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  • Mechanics union sues American Airlines [View news story]
    BPinky, The Dallas Morning News article reproduced a verbatim unchallenged letter from Local 591 president Gary Peterson. For sure there is always a debate on what rules are enough and what is too much. To present this as an indictment of AAL is a misrepresentation. Do you realize that the managers, that you accuse, and have families at home, can go to prison for what you accuse them of?

    For the actual article that does not challenge the union letter, readers can look here:
    Jan 25, 2015. 10:23 PM | 1 Like Like |Link to Comment
  • Virgin America: How Not To Update The Market [View article]
    Adam, so from the east coast you are seeing the rapid development in the transcon product from major VA competitors including American (hourly JFK-LAX shuttle and lay flat seats to SFO), JetBlue (JFK-LAX and JFK-SFO Mint discount First Class service), United PS (3 class, lay flat seat, service to LAX and SFO). This is in addition to existing flights from other airports and airlines and connections. There is a lot of new capacity coming online with all these expansions.

    Don't forget that slot restrictions also force the larger airlines to put more seats on larger planes that have more amenities. VA fleet focuses on Airbus A319s (smallest) and 320s (medium sized) which are the smaller single aisle planes. The other airlines like American and JetBlue are buying A321s which are much larger aircraft.

    I am aware of cross airline point/mile schemes, but when you look at the plans, usually the conversion ratio to use the "miles" on other airlines is very unfavorable unless you are part of one of the big three alliances (One World, Star Alliance, and SkyTeam). Check what it takes to take Southwest to Hawaii, it can be done.

    As for strategy, VA's size limits what it can do. Even with additional planes, they are relegated to limited service for the leisure market in almost all their markets. Meantime other airlines provide a number of flights per day (so business guys can do day trips), so if someone wants to buy a roundtrip, they might find a VA flight one-way but be forced to take another airline back. That is not the best scenario for VA.
    Jan 25, 2015. 01:00 PM | Likes Like |Link to Comment
  • Virgin America: How Not To Update The Market [View article]
    Yes there is an order for 10 planes in the next year. Planes are very hard to get right now, so their plans for more planes should be questioned unless someone like an Air Berlin goes belly up.

    I have always questioned whether an airline with their price/quality characteristics has enough return to grow effectively into the future vs. a profit leader like Spirit, who is getting 15 planes per year and has a 20+% operating margin and by the end of 2020 will have 130 planes. VA is highly tied to its San Francisco hub, generating a large portion of its flights to/from there. If you look at SFO, VA's hub, you are seeing expansion by JetBlue and Frontier, with JetBlue adding Mint flights to NYC and leisure flights to Las Vegas. Frontier has moved into SFO and is offering non-stop service to Houston at severely discounted prices.

    The San Francisco economy is exploding right now. So for sure SFO has room to grow, and VA is there, but discounters are also building a bigger beachhead there too. In my career, I have seen the Bay Area implode three times, so I am always skeptical about too much reliance on that area as a hub.

    One question I have about VA is whether their loyalty program that business flyers will rank above the competition. Right now, the large network carriers have the inside edge, even with diminished programs, since they serve so many cities.
    Jan 24, 2015. 05:06 PM | Likes Like |Link to Comment
  • Mechanics union sues American Airlines [View news story]
    go-4-it, The press release put out by the union was very one sided, period. Kudos for the Fort Worth Star Telegram to dig out the extra facts.

    Nobody is downgrading the efforts of employees or legitimate union organizing activities. The press release did not refer to legitimate anonymous complaint routes nor the prison penalties that management could be faced with for such activity.

    What I don't think you realize is that there is a difference between union management and the workers. Based on the article, the workers may be firing the TWU and replacing it with another collective bargaining group. In this case, as in many union efforts, the current union management is clinging to their jobs, not improving the safety of the maintenance activity. The TWU efforts are not necessarily condoned by the unionized workers and are can be definitely construed to be in their own self interest.
    Jan 24, 2015. 08:14 AM | 5 Likes Like |Link to Comment
  • Mechanics union sues American Airlines [View news story]
    I wish the SA editor would have included more than just the Union's story. Here is the article from the Fort Worth Star Telegram which cites the upcoming battle among competing unions for running the combined American/USAirways union.

    Throwing these charges into the mix can improve the TWU Local 591 "control" over the situation. There appears a possibility that the TWU might not be the victor.

    Just a reminder that workers are protected by whistleblower laws, so why would American Managers even suggest suppressing complaints then go to jail for that? Since there are actual complaints with the FAA, why are these guys trying to profit from the situation? The article cites 21 complaints by mechanics, so how can American be accused of suppressing complaints? Mechanics trying to profit from complaints by lawsuits is unusual.

    This whole thing looks fishy.
    Jan 23, 2015. 08:04 PM | 6 Likes Like |Link to Comment
  • Virgin America: How Not To Update The Market [View article]
    This is one more issue I have with VA. Management there is not tested well, years of losses really hurt, there are very few new plane orders, scale is an issue without growth and their airport footprints are increasingly being dominated by bigger airlines with better loyalty programs. They may have maxed out their current strategy.

    I am pricing VA as a potential buy-out candidate. Assets include NYC, DCA and DAL limited landing slots as well as 53 planes. Current market cap for VA is $1.85B. Potential buyers would include either ALK, SAVE, JBLU or Indigo Partners. The problem is that, on a comparative basis, they are almost fully valued. A buyer would have to pay a 10-20 percent premium to make the deal work.
    Jan 23, 2015. 07:22 PM | Likes Like |Link to Comment
  • High-flying days for the airline sector [View news story]
    wachang, "give back?" I don't understand your terminology.

