Coming To An End….Sigh

Thanks to all of you who have been attempting to get me to comment this week on any number of goings-on in the airline industry.

But, I am happy to say — I resisted.

Until today.

No, I said, I am on vacation, and damn it, I am going to stay offline. Until Tuesday.

Until today.

And what got me to finally break my silence? Something wickedly funny. Of course.

Most of you probably saw the recent YouTube effort in which some enterprising Boeing employee ( I would bet) did a take off on Boeing’s continued delays with the 787. The video used? A now-familiar clip from a recent Hitler made-for-television movie that seems tailor-made for such antics. In fact, there are scores of these parodies now on YouTube, including one dealing with Brett Favre’s sign-up with the Vikings. I know. Just one of those things that seems to be tailor-made for mischief.

This week das Fuhrer has made yet another appearance.

But this time it appears that a Southwest Airlines’ pilot is the one responsible for the sub-titles. And Southwest’s CEO Gary Kelly is the one barking out German invectives to his underlings.

I’ve had more than a handful of you inquire as to whether moi had anything to do with this. I think the reason is because there are some very “inside” management barbs in this new satire. So I guess the assumption is that this was something right up my alley.

But I am here to say — I am completely innocent.

That is not to say that I didn’t chuckle out loud more than once when I watched it, though. (Yeah, you know Business Select takes a hit in here, along with…..”It’s ON!”) But I think I may have laughed the loudest at the “deck party” comment.

Not sure some folks over on Denton Drive are going to be too amused, however. This one hits just a little too close to home. On more than one front.

Serious stuff? Oh of course there has been a lot of serious stuff going on in the industry this past week — including headline-grabbing FAA interventions with both American Airlines and Southwest Airlines. I mean, if this continues, the FAA should just move their headquarters to Dallas, don’t you think?

And yes, Southwest, when not feverishly repairing aircraft this week, also announced a new “fee” for passengers. I’ll be talking about this news this next week, along with a whole lot more. When my vacation finally ends on Tuesday.

Sigh.

Enjoy your Labor Day weekend everyone. Tennis in the greatest city in the world, college football at a stadium near you, and cooler temps almost everywhere.

Life simply doesn’t get any better than this. Get out there and enjoy it.

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

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.