This Week in Airlines
by Holly Hegeman (MF Wings)

Dallas, TX (April 27, 1997) -- Foolish readers--VOILA! Here we are once again--at the TMF Wings Wall Street Bar and Grill. We have the Foolish BarcoLounger situated next to the juke box this afternoon, and are reclined--Foolish Margarita in hand--reflecting upon the wild week our Motley Flyers experienced this past week. By the way, my thanks to all of you who wrote and voiced your preference for speed over spelling. Actually I thought the whole thing was rather humorous--and could not resist the chance to comment. So, from now on, be it voila or viola, the weekly update shall be sent in its usual speedy (albeit sometimes imperfect) state. You asked for it, you got it!

And, in response to my Foolishly wondering whether anyone out there would forward me a Delta Crown Room pass so I could check out the difference between those amenities and the Admiral's Club--one of my readers who just happens to be a Customer Service Manager for Gordon's Planes, (you know--the ones that USED to have a Golden Tail) was kind enough to offer me an invite to a Continental President's Club. Thanks to Dan Baumann. Now, I guess we know who is REALLY interested in proving they provide superior customer service.

Ahem.

You know, if this is the first update you have ever read--nah--never mind--too long to go into. After awhile you will begin to feel like one of the regulars. It will just take a couple of weeks or so.

TMF Wings' Market Watch

If you ever believed that the stock market was something that was rational and orderly, this week might have taken that notion and left it for dead. It is not like there is not an explanation for everything that happened. And, in the long term, all of this volatile and bizarre activity will eventually even out.

It is just that compared to most people's perception of how Wall Street should operate--i.e., fairly rationally--well, folks this week, especially for this sector, the market acted more like something out of a Stephen King novel. Talk about ironic twists, strange turnarounds, and things that were not what they appeared to be. It was a never-ending litany of surprises.... one after another.

But before we get into the sector specifically, how did the markets do overall this past week?

Well, I have to tell you folks, I am not a happy camper. Yes, the Ratty Old Bear Suit is here, draped over the top of the Foolish BarcoLounger. Why am I not happy? I'm not happy because this market is beginning to do some strange things. Case in point--the difference between what is going on with the Russell 2000 Index, the Nasdaq, and the Dow.

For those of you who are not aware, the Russell 2000 is an index that is made up of 2,000 small cap companies. The Nasdaq is comprised of roughly 5,000 companies that range from teeny to some of the largest capitalized companies that are traded on any exchange.

My point?

The Dow consists of 30 stocks--period. Now, while it has had a wild ride the past week, and while it did have almost a 10% correction here in the last three weeks, the Dow is still seemingly doing okay.

It is the Russell 2000 Index and the Nasdaq that are not. And when people say. "How is the market doing?" My answer has to be--"What PART of the market?" I see the next two or three weeks as very crucial in terms of what the Dow and Dow type of stocks (i.e. Big Caps) are going to do. Meanwhile, just remember when you hear that daily tally of the Dow Jones Industrials, the Dow is an index of only 30 stocks, all of which are large cap, blue-chip stocks.

Or, to put it in terms that will bring it home more easily -- how many of you have made money in your mutual funds this year? My bet? Not too many.

My point? For the last several years, smaller-cap stocks were where the money was. These were the stocks that were appreciating the fastest. It was true to an extent in the airline sector as well. It appears that this has changed.

Speaking of the Dow, the Dow stocks finished lower in lackluster trading Friday, ending a week which saw the Dow Jones Industrial Average post its second-greatest one-day point gain before losing much of that ground over the last three sessions. The Dow Jones Industrial Average dropped 53.38 to close at 6738.87; the index, added 35.32 for the week. Friday, the Nasdaq shed 18.81, as declining issues led advancers 10 to 7 on about 497.3 million shares traded. Other indexes ended lower, as the S&P 500 lost 5.81, the Amex was down 1.12, and the Russell 2000 fell 2.67.

