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Safety Program Stalled at 3 Airlines
FAA Chief Again Urges Carriers To Fix Conflicts

By Sholnn Freeman
Washington Post
Wednesday, December 31, 2008

A program that allows pilots to voluntarily report safety lapses without the fear of punishment has remained suspended at three big airlines, even after a push this month by acting FAA Administrator Robert A. Sturgell to get it back on track.

Sturgell is trying to break an impasse between US Airways, American Airlines and Delta Air Lines and their respective pilots unions over rules that pilots say could expose them to more disciplinary action. He sent letters this month to union presidents and the carriers' chief executives urging them to resolve their conflicts. On at least one letter, Sturgell scribbled in the margin: "Get this done."

"Both sides need to compromise," Sturgell said in a recent interview. "It's very hard to understand, from my perspective, how a program that has been in place for a decade or more, and providing benefits all along the way, suddenly becomes not a good program."

Some congressmen also are demanding action to restart the programs, known as Aviation Safety Action Programs, or ASAPs. Earlier this week, pilots received a letter from Rep. John L. Mica (Fla.), the ranking Republican on the House Transportation and Infrastructure Committee, encouraging the sides to reopen talks.

"The Aviation Safety Action Program is an invaluable tool in protecting the flying public," he wrote. "In fact, every day this matter remains unresolved places the safety of the aviation passengers at risk."

One option floated this week in Washington involved convening a meeting of union leaders and top airline executives, possibly the chief executives themselves, as a way to work through the impasse. Of the three airlines, only US Airways has reported that it is in active talks with pilots to restart the program.

Designed to encourage pilots and other airline employees to voluntarily report safety concerns without the threat of disciplinary action or punishment, American Airlines became the first carrier to institute a safety action program in 1994. Since then the programs have grown to cover dispatchers, flight attendants and air traffic controllers. The FAA currently has 170 agreements in place with 70 air carriers. So far this year, the industry has generated about 50,000 reports, the FAA says.

John Hansman, an aviation professor at the Massachusetts Institute of Technology, said the programs have become increasingly important to understanding aviation safety, especially given the industry's low accident rate.

"We are actually in a period when the aviation system is incredibly safe," Hansman said. "As a consequence we have to look for what we call accident precursors -- identifying things that are unsafe in the system before they cause accidents."

Conflicts started to arise in recent years as attorneys and safety officials started fighting over the complicated language of the agreements. The pilots' attorneys say the airlines appear to be seeking language that would give airlines greater ability to reject reports.

Union officials have described the programs as priceless because they uncover information that may have never come to light. Some are small, like paperwork abnormalities or training issues. Others draw greater concern such as a pilot landing a plane or crossing a runway without proper clearances.

Under FAA guidelines, inadvertent safety lapses are supposed to be resolved though corrective action rather than through punishment. Pilots say any changes in the agreements' language could leave them exposed to greater risk of disciplinary action.

Tom Westbrook, vice president of the Allied Pilots Association, which represents the American Airline pilots, said negotiations are at a stalemate.

"Nothing is going on," Westbrook said. "We have been making statements in every forum we can to get word to them that we are prepared to meet. If they'd agree to stop disciplining pilots for safety events, then we'd sign the agreement."

On the other side, airlines say they are trying to block changes sought by the pilots that they say would unfairly expand pilot immunity.

"We want to achieve protections for our pilots for unintentional acts and unintentional violations," said Billy Nolen, manger of flight safety at American Airlines. "At the same time we want to ensure accountability that if someone commits a willful act, this program doesn't offer them protections."

Disputes also have centered on the handling of individual ASAP reports as well as personality conflicts between individuals involved in the process, including FAA personnel. At Delta, which suspended its program in 2006, progress on new agreements for pilots has been slowed by the carrier's recent merger with Northwest Airlines.

The controversies have forced the FAA into action, even though the agency typically tries to stay clear of airline labor disputes.

"This is a safety issue," Sturgell said. "It should not be treated by anybody as a labor-management issue."
 

Can Obama Make Airlines, Unions Get Along?

TheStreet.com

Ted Reed

12/29/08 - 10:45 AM EST 

CHARLOTTE, N.C. -- Labor issues will take center stage in the airline industry in 2009, with conflicts simmering at most major carriers.  

The world's two largest airlines will receive particularly keen attention. Delta, a largely nonunion carrier that merged with heavily unionized Northwest, could face a half-dozen union representation elections in 2009, as the Association of Flight Attendants and the International Association of Machinists approach its various work groups.  

At American, which worked hand in hand with its unions to avoid bankruptcy in 2003, cooperation has given way to antagonism. Contracts with all three of the carrier's major unions became amendable April 30, and the parties have requested federal mediation in every case.  

In general, concessionary contracts -- signed during the series of bankruptcies that followed the Sept. 11 terrorist attacks -- are expiring or, in the case of United, will expire at the end of 2009.  

"I don't think you will find any airline employee at any company that's happy these days," says Joe Tiberi, spokesman for the IAM, the largest airline union. "Since 2001, employees have been forced to subsidize bad management decisions and bankruptcies. Those contracts begin coming up for renewal in 2009, and employees expect to see a return on their investment." 

President-elect Barack Obama's victory could alter the tone at the National Mediation Board, says Corey Caldwell, spokeswoman for the Association of Flight Attendants.  

The NMB presides over a series of steps that must occur as airlines and railroads negotiate contracts. A final stage is the board's declaration of a 30-day cooling-off period, after which unions are free to strike. "It seems that over the past several years, mediators have been reluctant to get to the (final) stage," Caldwell says. "The impact has been to not bring pressure to the corporate side. The balance of power needs to return to the process, which has worked in the past."  

As for pilot negotiations, the rancorous relationship between American and the Allied Pilots Association is, for the moment, the hot spot in airline labor relations.  

In the latest of a series of unusually strident pronouncements, the union has challenged the airline's application for joint antitrust immunity with its trans-Atlantic partners and, this month, withdrew from the Aviation Safety Action Program. ASAP is a widely praised joint effort by pilots, airlines and the Federal Aviation Administration to enhance aviation safety by allowing pilots to report problems and incidents without penalty.  

The APA charged that American used the program to discipline pilots for inadvertent safety lapses, putting their jobs at risk, The Associated Press reported. Subsequently, pilots at US Airways dropped out. Pilots at Comair also dropped out this year; Delta pilots had dropped out in 2006.  

While the unions acted independently, their efforts have created an impression that safety is being used as a negotiating tactic. "Using safety as a chip at the bargaining table is unconscionable," acting FAA administrator Robert Sturgell said recently, in a prepared statement. "These voluntary reporting programs are crucial to safety, and it's disappointing to see them cast aside at a time when they're needed most."  

At US Airways, according to U.S. Airline Pilots Association spokesman Scott Theuer, the airline has sought to dilute the immunity provisions, continuing to maintain that a pilot who reports an incident to ASAP can still be disciplined if a second party -- such as another worker or an air traffic controller -- reports the same incident.  

Theuer says the "dual-source reporting issue" has lingered for years, threatening continuation of ASAP. "This has absolutely nothing to do with negotiations," he says. "The FAA's characterization that pilots are using safety as a bargaining chip is offensive. 

The issues are generally similar at all the carriers that have withdrawn, Theuer says: "We're all in the same boat: Thousands upon thousands of pilots have reached this conclusion. We want to be able to report minor mistakes without fear of punishment."

USAPA, he adds, "is working to establish new language that addresses our concerns." In the meantime, USAPA encourages pilots to use a parallel reporting system by reporting incidents to NASA, which provides immunity in terms of FAA violations but not in terms of company policies.  

At Delta, although pilots have recently been consumed by merger negotiations, restoring ASAP is a high priority, says a union spokeswoman. Pilots and the carrier "were unable to come to agreement on processing issues, hence the program was suspended," she says. "The union is looking forward to reanimating very soon."  

Aviation consultant Robert Mann says the APA's withdrawal from ASAP stands out because it "reflects a complete breakdown of trust" between American and its work groups, partially as a result of various management compensation efforts. "It's not just pilots," he says. "It's every one of the groups."  

In a recent interview, Jeff Brundage, American's senior vice president for human relations, said that being first in the current round of pilot contract talks has worked to the carrier's disadvantage.  

"Historically, pilot contract talks have followed a pattern," he says. "When a contract comes open, and someone has gone before, you attempt to get to that higher standard. But our pilots are the highest paid in the industry, and there's no one else we can (compare) to." He says American is seeking productivity improvements "so we can protect our above-market pensions and benefits."  

One effect of the harsh tone at American has been to highlight the contrast with Delta, which enjoys a generally favorable relationship with its pilots. That relationship has made Lee Moak, chairman of the Delta chapter of the Air Line Pilots Association, the industry's most important labor leader. In general, Moak's view is that a profitable airline leads to better pilot careers.

At a recent investor conference, Delta CEO Richard Anderson proclaimed: "We have competitors that can't sit in the same room with their pilots, and we did three collective bargaining agreements in 2008." He referred to a failed negotiating session a week earlier, when American pilots walked out on company representatives.

JetBlue faces first union election
USA Today
December 19, 2008
By David Koenig, AP Airlines Writer

DALLAS — Since it began flying in 2000, JetBlue Airways has operated free of labor unions as part of a strategy to keep labor costs below those at highly unionized competitors.
That could change next month, however, when JetBlue pilots begin voting on a proposal to form their own union to bargain over wages, benefits and other issues.

Leaders of the organizing campaign hope to pattern their group after the pilots' union at Southwest Airlines Co., which is ironic because JetBlue itself was patterned after Southwest's low-fare model.

Southwest has enjoyed relative labor peace despite having one of the highest percentages of union workers among U.S. carriers. JetBlue pilots say they too want to avoid the kind of bitter labor-management fighting common at other airlines, and say they will be realistic about wages while the recession cuts into demand for air travel.

JetBlue lost money for three straight years, turned a profit last year, but lost $19 million through the first nine months of 2008. It delayed delivery of 31 jets and no longer expects to grow next year.

"I think we're below average in just about every measure of compensation, but today is not the time to be asking for money," says Bill Evans, a Boston-based pilot. "We know we're facing a severe economic situation."

Mike Sorbie, another member of the organizing drive, said union representation would help the pilots win better health and retirement benefits and protect their seniority rights in case JetBlue merges with another airline. Seniority dictates which pilots get the best-paying assignments and which ones lose their jobs first in a downturn like the one now facing the industry. And when airlines merge, seniority fights can get ugly.

Leaders of the JetBlue Pilots Association collected enough signed cards from pilots favoring a union to force an election, which will run from Jan. 6 until Feb. 3. The pilots association says it is confident of winning.

The JetBlue group elected to form an independent union rather than become part of the larger Air Line Pilots Association, or ALPA. Many JetBlue pilots came from ALPA carriers with hostile labor-management relations.

"We wanted to see if there was a model of success instead of becoming discouraged by all the models of failure," Evans said.

JetBlue opposes a union but declined to make an official available for comment. In a statement, spokesman Todd Burke said, "We believe a direct relationship with the company is in the pilots' best interest."

Unions, with the power to bargain over wages and benefits, have long been thought to increase costs at airlines. But Anthony Sabino, a business and law professor at St. John's University who has represented creditors in airline bankruptcy cases, said a union would not have much clout while the airline industry is losing billions.

In the current climate, "even a unionized work force doesn't have much leverage," Sabino said. "When the boom cycle returns it might be different, but right now the first order of business for everybody at JetBlue — like everybody at all the other carriers — is survival."

New York-based JetBlue has more than 1,900 pilots and a total of about 11,500 employees, including nearly 3,000 part-timers.

In 2006, the International Association of Machinists and Aerospace Workers tried to organize the company's baggage handlers but failed to get enough workers to sign cards for an election.

Pilots Evans and Sorbie said they decided to form an independent union so it would be more in tune with JetBlue's needs. But independent unions can be just as adversarial as bigger ones such as ALPA.

At American, the independent Allied Pilots Association regularly clashes with management. Pilots have tried to strike and conduct sickouts. The two sides have made little progress in two years of contract negotiations, leading the union to take out billboards blasting the company.

Even at Southwest, it's not all hugs and kisses. Pilots and other workers have picketed to protest slow contract negotiations, and they worry that deals with Canadian and Mexican airlines could threaten their jobs.

"We have our spats with management, but we can't get a divorce; we're stuck with each other," said Carl Kuwitzky, president of the Southwest Airlines Pilots' Association. "The company has to succeed for our pilots to do well."

Kuwitzky said he was puzzled by JetBlue's opposition to unions, noting that Southwest co-founder Herb Kelleher helped set a conciliatory tone by recognizing the pilots' union without forcing them to hold a federally sanctioned election.

William Swelbar, a researcher at MIT and director of Hawaiian Airlines parent Hawaiian Holdings Inc., said JetBlue needs to remain flexible and avoid rigid work rules, especially during an industry downturn.

If JetBlue and its pilots can do that, "there should be no reason to believe that the carrier's labor-cost advantage will be undermined by the pilots forming an in-house union," Swelbar said. "Southwest has proven this over the past three decades."
 

PRESS RELEASE
Atlas, Polar Air Cargo Crewmembers Vote to Join Teamsters Union

Group Of Nearly 900 Workers Vote To Join Union By a 2-1 Margin


WASHINGTON, Dec 19, 2008 -- By a more than 2 to 1 margin, nearly 900 crewmembers at Atlas Air, Inc. and Polar Air Cargo Worldwide have voted to join the International Brotherhood of Teamsters, said Jim Hoffa, Teamsters General President.

