Friday, October 31, 2008

Delta begins long integration with Northwest

Friday October 31, 5:58 am
ET By Joshua Freed,
AP Airlines Writer

Delta begins long integration with Northwest; says customers will see little change
MINNEAPOLIS (AP) -- One day after his airline swallowed Northwest Airlines, Delta executive Ed Bastian was in town with a polar bear tie and a smile in a bid to reassure travelers that little would change.

Hubs? They all stay. Flights? Maybe fewer seats, but no outright cuts. Frequent flier miles? You'll keep them all.

Still, Bastian and the rest of the executives who will stir the two airlines together have plenty to do.

"It's probably going to take us two years before we can really operate as a single carrier," Bastian, who is Delta Air Lines Inc.'s chief financial officer, said Thursday. Bastian is also now the chief executive of Northwest, which became a subsidiary of Delta when their tie-up closed on Wednesday.

Although dozens of teams with members from both companies have been working together for months toward the integration, several items still have not been decided yet, Bastian said from behind a "Delta" podium above a ticketing area dominated by Northwest counters. That includes whether Delta will continue to allow a single checked bag for free (Northwest charges a fee), and which planes will go on which routes.

Bastian did not rule out the possibility that Delta would add a checked-bag fee. In any case, both airlines will have the same fee structure soon, he said.

He said Delta would arrange its fleet and schedule in the spring. Only one airplane, the 757, is common to both carriers.

Airline mergers have a checkered history. AMR Corp.'s American closed on a buyout of TWA months before the Sept. 11, 2001, attacks turned the industry upside-down. And US Airways Group Inc. is still struggling with its integration with America West.

"In the past it's been like trying to integrate oil and water," said Mo Garfinkle, who runs airline consulting firm GCW Consulting.

Delta and Northwest will have to integrate different corporate cultures, different software for ticketing and schedules, different fleets, different unions (most of Delta's workers are not unionized) -- and it all has to be done without missing a beat in a 24-7 operation that includes hubs from Tokyo to Amsterdam.

Garfinkle says he is optimistic, because of all the work that the two airlines have already done, and because they seem willing to take it slow.

"I think this is going to be the poster child for successful airline mergers," he said.
Bastian said that regional subsidiary Comair would remain a part of the airline. Comair's future has been uncertain, in part because it flies 50-seat jets that are money-losers when oil prices are high.

"Comair is an important part of the family, just as they've always been," he said.
The airlines have been cutting domestic capacity while in many cases adding international routes. Bastian said that's on hold now because of the economy.

"The growth will be slowed if there's any growth at all on the international seats," he said.
On Wednesday, before the deal closed, Northwest said it had arranged $500 million in loans backed by its remaining unencumbered assets, which had included its old DC-9 planes. Bastian said the borrowing won't change Delta's ability to park or fly the planes as the schedule requires. He said Delta has not settled on a replacement for the DC-9.

Delta is also negotiating with the state of Minnesota over bond debt backed by the state. Northwest signed agreements promising to repay the debt, at a cost of about $230 million, if its headquarters leaves the state. That hasn't happened yet because it's still a Delta subsidiary.
Northwest has its headquarters in Eagan, Minn. The combined carrier will be based in Atlanta.
Minnesota Rep. Debra Hilstrom, D-Brooklyn Center, said she would call a Nov. 13 hearing about the matter in the House Local Government and Metropolitan Affairs Committee, which she chairs.

October 31, 2008, 9:10 am
Five Issues Delta-Northwest Marriage Could Face
Posted by Matt Phillips

It’s well established that airline mergers aren’t always smooth affairs. Here are five things that the executives tasked with creating a “new” Delta out of the Atlanta-based carrier and Northwest have likely been considering for months — and why travelers should care.

Reservation glitches: Merging hundreds of routes and reservations is no easy task. It took quite a while for US Airways, which merged with America West back in 2005, to straighten out its schedule.

Back in October 2007, Scott wrote a column in which US Airways CEO Doug Parker said some issues arose as a result of an effort to unify US Airways and America West’s reservation system. “Reservations were lost, flights were delayed and many customers fumed in long lines. For many months, US Airways had two separate check-in lines depending on whether your reservation was made through the old US Airways system or the America West system,” Scott wrote.