The long bond was down 3/32 to yield 7.13%. Again, the TMF Wings' rule of thumb on this one is the higher the yield, the more trouble that can mean for stock appreciation in the airline industry going forward. As the yield on bonds approaches the 7.25% mark, bonds begin to look more attractive than equities to institutional buyers. So, just another indicator we watch. Yep--the Ratty Old Bear Suit is right here.

And just a note for those who are looking for some good news. I had a chance to talk with John Murphy, the technical analyst guru for CNBC yesterday at the Association for Technical Analysis Conference here in Dallas -- and he LIKES the transports. Says the chart looks like one of the best of the 90 industry sectors he follows. However, he, too, is concerned with the divergence between the performance of the bulk of the market versus the Blue-Chip Dow stocks.

The TMF Wings' Test Your Market Predictability Quiz

So, in our never-ending quest not to just TELL you, but to shed some light on the wacky goings-on in the markets, here is a little three-part quiz to test your knowledge of how you think the markets should have reacted to particular news items from this past week.

First example we will look at is that of USAIRWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %>. The stock closed on Monday of this past week at $27 5/8. Tuesday the stock closed up 4.5%, closing at $28 7/8. On Wednesday, the company announced spectacular earnings and, as we would have expected--the stock closed up. But HOW much was a surprise.

A whopping 18% in one day. The stock closed at $34 1/8. Thursday the stock closed DOWN 7.7%, ending the day at $31 1/2. So, after this occurred, you probably would have thought the stock would even out, or even be up on Friday.

Nope.

Friday the stock closed DOWN another 6.7%, to close the week at $29 3/8.

On the week, the stock was still up a net of 6%. Not bad--but whoa--sure a far cry less than that 18.2% it posted in the temporary trading euphoria of Wednesday. How come?

Because the market overreacted to the good news on Wednesday. Picture this. You are sitting in front of your Bloomberg in your office off Pine Street in the canyons of Wall Street. Suddenly you see a headline that tells you that USAirways has reported earnings that are just off the chart. Well, you may not know much about airlines, but you know about Stephen Wolf, you know that the company just paid its long-overdue preferred stock dividends, and well, hey--we need to jump on this one!

After all was said and done, and after the reality of the real situation of the company set in the next day--things came back to earth.

DELTA AIR LINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> was another Wall Street wonder this past week. Well, at least in terms of great earnings news. The carrier also announced better-than-expected record earnings--this time on Thursday. The tale of the tape for Delta? Monday it closed at $93 1/8, down 1.1%, Tuesday it closed up 2.4% to close at $95 3/8, Wednesday it closed up 2.9% to close at $98 1/8 (TMF Wings and her erstwhile friend and former MF pal MF Macro were placing bets at this point on when the stock would hit $100 and stick). Thursday, as we said, the company announced earnings. The news was nothing less than stellar. Anyone want to guess what the stock did on Thursday?

So, you think it went up? Nope.

It dropped. Dropped 5.1% to close at $93 1/8. Not only that but the stock then went and dropped another 3.5% on Friday, closing the week at $89 7/8.

Delta's weekly performance? After reporting fantastic earnings? Down 5%.

How come?

In the case of Delta, the stock began to sink after the carrier said it expected its costs to increase going forward. [Remember the TMF Wings' mantra--Wall Street buys going forward--not on what is being reported today.]

Delta said Friday it expected its current-quarter unit costs, or costs per available seat mile, to increase 5.8 % over the third quarter. Delta also said it expected available seat miles for the fourth quarter ending June 30 to increase 2.9% over the third quarter.

The airline is also facing increased pilot training costs related to its trans-Atlantic realignment, which was announced in January, as well as higher profit-sharing and incentive payments for employees.

In addition, Delta also expects additional costs due to a higher volume of passengers carried during the busy spring and summer season.

The airline also will face additional advertising and marketing costs to announce upgrades in its trans-Atlantic business class service. Delta is expected to announce the new advertising campaign next week.