"We are excited to welcome the Atlas and Polar flight crewmembers to the Teamsters," Hoffa said. "Our Airline Division, under the leadership of Capt. David Bourne, will help negotiate a strong contract for the crewmembers. The Teamsters will also provide accountable representation."

The crewmembers have been represented by an association, the Air Line Pilots Association (ALPA), but the association does not have the focus, strength and cargo experience of the Teamsters to represent their interests.

"Now, the Atlas and Polar crewmembers will receive strong Teamster representation and they will have an independent local union backed by the 1.4 million member Teamsters," Bourne said. "The Teamsters have the necessary resources to help our newest members achieve a more secure future."

The Teamsters will also allow the crewmembers more decision-making power through their Teamster local union for the issues that matter most to them.

Crewmembers voted by telephone and over the Internet since November 19, and the votes were tallied today. The election was administered by the National Mediation Board.

The Teamsters Airline Division represents more than 40,000 workers in the aviation industry in every craft and class. Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women in the United States, Canada and Puerto Rico.

SOURCE: International Brotherhood of Teamsters

US Airways Pilots Halt Voluntary Data-Sharing Program
The Wall Street Journal
DECEMBER 15, 2008, 8:23 P.M. ET
By ANDY PASZTOR

LOS ANGELES – In the latest setback for pilot-airline cooperation on safety initiatives, US Airways became the third mainline U.S. airline to discontinue voluntary programs for reporting operational incidents.

Following similar disputes affecting Delta Air Lines Inc. and AMR Corp.'s American Airlines, the collapse of the US Airways program underscores the difficulties of pursuing voluntary data-sharing in the face of the airline industry's rancorous labor-management relations. The move not only does away with a powerful tool for the airline and its pilots to spot all types of budding safety hazards, it also could slow the spread of such voluntary incident-reporting systems at some foreign carriers, safety experts say.

The US Airways program, which had been active for more than 10 years, ran into trouble over pilot complaints that the company was seeking to use voluntary reports to punish individual pilots. The pilot union said the program was scheduled to lapse in early 2008, but had been extended repeatedly by pilot representatives "in an attempt to reconcile disagreements" over immunity provisions. Pilot union leaders of American and Delta had basically the same complaints when those long-standing voluntary data-sharing programs were allowed to lapse.

The Federal Aviation Administration views such programs as the cornerstone of proactive safety monitoring and enforcement. Under the concept, pilots report in-flight mistakes, incipient safety threats and other subtle problems before they create accidents. Then pilot representatives, airline officials and federal regulators jointly analyze the incident, assess the dangers and recommend safety fixes to prevent a repeat. With some exceptions, pilots expect to avoid punishment for making mistakes.

Senior FAA officials for years have touted such voluntary programs as one of the big reasons for steadily dropping accident rates in the U.S. and elsewhere.

The labor-management flare-ups come at a time when "data collection systems are fragile" and "safety systems don't belong on the bargaining table," said William Voss, president of the non-profit Flight Safety Foundation, at a recent industry safety conference. Other air-safety experts have argued that with traditional safety enforcement strategies stalling, voluntary data-sharing and compliance are the keys to further improvements.

The FAA, for example, is hoping to persuade mechanics and air-traffic controllers to step up voluntary reporting programs. Longer term, the agency's safety agenda envisions private pilots, engine manufacturers and even helicopter manufacturers voluntarily feeding data into a centralized safety data base.

One potential bright spot, according to pilots and industry officials, is that the merger of Delta and Northwest Airlines is expected to produce an ambitious voluntary data-sharing program. Despite the recent problems, Continental Airlines and its pilots recently agreed to reauthorize their voluntary incident-reporting system.
 

Court Order Delays Auction of Landing Slots at Airports
The New York Times
Published: December 8, 2008

By MATTHEW L. WALD

WASHINGTON — A court order on Monday delayed a Bush administration plan to auction landing slots at the three major airports in the New York region, pushing the proposal into the Obama administration, where it may die.

The Court of Appeals for the District of Columbia granted a stay on Monday, in a case brought by the Port Authority of New York and New Jersey, pending arguments on whether the Federal Aviation Administration has the legal authority to auction the slots. The first auction was scheduled for Jan. 12, eight days before the Bush administration ends.

Elected officials in New York were mostly against the idea; presumably they will get a better hearing from the Obama White House than they did from the Bush administration.

Senator Charles E. Schumer, a leading opponent of the proposal, said, “This decision should buy enough time for the next administration and Congress to put slot auctions on the shelf for good, and then craft a new, workable plan to reduce flight delays and give New York’s airspace and airports the upgrade they need and deserve.”

The Federal Aviation Administration has capped the number of flights at Kennedy International, La Guardia and Newark Liberty Airports, and was looking for a way to redistribute the available takeoff and landing slots, to preserve competition and make the best use of a limited commodity — the right to land at these airports. Its idea was to seize some slots from large airlines — it had not said how many — and redistribute them to the highest bidders, for a 10-year period.

The Port Authority said in a prepared statement that auctions “would invariably drive up ticket prices for passengers, without alleviating delay.”

“We are confident that upon full review, the court will agree that the administration does not have the authority to conduct an auction, and we look forward to working with the next administration to develop real, long-term solutions to improve air travel,” the statement said.

Sarah Echols, a spokeswoman for the Department of Transportation, said: “Today’s court decision is bad news for travelers seeking a better flying experience in and out of the New York region. We are committed to our goal of protecting travelers, giving passengers more options and improving the air travel experience, and will continue to assess our options to provide relief.”

Full-fare fliers get extra perks, even in coach

The Dallas Morning News
Sunday, December 7, 2008
By TERRY MAXON

One of the more vexing problems for airlines has been the $800 business traveler sitting in coach next to the $75 leisure traveler – same seats, same service and vastly different fares.

But the recent spate of new charges and fees is giving airlines a chance to better differentiate what that high-dollar traveler enjoys from what the bottom-dollar traveler gets.

By exempting full-fare passengers and elite members of frequent-flier programs from the new fees, the airlines are making it better to pay more – even if it is only through the absence of pain newly created for the bargain flier.

American Airlines Inc. executive Dan Garton says that the goal is to give every customer some things in common, such as safe flights, on-time arrivals, clean facilities and airplanes, and courteous and professional service.

But beyond that, American would like to charge the low-fare customers – often leisure travelers – for a lot of things they previously got at no extra cost and give its best customers more services and extra perks for free, he said.

For example, American and other airlines have implemented charges this year for checked bags – typically $15 for the first bag and $25 for the second bag. But full-fare customers in the coach section, passengers in first class and business class, and premium members of their frequent-flier programs don't pay those fees.

Carriers in many cases are waiving other fees for the best customers, such as for phone reservations, frequent-flier ticket fees and other items that once carried no extra charge.

Mr. Garton, American's executive vice president of marketing, said the Fort Worth-based airline is studying how to expand that differentiation to better reward the best customers – the lifeblood of airline profitability.

"There are features and products that we would like to go over and beyond that for people who either pay us more fares or fly us more often, in most cases both," said Mr. Garton.

What does that mean for the elite customers?

"Our objective is to provide some enhanced level of experience from 'cradle to grave,' from the beginning to the end of their experience with us," Mr. Garton said.

"So if they call our reservations centers, their calls are handled in a prioritized fashion; when they arrive at the airport, PriorityAAccess [special lanes at the airport] gives them a different queue at the ticket counter, at security and even to get on the airplane."

One issue is how to give that best customer in coach a better experience.

Many airlines, including American, try to set aside enough of their best seats – the aisle and window seats toward the front of the cabin – to hand out to last-minute, higher-priced travelers. Others have begun charging for the best coach seats.

Mr. Garton said American has studied implementing similar charges and perhaps waiving the fee for full-fare and elite customers.

Getting the best seats "is still viewed to be one of the benefits of being a frequent flier or premium customer. So we would have to think very carefully about how you'd handle the revenue-generating aspects of this," Mr. Garton said.

Airlines have undergone perhaps the most radical repricing of their basic services in the industry's history in 2008, driven by a jet fuel emergency.

As the spot price of jet fuel soared from under $2 a gallon in early 2007 to over $4 in mid-2008, airlines scrambled to boost fares and generate enough revenue to cover those costs.

United Airlines Inc. arguably kicked off the fee-raising spree when it announced Feb. 4 that it would charge $25 for the second checked bag on domestic flights. American raised the ante May 21 when it announced a $15 fee for the first checked bag.

Most major U.S. carriers matched American, meaning that a two-bag traveler without special status would pay $80 more for a round trip in the United States.

Fees here to stay

With the U.S. airline industry posting enormous losses through Sept. 30, airlines began looking at all parts of their operations to find ways to raise money, from charging $2 for soft drinks (US Airways Inc.) to selling blankets and pillows for $7 (JetBlue Airways Corp.).

Having tasted the drug of ancillary revenue, airlines aren't likely to go back. We're talking big money – billions of dollars a year.

Speaking at a Credit Suisse conference last week, United Airlines officials estimated that new fees and charges will bring the airline an extra $1.2 billion in revenue in 2009: $250 million from the new bag fees, $600 million for ticketing charges, $250 million from "upselling" seats for premium seating in coach or upgrading to first or business class and $100 million from selling extra frequent-flier miles and offering baggage delivery service outside the airplane trip.

"The new products are designed to improve the customer experience while giving customers more flexibility, choice and control," said Kathryn A. Mikells, United's chief financial officer. "But they're obviously also designed to add to our bottom line."

United's "award accelerator" is a good indication of how airlines are doing things now that weren't on the agenda before. Under the program, the carrier allows a frequent-flier member to pay a fee to get more miles.

For example, a United passenger could pay $9 more on a 316-mile Cleveland-Chicago flight to double the number of frequent flier miles earned or $19 to triple the miles.

The award accelerator is already bringing in about $2 million a month, United says.

Doug Parker, chairman and chief executive of US Airways, worried aloud at the Credit Suisse conference that airlines will backtrack on all these new fees and charges, to the industry's detriment.

The extra charges that US Airways has implemented are adding $400 million to $500 million a year to the carrier's revenue, Mr. Parker said. But the new fees are also helping make the airline run better, he said.

Customers are checking 20 percent fewer bags, and US Airways, as a result, is handling bags better and faster, he said.

"It's not just about the money," he said. "It's helping us all run a better operation."

Unpopular

While most airlines like the new fees and charges, the costs are proving less popular with passengers, as traveler surveys have shown.

Tim Zagat, co-founder and chief executive of Zagat Survey, said the airlines' decision to charge separately for services travelers formerly got for free is contributing to the low regard many customers have for airlines.

"I think à la carte pricing stinks," he said. "I think it's showing up in the financials. I think it's showing up in the comments we get. I think it's showing up in the ratings. I think people think airlines, with few exceptions, don't treat them very nicely."

Mr. Zagat said there's a link between Southwest Airlines Co.'s good ratings on such issues as luggage and value and its policy not to charge many fees. It should eventually pay off for Southwest, "one of the few airlines that people really like," he said.

At Credit Suisse, Southwest chairman and chief executive Gary Kelly said "time will tell" whether the Dallas-based carrier will pick up more passengers and revenue by not charging fees.

"It has to," he said, "and if it doesn't, then I would argue that we probably will have to change that."

IBM Global Business Services found in a recent survey that 70 percent of travelers generally thought fares were reasonable, and 50 percent accepted fuel surcharges.

However, "a very high percent of people were concerned about paying for baggage," said Bruce Speechley, partner and hospitality and leisure practice leader for the IBM unit.

Mr. Speechley said that as basic airline travel has become more like mass transit, passengers should not expect much beyond basic transportation.

"You don't expect being fed and watered and all these things on Greyhound or a train," Mr. Speechley said. "If you want them on a plane, then à la carte pricing is probably best for you and helps them keep down the price of the fares."

 

Thanks to Fuel Crisis, Airlines Weather Storm
Fuel Crisis May Have Helped Airlines Prepare for Economic Meltdown
By LISA STARK and JENNA MUCHA
WASHINGTON, Dec. 7, 2008

When travelers find themselves on packed planes this holiday season, it could lead them to believe that business is booming for the airlines.

But holiday travel is actually off 10 percent this year, a sign not only of the troubled economy but also that there could be more turbulence ahead.

Overall, U.S. airlines predict they may lose between $4 billion and $6 billion this year.

"We are starting to hear some reports of advanced bookings being off significantly, and that of course, is a very ominous sign for what we could be looking at in 2009," John Meenan of the Air Transport Association said.

Despite the troubled economy, the airlines are actually in better shape than some other industries, though.

Last summer, when fuel prices soared to record highs, airline carriers were forced to lay off workers, keep planes grounded and slash flights to save money. All the trimming actually helped them, when the economy suddenly went south and they had already made extreme adjustments.

"They traded a fuel crisis for an economic crisis, and if they hadn't cut seats out of the system, they'd be scrambling to do so right now," said Rick Seaney, the CEO of FareCompare.com.

So in this ailing economy, the airlines won't be following in the steps of other businesses reaching bankruptcy.