Pilot issues: In past mergers, seniority integration has been a major sticking point leading to litigation and years of bad feelings. (Seniority determines pay and schedules for pilots.) Some Northwest pilots have been around long enough to remember the hostility that followed that carrier’s 1986 acquisition of Republic Airlines. The deal doubled Northwest’s size, but the integration led to months of lost baggage and years of worker infighting. Senior pilots at the airline still identify themselves as “red book,” meaning they were covered by the old Northwest contract, or “green book,” Republic’s contract. Why should you care? Well, back in 1999, after American Airlines acquired tiny Reno Air, an integration dispute triggered an illegal pilot sickout that disrupted travel nationwide for 11 days. As Susan Carey and Paulo Prada wrote in the Journal, this is one issue in the Delta/Northwest tie-up that isn’t yet resolved. But Delta’s 6,000 pilots and Northwest’s 5,000 already have voted for a common labor contract and agreed to abide by an arbitrator’s ruling if they can’t agree by next month.

Cranky Workers: Poor customer service has been a problem with airline mergers before. Generally speaking, the ongoing uncertainty of mergers can sap employee morale. (After all, one rationale behind combining two airlines — cost savings — often translates into job cuts.) The list of potential merger problems can seem endless. For instance, during the US Airways/America West integration, one sticking point was how empty seats on flights were given to employees. America West employees got to ride in empty seats on a first-come, first-served basis, while US Airways, employees got seats based on seniority. While this might seem like inside baseball, all these issues play a role in employee attitudes, and consequently, passengers’ experience with those employees.

Generalized confusion: As Northwest joins Piedmont, AirCal, Republic, and Mohawk in the great airline-brand scrapyard in the sky, it’s crucial that the “new” Delta makes it clear which airline’s terminals, gates and check-in counters will be in use for customers. It sounds simple, but sometimes airlines can take an extremely long time to iron this stuff out. In a November 2006 column, Scott wrote how Delta’s terminal at New York’s Kennedy was still waiting for full merger integration 15 years after Delta bought Pan Am’s European business, making Delta’s Kennedy operations confusing — even for some cab drivers.

The false start: After airlines merge, it often takes awhile before they’re ready to enact major changes in operations and procedures. Again, the US Airways/America West deal may serve as an example. The integration of the two started off smoothly but ran into large operational snags — poor on-time and baggage handling, people stranded at airports — that inconvenienced customers. (It’s important to note, however, that US Airways has made big strides in straightening most of them out.)

That said, there are plenty of reasons to believe that the integration of Delta-Northwest will be less rocky than other airline marriages. For one, Delta’s CEO Richard Anderson — who will lead the combined carrier — has been in charge of both companies, which may give him special insight into how the two cultures will blend.

Readers, we know many of you are airline experts. What other unexpected bumps lie down the road?

Wednesday, October 29, 2008

Delta buys Northwest to create biggest airline

Wednesday October 29, 9:58 pm ET
By John Crawley

WASHINGTON (Reuters) - Delta Air Lines (NYSE:DAL - News) swallowed rival Northwest Airlines Inc on Wednesday in a $2.6 billion merger that created the world's biggest airline and prompted new speculation about further industry consolidation.

The all-stock transaction, the first domestic airline combination in three years, closed after clearing its biggest and last regulatory hurdle earlier in the day -- U.S. Justice Department antitrust review.

Justice officials cited the likelihood of "substantial and credible efficiencies" without harming consumers or competition.

Government approval was expected. Industry vigorously made the case to regulators earlier this year, when airline finances were rockier than they are now, that consolidation was an important tool for remaining viable with fuel prices high and the economy worsening.

"The airline industry faces a very difficult economic environment around the world and this merger gives Delta increased flexibility to adapt to the economic challenges ahead," said Richard Anderson, the Delta chief executive who will head the combined entity.

The new, larger Delta will be an international powerhouse with unparalleled scheduling and pricing strength with service to 375 cities worldwide, experts said. The company estimates a combined $2 billion in cost savings and revenue enhancements annually.

An ambitious plan is to link the long-established strength of Northwest in Asia with Delta's expanding overseas network, and leverage benefits from the transatlantic SkyTeam alliance that includes AirFrance/KLM.

"There are global corporations but no global airlines. The race to become the first truly global airline has an incredible reward to it," said consultant Darryl Jenkins. "The revenue potential is something that we have not seen yet. That's the synergy that will make this very lucrative."

Jenkins and other experts said the deal's potential may reignite merger fever, which burned this year until fuel prices started their dramatic rise this summer to record heights and prompted sharp airline cost cutting.

Doug Parker, chief executive of US Airways Group (NYSE:LCC - News) and a long-time proponent of consolidation, said last week that he still believes mergers are right for the industry. US Airways failed last year in its bid for Delta.

