What's Wrong With Airtran?

[JECKEL]

Not to flame, but why does it appear that Airtran is on every one's list as an airline who is in trouble or may not make it?

Someone please explain to me why Airtran is in dire straits.

 

[Ernest T. Bass]

I'm sure you'll get a highly educated response from all the wanna-be airline analysts on flightinfo, most of whom couldn't tell you the difference between a profit and profit margin.

I can't wait to read this.....

 

[Wesb737fo]

Google some financial sites. I read one that talks about which airlines he (the author of the report) thinks are in a difficult financial spot with oil being over $100/bl. I don't totally agree with the report, but I do think we (meaning Americans) are all heading into rough seas at this point.

 

[PCL_128]

Not to flame, but why does it appear that Airtran is on every one's list as an airline who is in trouble or may not make it?

Someone please explain to me why Airtran is in dire straits.

AirTran isn't anywhere close to being in dire straights. Listening the the mental giants around here will get you nowhere in figuring out which airline is the next to go under. We have 14% of our annual revenue in cash according to the latest numbers. Not too shabby.

 

[Max Powers]

AirTran isn't anywhere close to being in dire straights. Listening the the mental giants around here will get you nowhere in figuring out which airline is the next to go under. We have 14% of our annual revenue in cash according to the latest numbers. Not too shabby.

It isn't great but it seems to be one of our only weak points being brought up. I think when others start dumping capacity well just pick up the scraps. And keep growing slowly but surely.

 

[whoknows]

Coming off a week that saw three U.S. airlines cease operations, it's only natural to ask "who's next?"


The good news is that no remaining airline appears wobbly enough that customers should book elsewhere and not risk being left at the airport. The U.S. majors, which went through a round of restructuring earlier in the decade that included nearly a half-dozen bankruptcy filings, have large cash hordes and route networks loaded with international flying that does not face the price competition experienced at home. Established discounters like Southwest Airlines Co. and AirTran Airways Inc. have low costs and fuel hedges in place that should allow them to remain competitive regardless of the price of oil. These airlines will undoubtedly be bruised, but are more likely considering dealmaking during this period of weakness than they are pondering bankruptcy filings.
Similarly, Hawaiian Airlines Inc. and Alaska Airgroup Inc., though facing challenges, have lucrative niches that they should be able to take advantage of and make it through a downturn. And JetBlue Airways Inc., armed with a $305 million capital infusion from Deutsche Lufthansa AG last December, seems safe for now.
But if history is a guide, there could be more casualties. The U.S. industry has always seen airlines fail when a downturn strikes, with Midway Airlines, Vanguard Airlines and Legend Airlines among the fatalities from the slowdown earlier in the decade. The only thing that appears different this time around is that with oil at $100 per barrel, the failures are coming early on in a downturn instead of toward the end. And while no one is predicting a near-term shutdown of carriers such as Frontier Airlines Holdings Inc., Spirit Airlines Inc., Midwest Air Group Inc. and Virgin America Inc., these airlines are being watched closely.

Frontier has long been a popular name to throw out when talking about potential shutdowns. The discounter lost money in 2007 as it battles not only United Airlines at its Denver base but a rapid expansion by Southwest as well. But Frontier also has $170 million in cash on hand and is raising more by selling planes. The airline has revamped its route network and cut about 100 jobs in December to save cash, and it appears to have the resources on hand to weather the storm for the time being.

Spirit, meanwhile, has a model with some similarities to ill-fated Skybus Inc., including charging for checked baggage and for beverages and snacks. However, the airline has a much better route map than Skybus, flying to a number of Caribbean destinations where its exposure to discount competition is less intense. But those markets are also reliant on tourist traffic, which is driven in part by the U.S. economy. A prolonged slowdown in the U.S. could cut into the number of island vacationers, which could eventually lead to trouble for Spirit.

Many in the business did not expect to see Midwest planes still in the air in 2008. The Milwaukee-based airline was the subject of a hostile bid by AirTran launched in late 2006, escaping only when it found a white-knight bidder in private equity firm TPG willing to take it private. Ironically, that hostile buyout offer might have saved Midwest, which operates a fleet of inefficient aircraft and might not have made it through a slowdown as a publicly traded company. Armed with TPG cash, Midwest is stable, but its fares are under pressure as AirTran builds its presence flying from Milwaukee to key Midwest destinations. Midwest's fate could be tied to how willing TPG is to contribute new capital to the airline to help it buy new planes, which in turn could be determined by how bad the U.S. economy gets in the coming months.