Travelers can rest assured the airlines won't emulate the automakers and at this point don't seem to be at risk of more bankruptcies. They won't parade up to Capitol Hill to ask for a federal handout.

"The cost of oil removed their strongest argument for asking for aid. They can't go up and say, Mr. Chairman, my costs have gone up 87,000 percent, because their costs have come down," said David Field, U.S. editor of Airline Business Magazine.

However, airlines didn't just make cuts, they added things passengers weren't accustomed to. They added fees for everything from checked bags, to a can of Coke -- all to help cover the rising fuel bills.

Now fuel prices are down, but the fees haven't been eliminated.

Airline Fees 'Are Forever'

"Fees are like diamonds, they are forever. I don't think fees will go away," Field said.

The fees are bringing in hundreds of millions of dollars and airlines say it's money they can't afford to give up.

Airlines are watching lucrative business travel drop as companies are cutting back on travel expenses. Leisure customers flying to vacation destinations are also staying home.

"I think the airlines are terrified of softening demand. I think it's the one thing they didn't count on," Seaney said.

For passengers, the tough economic times can mean good deals, since airlines are now slashing ticket prices to try to entice more business.

 

Extra airline fees add up for travelers
Southwest, US Airways charges reflect choices fliers now face

The News Tribune - Tacoma, WA
December 7th, 2008
JOHN GILLIE

Holiday fliers, take heed. You may find the familiar phrase, “My, how you’ve grown,” doesn’t apply just to your towheaded nephew this year.

That same phrase, uttered with more alarm and less wonderment, easily describes the fat package of fees most of the nation’s airlines are imposing on their customers.

Born of escalating fuel prices and nurtured by a declining economy, those fees, hidden in the fine print on airlines’ Web sites, can easily add 20 to 50 percent or more to the price of a trip for those who are unaware of their existence.

Infrequent fliers whose last trip to the airport was in 2007 will find a whole new world awaiting them from the time they reserve their flight until the time they claim their luggage after the return flight.

Those fees of $5 here and $20 there add up to big numbers for cash-strapped airlines.

Delta Air Lines, which held out for months from joining other major carriers with a $15 fee for the first checked bag, recently announced it was imposing that fee. The incentive? An estimated $500 million in additional revenue.

“The increase in bags being carried on board Delta aircraft this year tells us that customers are not differentiating Delta as the only major airline not charging for a first checked bag,” said Steve Gorman, the airline’s chief operating officer in announcing the new fees early last month.

Many passengers simply are unaware of the new fees or don’t see them as a deterrent to travel on their favorite carrier.

“We were unaware of those extra fees until we got to the airport,” said Amber Young of Las Vegas after she checked in recently at Sea-Tac Airport. “The baggage charges weren’t a consideration,” said Young, who checked two bags. “But they may be in the future. We just picked the lowest fare.”

The new fees have not only added costs to flying, but they’ve also made the hitherto simple task of finding the least-expensive fare between home and a distant destination an exercise worthy of a CPA.

Simply entering the date and destination in a travel Web site might still give you the lowest cost for a ticket, but it won’t necessarily give you the lowest total cost.

Consider this example.

We’re comparing nonstop flights between Sea-Tac and Phoenix leaving in the morning of Dec. 22 and returning the evening of the 27. The airfares were the least expensive available at midweek on each of two airlines’ Web sites for nonstop flights at comparable times of day.

We’re using two airlines at the opposite ends of the fee spectrum, Southwest Airlines and US Airways.

Southwest has taken a well-advertised “no fees’ approach, not charging for the first two checked bags, for refreshments, curbside check-in, phone reservations or many of the other services for which other carriers are now charging extra.

US Airways has pioneered what it calls “a la carte” pricing, posting charges for check-in luggage, refreshments and even coffee served aboard. US Airways is even contemplating selling pillows and blankets, following the example of JetBlue Airways.

Each airline claims its approach is superior, US Airways because it charges customers for just the services they use, not those they don’t.

In announcing a list of new fees, US Airways President Scott Kirby said the airline needed to find new revenue sources.

“We simply must adapt to the current environment and transform our business by generating new sources of revenue and adding fees to better offset our costs. The ‘pay for what you choose and use’ model ensures that only the customers that want such services bear those costs. While new and different, this model ensures that competitive and affordable travel remains intact across our system,” he said.

COMPARING PRICES

Southwest claims certain services should be part of the airfare package, not extras.

For the sake of this comparison, let’s assume you’re loaded up with luggage full of Christmas presents, two bags. Let’s also assume that you like to sit on the aisle near the front of the plane for a quick exit on landing. We’ll also say you check your bags at the curb instead of inside at the counter. While you’re aboard for the three-hour flights, you drink a soda and eat a snack each way.

So here’s how it works out:

US AIRWAYS

Basic fare: $417.
Two checked bags: $40 each way for a total of $80.
Curbside check-in at each airport: $4.
Aisle seat near the front: $5 each way for a total of $10.
Drink and snack: $7 each way for a total of $14.
Grand total: $525.

SOUTHWEST AIRLINES

Basic fare: $512.
Two checked bags: $0.
Curbside check-in: $0.
Aisle seat near the front: $0 if you check in early.
Drink and snack: $0.
Grand total: $512.

Under those circumstances, US Airways’ $95 advantage turns into a $13 disadvantage compared with low-fee Southwest.

But wait. Change a few details, and the advantage shifts back to US Airways.

For instance, say you’re satisfied with an aisle seat farther back in the plane. You can reserve those at no charge on US Airways, while at Southwest you’ll just have to take your chances because Southwest doesn’t reserve seats. You could also roll you bags inside, forgo the snack and check only a single bag.

COMPARING SERVICE

That reduces US Airways’ total to $451, a price advantage over Southwest of $61.

Though both airlines will get you from Seattle to Phoenix, their services aren’t identical. Southwest, for instance, doesn’t have assigned seats, though it has refined its system for queuing up passengers on a first-come, first-serve basis. It has also added what it calls “Business Select” fares which, among other things, puts you in the front part of the line to grab seats after you enter the plane. Business Select fares also include frequent-flier benefits, a free alcoholic drink and other amenities, all for an extra charge.

Southwest offers free soft drinks and small snacks, services for which US Airways charges, but it doesn’t offer meals, even for extra bucks.

And while Southwest has free checked baggage service, it doesn’t exchange bags with other carriers, so if you’ve booked a trip that includes multiple carriers along with Southwest, you’ll have to reclaim your bags at a midpoint in you trip and check them in with the other carrier. US Airways and most other major carriers will transfer the bags to your next airline for you.

Dallas-based Southwest offers free phone reservations, but its least-expensive fares, called “Ding” fares, are only available on the Web, not through telephone agents.

Southwest planes are all-coach. US Airways offers first class at a considerable bump in price.

WEIGHING ALL FACTORS

Seating can be a critical issue for some travelers.

Sally and J. Michael Shaffer picked Midwest Airlines for their trip from Kansas City to Seattle and back over rival Southwest because they could pick seats with better legroom on Midwest. Sally Shaffer has had knee and hip replacement surgery, so the seat configuration is of prime importance on a flight of more than three hours.

“I can remember when they didn’t have any of the fees they have now and they served fine meals,” she said, “but if the extra money goes toward making sure the airline is safe and reliable, it’s worth the extra cost.”

Southwest, the nation’s original and largest “low-fare” carrier has an enviable reputation for on-time flights and few customer complaints, but while US Airways in the past struggled with several holiday baggage handling meltdowns, it has improved its performance markedly.

It behooves air travelers looking to keep their costs of travel low to consider not only the ticket cost but the plethora of extra fees that airlines are rolling out.

Eight rules for avoiding sky-high travel costs

1. Plan ahead: Many airline and travel service sites now offer “low-fare calendars” that show fare levels to your destination a few days or weeks surrounding your target arrival date. If you’re flexible, you can save 50 percent or more on a coach airfare by picking the least-traveled days with the lowest fares.

On the site for SeaTac’s Alaska Airlines, for instance, the airline’s low-fare calendar shows the lowest price for a two-day trip to Los Angeles leaving Jan. 4 and returning Jan. 6 is $390 including taxes. Move the trip one day later with a departure on Jan. 5 and return on the Jan. 7, and the fare drops to $159 with taxes.

If you’re not sure the fare you’re booking is a good buy, consult MSN’s Farecast. Farecast tells you based on historic data if the fare is lower or higher than normal and advises you whether to buy now or wait until the fares drop further.

2. Book tickets on the airlines’ Web sites: Other travel sites add small fees usually $5 to $8 to the price of a ticket to book a flight. The same goes for travel agents. Some travelers, however, think the extra advice and service they receive from in-person and Internet travel agencies is worth the extra cost.

Phone reservations on all airlines but Southwest incur an extra fee ranging from $10 to $35. The same fees often apply as well at the airport for a person-to-person purchase.

3. Don’t change your nonrefundable ticket once you’ve booked it: Most of the major airlines charge $150 for those changes. Southwest will change your ticket for nothing. Alaska charges $75 as does its West Coast competitor Virgin America. International change fees are even dearer, $250 in some cases.

4. Travel light: Most of the major airlines including longtime holdout Delta, now charge for all checked luggage. Fees typically are $15 for the first bag and $25 for the second. And that’s each way. Southwest has no extra fees for the first two checked bags. Alaska, JetBlue, Virgin America and Sun Country have no fees for the first checked bag but charge for the second.

Alaska spokeswoman Marianne Lindsey said the SeaTac-based carrier has no plans to implement a charge for the first checked bag.

“We’re sticking with our policy,” she said. The airline makes exceptions for its customers within the state of Alaska. There, the airline hauls three checked bags for nothing.

“We’re the bus up there, so people bring everything with them,” she said.

No airline imposes fees for carry-on luggage, but remember you can’t carry on liquids or gels in excess of 3 ounces for security reasons.

Weigh any bags you suspect might be over the 50-pound threshold for overweight charges, and redistribute the load to other bags or eliminate some items. Overweight bag charges range as high as $360, though they typically are $50 to $100 each way.

5. If you’re checking bags, do so at the counter though the charge for curbside check-in at the airlines that charge is relatively nominal, typically $2.

6. Use airlines that allow you to pick your seats in advance at no charge: About 40 percent of U.S. carriers now charge more for certain desirable seats, exit rows, aisle or window seats near the front of the plane, for instance.

Those charges range from $5 to $109 depending on the length of the flight, the airline and the configuration of the seats. Some airlines such JetBlue and United offer seats with more legroom for the extra fee.

If you’re buying your seat just a few days before the flight, you might find that airlines without seat selection fees have only a few less desirable seats left. Then the extra $20 may seem worth the expense if your other choice is a middle seat on a coast-to-coast flight.

7. Skip the snack and the beverage: Buy your own at the airport store, or fly with an airline that still features free refreshments. You can buy a beverage at airport stores beyond security and take them aboard, but you won’t get ice and the price could be close to the cost the airlines charge. Remember, too, that some airlines such as Alaska, have converted airborne sales to credit cards only. If you want that snack pack, you’ll have to haul out your Visa card.

8. Fly Continental if you expect a free meal on a long flight: The Houston-based airline is the only one of the major carriers that still provides coach passengers free meals on long flights. All the rest either offer no meals, like Southwest and AirTran, or charge prices ranging from $3 to $11 for food ranging from elaborate packs of crackers and cheeses to warm hamburgers and pasta. Don’t count having the selection you want available. Airlines estimate the need and put aboard only the amount they think they can sell. If you’ve boarded with a planeload of vegetarians, don’t count on their having a Garden Burger when flight attendants reach you in 32B.
 

U.S. Carriers Eye Profits Thanks to Capacity Cuts, Oil Drop

Aviation Week
Dec 7, 2008
By Adrian Schofield

The deepening recession is curtailing air travel, but not enough to deflate U.S. airlines' confidence that a return to profitability is just around the corner. The industry's determination to slash capacity should allow carriers to prosper in 2009 even as other U.S. sectors face a bleak future.

Fleet reductions of a scale rarely seen before have been made in the last few months, and they have the potential to cause a long-term shift in airline industry dynamics. The cuts are achieving the streamlining that industry consolidation could not deliver - the number of aircraft that have been parked is "the equivalent of one very large airline going out of business," notes American Airlines Vice President for Corporate Development Beverly Goulet.

Plummeting fuel costs, of course, are helping even more. Oil prices are now about half what they were at their peak earlier this year, and this is having a huge effect on costs. At current oil prices, American would pay as much as $3.5 billion less for fuel in 2009 than it did this year. Delta Air Lines says it would pay about $5 billion less, and United Airlines estimates a $3 billion drop.

This combination of shrinking capacity and lower fuel prices should offset declining demand caused by the wider economic malaise, and analysts believe only a depression of catastrophic proportions can prevent a profitable 2009 for legacy carriers (AW&ST Oct. 27, p. 32). "You probably couldn't find a better time for a recession" in the history of the airline industry, says JetBlue Senior Vice President Mark Powers.

All of this is new to the airlines, which typically suffer as much, if not more, than most sectors during downturns. The airline industry finds itself "running counter-cyclical" to the rest of the economy, US Airways CEO Doug Parker notes. Airlines will probably "have a better 2009 than 2008, and this is different from what other industries are seeing." Delta President Ed Bastian says the financial outlook for airlines "is more positive than negative" even though the wider economic outlook has worsened.