Calyon Securities analyst Ray Neidl said that economic wild cards could impede consolidation. A credit crunch and fuel price volatility must diminish before airlines can explore mergers, he said.
"Down the road, there will be more consolidation or attempts," Neidl said.


Northwest's history dates to 1926 and its common stock first traded in 1941. But the company now operates as a wholly owned subsidiary of Delta until the two fully integrate their operations. That process is expected to take up to two years and cost no more than $600 million.

Integration can be tricky. For instance, US Airways Group Inc (NYSE:LCC - News) has yet to fully combine its work force after merging with America West in 2005.

Delta said customers should continue to check-in and do business directly with the airline operating their flights just as they did before the merger.

For the time being, the carriers will maintain separate web sites as well as two reservation systems and loyalty programs.

The new company will retain the Delta brand and be headquartered in Atlanta, where Delta is based. The new Delta begins operations with 75,000 employees.

In the coming days, Delta will distribute an equity stake to substantially all U.S.-based employees with international employees participating through cash payments in lieu of stock. The pilots' unions of both airlines have agreed to a unified contract but still must negotiate a seniority arrangement, a detail that almost derailed merger prospects earlier this year.

The new Delta has said no frontline employees will be involuntarily furloughed as a result of the merger and that no hubs will be closed. The old Delta's strength was in the South while Northwest operations are based in the northern cities of Minneapolis and Detroit.

As approved by shareholders at both companies earlier this year, Northwest stockholders will receive 1.25 Delta shares for each Northwest share they own. Based on Delta's closing stock price on Wednesday, this exchange ratio is the equivalent of $9.99 per Northwest common share.
Delta shares closed down 2.1 percent at $7.99 on Wednesday on the New York Stock Exchange, while Northwest finished 0.6 percent higher at $9.90.

Government approval of the deal comes as airline finances begin to improve with fuel prices falling sharply off record highs. But carriers are now cutting back service to save money as travel demand softens due to economic weakness.

Northwest posted a $317 million third-quarter loss due to writedowns on its fuel hedging. Without the adjustment, the company earned $93 million and beat Wall Street share price estimates. Delta's third-quarter loss was $50 million.

(Additional reporting by Diane Bartz, Randall Mikkelsen and Kyle Peterson in Chicago; Editing by Gary Hill)

Thursday, October 23, 2008

US Airways, AirTran and JetBlue report steep losses
Christopher Hinton, MarketWatch
Last update: 4:46 p.m. EDT Oct. 23, 2008

NEW YORK (MarketWatch) - Fuel costs and non-cash charges related to its hedging program helped push US Airways into a significant third-quarter loss.

The Tempe, Ariz., legacy carrier wasn't alone. Also reporting swings to quarterly losses Thursday were low-cost carriers JetBlue Airways Corp and AirTran Holdings.

The smallest of the six so-called legacy carriers, said it swung quarterly loss of $689 million, or $8.45 a share, from a gain of $177 million, or $1.87 a share, in the year-ago period.
Total operating revenues rose 7.4% to $3.26 billion from $2.13 billion, while passenger-unit revenue jumped 4.6% to 12.71 cents.

Excluding items, the airline said it would have lost $2.35 a share. Analysts polled by FactSet Research expected, on average, a loss of $2.30 a share.

Shares of US Airways plunged nearly 16% to close at $7.14, along with the broader sector as investors brace for a possible oil-production cut among OPEC members. The stock hit its lowest point on record at $1.45 when oil hit $147 a barrel in July.

US Airways' total fuel bill in the quarter rose 60% to $1.11 billion due to those record oil prices. Since then prices have crashed to below $70, resulting in significant mark downs for the airline's fuel hedging program that's meant to buffer higher oil prices.

It's a scenario felt across the industry as the world's oil and jet fuel market remain volatile. Over the last two weeks, Northwest Airlines Southwest Airlines Co.
all reported losses due to the sharp rise and then falloff in oil prices.

Still, falling oil prices and steep seat-capacity cuts are expected to benefit the industry next year, and US Airways said Thursday its expects 2009 a "much better" year for the company as well.

Further, the carrier said it secured an additional $950 million in financing.
AirTran and JetBlue also report quarterly losses on fuel

Along with US Airways, JetBlue and AirTran were also predicting clear skies ahead.
"The great industry guide-up continues, with AirTran and JetBlue adding their voices to the chorus of airlines this season painting a brighter view of the fourth quarter and beyond," said J.P. Morgan analyst Jamie Baker in a note to investors.
AirTran Holdings said it swung to a third-quarter loss of $107.1 million, or 91 cents a share, compared to a profit of $10.6 million, or 11 cents a share, in the year-ago period.
The Orlando, Fla., airline said revenue rose 11% to $673.3 million.
Analysts polled by FactSet expected, on average, a loss of 41 cents a share on sales of $671.1 million.

