Welcome to Flightinfo.com
- Register now and join the discussion
- Friendliest aviation Ccmmunity on the web
- Modern site for PC's, Phones, Tablets - no 3rd party apps required
- Ask questions, help others, promote aviation
- Share the passion for aviation
- Invite everyone to Flightinfo.com and let's have fun
Following airlines will cease operations soon...
- Thread starter SFR
- Start date
- Watchers 32
Welcome to Flightinfo.com
- Register now and join the discussion
- Modern secure site, no 3rd party apps required
- Invite your friends
- Share the passion of aviation
- Friendliest aviation community on the web
whatitdoing?
Are you awake? Good
- Joined
- Feb 18, 2006
- Posts
- 795
Jeff Helgeson
Well-known member
- Joined
- Sep 17, 2002
- Posts
- 1,046
Qualify your comments....
.....below is a better thought out list. Allegiant is not on that list and is making money with those gas drinking MD80s. The article even states that Spirit might be better off if they still had their MD80s instead of the Airbus and a payment schedule to service.
An excerpt from the PlaneBusiness Banter - 04/04/08
The Titanic Watch Gets Really Busy
Editor's Note: I was going to re-edit this, given the events of Friday night, but hey, after re-reading it, I figured it was better to leave things as they were.
This industry now finds itself in one sad state of affairs. And hey, listening to Lehman Brothers' analyst Gary Chase didn't help my mood much last week out in Phoenix as he made the statement that "With [the effect of] fuel, it's like this is three recessions at once," he said. "And then, we also have a recession."
Great.
Needless to say, between the time I first mapped out our revival of our "Titanic Watch" two weeks ago and this week, some of the airlines on the list couldn't wait. They just went ahead and hit the ocean floor with a sickening thud.
There's really no secret in trying to figure out what is important in this current environment. As we have written here before -- it's cash. But right behind cash is an airline's fuel burn, and/or the airline's aircraft ownership costs.
This point was made clear a few weeks ago when Merrill Lynch analyst Mike Linenberg put together his chart showing just which two airlines would still be profitable with oil at $110 a barrel. That odd couple? Southwest Airlines and Allegiant. Yes, Allegiant. The airline that flies those gas guzzling MD-80s.
Why? Because right now Southwest has the drop-dead fuel hedges and Allegiant has the low aircraft ownership costs. Or to put it another way, if you don't pay much for an airplane, you can run through a lot of fuel before you get up to the same ownership costs of a brand spanking new Boeing 737.
As Gary Chase also pointed out last week (and we talk more about in our column this week), if you have older aircraft, it's much easier to manipulate your capacity because you can park them. You can cut utilization. It's not like you're parking new expensive metal. So as the cost of fuel goes up you can pull back on capacity fairly easily.
But if you have a lot of nice new "fuel efficient" aircraft -- you have to keep flying the hell out of them to cover your costs of ownership. And well, that then causes you to burn more fuel, and here we go.
I thought about this when I read a long story in MarketWatch Friday in which the traditional argument was made that the airlines that have higher maintenance costs, older aircraft, and higher fuel costs were the ones that had potentially the biggest problem -- in a high fuel environment. But as Gary reminded me last week, the other side of that argument, obviously, is how much is the airline paying for the airplane?
So before another list member decides to leave us, it's time to unveil the PlaneBusiness Titantic Watch. Note: List members are not necessarily listed in the order in which they could find themselves having to ask for third party support, i.e., bankruptcy.
As was the case in the past, by placing an airline on this list, we are saying that financially, the airline has issues that put the continued operation of the airline at risk.
Skybus
If reports we hear can be believed, Skybus is probably looking at a shutdown at any minute. We began to hear more chatter towards the end of this week that problems here were either going to result in a substantial pull-down, or a complete closure.
After the airline's CEO left last week, supposedly going back to his book writing, this week the airline's vice president of operations, Bud Sittig, left the building.
Never a good sign. But then again, this one has had ominous signs all over it since it opened the doors.
As our guest columnist pointed out in a recent column here in PBB, Skybus not only has problems with its pricing and route strategy, the airline was probably doomed from the start because of its decision to base itself in Columbus. We said when the airline first announced it was going to fly that it made much more sense for the airline to base itself in a much larger market. I still think if an airline of this type set up shop at DFW International, for instance, that it could cause some serious havoc.
But no -- because part of the money behind the airline was based in Columbus, that is where it was headquartered and that is a big, big, stumbling block to have to overcome.
We don't see the airline lasting much longer.
Sun Country
The airline has already furloughed nearly 30% of its pilots -- saying that they are going to bring them back in the fall. The airline also announced this week that it is going to cut unprofitable routes, and sublease two of its aircraft over the summer. Over the summer? So then you are going to bring them back in the slowest time of the year?