Executives admit that good luck played a large role in preparing the industry for the economic downturn. Airlines basically "made the right decisions for the wrong reasons," Continental Airlines Senior Vice President Gerry Laderman says. Carriers were very much in reactive mode when they announced capacity cuts, which were designed to make carriers leaner in the face of high oil prices. But oil prices receded before the reductions took effect, and airlines were left with trimmed-down capacity just in time for the next crisis - recession and falling demand.

United CFO Kathryn Mikells now says the record high oil prices that just months ago seemed insurmountable "were actually good for the industry." Such an opinion would have been regarded as heresy when oil was above $130 a barrel, but Mikells says the oil spike forced airlines to take a hard look at capacity. Now, the recent falloff in prices "is poised to be a real catalyst for profitability," she believes.

One of the big questions for next year will be whether airlines retain their new-found belief in capacity discipline. Executives claim reductions are not just a temporary reaction, and if this holds true then the U.S. industry has the potential to put itself on a much firmer footing no matter what the economy does.

"Even if we wanted to bring capacity back, we couldn't," JetBlue's Powers says, because orders for new aircraft have been deferred and aircraft have been sold. A succession of capacity cuts during the last year - more than 10% industrywide - show that airlines are prepared to hold the line. Mikells notes that airlines are "really sticking to their guns" on capacity cuts. AirTran CEO Robert Fornaro thinks this capacity discipline will last at least through 2009.

Of course, the situation isn't entirely rosy for the airlines. Most U.S. carriers reported a significant demand drop in November, the largest sign yet that the recession is finally hitting air travel. Also, oil prices are now so low that many fuel hedges are actually becoming a significant cost drag. However, Delta provides a good example of how these negative effects are being offset by capacity and fuel trends.

Delta is seeing the same demand weakness as its competitors, Bastian says. In its first estimate for the combined Delta/Northwest operation in 2009, the carrier plans a year-on-year domestic capacity reduction of 8%-10%. This is on top of extensive reductions already made this year - Delta's capacity will be down 12% by the end of this quarter. So the overall two-year cut will be around 20%.

At the same time, Delta's fuel costs could halve next year, if the forward curve prediction of $50/barrel for oil holds true. So, with its streamlined capacity, the carrier would have to see demand shrink by 20% to fall below breakeven. And a demand drop of that magnitude would be unprecedented, exceeding even the post-9/11 decline. Impossible? No. But unlikely.

US Airways' Parker agrees that 2009 looks promising, and he notes that most analysts see the industry "snapping back to profitability." However, he believes strongly that this is not enough, and that the industry should be looking further ahead to try and break out of the boom-and-bust cyclicality that has traditionally plagued airlines.

The current situation "is exciting, but the real question is what we do beyond that," Parker says. He notes that even in up-cycles, airlines have underperformed financially compared with other sectors. Changing this dynamic should be the goal, he says. "We could use this as an opportunity to take our industry to real economic returns like other businesses, or we can do as we've always done in the past and settle for much less."

Airlines often have the notion that "profitability is good enough," but "I think we can do better," says Parker. He believes conditions will be right over the next few years to achieve a real change. First, further consolidation is required. Progress has been made, but "the industry is still too fragmented."

More must also be done on the labor front. Management needs to do a better job of convincing unions that contracts "should be able to make it through all cycles," Parker says. At the moment, too many carriers concede pay raises "at the first whiff of profitability," and then "at the first whiff of losses they ask for them back."

On the pricing front, airlines "give away more of our product than other industries do." This tendency has been changing with a drive to "unbundle" many passenger fees, and this trend must continue, Parker notes.

Finally, airlines must change their strategic approach. Traditionally, carriers have focused too much on their performance versus each other rather than against other businesses. This has led to a focus on "beating each other up . . . rather than getting real returns." And beating each other up has not worked, because the major airlines have proven that "we don't go away, and find a way to stay around." Carriers should stop trying to drive competitors out of business to win, and instead take steps to make the industry stronger, Parker says.

 

American, Delta no longer in FAA safety program

By DAVID KOENIG

The Associated Press

DALLAS December 5, 2008 (AP)
 

The nation's two largest airlines have dropped out of a federal safety program that was designed to encourage voluntary reporting of pilot errors before they resulted in crashes.

Delta Air Lines Inc. and American Airlines quit the Aviation Safety Action Program, or ASAP, which allows pilots to admit mistakes without fear of being punished.

The acting chief of the Federal Aviation Administration said it was "disheartening" to see the programs end, which a leading safety expert blamed on lack of trust between labor and management.

American had taken part for 14 years, and its program was used as a model at other carriers in the U.S. and abroad.

The pilots' union at American, the Allied Pilots Association, charged that American was using the program to discipline captains for inadvertent safety lapses, putting their jobs at risk. The union sought language to strengthen job protections for pilots who reported errors.

"We will not accept any process that labels our pilots as reckless, and discipline for inadvertent safety events must stop," union official Kevin Cornwell said at the time.

Tim Wagner, a spokesman for AMR Corp.'s American Airlines, said Friday the company preferred not to change provisions of the program but that the union balked and refused to extend the agreement. He said a self-reporting system from NASA is still in place.

Wagner said ASAP doesn't have the day-to-day safety impact of such things as inspections and maintenance, "but it allows us to look at situations that have happened and make changes. We would love to see it renewed."

A similar dispute led Delta Air Lines Inc., the nation's largest carrier, to end its ASAP program in 2006, and subsidiary Comair also recently dropped out. Pilots at Delta and Comair are represented by the Air Line Pilots Association.

William R. Voss, president of the Flight Safety Foundation in Alexandria, Va., said Friday that ASAP is vital to maintain the improvement in airline safety over the past several years.

"These programs catch little problems before they become big problems," he said.

While the pilots' reports are confidential, Voss, a former FAA official, said ASAP helped identify certain runway configurations that can be confusing, which was a factor cited in the 2006 crash of a Comair jet in Kentucky. The accident killed 49 people.

Voss said he didn't want to blame the unions or the airlines for the demise of the programs, but attributed it to deteriorating labor-management relations in the industry.
 

Pilots oppose airport auction
Atlanta Business Chronicle

Friday, December 5, 2008

by J. Scott Trubey, Staff writer

A federal government plan to auction off valuable takeoff and landing slots to curb congestion at New York City airports doesn’t fly with Delta Air Lines Inc. pilots.

The pilots have joined the growing chorus of lawmakers and industry officials opposed to the controversial plan to take up to 10 percent of airlines’ takeoff and landing times, which would be auctioned off to the highest bidders.

The U.S. Department of Transportation says the auctions would help alleviate air congestion in the Big Apple by effectively instituting market-based pricing of landing and takeoff times during peak periods. In other words, carriers would pay more to fly in times of high demand and would pay more to use smaller aircraft, which occupy the same air and taxiway space as larger jets.

In September, only half of all flights from New York-area airports took off on time, compared with an average of 70 percent at other major U.S. airports.

The airlines say they schedule flights when their customers want to fly and improvements are needed to air traffic control systems and scheduling. The airlines see auctions as an encroachment of governmental power that could raise fares and cost small cities air service and some front-line airline employees — such as pilots, flight attendants and gate agents — their jobs.

“We like to say that what they’re proposing is auctioning off our jobs,” said Dino Atsalis, a Delta pilot and chairman of the Legislative Affairs Committee of the Delta Air Line Pilots Master Executive Council.

Analysts for Morgan Stanley wrote that the auctions will have “negative repercussions” for the airlines because it would “suggest” carriers don’t own the slots, which airlines have used as assets to obtain financing. Carriers also could lose some access to the airports and have the value of their New York operations eroded by new entrants.

Allowing other carriers — particularly oil-rich or government-subsidized foreign airlines — to bid against cash-strapped U.S. airlines for the slots could have severe ramifications for domestic carriers already reeling from the economic and fuel shock of the past year, airline analysts have said.

Half of all passengers into New York area airports arrive on narrow body planes and many come from cities whose airports can’t support larger jets, Atsalis said.

“But overall, it will affect everybody,” Atsalis said. Jobs could be cut and destinations could be eliminated or see reduced service.

On Dec. 9, the DOT and the Federal Aviation Administration will identify how many takeoff and landing times they intend to offer at auction Jan. 12.

The slots, the FAA says, are not the property of the airlines, and additional runways and upgraded air traffic control systems are either years away or not in the budget and improvements are needed now.

The General Accounting Office, however, has said the FAA does not have legal grounds to conduct the auctions, as it would amount to a new fee and can be approved only by Congress.

Pilots for Atlanta-based Delta (NYSE: DAL), Continental Airlines Inc. (NYSE: CAL), US Airways Group Inc. (NYSE: LCC) and JetBlue Airways Corp. (Nasdaq: JBLU) have joined with their companies to protest the auctions. The Port Authority of New York and New Jersey, which operates the airports, and the airlines’ trade group, the Air Transport Association of America (ATA) has filed a motion with the U.S. Court of Appeals to stay the auction. The ATA is challenging the government’s authority to conduct the auction.

They are joined in opposition by many in Congress — including the New York and New Jersey delegations — and the governors of both states.

“Originally proposed under the guise of congestion reduction and now advanced under the guise of ‘enhancing competition,’ the [FAA]’s continued pursuit of an illegal ivory tower scheme to confiscate and auction carriers’ slots is nothing but a new tax on U.S. consumers,” Delta spokeswoman Susan Chana Elliott said in a prepared statement.

The auction would occur just eight days before President-elect Barack Obama is inaugurated and the airlines want a stay until the new administration is in place. Though the president-elect has not directly commented on slot auctions, many ranking Democrats in Congress oppose them.

There are about 1,000 Delta pilots based out of LaGuardia, John F. Kennedy International and Newark Liberty International airports, Atsalis said, and hundreds more fly for Delta partners. More than 7,600 Delta employees have contacted their congressional representatives to protest the measure, airline officials said.

Atsalis said an auction could peel 20 takeoff and landing times away from Delta at Kennedy alone.

U.S. Sen. Johnny Isakson, R-Ga., is among many in Congress to voice his opposition to the auctions to Transportation Secretary Mary Peters.

Isakson is among a cadre of senators who want an amendment banning the auction inserted into any bill that might be passed during the lame-duck session before year’s end. Auctions, he said, amount to taking the airlines’ property.

“The odds are the results [of the auction] would be bad,” Isakson said, echoing the warnings of the airlines that the plan could cost jobs and some small cities their air service.

Isakson was not optimistic that a ban on the auctions could pass Congress before it adjourns next week. The issue might not be addressed until the 111th Congress is sworn in Jan. 6.


 

Airlines ready for fewer travelers in 2009

The Philadelphia Inquirer
By Linda Loyd
Fri, Dec. 5, 2008

The airlines expect to have fewer customers in 2009, and they seem well-positioned to deal with that.

Hammered first this year by staggering fuel costs and now experiencing a reduction in passenger demand, the major carriers are preparing to downsize even more next year to regain profitability.

A formula of dramatically lower fuel prices and capacity adjusted downward because fewer people are traveling in a brutal economy should result in a better bottom line in 2009.

Thus, industry executives are almost upbeat about the coming year, making them rare creatures in the world of commerce these days.

Airlines had their own tsunami - staggering fuel prices - earlier in the summer. They reacted aggressively, by slashing flying capacity - seats and flights - by 10 percent industrywide. Those actions serve now to mitigate the effect of a decline in passenger travel because of a different crisis: a recession.

With oil now below $50 a barrel, U.S. carriers say they believe they can counter a significant drop-off in demand and still come out better than when crude peaked at $147 in July.

Airlines say they stand ready to shed more flights and seats, either by curtailing schedules or flying smaller planes, if passenger demand weakens further.

"We remain optimistic on 2009 for the airline industry as a whole," analyst Bob McAdoo at Avondale Partners L.L.C. said in a research note two days ago. "If a weaker economy continues to reduce both oil prices and passenger revenues, the benefits of lower oil prices should more than offset reduced revenues," he said.

Twelve airline executives, speaking at a Credit Suisse investors conference in New York this week, said the earlier cuts in flying and fuel-inefficient airplanes helped blunt the effect of Wall Street's meltdown and a tumbling economy that is discouraging travel.

In contrast to other industries, such as housing and autos, airlines are expecting a better year ahead, said US Airways Group Inc. chief executive officer Doug Parker. "For airlines at least, 2009 looks better than 2008," he said.

Airlines not only cut flying, but also changed their pricing models to include ancillary fees and charges for everything from checked bags to soft drinks that "will have material impact on airlines' ability to generate higher profitability," Parker said. "Most analysts are now projecting you're going to see profitability for the industry next year."

Parker said bookings for January look better than in November, which "was very soft. December looks better than November, and January looks better than December."

US Airways reported a nearly 7 percent decrease in passenger traffic for November. Southwest Airlines Co. said traffic was down 8 percent. American Airlines said its traffic fell 14.5 percent in November compared with November 2007.

"We have seen business travel softening in certain markets," Parker told the investors conference, "presumably because of what is going on here in New York with the financial industry. Leisure bookings are staying almost surprisingly robust."

Southwest's CEO Gary Kelly said the Dallas low-fare carrier planned "significant" changes in its flight schedule in January.

"We are going into our daily flight schedule and pulling out trips that are not popular and not profitable," Kelly said. "Obviously we are concerned about the economy. We need to get our flight schedule adjusted to lower demand. Our plan is to not grow the fleet in 2009."