While Delta's move to improve its business class will increase near-term costs, the transition is necessary to improve customer service and amenities to attract more high-paying business class customers, analysts said.

Delta declined to comment on how the additional costs may affect its fourth-quarter earnings. However the airline told analysts in a conference call late Thursday that it expects revenue unit growth to exceed cost growth.

Then, there was the tale of RENO AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RENO)") else Response.Write("(Nasdaq: RENO)") end if %> . This one is really a good one. The stock closed at $7 1/4 on Monday, up 0.9%. On Tuesday, the stock closed down 1.7% to close at $7 1/8. On Wednesday the stock closed up 3.5% to close at $7 3/8. On Thursday, the stock closed flat.

Now, just a little note. Reno announced earnings on Thursday that were abysmal. Company lost lots of money. Granted, a lot of it was related to weather-related problems--but hey--bottomline--the company lost money. [A more complete wrap-up follows.]

So, your next, and final question in this Foolish quiz is this--How much ground did Reno stock lose on Friday?

Wrong again.

The stock gained 10.2% to close at $8 1/8.

In the case of Reno. Are you sitting down? The CEO of the company, Robert Reding, made from what I hear was one great performance on CNBC Thursday afternoon.

I kid you not. I can find NO other reason. None. Nata.

Friday, the volume took off, and dragged the price, kicking and screaming, along with it.

Now--who says Wall Street is not nutty?

Earnings Overload! HELP! TMF Wings is Buried!

Foolish readers, this past week was traditionally the one that is the busiest for earnings--so without anymore Foolish banter, we are going to go through the carriers that reported. If we have space, noteworthy news items will follow.

TWA <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %>

Our utmost Foolish congratulations to the folks at TWA. The company reported earnings not only on time for a change, but AHEAD of time, according to the First Call schedule. Congrats!

Trans World Airlines Monday said its first-quarter loss before items widened 89% amid capacity reduction and larger-than-expected maintenance outlays and pilot-training costs.

The nation's seventh-largest air carrier said its loss before special items was $70 million, or $1.51 a share, compared with $37.1 million, or $1.46 a share, in the year-ago period. Including charges, the company's net loss totaled $71.6 million, or $1.54 a share. Year-ago results included a special dividend requirement of $0.48 a share for the redemption of 12% preferred stock.

Still, the airline managed to top analysts' expectations. According to a First Call consensus estimate, Wall Street had expected TWA to post a loss of $1.61 a share.

TWA said its results in the latest quarter reflect certain unusual costs, including training costs associated with the phase out of TWA's larger wide-body aircraft.

Meanwhile, TWA's quarterly revenue dipped 2.6% to $762.3 million from $782.4 million a year ago. The carrier said revenue fell because of a reduction in capacity resulting from its ongoing move to smaller aircraft.

A special note here from TMF Wings about a letter that was distributed from Gerald Gitner this past week regarding TWA's problems and where he hopes to take the carrier going forward. If nothing else, I have to commend the CEO of the troubled carrier for being forthright and upfront about the problems confronting the carrier. No bs--no skirting around the issues. It was encouraging to read a letter from an airline CEO that was not heavy on the ambiguous "corporate speak"--but rather, explained, in pretty candid terms, the problems the carrier faces.

TWA ended the week up 10% to close at $7 5/16.

USAirways

As we have already mentioned, US Airways posted earnings Wednesday that nearly doubled Wall Street expectations, saying favorable economic and weather conditions, coupled with improved employee performance, more than offset a 16.1% increase in fuel prices.

The airline said its first-quarter net income was $152.7 million, or $1.45 a diluted share, which trounced the First Call estimate of $0.76 a share. In the year-ago quarter, US Airways posted a net loss of $32.3 million, or $0.86 a diluted share.

Revenue surged 12.5% to $2.1 billion in the 1997 quarter.

US Airways said revenue passenger miles in scheduled service rose 13.7% for the quarter, in part reflecting sharply improved weather conditions that allowed more flight completions. Passenger load factor, or percentage of seats filled, for the quarter was 68.4%, up from 64.6% a year ago.

