Monthly Archive for September, 2009Page 2 of 5

Additional Liquidty Moves By American, Delta, US Airways

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Dan Webb
on September 23, 2009
in American, Delta and US Airways
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I know I’ve been writing about efforts by airlines to boost liquidity a decent amount lately, but there’s been some more news coming out.

First, American has upped the ante on its latest offerings that I wrote about yesterday as it is now issuing more stock and notes than previously announced. The offerings can now give the airline around $770 million in additional cash – before that number was in the $500 million area. Meanwhile, the airline has offered yet another offering of notes worth $450 million. The proceeds of that offering “are expected to be used to refinance the Company’s existing $432 million secured bank term loan facility.”

Yesterday, Delta announced it would be offering $500 million in notes. This might sound familiar, considering that Delta announced a $500 million offering last week. The notes, which will be used for “general corporate purposes,” are due in 2015. This article has some interesting information about how these notes fit into Delta’s latest round of financing, which is apparently worth about $2 billion in total.

These latest announcements from American and Delta just make me think about JAL, to be honest.

Last but not least, US Airways, which has issued stock already this year, is doing it again. Yesterday the airline announced the sale of over 26 million shares of stock with an over-allotment option of nearly 4 million shares. Shares of the company have taken a decent hit after the news, and are currently down over 7% in pre-market trading. But, depending on share price and usage of the over-allotment option, US Airways could get somewhere around $130 million out of the offering.

These moves by the carriers are certainly exciting, and it’s nice to see that they’ve been able to find additional sources of liquidity.

American to Boost Liquidity Further; In Talks with JAL to “Deepen our Relationship”

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Dan Webb
on September 22, 2009
in American and JAL
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American, which had some big liquidity moves last week, announced yesterday that it would be making further moves to boost its cash balance by issuing notes $250 million of notes due in 2014 along with 30 million shares of common stock. The offerings have over-allotment options of $37.5 million and 4.5 million shares, respectively.

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(Photo courtesy of oneworld)

Shares of American’s parent, AMR, have taken a  hit in after-hours trading, and are currently down about 4%. Perhaps the street is concerned about the dilution caused by the new offering. The new shares could increase the number of shares outstanding by 10.7%, or up to 12.5% if the entire over-allotment option is utilized.

The combined offerings have the potential go give American an over $500 million in liquidity. I’m interested in seeing how the offering of notes goes – when United offered notes, for example, they had to offer them at a discount resulting in a 17% yield.

American will be using the proceeds of these offerings for the always-revealing “general corporate purposes,” though their was in interesting note in both SEC filings:

We are in discussions with The Japan Airlines Group (“JAL”), a member of the oneworld alliance, about ways to broaden and deepen our relationship. We are discussing various options, including a joint business relationship with JAL and possible capital or financing arrangements. We cannot give any prediction as to the timing or outcome of these discussions.

Could the proceeds be used to aid in a partial purpose of JAL? That’s very possible, but either way, building up cash is a good thing.

Speaking of JAL, one new idea going around is the possibility of splitting up the carrier into two parts, one with profitable operations, and one with all of the..er…crap. :D

Guidances from Hawaiian, Continental

Published
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Dan Webb
on September 22, 2009
in Continental and Hawaiian
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Yep, more third quarter guidances. :D

Hawaiian reported that PRASM for the third quarter will be down 15.5-18% year-over-year, which is in line with a previous estimate from July of of a 16-20% decline. CASM ex-fuel is expected to rise 14.5-17%, which is higher than previously predicted.

Continental didn’t have much to add on the PRASM side (though it does give monthly estimates), but it did note that high yield revenue was down 31.2% in July, and about 28% in August, which are both better than the 35.4% decline in June.

Meanwhile, for the next six weeks, the airline is reporting higher advance booked load factors for domestic, Latin, Transatlantic, and Pacific flights.

For costs, Continental is forecasting that CASM ex-fuel and items will be between 7.52 and 7.57 cents, which is better than a previous guidance of 7.59-7.64 cents. Like American, Continental’s fuel cost is a bit higher than previously thought – the airline is now predicting 2.84 cents/mile, compared to an earlier prediction of 2.73 cents.

American’s Third Quarter Guidance

Published
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Dan Webb
on September 21, 2009
in American
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A few airlines have been putting out guidances for third-quarter, and American was the latest with one on Friday. The PRASM estimate looks pretty good – the airline is estimating a decline of 14.3-15.3%, which would be an improvement over the 16% decline in the second quarter.

Americans new estimate for CASM ex-fuel and items remains the same at an increase of 7.2%.

However, while American was originally expecting a 14% decrease in CASM ex-items, that decrease will now be around 12%. That change is being driven by fuel costs. American forecasted a fuel cost per ASM of 3.34 cents in July, and is now expecting a cost of 3.40 cents.

I look forward to seeing how the cost numbers for the third quarter work out for all the carriers – many have seen increases, but others like United have been able to keep costs ex-fuel pretty constant.

Hawaiian Steps on Alaska’s Turf with New Oakland Flight

Published
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Dan Webb
on September 21, 2009
in Alaska and Hawaiian
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sep20Last week, Hawaiian announced some additional flights, which coincides with some changes in the carrier’s fleet. The airline is currently all-Boeing, but that will change next year when the first of three leased A330s will arrive. The airline has also ordered A330s and A350s from Airbus.

The airline will be doing some additional flying during the summer season. San Diego-Maui will be launched again – Hawaiian did operate route in summer 2008, but did not this year. Meanwhile, the airline said it would be adding an additional flight between Los Angeles and Honolulu with one of the new A330s, though at this point, it is listed as a 767-300 in Hawaiian’s timetable.

