Frontier Secures Buyer for 4 Airbus Aircraft

[Bavarian Chef]

I thought the Germans gave them a cash infussion of around $300mm+. I believe Lufthansa invested something like 19% in an equity investment in the form of cash. I'm not absolutely sure about the terms and conditions though.

They did. That happened after the last qtr reported.

 

[CitationUltra]

Jet Blue has capital BUT also getting hit with high fuel.
quote]
Wow. Had to reread that to see if I was missing something. So, jetBlue has capital but because they are paying high fuel prices they will be in line for "the next bankruptcy and liquidation"? BTW, in relative comparison, F9 is on par with most other airlines in terms of cash and ratios, and jetBlue is even better on that basis.

High fuel is hurting all airlines including SWA. SWA has the cash to offset fuel by playing the futures game in terms of fuel hedging, but they have not been making money in the business of flying passengers for quite some time. In any case fuel is not hurting Frontier or jetBlue worse than any of the others. Or if you would like it stated differently, fuel IS hurting all airlines equally.

Keep in mind that the airlines that have ceased operations in the past few days have had as little as single digit $mm unristricted cash at the time. Both the airlines that you predict to be next have hundreds of millions in unrestricted cash and equity at this time.

Well, for one, Frontier certainly does not have "hundreds of millions" in unrestricted cash. They had approximately $170m at the end of the last quarterly report; undoubtedly less by now.

 

[StaySeated]

A recent analysis of F9's cash position was not as positive as you mentioned. The term "highly leveraged" was used. Also, this was in today's WSJ. I italicized the part that should concern all of us deeply.

Cash Cushion Helps Big Airlines, for Now
By JOSHUA FREED

A slowing economy and high fuel prices appear to have killed off tiny ATA Airlines, Aloha Airlines, and Champion Air. A big pile of cash will keep the big airlines from that same fate, for now.

It's not that the big carriers aren't buffeted by the same forces that shut down ATA on Thursday and Aloha on Tuesday. Champion Air, a Minnesota-based charter airline, will stop flying by May 31.

But the nation's biggest airlines have hoarded some $19 billion in cash as of the end of 2007, according to a tally by Calyon Securities analyst Ray Neidl. Even if fuel stays at today's levels and revenue drops 2 percent, they would still have $14.7 billion in cash at the end of 2009, under Neidl's estimate.

That's less cash than the 10 percent of revenue they like to keep, but enough to hold off a crisis, analysts say. The only carrier in Neidl's analysis with less than 5 percent of revenue in cash at the end of 2009 would be Frontier Airlines, which would have just $4 million by then.

He believes the older hub-and-spoke airlines "and most of the low-cost carriers will survive the weak economic environment and high fuel prices over the next two years, though with not much room to spare," he wrote in a note on Saturday.

"They are fairly well-situated, but it's important to remember that a lot of their cash needs have changed now," said Moody's Investors Service analyst George Godlin. "Their fuel costs have gone up dramatically. And the cost of putting in place fuel hedging contracts has also gone up exponentially."

Size-wise, the major carriers are in an entirely different league than the small airlines that failed this week. The largest one, ATA, employs one-sixteenth as many people as US Airways Group. So the smaller airlines failed after losing key customers (ATA and Champion) or because of intense price competition in a single market (Aloha). The larger carriers are big enough to ride out that kind of turbulence.

Not that they aren't nervous. On Thursday Northwest said it would stop hiring new pilots and fly 5 percent less than planned this fall because of high fuel prices. The carrier pointed out that its $3 billion in cash works out to 24 percent of its 2007 revenue. "We are pro-actively making those decisions now to maximize our liquidity position," President and Chief Executive Doug Steenland said in a written statement.

Northwest also said it would remove an additional 15 to 20 planes from service this year, including about 10 DC-9s. Those aging aircraft are financially easier cheaper to park because they're paid for.

Aviation consultant Michael Boyd said larger airlines such as Northwest and United can weather high fuel prices better because more of their fleet is already paid for.

"From that perspective, what happened with ATA is not a harbinger of things to come in the rest of the industry," he said. "Most big carriers have parts of their fleet they can park very cheaply."

Airline consultant Robert Mann said the collapse of ATA shows it's becoming harder than ever for carriers to secure adequate financing, even from nontraditional sources such as hedge funds.

"You really see that the airlines have the cash on their balance sheets, and that's it," he said. "When they're out of that, there may be no replacing it."

 

[CitationUltra]

A recent analysis of F9's cash position was not as positive as you mentioned. The term "highly leveraged" was used. Also, this was in today's WSJ. I italicized the part that should concern all of us deeply.

Cash Cushion Helps Big Airlines, for Now
By JOSHUA FREED

A slowing economy and high fuel prices appear to have killed off tiny ATA Airlines, Aloha Airlines, and Champion Air. A big pile of cash will keep the big airlines from that same fate, for now.