The impressive earnings came despite a 16.1% surge in the cost of aviation fuel to 75.44 cents a gallon.

First-quarter operating profit was $175.6 million, compared with $10.8 million a year ago. Operating expenses were up 3.7% to $1.9 billion.

ALPA, which represents the pilots at USAirways, issued a release arguing with management over two points that were included in press releases concerning the earnings. First, the pilots say they do have a plan on the table for consideration and two, they feel the company's comments about "downsizing the airline" come across as a threat.

[TMF Wings' note: Anybody remember the New York Times' Sunday Magazine article on Robert Crandall, CEO of American Airlines about three years ago where he made the infamous quote, "If American Airlines does not change the way it does business (i.e., if the pilots don't come to their senses), we may never buy another airplane. We shall be forced to shrink." The article was graphically illustrated with an image of American Airlines' planes nose down in the ground for added emphasis on the quote.

Deja vu all over again.

USAirways, as we noted, ended the week up 6% to close at 29 3/8.

Delta Air Lines

Delta earned $187 million, or $2.52 per share, on revenues of $3.42 billion. A year earlier the airline lost $298 million, or $5.77 per share, on revenues of $2.96 billion.

Delta's traffic numbers were higher in the quarter and it flew with fewer empty seats. Its cost of flying one seat one mile rose 1.4 percent with a 15% increase in fuel prices.

For the first three quarters of Delta's fiscal year, the airline reported a profit of $552 million, or $7.30 per share, on revenues of $10.05 billion. A year earlier the company lost $72 million, or $1.39 per share, on revenue of $9.1 billion.

Delta ended the week down, as we said, 5% to close at $89 7/8.

Reno Air

Reno Air Thursday reported a net loss of $4,997,271 for the quarter ended March 31, 1997. The first quarter loss, which was in line with most analyst expectations, amounted to $0.47 per primary share compared to a net profit of $275,104, or $0.03 per share during the same quarter last year. Operating revenues for the quarter totaled $89,683,870, which is an increase of 23% year over year, while operating expenses were $93,855,969.

During the first quarter of 1997, the airline carried 1,272,875 passengers, and reported a load factor of 64.7%. Reno flew 722.6 million revenue passenger miles (RPMs), based upon a capacity of 1,116.8 million available seat miles (ASMs).

Reno's results were hit hard by weather conditions on the West Coast, including what has been called the "100 Year Flood" in Reno. Mainly due to weather-related causes, Reno CEO Robert Reding said that the company lost $5 million in January alone.

Reno Air ended the week up 13% to close at $8 1/8.

Southwest Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUV)") else Response.Write("(NYSE: LUV)") end if %>

Southwest's profit for the quarter ended March 31 was $50.9 million, or $0.34 a share, compared to $33 million, or $0.22 a share, in the same period last year. Revenues were $887 million compared to $773 million in the first quarter of 1996.

Southwest averaged 62.1 percent of its seats full in the quarter, up from 60.5 a year earlier. However, the airline said it doesn't expect to match the 67% load factor reached in the April-June quarter a year ago.

``Additionally, the March reimposition of the federal ticket tax may adversely impact revenue growth during second quarter 1997. The ticket tax was not in effect during second quarter 1996,'' said chairman and chief executive Herb Kelleher.

The markets liked what it heard. Southwest ended the week up 10% to close at $25 1/4. This price level is a crucial one for Southwest, as the stock has had trouble getting over $25 and staying there. We will watch to see if the stock doesn't make a move there and stay there for awhile after reporting these good results.

Southwest Named Top US Carrier

In the continuing war of the industry accolades, Southwest grabbed the latest one to add to its accumulation of awards already sitting pretty on the mantelpiece. For the second year in a row, Southwest was named the top U.S. carrier in the annual Airline Quality Rating issued on Monday by two Midwest universities. American Airlines, UNITED AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %>, and Delta Air Lines repeated their second, third place and fourth place finishes of 1995.

