 Weekly Airline Archive
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This Week in Airlines
by Holly Hegeman (TMF
Wings)
Dallas, TX (July 7, 1997) -- And a happy Fourth of July weekend to you all from a rather grey and soggy Dallas-Ft. Worth Metroplex. No, unfortunately, this has not been a Roast Wienies Weekend here in the Big D. More like a stay inside, clean up the house, watch tennis and just be pretty darn amazed with the latest photographs from Mars weekend. And on top of all that, The Motley Fool has been shut down all weekend due to a technological breakdown of sorts -- forcing Fools on AOL to travel to the Fool website (www.fool.com) for their Foolish Fix. Now, I ask you, if technology can bring us those great color pictures of those orange red rocks from Mars, why do we have to endure such a painful absence of Foolish wit and wisdom?
Bill Gates. He must be the reason. (I must warn you. I blame all computer software and/or technical difficulties on Bill.)
So, what were the Motley Flyers up to this week? Well, actually, let me get that little guy over here with the trumpet. Ta-da! Yes, ladies and gentlemen (and pilots), it is that time of year. It is time for the TMF Wings' Quarterly Update and Awards Show. The second quarter has come and gone. How did your favorite airline do this past quarter? Well, you are about to find out.
But first, a quick look at the past week in the markets in general and some news briefs.
TMF Wings' Market Watch
The Fed's little monthly get-together and running of the Bulls resumed at a frenzied pace, as the Dow Jones Industrials ended the shortened week Thursday up a staggering 208.09 points to close at a new record high--7895.81 points.
Thursday, the DJIA jumped 100.43 points as the Labor Department said the jobless rate rose to 5.0% in June from a 24-year low of 4.8% in May. In addition, monthly job growth and hourly wage increases were slightly lower than forecast.
The data, which was released one day after the Fed voted to hold interest rates steady, seemed to convince traders that the chances for future interest rate increases was nil.
Thursday, our Motley Flyers were fairly quiet, although a good number of our winged-ones were up on the week. Of the 36 stocks we track, 26 were either up or flat on the week. Speaking of those airlines we track, because of reader requests, we are going to add KITTY HAWK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTTY)") else Response.Write("(Nasdaq: KTTY)") end if %>, a cargo carrier based here in Dallas, to the airlines we track beginning next week.
Skywest Had a GREAT Thursday... and a Great Week
Foolish readers, remember, we talked about SKYWEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYW)") else Response.Write("(Nasdaq: SKYW)") end if %> a few weeks ago? Well, the stock took a 11.9% bump upward on Thursday to cap a week where it gained 7% overall -- closing at $17 5/8. Me thinks the proposed UNITED AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %>/Skywest codesharing agreement continues to propel this stock. Two weeks ago, United filed suit against MESA AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MESA)") else Response.Write("(Nasdaq: MESA)") end if %> in an attempt to alter what Mesa feels is an exclusive contract for a codesharing agreement with the two companies out of LAX.
Mesa said that of the 16 markets operated by Mesa and WestAir in Los Angeles, United intends to grant eight to Skywest Airlines.
Mesa believes that its two units have exclusive contract rights to the use of the United Express code in those markets.
Somehow TMF Wings thinks that United will persevere in this one. Let's just say... it is a strong hunch.
Western Pacific-Frontier Match Up Official
First, an apology for those who read our updates online. Last week, I wrote a blurb (before the proposed Westpac/Frontier merger was acknowledged on Monday) about how WESTERN PACIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WPAC)") else Response.Write("(Nasdaq: WPAC)") end if %> had moved north and was getting ready to begin flights out of its new home -- DIA. Well, we have this very responsible Foolish copyeditor who interpreted that as DETROIT International Airport. Heh heh. Needless to say, the TMF Wings' mailbag was quite full this week with notes from you folks who read our report online. It was quite humorous. I mean, I said they moved NORTH --but no, not nearly that far! Yes, it was DENVER -- not Detroit!