The company cited record-high fuel costs, which accounted for more than 50% of its expenses for the quarter, as a significant contributor to the loss.

Downgrading the company Thursday was Standard & Poor's Equity Research, saying the carrier's wider-than expected loss raises concern over its financial position. Further, the AirTran is more exposed to leisure and short-haul markets, which are likely to fare worse in a sustained downturn.

In an interview with MarketWatch, Chief Financial Officer Arne Haak said passenger numbers has slowed down a "little bit" for October, and for the first week of November. December so far looks "pretty good," he said.

Nonetheless, S&P cut its rating to hold from buy, with a 12-month price target of $4, down from $5.50. Shares of AirTran fell 7.2% to close at $3.20.

Meanwhile, JetBlue ( said it lost $4 million, or 2 cents a share, in the third-quarter. In the same period a year ago, the Forest Hills, N.Y., carrier earned $23 million, or 12 cents a share.
Operating revenue for the quarter totaled $902 million, up 17.9%.

Analysts polled by FactSet Research estimated, on average, a loss of 5 cents a share and sales of $896 million.

In the near term, JetBlue said it sees continued strength in bookings.

In an investor, note, J.P. Morgan upgraded the low-cost carrier to overweight from neutral.
"JetBlue remains one of the least-liked large jet operators, and has materially lagged the sector's recent sprint to the upside," the research firm said in a note. "In light of a significantly boosted 2009 outlook and continued liquidity improvements, we suggest investors focus on this laggard."
Shares of JetBlue bounced back with the broader market to end up 1 cent at $5.02.

Christopher Hinton is a reporter for MarketWatch based in New York.

Monday, October 20, 2008

World's Largest Airliner Lands at LAX
Monday, March 19, 2007 6:23 PM
Airbus A380 Will Undergo Tests

LOS ANGELES, Mar. 19, 2007 -- The world's largest airliner made its West Coast debut today, touching down at Los Angeles International Airport to complete its bicoastal American unveiling.
The massive Airbus A380 descended out of a dank, gray sky and made a picture-perfect landing just before 9:30 a.m. as spectators cheered from both sides of the airport.

About 15 minutes earlier, an A380 touched down on the other side of the country, at New York's John F. Kennedy International Airport.

The A380, which burns about one gallon of gas per passenger every 80 miles and can fly some 8,000 nautical miles, can seat as many as 550 passengers. Airbus has 166 orders from 15 airlines for the new plane, which has already made tests flights in Europe and to Asia.
The Los Angeles flight, operated by Australian airline Qantas, was devoid of passengers and crew, save for those in the cockpit.

Toulouse, France-based Airbus said that the plane will undergo tests at LAX, including airfield maneuvers, docking at the terminal gate and ground and gate handling exercises.

The New York flight carried 550 people, including four pilots, four Airbus crew members, 23 Lufthansa cabin crew and 519 passengers, mostly Airbus and Lufthansa employees along with some reporters.
The flight was operating just as if it were a commercial trek, with full dining and entertainment services.

Los Angeles officials fought hard to host the A380's inaugural landing, and wrote a letter to Airbus earlier this year urging executives to reconsider plans for an initial landing only in New York. Los Angeles officials contended Airbus was reneging on a promise to make the first U.S. stop in Los Angeles, which kept its word to speed up construction of new $9 million gate for the giant jet. Airbus relented just three weeks ago.

Los Angeles' airport agency ultimately plans to spend about $121 million to prepare for the A380, and has already written checks for about $50 million to improve runway and taxiway intersections. LAX, the fifth-busiest airport worldwide, is expected to be the first U.S. destination for the A380 when it enters commercial service.

(Copyright ©2008 by The Associated Press. All Rights Reserved.)

Saturday, October 18, 2008

Airlines Who Have Departed For The Last Time

Wednesday, October 15, 2008

AMR Places Big Order for New Jets
American Airlines to buy Boeing 787s
Wednesday October 15, 9:30 pm ET By David Koenig, AP Business Writer

American Airlines to buy new Boeing 787s to help make fleet more fuel-efficient

DALLAS (AP) -- American Airlines, suffering through one of the worst slumps to hit the aviation industry, is splurging on 42 new jets that have never flown a single paying passenger yet and come with a total sticker price of about $8 billion.