Ratings are based on factors that include average age of fleet, number of aircraft, on-time performance, number of accidents, denied boardings, mishandled baggage, fares, customer service and the airline's financial stability.

Brent Bowen, director of the Aviation Institute at Omaha, said the first-place gap has widened since 1995, but there was little difference among the next five carriers.``Southwest is clearly out there by itself,'' said Dean Headley, associate professor of marketing at Wichita. [Reminds TMF Wings of that joke about being "Outstanding in the Field--<Moooo!>--never mind.]

He also added that ``Continental Airlines is the most improved.'' [Oh, boy, here we go again. So Southwest wins, and now the folks that fly Gordon's Planes can also have something to toot their horn about as well.]

Following the top four carriers were Continental Airlines, NORTHWEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NWAC)") else Response.Write("(Nasdaq: NWAC)") end if %>, US Airways, AMERICA WEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AWA)") else Response.Write("(NYSE: AWA)") end if %>, and TWA.

Among the points the survey made were:

American slipped a bit with more consumer complaints and mishandled baggage and a worse on-time performance;

United also slipped a bit with more mishandled baggage and a lower on-time performance, but had fewer complaints;

Delta improved in factors that included on-time performance and consumer complaints;

Continental showed dramatic gains, with the fewest denied boardings of the nine major carriers surveyed, second best in lost baggage rate and a nearly 50% drop in consumer complaints;

TWA scored about the same as in 1995. It had the worst on-time performance, the second worse baggage handling record and the highest rate of consumer complaints.

Northwest Airlines

Northwest Airlines reported net income of $64.6 million for the first quarter of 1997, a 21% increase over the same period in 1996. For the quarter, earnings per common share were $0.58 a share ($0.52 fully diluted) compared with earnings of $0.41 per common share ($0.37 cents fully diluted) for the first quarter of 1996.

"The first quarter was characterized by strong domestic demand offset by sharply higher fuel prices and a weakening yen," said John H. Dasburg, Northwest president and chief executive officer.

Revenues for the first quarter rose to $2.376 billion, an increase of 4.9% over revenues of $2.265 billion in the first quarter of 1996. Quarterly operating expenses were $2.241 billion, an increase of 5.2% from expenses of $2.130 billion in the first quarter of 1996. The company's operating margin for the quarter was 5.7% versus 5.9% a year earlier.

Jim Lawrence, Northwest executive vice president and chief financial officer said, "We are forecasting demand to remain strong in the North American system, but less positively, we don't expect much improvement in fuel prices year-over-year and we expect the yen to continue to be weak. Further, capacity in the second quarter will increase less than planned due to the late delivery of five widebody aircraft which are currently undergoing third-party commissioning."

Northwest ended the week down 6% at $38 1/4, as apparently the markets took seriously the comments of management in terms of next quarter.

Checchi Leaves in Preparation for Run at California Governorship

The chairman of Northwest Airlines, Al Checchi, said Friday he is leaving his position. Checchi will continue to serve on the airline's board of directors. He will be replaced as chairman by Gary Wilson.

Checchi is exploring the possibility of running for governor of California.

Alaska Air <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALK)") else Response.Write("(NYSE: ALK)") end if %>

Alaska Air Group Inc., the parent of Alaska Airlines, said Monday its loss narrowed in the first quarter. Still, the company's loss was wider than the mean estimate of analysts surveyed by First Call.

The company posted a loss $5.7 million, or $0.39 a share, compared with a loss of $7.2 million, or$0.52 a share. Analysts were expecting a loss of $0.36 a share. Sales, meanwhile, rose to $342.9 million from $312.6 million a year ago.

The company said that first-quarter passenger load factor for Alaska Airlines rose to 65.4% from 60.7%. Alaska Airlines flew 2.34 billion revenue passenger miles for the quarter, up 10.2% from the 2.13 billion miles flown a year earlier.