It's not that the big carriers aren't buffeted by the same forces that shut down ATA on Thursday and Aloha on Tuesday. Champion Air, a Minnesota-based charter airline, will stop flying by May 31.

But the nation's biggest airlines have hoarded some $19 billion in cash as of the end of 2007, according to a tally by Calyon Securities analyst Ray Neidl. Even if fuel stays at today's levels and revenue drops 2 percent, they would still have $14.7 billion in cash at the end of 2009, under Neidl's estimate.

That's less cash than the 10 percent of revenue they like to keep, but enough to hold off a crisis, analysts say. The only carrier in Neidl's analysis with less than 5 percent of revenue in cash at the end of 2009 would be Frontier Airlines, which would have just $4 million by then.

He believes the older hub-and-spoke airlines "and most of the low-cost carriers will survive the weak economic environment and high fuel prices over the next two years, though with not much room to spare," he wrote in a note on Saturday.

"They are fairly well-situated, but it's important to remember that a lot of their cash needs have changed now," said Moody's Investors Service analyst George Godlin. "Their fuel costs have gone up dramatically. And the cost of putting in place fuel hedging contracts has also gone up exponentially."

Size-wise, the major carriers are in an entirely different league than the small airlines that failed this week. The largest one, ATA, employs one-sixteenth as many people as US Airways Group. So the smaller airlines failed after losing key customers (ATA and Champion) or because of intense price competition in a single market (Aloha). The larger carriers are big enough to ride out that kind of turbulence.

Not that they aren't nervous. On Thursday Northwest said it would stop hiring new pilots and fly 5 percent less than planned this fall because of high fuel prices. The carrier pointed out that its $3 billion in cash works out to 24 percent of its 2007 revenue. "We are pro-actively making those decisions now to maximize our liquidity position," President and Chief Executive Doug Steenland said in a written statement.

Northwest also said it would remove an additional 15 to 20 planes from service this year, including about 10 DC-9s. Those aging aircraft are financially easier cheaper to park because they're paid for.

Aviation consultant Michael Boyd said larger airlines such as Northwest and United can weather high fuel prices better because more of their fleet is already paid for.

"From that perspective, what happened with ATA is not a harbinger of things to come in the rest of the industry," he said. "Most big carriers have parts of their fleet they can park very cheaply."

Airline consultant Robert Mann said the collapse of ATA shows it's becoming harder than ever for carriers to secure adequate financing, even from nontraditional sources such as hedge funds.

"You really see that the airlines have the cash on their balance sheets, and that's it," he said. "When they're out of that, there may be no replacing it."

Thanks for the overview. This is more recent information than what I was referring to, which was Frontier's stated cash position as of the end of their last quarter.

As you know, $4m would not stretch far in this business.

 

[USMC319]

Well, for one, Frontier certainly does not have "hundreds of millions" in unrestricted cash. They had approximately $170m at the end of the last quarterly report; undoubtedly less by now.

OK brain surgeon, now go back and read what I wrote. They have an estimated $200 million in equity. That is why I stated cash and EQUITY. Go bash somewhere else.

 

[CitationUltra]

OK brain surgeon, now go back and read what I wrote. They have an estimated $200 million in equity. That is why I stated cash and EQUITY. Go bash somewhere else.

Equity?

They're selling off assets to produce short-term operating cash. In the end, when they've burned up the little cash they have and converted all the "equity" they have effectively liquidated.

Clearly, you have a grade-school understanding of airline economics.

 

[USMC319]

Clearly, you have a grade-school understanding of airline economics.

Nice try old man. I operate a couple of businesses quite successfully. This airline gig is for fun and easy money. But I got a belly laugh out of a Citation pilot lecturing me on fundamentals of business when clearly you only have a cursory understanding of it. Hahaha. I better get my accountant on the phone and tell him to take all the equity off my balance sheets because according to you it has no value and can not be considered an asset.

 

[CitationUltra]

Nice try old man. I operate a couple of businesses quite successfully. This airline gig is for fun and easy money. But I got a belly laugh out of a Citation pilot lecturing me on fundamentals of business when clearly you only have a cursory understanding of it. Hahaha. I better get my accountant on the phone and tell him to take all the equity off my balance sheets because according to you it has no value and can not be considered an asset.

So you have an accountant. My, that is impressive. You must be very wealthy to employ an accountant. Yes, if I were you, I would get him on the phone right away, if that makes your day.

Keep deluding yourself and enjoy your "fun and easy money" from your airline "gig" if in fact you have one. Troglodyte.

 

[USMC319]

So you have an accountant. My, that is impressive. You must be very wealthy to employ an accountant. Yes, if I were you, I would get him on the phone right away, if that makes your day.

Keep deluding yourself and enjoy your "fun and easy money" from your airline "gig" if in fact you have one. Troglodyte.

Hahaha. I digress. So, I pose the question to you once more; Horizon or Lynx?

 

[CitationUltra]

Hahaha. I digress. So, I pose the question to you once more; Horizon or Lynx?

Run along to your Amway meeting.