But one of the interesting moves is new daily summer service between Oakland and Maui. ATA and Aloha operated this route before they went bust, but this year Alaska announced it would start operating the route four times a week starting in November. The new flight from Hawaiian complements its existing flight from Oakland to Honolulu.

Clearly, Hawaiian thinks there’s more demand in the market, and a daily 767-300 is a lot of capacity compared to Alaska’s four 737-800s a week. It will be interesting to see how this one shakes out, at least for the summer – Hawaiian’s flight starts on June 18 and runs through September 6. I wonder if Alaska will decide if it’s worthwhile to add any additional capacity in this market.

Photo Credit:

http://www.flickr.com/photos/uzvards/ / CC BY-SA 2.0

Sunday Video #40

Published
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Dan Webb
on September 20, 2009
in Sunday Video
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I saw this video on Twitter this week, and it’s just hilarious! So true – maybe I can be one of the “first class people” one day. :D

YouTube Preview Image

Saturday Links #60

Published
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Dan Webb
on September 19, 2009
in Saturday Links
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  1. US Airways finally unveiled a new business class seat, and it looks great.
  2. Flightblogger has some renderings of concepts for an A320 replacement.
  3. Virgin Blue is planning to take advantage of this weak environment to order new aircraft to replace 737s whose leases are expiring.
  4. Aer Lingus had a bit of an embarrassing incident recently.
  5. Qantas has said it is not in any negotiations about a deal with JAL.

Thoughts on American’s Big Announcement Yesterday

Published
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Dan Webb
on September 18, 2009
in American
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American had some pretty interesting things to announce yesterday, including  a boost in liquidity, financing for new aircraft, basically eliminating anything left of a St. Louis hub, and ordering additional CRJ-700s to boost its American Eagle fleet.

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First off, American’s made some pretty significant progress with boosting its cash position. American sold frequent flier miles to partner Citi, and will receive a $280 million loan from GECAS that is secured by aircraft. Only $255 million of that loan will appear on the third quarter balance sheet – the rest will come will come in October.

It’s great that American can get more cash – maybe it could help them buy a stake in a certain Japanese carrier? :D

Meanwhile, American participated in $1.6 billion worth of sale-leaseback deals with GECAS for aircraft it has ordered but has yet to receive. That deal will help finance 737-800 deliveries – American expects to receive 15 more this year and 45 in 2010. The airline is currently using the 738s to replace the oldest MD-80s in the fleet.

With all this GECAS action, it didn’t sound all that shocking when American announced that it will be going with General Electric’s GEnx engine to power the 787-9s it has ordered.

Now, let’s talk about the shifts in the route network. American is further cutting its operations in St. Louis and Raleigh, but the former, a hub from the TWA acquisition, is getting hurt the most here by losing 46 departures and 20 destinations. O’Hare is clearly getting the biggest boost, and that becomes more interesting after we look at the fleet side. Here’s a slide from a presentation American released yesterday that shows the changes very nicely:


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Now, let’s talk about the fleet. American is ordering 22 CRJ-700s from Bombardier, which will be fully financed, and therefore help preserve cash. The delivery of these aircraft will begin the middle of next year. These aircraft will bring Eagle’s CRJ fleet to 47. In addition, the CRJ-700 fleet will be reconfigured to have a first class cabin. But wait, there’s more! Note about how DFW is going to be losing a bunch of CR7 departures, and O’Hare will be gaining more. So it appears a bunch of DFW-based CR7s are heading up north. Conveniently, American will be using them launch some new Eagle destinations. New mainline service to Beijing, Vancouver, and Honolulu will also begin from ORD.

Guess who American is competing with in these new markets? Guess what other carrier with a hub out of O’Hare has a first class cabin on its CR7s? Clearly American wants to go after United here with both some new mainline service and the regional flying, which should be pretty interesting.

On a side note, I’ve always found American’s fleet interesting. The next-largest aircraft after the CR7 are the MD-80 and the 737-800 in the old seating configuration. Previously, the Fokker 100 filled that void, but the type left the fleet in 2004. Would American ever be interested in ordering a slightly larger jet? Could they be a customer for Bombardier’s CSeries?

In closing, I’d like to humbly suggest to American that a fantastic use of some of those new CRJs coming next year would be re-launching service to PVD. :D

Southwest Pilots to Vote on TA in October

Published
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Dan Webb
on September 17, 2009
in Southwest
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Southwest and its pilot union, SWAPA, reached an agreement-in-principle last week, and the board of the union voted to send the tentative agreement to the union for a vote in October. The board “also voted unanimously to endorse the tentative agreement.” From the SWAPA press release:

The new five-year agreement, which became amendable in September 2006, is different from the rejected agreement in that it allows more flexibility to the pilots’ quality of life, maintains long-standing scheduling programs, gives an increase to a retirement benefit for pilots sooner, and further restricts the Company’s ability to codeshare both domestically and internationally.

It will be interesting to see how this pans out in a couple of weeks. While the last TA was indeed rejected, it was by a razor-thin margin (51% to 49%) – I’m looking forward to seeing the count this time around.

Hopefully Southwest and its pilots can get this over with – the current contract became amendable back in 2006. Even if this contract is approved, the airline and the pilots will begin negotiating again in less than two years.

Double Rapid Rewards Credit on Southwest

Published
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Dan Webb
on September 17, 2009
in Southwest
. 0 Comments

A few airlines now have double EQM promos going on, and US Airways has launched a fast track promo. Now, Southwest has joined the mix with a double Rapid Rewards credit promotion. The offer isn’t as generous as the others, at least in terms of when one can earn the double credits, but it’s still worthwhile for those who will be flying Southwest through the end of October.