But yes, on Monday it was officially announced that Western Pacific Airlines and FRONTIER AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRNT)") else Response.Write("(Nasdaq: FRNT)") end if %> will merge this fall. Western Pacific has agreed to acquire Frontier Airlines for stock valued at about $41.3 million.
Terms of the transaction call for Western Pacific to issue three-quarters of a share for each of Frontier's approximately 10 million shares outstanding, The Wall Street Journal reported Tuesday. Based on WPAC's closing price of $5 1/2 on Monday, Frontier would be valued at about $4 1/8 a share, a 6.5% premium over its closing price of $3 7/8 on Monday. The agreement was announced after the close of regular trading hours.
Frontier shareholders will own about 31% of the combined company, and three Frontier directors will sit on the nine-member board. The airlines said they hope to have a codesharing agreement in place by August 1, allowing passengers to book flights on either airline, and expect to complete the transaction by October. As with any transaction of this type, the deal is subject to regulatory and shareholder approval.
Bottomline? Neither carrier had a choice. Western Pacific was a carrier on the verge of bankruptcy when former CEO Ed Beauvais was replaced by the WPAC board in November of 1996 with Robert Peiser.
Peiser quickly assessed that Western Pacific was going nowhere fast, and that if the carrier was going to survive at all, it had to move to Denver because the passenger pool at Colorado Springs was not enough to keep the carrier afloat. This was because 1) there were not enough passengers period, and 2) the passengers that were there were not "business passengers." They were low-yield leisure travelers.
On the Frontier side of the ledger, the carrier had actually begun to turn the corner on the fallout it experienced as a result of the ValuJet backlash last year. But the carrier had to get more planes to justify its existing infrastructure. And planes were hard to come by.
After Peiser announced the move to Denver, the rest was a foregone conclusion. The two small carriers would have killed each other in an attempt to survive in the shadow of the United Airlines behemoth that exists at DIA. (Yes, that is DENVER International Airport.)
Of course, as one industry wag has put it, this merger is akin to the one between Studebaker and Packard.
We'll have to wait and see. But it is clear that this is a survival tactic on the part of both carriers.
Of course the next question is -- just how much IS United going to expand its Shuttle service out of Denver?
Reno Loses its Interim CFO
Just an interesting note. As you know, TMF Wings' antennae get warmed up whenever a CFO leaves an airline. Well, RENO AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: Reno)") else Response.Write("(Nasdaq: Reno)") end if %> has now lost two in about five months. CFO Paul Tate unexpectedly up and left in January to join ATLANTIC COAST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACAI)") else Response.Write("(Nasdaq: ACAI)") end if %>, and at the time, it seemed like perhaps a small red flag. Well, I think it might be time to get out the larger one. The interim CFO, J.T. Fisher, left last week. He was the former Director of Planning and had been with the company since 1994.
In addition, Reno publicly admitted that it would have a worse-than-expected second quarter due to mounting maintenance expenses -- specifically expenses involving its Pratt and Whitney engines. Reno cited scheduled and unscheduled engine removals and delays in engine overhauls caused by a shortage of Pratt & Whitney JT8D-219 engine parts used on MD-80 aircraft, and limited availability, industry-wide, of spare engines for short-term lease.
The resulting shortage of spare engines forced Reno to temporarily ground as many as three aircraft, two of which were returned to service before the end of June. These factors have led to an increase in maintenance expense, a decrease in fleet utilization, and an increase in overall unit cost.
Just a note. This problem with the Pratt and Whitney engines is not limited to Reno. However, I do believe Reno is just the first carrier to publicly mention it.
Interestingly, Reno closed the week up 1% to close at $8 5/8. Yesterday, Barron's mentioned an unusually high amount of option activity -- calls to be specific -- involving Reno stock.
This stock has always been at the mercy of some strong institutional buyers, and given the news that was released, I find it interesting that the stock did not slip.