Again, just as Reno was hit with weather-related problems this quarter, so was Alaska.

United Airlines

UAL Corp, the parent company of United Airlines, reported net income on a fully distributed basis soared 104.8% to $215 million, or $1.61 a share, well above First Call analysts' estimates of $1.40 a share. In the year-ago period, UAL posted pro-forma, fully distributed earnings before specialty items of $105 million, or $0.72 a share.

UAL's quarterly revenue rose 10.3% to $4.12 billion from $3.74 billion a year ago, fueled by a 6.9% revenue growth in the domestic passenger unit and a 6.1% growth in the international passenger unit.

UAL shares (UAL) rose $4.125, or 5.5%, to $78.875 Tuesday.

United also posted a load factor, or percentage of seats filled, of 69.9%, up from last year's 68.7%. UAL President John Edwardson said operating expenses rose 3.2% in the quarter, but that figure includes a 14.5% increase in the price of jet fuel. Excluding fuel costs, operating costs rose just 1.6% in the quarter. Edwardson said the company's strong results in the first quarter set the stage for record results in 1997.

UAL said it expects strong performance at the nation's largest carrier to continue in the second quarter. The company foresees a "modest" increase in unit revenue and expects to slightly exceed last year's second-quarter fully distributed earnings before items of $2.52 a share. The mean estimate of 12 analysts surveyed by First Call is a net income of $2.49 a fully distributed share for the second quarter.

America West

America West Holdings, the parent company of America West Airlines, Inc., posted a slight increase in earnings Tuesday, managing to beat Wall Street forecasts on an 11.8% increase in sales.

Phoenix-based America West said its first-quarter net income was $14.0 million, or$0.31 a diluted share, compared with $13.7 million, or $0.27 a diluted share, in the year-ago quarter. The results beat by two cents the mean estimate of seven analysts surveyed by First Call.

Quarterly sales at the nation's ninth-largest carrier totaled $462.2 million, up from $413.2 million a year ago. America West's load factor for the quarter was 68.8%, slipping from 70.7% in the year-ago period.

Atlas Air <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %>

Atlas Air reported last week that it earned $5.8 million, or $0.26 per share, for the quarter ended March 31, 1997. Including a non-recurring charge associated with returning two aircraft, net earnings were $5.0 million, or $0.22 per share. Revenues of $82.0 million represented a 40% increase over the $58.6 million in revenues for the year-earlier period. Earnings were below the $0.32 per share of a year ago due to the comparatively greater number of seasonal cancellations by certain customers in the first quarter of 1997. This is nothing that was not expected.

The company's financial position continues to be very strong. Atlas ended the quarter with $123 million in cash, in addition to a $275 million revolving aircraft acquisition facility, which was increased by $100 million during the quarter. Furthermore, Standard & Poor's and Moody's have announced their intentions to review Atlas's debt rating for a possible upgrade.

My thanks to TMF Boring who provided us with a great recap of the Atlas Air Conference Call--we will look at at Atlas in a little more detail next week. Overall, no surprises--we still like the stock.

Amtran <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTR)") else Response.Write("(Nasdaq: AMTR)") end if %>

Amtran Inc., parent of American Trans Air, said on Friday it expects to report a first-quarter profit of $3.2 million, or $0.27 a share, compared with year-ago net of $2.4 million, or $0.21 a share. Chief Executive Stanley Pace said he foresees "record results" for all of 1997 at the nation's 11th-largest airline.

Pace, a former Bain and Company consultant, began troubleshooting at American Trans Air, or ATA, last spring when the carrier ran into problems after it overexpanded its scheduled air services. In August, Pace was named CEO, succeeding J. George Mikelsons, founder, chairman and 73% owner, and he instituted a turnaround plan.

ATA canceled underperforming scheduled services, reduced its head count, sold four airplanes and focused on improving its core charter business. But the fixes were costly. ATA posted losses in the second, third and fourth quarters last year, for an overall 1996 loss of $26.7 million, or $2.31 a share, on revenue of $751 million.