Delta Air Lines Inc., which merged recently with Northwest Airlines Corp., said it would trim domestic flying 8 percent to 10 percent in 2009, and cut international capacity 3 percent to 5 percent.

US Airways expects to shrink flights and seats 6 percent to 8 percent next year, but does not anticipate reducing capacity more than that.

United Airlines said it would lay off nearly 1,200 workers in January as part of a previously announced plan to eliminate 7,000 jobs.

United is also closing repair stations at Philadelphia International Airport, LaGuardia Airport and Newark International Airport on Jan. 11.

"We announced those maintenance facility closings on Oct. 21," said United spokeswoman Megan McCarthy. About 30 mechanics work at United's repair station at Philadelphia International.

"Most of the work that is performed at Philadelphia will move to other airports throughout United's system," she said.

United announced in October that it expected to shrink capacity 8 percent to 9 percent in 2009. "These difficult but necessary decisions are all part of United's work to remain competitive in this extremely difficult economic environment," McCarthy said.

 

Associated Press
Sector Snap: Falling oil helps airline shares
Associated Press, 12.05.08, 02:57 PM EST

Friday marked the fourth day in a row that airline shares have risen, as oil prices fell to a four-year low.

Airline shares fell on Monday but have generally climbed since then. Friday, crude oil dipped as low as $40.81 per barrel, and was trading at $41.20 by early afternoon.

Oil prices fell the most after the Labor Department reported a half million people had lost their jobs in November. So while airlines should benefit from a drop in the price for jet fuel, their single largest expense, they stand to be hurt by falling demand from formerly big-spending business travelers, and tourists.

Some airline analysts have said that airline shares should have risen much more than they have, considering the drop in fuel prices.

"Clearly the market is saying demand will be very poor in 2009," UBS analyst Kevin Crissey wrote in a note distributed Friday morning.

Using American Airlines and US Airways Group Inc. as proxies for the industry, Crissey calculated that revenue per available seat mile would have to drop 12 percent to 15 percent - about the same as the worst year after the Sept. 11, 2001 terrorist attacks. US Airways revenue per available seat mile would have to drop an additional 10 percent in 2009 to reach those levels. "We view such an outcome as unlikely," he wrote, adding, "We believe the stocks are undervalued."

In afternoon trading, American parent AMR Corp. rose 98 cents, or 11.2 percent, to $9.77. Delta Air Lines Inc. advanced $1.19, or 13.4 percent, to $10.07, United Airlines parent UAL Corp. soared $1.42, or 13.6 percent, to $11.85, and Continental Airlines Inc. rose $1, or 6.5 percent, to $16.48, and US Airways was up 82 cents, or 12.3 percent, to $7.47.

Among discounters, Southwest Airlines Co. jumped 23 cents to $8.66, and JetBlue Airways Corp. rose 18 cents to $5.62.

 

AIRLINE STOCKS
Airlines advance as oil drops 25% for the week

By Matt Andrejczak, MarketWatch
Dec. 5, 2008

SAN FRANCISCO (MarketWatch) -- Major U.S. airline stocks surged Friday as the price of crude oil fell to its lowest level in four years.

Delta Air Lines, United Airlines parent UAL Corp. and US Airways led the charge as oil prices plunged 25% for the week.

Delta Air Lines jumped 17% to $10.36. UAL surged 13% to $11.76. US Air popped 12% to $7.47.

The broad advance came even after the Labor Department said the U.S. racked up its worst monthly job losses in 34 years.

Overall, the Amex Airline Index closed up 9% at 22.45 points. For the week, the index gained 9% compared with a 2% loss for the Dow Jones Industrial Average.

Crude oil for January delivery ended down $2.85, or 6.5%, at $40.81 a barrel on the New York Mercantile Exchange, the lowest closing level since December 2004. Oil lost 25% during the week, the largest drop since the week ended Jan. 18, 1991.

Another big mover Friday was Ryanair Holdings, Europe's largest low-cost airline. Its shares rose 10% after it was said to be closer to acquiring rival Aer Lingus Group.

Ryanair sweetened its bid to 1.40 euro a share, a 20% premium to the Friday closing price. The offer values Aer Lingus at around 748 million euros.

In other developments affecting the airline sector, Boeing Co. may delay the first deliveries of its new 787 Dreamliner at least six more months, according to media reports. It would mark the fifth time the aerospace giant has been forced to extend the flagship commercial jet's rollout schedule.
 

US Airways CEO: Demand may improve in January
By The Associated Press
Thursday, December 04, 2008


MINNEAPOLIS - Demand for airline seats at US Airways is getting better rather than worse but the outlook is still hazy, the airline’s chairman and chief executive said Tuesday.

At the Credit Suisse Global Airlines Conference in New York, an analyst asked Doug Parker how demand was shaping up. Airlines — and their investors — have been worried because many companies have cut back on corporate travel at the end of the year to save money.

Parker said January “looks better than certainly November did. November was very soft. December looks better than November, and January looks better than December.” Parker stressed that it’s early yet, and hard to tell how January bookings will really shape up.

Parker also said that a $15 fee for the first checked bag has caused a 20 percent dropoff in the number of bags checked by travelers on his airline. He said that, in turn, has helped it improve baggage handling performance by more than 20 percent. The fee also makes up the bulk of $400 million to $500 million in revenue for extra services.

“It’s generating real economic value, but it’s not just about the money. What’s also happening is it’s helping us all to run better operations,” Parker said.

US Airways Group Inc. shares rose 88 cents, or 17 percent, to $6 in Tuesday’s trading. The airline’s largest hub is in Charlotte, N.C.

 

Judge refuses to block US Airways layoff policy
November 24, 2008 - 5:36PM
By Howard Fischer, Capitol Media Services

A federal judge has refused to block US Airways from laying off pilots from the old America West Airlines ahead of those hired by the original East Coast airline.

U.S. District Judge Neil Wake concluded that his court has no jurisdiction over the airline - at least, not until it exhausts other appeals.

But Wake, in his 24-page ruling, said he would not force the airline to keep the America West pilots on the payroll even if he had the legal authority. He said doing so would unfairly interfere with the business operations of the merged airline.

For example, he said, one of the purposes of the merger was to allow the reduction of some flights that had been flown by America West. He said if the company cannot shed itself of the pilots who were flying those flights - or at least the least senior of those America West pilots - it might be forced to continue paying them for doing no work.

Wake said that if the airline eventually wins the lawsuit, forcing it to alter its business plan now would result in a "grave and unjustifiable cost."

But Wake said that if the pilots win, they can be compensated retroactively for lost wages.

Calls to the lead attorney for the America West pilots were not immediately returned.

Central to the battle is the announced merger of the two airlines more than three years ago. Each airline had its own seniority plan for its pilots.

A federal arbitrator, after hearing arguments from unions representing both groups of pilots, subsequently imposed an integrated seniority schedule.

That was based not only on total seniority - the US Airways pilots had been around longer - but the fact that America West was the stronger of the two airlines and that its pilots, despite their shorter employment history, deserved special consideration.

Since that time, though, the more numerous original US Airways pilots - referred to in the lawsuit as the East pilots - formed a new union and sought to repudiate that agreement.

The airline itself has been doing layoffs, which, according to the lawsuit, have disproportionately hit the "West" pilots because the cutbacks in flights have been more from the old America West routes.

Attorneys for the West pilots want any pilots who were on furlough when the merger was announced to be the last hired or the first laid off.

More to the point, they asked Wake to block layoffs of any West pilot before the merged airline has shed itself of any of those who were rehired since the merger.

And it wants future furloughs to be based on the arbitrator's order that spells out the seniority and bumping rights of both the East and West pilots.
 

Ahead of the bell: Calyon upgrades airlines
Tuesday October 28, 8:26 am ET
Calyon's Neidl upgrades rating on airline stocks, cites steep drop in oil prices


ATLANTA (AP) -- Stocks of major network carriers got an upgrade Tuesday from a Calyon Securities airline analyst, who cited dramatically falling oil prices and the deep capacity cuts implemented to support ticket prices and revenue.

Analyst Ray Neidl said in a research note that his firm raised its ratings for major network carriers to "Add" from "Neutral."

Neidl said the firm also was raising its earnings per share estimates based on new, lower oil price assumptions.

The firm remains cautious on airlines' outlook in the short-term due to the uncertain economy and volatile markets and oil prices.

The research note said the airlines have shown discipline in cutting capacity, and the firm believes that carriers have the ability and would be willing to take further actions if demand falls more sharply than currently forecast.

"We expect these actions will provide further pricing traction for the carriers," the note said. "Since new market development will be largely curtailed, this large cost item should be eliminated for the duration of the economic slowdown."

The note said as the economic downturn continues and airlines move into the slower winter season, the firm believes that if airline stocks soften further, that would make them even more attractive to purchase.

"It is difficult to predict short-term stock price movements in such a volatile market for both equities and oil prices, but we recommend investors establish and add to positions on price weakness," the note said.

In premarket trading AMR Corp., parent of American Airlines, rose 50 cents, or 5.8 percent, to $9.10. Continental Airlines gained $1.05, or 7.3 percent, at $15.49. Delta Air Lines added 33 cents, or 4.3 percent, at $7.99. Northwest Airlines rose 8 cents to $9.10. UAL Corp., parent of United Airlines, gained 70 cents, to 6.1 percent, at $12.10. US Airways added 39 cents, or 5.5 percent, at $7.54. JetBlue rose 36 cents, or 8.1 percent, at $4.82. Southwest Airlines lost 6 cents at $10.60.
 

Major airlines upgraded on oil prices, capacity cuts
By Christopher Hinton
Last update: 8:54 a.m. EDT Oct. 28, 2008

NEW YORK (MarketWatch) -- Calyon Securities on Tuesday raised its rating for the major airline carriers to add from neutral, citing the dramatic drop in oil prices and deep capacity cuts. The major carriers are AMR Corp., Continental, Northwest, Delta, UAL Corp., US Airways, and Alaska Air. The research firm raised its rating despite the weakening economy since carriers have aggressively increased their cash positions, helping them weather the economic downturn without bankruptcies. It also puts them in a good position to take advantage of a "likely" spring recovery, Calyon said. However, economic pressure could further soften stock prices over the winter, the firm said.

UAL, Delta Fuel-Hedge Losses May Herald Profits for Airlines
By Mary Jane Credeur

Oct. 27 (Bloomberg) -- UAL Corp.'s United Airlines, Delta Air Lines Inc. and Southwest Airlines Co. all posted quarterly losses in part because of charges tied to jet-fuel contracts they bought in advance. Investors say that's good news.

The Bloomberg U.S. Airlines Index is up 8.2 percent since carriers began reporting earnings Oct. 15, while the Standard & Poor's 500 Index has fallen 3.4 percent. After tumbling fuel prices caused deficits because of airlines' hedges, Wall Street is betting that lower energy costs herald profits next year.

``Long-term value investors who have basically avoided airlines for decades are looking at taking stakes,'' said Michael Derchin, an analyst at FTN Midwest Research Securities in New York. ``The common wisdom going into a recession is that the last group to do well would be airlines. But I'm modeling profits for all of them'' in 2009.

The 10 biggest U.S. carriers lost a combined $2.52 billion in the third quarter, partly because of writedowns in the value of hedges. Jet fuel surged to a record $4.36 a gallon in July, then plunged 52 percent to $2.18 on Oct. 24.

``It's remarkable how much has changed in such a short period,'' Doug Parker, chief executive officer of US Airways Group Inc., said on a conference call on Oct. 23, when the airline posted an $865 million net loss that included writedowns for fuel hedges.

US Airways jumped 32 percent in New York trading this quarter through Oct. 24, the second-biggest advance among 14 airlines in the Bloomberg index behind UAL's 36 percent. The S&P 500 plummeted 25 percent in the same period.

`Nobody Knows'

The largest U.S. carriers announced 26,000 job cuts and the grounding of 460 jets as fuel was rising, trimming costs to help them weather any travel slowdown from the credit crunch. The drop in fuel prices further strengthens their ability to halt losses.

``Most airlines can make a profit at jet-fuel prices at these levels,'' said John Armbrust, an aviation fuel consultant in Palm Beach Gardens, Florida. ``The question is, do prices stay where they are? Nobody knows.''

Without last quarter's fuel-hedge charges, Southwest, Northwest Airlines Corp. and Alaska Air Group Inc. all said they would have made money. Marking down the value of fuel hedges snapped Southwest's 17-year quarterly profit streak.

The 10 carriers had an operating loss of about $870 million, narrower than analyst Derchin's estimated $1 billion. He projects about $5 billion in profits for the group next year.

They'll probably be ``break-even, maybe better'' this quarter, he said. Through nine months, the collective operating loss was $2.86 billion, based on airlines' reports.

Carriers including Southwest, US Airways and AirTran Holdings Inc. said they may defer additional fuel-hedging contracts until oil prices stabilize.

`Free Fall'

``In the last three weeks alone, oil's down $40'' per barrel, AirTran CEO Bob Fornaro said in an Oct. 23 interview. ``The market really is in a free fall.''

Fidelity Management & Research is among the investors adding to airline holdings last quarter, boosting its stake in Continental Airlines Inc. to 15 million shares, or almost 14 percent. The world's largest mutual-fund company previously held 4.8 percent.

