ACA Pollies and Possible Furloughs

[Capt RJ]

Sorry to announce the facts at ACA-we are currently going through issues with our rolling bid that will probally end the current hiring pool. Our MEC Chairman along with management have decided to extend bids through the summer months, because of late retirement of the J-41. Due to a slower growth period than expected we will now utilize J-41 pilots to our current expansion of the CRJ deliveries. Should there be any other unexpected slow downs it may result in furloughs of current junoir pilots at ACA. We all hope for good news at the Feb 24 UAL hearing, but should expect to cope with the worst. I don't write this with the intention to destroy peoples futures, but to enlighten them to take opportunities that may come along to further their careers.


Good Luck

 

[CRJ puppy]

Don't you just love "flame bait"?!?

 

[Cappy]

Don't you just love "flame bait"?!?

I don't think Capt RJ is trying to "bait" anyone. I f you have been paying attention to the latest ACO hotline you could easily gather that hiring may come to a stop soon. As far as furloughs? Well, who knows?

As long as ACA continues it's profit streak and our senior management is aggressive at getting flying, I don't personally see furloughs...yet.

Chow.

Mike

 

[Pilot877]

There are so many rumors flying around right now, its enough to make you go bananas! The best thing to do is just sit back and ride it out. Capt. RJ is just trying to let the poolies know that things may not go their way. On the other hand, maybe they will get better.......just counting the days until the 24th!

 

[RJPilott]

Jan 16 Stock price ACAI: 14.50

Feb 10 Stock Price ACAI: 7.65

ACAI lost almost half its value in less than a month.

 

[Pilot877]

That would be thanks to the uncertain situation with UAL, when this is all resolved, one way or the other, things will change.

 

[WhiteCloud]

Jan 16 Stock price ACAI: 14.50

Feb 10 Stock Price ACAI: 7.65

ACAI lost almost half its value in less than a month.

Thanks for the info. I'm buying. Ziggy1

 

[rptrain]

Here are some viewpoints from the financial industry. Take away what you will.

United Airlines [UAL] is keeping Atlantic Coast
Airlines [ACAI] in the dark about whether a
fixed fee contract will be negotiated this year, but
analysts believe market forces eventually will
break in favor of the regional carrier. At press time,
however, the market was not kind to Atlantic
Coast. Uncertainty over the contract is compounded by
a fear United could be forced to liquidate.
As a result, share prices for the regional carrier
dropped to a low point reached in October.

Atlantic Coast has been able to negotiate rates for
2002 with Delta Air Lines [DAL]. But United
is a much tougher sell. The regional carrier has been
trying to get a commitment from United for
some time. Still operating under a 2002 rate
agreement, it wants a bankruptcy court to make United
decide by Feb. 28 whether Atlantic Coast will continue
to be a main regional carrier.

For the most part, analysts are optimistic. One
observer believes United will affirm the contract by
the end of the first quarter and that the move will
trigger a recovery for regional airline stocks. The
feeling is that United and other major carriers
struggling to reorganize under Chapter 11 will need
regional carriers more than ever. This assumes, of
course, that United does survive.

Following a meeting with Kerry Skeen, chairman and CEO
of Atlantic Coast, an analyst at
Blaylock & Partners was heartened. Ray Neidl said he
expects growth to continue for this
"well-managed, regional airline." He believes margins
and growth will be protected because United
needs Atlantic Coast not only for capacity on key
short-haul routes but for valuable services on the
cost side, such as station handling.

Atlantic Coast expects capacity to grow by almost 40
percent by 2004 -- to 5.7 billion available
seat miles (ASMs), with the delivery of 35 CRJ-200s in
2003 and 12 in 2004 flying under contract
with United. But until the United Express regional
flying agreement is affirmed, future regional jet
(RJ) deliveries will be uncertain.

Atlantic Coast's contracts with United and Delta are
cost plus- with margins determined over base
costs. Atlantic Coast is protected from fuel price
hikes and any additional costs, such as insurance
and security costs, because these costs are a
pass-through to the majors.

Neidl believes Atlantic Coast has one of the strongest
balance sheets in the industry, with cash and
deposits of $288 million, enough to enable the stock
to ride out any turbulent quarters.

On Feb. 3, James Parker of Raymond James & Associates
reduced Atlantic Coast's earnings
per share (EPS) forecast for 2003 and 2004 -- yet
continued to rate the carrier a Strong Buy. He
lowered his EPS estimate from $1.40 to $1.15 for 2003
and from $1.75 to $1.36 for 2004. That
earnings forecast assumes that United will reaffirm
the contract or agree to interim rate increases,
but not retroactive to Jan. 1.

"We believe the eventual affirmation of ACA's contract
will call for a margin of 10% to 11% versus
its current estimated margin of 12.5 percent to 13
percent, Parker said in a research note.
"However, if United does not reaffirm ACA's contract
and ACA operates the full 2003 year at
2002 rates, we believe its 2003 EPS would be in the
range of $0.80 to $1.00."

Parker believes United will affirm the contract by the
end of the first quarter. While the outcome
may produce lower profit margins, he believes Atlantic
Coast's valuation would rise due to a more
certain earnings path. Moreover, he says it is likely
United will contract with Atlantic Coast for
incremental and larger RJs, probably 70-seaters, that
are in addition to those currently under
contract. "United needs more RJs and ACA, SkyWest and
Air Wisconsin do not appear to be
able/inclined to finance additional RJs for United
without the affirmation of their contracts," he said.