Virgin America remains a wild card. The airline only began service last August, and typical of a startup has bled money so far, losing $35 million during its first quarter of operations. The airline is attempting to ramp up while other airlines are scaling back flying. Working in its favor is Richard Branson's involvement, as the British entrepreneur who spent more than three years wrangling with U.S. regulators for permission to start service is unlikely to give up easily. But U.S. law limits Branson's ownership, and it is unclear that U.S. investors led by Black Canyon Capital and Cyrus Capital Partners who have already committed about $162 million will be willing to fund continuing losses.
A number of smaller regional airlines that operate small jets and propeller planes under major brands could also be in jeopardy should their partners attempt to squeeze them for lower costs, but that flying could quickly be absorbed by other regional operators. - Lou Whiteman

 

[MINIME]

Very good informative article. I think the same is true. I believe AAI will survive this correction. Bruised perhaps but alive nonetheless. Who knows, perhaps a LUV cash infusion might save the day. This could be the fire sale that LUV is looking for. Hmmmmm...what yaw think?

 

[Yuppyguppy]

me thinks so

 

[IronCityBlue]

I'm sure you'll get a highly educated response from all the wanna-be airline analysts on flightinfo, most of whom couldn't tell you the difference between a profit and profit margin.

I can't wait to read this.....

Yeah, cause as we all know, all the true-dat respect goes to airline execs as witnessed by the quality decisions they've made over the years.

People, in large part pilots, come on this forum to discuss our opinions, the underlying reasons behind them, and in some cases to make predictions.

You, on the other hand, seem to think everyone sucks and should just shut up and color. Thanks for sharing, but I disagree.

 

[RIDETHELIGHTING]

Here is a little good news on FL. Mix with bad industry news.

http://www.thestreet.com/_yahoo/vid...l?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA#10411386

 

[PCL_128]

From today's 8-K filing:

Item 7.01. Regulation FD Disclosure.

AirTran Holdings is providing the following updated guidance for the first quarter 2008 for its wholly owned subsidiary AirTran Airways.

The Company anticipates that their all-in fuel cost per gallon, including taxes and into plane fees for the first quarter 2008 will be in the range of $3.00 to $3.05.

Passenger unit revenue (RASM) is expected to increase 6.0% to 6.5% year over year.

Non-fuel unit costs excluding fuel (CASM ex-fuel) is forecasted to be up 0.5% to 1.0% year over year.

The company anticipates that its effective tax rate for the first quarter will be between 35-36%.

 

[scarlet]

AA's problems=good thing for Airtran.

I have had several friends who had to buy a last minute tickets on Airtran, due to being stuck by AA.

Airtran loads the last couple of days over 90%...

 

[buxflyr]

I'm sure you'll get a highly educated response from all the wanna-be airline analysts on flightinfo, most of whom couldn't tell you the difference between a profit and profit margin.

I can't wait to read this.....

If you make a profit, you have a job. If you have a profit margin, you keep your job.

 

[CitationLover]

AA's problems=good thing for Airtran.

I have had several friends who had to buy a last minute tickets on Airtran, due to being stuck by AA.

Airtran loads the last couple of days over 90%...

It is sad....We were shuttling AA flight attendants from MCI to LGA.

Got to love the FAA making a mountain out of a molehill!

 

[flying zephyr]

First let me say that I hope that these guys are wrong! I have a lot of great friends at AirTran and toward the end I was in favor of the merger last summer. There was an article in the WSJ just about two weeks ago that said that if the economy and fuel costs did not significantly improve that Frontier would have less than six months cash on hand before being totally bankrupt. Looks like maybe that they were right about that, but the other Airline discussed was AirTran. Now I don't claim to be an expert and this was not my opinion and I wish that I could find the article to link it, but it said that Airtran is heavily debt laden and could fall below 10% cash/debt ratio, which could force AirTran to refinance debt and in the tightening credit market they would have trouble securing credit or be forced to pay higher interest on the loans.

You asked the question, and this is the only answer I have. Best of luck to all and happier skies ahead. The last six months have been rough on everyone. I'm thinking you guys force us to clean up our act here in MKE or there will be a lot more gates open in the D concourse.

 

[PCL_128]

We still have 14% of yearly revenue in cash on hand. We're safe for now. I don't think this year will be the bad year for us. But if oil stays above $100/bbl, then next year could be very dicey.