The risks for airline stocks include the possibility that the weakening global economy will decimate demand, as well as the prospect of another jump in fuel prices, said Kevin Crissey, an analyst at UBS Securities in New York.

Still, Crissey also projects profits for the U.S. industry next year. He cited the carriers' cuts in domestic capacity of 10 percent to 15 percent and said oil is unlikely to return to its $147-a-barrel peak.

Offering fewer flights gives airlines more pricing power. Passenger unit revenue, a measure of fares and fees, jumped by 8 percent or more for most carriers last quarter, and Delta is among the airlines saying they expect similar gains in the current period.

``The perception is that the airlines are in more trouble than they actually are,'' Crissey said in an interview. ``Investors love the capacity argument. If it was just a fuel price drop, that'd be more shaky. But together, it's a much more compelling argument.''

With fuel costs lower, airlines say they can stand less demand
10:16 PM CDT on Sunday, October 26, 2008
By TERRY MAXON

After all they've been through, airlines are saying they can withstand a little drop in demand – or a big drop, if it comes to that.

Delta president Ed Bastian says, 'A significant decrease in demand is in some ways easier to work with than $150 oil.' The reason? The big fall in energy prices means that they'll have billions of dollars more left in their pockets in the fourth quarter and next year than they had – until very recently – been expecting.

"Given the magnitude of the oil decline, it would take a truly unprecedented decline in demand to overcome the impact of oil," US Airways Group Inc. president Scott Kirby said last week.

As major U.S. carriers have taken turns talking about their dismal third-quarter losses – $2.5 billion for the 10 largest carriers – they've also expressed optimism they'll weather any economic downturn.

Speaking to analysts last Thursday, Mr. Kirby pointed out that each $1 decrease in the price of a barrel of oil translates into $35 million of savings a year for US Airways. And oil has declined by more than $80 a barrel since hitting a high over $147 in July.

Using some complicated math, Mr. Kirby said industry revenue would have to decline 22 percent to offset the savings from cheaper jet fuel and capacity cuts taken by airlines in 2008 or planned for 2009.

"And with the exception of 9/11, nothing like that has happened in the history of the airline industry," Mr. Kirby said.

Industry executives have told Wall Street that they're seeing only slight drops in passenger demand so far, although they're planning for the worst.

"Looking into 2009, we expect to experience a decline in demand given the current economic crisis and are developing plans with a number of different scenarios," Delta Air Lines Inc. president and chief financial officer Ed Bastian told analysts on an Oct. 16 conference call.

"But a significant decrease in demand is in some ways easier to work with than $150 oil was this past summer," he added.

In many ways, the airline industry has been like an area hit by a hurricane – the winds have died down, but the damage is still being cleaned up.

Through the first nine months of 2008, the 10 largest U.S. carriers reported net losses of $20 billion, compared to $6.5 billion in profits in 2007. The 2008 losses were inflated, however, as several airlines wrote down "goodwill" they had been carrying on their balance sheets.

On an operating basis excluding the goodwill write-offs, those 10 carriers lost $2.6 billion through Sept. 30, compared with an operating profit of $5.5 billion in the first nine months of 2007 – an $8.1 billion reversal.

Blame it all, and then some, on fuel. The 10 carriers have paid $12.9 billion more for fuel in 2008 than in 2007. Through Sept. 30, fuel made up nearly 35 percent of all expenses, compared to less than 27 percent a year earlier.

In the third quarter alone, those airlines spent $14 billion on fuel, up $5.8 billion from the 2007 period. Six of the 10 carriers spent more than 40 percent of their operating budgets on fuel, led by AirTran Airways Inc.'s 50.6 percent.

However, assuming that oil prices don't make another U-turn and head upward, airlines expect to get a big relative break on energy spending in coming quarters. Industry analysts are quickly rewriting their earnings estimates to reflect the improving picture.

Only a few months ago, a number of analysts were muttering aloud about the potential for bankruptcies and debating about who would crater first. The talk now is more about how much capacity the industry needs to support a down economy, not whether the airlines will run out of money this year or next.

Typical is airline analyst Jamie Baker of J.P. Morgan Chase, who said in a research note last week that cheaper fuel is a bigger deal than lower demand.

"We are exponentially more comfortable with airline credit quality across the board ... in the current rapidly weakening demand but much lower oil and significantly lower capacity environment vs. our view six months ago when oil was on its way to $150, demand trends remained uncertain, and the industry was much bigger," Mr. Baker wrote.

"In other words, we are happy to trade demand trend downside for a 50 percent cut in fuel prices, a scenario that is inherently much more easily navigated by airline management teams," he said.

 

Capacity cuts, fuel price fall to help US airlines: UBS
Fri Oct 24, 2008 2:38pm EDT


Oct 24 (Reuters) - The combination of capacity cuts and a decline in fuel prices will help U.S. airlines weather a slack in demand, said a UBS analyst, who raised his price targets on three airlines, including US Airways Group.

However, airlines should boost liquidity through capital raises as debt levels remain too high, analyst Kevin Crissey said.

"The balance sheets of most US airlines look as if they've just come out of a recession, rather than going into one," the analyst said. "There is nothing to say fuel can't reverse course quickly and leave the airlines short on cash again."

Oil dropped more than $4 a barrel on Friday as gloom about a global economic downturn sapping fuel demand took the steam out of an OPEC agreement to cut output.

On Thursday, US Airways, AirTran Holdings, JetBlue Airways and Alaska Air Group reported quarterly losses, linking their results to a historic spike in fuel prices in the third quarter.

Crissey, who expects travel demand to likely be very weak soon, raised his price targets on US Airways, AirTran and Alaska.

Separately, Credit Suisse raised its price target on US Airways to $13 from $10.

"Fourth-quarter 2008 revenue should be ok for the industry, but our thesis is that 2009 likely proves more challenging," analyst D.McKenzie wrote in a note to clients.

Shares of US Airways jumped more than 12 percent to $8.03 in afternoon trade on the New York Stock Exchange.
 

US Airways Group, Inc. Secures $950 Million in Financing and Liquidity Commitments
TEMPE, Ariz.--(BUSINESS WIRE)-- 
October 23, 2008

US Airways Group, Inc. (NYSE: LCC) announced today that as part of a comprehensive liquidity program launched in mid August, the Company has raised approximately $950 million of financing and near-term liquidity commitments. On October 20, 2008 the Company closed on $800 million of these transactions with $400 million of proceeds used to prepay the Company's $1.6 billion bank debt facility. In exchange for this prepayment, the unrestricted cash covenant contained in the loan agreement for the bank debt facility has been reduced from $1.25 billion to $850 million. The loan agreement's term remains the same at seven years with substantially all of the principal amount payable at maturity in March 2014. The remaining proceeds from these financing transactions, approximately $370 million after payment of certain bank and other service fees, increase the Company's total cash position and will be used for general corporate purposes. The remaining $150 million of liquidity commitments are expected to close during the fourth quarter, with cash benefits realized through 2009. 

"Today's announcement confirms that US Airways' financial footing is solid," said Chairman and CEO Doug Parker. "As a result of these financings our total cash position relative to annual revenues ranks solidly among the highest of the largest US carriers. Most notably, we were able to complete this financing in the midst of unprecedented global financial unrest, which is a testament to the confidence our investors and business partners have in the people of US Airways. We are extremely appreciative of their support, and we intend to reward their commitment to us by continuing to run a great operation and returning our airline to profitability in the years ahead." 

The Company estimates that 2009 expenses will increase by approximately $90 million due to costs related to these transactions, of which approximately $65 million is non-cash. 

Chief Financial Officer Derek Kerr added, "Combined with our August equity offering which generated $179 million, and other financings completed during the quarter, US Airways has raised or secured approximately $1.2 billion in cash and payment deferrals since we released our second quarter financial results."

US Airways beat earning estimates by $0.19, reports Revs in-line
BRIEFING.COM
October 23, 2008

LCC Reports Q3 (Sep) loss of $2.35 per share, excluding charges, $0.19 better than the First Call consensus of ($2.54); revenues rose 7.4% year/year to $3.26 bln vs. the $3.26 bln consensus. Mainline passenger revenue per available seat mile in Q3 was 11.32 cents, up 4.4% over the same period last year. The company announced separately today, it has significantly improved its liquidity position and raised approximately $950 mln of financing and near-term liquidity commitments. "Today's announcement confirms that US Airways' financial footing is solid," said Chairman and CEO Doug Parker. "As a result of these financings our total cash position relative to annual revenues ranks solidly among the highest of the largest US carriers. Most notably, we were able to complete this financing in the midst of unprecedented global financial unrest, which is a testament to the confidence our investors and business partners have in the people of US Airways... The industry is also moving to a more profitable a la carte pricing model of its product and services with US Airways at the forefront of that change. We expect these new a la carte pricing initiatives to contribute between $400-500 mln in revenue during 2009."

AIRLINE STOCKS
Airlines fire up after oil hits 14-month low
By Christopher Hinton, MarketWatch
Last update: 4:39 p.m. EDT Oct. 16, 2008

(MarketWatch) -- Oil dipped to its lowest point in more than a year on Thursday, bringing about sharp gains in shares of the so-called legacy carriers that had appeared to be sinking this summer beneath the weight of record-high fuel costs.

The Amex Airline Index surged 21% to finish at 21.64 points with all of its 14 components trading higher. The benchmark index has climbed about 71% since hitting bottom in July when the price of oil reached $147 a barrel. More recently, crude oil for November delivery fell $4.69 to finish at $69.85 a barrel in electronic trading on Globex, ending below its 2007 average price of $72 a barrel, a year when most airlines were posting profits. Early last year the airline index peaked at 66.92, but prospects for a return to such lofty highs look bleak these days as the economy weakens toward an economic recession. The crisis in the credit markets has taken its toll on airline sales, and in August, the number of passengers flying declined for the first time since 2003.

Now carriers that were cutting back on seat capacity to trim costs in the wake of record-high jet fuel prices are focused on reducing capacity to deal with an anticipated decline in passenger numbers. Again, analysts are saying those airlines with the most flexibility in their fleet management will fare best.

Leading the pack Thursday were shares of United parent company UAL Corp., up 40% to close at $10.30; US Airways added 28.2% to $6.78; Delta Air Lines rose 18.8% to end at $8.84; and American Airlines parent AMR Corp. jumped 23% to $10.80.

Also climbing was Southwest. The Dallas carrier swung to a third-quarter loss after falling oil prices penalized its fuel hedging program, but on an adjusted basis Southwest posted a profit ahead of the Wall Street consensus. Shares of Southwest rose 8% to close at $12.49.

Meanwhile, the world's No. 5 airline, Continental, swung to a third-quarter loss from a year-earlier profit. Despite 8.8% higher revenue, 62% higher fuel prices and the impact of Hurricane Ike hammered results. Continental shares rose 22.7% to finish at $15.75.

AP
Sector Snap: Airlines mostly up as oil drops
Wednesday October 15, 2:38 pm ET
Airline stocks trade mostly higher amid broader market sell-off as oil dips below $75 a barrel


NEW YORK (AP) -- Shares of major U.S. airlines rose in trading Wednesday amid a sharply lower broader market, as the price of oil reached its lowest point in 13 months.

Also Wednesday, American Airlines parent AMR Corp. and Delta Air Lines Inc. reported third-quarter earnings. AMR reported an operating loss that was roughly inline with Wall Street expectations, while Delta Air Lines missed analysts' forecasts.

But investors were squarely focused on oil prices. Light, sweet crude for November delivery fell $2.95 to $75.68 a barrel on the New York Mercantile Exchange after earlier sliding to $74.57, the lowest trading level since Sept. 5 of last year.

Oil prices have now plummeted 48 percent since a July 11 record.

In afternoon trading, Delta rose 34 cents, or 5 percent, to $7.69. AMR gained 14 cents, or 2 percent, to $8.93. Northwest Airlines Corp. added 24 cents, or 3 percent, to $9.11. United parent UAL Corp. rose 25 cents, or 4 percent, to $7.38.

Among airline stocks losing steam was Southwest Airlines Co., which declined 24 cents, or 2 percent, to $12.08. The carrier is set to report earnings Thursday.

TheStreet.com
US Airways' CEO: Merger Saved Jobs
10/14/08 - 04:27 PM EDT
Ted Reed


CHARLOTTE, N.C. -- Three years after the merger between US Airways and America West, it seems clear the deal was an overall success.

Still, the inability to reach an agreement on pilot seniority stands out as a glaring shortcoming.

Without a merger, "neither the standalone US Airways nor the standalone America West could have managed through," said CEO Doug Parker, in a recent interview. "Both these airlines would be nonexistent had they not merged. But merged, we saved 35,000 jobs."

At the same time, "pilot seniority is not something we contemplated we'd still be dealing with three years later", Parker admitted.

The bitter seniority conflict follows an arbitrator's ruling that was deemed unacceptable by most pilots from the former US Airways. It has been accompanied by an April election that ousted the Air Line Pilots Association after 57 years, and a series of lawsuits.

On the positive side, "our pilots are keeping this between themselves," Parker said. "We've had no customers see this affect them in the last three years. People read about it, but it hasn't affected our operations one bit."

