Search results matching tag 'airlines'

Airlines to lose $11 billion

Douglas McIntyre — Wed, 16 Sep 2009 11:03:00 GMT

The global airline industry, still staggering from huge losses and bankruptcies late last year after oil prices passed $140 a barrel, is not doing much better in 2009. Low passenger traffic is the chief culprit, but crude at $70 after a sharp dip early in the year puts on significant additional pressure.

The International Air Transport Association (IATA) released its new forecast for worldwide airline losses this year and it moved up $2 billion to $11 billion. “The bottom line of this crisis – with combined 2008-9 losses at $27.8 billion – is larger than the impact of 9/11,” said Giovanni Bisignani, IATA’s Director General and CEO.

The industry is so heavily burdened with debt that weak demand during the upcoming holiday season will threaten to sink some carriers. Japan Air has already announced nearly 7,000 layoffs and the Asia carrier is looking for a cash infusion from AirFrance-KLM or a major US carrier–perhaps American Airlines.

The financial situation in the North American market is particularly acute. The IATA is expecting losses in the region to be $2.6 billion rather than the $1 billion it previously forecast. Wall Street has shown its concern about the weakest carriers by pushing the shares of US Air (LCC) down 40% this year and the shares of American (AMR) down more than 30%.

Filing for Chapter 11 is a time-honored tradition in the U.S. airline industry. It allows carriers to cut debt and force union concessions on jobs and pay. With Thanksgiving and Christmas coming, unless there is a miraculous turn up in traffic, one or more carriers will lose their independence or will have to seek court protection.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

Related articles:

Real-time list of 500 largest companies

The recession is not over

Facebook hits 300 million users

Airline stocks on the move

Anthony Mirhaydari — Fri, 11 Sep 2009 22:30:00 GMT

Airline stocks were big movers this week after the release of positive analyst reports from J.P. Morgan and Barclays Capital. This helped push up the airline sector in particular and transportation stocks in general. UAL Corp. (UAUA), the parent of United Airlines, gained 21.4% this week while US Airways (LCC) gained 19.2%. Compare this to the 2.6% rise in the S&P 500.

Transportation stocks tend to act as a leading indicator for both the broad market and the economy, so bullishness here is a good sign traders believe the economy is healing.

I snagged copies of both reports. The team at J.P. Morgan believes that we won't see any airline bankruptcies this winter based on better-than-expected revenue trends in July and August as well as stable fuel prices. In their words, they suggest "everyone makes it, this time." Barclays Capital believes many "underestimate the potential for a significant airline revenue recovery."

These are very optimistic outlooks to be sure, especially in light of the 27% peak decline in revenue we saw earlier this year. But the analysts are still willing to recognize that the industry faces long-term challenges in that revenue growth has now decoupled from GDP growth. This is the result of increased competition, drastic fare cuts as the recession deepened, and the increased use of travel alternatives like video conferencing.

J.P. Morgan analysts are looking for industry revenue to expand 5.5% next year. Gary Chase at Barclays Capital finds that while revenue expectations are currently higher for low-cost carriers like JetBlue (JBLU) history suggests it is the legacy carriers like United and Delta (DAL) that provide the greatest leverage to economic recovery. This is because they are more exposed to business travel and international markets instead of budget-conscious consumers. Chase finds that during the last three downturns revenue from international routes recovered twice as fast as the domestic market.

One potential way to play the recovery would be the Claymore Airline ETF (FAA). It was launched earlier this year and is still lightly traded. Another option would be the broader iShares Transportation ETF (IYT). It moved over its 2009 high last month and is up 89.2% since the March low. It lags the broad market year-to-date however, up 15.4% versus the 15.4% rise in the S&P 500. As for individual picks, I'll be adding AMR Corp. (AMR), parent of American Airlines, to my portfolio at Wall Street Survivor.

Disclosure: The author does not own or control a position in any of the funds or companies mentioned.

Anthony Mirhaydari is a researcher for the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below.

Related reading:

Did the stimulus save a million jobs?

Gold set to lose its shine

Bank stocks lose leadership role

The end of the new commodities bubble

Airplane food takes off

Kim Peterson — Fri, 04 Sep 2009 15:43:00 GMT

Airplane food -- the butt of a thousand jokes -- is getting upgraded this summer at some airlines. Soon, you might see sushi, ice cream and gourmet cheese served during your flight, The Wall Street Journal reports.

