 Weekly Airline Archive
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| This Week in Airlines by Holly Hegeman (MF Wings) Dallas, TX (April 7, 1997) -- Foolish readers, what a week this was for our Motley Flyers. I am at a loss as to where to start! So, I suppose I will start with the admission that, yes, I did the dreaded deed last week--I pulled the MF Wings' Ratty Old Bear Suit from the trunk in which I keep it safely hidden away. I'm sure many of our new readers are unfamiliar with the concept of the MF Wings' Ratty Old Bear Suit. So a brief explanation. See, MF Wings' is basically, overall -- in her hearts of hearts -- bearish on this sector. My attitude? SHOW ME THE EARNINGS! Then, and ONLY then we can talk bulls and higher stock prices. However, I have to admit, the Ratty Old Bear Suit has been folded up, having never been out of the cleaning bag in which it came back from the cleaners some time ago. But JUST when I went looking for it last week--poof! The bottom dropped out of the oil market, the outlook for first quarter industry earnings continued to look strong, and forget it -- I slammed the top of the trunk closed and figured I'd just go sit in the sun, have another gin and tonic and count my profits. While a look at the weekly figures is not bad--let's do something different this week and look at what happened to the airlines on Friday. It is mind-boggling. Of the 36 stocks we track, only six were down, and then not by much. Unheard of. We are talking serious one day gains. Let's take a sampling. NORTHWEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NWAC)") else Response.Write("(Nasdaq: NWAC)") end if %> was up 9.4% on Friday, AMERICA WEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AWA)") else Response.Write("(NYSE: AWA)") end if %> up 9.2%, USAIRWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %> up 7.8%, UNITED AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> up 7.6%, FRONTIER AIRLINES (FRNT: Nasdaq) up 7%, RENO AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RENO)") else Response.Write("(Nasdaq: RENO)") end if %> up 6.7%, ATLANTIC COAST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACAI)") else Response.Write("(Nasdaq: ACAI)") end if %> was up 5.6%, CONTINENTAL AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAI/B)") else Response.Write("(NYSE: CAI/B)") end if %> up 4.8%, DELTA AIR LINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> up 4.8%, AMERICAN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> up 4.7%, SOUTHWEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUV)") else Response.Write("(NYSE: LUV)") end if %> up 4.6%, AMTRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTR)") else Response.Write("(Nasdaq: AMTR)") end if %> was up 4.6%, MESABA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAIR)") else Response.Write("(Nasdaq: MAIR)") end if %> was up 4.3%, ALASKA AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALK)") else Response.Write("(NYSE: ALK)") end if %> up 3.6%, and it just went on and on and on. The Dow Jones index of seven airline stocks rose 5.2% compared with a 0.5% gain for the Dow Jones Equity Market Index on Friday, and the Dow Jones Transportation Average was pushed up 50.55 points to end the week at 2400.54. The Dow closed up 48.72 points on Friday, to close at 6526.07, but this represented a loss of 214.52 points on the week. So, let's go back to Airline Industry Investing 101. WHY did this happen? Let's look at the two external factors that can have the biggest effect on this sector--interest rates and oil prices. Well, on the interest rate side, for most of the week, the consensus was that the Fed just may raise rates again. Therefore airline stocks were somewhat sluggish. However, it is clear that the main motivator in this tremendous surge on Friday was the drop in oil prices. The market is concerned about an oversupply of oil, and as a result, May crude oil futures closed $0.35 lower on the New York Mercantile Exchange--ending the day at $19.12 a barrel--the lowest price in eight months. So, long-term, who benefits from a drop in oil prices, which usually indicates an eventual drop in jet fuel prices? Our own dearly beloved group of Motley Flyers. FIRST QUARTER PERFORMANCE With the close of the markets Monday, we reached the end of the first quarter, so it is time to pass out the MF Wings' Performance Awards for the Motley Flock. The best performance by any carrier in the first quarter? AIRTRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAIR)") else Response.Write("(Nasdaq: AAIR)") end if %>. The small Orlando-based carrier posted an astonishing 96% return for the first quarter. The best performance by a