The stock has also been tracking upward of late, posting a very nice 28% gain for the second quarter. And you know Foolish readers, this movement does not track the fundamentals for this stock. Me thinks there is something else at work here.
The TMF Wings' Second Quarter Performance Awards
Foolish investors! It is that time of year. The second quarter has now come and gone, and it is time to recognize the High Flyers, as well as the Goats. So, since we are supposed to be short and sweet (something that TMF Wings is just not really capable of being -- well, maybe nice -- but the short -- forget it!) Let's get ready to rumble!
First, the Second Quarter Overall High-Flyer Award goes to... (drum roll please) US AIRWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %>. The shares of US Airways jumped 43% in the second quarter of 1997, to close at 35 on June 30.
While the carrier remains, in my opinion, in a state of being betwixt and between, with no real plan for growth and management that is hell-bent on getting sizable concessions from labor, Wall Street, as we have said many times, loves the Wolfman. I suspect they also suspect what I suspect. That is -- that Mr. Wolf is paring down debt, paying long-past-due dividends on preferred stock, dismantling the US Airways/BRITISH AIRWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAB)") else Response.Write("(NYSE: BAB)") end if %> alliance, and looking to reconstruct the labor contracts for one reason. I think that Mr. Wolf's plan for growth at US Airways means one thing. Merging the carrier, or selling the carrier. Remember, United Airlines and AMERICAN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> were both VERY interested in acquiring USAir the end of 1995. But what stopped them? Debt and union contracts that were seen as onerous.
Just a tidbit that another industry analyst and I had both noticed and were talking about the other day. Guess who has announced they are dropping out of the American Express Membership Miles Program? You got it. US Airways. This program is often cited as one of the best for travelers, and has certainly been a bonus to US Airways. Why would it do this?
TMF Wings' opinion? Sets the stage for an easier acquisition or merger with a non-AMEX aligned carrier.
Remember, you read it here first.
On the other end of the spectrum, we have the highly competitive and always cherished Second Quarter Overall Goat Award. Which carrier, of all the ones we tracked, tanked the worst this quarter?
Western Pacific--The airline that sounds like a train with wings. The stock continued to lose steam as the proposed merger talks with Frontier continued.
The stock lost 19% on the quarter to close at 5 1/2.
Which Mighty Titan had the best Second Quarter?
The Mighty Titans -- United Airlines, American, NORTHWEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NWAC)") else Response.Write("(Nasdaq: NWAC)") end if %>, and DELTA AIR LINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> -- did NOT have a particularly good second quarter. Well, let me take that back. They HAD a good second quarter until late May and June arrived. From then, it has not been so good, as we have discussed.
The Mighty Titan that posted the best return? Our friends and pals over at Amon Carter Blvd., American Airlines. American posted a 12% gain on the quarter, closing at $92 1/2 to take the prize.
The Goat of the Mighty Titans? Whew, this one was neck-and-neck down to the final week. But just by a nanosecond, Northwest Airlines edged out our pals in Atlanta, Delta Air Lines. Northwest takes the Mighty Titan Goat Award, posting a 3% loss on the quarter to close at $36 3/8. Delta posted a 2% loss on the quarter to close at $82 5/8. However, as you will remember, Delta was sky-high at the end of April -- flirting with that $100 mark. The stock has taken quite a drop since then.
Who took the prize as the High-Flying Big Boy? Now, here is another one that might be a surprise. CONTINENTAL AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAI/B)") else Response.Write("(NYSE: CAI/B)") end if %>? Nope. SOUTHWEST AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUV)") else Response.Write("(NYSE: LUV)") end if %>? Nope. Our friends in St. Louis. Yes, TWA <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %>. (See, just goes to show you how wacky the world of investing in airline stocks can be. Here is a company that is losing money hand over fist, that reports that its second quarter figures will not quite be as good as expected, and lookey here -- from a trading perspective, it was one hot number this past quarter.) TWA ended the second quarter up 23% to close at $8 9/16. Now, in all fairness, it must also be mentioned that TWA made those second quarter comments THIS week, after the end of the second quarter. In fact, TWA lost 12% this week to close at $7 1/8.