    The combination of AAMRQ(AMR corporation) and LCC (USAirways) actually merged LCC into the existing legal entity named AMR (now renamed American Airlines Group). They did this to preserve the tax losses of AMR. The LCC shareholders were given a fixed percentage of the combined AAL company and were converted at 1 share for every LCC share owned. While the bankrupt shareholders of AMR were given rights to the remainder of the combined company, minus an amount for any liability claims that might have survived bankruptcy. The stock of the old AMR company was cancelled and shareholders were given rights to receive the new AAL stock. AAL made a series of distributions from Dec 13 to May of 14 representing their ownership.
    Those distributions concluded before distributing all the stock because there were some residual claims that might require the stock from the bankrupt entity to satisfy.

    I have not seen any press release indicating when that might happen and when the warrants might be satisfied..
    Jan 23, 2015. 01:36 PM | 2 Likes Like |Link to Comment
  • Is JetBlue Worth Considering Ahead Of Earnings? [View article]
    vicheat, Barger resisted any changes to the existing model. It was necessary for him to step aside because at around 7%, JetBlue's operating margins were just too low to sustain the company in the new industry. With all the other airlines compressing their seating, JetBlue was not going to be able to compete without matching them. Look for the additional seating (15 more seats on their a320s) and bag fees to add some 10-15% to the top line without adding costs. That could be $400,000 or about $1-1.50 per share. PLUS some $700-800 million (pre-tax) due to fuel price reductions... $2-3 per share pretax, plus about $1.50 (after tax) from just regular earnings. Clearly, unless fares change we are looking at an airline that could be earning $5 per share in 2016. In my mind, that is way undervalued.
    Jan 23, 2015. 12:42 PM | Likes Like |Link to Comment
  • High-flying days for the airline sector [View news story]
    Seems like a lot of back slapping in this thread!

    With gains like we are seeing, I hope the people reading this are thinking about what happens when you "take profits". You immediately lose the capital gains taxes and Obamacare taxes you pay, so instead of having 100 cents on the dollar, your reinvestment has to be a lot less. If you leave the investment in the stock, you are subject to the ups and downs of the market, but you don't get the tax haircut.

    Its important to think about taxes before selling!
    Jan 23, 2015. 12:28 PM | 1 Like Like |Link to Comment
  • Update: Aggressive Accounting Leads To Southwest Soaring On EPS Beat [View article]
    ColoradoWealthManageme... I have to agree with hokieincanecountry, the frequent flyer adjustment is nothing when compared to the fuel price reduction, which will add $2-3 pretax per share while your analysis looks at $0.04 for your downgrade?

    Also Southwest has so many expansion opportunities, they can't get enough planes to fill the opportunities. The pipeline at Boeing and Airbus is so full that there will not be any credible competitor with new planes any time soon.

    I disagree with your call totally as the big elephant is falling fuel prices and stable fares.
    Jan 23, 2015. 10:10 AM | Likes Like |Link to Comment
  • Profit soars at Southwest Airlines as fares to fuel costs gap widens [View news story]
    With planes full over 80%, why would any airline reduce fares?
    Jan 22, 2015. 09:41 AM | Likes Like |Link to Comment
  • Delta Air Lines: How New Efficient Aircraft Will Boost Results In The Future (Part 1) [View article]
    Adam, Delta is leasing 15 year old Boeing 717s from Southwest (AirTran). The reduction in price is due to the low remaining life of planes and the inherent increase in maintenance issues. Reliability has a cost. Passengers standing in a terminal due to a broken plane have a cost, not to Delta though.

    As for passing on savings, LOL!
    Jan 21, 2015. 11:28 AM | Likes Like |Link to Comment
  • Fuel savings help Delta Air Lines top estimates [View news story]
    starcorral, lets recognize that a large portion of hedging is just plain gambling. American sees it as an expensively managed zero sum game over the long term and says no and instead focuses on operations.
    Jan 21, 2015. 11:19 AM | Likes Like |Link to Comment
  • Fuel savings help Delta Air Lines top estimates [View news story]
    Addendum: I just read the earnings call transcript and management kept referring to the benefit from falling oil prices, which is, in fact, positive, offsetting the $1.4 billion adjustment. The refinery profits also go into the same bucket. With operating profits based on conservative fuel numbers, it looks like their forecast is good.
    Jan 20, 2015. 07:31 PM | Likes Like |Link to Comment
  • Fuel savings help Delta Air Lines top estimates [View news story]
    higgi, The mistake? The bullets you quote are from Delta's press release, The Associated Press got it right and said "Delta reported a $712 million loss after taking $1.4 billion in special charges, mostly hedging losses. Excluding those items, Delta would have earned $649 million, or 78 cents per share." The bullets provided by Delta above only refer to the relatively small operating profit at Trainer, not the commodity losses.

    Mistake? When they bought Trainer, then they had to feed it with crude, so they signed a 5 year deal for 65,000 barrels per day in July when oil was in the $90s. The timing was bad, I get that, but in business there are no take-backs. Delta is clearly in the refining business and gains and losses are material to financial statements, will recur in the future so we need more disclosure, not just executives patting themselves on the back saying how much Trainer made and will save them.

    By the way, it is not my intention to talk negatively about Delta in general, just this transaction. I am still very positive about Delta's prospects and think this is a great company, but they have put themselves in a situation. They will absorb the $1.4 billon in losses for roughly $1.50-$1.70 per share and move on. As analysts analyze PE multiples in 2015, DAL stock will be impaired for this year. BTW, This opens the door for American Airlines unhedged earnings that come out soon.
    Jan 20, 2015. 02:52 PM | Likes Like |Link to Comment