Tag Archives: airTran

PlaneBusiness Banter Now Posted!

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Hello everyone. This week’s issue of PlaneBusiness Banter is now posted. This week we wrap up our Q2 earnings coverage with a look at Air Canada and WestJet. Bottomline? WestJet turned in a terrific performance. For Air Canada, the airline has made good progress wading through the swamps of its myriad of labor contracts that came up this year, but the airline was close-mouthed about its efforts at pension restructuring it is trying to incorporate in the new contracts.

Meanwhile, RASM performance at Air Canada lagged, the airline still has that large overhang of debt, and oh yeah, there are those pension obligations.

Meanwhile, the airline still sounds as though it intends to go through with its idea for a new low cost carrier.

I still say that is a mistake.

In other news, we look at the DOT Air Travel Consumer Report for July. Yes, the rather obvious decline in the on-time stats of US Airways continued in July, as did the abysmal showing for American Eagle in three out of four categories.

Lots of labor follow-up this week including; Southwest pilots; AirTran pilots, United baggage handlers, mechanics at American Airlines; and Delta Air Lines‘ pilots.

How about this effort on the part of a group of Delta Air Lines‘ pilots to start their own independent union? They claim they have more than 3300 pilot members and their hot-button issue is …scope.

Meanwhile, we’ll update you on the latest in the AirTran/Southwest pilot contract activity. Last week some Southwest Airlines‘ pilots were upset after SWAPA sent out a letter detailing some of the terms of the proposed deal. Meanwhile, AIrTran pilots have yet to see anything, as their MEC still hasn’t decided if they are even going to a copy of the deal.

[Insert the voice of the old commercial for that silly game “Operation!” Only insert “Arbitration!” instead.]

And — then there was the ALPA representational election at JetBlue. JetBlue pilots voted no.

American put out more details about how it plans to “spin-off” Eagle last week. Apparently there are no third parties involved at this point in time.

Oh, we talk about crack spreads this week, Ryanair buying airport buildings, Tiger Airways taking to the skies again, Gol’s abysmal second quarter earnings, why Spirit Airlines is sizzling hot, and more.

Subscribers can access this week’s issue here.

PlaneBusiness Banter Now Posted!

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Greetings to all you turkey lovers out there.

It’s Monday. It’s time for this week’s issue of PlaneBusiness Banter.

Speaking of turkeys, yes, we’re talking about the TSA this week. Isn’t everyone?

But we’re also talking about Deutsche Bank analyst Mike Linenberg’s rather gushing research note on Republic Holdings. Also — where does Mike think the industry now has too many competitors?

We’re talking union stuff too. Two more thumbs down employee votes at Delta Air Lines, a thumbs up from the Southwest Airlines’ flight attendants on their contract ratification and a thumbs up ratification from the AirTran pilots on their new contract.

However — there is one part of the new AirTran pilot contract that we are curious about. Can you guess what part that is?

Then there is the picketing this week by the Continental and United pilots. Pahleez. Is this really necessary?

Not sure if you have been keeping up with the fight north of the border, but Canada and the UAE are about to go to blows over the issue of giving Emirates more access into Canada. I mean, this is getting serious.

We have a lot more information this week regarding exactly what happened when that Qantas A380 had an engine suffer an uncontained failure. The laundry list of items that were affected on the aircraft is not pretty.

Meanwhile, as has been the case since the beginning, most of the information coming out concerning the problems with the Rolls-Royce Trent 900 engine is not coming from Rolls-Royce.

Then we had Boeing running around, telling websites they had to remove photos of the damage to its 787 test aircraft. Lovely. I do so love it when a company thinks they can make a problem go away by removing the evidence in a rather heavy-handed manner.

On the GDS front, American Airlines seems more determined than ever to cause mayhem and madness in the travel agency business. More on their latest moves in this week’s issue as well.

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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Okay all you hungry people. This week’s issue of PlaneBusiness Banter is now posted.

Whew.

This is the last earnings issue for the quarter, and that is a good thing.

Next week we can get back to our normal format and usual publishing schedule. Right before we embark on our Turkey day extravaganza.

But — before then — this week we have our hand’s full.

First, we have an update on the Rolls-Royce Trent 900 engine failure involving the Qantas A380. All the Qantas A380s remain grounded. Rolls still isn’t saying a lot. But everyone else sure is. Engines are apparently being taken off the A380 production line, Singapore Airlines has swapped out three engines already, and, well, this is a very serious situation.

It is going to make for a very serious dent in Rolls-Royce’s net profits as well, as you can bet all these airlines are keeping tabs on their expenses incurred and Rolls is going to receive the final bill.

Not to be left out, Boeing had its own problem last week with one of its 787s — as it was forced to land after a fire broke out in an aft electrical panel.