It's an odd thing to do, in this age of cost-cutting, and particularly as airlines are increasingly threatened with swine flu and the downturn in corporate travel.

But better food is being eyed as a profit center for airlines. Food-for-purchase has been a bust (could the quality be any worse?) and any profits made usually went to cover the cost of the food that was thrown out.

Bing: How to DIY airplane food

Now, the idea is to provide food in coach that actually tastes good -- for free or at a cost. The food itself may not bring in big money, but it will give some airlines a leg up in the competitive business.

So what's headed to the menu? The Journal reports that Delta Air (DAL) is trying out grilled chicken gyros, almond-butter-and-grape-jelly sandwiches, and Ben & Jerry's ice cream in coach.

Already, a standout hit has been the $6 fruit-and-cheese plate with a trio of cheeses that don't look like Kraft singles.

American Airlines is testing Boston Market sandwiches and salads, like a $10 chicken sandwich meal plate, the Journal reports. Hawaiian Airlines (HA) is rolling out the culinary red carpet, selling sushi bento boxes and satay chicken in vermicelli noodles.

It's about time airlines did this. They lose too much business to the restaurants that now populate airports. But people have grown accustomed to buying food at the airport to carry on the plane, and those habits are hard to change.

Image credit: Alessandro Scotti, Creative Commons Attribution ShareAlike 3.0 license

At the time of this writing, Kim Peterson did not own shares of any stocks mentioned in personal or client portfolios.

Related reading:

Turbulence ahead for the airlines

Fare wars sizzle with Southwest entering the fray

US Airways returns to free drinks for all

Southwest Air's stock turbulence

Air reservations get personal

Kim Peterson — Tue, 18 Aug 2009 17:10:00 GMT

If you make a flight reservation from now on, you may be asked for your date of birth, and to state whether you're male or female.

The government is asking for the new information, hoping to make it harder for terrorists to use boarding passes to get on airplanes, The Wall Street Journal reports. The move is part of a program called Secure Flight, and stems from safety recommendations that followed the 2001 terrorist attacks.

Bing: More on Secure Flight

The goal, according to the Journal, is to "vet all passengers on domestic commercial flights by early next year." So how exactly would the information be used?

The government has a list of potential terrorist suspects that has grown to 1 million names. The Transportation Security Administration tries to match airport flyers with names on its own lists.

The problem is that too many people are being snagged at airports simply because their names are similar to those on the list. USA Today reports that 51,000 people have filed claims in the last two years saying they were wrongly included on the list.

So now, the government says getting more personal information from travelers will help them better match names on the list.

Not all the airlines are participating in the collection yet, the Journal reports.

Related reading:

3 airlines that won't survive swine flu

All-pet airline takes off

Low-budget airline eyeing stand-up seats

United wants cheap deal on new planes

Air passengers need a break

Karen Datko — Wed, 12 Aug 2009 19:54:00 GMT

Continental Airlines' offer of refunds and travel vouchers to the 47 people kept overnight on a grounded commuter plane wouldn't fly with Linda Maddox if she had been one of those passengers.

"Oh yeah, what I want from you now is a VOUCHER for another flight, so I can get trapped in another one of your cans ... again. Give me a refund, and I'll call a cab," Linda, who is claustrophobic, commented at The Two-Way blog at NPR.

Could this latest outrage be the one that breaks the opposition to the proposed air passengers' bill of rights?

"If senators don't think the air-travel bill is as important as health care and some other issues, maybe they should hold a town hall meeting with the 47 passengers who were forced to sit on a grounded airplane for six hours last weekend in Rochester, Minn.," opined Maine's Kennebec Journal.

Tom Belden said at Winging It, "Whatever, I suspect the chances of Congress actually adopting federal rules for treatment of airline customers during long tarmac delays just got a lot better with a tale from a flight this weekend."

Key among the provisions in the bill is one that BusinessWeek calls "the largest sticking point": "a three-hour time limit in the Senate version of the bill, which means passengers have the right to get off the plane after three hours unless the captain determines that it is unsafe to deplane or if he or she reasonably believes the flight will depart within the next 30 minutes."