Parker reasons that the demand for RJs far exceeds the
supply and United and other major airlines
in Chapter 11 bankruptcy should have a greater need
and ability to increase their feeder airlines' RJ
fleets. His price target of $19 remains intact because
he believes Atlantic Coast's price-to-earnings
should rise to 13x to 15x based on 2004 EPS of $1.36.
This assumes that the contract will be
reaffirmed by the end of the first quarter.

While several analysts are still sweet on Atlantic
Coast, Standard & Poor's put the carrier's
Equipment Trust Certificates and Enhanced Equipment
Trust Certificates on "credit watch"
with negative implications.

Without an affirmation of its United Express contract,
Atlantic Coast could have problems financing
and implementing its RJ growth plans for 2003. But
Michael Linenberg of Merrill Lynch thinks this
uncertainty already is discounted in the carrier's
share price. On Feb. 3, his 2003 EPS forecast was
$1.25, and he introduced a 2004 EPS of $1.45.

In a note to investors two days later, he cautioned
that Atlantic Coast could see further downward
pressure to 2003 EPS. He also said the stock market is
not willing to ascribe more than a nominal
value to a regional franchise such as Atlantic
Coast's. "The market appears to be solely focused on
the risks, believing there is no world beyond United
or any other major code share partner, for that
matter," he said. But he was still optimistic about
growth opportunities at Atlantic Coast.

While talks continue with United, if Atlantic Coast
continues to be paid at 2002 rates, its margin
could see some pressure, Linenberg acknowledged. As
Atlantic Coast's RJ operation matures, the
carrier is likely to see "natural" increases in costs.
Usually, these are addressed each year during the
annual rate-setting process. Without a rate agreement
in place for 2003, Atlantic Coast would likely
be forced to book its revenue using 2002 assumptions.

Linenberg emphasized that Atlantic Coast offers
capacity that is the right size at the right price.
"Given the decrease in demand in many markets, it only
makes sense to continue servicing those
markets with smaller aircraft, like the 50-seat CRJs,"
he said in an analysis. "UAL itself cannot offer
this service at the cost structure that ACA can.
Hence, it does not make sense for UAL to "impair"
their profit-generating (that is, for UAL) partner."

Moreover, US Airways recently received court
approval to expand its relationship with Mesa
Airlines [MESA], one of its regional partners.
Linenberg says this shows that regional carries are
"part of the solution" to ailing carriers.

Jim Higgins of Credit Suisse First Boston said he does
not have enough information to make
adjustments to determine Atlantic Coast's quarterly
operating margin. But he is estimating 10.8
percent. He noted that Atlantic Coast's cost-plus
contracts set a cost 'budget' each year. The
mainline carrier covers these contracted costs and
provides a target margin of 12-14 percent. If
Atlantic Coast is able to reduce costs from the
contractually agreed rate, it earns incremental
profit.
Conversely, operating over budget normally translates
into a smaller margin. Given the financial
distress of its mainline partners, Higgins believes
the cost budget is tightening each year, making it
more difficult for Atlantic Coast to earn higher
operating margins.
Standard & Poor's put the Equipment Trust Certificates
and Enhanced Equipment Trust
Certificates of Atlantic Coast Airlines [ACAI] on
"credit watch" with negative implications on
Jan. 31. Part of an industry-wide review of
aircraft-backed obligations, S&P is focusing on
collateral protection for bondholders. Its review does
not relate to the regional carrier's overall
credit profile.

S&P acknowledged that Atlantic Coast's earnings and
cash flow have held up fairly well in the
current weak airline environment. But it said any
"material adverse actions" taken by either of its
partners -- United Airlines [UAL] and Delta Air Lines
[DAL] - could cause a ratings
downgrade.

United and Delta have reduced capacity in their
main-line operations after the events of Sept. 11.
Some of this capacity has been replaced through their
feeder partners. As a result, Atlantic Coast's
operations have continued to grow when the overall
industry is taking a beating. In addition, Atlantic
Coast, with its hub located at Dulles Airport outside
Washington, D.C., has benefited from
reduced flying levels at Washington's Ronald Reagan
National Airport, as well as the reduction
of service from some competitors, such as US Airways
.

But S&P says that because of United's Chapter 11
bankruptcy filing, Atlantic Coast's growth
prospects are less certain. Atlantic Coast's
operations at Dulles could be affected by United's
potential flight reductions at that airport. It is
possible, of course, that United could transfer more
of
its short-haul operations to Atlantic Coast at other
airports it serves. But United also could seek to
revise the terms of the fee-per-departure agreements,
which could result in lower margins for
Atlantic Coast. In the meantime, S&P says, Atlantic
Coast is expected to continue its growth for
Delta.

Atlantic Coast's earnings and cash flow have benefited
from its increased level of flying. Since 2001,
the company has been one of the few airlines in the
industry to achieve profitability. S&P
acknowledges that Atlantic Coast's financial profile
has remained relatively stable. Atlantic Coast
relies on internally generated cash to meet liquidity
requirements. Standard & Poor's expects that
cash and equipment financings will be sufficient to
meet capital spending needs. The company has
moderate debt maturities of $5 million-$6 million a
year through 2005.

 

[46Driver]

Just to make things more interesting: ACA just spent $1 million buying back the AC JET operating certificate from Delta (we now fly as ACA for Delta). What this means has the rumor mill working overtime....

 

[RJPilott]

Thanks for the info. I'm buying. Ziggy1

Im waiting till Feb 27th. Maximize the profit.