Nope. This one is definitely listing.
Virgin America
The question here is this: What is distinctive enough about this airline's business plan that it can extract more money from potential investors to keep it afloat?
Clearly, if this airline was named "No-Name Airlines" the writing would already be on the bankruptcy papers.
But because it has "Virgin" in its name, you have to believe that the powers that be of the Virgin Group are going to do whatever it takes to put more resources into the product.
But that doesn't take away from the fact the airline has to be losing money at a tremendous rate. We already talked here about how the airline is trying to keep its DOT financial information from being released. There's only one reason for this attempt -- the numbers are bad.
In addition, the anecdotal information that many of us continue to receive in regard to the airline's loads continues to affirm that the airline is posting very marginal load factors.
Add to that the cost of "new metal" as we were just discussing, and low margin trans-con flying, on top of record fuel costs, and the numbers have to be rather hard to swallow.
So my bet on this one is this. The only thing that will keep this one flying longer than it should is the ego power attached to the brand name. How valuable that is, in terms of the ability to find more investors to chip in to the cause, will be the factor that determines the airline's eventual longevity.
Frontier Airlines
New metal, low cash levels.
I think that sums it up in a nutshell.
We already see the airline pulling back on aircraft, we've now seen them start to cancel more mainline flying -- but at the same time they are trying to launch a new regional subsidiary.
Frontier does have the benefit of the first quarter. Remember that unlike much of the industry, the first quarter is usually the strongest for the airline because of ski bunny season. And this year the ski resorts in Colorado had a great year.
So the airline will get some breathing room as a result of that. But not much.
AirTran
The biggest advantage that AirTran has is its inherent low costs. The biggest disadvantage? It, like Frontier, has been push, push, push, on the growth side. And it is also sitting on a lot of new metal. In addition, AirTran is not sitting on that much cash. The airline said it had $318 million in cash at the end of 2007. In this environment, that is not enough.
Remember -- JetBlue is now sitting on about $1 billion in cash by comparison.
So how does the airline, which has been pushing double-digit levels of growth for the last year, manage this with record-high fuel costs?
I'm not really sure. I think 2008 is going to be a major transition year. An advantage for the airline is that it usually posts its best numbers in the second quarter. But its low cash position and limited opportunities for leverage concern me.
Spirit Airlines
With fuel where it is, can Spirit continue their goofy 99 cent sales? I'm not so sure. The one thing the airline has done is push to a low, low fare ala carte pricing model. They've had this in place for sometime.
But again, we're looking at an airline with nice, shiny "fuel-efficient" airplanes and no fuel hedges in place. (Wonder if they now wish they had some of their old MD-80s back on the property?)
In addition, you have to believe that JetBlue, as well as others, are going to continue to mine the Caribbean for new profitable route opportunities.
I'd be concerned that the Spirit business model will not hold up -- if fuel prices continue at present levels.
Mesa Air Group
Okay, I assure you I have my bifurcated hat on here.
Given the news this week that Delta Air Lines is going to cancel its contract for approximately 19% of Mesa's current fleet, and the fact that those aircraft are going to be hard to re-place; given that the airline seems intractable on its money-losing Hawaiian escapade; and given the airline's financial results during 2007--for these reasons alone Mesa merits inclusion on the list.
But there are other issues.
The biggest of which is the fact the airline has an approximately $37 million convertible note payment coming due in June. The airline now has a market cap of about the same amount. In the last earnings call, CEO Jonathan Ornstein talked about how the airline would probably 'go to the markets' in an attempt to raise more cash.
With the stock below $2 a share and no major regional contracts out there to replace what Delta is pulling out -- you have to believe that 'going to the markets' at this point in time is going to be a) very expensive and/or b) not possible.
.....below is a better thought out list. Allegiant is not on that list and is making money with those gas drinking MD80s. The article even states that Spirit might be better off if they still had their MD80s instead of the Airbus and a payment schedule to service.
An excerpt from the PlaneBusiness Banter - 04/04/08
The Titanic Watch Gets Really Busy
Editor's Note: I was going to re-edit this, given the events of Friday night, but hey, after re-reading it, I figured it was better to leave things as they were.
This industry now finds itself in one sad state of affairs. And hey, listening to Lehman Brothers' analyst Gary Chase didn't help my mood much last week out in Phoenix as he made the statement that "With [the effect of] fuel, it's like this is three recessions at once," he said. "And then, we also have a recession."
Great.
Needless to say, between the time I first mapped out our revival of our "Titanic Watch" two weeks ago and this week, some of the airlines on the list couldn't wait. They just went ahead and hit the ocean floor with a sickening thud.
There's really no secret in trying to figure out what is important in this current environment. As we have written here before -- it's cash. But right behind cash is an airline's fuel burn, and/or the airline's aircraft ownership costs.