thinly traded stock? VANGUARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNGD)") else Response.Write("(Nasdaq: VNGD)") end if %> which posted a 37% increase, as the stock plummeted to $1 1/2, and ended the quarter at $2 3/50. Best performance by a Foreign carrier that is traded on the US exchanges? CHINA EASTERN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEA)") else Response.Write("(NYSE: CEA)") end if %>. This carrier went public this quarter and never looked back. The stock posted a 55% gain on the quarter. Goat? JAPAN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JAPNY)") else Response.Write("(NYSE: JAPNY)") end if %>, which got battered over the yen/dollar situation. ADR's for the stock lost 27% of their value. Best performance by a cargo/freight carrier? AIRBORNE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABF)") else Response.Write("(NYSE: ABF)") end if %> The carrier was up 28% the first quarter of 1997. Goat? ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> , which dropped 45%. Best performance by a Top Ten major? Alaska Air. The company posted a 22% increase. The Goat of the bunch? American Airlines, which dropped 6%--which gave it the dubious distinction of being the Mighty Titan Goat as well. Best performance by a Mighty Titan? (This is the Foolish Foursome of Delta, American, United and Northwest.) Delta Airlines had a stellar quarter, with the stock ending up 19%. (And shows little signs of stopping anytime soon.) Best performance by a regional/commuter airline? Atlantic Coast, which posted a 10% gain. Goat? Mesaba, which dropped 22%. Best performance by a lowfare carrier? The new carrier that paid for the right to call itself PAN AM <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: PAA)") else Response.Write("(AMEX: PAA)") end if %>. The carrier posted a 16% increase on the quarter. The Goat? Reno Air, which lost 8%. And, of course, we must recognize the end of the spectrum. The MF Wings' Goat of the Quarter Award goes to ... (drum roll please) Atlas Air. The cargo carrier lost 45% in the first quarter, ending the quarter at $26 1/4 placing it dead last on the list of all the carriers we track. However, just a caveat here. Remember what we said about Atlas Air, and how we felt Wall Street might have overreacted to the company's comments earlier this quarter. So, just because a stock had a lousy first quarter does not mean it may not be a good investment opportunity. Conversely, if a stock has had an exceptional first quarter, that does not necessarily mean that trend will continue. The stock may now be priced where the Street thinks it should be. "THEY OUGHTA TAKE A FLAME-THROWER TO THIS PLACE!" With acknowledgment to Al Pacino's character in the movie "Scent of a Woman", this is how one APA member summed up his feelings towards the situation in regard to the APA, the tentative agreement that is now being sent to the members for a vote, and I think, everything in general. (Heck, maybe the actual APA headquarters as well!) The Board of Directors of the APA, the union that represents the pilots at American Airlines, did indeed meet and vote to endorse the tentative agreement that is currently on the table, and sent the matter to the members for a vote. The agreement that was endorsed gives American Eagle pilots the sole right to fly the regional jets, and also gives American Eagle pilots the ability to move up to American pilot positions more easily. (American Eagle pilots are represented by ALPA, not APA.) What do the American pilots get? In summary--a bigger total compensation package than the PEB recommendation allowed for, and some additional restrictions on the implementation of the regional jets. As most of you know, if you follow my weekly updates, I am of the belief that the APA was outmaneuvered very badly on the political side of this fight. When Bill Clinton stepped in as quickly as he did, and imposed the Presidential Emergency Board, the writing was on the wall, in my opinion. (Would that be the wall in the Lincoln Bedroom?) American was successful in staging a public relations and lobbying effort that was very well-executed--and one which looked ahead and played the political cards to a "T". Interesting note here. Since 1993, according to an Associated Press analysis of Federal Election Commission records, American Airlines has donated more than $230,000 to the Democratic party. AMR Chairman Robert Crandall is also a member of one of the special Presidential trade advisory committees. Did American contribute towards the Republican efforts as well? Yes, but a lower rate. In addition, all one has to do is look at the areas where a strike of American would have the most