American, the nation's largest airline, said it also took rights to buy up to 58 more of the Boeing 787-9 aircraft.

Officials at American acknowledge that Wednesday's announcement is a bold move -- and a bit contrarian.

They are betting that the airline industry will be looking a lot better when the planes are ready for delivery, starting in 2012 and running through 2018.

"We've been criticized before for buying airplanes at the peak of the market only to have them delivered in the valley," said Daniel Garton, executive vice president of American parent AMR Corp. "Maybe this time we'll get the timing right."

Garton even compared American's move to the strategy of value investors such as Warren Buffett -- buy when everyone else is running from the market.

American also had important operational reasons for ordering the Boeing 787, which is to feature a fuselage made of new lightweight material instead of the traditional aluminum skin.

American has 150 wide-body jets that are used heavily on international routes. Many of
them are nearing retirement age. At a minimum, the 787s would be replacements for older planes that burn 20 percent more fuel.

That's a major consideration for an airline that spent $2.72 billion on fuel in the July-to-September period.

The new planes could even carry American's hopes to expand its international service, which has held up much better than domestic service in the current slump. The 787 is designed to carry up to 290 passengers and have a range of up to 8,500 nautical miles.

International routes are among American's most profitable, and they could get another boost if federal regulators grant American's wish for an antitrust exemption to expand its partnership with British Airways. Such approval would let American, BA and Iberia work together in setting prices and schedules on trans-Atlantic flights.

AMR Chairman and Chief Executive Gerard Arpey said the new plane represented a prudent investment for the long haul. It will reduce fuel and maintenance costs, and cut greenhouse gas emissions -- airlines may eventually face payments for those emissions.

Without discussing details, Arpey said the deal had "flexibility" built in to let American manage its fleet replacement and growth.

The order would be American's second big move to upgrade its fleet, among the oldest for U.S. carriers. The Fort Worth-based airline has already announced it will take delivery of 76 Boeing 737-800 aircraft in 2009 and 2010 to replace gas-guzzling MD-80s, which are used heavily on domestic routes.

AMR reported Wednesday that it had an operating loss of $360 million in the third quarter. That came on top of more than $1.7 billion in losses in the first half of the year. AMR has $15.4 billion in total debt -- $10.7 billion if you give the company credit for its cash and short-term investments.

So how will it afford planes that are worth around $8 billion, according to list prices? (Airlines usually get discounts, particularly on big orders, but American declined to give financial terms of the Boeing deal.)

It plans to borrow.

"We're pretty confident that we'll be able to find financing," Garton said in an interview.
American just completed lining up financing for 20 Boeing 737s that it had previously ordered.
The 787 purchase order is contingent on American's pilots going along. The union and management have clashed on many other issues, but Arpey said he believes the two sides can agree on how much pilots will earn for flying the new plane.

The order was welcome news at Boeing Co. facilities around Seattle. It could be Boeing's biggest plum of the year in dollar value, likely trumping Air China's announcement in July that it will buy 45 planes with a list price of $6.3 billion.

The orders indicate that Boeing's airline customers are not spooked by the machinists' strike that has closed Boeing's commercial airplane factories since Sept. 6. Some airlines are still making long-term fleet purchases.

The strike, however, will likely delay the first test flight of the 787, which had been planned for later this year. The production schedule has already been pushed back several times because of other glitches.

The first airline scheduled to receive the plane, All Nippon Airways Co., said late last month that it expected to get its first one next August.
From "The" below
is contingent on American reaching an agreement with its pilots to fly the aircraft. 10/15/08 - 05:02 PM EDT
Ted Reed

Despite a volatile economy and a $360 million third-quarter adjusted loss, American Airlines parent AMR (AMR Quote - Cramer on AMR - Stock Picks) said Wednesday it has ordered 42 Boeing (BA Quote - Cramer on BA - Stock Picks) 787 jets and has options for 58 more. "This is a difficult decision in these incredibly volatile times, but it is fundamental to the long-term strategy of the company, and we felt it was a wise decision to make," said Dan Garton, executive vice president for marketing, in an interview. "

Airlines are often criticized for buying at the peak and having the airplanes delivered four years later, for buying when things are great and then having the [deliveries] when things are bad," he said. The order has a book value of $20 billion, but airlines invariably pay less than book value for new aircraft. Garton said American is not concerned about financing, since the first delivery is four years off. "It's very likely there will be some slippage to the original schedule," given delays in the 787 program and the ongoing strike at Boeing.

While it's rare for a carrier to acknowledge that an order might not be on schedule the day it's placed, Garton noted that "it's not ideal to enter into an agreement when you have uncertainty, but it's a reality we have to face." The planes would replace aging widebodies in the American fleet, including Airbus 300s, as well as 767s and 777s.

The first 42 deliveries are scheduled for 2012 to 2018, with the 58 option deliveries tentatively planned for 2015 to 2020. The deal is contingent on American reaching an agreement with its pilots to fly the aircraft. Meanwhile, AMR said its third-quarter loss resulted primarily from a fuel bill that was $1.1 billion higher than in the same quarter a year earlier. The loss was equivalent to $1.39 a share. Analysts surveyed by Thomson Financial had estimated a loss of $1.50. Revenue rose 8% to $6.4 billion, slightly ahead of expectations.
AMR to slash more capacity in 2009
Airline also sets plans to take delivery of more fuel-efficient aircraft
Christopher Hinton, MarketWatch
Last update: 4:40 p.m. EDT Oct. 15, 2008

NEW YORK (MarketWatch) -- AMR Corp., the largest U.S. airline and owner of American Airlines, said Wednesday that it would slash more of its seat capacity next year to offset an anticipated economic recession.
The Fort Worth, Texas, airline also said it intends to take delivery of up to 100 more fuel-efficient aircraft beginning in 2012.

For the fourth quarter, AMR expects to pull down about 8.3% of its mainline capacity, with domestic capacity expected to decline 12.5% and international capacity to fall less than 1% compared to last year.

AMR said it expects its mainline capacity to decline 3.7% and plans to cut 9% next year, including a 14% reduction of mainline domestic capacity.

"These reductions will help to offset weakness in the revenue environment associated with a recessionary economy and... we think it makes sense to revise our capacity downward further for next year while at the same time accelerating our fleet replacement with more fuel-efficient aircraft," said Chief Financial Officer Thomas Horton on a post-earnings call.

In a note to investors, J.P. Morgan analyst Jamie Baker said that next year's capacity-reduction guidance is consistent with the airline's prior forecast, and said the industry in general has yet to undertake the unprecedented cuts needed to reflect the recent "global malaise."

However, Baker noted, "AMR guidance, while characteristically devoid of demand commentary, portends a fourth-quarter outcome modestly ahead of both our own forecast and that of consensus."

Shares of AMR slipped once cent to close at $8.78.

For the recent quarter, the carrier reported a profit of $45 million, or 17 cents a share, down from $175 million, or 61 cents a share, in the year-ago third quarter.

Excluding one-time items, such as a $432 million gain from the sale of American Beacon Advisors and a $27 million charge related to capacity reductions, AMR would have posted a third-quarter loss of $360 million, or $1.39 a share.

Analysts polled by FactSet Research had expected, on average, a loss of $1.44 a share.
Quarterly operating revenue rose 8% to $6.42 billion from $5.95 billion, helped by higher fares and new passenger fees.

AMR said it would buy up to 100 more fuel-efficient Boeing 787 Dreamliner aircraft beginning in 2012. The company intends to buy 42 Boeing 787s and has the rights to add 58 more starting in 2015.

Dreamliner is its next-generation, wide-body aircraft, built with lighter materials and more efficient engines to help reduce fuel burn.

"While fuel prices have fallen from record-high levels a few months ago, the economic uncertainty, and what that might mean for travel demand, is a serious concern," said AMR's Chief Executive Gerard Arpey. "It would also be shortsighted to conclude that fuel prices, which remain volatile, are no longer a challenge."

For the fourth quarter, AMR said it was planning for an average system price of $2.76 a gallon. The company has 38% of its anticipated jet fuel consumption hedged at an average price of $3.33 a gallon.

AMR paid $3.57 a gallon on average in the third quarter, up 65% from $2.17 in the same quarter last year.

The total fuel bill for the airline increased 56% to $2.72 billion.

AMR said its end-of-the-quarter cash balance was $4.62 billion, compared to $5.5 billion at the end of the second quarter.

Wednesday, October 08, 2008

United Airlines to lay off 414 mechanics
Wednesday October 8, 4:14 pm ET

United Airlines laying off 414 mechanics as part of previously announced cuts
MINNEAPOLIS (AP) -- United Airlines said on Wednesday it will lay off 414 mechanics at its San Francisco maintenance base.

The layoffs are part of 7,000 job eliminations announced previously by the Chicago-based carrier as it reduces its flying and eliminates the Boeing 737 from its fleet.

United spokeswoman Megan McCarthy said the notices went to the workers on Sept. 29, and the layoffs will take effect on Dec. 7.

"We feel it's reprehensible they're laying off people while work is being outsourced overseas where there are less-qualified mechanics working on the planes," said Paul Molenberg, a spokesman for Teamsters Local 856 in San Bruno, Calif., which represents the laid-off workers.

Every major work group at United is shrinking. Enough flight attendants volunteered for furloughs that it avoided involuntary layoffs, allowing it to reduce the cabin staff by 1,550 positions. McCarthy said efforts to reduce 950 pilot positions will continue into next year, and cuts of as many as 1,600 managers are continuing, too, she said.

That leaves the Teamsters-represented mechanics, as well as baggage handlers and customer service agents represented by the International Association of Machinists and Aerospace Workers. McCarthy said totals for those groups have not been announced.
United shares rose 14 cents, or 2.8 percent, to $5.16 in afternoon trading.
October 8, 2008, 4:14 pm
Air France Ends an ‘Open Skies’ Experiment
Posted by Scott McCartney

Air France is dropping its Los Angeles-London non-stop flight, taking with it some of the cheapest tickets available to London.

It’s rare for airlines to fly internationally without at least beginning or ending the flight at one of their hub airports. You usually need connecting passengers to fill big jets. But Los Angeles-London was an experiment for Air France, a trip the airline inaugurated with the passage of the Open Skies treaty between the U.S. and the European Union. Air France flies from Los Angeles to Paris, and decided to see if Los Angeles and London were big enough markets to support a once-a-day trip.

But there’s tough competition on this route from British Airways, Virgin Atlantic and American Airlines, all carriers with bigger bases of frequent flier program members and corporations with travel deals in either city. (Some cynically saw the flight as retaliation by Air France against British Airways for launching its Open Skies treaty experiment, the airline it calls “Open Skies,” from Paris.)

Just look at prices for a trip next week to see how poorly Air France is faring.

For a one-week trip leaving Monday, Air France offers a coach price of $954 including taxes and fees, according to That’s cheaper than flights from New York to London on the same dates, even though Los Angeles is obviously a longer trip. And it’s a whole lot cheaper than an Air France ticket from Los Angeles to Paris on the same dates: $2,897. Other airlines seem able to ignore Air France, too, in the Los Angeles-London market. British Airways’ cheapest Los Angeles-London fare for the same dates was $3,102, according to Orbitz.

(Travel tip: If you’re going to Paris from Los Angeles anytime soon, take the London flight and book a Chunnel ticket - you’ll save big bucks. Heck, if you’re going to London from just about anywhere in the U.S., think about going to LA and using the cheap Air France fare to get you across the Atlantic.)

The lack of passengers means Air France is surrendering and shifting the flight in its winter schedule to New York-London, where it will offer one daily non-stop.

(The L.A.-London flight will halt on Nov. 6. And the London-JFK route is expected to start in the summer of 2009.)
Its SkyTeam partner, Delta Air Lines, has two flights a day. New York-London is one of the most competitive markets in the world, with multiple major players and often competitive fares. It’s still an experiment for Air France to see whether a French airline can build enough traffic in the U.S. and U.K. without a hub.

With the move, pricing will become rational again. Los Angeles-London tickets will actually be more expensive than New York-London. At least until another airline starts experimenting
American Airlines flight attendants to picket

Wednesday October 8, 3:50 pm ET

American Airlines flight attendants to picket at airports Friday over working conditions
FORT WORTH, Texas (AP) -- American Airlines flight attendants will protest poor working conditions by picketing at four airports on Friday, according to union officials.

The Association of Professional Flight Attendants said Wednesday that members face increasing challenges dealing with reduced flight schedules, crowded planes and collecting charges for food and beverages.

The union, which is seeking pay raises from labor negotiations with American, said attendants will picket at Dallas-Fort Worth International Airport, Los Angeles International Airport, New York's LaGuardia Airport and Miami International Airport.

American, the nation's largest airline, is a unit of Fort Worth-based AMR Corp. The union said it represents more than 18,000 attendants at American.

Shares of American Airlines parent AMR Corp. fell 20 cents, or 3 percent, to $6.55 in afternoon trading.

Monday, October 06, 2008

Sun Country files for bankruptcy (Sun Country is a sweat shop...Ed.)
By Shawn Langlois & Sue Chang, MarketWatch
Posted 6:11 p.m. EDT Oct. 6, 2008

SAN FRANCISCO (MarketWatch) -- Cash-strapped Sun Country Airlines filed for bankruptcy protection Monday after its owner of two years, Thomas Petters, was arrested last week for wire fraud, money laundering and obstruction of justice, The Wall Street Journal reported in its online edition.

Sun Country had run into cash problems after Petters became the target of a federal investigation for allegedly defrauding hedge funds, the newspaper said. He had resigned as chairman and chief executive of the company earlier last week, the report said.

Petters, through his company Petters Group Worldwide, bought Sun Country two years ago, adding to his portfolio of investments, which also include Fingerhut and Polaroid.
The Mendota Heights, Minn.-based low-cost carrier -- the second biggest in the state after Northwest Airlines, said it will continue to operate and doesn't expect the filing to result in any disruptions.

Sun Country, which had previously filed for bankruptcy in 2002 before emerging with new ownership, had been looking to get a short-term loan from its owner to help get it through a slow fall season of travel and into winter, when travel generally picks up.

But Stan Gadek, the airline's CEO, said last week that he needed to distance the company, which is not being investigated, from Petters, who allegedly fleeced investors for personal enrichment and to pay off other lenders.

Friday, October 03, 2008

American cuts September flying capacity 7%
10:10 PM CDT on Friday,
October 3, 2008
(as previously announced)

American Airlines Inc. said Friday it reduced its flying capacity by 7 percent in September, cutting it to the smallest it has been in a September since 2001, when terrorist attacks grounded all airline flights in the U.S. for several days.

Excluding 2001, American hasn't operated with so little capacity in a September since 1998.
Spokesman Tim Smith said the airline has reduced its flying "to bring capacity more in line with actual demand, as well as our ability to price our services at fares that are closer to the costs of providing the service."

American and many other airlines began cutting capacity – measured in available seat miles – after Labor Day as they adjusted to the higher cost of jet fuel. Though energy prices have dropped recently, the carriers published their schedules months ago and have indicated they plan to go ahead with additional cutbacks later this year and in 2009.

"There will be another round [of cuts] in our November schedule to bring our capacity reductions to the fourth-quarter numbers we've announced," Mr. Smith said – about 12 percent on domestic flights and 8 percent systemwide.

American flew 12.87 billion available seat miles last month, down 7 percent from September 2007. It operated 12.25 billion in 2001, American's lowest capacity since it operated 12.76 billion available seat miles in 1998.

American also said its traffic fell 9.1 percent in September, joining most other major carriers in reporting a loss in passengers to go along with the drop in capacity. The biggest declines were posted by American; United Airlines Inc., down 9.2 percent; and Continental Airlines Inc., off 10.9 percent.

With nine of the 10 largest U.S. carriers releasing their September results so far, only Alaska Airlines Inc., with a 0.8 percent increase, and Delta Air Lines Inc., with 2 percent, have reported more traffic than a year earlier. The nine carriers as a group saw a 5.7 percent decline in traffic.
Among that nine, only Southwest Airlines Co. reported flying more capacity than in September 2007. The nine carriers collectively flew 5 percent less capacity than a year earlier.

American made sharp reductions early in September in its San Juan, Puerto Rico, hub, as well as selective cuts elsewhere in its system including an end to service out of Oakland, Calif.
The Puerto Rican cutbacks also hurt results of its commuter unit, American Eagle Airlines Inc., which reported Friday that its September traffic plummeted 17.2 percent on a 9.9 percent cut in capacity. The biggest drop came at American Eagle's San Juan-based Executive Airlines Inc., which saw its traffic decline 21.9 percent.
October 3, 2008
American Airlines Attendants endorse Allen in Missouri’s 8th Congressional district

Forsyth, MO – The Association of Professional Flight Attendants (APFA) voted unanimously to endorse Joe Allen as its candidate for Missouri’s 8th Congressional district. APFA is the nation’s largest independent flight attendant union representing more than 19,000 flight attendants at American Airlines the nation’s largest airline and is a unit of AMR Corp.

“I am honored by this labor endorsement of the Association of Professional Flight Attendants.” Allen stated. “The US aviation system and its workforce are in an economic tailspin faced with a multitude of issues and consequence. It is extremely important this industry and America’s aviation workers have a voice in Washington that comprehends these issues and the measures that must be taken to protect this industry and its workforce.”

APFA’s endorsement is the second major endorsement from airline workers in as many months after the Association of Flight Attendants endorsed Allen in August; combined they represent over 74,000 members and working families.