Meanwhile, Charlotte and Philadelphia, the two hubs operated by the former US Airways, have been the strongest links in the new carrier. They have suffered minimal capacity reduction despite cuts of about 25% in Las Vegas and 10% in Phoenix, which has come as the industry moves to reduce total capacity by an unprecedented 10% in response to higher fuel prices.

"Charlotte has proven to be more resilient than other parts of the country," Parker said, even taking into account the merger of Wachovia, Charlotte's second-largest employer, into Wells Fargo.

"US Airways' position in Charlotte is not dependent on Wachovia being as big as it is here," Parker said. "Charlotte is much bigger and stronger than that."

Philadelphia, long a trouble spot for the airline, has improved. In terms of departures within 14 minutes of the scheduled time, US Airways' Philadelphia operation showed a 25-point improvement, to 76.5%, from the first half of 2007 to the first half of 2008. "The turnaround in US Airways has been stunning within itself," Parker said. "The turnaround in Philadelphia is even more dramatic."

US Airways emerged from bankruptcy in September 2005 after a merger with America West. The new company quickly began to make money due to capacity declines throughout the industry and strong demand.

The merger's success led Parker to pursue both Delta and UAL. Those efforts failed, although some speculate that UAL, the parent of United, might become interested were US Airways to resolve its pilot seniority issues. Meanwhile, Delta plans to combine with Northwest.

For its part, the US Airline Pilots Association, which replaced ALPA at US Airways, recently marked the third anniversary of the tie-up, saying in prepared statement that "the airline is entangled in labor disputes, lawsuits and customer service issues, and management so far seems incapable of getting the merger completed."

As for merging pilot groups, said USAPA president Stephen Bradford, "What the Delta and Northwest managements did in just a couple of months, US Airways management hasn't been able to do in over three years."

Aviation consultant George Hamlin says the carrier could gain efficiencies if pilot lists and contracts are merged. But, if unresolved, the pilot conflict could encumber US Airways to the extent that it comes to resemble Eastern Airlines in its final days, Hamlin says.

"If you put parochial interests first, last and only, you could destroy your employer," he says. "But so far, you have to count this as a success, because the airline is still here."

TheStreet.com
For Airlines, Demand Matters More Than Earnings
Monday October 13, 2:30 pm ET
By Ted Reed, TheStreet.com Staff Reporter


If the world economy is going to be smaller going forward, the U.S. airline industry was ahead of the curve.
Carriers have downsized dramatically since the summer travel season ended, preparing for a world of $140-a-barrel oil. They have eliminated older aircraft and marginal routes that account for about 10% of nationwide capacity, and they have implemented fees that are expected to add hundreds of millions in annual revenue for the major carriers.

Since then, oil prices have fallen steeply, setting the stage for what many people see as a profitable 2009. The wild card is whether the financial market turmoil will impact demand, but so far industry cuts appears to have offset any impact from a potential decline in travel.

With airline earnings reports set to begin this week, observers will be closely watching for news on future booking trends.

AMR and Delta will report on Wednesday, while Continental and Southwest will report on Thursday.

At US Airways, "bookings remain solid and we're not having any trouble filling up airlines," CEO Doug Parker said in a recent interview. "But you can't help but be concerned."

UAL, the parent of United Airlines, moved to cut fall and winter capacity, a decision that was "very timely, largely driven by high oil prices but just before the financial crisis had arrived," CEO Glenn Tilton told ATW Online last week. United cut capacity by 16%.

Tilton said United has not seen any significant drop in passengers during the current quarter, although there is "some softening" in forward bookings for next year.

Without question, some airlines will pay a price for fuel-hedging bets they made when oil traded at higher prices. Last month, United said its third-quarter earnings will include $544 million in losses from fuel-hedging contracts. Alaska Air said last week that it expects a "significant" third-quarter loss due to special items including a $220 million mark-to-market loss on fuel hedges.

Still, as American CEO Gerard Arpey said in July during a third-quarter earnings call, falling oil prices "would be a high-class problem to have."

Parker, meanwhile, notes that passengers are less likely to check luggage or consume drinks when a charge is involved. For instance, in September, the number of checked bags on US Airways fell by 25%. "We've stumbled onto a better product," he says.

Many airline analysts are optimistic about 2009. In a recent report, Avondale Partners analyst Bob McAdoo writes that investors worry that demand is slowing, but he says the double-digit capacity cuts should more than cover any shortfall.

"Based on recent conversations with various airline management teams, we believe the sharp stock market selloff and current overall economic weakness are not materially slowing demand for air travel," McAdoo wrote last week. "New bookings in the past seven days are neither meaningfully different than in recent weeks nor different from booking patterns last year."

Standard and Poor's analyst Jim Corridore has doubts. He recently reiterated a hold on American, raising his 12-month target price to $8 from $6. "For '09, we think the recent sharp drop in oil prices will lead to significantly lower losses than we were earlier expecting, although we remain wary of the impact of the global financial crisis on air travel demand next year," Corridore wrote.

However, JP Morgan analyst Jamie Baker wrote in a recent report that even were demand to fall considerably, "we are having a tough time modeling losses." Baker said airline shares are trading far below their value, saying: "Nothing we've experienced comes close to explaining a recent $5 share price for United, considering we expect it to earn something similar (untaxed) in 2009." JP Morgan has a financial relationship with United that includes acting as a market maker.

 

AP
Barclays says airlines earnings set to improve
Thursday October 2, 1:17 pm ET
Barclays analyst sees smaller losses or profits for airlines as capacity and fuel costs fall


MINNEAPOLIS (AP) -- The outlook for airlines is improving, with lower fuel prices and fewer seats setting carriers up for a better 2009, Barclays Capital analyst Gary Chase wrote on Thursday.

Chase forecast much smaller losses for 2008 and 2009 across the sector versus his previous expectation, and he predicted profits for Continental Airlines Inc. and Alaska Air Group this fiscal year, instead of losses.

Spooked by fuel prices which spiked over the summer, airlines have been cutting the number of flights, hoping to raise prices. They are still doing that, even though fuel prices have retreated.

"The new lease on life afforded the industry by a dramatic reduction in jet fuel prices should give investors the time to benefit from this phenomenon," Chase wrote. He said his top picks are United Airlines parent UAL Corp., as well as Delta Air Lines Inc. and Northwest Airlines Corp. (which are hoping to combine by the end of this year), "but we believe the whole sector looks very compelling right now."

He left his ratings on the stocks unchanged. But for Continental, he now predicts 2008 profit of 25 cents per share, versus a previous call for a loss of $2.04 per share, and 2009 profit of $1.50 per share instead of a loss of $3.70.

The analyst still expects AirTran Holdings Inc. to lose money this year, but he now expects a 2009 profit of 25 cents per share instead of a loss of 85 cents.

Chase wrote that the results are being driven by the reductions in flying capacity by the airlines. He wrote that he expects domestic capacity to fall almost 12 percent in the fourth quarter of 2008.

"We continue to believe the industry will remain disciplined on capacity and will execute on announced capacity reductions," he wrote.

In Thursday afternoon trading, shares of most airlines fell with the broader market. AMR Corp. lost 20 cents at $10.96. Continental fell 10 cents to $17.50. Southwest gave up 27 cents at $13.93. JetBlue dropped 23 cents, or 4.6 percent, to $4.82. Delta lost 56 cents, or 6.6 percent, at $7.99, and Northwest fell 84 cents, or 8 percent, to $9.66.

A couple of carriers posted slim gains. UAL added 11 cents at $9.63, and US Airways rose 10 cents to $7.10.

Union: Lingering talks in airlines' merger causing confusion, morale problems
Oct 02, 2008
Beaver County Times - McClatchy-Tribune Information Services

Three years after the merger of US Airways and the former America West Airlines in September 2005, the combined carrier's two largest labor groups still remain without joint contracts. One of the labor groups believes that has taken its toll on the carrier's performance.

"Our situation causes confusion, inefficiencies and severe morale problems that carry over into the airline's operation," said Stephen Bradford, president of the US Airline Pilots Association, which represents US Airways' 5,300 pilots.

"We see these inefficiencies day after day, and at times, they create passenger delays and prevent the company from achieving its potential," Bradford said.

USAPA spokesman James Ray pointed to federal statistics that show US Airways ranked second-to-last (worst) in customer complaints during the first half of the year among the nation's 19 largest carriers.

That has been at least in part because of the fact that pilots from the former US Airways, or East unit, make $17 an hour less than those from the former America West, or West unit, Ray said.

"We do the same job as they do, but we don't get the same pay. I don't care what line of work you're in, whether you're flipping burgers or flying an airplane, it's human nature. It affects your performance. It's demoralizing," Ray said.

US Airways spokesman Morgan Durrant said contract negotiations with the carrier's pilots and flight attendants continue. Pilot talks were stalled for months while the group wrangled over a combined seniority list and then ultimately voted to scrap its former union, the Air Line Pilots Association, in favor of USAPA this spring. Lingering resentment and lawsuits between the East and West pilots remain unresolved.

Still, Durrant disagreed that the lack of joint contracts has adversely affected the carrier's performance, citing improvements in on-time performance and baggage handling. Federal statistics show US Airways has ranked in the top 10 in on-time performance for the last nine months reported and in the top 10 in baggage handling for the last five months.

"We have made dramatic improvements. I think the (high rate of) customer complaints are driven by a perception that is lagging reality," Durrant said.
 

US Airways Pilots Mark Three Years Of Failure To Complete Merger
Wed, 01 Oct '08
The Aero-News Network


Joining With America West Announced September 27, 2005. September 27 marked three full years in which US Airways management has failed to complete their merger between the old US Air, and America West. Today, the airline is entangled in labor disputes... lawsuits... customer service issues... and public perception as a nickel-and-dime outfit, willing to sell its soul for a $15 service fee.

Adding its chorus to the chaos is the US Airline Pilots Association... formed earlier this year when US Airways pilots (that is, pilots from the old US Air operation) voted to remove the Air Line Pilots Association as their collective bargaining agent, saying ALPA had done little to represent their interests in early joint contract talks.

As ANN reported, a federal arbitrator presented a seniority formula in June 2007 that based pilot ratings on aircraft type, with pilots ranked by seniority within each group based on their time at their respective airline, and how many aircraft of that type are within the combined US Airways fleet. Under the proposal, the top 517 pilots came from US Airways... but the trouble began when talking about first officer rankings, which US Air pilots said favored their younger counterparts coming from America West.

As a result, today US Airways pilots still work under different Collective Bargaining Agreements left over from their former airlines... each having a different set of work rules and pay rates. They are not permitted to fly each other’s aircraft, or intermix crews.

While neither side is willing to budge from its stance (and, indeed, USAPA faces discord within itself, from former America West pilots) USAPA President Stephen Bradford says management is to blame for the current crisis.

"What the Delta and Northwest managements did in just a couple of months, US Airways Management hasn’t been able to do in over three years," Bradford states. "Management’s inability to complete the merger of US Airways and America West, coupled with their apparent focus on short term, quick-return management philosophies, is costing our Company in a big way."

According to USAPA figures, for the first six months of 2008 US Airways ranks a dismal 18th out of 19 on the Department of Transportation's consumer complaint list... a "sobering change" from the airline’s top rankings in years prior to the merger.

"Our situation causes confusion, inefficiencies and severe morale problems that carry over into the airline’s operation. No wonder we have to charge our passengers for water," said Bradford. "We see these inefficiencies day after day and at times they create passenger delays and prevent the Company from achieving its potential."

USAPA states merging US Airways and America West into a single airline, with a single Pilot Collective Bargaining Agreement, would allow management to capture synergies that would benefit US Airways’ passengers, investors and employees alike and go a long way towards positioning the airline for a secure future.

Airlines rattle former GOP allies
By CHRIS FRATES | 10/1/08 5:06 AM EDT
Politico.com




The airline industry hit some unexpected turbulence last summer when its push of a Democratic-backed proposal to rein in oil speculators so infuriated some Republicans that they threatened to slap their longtime allies with unwanted regulations.

One of those saber-rattling Republicans was Rep. John B. Shadegg, a longtime airline advocate whose Phoenix-based district includes the US Airways headquarters.

“I said, ‘Wait a minute. I’m not just your errand boy here, where you come in and say you want something, [and] I do it because it’s you,’” Shadegg said. “‘You guys have a history of coming in and saying small [government], low tax, less regulation, and therefore we have an agreed agenda.’”

Shadegg was outraged by what he saw as the industry’s hypocrisy, saying he made the flippant threat to illustrate how inconsistent it was that airlines, which for years had asked him to fight regulation, were now asking him to support more controls on another industry.

Airlines are just the latest industry to get snagged in Capitol Hill’s bitterly partisan election-year battles. Some of Washington’s most influential business groups are struggling with how to navigate a Democratic-controlled Congress without alienating their longtime Republican boosters — and the drive for a $700 billion financial rescue package is just the latest example.

Winning over Democrats has not come easily for business lobbyists, particularly after years of being viewed as the Republicans’ best buddies. In this Congress, business has carried the flag on Republican issues that don’t affect its industries, said a chief of staff for a House Democrat.

His advice: “Don’t be carrying the Republicans’ water on crap. The CEO of Pfizer or Abbott or whatever should not give a sh-- about the marginal tax rate, and the estate tax ought not matter to them. When you’re doing that, you’re representing a party — and the minority party to boot — and you’re not representing your interest.”

Business Roundtable President John Castellani explained it this way: “Overall, it’s a very challenging climate because the politics of the election season have really overwhelmed the ability to get the kinds of things done that we need to be competitive.”

