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the "L" word?

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JoeBoy26

JoeBoy26

Member
Joined
Mar 13, 2006
Posts
16
Over the weekend I listened to a person from the Transportation Research Board (trb.org) give a talk about the industry as a whole. They said that "unofficially" they expect one of the majors to liquidate within a year. Not talking about merging, consolidating, etc. They would not go into anymore specifics. I don't know how legit the person was and how/who/where they got their info from. Hearing them use the word liquidation was pretty chilling in all honesty :erm: Again, I just want to add this is NOTHING OFFICIAL! I don't know this individual personally so for all I know, it's just talk. Just wanted to see what some of the thoughts are?
 
"Caylon analyst Ray Neidl says U.S. airlines will lose over $1B in 2008 due to high fuel prices and fare cuts. Most, he says, can make it through the year, though he's worried about AirTran (AAI) and Frontier Airlines (FRNT). Delta Air Lines (DAL), Northwest Airlines (NWA) and Southwest Airlines (LUV) are in the best shape -- especially LUV because of its low leverage and fuel hedges."

"...AirTran's cash position will fall below 10% of revenue by year end"


Must be Airtran they are talking about.
 
BoilerUP said:
Folks were saying that about US Airways from 2001 through 2005...
Click to expand...
I remember delivering a package to an office at National Airport (DCA) in 1994. Outside the US Air crewroom was a company message saying "Contrary to rumors, we are NOT shutting down tomorrow - we have plenty of cash at the moment. Everyone is to report to work tomorrow."

Point is - US Air has been in trouble for a long, long time.
 
Clyde said:
"Caylon analyst Ray Neidl says U.S. airlines will lose over $1B in 2008 due to high fuel prices and fare cuts. Most, he says, can make it through the year, though he's worried about AirTran (AAI) and Frontier Airlines (FRNT). Delta Air Lines (DAL), Northwest Airlines (NWA) and Southwest Airlines (LUV) are in the best shape -- especially LUV because of its low leverage and fuel hedges."

"...AirTran's cash position will fall below 10% of revenue by year end"


Must be Airtran they are talking about.
Click to expand...
Most investment banks have actually been upgrading AAI's outlook over the past few weeks. I think we'll be fine.
 
High oil prices will eat out - er, eat through cash pretty fast...

Now this is a solid thread. Some legitimate information and opinion interspersed with solid comedy (my contribution excluded). I'm gonna enjoy it until someone gets his panties in a wad and the mud-flinging starts.
 
Guys, Please do not post links to adult/porn sites.

Thanks
 
Sorry Colonel, I just cant keep the link up here...
 
I think the days of fuel hedges are going to be gone shortly. The playing field will soon be level. It will be up to the smart business plan and market share. Screw the pax in cheap fares....Who needs to go to Hawaii for $300? Jack the fares or ride the bus!! As far as I'm concerned deregulation isn't gone.....How is it that all the majors can go Ch-11 and get a Govt bailout, but the one's that don't go BK and just hang on don't get the same benefits? As far as I'm concerned if they can't hack it just shut the doors and let it all wash out. What's the saying....? Laze e Fare (sp?) Oh well.....Kind of like playing the lottery.....You never know who's going to win.

Baja.
 
Going2Baja said:
...... As far as I'm concerned if they can't hack it just shut the doors and let it all wash out. What's the saying....? Laze e Fare (sp?) Oh well.....Kind of like playing the lottery.....You never know who's going to win.

Baja.
Click to expand...

It's LAISSEZ-FAIRE.....and I totally agree with your last post. Some airline dinosaurs need to die....the sad part is all those people connected to the sinking ship.
I think we'll see some things turn around in terms of ticket prices and airline mergers....it's just a matter of time until the lit fuse makes it's way to the bomb.
 
Colonel, I feel for you. That Longhorn guy, he's just EEEVVVIIIIIL... he even admits to it in his avatar. I mean, come on... porn is the cornerstone of the California lifestyle. ;)

Does Frontier qualify as a "Major"? Don't know where their sales have been the last few years, just that they've been struggling.

Funny when one rogue reporter throws that bomb on airTran the same day airTran is upgraded to "Outperform" by every major investment group and a new stock price target of $10 a share is updated.

Just goes to show, NO ONE knows what's going to happen, and very few of those who report the "news" know ANYTHING about our industry.

Take everything with a grain of salt and believe it when the airline files an 8k about it.
 
Lear70 said:
Colonel, I feel for you. That Longhorn guy, he's just EEEVVVIIIIIL... he even admits to it in his avatar. I mean, come on... porn is the cornerstone of the California lifestyle. ;)

Does Frontier qualify as a "Major"? Don't know where their sales have been the last few years, just that they've been struggling.

Funny when one rogue reporter throws that bomb on airTran the same day airTran is upgraded to "Outperform" by every major investment group and a new stock price target of $10 a share is updated.

Just goes to show, NO ONE knows what's going to happen, and very few of those who report the "news" know ANYTHING about our industry.

Take everything with a grain of salt and believe it when the airline files an 8k about it.
Click to expand...

Investment banks upgrade stocks because they want to sell the shares they and their clients own. They downgrade stocks when they and their clients want to buy. Always do the opposite of what they say, do what the do.....follow the money!
 
FWIW our management is of the opinion that (at least 3 weeks ago when asked) both JetBlue and Frontier are in big trouble.

Not looking for a flamewar, just the messenger.
 
RocketRob said:
FWIW our management is of the opinion that (at least 3 weeks ago when asked) both JetBlue and Frontier are in big trouble.

Not looking for a flamewar, just the messenger.
Click to expand...


I would add to that list: All airlines are in trouble.

The industry just can't seem to understand fuel and labor costs are fixed. You must charge what it costs to run the operation and not count on your employees to cover the bill in the end. Management just can't grasp this.
 
RocketRob said:
FWIW our management is of the opinion that (at least 3 weeks ago when asked) both JetBlue and Frontier are in big trouble.

Not looking for a flamewar, just the messenger.
Click to expand...

I always knew I would find out about JB's demise from an anonymous post from a pilot at an anonymous airline.
 
acbarney said:
Investment banks upgrade stocks because they want to sell the shares they and their clients own. They downgrade stocks when they and their clients want to buy. Always do the opposite of what they say, do what the do.....follow the money!
Click to expand...
That's quite the conspiracy theory! Never mind that it's blatantly illegal and even the soulless wall street goons aren't dumb enough to be that blatant.
 
Ten percent of revenue would be $250 million in cash remaining . . . doesn't sound very earth-shattering to me, considering it's twice what we had on hand 5 years ago.

Unless there is some sort of DOT requirement to have 10% of revenue in "restricted" cash, it would hardly appear newsworthy . . . .
 
WTF do these analysts know? They're parrots. They just repeat what their told.

1) IF, thus far a BIG IF, fare price hikes stick there will be no losses. Furthermore, it's just the beginning of the year. There is plenty of time left for more fare increases. You can't say "XYZ carrier will lose a billion" while fare increases are holding, which they presently are, that more than offset any fuel price hike.

2) If I had $100 for every analyst that predicted UAL, USAir and AWA would liquidate I'd be wealthy right now. What do they know? This is a dynamic, fluid situation. Things look gloomy now, by summer the outlook could change. It's way too early to predict the demise of any major carrier.


Aloha was an exception to the rule due to

A) mismanagement of cashflow (they should have filed months ago and simply cut back interisland 30-50% to give up market share rather than shut down).

B) Being a victim of too much dependability in their price-war ridden markets (meaning Mesa drove them out).

US mainland carriers business model is quite different from the interisland mkt.
 
Last edited:
I hope we all make it but here are some serious facts about the future

JBLU-profit margin is .05%, debt 2.94 for every dollar in the the bank.

FRNT-profit margin is -5%, debt 3.03 for every dollar in the bank.

It would not take much to tip the scales unfavorably in either case.
 
Bavarian Chef said:
I always knew I would find out about JB's demise from an anonymous post from a pilot at an anonymous airline.
Click to expand...

JBLU's not in immediate danger. They've got sufficient cash on hand.
One of the things that I've watched with JBLU over the years is that they've kept a large amount of their debt short term. That's to capture lower interest rates, not an uncommon corporate practice. This strategy doesn't work well in rising interest rate environments (not the current case) or if credit availability tightens (that IS a problem).
From looking at JBLU's last 10K, it looks like they're slowly shifting to longer term debt. I'd say that your CFO has been earning his pay.
JBLU looks like they could have a few cash issues, but not as bad as some other airlines.
 
Whymeworry, the big difference this time around is being able to find cash. Whether it be a loan, refinancing debt, sale/leaseback agreements, or even DIP financing, the capital markets have pretty much shut down.
In this environment, a 'relatively healthy' company can go from smooth operations one day to chap 7 the next.
 
whymeworry? said:
WTF do these analysts know?
Click to expand...

Yeah, 5 years ago, the Legacies were deader than Jimmy Hoffa and LCC's were going to rule the world.

So WE'RE overpaid and financial analysts are looked upon as gods. This country IS f#@ed up! :rolleyes: TC
 
Benhuntn said:
I hope we all make it but here are some serious facts about the future

JBLU-profit margin is .05%, debt 2.94 for every dollar in the the bank.

FRNT-profit margin is -5%, debt 3.03 for every dollar in the bank.

It would not take much to tip the scales unfavorably in either case.
Click to expand...

Thats life dude. How much debt do you have for every dollar in the bank. My guess it wouldn't be much better.
 

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