Tag Archives: US Airways

Airline Stocks Ride the Wall Street Rollercoaster; Another Volatile Friday

What a week.

We had a slew of airlines report earnings this week — including Allegiant — which posted a stunning revenue performance for the third quarter.

And — everyone else. Who all reported losses to one degree or another. This group included United Airlines, US Airways, Alaska Air Group, AirTran, and JetBlue.

By now you are all probably cognizant of how the markets opened this morning. There was a huge sell off in the Asian markets overnight – and the futures markets were showing such precipitous declines that the NYSE decided to put in curbs before the market even opened in New York this morning.

However, after another rock and roll day, the Dow Jones Industrials closed down only 215.05 points to 8476.20, after having been down as much as 500 points at the opening bell.

Just another fun Friday on Wall Street.

And frankly, these fun Fridays are not going to go away until the Feds begin to address the housing problem.

What? Aren’t they doing that with all that bailout money you and I are now on the hook for? No.

In fact, theoriginal thinking behind the $700 billion plus bailout idea, along with all the moves the Fed has made to increase the willingness of banks to lend money to one another — was that these moves would buy the markets time. Time to sort out the housing debacle.

The root cause of this mess — a housing market that grew out of control on inflated home prices, low interest rates, and greedy banking institutions has yet, however, to really be addressed.

Oh, and yes, I’m sure you also heard yesterday that the number of foreclosures was up 70% in September, year-over-year.

So, to put all the current mess in perspective — the root cause of all of it is still just ….sitting out there.

As for the airlines, it was another bittersweet day.

Bittersweet because the price of oil continues to drop like a rock. Today the price of crude dropped 3.69 to end the day at 64.15. This is the lowest price in 17 months. Meanwhile, N.Y. Harbor Jet Fuel closed the day at $2.08/gallon, down 10 cents on the day.

On the other hand, the vast majority of airline stocks were stung badly today. The reason? The rest of the economic news is so bad.

One of the few airline stocks to post a nice gain today was US Airways. The stocks was up almost 20% on the day at one point, but it drifted back as the day went on. The stock closed up 12% to 7.97. I think analyst comments concerning the airline’s increased liquidity — which the airline disclosed yesterday when it reported earnings — was the key to this uptick.

Wall Street Sends Politicians a Message: We Run This Hood

In case you’ve been occupied with feeding the cat, doing Sudoku, or eating a late lunch, the world financial markets are one big mess today.

So much for the power of politicians in Washington to snap their fingers and hope that the rest of the world simply agrees to sit back and let Treasury Secretary Hank Paulson do his “magic.” A couple of problems with that $700 billion gift from the U.S. taxpayers that Congress okayed last week. One, it’s going to take weeks before any of that buy-back of crappy debt even begins. Two, credit markets are frozen NOW. Third, now world markets are starting to unravel.

Which brings us to the big news if you are an airline investor, or someone who simply owns shares of your own airline that you work for.

Not only are world financial markets one big mess today — but airlines stocks are getting hit very hard.

You’d think that with the price of oil now down below $90 today that investors would be snapping up airline shares right and left.

After all — think of the potentially lethal profit cocktail we have going on — sharply lower fuel costs on their way, coupled with sharply reduced capacity. It would seem like the perfect recipe for higher airline stock prices.

Unfortunately that is not how the market is thinking today. Then again, the market is not thinking very clearly about much of anything. This is definitely one of those days when fear rules.

As for the airline sector, the biggest decliners as of this posting include: United, which is down 18% at 6.68, Continental Airlines, down 20% to 12.15, Republic Holdings down 16% to 7.86, AMR, parent of American Airlines, down 18% to 7.65, and US Airways, down 14% to 5.58.

We’re Getting on a Plane and the Economy is Going Down the Tubes

Black Monday Recalled

Good morning from the Louis Armstrong International Airport. Yes, for you without GPS capability, that means I’m in New Orleans. I’m leaving this morning for Dallas, where I will attend the Southwest Airlines’ Media event Tuesday and Wednesday.

I’m sitting here looking out the window at the US Airways Piedmont retro livery. What a cool airplane. Then again I’m a sucker for most any retro paint job.

Actually, I’m looking at the Piedmont livery in-between reading about the meltdown in the financial markets, both here and overseas.

All jokes aside (re: the Origami Bank folded overnight) it’s not good out there folks. As the ex-CEO of Salomon Brothers, John Gutfreund, said this morning on CNBC, the problem is — nobody knows what the hell is going on or how bad things really are. Either here or in Europe. Much less Asia.

My personal take is that John is exactly right.

The FDIC announced a deal this morning between Citi and Wachovia. I was not able to hear just what Citi is taking over and what it is not. But it sounds very similar to the WaMu deal last week.

While they are both being cloaked as having been “absorbed” or “taken over” by other banks — the truth is that both banks failed. Period.

And I doubt they are going to be the last.

Meanwhile on the other side of the pond, Belgian-Dutch banking and insurance group Fortis was propped up as the governments of Belgium, the Netherlands and Luxembourg took a 49% interest in the financial, banking and insurance group, in return for an injection of $16.4 billion.

But that’s not all.

The U.K. Treasury said Monday it took control of Bradford and Bingley and will transfer the midsized mortgage lender’s retail deposits business and branch network to Abbey National. B&B is a major provider of mortgages in the U.K.