The airlines, working to control escalating fuel prices, tried to minimize partisan fallout by crafting a plan to regulate oil speculators and increase domestic supply. With Democrats behind reining in oil speculators and Republicans favoring more oil drilling, airlines thought they had straddled the aisle.

They were wrong.

Some Republicans and business insiders saw the airlines making a deal of convenience. The move, they said, helped airlines on two levels: It gave them a boogeyman to explain away rising ticket prices and, they hoped, earn a political chit that they could cash in with Democrats the next time they had union problems.

Shadegg and some of his fellow Republicans were flabbergasted that their longtime allies had the temerity to expect their support for a position they had no hand in crafting.

Not to mention that some Republicans felt that the lobbying campaign the airlines unleashed — complete with e-mails to frequent fliers, on-hold messages on reservation lines and even in-flight magazine columns penned by chief executives — dealt almost exclusively with oil speculation and said little about increased drilling.

“What really caught a lot of Republicans off guard was not necessarily that the airlines would take the position that they took on speculation, but the aggressiveness and grass roots that they put behind it,” said a House Republican leadership aide.

“We never saw near the effort put into an initiative that they put into speculation.”

How the campaign was handled, the aide said, is “fairly well-burnt into people’s memories. They’re not likely to be forgotten.”

The airlines decided in June at an Air Transport Association board meeting to push Congress to rein in oil speculators and increase domestic supply, a solution the group thought took a bipartisan tack, said ATA President Jim May. The proposal was not drawn up to curry favor with the Democrats on labor issues but as an answer to a looming business problem.

“Since no one else was pushing the impact of speculation, that became the focus of our activity on the Hill,” May said. “We got into it for a simple reason: We were going to go bankrupt from $147-a-barrel oil.”

As the summer wore on and gas prices continued to climb, “it became abundantly clear that ‘Drill, baby, drill’ was going to become the mantra of House Republicans,” May said. “It became clear that we had a far more partisan atmosphere.”

Speculating is when investors buy or sell oil for a fixed price over a certain time period, betting that the price they negotiate will be a better deal than what they can get in the future.

Airlines believe that massive cash infusions from speculation accelerate the oil market’s volatility. The financial services industry, whose firms make many of the trades, argues that the airlines have made oil speculators straw men.

“Gas prices are set by the law of supply and demand,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable. “Congress should focus on a comprehensive, fact-based energy plan that focuses on increasing supply and decreasing demand.”

“Speculators have no more effect on the price of oil any more than the weather man has control over the weather,” he added.

Still, the airlines’ position hasn’t won them much love from some of their usual business allies. A financial services lobbyist called the industry’s campaign “reckless.”

“The airlines needlessly picked fights within the business community and with a political party,” the lobbyist said.

The business community, the House Democratic chief of staff said, would be well-served to take a page out of the pharmaceutical industry’s revamped playbook. The Pharmaceutical Research and Manufacturers of America championed the Democratic charge last year for increased health care coverage for children.

“If PhRMA can make that kind of move, then a lot of other sectors and industries that had a less bad reputation, they have less distance to cover,” he said.

And Democrats aren’t alone in believing that the business community’s veneer of nonpartisanship is nothing but a fancy paint job.

The business community, said one of its lobbyists, is “bitching because they’ve been partisan themselves for years, and now that things look like they are changing, they’re trying to figure out what to do next.”

 

Airlines' New Fees May Mean 2009 Profits
09/25/08 - 10:48 AM EDT
Ted Reed


CHARLOTTE, N.C. -- People may complain about airlines charging fees for bags and other extras, but they are paying them anyway, to the tune of hundreds of millions of dollars annually.

Combined with unprecedented capacity cuts, the new charges could help to turn the industry profitable in 2009. UAL for instance, says new fees will likely boost next year's revenue by $750 million. US Airways expects a revenue gain of $400 million to $500 million.

"These fees do seem to work," Brad Tilden, CFO of Alaska said at a Calyon-sponsored investor conference last week.

"A lot of times you see a $50 fare increase, then you look back at the end of the quarter and the average ticket price didn't go up at all," Tilden said. By contrast, he said, projected revenue from the fees actually materialize.

US Airways President Scott Kirby said fees result not only in new revenue, but also in operational benefits. "We've seen huge improvement in baggage numbers from having 10% fewer bags go through the system," he said.

Baggage handling has historically been a challenge for airlines, which are expected to transfer thousands of bags between aircraft in narrow time windows at hub airports. Not only is it time consuming, but "it's where we fail the most," Kirby said. Those failures are costly, leading to re-accommodations, deliveries beyond the airport and lost bag claims.

So far, US Airways is the only carrier to charge for drinks -- $2 for soda, juice and bottled water and $1 for coffee. As a result of the charges, which began Aug. 1, "the cabin environment is much calmer and more efficient," Kirby said.

In the past, because drinks were free, nearly every passenger had one. Now, carts no longer clog the aisles. Restroom lines have diminished. Less trash is left onboard. And it's no longer necessary to cater the aircraft every time it's on the ground.

Furthermore, "we've seen no market share impact," Kirby said. "We've looked at this closely."

AMR's American Airlines unit, which introduced the concept of a first-bag charge in May, has now been vindicated by widespread adoption of bag fees.

Three weeks later, UAL's United followed American, but the delay had allowed time for speculation that the charge might have to be rescinded if no one else implemented fees. "Four of our major competitors have now matched that fee, which I believe validates that decision," said AMR Treasurer Beverly Goulet.

Still, neither Southwest nor Delta has matched the move. Southwest, which carries the most passengers of any airline, touts its lack of fees in its advertising.

Delta, meanwhile, is poised to become the world's biggest carrier by revenue passenger miles pending approval of its planned merger with Northwest. (A report Thursday said shareholders of Delta and Northwest are likely to vote in favor of the deal.)

"While we're always keeping an eye on what's happening in the market, Delta customers can still check a first bag for free," said Delta spokeswoman Betsy Talton.

Ahead of the Bell: UBS upgrades airline sector
Monday September 15, 8:59 am ET

UBS analyst upgrades rebounding airline sector, saying stocks have more room to rise

MINNEAPOLIS (AP) -- UBS airline analyst Kevin Crissey sees smoother air ahead for airlines, and he upgraded several carriers Monday morning.

Crissey acknowledged that air travel demand will continue to be weak, but said airline shares could gain value anyway. They've already rebounded as oil prices have fallen, but Crissey thinks they could rise further as companies top conservative Wall Street earnings estimates.

"The impact of the lower fuel prices is significant and results in much better (earnings per share) than our prior estimates," he wrote in a note to clients.

He also said October has proved to be the best month for airline shares in the past.

The upgrades to "Buy" from "Neutral" included AirTran Holdings Inc., American Airlines parent AMR Corp., Continental Airlines Inc., Delta Air Lines Inc., Northwest Airlines Corp., United Airlines parent UAL Corp., and US Airways Group Inc. He also bumped JetBlue Airways Corp. to "Neutral" from "Sell."

Southwest Airlines Co. and Alaska Air Group Inc. retained "Neutral" ratings.

Oil prices continued to fall on Monday, dipping below $97 a barrel after U.S. oil operations sustained minimal damage from Hurricane Ike. Fuel has become the biggest expense at most airlines so their share prices had fallen as oil prices rose.
 

Shares of US Airways rise on upgrade
Friday September 12, 7:04 pm ET

US Airways rises on upgrade to 'Outperform'; analyst sees boost from competitors' cutbacks


NEW YORK (AP) -- A Credit Suisse analyst upgraded shares of U.S. Airways Group Inc. to "Outperform" from "Neutral" on Friday, suggesting a rival's flight cutbacks on competitive routes should help the carrier.

Shares rose 36 cents, or 4.8 percent, to end at $7.88. Oil prices, which rose 31 cents to settle at $101.18 a barrel, after briefly below $100 for the first time in five months, also helped shares of major airlines. The Amex Airline Index rose 1.7 percent to 25.21.

Analyst Daniel McKenzie predicts capacity reductions by Southwest Airlines Co. should help US Airways boost revenue by expanding in some key markets. He raised his earnings forecast for the company and said that analysts' consensus expectations are "too pessimistic."

Also, the analyst noted that previous concerns on the Tempe, Ariz., company's long-term liquidity have lessened. He said that while demand might fall a bit in the coming months, it likely won't be as severe a drop as analysts expect.
 

Credit Suisse raises US airlines sector
Fri Sep 12, 2008 11:23am EDT

Sept 12 (Reuters) - Credit Suisse upgraded the U.S. airlines sector to "market weight" from "underweight," saying there is good opportunity in the sector as the stocks have already priced in a weak revenue outlook and higher crude prices.

"If investors do the math on the weak economic backdrop, demand looking ahead, and the collapse in crude prices, the equation yields profit," said the brokerage, which raised its rating on U.S. Airways Group Inc.

Though there is a "modest" fall in demand, there is no sign of a collapse as in the previous downturns, it added.

"Demand overall is poised to remain intact for the next several months which means revenue should prove better than most expect," Credit Suisse said.

Credit Suisse upgraded U.S. Airways Group to "outperform" from "neutral," and said "previous concerns over LCC's longer-term liquidity outlook dissipate."
 

Airlines get a small boost on falling oil prices
4:50 p.m. EDT Sept. 5, 2008

Weaker U.S. economic data temper investor enthusiasm
By Christopher Hinton, MarketWatch

Despite a weaker economy, airline industry revenue per available seat mile, or RASM, is expected to surge starting in late September, said J.P. Morgan analyst Jamie Baker in a Friday note to investors.

"With fuel prices at manageable levels, demand trends are expected to retake center stage. Starting in September, we expect system mainline RASM to exceed 10%, remaining there until well into 2009," Baker said.

"While airline shares tend to seasonally find traction starting in November or December, we suggest positions instead be established before the release of September demand data," Baker said.

Airlines have been raising prices on airfare and adding new fees. On Friday, Continental (CAL:Continental Airlines Inc said it would start charging $15 for the first checked bag for certain customers who buy economy-class tickets.

The fee will go into effect Oct. 7 but won't apply to EliteAccess customers, OnePass Elite and SkyTeam Elite members, customers traveling on full-fare economy class tickets, or military personnel and their families traveling on official orders, the airline said.

Late Thursday, Northwest Airlines said its total August traffic rose 1.9% to 7.27 billion revenue passenger miles from a year ago. A revenue passenger mile equals one passenger flown one mile.

However, Delta reported its August traffic fell 0.5% to 11.84 billion revenue passenger miles from 11.91 billion last year.

 

Sector Snap: Airline shares higher
Friday September 5, 1:57 pm ET


ATLANTA (AP) -- Airline shares were mostly higher Friday afternoon as oil prices continued to fall.
Light, sweet crude for October delivery fell $1.66 to $106.24 a barrel in afternoon trading on the New York Mercantile Exchange. It dropped as low as $105.13 during the session, its lowest trading level since early April.

The Amex Airline Index rose nearly 2 percent, with 13 of 14 component stocks higher.

JP Morgan analyst Jamie Baker said in a research note Thursday that with fuel prices at manageable levels, demand trends are expected to be a key issue as airlines try to return to profitability.

Baker pointed out the jet fuel prices are now around $3.20 a barrel, down from $4.20 a barrel when oil hit $147 a barrel earlier this summer. While that amounts to annualized cost savings of $13 billion for the industry, Baker said collective fuel costs are still about $13 billion above 2007 levels.

Shares of AMR Corp., parent of American Airlines, rose 31 cents, or 2.8 percent, to $11.09, while shares of UAL Corp., parent of United Airlines, gained 52 cents, or 4.4 percent, to $12.44. Shares of Delta Air Lines Inc. added 25 cents, or 2.8 percent, at $9.21, while shares of Northwest Airlines Corp. rose 15 cents to $11.11.

Continental Airlines Inc. shares gained 7 cents at $18.02. The carrier said it will join other airlines in charging $15 for the first piece of checked luggage.

Shares of US Airways Group Inc. rose 25 cents, or 3.3 percent, to $7.90.

Among low-cost carriers, shares of Southwest Airlines Co. rose 3 cents to $15.64, while shares of AirTran Holdings Inc., parent of AirTran Airways, rose 8 cents, or 2.9 percent, to $2.86. Shares of JetBlue Airways Corp. fell 5 cents to $6.13.

Airport traffic soars again

Thursday, August 28, 2008

(Dayton Business Journal) -The Dayton International Airport saw a 4.8 percent increase in passengers for the month of July, from the same time last year.

Year-to-date passenger traffic at the airport is up 3.5 percent.

July’s increase continues consecutive passenger growth, dating back to February 2006.

AirTran Airways was the busiest carrier with 31,845 enplanements, a 18.5 percent increase fro July 2007. US Airways followed with 22,697 enplanements, a 12 percent increase from last July. Delta Airlines dropped 0.5 percent to finish at 22,385.

Of the top 100 airports in country, Dayton International Airport ranks almost in the middle of the pack in ticket prices.

That Dayton airport slid in at No. 43 this year, with an average fare of $337 per passenger in the first quarter, according to U.S. Bureau of Transportation Statistics.

That’s a 2.9 percent drop from 2001, when the average was $347. But it is a 3 percent hike from the first quarter in 2007, when the average was $327.