However, it cannot be denied its Second Quarter High-Flying Big Boy Award. TWA -- step up and claim your prize.
The Big-Boy Goat?
AMERICA WEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AWA)") else Response.Write("(NYSE: AWA)") end if %>. The carrier continues to struggle, and the stock slipped 7% on the quarter to close at $14 1/2.
What Small-Fry takes High-Flyer honors? HAWAIIAN AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HA)") else Response.Write("(AMEX: HA)") end if %>. Hey folks, we mentioned them just briefly not too long ago, but this one might be worth a closer look. The stock gained a healthy 40% on the quarter, to close at $5.
The Second Quarter Small-Fry Goat? Ah! We have a double winner! Western Pacific. OUCH! Mr. Peiser has best hope that the third quarter is more generous to his folks in Colorado. Not to mention the WPAC shareholders.
Best Second Quarter Performance by a Regional/Commuter?
ATLANTIC SOUTHEAST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASAI)") else Response.Write("(Nasdaq: ASAI)") end if %>.
The Foolish Four regionals that we looked upon so favorably at the beginning of the year have not disappointed and Atlantic Southeast led the pack with a 38% return on the quarter, closing at $28 5/8. COMAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMR)") else Response.Write("(Nasdaq: COMR)") end if %> posted a respectable 27% return, closing at $27 11/16, as did MESABA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAIR)") else Response.Write("(Nasdaq: MAIR)") end if %>, which also posted a 27% return, closing at $14 3/4. Finally, ATLANTIC COAST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACAI)") else Response.Write("(Nasdaq: ACAI)") end if %> posted a 17% return, closing at $15 3/4.
Who says we don't have great taste in airline stocks?
Who was the Second Quarter Cargo High-Flyer? That stratospheric AIRBORNE EXPRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABF)") else Response.Write("(NYSE: ABF)") end if %>. This stock has just gone nuts this year. For the second quarter, the carrier posted a 40% gain, closing at $41 7/8. But that is not all. This past week, the stock became our year-to-date (YTD) High-Flyer, surpassing AIRTRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAIR)") else Response.Write("(Nasdaq: AAIR)") end if %>. Airborne has gained 86% ON THE YEAR.
The Second Quarter Cargo Goat? FEDERAL EXPRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %>. But don't cry for Fedex. The carrier posted a nice 11% gain on the quarter, closing at $57 7/8. But with Airborne posting a 40% gain and ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> posting a 31% gain -- well, the competition was just pretty darn tough in this category. (So, Foolish investors -- see a trend here? Think the cargo boys might be worth a look here?)
So, there you have it -- The TMF Wings' Second Quarter Performance Awards. Congratulations to the winners, and a round on TMF Wings for the losers. By the way, a complete list of the second quarter performance numbers follows our weekly performance chart this week so you can check out just how your own airline did if it was not mentioned.