This point was made clear a few weeks ago when Merrill Lynch analyst Mike Linenberg put together his chart showing just which two airlines would still be profitable with oil at $110 a barrel. That odd couple? Southwest Airlines and Allegiant. Yes, Allegiant. The airline that flies those gas guzzling MD-80s.
Why? Because right now Southwest has the drop-dead fuel hedges and Allegiant has the low aircraft ownership costs. Or to put it another way, if you don't pay much for an airplane, you can run through a lot of fuel before you get up to the same ownership costs of a brand spanking new Boeing 737.
As Gary Chase also pointed out last week (and we talk more about in our column this week), if you have older aircraft, it's much easier to manipulate your capacity because you can park them. You can cut utilization. It's not like you're parking new expensive metal. So as the cost of fuel goes up you can pull back on capacity fairly easily.
But if you have a lot of nice new "fuel efficient" aircraft -- you have to keep flying the hell out of them to cover your costs of ownership. And well, that then causes you to burn more fuel, and here we go.
I thought about this when I read a long story in MarketWatch Friday in which the traditional argument was made that the airlines that have higher maintenance costs, older aircraft, and higher fuel costs were the ones that had potentially the biggest problem -- in a high fuel environment. But as Gary reminded me last week, the other side of that argument, obviously, is how much is the airline paying for the airplane?
So before another list member decides to leave us, it's time to unveil the PlaneBusiness Titantic Watch. Note: List members are not necessarily listed in the order in which they could find themselves having to ask for third party support, i.e., bankruptcy.
As was the case in the past, by placing an airline on this list, we are saying that financially, the airline has issues that put the continued operation of the airline at risk.
Skybus
If reports we hear can be believed, Skybus is probably looking at a shutdown at any minute. We began to hear more chatter towards the end of this week that problems here were either going to result in a substantial pull-down, or a complete closure.
After the airline's CEO left last week, supposedly going back to his book writing, this week the airline's vice president of operations, Bud Sittig, left the building.
Never a good sign. But then again, this one has had ominous signs all over it since it opened the doors.
As our guest columnist pointed out in a recent column here in PBB, Skybus not only has problems with its pricing and route strategy, the airline was probably doomed from the start because of its decision to base itself in Columbus. We said when the airline first announced it was going to fly that it made much more sense for the airline to base itself in a much larger market. I still think if an airline of this type set up shop at DFW International, for instance, that it could cause some serious havoc.
But no -- because part of the money behind the airline was based in Columbus, that is where it was headquartered and that is a big, big, stumbling block to have to overcome.
We don't see the airline lasting much longer.
Sun Country
The airline has already furloughed nearly 30% of its pilots -- saying that they are going to bring them back in the fall. The airline also announced this week that it is going to cut unprofitable routes, and sublease two of its aircraft over the summer. Over the summer? So then you are going to bring them back in the slowest time of the year?
Nope. This one is definitely listing.
Virgin America
The question here is this: What is distinctive enough about this airline's business plan that it can extract more money from potential investors to keep it afloat?
Clearly, if this airline was named "No-Name Airlines" the writing would already be on the bankruptcy papers.
But because it has "Virgin" in its name, you have to believe that the powers that be of the Virgin Group are going to do whatever it takes to put more resources into the product.
But that doesn't take away from the fact the airline has to be losing money at a tremendous rate. We already talked here about how the airline is trying to keep its DOT financial information from being released. There's only one reason for this attempt -- the numbers are bad.
In addition, the anecdotal information that many of us continue to receive in regard to the airline's loads continues to affirm that the airline is posting very marginal load factors.
Add to that the cost of "new metal" as we were just discussing, and low margin trans-con flying, on top of record fuel costs, and the numbers have to be rather hard to swallow.
So my bet on this one is this. The only thing that will keep this one flying longer than it should is the ego power attached to the brand name. How valuable that is, in terms of the ability to find more investors to chip in to the cause, will be the factor that determines the airline's eventual longevity.
Frontier Airlines
New metal, low cash levels.
I think that sums it up in a nutshell.
We already see the airline pulling back on aircraft, we've now seen them start to cancel more mainline flying -- but at the same time they are trying to launch a new regional subsidiary.
Frontier does have the benefit of the first quarter. Remember that unlike much of the industry, the first quarter is usually the strongest for the airline because of ski bunny season. And this year the ski resorts in Colorado had a great year.
So the airline will get some breathing room as a result of that. But not much.
AirTran
The biggest advantage that AirTran has is its inherent low costs. The biggest disadvantage? It, like Frontier, has been push, push, push, on the growth side. And it is also sitting on a lot of new metal. In addition, AirTran is not sitting on that much cash. The airline said it had $318 million in cash at the end of 2007. In this environment, that is not enough.
