Frontier goes Chap 11...

[Andy]

my wild guess would be boeing, airbus or an engine manugacturer. They both have some old planes and will need huge orders for new ones soon.

I guess you missed what happened with GE's earnings this morning? Boeing and Airbus are also going to have troubles moving forward.

 

[learflyer]

This is worse than after 9/11. no?

 

[ackattacker]

This is worse than after 9/11. no?

I think that's a bit premature. It's not that bad... yet.

Post 9/11 almost all the majors went into BK and many thousands were furloughed. We're not there. Yes there's been lots of bad news but so far it's just relatively small players. That's little consolation for those out of a job, but still, I think there's a good chance that we will pull through this without industry wide furloughs and bankruptcies.

edit:

I meant to also mention that I think the airlines have wised up and are preparing to pass the cost of fuel onto the customer, which they failed to do post 9/11. They were too cocky and everyone felt they had enough cash to still undercut their competitors. This time all the major's are making modest cuts to domestic capacity ahead of time. This is a smart move IMHO. They know they need to drive prices up.

 

[Andy]

This is worse than after 9/11. no?

By a longshot. About a year ago, I thought that we were looking at the worst recession since the Great Depression. I didn't bother posting it here because of the ridicule that you're subjected to by making such a statement.
Last fall, I revised that downward. I think that we're looking at worse times than the Great Depression due to the huge problems in the credit markets. I might've posted that here in the last month; pretty sure that I took a few shots for that statement.

You haven't seen bad yet. After this spring, I expect the housing market to collapse. That's going to trigger a lot of waterfall financial events throughout the world.
If you watch the talking heads on TV, they're going to paint a much brighter picture because it's in their best interest to do so. However, they keep revising every estimate downward.

Failure to plan is planning to fail.

 

[Lear70]

Yeah, you took a few potshots... But gave a few back yourself.

Seriously, Andy may be a little alarmist, but it's going to be bad. Maybe not "Great Depression" bad but not that far off it, IMHO.

This is just the tip of the iceberg. Heard of all the bills being passed around the House and Senate to try to "fix" the housing market? That's because they know the bottom isn't here yet and are trying to shore up the housing market.

It will help a lot of people who are in danger of defaulting on their homes but are otherwise OK for credit by basically letting them refinance their ARM into a fixed-rate FHA loan at 5% or so. That will help, but won't fix the problem for people who are having income problems (low-paying jobs or no jobs with rising fuel, energy, and food costs).

The tax credits for people buying homes they plan to live in is great, but it's not anything NEAR an incentive to buy and won't stimulate the market at all. Those who plan on (and are capable) of buying a new home were going to anyway, regardless of tax cuts. I don't mind, every little bit helps on a personal level, but it will fail miserably as a "stimulus package" (like just about everything else Bush has tried).

I expect the aviation market to get a lot worse as well. Wait until DAL and NWA start consolidating operations... why do you think they'll keep 6 RJ feeders who operate a LOT of money-losing 50-seaters? I'm betting another 2,000+ on the street by the end of the year from furloughs at regionals that may even shut down (maybe even Mesa) plus some furloughs at places like Midwest and Spirit (word on the street is that Spirit is cash-only in some of the cities they serve - not a good sign).

Who knows... airTran is OK for cash but, to preserve that spot, may sell some of their 717's that are coming up on heavy checks which will trigger some furloughs (hopefully enough voluntary to go back on Mil duty to keep from kicking too many people to the curb).

Andy and I may disagree from time to time, but I think he's closer to the truth on this one than most here on FI want to believe.

Plan accordingly. Better safe than sorry.

Best of luck to the fine folks at Frontier. Been on you guys several times, always a class act!

 

[learflyer]

agreed. The first indicator is the housing market.....should've come back by now. Especially in a "transient" state like Florida. Scary stuff.

 

[PCL_128]

I guess you missed what happened with GE's earnings this morning? Boeing and Airbus are also going to have troubles moving forward.

GE has $16 billion in cash and BA has $10 billion. If they think their entire domestic market for aircraft and engines is collapsing, I think you'll see them use a significant portion of their cash to help bail out some key airlines.

 

[Tanker Clown]

Didn't GE do a lot of the "bailing out" last time all the majors went through Ch 11? BTW, GE missed earnings by $.07 a share today. They say around $.05 of that was their credit operation. With their credit operation already under pressure, would you lend money to an airline. Talk about a sub prime borrower...

 

[Lear70]

GE has $16 billion in cash and BA has $10 billion. If they think their entire domestic market for aircraft and engines is collapsing, I think you'll see them use a significant portion of their cash to help bail out some key airlines.

"key" airlines being the defining term.

I don't think Frontier qualifies. All they've had on order as far as I know is Q-400's, and Bombardier is doing OK, but may not be interested in investing a lot of capital, not to mention is restricted by foreign ownership limits (for now).

Frontier isn't exactly a "booming" mecca of aircraft purchases. My bet is G.E. Cap et al. will wait to use their money to shore up Legacy carriers such as AA who I believe will file Ch. 11 and reorganize, using the losses from the recent FAA checks as an excuse to shed some debt.

Tanker, companies such as G.E. Cap don't really have a choice but to bail out their customers. If they don't bail them out, the airlines default on Billions of debt and you lose any future money you will make as well.

It's a lose-lose position, they just have to pick the lesser of two evils.

 

[Charlie Brown]

It would be a real shame to see a large chunk of the Denver market go to SWA.

Yeah what a bunch of bastards for having a solid business plan.

I wish the folks at F9 the best.