impact. What states are we talking about? Illinois, Florida, New York, and Texas. Guess what? All of these are key political battlegrounds for the Democrats. Translation? Both Republican and Democratic members of Congress were more than happy to take up the cry American voiced that a strike would have been a "disaster" or a "national emergency". Clinton's decision was not one made out of concern of a "national emergency", it was purely political. Do I think Congress would have stepped in had the APA Board not voted to accept this latest tentative agreement? Probably. It was a risk that the APA could not afford to take. I think, as opposed to the tentative agreement that was voted down in January, this one will be approved by the general membership. I do not think anything positive can come from a strike at this point. I don't even think they would have the opportunity to strike. Congress would probably intervene--as it has the right to do as a result of the PEB process. APA leadership is now touring the country doing informational sessions with APA members on the details of the proposed agreement. American was up 2% on the week, to close at $86 3/8. I expect their first quarter to be off a bit, due to the expenses related to the slowdown and short-lived strike in February. The Carrier that Bought the Right to be called Pan Am Announces Earnings This past week Pan Am reported operating revenues of $10.2 million and expenses of $24.9 million in the fourth quarter of 1996, resulting in a net loss of $14.7 million from start-up operations. For the full year 1996, which includes approximately nine months of pre-flight activities, Pan Am reported a net loss of $27.5 million. Yield for the 4th quarter was 8.3 cents per revenue passenger mile while load factor was 46.8%. Pan Am began scheduled service on Sept. 26, 1996, and therefore, comparisons with earlier periods are not applicable. The airline noted that the loss was consistent with expectations for the pre-start-up and launch periods and that passenger load factors have been climbing steadily since the airline started service. For the month of October ,1996, Pan Am reported a load factor of 28.2%. In November, load factor was 36.9% and grew to 64.6% in December. Pan Am reported that the very positive increase in load factor has continued in the first two months of 1997 with Pan Am recording a load factor of 64.8% in January and a load factor of 67.4% in February. The airline expects to report a load factor of approximately 69% in March. On March 21, Pan Am announced that it had reached a definitive agreement to acquire Carnival Air Lines for 9.5 million shares of Pan Am stock, as well as raise up to $30 million in additional liquidity through a private placement of preferred convertible stock. Carnival reported revenues of some $270 million in 1996 and operates 60 daily flights with a fleet of 27 jet aircraft, including nine A300's. Carnival serves 20 airports across the United States and the Caribbean and has nearly 1,600 employees. Pan Am and Carnival plan to consolidate their Alliance partners, creating a large network of international feed traffic at the major U.S. gateways. Pan Am expects to close this transaction in the next 90 days. The airline said that it had anticipated operating a fleet of four A300's during the fourth quarter of 1996. Because of a delay in deliveries of the fourth and fifth of these aircraft, and because Pan Am had increased its schedule and entered new markets, the airline was obligated to wet-lease certain Boeing 727 aircraft to meet schedule commitments. Had Pan Am been able to operate such services on its own behalf, the cost of those operations would have been substantially less. Pan Am is currently operating four A300's and has contractual commitments for a fifth and sixth A300, due to be delivered in the second quarter of this year. Pan Am Completes Placement of $25 million in Convertible Debt Pan Am announced today that it had successfully completed the private placement of $25 million in convertible preferred securities, of which the company has received $15 million, with the balance due upon closing of the previously announced acquisition of Carnival Air Lines. The preferred issue is convertible at the lesser of a fixed price per share equal to 106.25% of the closing bid price at the time of negotiations, or a floating price with an increasing discount to market initially set at 3%. The three-year issue yields 8%, payable cumulatively in stock, and may be redeemed by the company for cash equal to the value of the common shares at a discount plus warrants. Pan Am said that 23,734,596 primary common shares would be outstanding after the conversion of this preferred issue at the fixed price and the closing of the acquisition of Carnival Air Lines in which Air Holding Corp. would receive 9.5 million shares of Pan Am common stock. The markets were not overly impressed, as the carrier ended the day down $1/8 to close at $9 1/8. TRAFFIC, TRAFFIC, and more TRAFFIC! It's that time of month--and just an advance summary of what is happening. Overall, carriers continue to report strong, and in some cases, record traffic levels. So, without further ado - -here are the latest traffic reports. American Airlines American Airlines announced Tuesday March traffic rose 6.7% from a year ago, while load factor, in the month rose to 73.2% from 69.1%. American Airlines' traffic was up 2.9% from a year ago, while load factor rose to 67.4% from 65.6%. Alaska Air Alaska Air announced last week that its load factor was 70.8% last month, up from 68.6% a year ago. Traffic rose 6.8% to 893 million revenue passenger miles from 836 million flown a year earlier. The load factor for the first three months of the year was 65.4%, up from 60.7% a year ago. Revenue passenger miles for the period was 2.34 billion, a 10.2% increase from the 2.13 billion miles a year earlier. Alaska's Horizon Air posted a load factor of 60.9% in March compared with 60.4% a year ago. Traffic fell 3% to 72 million revenue passenger miles from 74 million miles a year earlier. Load factor for the first three months of the year was 59.1%, unchanged from last year. Traffic was 204 million miles, a 2.6% decrease from the 209 million miles a year earlier. Continental Airlines Continental Airlines announced Wednesday its March load factor rose to 74.5% from 72.2% a year ago. Continental said it flew 4.1 billion revenue passenger miles in March, up 11.4% from the 3.69 billion miles it flew last March. The company's load factor was 68.8%, compared with 67% in the year-earlier period. The company flew 10.89 billion revenue passenger miles for the year-to-date, up 11.7% from the 9.76 billion revenue passenger miles it flew in the year-ago period. Northwest Airlines Northwest Airlines announced this past week its international passenger load factor in March rose 0.4 points to 81.5% from 81.1%. Domestic load factor for the month increased 2.8 points to 74.7% from 71.9% with the year-to-date, system-wide load factor 72%, up 1.8 points from 70.2% a year ago. Available seat miles rose 3.9 percent to 23.05 billion and revenue passenger miles increased 6.5 percent to 16.59 billion. Southwest Airlines Southwest Airlines announced today that the company flew 2,399.4 million revenue passenger miles in March 1997, a 5.5% increase over the 2,274.1 million RPMs flown in March 1996. Available seat miles increased 9.6% to 3,644.7 million from the March 1996 level of 3,326.4 million.The load factor for the month was 65.8%, compared to 68.4% for the same period of a year ago. Herbert D. Kelleher, CEO, said: "While our March 1997 load factor performance, although somewhat lower than last year, was solid, our revenue growth for the month was excellent." [MF Wings' note: Herb is ALWAYS conservative in his comments--this means to me the company MUST be showing some serious increase in yields.] For the first quarter 1997, Southwest flew 6,533.0 million RPMs, compared with the 5,837.1 million RPMs recorded for the same period of 1996, an increase of 11.9%. Available seat miles increased 9.1% to 10,517.6 million from the 1996 level of 9,641.4 million. The first quarter load factor was 62.1%, compared to 60.5% for the same period last year. TWA TWA <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %> announced last week its March passenger load factor rose 2.4 points from a year earlier, to 72.9%. TWA's revenue passenger miles fell 4.4% to 2.18 billion from 2.28 billion, and available seat miles declined 7.6% to 2.99 billion from 3.24 billion. USAirways US Airways announced Thursday its load factor in March was 75.2%, up from 70.8% during the same month a year ago. US Airways said it flew 3.78 billion revenue passenger miles in March, 11.9% higher than the 3.38 billion miles flown in the year-ago period. Load factor in the first three months of 1997 was 68.4%, up from 64.6% a year earlier, while revenue passenger miles rose 13.7% to 9.89 billion miles from 8.71 billion miles the previous year. ValuJet Airlines VALUJET AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VJET)") else Response.Write("(Nasdaq: VJET)") end if %> unit load factor fell to 62.1% last month from 65.3% in March 1996. Traffic fell 60.9% to 126 million revenue passenger miles from 322 million miles a year earlier. Valujet had a load factor of 53.9%, compared with 58% for the first three months of 1996. Traffic fell 64% to 276 million miles from 767 million miles in the same period in 1996. A revenue passenger mile is one paying passenger flown one mile. World Airways WORLD AIRWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WLDA)") else Response.Write("(Nasdaq: WLDA)") end if %> announced last week it flew 4,711 block hours during March, an increase of 24% from the 3,789 hours of March 1996. World announced they appointed Russel L. Ray Jr. interim president and CEO, replacing Charles W. Pollard, who was fired last month. Ray, the airline's interim president, has served on World Airways' board for four years. He has held senior executive positions with British Aerospace PLC and several airlines. [MF Wings' note: Anyone know what is going on with World and what the scoop is with Pollard leaving? Just curious.] Average daily utilization was 10.8 hours a day in March, compared with 10.3 hours a year earlier. For the quarter ended March 31, block hours totaled 11,814, an increase of about 20% from 9,834 a year earlier. Average daily utilization was 9.8 hours, compared with 10.0 hours a year earlier. Okay--did the folks at USAirways steal the DOT on-time prize from those rabid Texans again? NOT! Here are the on-time rankings for February based on the Department of Transportation (DOT) office of consumer affairs reports. Note that this month Stephen Wolf's folks did NOT manage to wrestle the top spot from those two feuding Texas contingents--Continental and Southwest. Once again, Southwest took all the marbles. Stay tuned for next month's edition of "Does Southwest cheat?" or "Does Continental have some secret way of tripping those ACARS?" (JUST kidding folks!) well...maybe. Airline % On Time Southwest 81.3 Continental 79.4 America West 78.7 USAirways 78.5 TWA 76.2 Alaska 75.2 United 73.5 American 72.6 Delta 71.1 Northwest 69.3 ValuJet warns of Changes in Debt Situation in 10-K. Ever read a company's 10-K report? If not, I strongly suggest that you do so sometime. The Securities and Exchange Commission (SEC) is on the web, (http://www.sec.gov/edgarhp.htm) and you can go in and access any corporate filing at no charge. There are other web sites that do charge to find particular filings, or that alert you when a particular company you designate files something--but if you want to cruise the SEC filings yourself, they can be a whole lot more informational than the daily press releases that tend to tell us little in the way of substantial information. And--there is no charge. For example, I don't think you read about this in a ValuJet press release. My thanks to a regular reader, Blucore, who eagle-eyed this mention in the ValuJet 10-K report that was filed this past week with the SEC. As some of you may recall, Steve Lewins, analyst for Gruntal, warned a couple of months ago that ValuJet might be in danger of not meeting certain financial covenants in regard to the $150 million of debt the company sold just before the crash last May. Well, guess what? The company is in violation of the restrictions placed on the original debt. What does this mean? It means the debt holders can now ask for the acceleration of the debt at any time--which would significantly alter the company's cash position. For those of you who are not familiar with the information contained in a 10-K, here is the direct quote for you to chew on: "....In light of these factors, persons investing in securities of the company should be apprised of the following additional risks: As I said, the 10-K's are where the "Happy Press Release" talk ends, and the realities are clearly stated in black and white. E-MAIL Delivery Available! If you would like your own copy of the MF Wings' Airline Industry update mailed to your own personal e-mail box, just send me a note and tell me....."Yes--I want it!" Just send to MF WINGS @aol.com. There is no charge, and you will get it more quickly than if you access us online. Mail Update We still have problems with mail delivery from time to time. If you are NOT receiving your updates, just drop me a note and we will make sure it is not a problem on our end. Sometimes the servers out there just don't take them. Then again, it has been suggested that if I just made them shorter--that would help, as that is probably part of the problem sometimes. But, well, we all know that is virtually impossible. I also did have one request for a new sub that got deleted by mistake. I admit it. Just hit the wrong button. So, if James, who identified himself as "the old guy" will send me another request, I will be sure to get you on the list. That's it--have a great week everyone.
Holly Hegeman |
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