When we’re not talking aircraft and engines, we’re talking TSA.

As someone who is now faced with the prospect of having to go through an “extended pat down” every time I fly as a result of having a big piece of titanium in my hip, I am not happy about the new “group and grab” procedures.

Funny thing though — we received a number of notes this week from airline crew members. It appears that the TSA has pulled back on insisting on either the AIT scanner or the “extended pat down” for crew members. Not in all locations though.

No, the TSA has not issued an official backdown. But I’ve received enough notes to tell me that there has been a relaxation in the previous directives.

We also wrap up third quarter earnings coverage this week with our own “extended” look at Republic and Pinnacle.

If you took a look at the stocks of either airline and how they performed for the last week — you might have some questions.

In the case of Pinnacle, shares soared.

In the case of Republic, they did just the opposite.

We’ll tell you why.

We also go over the September DOT Airline Consumer Travel Report. And the September tarmac and cancellation numbers. Very interesting “rounding” of numbers going on here. We talk about all that as well.

There was a rather bizarre Airbus A380 order announced last week, the DOT and FAA sought to assure air travelers that they are working to make sure older aircraft are safe — only problem is that the efforts won’t take effect for years — and hey, the future King of England’s wife-to-be has two parents who met while working for British Airways.

We only talk about the important things here at PlaneBusiness Banter.

Subscribers can access this week’s issue here.

Southwest Airlines To Buy AirTran

Funny thing about the recent push by Southwest Airlines to get their flight attendants and pilots to agree to contracts that will allow 737-800 flying. As I told an audience in Chicago last week — I seriously doubted the airline was only interested in getting their employees’ okay so that they could order new airplanes.

Bingo.

Today the reason became clear as the airline announced it is purchasing AIrTran.

This morning Southwest announced its intention to purchase AirTran for a combination of cash and Southwest stock. Each share of AAI will be exchanged for $3.75 cash and 0.321 shares of LUV with an adjustment mechanism to provide $7.25 to $7.75 in value for each share of AAI.

Are we surprised? No.

Atlanta has long been the big gaping hole in Southwest’s business model. In addition, Southwest now realizes that with a mature (i.e., flat) market in the domestic U.S., the only way to grow is through the acquisition of a new livery as the opportunity for organic growth is practically non-existent.

PlaneBusiness Banter Now Posted!

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Hello all.

Live and direct from the PlaneBusiness Worldwide Steaming Hot Headquarters, we bring you a 150 plus-page issue of PlaneBusiness Banter.

Yes, this is, without a doubt, the mother of all earnings issues.

We have full transcripts and PlaneBusiness Banter earnings summaries for Southwest Airlines, AirTran, JetBlue, Alaska Air Group and Allegiant Travel this week.

Not only that but we give you the numbers that were just reported from Air France/KLM, Lufthansa, British Airways, ANA and Singapore Airlines.

Whew.

All of this plus our take on the more “newsworthy” topics from the past week including the meltdown at Mexicana (and no, we’re not talking about the FAA’s downgrade of the Mexican aviation safety rating) and the showdown between the pilots and management at Philippine Airlines.

So what do you think? Do you think the pilots and flight attendants at Mexicana should have taken up management’s offer to buy the airline?

Or — should they have cut their pay and benefits essentially in half?

As we were posting this issue, the news came down: Mexicana has filed for bankruptcy.

One thing that will do — it will stop airline leasing companies from taking their aircraft back. Apparently at least three of the airline’s aircraft had already been snatched back by their owners.

Aside from all this turmoil, we then have the latest attempt by the U.S. government to “make the airline industry a better and safer place.”

Yes, from the same folks who brought us the Three-Hour Tarmac rule, the Senate and the House passed a bill last week that will see the minimum number of flight hours required for a regional airline pilot position jump to 1500.

Needless to say, I can understand why members of Congress want to look like they are making the industry a safer place — but is a 1500 hour flight time minimum the way to do it?

One of our regular contributors gives us his take on the potential ramifications of this legislation in this week’s issue.

One thing that is a constant in this industry is that it always has a lot of debt.

But while most of the airline’s debt ratings are in the “junk” category, shrewd investors know that investing in airline debt can be quite profitable.

This week I assemble the latest credit and debt comments on the major airlines from Mark Streeter — the man who does this for a living for JPMorgan Chase. I think Mark is the sharpest guy on the Street when it comes to airline debt.

As for airline stocks — a Foreign Flyer took the first place nod last week in terms of gains. Overall, it was a good strong week for the sector.

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

Subscribers can access this week’s issue here.

Reading the Fine Print: Southwest Taking a Page from the AirTran Playbook

Wanna get Southwest to begin service to your city? Wanna write a check?

If some of you are scratching your heads over the news that Southwest Airlines is going to start service from “Northwest Florida’s New International Airport near Panama City, Florida” in May 2010, all one needs to do is take a look at the fine print in an SEC filing from the St. Joe Company — a major land developer in the Florida panhandle.

According to St. Joe’s SEC filing dated today, $14 million in revenue guarantees, profit sharing, and a no-compete agreement are just some of the “enticements” being put on the table for Southwest.

Is this AirTran or Southwest we’re talking about?

“St. Joe has agreed, to the extent that Southwest operates at a loss, to make quarterly cash payments to Southwest to cover shortfalls in the results of Southwest’s operations at the new airport during the first three years of service. For purposes of the break even calculation, the agreement establishes fixed amounts for Southwest’s non-fuel expenses and the minimum revenues that will be attributable to the air service. It also provides that Southwest’s profits from the air service during the term of the agreement will be shared with St. Joe up to the maximum amount of St. Joe’s prior break even payments.

The term of the agreement extends for a period of three years after the commencement of Southwest’s air service at the new airport. The agreement may be terminated by St. Joe if the payments to Southwest exceed $14 million in the first year of air service, or $12 million in the second year of air service. St. Joe may also terminate the agreement if Southwest has not commenced air service to the new airport within 90 days of its opening. Southwest may terminate the agreement if its actual annual revenues attributable to the air service at the new airport are less than certain minimum annual amounts established in the agreement.
Southwest’s obligation to commence air service to the new airport is conditioned upon: (1) the certification of the new airport by the Federal Aviation Administration and the Transportation Security Administration on or before April 15, 2010; (2) receipt by the local Airport Authority of a certificate of occupancy for the new airport on or before April 15, 2010; (3) the execution of satisfactory agreements between Southwest and the Airport Authority authorizing Southwest to use and lease space at the new airport and to receive any cost mitigation measures that may be available from the Airport Authority; (4) the execution of an agreement between Southwest, the Bay County Tourist Development Council, the Panama City Beach Convention and Visitors Bureau and the Beaches of South Walton Tourist Development Council, no later than 30 days from the date of the agreement, regarding the coordination of marketing resources and efforts for the air service; (5) the execution of an agreement between Southwest and Coastal Vision 3000, no later than 60 days from the date of the agreement, regarding the establishment of a program through which Southwest would receive available room nights free of charge at various rental properties in Northwest Florida for use in the marketing efforts for the air service; and (6) the execution of any other agreement that Southwest deems necessary or appropriate prior to the commencement of the air service.

Southwest has agreed that it will not commence air service to any airport within 80 statute miles of the new airport during the term of the agreement. In the event Southwest starts service to any airport that is more than 80 statute miles but within 120 statute miles from the new airport during the term, Southwest and St. Joe will either negotiate a modification to the terms of the agreement to accommodate the impact of such service or the minimum revenues used in the annual break even calculations under the agreement will automatically be increased by 10%. In such event, Southwest has agreed that the air service to the new airport in Bay County would not be diminished.”

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.

Flea Market Open for Business: US Airways, Delta, AirTran and Continental Play “Let’s Make a Deal” With Slots

First, AirTran and Continental announce a slot swap involving slots at Newark, Reagan National and LaGuardia on Tuesday. But the scope of that deal was swamped this morning with news that US Airways and Delta Air Lines have agreed to terms on a much larger deal that involves both a swap of slots, and a few routes thrown in for good measure.

This morning US Airways announced that it will obtain 42 pairs of slots at Reagan National, as well as access to slots in Tokyo (NRT) and Sao Paulo, Brazil (GRU) from Delta Air Lines.

In return, US Airways is giving Delta Air Lines 125 pairs of slots at LaGuardia.

This is a big deal for US Airways. The airline estimates that the deal will create an additional $75 million dollars in revenue per year.

It’s a positive for Delta Air Lines as well, as Delta continues to muscle into the New York market in a major way. This is a huge gain for them.

And no, this does not affect the US Airways’ Shuttle operation in any way.

Meanwhile, yesterday it was reported that AirTran plans to stop flying to and from Newark completely — giving its takeoff and landing slots to Continental Airlines. In exchange, Continental is going give AirTran slots at both Washington Reagan and LaGuardia.

Apparently AirTran will give Continental 10 slots, a single gate and a jetway at Newark. In exchange, Continental will give AirTran four slots at LaGuardia and six slots at Washington Reagan.

So, those are the facts.

What does all this horse trading mean?

It means that the bigger airlines are doing exactly what we said they were going to do. They’re getting creative.

While most headlines over the last few months have continued to talk about the lack of liquidity, “Which airline is most at risk?” — we have continued to make the argument in PlaneBusiness Banter that in this industry — good management teams are going to find a way to survive.

Look at the airlines involved in these two deals announced. Four of the better management teams out there.

We don’t see United, we don’t see a mention of American.

Meanwhile, Republic and Southwest are slugging it out over Frontier. Again, two of the better management teams in the industry.

Oh, and speaking of American – is it just me, or does that Holy Grail of a British Airways – American Airlines anti-trust agreement seem to continue to diminish in importance as the days go by?

I continue to believe that American, by putting all of its eggs in one basket it doesn’t even have in its possession yet, runs a big risk of being odd man out when the music stops.

PlaneBusiness Banter Now Posted

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

It was a busy week for the Things With Wings last week.

First, American Airlines reported its second quarter earnings results. The airline lost a lot of money. $390 million to be exact. $319 million excluding special items. However, you’d never have known it if you listened to the airline’s earnings call — which seemed focused on one thing — liquidity. Oh, and capacity reductions. That’s fine, but there are other aspects of an airline’s operations I’d like to hear about.

Then we had the blockbuster news concerning Continental’s Chairman and CEO, Larry Kellner. As I write in this week’s PBB, even though the management backbench strength at Continental Airlines is strong, and the airline should be able to carry on just fine as Larry goes to seek his fortune in the equity investment game — it’s quite discouraging to see one of the industry’s best and brightest leave.

Following up on our piece in last week’s issue about United’s bone-headed (or would that be heavy-handed) attempts to get travel agencies to take on more financial risk — or rather some travel agencies — the airline said late last week that it is going to give agencies 60 days to implement the business operation changes it seeks.

This whole thing still reeks. Nothing the airline says rings true.

Southwest Airlines had its own place in the spotlight last week, or would that be the sunlight, as the airline had a 737-300 aircraft develop a hole in the roof while enroute from Nashville to BWI. Not what the airline wants or needs — especially considering the issues the airline has had with the FAA concerning fuselage checks in the past. Preliminary NTSB report says there was no evidence of previous corrosion at the site.

That was not the only bad news Southwest had last week. The airline was also notified that its debt rating with Moody’s is under review, signaling a potential downgrade.

The Senate produced its version of an FAA Reauthorization bill last week. How did it differ from the House version? It differed on quite a few items. We talk more about that in this week’s issue.

Those misguided folks at the US Airways Pilot Association, the pilot union that was created in an attempt to circumvent the original ALPA seniority award that was handed down after US Airways and America West combined forces — had their head handed to them on a plate by U.S. District Judge Neil Wake last week. Wake issued his final injunctive order on the case brought against USAPA by the former America West pilots. Yes, we talk about this too.

Oh, and speaking of USAPA, we also give them, and our readers, a handy step-by-step instruction of how you correctly determine just how much an airline executive makes, using SEC documentation. Apparently the folks at USAPA have a problem figuring these things out.

British Airways raids its guaranteed employee pension benefit larder, Air Canada gets all of its employees “on board” with its 21-month contract extension program, and 215 Delta pilots sign up for the airline’s sweetened “early-out” package. Somehow I think the guys in suits over in Atlanta had hoped that number had been higher.

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

If you are a subscriber, you can access this week’s issue here. If not, you can learn how you can become a subscriber by clicking here.

Bleak Cold Day on Wall Street

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Yikes. It wasn’t the bad weather up and down the East Coast today that made investors shiver.

The folks on Wall Street did a find job of doing that on their own.

And not just for airline stocks.

When all the shouting was over, the Dow Jones Industrials ended the day down 299.64 points, or 4.2%. This brought the Dow down to 6763.29. This was the first time the Dow has closed below 7000 since May 1, 1997.

Meanwhile, the S&P 500 fell 4.7% or 34.27 points, while the Nasdaq lost 4% or 54.99 points, closing at 1322.85.

The big news pushing stocks lower today concerned insurance giant AIG. The federal government announced that it was increasing its stake in the company by some $30 billion. The total for both U.S. Treasury and Federal Reserve investments in the cratering financial giant is now about $163 billion.

The market was in no mood to hear this today, and stocks took the brunt of investors angst as a result.

In the airline sector, the carnage was deep, and it ran pretty much across the board.

Of all the stocks we track at PlaneBusiness, none, not one, was up for the day.

The biggest losers for the day included: AirTran, which lost 15%, closing at 2.54; Hawaiian Airlines, which also dropped back 15% to close at 2.68; US Airways which lost 13%, closing at 2.47; JetBlue, which was down 14% to close at 3.29; Pinnacle, which lost a whopping 20%, closing at 1.12; ExpressJet, which was down 10%, closing at 1.22; and United Airlines, which lost 13% to close at 4.26.

Whew.

That’s all I can say.

Oh, and Southwest shares, which are plumbing unbefore seen depths of late, closed at 5.52, down 6% for the day.