You've probably heard the basic facts about the recent incident. The Continental Express flight left Dallas for Minneapolis-St. Paul, but was diverted to Rochester, Minn., because of very stormy weather, The Associated Press reported. As the sole toilet filled and the stench built up, people were forced to remain on the 50-seat plane for six hours with no food or water. Add to this scenario a couple of screaming babies.

Meanwhile, another airline bused its stranded passengers to Minneapolis, about 90 miles away. But not the hapless passengers on Flight 2816. They were finally allowed to deplane about 6 a.m., and continued their flight on the same aircraft -- toilet still full -- 2½ hours later.

According to TwinCities.com, ExpressJet, which operated the flight, initially said the passengers couldn't go into the airport because TSA employees had gone home for the night. Au contraire, said Rochester Airport manager Steven Leqve: Passengers could have been confined to an area secured by locked doors. Meanwhile, TSA issued a statement saying the airline could have asked for after-hours officers if need be.

"It wasn't an airport issue. It was strictly Continental's," Leqve said.

"It," passenger Link Christin told AP, "felt like you were trapped in a cave underground."

Continental eventually said: "We recognize that service provided to customers on this flight was completely unacceptable."

Is legislation the answer here? Airline promises don't seem to be enough. The Airline Biz blog said Continental Airlines president and COO Jeff Smisek made this statement in January:

Finally, we are implementing a new internal policy for 2009, whereby we will give customers the opportunity to get off an airplane during tarmac delays in excess of three hours, subject of course to making sure we can do that safely.

But not just the airline industry says a bill of rights would be overkill. Airline Biz relays a scenario from travel expert Terry Trippler on how the proposed law could backfire: What if some passengers wanted to get off the plane but others didn't, etc.? (You can read it here if you missed the earlier link.)

William Swelbar of Swelblog also argues that a bill of rights would have unintended consequences. "Now I will add that in order to wait out a delay, there is a rightful expectation of a fully functioning aircraft and onboard amenities that allow a bearable experience," he said.

Is airline policy for obese passengers fair?

7 tips for getting free airline vouchers

Online travel sites: The thrill is gone

Teresa Mears — Tue, 04 Aug 2009 21:00:00 GMT

It turns out we are not the only ones bothered by the difficulty of making travel reservations online. A new report released today by Forrester Research found that 15% fewer travelers enjoy using the Web to make travel arrangements than they did in 2007.

Only one in three travelers believes travel Web sites do a good job of presenting choices.

"What we've seen is growing frustration," Henry H. Harteveldt, a Forrester travel analyst, told The New York Times. "Consumers see other Web sites becoming easier to use -- retail Web sites, banking Web sites, media Web sites. But travel is treading water as a category. There are very few travel companies that are really looking to improve the planning and booking process."

"Travel companies expect the consumer to behave like a travel agent," he said in the Times article. "The question I always ask these guys is, ‘Could your mother-in-law use your Web site without having to call you for help?' The answer is always no."

In his syndicated travel column Christopher Elliott, who also writes a travel column for MSNBC, handles complaint after complaint about online travel purchases gone bad and how to resolve problems. Even "low-price guarantees" have a lot of loopholes when it comes to travel, notes MSN Money columnist Liz Pulliam Weston.

ConsumerSearch recommends Kayak.com as a starting point for researching airline and hotel prices. Its editors agree that, once you've found a deal, it's best if you can book it directly with the airline or hotel rather than going through a travel site.

Bob Cowen, editor of Internet Travel Tips, has an extensive menu of advice for getting the best fares, the best seats and otherwise using Internet resources for making the most of your travel experience. He lists his favorite search sites for various travel services. He also likes Kayak.com as a starting point.

Analyst Harteveldt told The Times that more and more travelers are saying they'd really rather use an offline travel agency -- if they could find one.

How do you find the experience of booking travel online? Any tips for your fellow travelers?

8 tips to snag the lowest fare

Your 5 minute guide to travel deals

Airfare sales and the high cost of change

Teresa Mears — Thu, 30 Jul 2009 18:07:00 GMT

These days, buying an airline ticket is a cross between a major online research paper and playing the lottery. Which airline has the lowest fare? Will an airline with a better schedule match it tomorrow? Will there be a better deal next week? What about baggage fees?

If you live near several airports, which has the best deal to your destination? Don't forget to take into account the cost to get to the airport and the charge to park your car, which can exceed $10 a day where we live.