Meanwhile back on this side of the pond, the Federal Reserve announced a massive injection of liquidity — a deal that involves the central banks of a number of European countries

I’m not sure I want to see what’s going on when I get off the plane at Love Field.

Hang in there folks. It’s going to be a very rough day on Wall Street.

Update on the Potential Benefit of $2 Cokes on US Airways

Back at the WHQ today. More from me later today. But first — as they say in TV land — an update on something I wrote earlier this week in regard to US Airways. In my post the other day about how quiet the flights were — sans the usual drink service — I alluded to the fact that perhaps the airline was also saving some money in terms of not having to provision as many soft drinks, etc. on board.

The airline continues to stock just as much, in terms of provisions, as it did before. I heard this first from one of the flight attendants on my flight yesterday and a quick check with the folks in Tempe today confirmed that yes, this was the case.

So the airline is not really saving any money, in terms of any weight issues onboard. And no — there is no danger of passengers being without ample refreshment should a long delay occur.

Where the airline is saving money is in the fact that fewer people are drinking soft drinks, which, obviously, means that in the big scheme of things the bill from Coca-Cola or whomever is lower than it would be normally.

Then there is the actual revenue the airline is making from charging for drinks.

Another point — several readers wrote me the last two days and asked more or less the same question. “Does this mean I think all airlines should do this? Have I lost my mind?” Or words to that effect.

No.

As I said in my speech at TheBeat Live Conference on Tuesday, we are in the middle of an extremely creative time for the airlines right now. The question is — given an airline’s brand and the level of service it wants to provide — against its current revenue and cost structure — what is an airline going to do in terms of ancillary revenues?

In the case of US Airways — the airline has continued to push to be more of a low cost carrier since America West merged with US Airways. In effect the airline really has no definable “brand” right now. So for them, I don’t think it is that big of a problem.

But — would I recommend that Continental Airlines do it? No. Never. It would be a total 180 degree turn to the airline’s continued attempt to stress a particular level of passenger service.

And I doubt Continental Airlines will do it. They may do some other things. But they are not going to charge for Cokes.

Just how to tweak an existing airline brand right now is a huge question — given the revenue and cost scenarios. But I don’t see this as a negative. I see it as a very opportunistic time for the industry. Or at least for those who are willing to break the old mold of “well if airline A is doing it, we must all have to do it.”

I just don’t think that holds anymore. Some things are going to work well for some airlines. But they are not going to work for all airlines in the same manner. Yes — those “marketing” people at airlines may just have to start earning their stripes. Instead of simply thinking about what routes to add next week.

Shock and Awe as Holly Discovers An Unexpected Benefit to Traveling on US Airways

electric shock sign.jpg

I will be the first one to tell you that when US Airways announced it was going to start charging for soft drinks I was not a big fan.

No, it was worse than that. I thought they had lost their minds.

What self-respecting marketing-blooded human being (like myself) would agree that this was a smart move for the airline? Much less — for their passengers?

Then last week US Airways President Scott Kirby made headlines (which we noted in PlaneBusiness Banter this week) for telling the folks at the Calyon Securities Airline Investor Conference that hey — the change was proving to be a good deal for US Airways. And its passengers. The cabins were quieter, there was less trash to worry about, and the lines were shorter for the lavs. And yes, the airline was, net/net, improving the numbers on the bottom line, which is what we had suspected was going to be the case.

Some folks had thought the airline would need to sell a lot of drinks to make the move a smart one. No, not necessarily. If the airline sells fewer cans of Coke, they will save money in terms of weight and in terms of the number of soft drinks they have to pay for and stock onboard.

When I read Scott’s comments from last week, I laughed. Knowing Scott — I had to give him a gold star for what I thought was an attempt to make a positive statement about what was obviously a “deterioration” in passenger service.

Okay, I eat my bad thoughts. And I also admit that I am as shocked as anyone.

I flew two segments today on US Airways as I traveled from New Orleans to Cleveland. Tomorrow I will present the luncheon keynote speech for The Beat Live Conference.

And you know what?

The flights were more enjoyable. They are quieter, less stressful (where’s the cart, when is the drink coming, put down the tray, put up the tray, can I get past the cart to get to the bathroom) and yep, the lines are not as long outside the lavs.

Now — one caveat.

The flight out of MSY was held for an hour by ATC because of delays in Philly. That meant that folks in coach were sitting an awfully long time and were going to be sitting even longer without anything to drink — unless they purchased it.

So about 3/4s of the way through the hold, as we sat on the taxiway at MSY, the flight attendants began to distribute water to those passengers who wanted some in coach. Nice touch, and it was done well.

And that is where — going forward — I could see some potential problems. If, say, an aircraft was forced to sit for a long time somewhere with no food and a limited supply of beverages onboard.

But other than that — yeah, I was as shocked as anyone. But I’m telling you — it was different. And good different.

Oddly enough I wrote this week in PBB about the big revenue gamble that Southwest Airlines has taken by advertising the hell out of their “full service, no fee” strategy. They really have dug a huge hole for themselves now — both in terms of putting themselves out there as the only major airline not charging fees — which could backfire if they have to reverse course — and in terms of lost potential revenues.

Today, after the two flights I had — I’m convinced that paying $2 for a Coke on an airplane is not a bad thing. Either in terms of the passenger experience — which, shockingly, is actually improved — or the airline’s bottom line.