However, Pace said the first-quarter results "demonstrate that the turnaround is working." Moreover, the company's cash position, down to less than $40 million last fall, rebounded to $60 million at the end of the first quarter, even after aircraft down payments to Boeing and some extra airplane lease payments, he said.

Pace said he expects ATA to post 1997 revenue of $750 million, the same as last year, but with four fewer airplanes in the fleet. ATA operates 45 jet aircraft, 24 Boeing 727s, seven Boeing 757s and 14 Lockheed L-1011s, and it has two more 757s on order for delivery last this year and in 1998.

The company derives more than half its revenue from charter flights. According to Pace, ATA has improved its margins by negotiating price increases with tour operators, boosting its volume of contracts with the U.S. military and landing additional contracts for high-margin, round-the-world luxury charters.

Pace said ATA also purchased an inventory management system that will help it better manage its fleet. That, together with a sales blitz among travel agents and increased advertising, should boost charter revenue to $400 million this year from $350 million in 1996.

Midwest Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEH)") else Response.Write("(NYSE: MEH)") end if %>

Midwest Express Holdings, Inc. reported record results -- including an all-time-high first quarter revenue, operating income, net income and earnings per share -- for its Midwest Express and Astral Aviation (dba Skyway Airlines) operations.

For the first quarter ending March 31, 1997, total operating revenue increased 20.0% to $79.9 million from $66.6 million in the same quarter last year. Operating income rose 46.6% to $6.5 million from $4.4 million in the year-ago quarter. Consolidated net income totaled $4.2 million, up 49.2% from $2.8 million last year at this time. Earnings per share for the quarter were $0.67, compared with $0.44 in the first quarter of 1996. Revenue yield increased 10% from a year ago, and traffic was up 7% on a 12% capacity increase.

Midwest Announces Stock Split

Midwest Express Holdings also announced this past week that its board of directors had approved a plan to split its stock 3-for-2 in the form of a 50% stock dividend. Shareholders will receive one additional share of common stock for every two they hold on the record date. The new shares will be issued May 28 to shareholders of record as of May 12.

Upgrades, Downgrades

The Private Client Group (PCG), the retail division of PaineWebber Inc., announced last week that it has added AMR Corp., parent of American Airlines, to its group of stocks known as the PaineWebber Focus List.

UAL Downgraded

Morgan Stanley analyst Kevin Murphy downgraded his investment rating on shares of UAL Corp. to "outperform" from "strong buy."

Murphy said he thinks that although the stock is still undervalued, the easy money has been made. [TMF Wings' note! Do you detect a pattern here? The "easy money" has been made, most of the carriers are telling analysts that second quarter will not be that good, etc., etc.]

Murphy raised his 12-month price target for UAL (UAL) to $90 from $80. He also raised his 1997 earnings estimate to $8.95 a share from $8.75.

Tower Air Upgraded

Goldman Sachs & Co. upgraded its investment rating on shares of TOWER AIR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TOWR)") else Response.Write("(Nasdaq: TOWR)") end if %> to "market outperformer" from "market performer," according to market sources.

Southwest Upgraded

Lehman Brothers Inc. upgraded its rating on Southwest Airlines Co. to "buy" from "outperform," said market sources.

Gruntal & Co. also upgraded Southwest Airlines to "outperform" from "long-term outperform." In a research note, the firm said it raised its earnings estimates to $2 a share from $1.75 for 1997 and to $2.50 from $2.40 for 1998.

American Airlines and the APA: Stop the Presses!

Foolish readers--in last week's edition of the Weekly Update I made the statement that I anticipated that the members of the APA (Allied Pilots Association) would probably vote to accept the tentative agreement that is now before them.

Tonight? I am not so sure. I detect a shift in opinion.

Based on my sources, I am seeing a lot of "swing votes" that appear to be now voting no on the proposed agreement.

My opinion on the vote has changed. I now think it is too close to call.

Holly Hegeman

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