Remember -- JetBlue is now sitting on about $1 billion in cash by comparison.
So how does the airline, which has been pushing double-digit levels of growth for the last year, manage this with record-high fuel costs?
I'm not really sure. I think 2008 is going to be a major transition year. An advantage for the airline is that it usually posts its best numbers in the second quarter. But its low cash position and limited opportunities for leverage concern me.
Spirit Airlines
With fuel where it is, can Spirit continue their goofy 99 cent sales? I'm not so sure. The one thing the airline has done is push to a low, low fare ala carte pricing model. They've had this in place for sometime.
But again, we're looking at an airline with nice, shiny "fuel-efficient" airplanes and no fuel hedges in place. (Wonder if they now wish they had some of their old MD-80s back on the property?)
In addition, you have to believe that JetBlue, as well as others, are going to continue to mine the Caribbean for new profitable route opportunities.
I'd be concerned that the Spirit business model will not hold up -- if fuel prices continue at present levels.
Mesa Air Group
Okay, I assure you I have my bifurcated hat on here.
Given the news this week that Delta Air Lines is going to cancel its contract for approximately 19% of Mesa's current fleet, and the fact that those aircraft are going to be hard to re-place; given that the airline seems intractable on its money-losing Hawaiian escapade; and given the airline's financial results during 2007--for these reasons alone Mesa merits inclusion on the list.
But there are other issues.
The biggest of which is the fact the airline has an approximately $37 million convertible note payment coming due in June. The airline now has a market cap of about the same amount. In the last earnings call, CEO Jonathan Ornstein talked about how the airline would probably 'go to the markets' in an attempt to raise more cash.
With the stock below $2 a share and no major regional contracts out there to replace what Delta is pulling out -- you have to believe that 'going to the markets' at this point in time is going to be a) very expensive and/or b) not possible.
I think the numbers on AAI are a little misleading. I was told that AAI invested in a large CD (or something like that) at the tune of about 150 million. It is money that is basically in a savings account but its not reported as cash. In the middle of 2007 AAI had 400 million + cash, but yet now they have 318 million. Add the fact that AAI made 53 million last year and it just doesn't add up. At least thats what Ive been told. Lets hope there is some truth to that and that AAI is better off then the numbers make it seem...
Colonel Savage
Southern style...
- Joined
- Mar 11, 2008
- Posts
- 1,271
In that order...
What about the legacy carriers....
If DL and NW does not merge, both will be back in BK court by the end of the year...check my sources..I said this was coming in JAN!!
AA looking for BK, United will go to BK court, CAL may miss but will be at a disadvantage if alot of airlines go into BK protection.
No airline wants to be one of the last into BK, because there will be no money from investors. If you are going to BK you want to be one of the first in!!
There will be several come the next several months!
If DL and NW does not merge, both will be back in BK court by the end of the year...check my sources..I said this was coming in JAN!!
AA looking for BK, United will go to BK court, CAL may miss but will be at a disadvantage if alot of airlines go into BK protection.
No airline wants to be one of the last into BK, because there will be no money from investors. If you are going to BK you want to be one of the first in!!
There will be several come the next several months!
airlinepilot
Well-known member
- Joined
- Apr 19, 2002
- Posts
- 481
You caught what the above poster did Not. No airline want to go into BK; as the change in the BK laws make 'debtor in possession' much more difficult. Don't have the specifics, but know that the new law sets specific 'timetables/schedules' and further restricts a company's ability to re-organize.
And, with the credit crunch and the lack of 'investment capital' out there; put simply, unless it is a 'pre-packaged' BK with additional investment already arranaged, BK could very well mean, "liquidation."
For what its worth.
DA
brainhurts
Well-known member
- Joined
- Jan 21, 2006
- Posts
- 826
Superpilot92
LONGCALL KING
- Joined
- Nov 7, 2004
- Posts
- 3,719
Poahi
Well-known member
- Joined
- Nov 19, 2005
- Posts
- 3,766
Everyone seems to have their crystal ball, but I think it will ultimately come down to:
1. Cash reserves to weather the storm.
2. The abilty to pass along higher fares and remain competitive.
3. Cost structure. Old inefficient aircraft and lean routes are going to put pressure on the weaker carriers. Those competing with LUV are going to really feel the LUV this year.
1. Cash reserves to weather the storm.
2. The abilty to pass along higher fares and remain competitive.
3. Cost structure. Old inefficient aircraft and lean routes are going to put pressure on the weaker carriers. Those competing with LUV are going to really feel the LUV this year.
Share this page
Latest resources
-
-
-
-
-
AC 90-89C - Amateur-Built Aircraft and Ultralight Flight Testing HandbookAmateur-Built Aircraft and Ultralight Flight Testing Handbook
- Neal
- Updated:
