News for Friday, January 27, 2012

@...Republic Airways (NASDAQ: RJET - News) today announced that David Siegel will join the Company as CEO, President, and interim Chief Operating Officer of Frontier Airlines, a wholly owned subsidiary of Republic Airways Holdings, Inc. Siegel’s appointment is another step towards the goal of making Frontier Airlines a viable, strong and independent business. Siegel and the entire Frontier executive team will be based at Frontier’s headquarters in Denver, Colo. Siegel comes to Frontier with a wealth of relevant CEO experience. Siegel previously served as CEO of XOJET, gategroup, US Airways and Avis Budget, in addition to other key leadership roles in the airline industry. Siegel served as lead independent director on the Republic Airways (RAH) Board of Directors and will give up that role, but will remain on the board in this new position. “Dave is an incredible talent with the skills to lead Frontier during its separation process from Republic and continue its transformation into a profitable ultra-low-cost-carrier,” said Bryan Bedford, Chairman, President and CEO of Republic Airways Holdings, Inc. “We believe that Dave’s combination of travel industry and restructuring experience makes him uniquely well suited for the task at hand. Placing Frontier in Dave’s capable care affords me the opportunity to fully focus my time and energy on the regional airline segment of our business.” Republic also announced the addition of new senior officers for Frontier’s finance and commercial team, among other changes in the executive leadership team. Robert Ashcroft has joined Frontier as Senior Vice President, Finance. Ashcroft will work closely with Siegel and Bedford in the project of moving Frontier towards independence, as well as defining opportunities to ensure profitable growth for the Company. Ashcroft has an unusually diverse background encompassing finance, planning and IT. Most recently he was at Allegiant Travel Company overseeing network and capacity planning, scheduling, pricing and investor relations. Daniel Shurz has been promoted to the role of Senior Vice President, Commercial for Frontier and will have responsibility for all commercial activities, including network planning, pricing and revenue management, marketing, product and brand definition. Daniel joined Frontier as Vice President of Strategy and Planning in 2009. Greg Aretakis is assuming an expanded role as Vice President of Network and Revenue Management, adding responsibility for scheduling and planning, sales and distribution to his current portfolio. Greg previously served as the Company’s Vice President of Revenue Production. Dan Krause has been promoted to Vice President of Marketing and Customer Experience for Frontier. Dan has been with Frontier since 2004 and most recently served as Senior Director, Commercial Strategy and Customer Experience.

@...JetBlue Airways posted stronger-than-expected quarterly earnings and increased revenue, underscoring an industry recovery aided by higher fares and restrained capacity. JetBlue's quarterly net income rose to USD$23 million, from USD$8 million a year ago. The airline's revenue climbed 22 percent to USD$1.14 billion. The carrier said they benefited from higher fares during the fourth quarter. The profits, reported on Thursday, follow those in recent days by United Continental, Delta Air Lines, US Airways and Southwest Airlines. Major carriers say travel demand has held up well in recent months despite concerns that economic weakness could be a drag. "The big issue for the industry in general is we seem to be having an acceleration of bookings in the first quarter," said Helane Becker, an analyst with Dahlman Rose, also noting a relatively mild winter with few major disruptions. "I think we're definitely going to have a pretty good first half of 2012," Becker said. The industry is in recovery mode after a decade-long downturn that saw several major airlines fall into bankruptcy. But capacity cuts and mergers have helped to trim costs and drive up ticket prices, giving the embattled companies a much-needed toehold on stability. Despite the renewed industry stability, airlines face high fuel costs and economic troubles that could still disrupt the industry recovery, given their potential ripple effects on travel demand from businesses and consumers.

@...United Continental posted stronger-than-expected fourth quarter earnings and increased revenue, underscoring an industry-wide recovery. Net loss narrowed to USD$138 million, from USD$325 million a year earlier. Revenue rose to USD$8.9 billion from USD$8.5 billion. United Continental said it had paid USD$3.1 billion for fuel in the quarter, up 26.3 percent from a year earlier. It ended the quarter with USD$8.3 billion in unrestricted cash, cash equivalents and short-term investments and undrawn lines of credit. United said they benefited from higher fares during the quarter. For United Continental, the results speak well of the company's post-merger performance, Maxim Group analyst Ray Neidl wrote in a research note. "Our take is that the quarter was good and the merger results continue to pay off," Neidl said. "We believe there is much further upside potential from the merger. However, short-term challenges remain with integration, especially the combination of unions." Despite the renewed industry stability, airlines face high fuel costs and economic troubles that could still disrupt the industry recovery, given their potential ripple effects on travel demand from businesses and consumers. The profits, reported on Thursday, follow those in recent days by Delta Air Lines, US Airways and Southwest Airlines. Major carriers say travel demand has held up well in recent months despite concerns that economic weakness could be a drag. United Continental was formed in 2010 from the merger of former United parent UAL and Continental Airlines. United and Continental are still integrating their operations and unionised labour groups.

@...German services union Verdi said on Thursday that Lufthansa agreed to raise the wages of about 33,000 workers represented by the union by 3.5 percent. The agreement, which applies to the company's workers on the ground as well as to Lufthansa Systems, Lufthansa Technik and Lufthansa Cargo units, retroactively takes effect from January 1 and will run for 13 months. Employees of the catering business LSG, which has just been restructured, will receive only a one-time payment of EUR€250 each. When talks started earlier this month, Verdi demanded a 6.1 percent pay increase for the next 12 months.

@...Pinnacle Airlines Corp., which flew about 4 million passengers in and out of the Twin Cities last year, is flying dangerously close to a landing in bankruptcy court. If the Chapter 11 filing occurs, it will trigger bad memories and financial insecurity for Minnesota-based Pinnacle employees who were working for Mesaba Airlines in 2005. That's because it would be their second trip through bankruptcy. The Eagan-based Mesaba, which operated regional flights for Northwest Airlines, entered U.S. Bankruptcy Court in Minneapolis in October 2005 on the heels of Northwest's bankruptcy. Airline employment isn't well-suited for people who need stability in their lives. MAIR Holdings was Mesaba's owner when it entered bankruptcy in late 2005, then Northwest brought Mesaba out of bankruptcy in April 2007 when the regional carrier became a wholly-owned Northwest subsidiary. That structure was short-lived because Delta Air Lines acquired Mesaba in October 2008 when the Delta-Northwest merger deal closed. Memphis-based Pinnacle later acquired Mesaba for $62 million in a deal announced in July 2010. Since early December, Pinnacle has been attempting to slash costs and strengthen its revenue position. It's been trying to negotiate new labor contracts, modify terms with its lessors and debt holders and reset agreements with its airline partners. Pinnacle pilots fly regional flights for Delta, United, Continental and US Airways. Sean Menke corporate-ir.netSean Menke But Pinnacle CEO Sean Menke painted a dire picture on Friday in a letter to Pinnacle's 8,000 employees. Need to act "On the current path, our financial position will continue to worsen at an alarming rate," he wrote. "We need to act immediately." Menke said management hoped to reach deals with all of the major parties, so it could implement its turnaround plan and ensure the carrier's viability. "What happens next is not yet clear," Menke wrote. "We may ultimately conclude the best way for us to achieve our goal is to use the court-supervised Chapter 11 process." He said that route could allow Pinnacle to "change or cancel key contracts, obtain financing and take other important actions" while "continuing normal business operations." In the past dozen years, bankruptcy has become commonplace in the airline industry. Using the federal bankruptcy code is expensive. Bankruptcy attorneys and restructuring specialists don't come cheap. But airlines use bankruptcy to pump up their leverage so they can extract contract concessions to reshape their businesses. Pinnacle had a simple business model for many years and it was a safe investment because Pinnacle bore little financial risk. Most of Pinnacle's revenue came from Northwest Airlines, which would provide Pinnacle with airplanes and pay the regional carrier for transporting passengers in and out of Northwest's hubs that included the Twin Cities. Right now, Pinnacle is struggling to revamp its business plan that has become vastly more complicated. It purchased Colgan Air, a Virginia-based operator of turboprops, for $20 million in 2007, and it acquired the larger Mesaba in 2010. Between those transactions, Pinnacle executives took part in investigations and policy reviews and addressed training issues that surfaced after a Colgan Air plane crashed in 2009. The accident killed 50 people in New York state. Menke, who became Pinnacle CEO last summer, alluded to the growing pains in his employee message on Friday that also was filed with the Securities and Exchange Commission. Delta provides more than 75 percent of Pinnacle's revenue and Delta pays the fuel bills for those regional Delta Connection flights, so the Atlanta-based carrier takes the risk on volatile oil prices. But Pinnacle has multiple contracts with Delta and has been in talks about alterations to those service agreements to boost Pinnacle's revenue. Losses 'not sustainable' It also has a different type of contract with United Continental Holdings, in which Pinnacle is responsible for fuel and maintenance expenses. "The losses on this operation are not sustainable," Menke wrote. Pinnacle executives reached a deal with the Air Line Pilots Association a year ago in which compensation rates and work rules were spelled out for the combined pilot groups from Pinnacle, Mesaba and Colgan. An arbitrator's ruling detailed how the pilot seniority lists of the three carriers would be merged. Menke blamed that ruling as driving up costs for Pinnacle because he said it allowed pilots to move quickly to bid on different aircraft to fly. While Menke wanted a gradual phase-in, he indicated that the faster integration of the three pilot groups increased training costs and pilot pay. Pinnacle Airlines Corp. lost $8.8 million during the first nine months of 2011, and won't report full 2011 results until February. That loss compares with a $17 million profit for the same three quarters in 2010. The carrier's unrestricted cash was $82 million at the end of September. It's unclear how much money Pinnacle may have burned through since releasing that liquidity figure. Many consumers are just looking for a safe flight at a reasonable price. To deliver on that promise and survive in a tough industry frequently battered by high oil prices, U.S. airlines have been choosing the paths of bankruptcy and consolidation. Since 9/11, some of the airlines that have endured the expense, time and agony of bankruptcy are Northwest, Mesaba, Delta, United, US Airways and Sun Country. Delta kicked off the big mergers in 2008 when it struck a deal to buy Northwest, and Continental and United forged a combination deal two years later. American Airlines, a recent entry into bankruptcy, is now being eyed as a potential acquisition target for Delta. But before that could happen, the Pinnacle restructuring will unfold inside or outside bankruptcy court. Many of the key players on opposing sides don't need introductions. Delta is Pinnacle's chief customer and several top Delta executives are familiar with every nuance of Pinnacle's business. For example, Steve Gorman, a Delta executive vice president, served as Pinnacle's board chairman for five years. Pilot Tom Wychor, who lives in the Twin Cities, is chairman of the combined Pinnacle pilots union, and he held that same union post with Mesaba. John Spanjers was Mesaba's president and now he's the chief operating officer at Pinnacle. The pair spent months of their lives together across bargaining tables and in Judge Gregory Kishel's bankruptcy courtroom in Minneapolis. Turnaround plan Pinnacle hired the Seabury Group to mold its turnaround plan, and Seabury worked on Northwest's financial restructuring. Pinnacle's legal counsel handled Delta's bankruptcy case. In 1978, Congress and President Jimmy Carter deregulated the airline industry, an action that was designed to stimulate competition. Yet, instead of seeing an increasing number of carriers operating out of U.S. airports, we are watching all kinds of mergers take shape. United and Continental, big network carriers, are in the process of combining. So are two prominent low-fare airlines, Southwest and AirTran. Now Minnesotans who've been working for Pinnacle or Mesaba will get financially squeezed as Pinnacle becomes a bigger, newly-merged regional airline. The unknown for Pinnacle employees, including about 1,200 Minnesotans, is precisely what kind of pain is coming their way. But some cutbacks are inevitable. Pinnacle CEO Menke's message was abundantly clear on Friday. He wrote: "We cannot continue to operate businesses that are losing money. We do not have the cash to sustain it."

@...Once again, there was a message about Memphis International Airport’s importance to Delta Air Lines in comments Delta’s leaders made this week when the company released year-end and fourth-quarter 2011 earnings figures for its global system. [Click to enlarge] ANDERSON The message, written below the dollar figures, estimates and safe harbor statements in its earnings report, was that there could be a third round of capacity cuts at the airport and that the airline industry is again in shuffle mode, with new possible scenarios surfacing for Memphis International Airport. Delta CEO Richard Anderson resolutely dodged a few questions about a possible merger with the parent company of American Airlines – a merger being pursued by both Delta and rival global carrier US Airways Group Inc. Anderson rejected even general questions about the nature of past airline mergers. And he also declined comment on what Delta’s reaction might be if Memphis-based regional carrier Pinnacle Airlines Corp. files for Chapter 11 bankruptcy protection, which allows for reorganization. Pinnacle CEO Sean Menke specifically mentioned the possibility of such a filing in a written statement he recently sent Pinnacle employees after a month of continuing drama in a different part of the city’s commercial aviation scene. Anderson again this week touted Delta’s “conservative” stance on capacity, which will be cut another 2 to 3 percent in 2012 including cuts that began this month at Memphis International and other airports. “We will remain flexible with the ability to further reduce capacity if conditions so dictate,” Anderson said. In later comments, Delta Executive Vice President Glen W. Hauenstein specifically said the Memphis hub is “generally in the vicinity of where it needs to be” but added it wasn’t exactly where Delta wants it. An analyst asked Hauenstein if Delta could improve its return to investors if it readdressed its capacity in the region, specifically in Charlotte and Atlanta. Atlanta’s Hartsfield-Jackson International Airport is Delta’s “flagship” hub, and the company’s philosophy has been it sees the role of Memphis International as a place for overflow Delta passenger traffic from Atlanta. Charlotte is a US Airways hub. At neither Charlotte nor Atlanta has Delta made the capacity cuts it has at Memphis. “Atlanta continues to lead the hubs in terms of core profitability,” Hauenstein responded. He also cited rising fuel prices and other economic conditions in the last five years after a trend in which 50-seat regional jets “somewhat diminished the pull, if you will, of the geographic historical hubs.” With the recent economic changes, that regional service was re-examined along with industry trends “which is not to fly in uneconomical areas.” The geographic pull of the hub becomes more relevant, Hauenstein added. Meanwhile, Memphis International made an important list earlier this month when Southwest Airlines announced Memphis was one of 53 cities where AirTran Airways service will be converted to Southwest service “over time.” Six other AirTran cities didn’t make the cut. Memphis frequent fliers have speculated about the possibility since Southwest bought AirTran in May. Southwest’s response at the time was to be cautious, and the airline remained guarded in its statement about any steps beyond replacing existing AirTran flights. The Memphis-Shelby County Airport Authority’s most recent figures, which run through the end of December, show four scheduled AirTran flights at MEM in December, accounting for 3.78 percent of the monthly passenger count at the airport. That was a total of 23,783, counting the total of about even amounts of enplaned and deplaned passengers. For the first half of the current fiscal year that ended Dec. 31, AirTran’s enplaned and deplaned total was 147,445 compared to 1,483,038 for Delta. US Airways had the fewest passengers by that count, with its 47,826 below American Airlines, which counted 94,092. The US Airways numbers could go up starting in March because of an agreement elsewhere with Delta that Delta leaders touted this week. They were touting the growth in share of business travelers in the “slot swap” with US Airways that gave Delta 132 take-off and landing slots at LaGuardia Airport – the airport Anderson termed “New York’s No. 1 business airport.” The impact for US Airways has meant a coming expansion of service between Memphis International and Reagan National Airport in Washington starting in March. The other end of the slot swap was 43 slots for US Airways at Reagan National, which the airline will use to serve Memphis and other destinations.