We thought earlier this month that airfares had gone as low as they were going to go this summer But this week, several airlines announced new sales, most for travel starting in mid-August. Can you get a better deal now? Maybe. It depends on where you want to go and when. But move quickly. The sales at Southwest (no bag check fees) and Spirit airlines end today. The sales at Delta and Frontier have various expiration dates, and other airlines have matched those prices. We're going to book some fall trips today.

Will prices be lower or higher next week? Who knows? Bing has some new tools for predicting airfares, but not all cities are included yet.

We just hope we don't have to change our plans, because the high change and cancellation fees will easily wipe out any savings from buying discount tickets in advance.

Those fees are turning out to be big business for airlines, reports Scott McCartney of the Wall Street Journal's Middle Seat column. Airlines are collecting $2 billion a year in change fees and cancellation penalties. In the first quarter of 2009, change and cancellation fees added 3.2% percent to airlines' passenger revenue.

That's not including baggage check fees, which American Airlines just raised from $15 to $20 for the first bag and $25 to $30 for the second, effective Aug. 14. Then there are fees for phone booking, phone, pets, unaccompanied minors, wi-fi use and, of course, food. USA Today has a comprehensive chart of fees as of June 22, 2009.

Oh, and the quoted fare usually doesn't include substantial taxes. No matter how much you pay, don't expect pillows and blankets (swine flu).

Related reading:

8 tips to snag the lowest fare

Frequent fliers mad as hell and not going to take it anymore

Those pesky airline fees can really add up

Travel for less

3 airlines that won't survive swine flu

James Dlugosch — Mon, 27 Jul 2009 18:52:00 GMT

The single biggest risk threatening your portfolio has nothing to do with the economy, credit crisis, global recession, massive unemployment, easy monetary policy, green shoots or corporate earnings.

No, the single biggest risk to your portfolio is the swine flu. Health officials recently projected that up to 40 percent of Americans could contract swine flu this year and next.

One of the industries likely to be hardest hit by a swine flu pandemic is the airline industry. Airline stocks have been big losers so far in 2009, but green shoots are appearing in the form of firmer load factors and price increases that are sticking.

But don't be fooled. The perpetual bust cycle of the airline industry is likely to strike again as the flu season ramps up this fall. Given the spread of the virus through human contact, load factors will surely fall as individuals seek to defend themselves from contracting the flu.

Insulate your portfolio from a pandemic by selling these three airline stocks now.

Airline Stock to Sell #1 -- US Airways (LCC)

US Airways (LCC) has always been a bit of a dog with fleas. The company has had numerous brushes with bankruptcy, and the current crisis has pushed the air carrier to the brink once again.

Shares of LCC dropped below $2 per share this year on fears that it would not be able to withstand a long recession. Those fears were calmed a bit last week as the company posted a profit of $58 million. But those gains are illusory as they includ one-time gains from settled jet fuel contracts. Without those gains, the airline lost $95 million.

Shares of LCC rallied on the news as investors covered short contracts or were speculating that the worst may be behind the company. Like many companies during the recession, the "it's not as bad as it could be" angle seems to be buoying shares.

But what happens if swine flu explodes? As far as I know, there is no market taking swine flu contracts to hedge against the pandemic.

Use the gains as a chance to exit a position before things get crazy this fall. Check out my top stock tracking portfolio at WallStreetSurvivor.com.

Get details on two more toxic airline stocks here.

Airline Stock to Sell #2 -- Delta (DAL)

On the surface, the acquisition of Northwest Airlines was strategically wise. The deal eliminated another large competitor and provided Delta (DAL) with more leverage in negotiations with unions.

Indeed, DAL has been one of the best performers this year with a loss of only 50% as compared with much larger losses across the airline industry. But factor in the threat of the swine flu, and the deal may not look so good and shares may be vulnerable. Northwest's global routes would suffer tremendously if a massive outbreak were to occur.

Irrespective of swine flu, Delta is feeling some pain. In the current quarter, Delta lost $257 million and withdrew its forecast of a profit for the year. Management stated that it did not expect a material recovery any time soon. Now, add swine flu to the mix and you have a very significant problem.

I would sell Delta now taking advantage of relative strength as compared to its rivals.

Airline Stock to Sell #3 -- JetBlue Airways (JBLU)

Discount airlines will be particularly vulnerable by a protracted pandemic that keeps consumers from flying commercially. Low ticket prices require higher volumes of traffic to support the business. Take away that volume, and the business suffers.

With a low-price strategy and point-to-point flight model, JetBlue (JBLU) made a big splash in the industry by providing flyers with cheap, high-quality travel options. But a blip in customer service and overly aggressive expansion hurt the airline in its push to rival fellow discounter Southwest (LUV).

The stock has been trading aggressively lower since peaking in early 2007. In the second quarter, JBLU made a profit of $20 million or seven cents per share. More importantly, in stark contrast to the rest of the industry, the company expects to post a profit in the last half of the year based on fare hikes and a stronger economy.

In my opinion, that seems to be a bit aggressive and does nothing to warn investors of what would transpire should the swine flu drastically cut passenger loads. In the short term, that aggressiveness is supported by current share price. But all bets are off if a pandemic hits.

Investors would be wise to sell LCC, DAL and JBLU. Here are two more airline stocks to avoid at all costs. And be sure to check out my top stock portfolio at WallStreetSurvivor.com.

Related Articles:

Airline crews call LAX parking lot home

Karen Datko — Thu, 23 Jul 2009 22:44:00 GMT

Here's the strangest proof we've seen to date that the airline industry ain't what it used to be. According to the Los Angeles Times, airline pilots and other employees are living in a collection of 100 campers and RVs in Parking Lot B of Los Angeles International Airport, less than 3,500 feet from the south runway.

It has the feel of a modern-day shantytown, replete with the sounds and smell of jets coming in for a landing at the nation's third busiest airport. Parking the motor home at a Wal-Mart sounds glamorous compared with this.

The LA Times reports:

It is a drab expanse of crumbling gray asphalt, approach lights, chain-link fencing and rows of beige and white RVs -- some battered, others grand. A splash of color comes from the red and white blooms of about a dozen rose bushes along the colony's northern edge.

But it's a steal. Rent for each space is only $60 a month.

Incidentally, it's not the only way LAX is setting a standard for weird. It gets a "Worst Airport Winner" award from The Guide to Sleeping in Airports Web site. (From what reviewers said, sleeping out in the parking lot would be preferable, even with the noise and fumes.) And, of the 12,000 laptops lost or stolen in U.S. airports each week, LAX ranks No. 1 with 1,200. LA Weekly reports that most are left behind at TSA checkpoints.

Why are pilots and other airline workers no longer sharing LA apartments with colleagues, which is what they used to do so they wouldn't have to commute long distances to their primary homes between flights? Pay cuts are part of the shrinkage that has plagued the troubled industry. The Times further explains:

Salaries for pilots, mechanics and other airline workers have plummeted. Captains like (Alaska Airlines pilot Jim) Lancaster have been demoted to first officer, losing hard-earned seniority and forcing them out of plum assignments at airports close to home. Lancaster, who came to LAX from Seattle about 18 months ago, estimates that his reduction in rank cost him about $30,000 a year, roughly 20% of his pay.

New airline price wars

All-pet airline takes off

Airlines expand in-flight Internet access

New airline price wars

Douglas McIntyre — Wed, 08 Jul 2009 10:44:00 GMT

Airline price wars are back, just when carriers cannot afford them. The price of jet fuel is up. Passenger traffic is down.

Southwest (LUV) is offering fares as low as $30 each way on short flights and $90 on longer ones.

Southwest, which has a strong balance sheet, may be able to afford cutting ticket prices to bring in customers. Larger carriers such as American (AMR) and United (UAUA) have huge debt burdens and are actually in the process of raising ticket prices and fees on items, including extra baggage, to make up for growing losses. A prolonged period of having to match low fares from discount carriers could drive the legacy airlines closer to the bankruptcies some investors already fear.

"We haven’t seen $30 fares in at least 15 years,” the chief executive of BestFares.com told USA Today.

The industry has a multi-decade habit of cutting its own throat. When one airline cuts prices to bring in traffic to fill unfilled seats, more and more carriers match to keep their customers. The cost of low fares when combined with low passenger loads undermines revenue. A carrier or two goes bankrupt and then they drop fares more to push up sales to get out of Chapter 11.

The recession is damaging airline prospects. A fare war will finish them off.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

Related articles:

Google challenges Windows

Cutting credit card debt

Boone Pickens' dream dies