Weekly Airline Industry Performance
Closing Price Closing Price Percent Sumbol 6/27/97 7/3/97 Change WPAC 5 3/8 6 3/16 15% KLM 31 1/2 34 1/8 8% SKYW 16 1/2 17 5/8 7% ABF 40 3/4 43 3/8 6% MESA 5 3/16 5 1/2 6% COMR 25 1/4 26 1/2 5% JAPNY 8 7/8 9 1/4 4% CAIB 33 5/8 34 13/16 4% VNGD 1 3/4 1 64/79 3% UAL 72 74 1/16 3% FDX 57 9/16 59 1/8 3% ALK 25 9/16 26 1/4 3% AIRT 4 3/4 4 7/8 3% HA 4 3/4 4 7/8 3% LUV 26 3/8 27 2% DAL 85 5/16 87 1/4 2% AMR 94 1/4 96 1/4 2% ATLS 32 1/2 33 1/8 2% U 35 3/4 36 7/16 2% AWA 14 9/16 14 13/16 2% ACAI 15 3/4 16 2% RENO 8 1/2 8 5/8 1% BAB 115 5/8 115 11/16 0% AAIR 5 1/4 5 1/4 0% VJET 7 1/32 7 0% MEH 27 7/8 27 3/4 0% NWAC 37 36 3/4 -1% PAA 7 15/16 7 7/8 -1% CEA 26 25 3/4 -1% FRNT 4 3 15/16 -2% ASAI 28 27 3/8 -2% AMTR 8 7 3/4 -3% WLDA 8 1/2 8 1/8 -4% MAIR 15 1/4 14 1/2 -5% TOWR 3 3/8 3 1/8 -7% TWA 8 1/16 7 1/8 -12%
2nd Quarter Airline Industry Performance Summary
Closing Price Closing Price Price Percent Symbol 3/31/97 6/30/97 Change Change U 1/2 35 10 1/2 43% HA 3 9/16 5 1 7/16 40% ABF 30 41 7/8 11 7/8 40% ASAI 20 3/4 28 5/8 7 7/8 38% AIRT 3 1/2 4 3/4 1 1/4 36% ATLS 26 1/4 34 1/2 8 1/4 31% RENO 6 3/4 8 5/8 1 7/8 28% COMR 21 3/4 27 11/16 5 15/16 27% MAIR 11 5/8 14 3/4 3 1/8 27% TWA 6 15/16 8 9/16 1 5/8 23% SKYW 13 15 5/8 2 5/8 20% WLDA 7 1/2 8 7/8 1 3/8 18% LUV 22 1/8 25 7/8 3 3/4 17% ACAI 13 1/2 15 3/4 2 1/4 17% FRNT 3 3/8 3 7/8 1/2 15% TOWR 2 3/4 3 1/8 3/8 14% JAPNY 7 7/8 8 7/8 1 13% AMR 82 1/2 92 1/2 10 12% FDX 52 1/8 57 7/8 5 3/4 11% UAL 64 1/2 71 9/16 7 1/16 11% BAB 104 3/4 114 15/16 10 3/16 10% CAIB 31 7/8 34 15/16 3 1/16 10% MEH 25 1/6 27 3/8 2 5/24 9% KLM 28 5/8 30 7/8 2 1/4 8% ALK 25 5/8 25 5/8 0 0% AMTR 8 3/8 8 1/4 - 1/8 -1% DAL 84 1/8 82 5/8 -1 1/2 -2% NWAC 37 5/8 36 3/8 -1 1/4 -3% VJET 7 3/8 6 29/32 -15/32 -6% AAIR 5 5/8 5 1/4 -3/8 -7% AWA 15 5/8 14 1/2 -1 1/8 -7% VNGD 2 3/50 1 7/8 -5/27 -9% CEA 28 3/4 26 -2 3/4 -10% PAA 8 3/4 7 7/8 -7/8 -10% MESA 6 3/32 5 3/8 -23/32 -12% WPAC 6 3/4 5 1/2 -1 1/4 -19%
E-Mail Delivery
You too can have the TMF Wings' Weekly Airline Update sent to your e-mail box. Just send me a note, c/o TMF [email protected] that says, "Wings, Send it or I Shall Surely Suffer," and we will make sure it is sent to you post haste.
E-Mail Problems
Did the dog eat it? Again, our apologies. I think the AOL servers have decided to eat our e-mails of late. Whole groups, such as a large number of AMR readers, NWA.com, goodnet.com readers, and our Compuserve readers have been mysteriously disappearing in the midst of "transmission not completed" messages. IF YOU DO NOT RECEIVE YOUR UPDATE and would like to get another copy, please send me a note, TMF [email protected] and we will make sure you are forwarded a copy by hand.
Have a great week everyone.
Holly Hegeman
TMF [email protected]
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