@...Southwest Airlines confirmed Thursday that it’s considering flights to Mexico from Hobby Airport. The flights would be operated by AirTran Airways, which Southwest recently acquired. The plans are still in the very early stages, said Olga Romero, a Southwest spokesperson. “Southwest Airlines has recently expressed interest in conducting international operations from Houston,” Mario Diaz, the aviation director for the Houston Airport System, said in a written statement. “We are currently evaluating the request made by Southwest and have agreed to give it fair and full consideration." The new flights could increase Hobby Airport’s profile. Currently, only George Bush Intercontinental Airport offers international flights in Houston. "Our airports are important, are very important to us and anything we can do to increase traffic at our airports is good for the region and good for the City of Houston," Mayor Annise Parker said. But there would be some challenges. Right now, Hobby's not ready for international travel. "There's nothing we would need to do to the airport, per se,” Parker said. “But we would need the presence of customs and immigration -- and that would depend on the cooperation of the federal government." Southwest wouldn’t provide details of specific international destinations from Houston, stressing that the talks were preliminary. "We want to fly where our customers want to fly," spokesperson Olga Romero said. But just last month, the Dallas-based, low-cost airline announced flights to Cancun and Mexico City from San Antonio – also operated by AirTran. Those flights were priced at $119 each way. Passengers on Thursday seemed to like the idea of easier travel to Mexico from Houston's smaller airport. "I love Southwest’s service,” said Brittany Boynton. “They never cancel a flight." "International flights are more expensive,” said Carlos Flores. “But if it's at an affordable price, yes, it'd be very convenient."

@...Delta Air Lines DAL +0.10% today announced an exclusive marketing agreement with OnAsset Intelligence, a leading provider of machine-to-machine (M2M) wireless asset tracking solutions, enabling Delta Cargo customers to view GPS location information on deltacargo.com. The agreement offers exclusive features and enables a seamless user experience for tracking and tracing cargo in transit on a customized Web page. The service will be available for all cargo shipments across the Delta and Delta Connection fleet, which operates more than 5,000 daily flights to more than 340 destinations, 61 countries and six continents. "Our agreement with OnAsset is a huge boost for Delta customers, who move high value cargo, to allow them to see where there shipment is every step of the way," said Neel Shah, Delta's senior vice president and chief cargo officer. "Offering GPS customers our complete network and combining active and passive tracking data into a single location will be a considerable advantage for their critical shipment needs." Delta is the first airline to receive FAA approval for the SENTRY 400 FlightSafe(R) device on all Mainline and Connection flights, which allow shippers critical visibility of sensitive shipments in remote and rural locations. Delta is working with OnAsset to enable GPS tracking on other shipments such as pets as cargo, as well as specialty items like golf bags, hunting and fishing gear, and jewelry cases. "We are pleased to announce our relationship with Delta," said Adam Crossno, president and chief executive officer for OnAsset Intelligence. "Closing visibility gaps with innovative solutions will enhance the supply chain significantly. We are proud to be a part of Delta's plans for today and in the future." In addition to the integration of GPS track and trace information with deltacargo.com, the agreement also will enable Delta customers to benefit from preferred-rate pricing. Information from deltacargo.com regarding flight status will also be available for viewing on OnAsset's Vision(TM) Platform -- a web-based, enterprise platform, for the management of high volume fleets and automated shipment management for GPS-enabled cargo. Details about SENTRY 400 FlightSafe(R) are available at deltacargo.com or by calling a local cargo sales representative.

@...A grand jury has indicted a co-owner of a now-defunct North Carolina charter airline and jet maintenance company for willfully failing to keep up payments on his employees' group health insurance. A Forsyth County grand jury this week indicted Pace Airlines Inc. CEO William Charles Rodgers on one count of willful failure to pay group health-insurance premiums to Blue Cross Blue Shield of N.C. and 26 counts of willful failure to deliver notice to employees. Investigators allege that he knowingly terminated the company's group health insurance without giving the required 45-day notice to 337 employees. Rodgers has been free on a $50,000 bond since September 2009. The N.C. Department of Justice says Rodgers was allowed to leave the state on bond when first arrested and he has not been served. Read more here: http://www.charlotteobserver.com/2012/01/26/2962270/grand-jury-indicts-co-owner-of.html#storylink=cpy

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