And the current price for a gallon? Anyone.....anyone....?? :D

disregard.......................

Yes, for Jet A. That was what their guidance was last quarter. We will see what it is when they report Q2 numbers.

Short term stock tip, upholding Mesa's injunction means good things for all the fee for departure carriers who depend on Delta contracts. The market has not figured this out yet.

So our management thinks someone will go BK in the next 22 months. Many think it will be UAUA or LCC. This guy thinks CAL, in 2010! Interesting read.

Investment Research, Stock Analysis, Investment Advice, Newsletters

I'm about to tell you how I know exactly when Continental Airlines will go bankrupt. You might recall my similar work on GM. I spent about two years explaining, quarter after quarter, that there was no way the company could escape bankruptcy. Even though such information can be incredibly valuable to stock traders, my work inspired a lot of anger from our subscribers, who didn't understand my reasoning had nothing to do with cars, or "America," but simply with mathematics. GM's enormous debt load ($172 billion at last count) couldn't be supported by the car company's dwindling market share and negative profit margins. At a certain point (I'd say 2006), it became mathematically impossible for GM to ever make enough money to repay its obligations. The interest payments were compounding faster than it could ever hope to grow the business, and it didn't have enough equity left to refinance.

These situations are tragic for investors, employees, and customers. There are no easy explanations for why companies sometimes end up in these "no way out" scenarios. Thus, it may seem crass or even immoral for me to demonstrate how these situations can be the best investment opportunities of all. But I'd ask that you, if only for a minute, put aside these "good neighbor" emotions. You see, when you buy a stock, an endless number of things might go wrong. As an analyst, it is impossible for me to identify every possible business risk. And as you know, sooner or later, everything that can go wrong will go wrong.

On the other hand, when you're researching companies that are truly stuck in "no way out" scenarios, there aren't any realistic alternatives. No matter what else happens, their debts and interest payments will come due. And that means you can know, with a far higher degree of certainty, what your investing outcome will be. And so, I ask you: Would you rather own a stock that may or may not increase in value? Or would you rather short a stock that you can know, for certain, will go bankrupt by a specific date in the future?

This kind of analysis has always appealed to me because of the certainty. Most subscribers don't know my very first newsletter, written in 1999, accurately predicted the demise of the original AT&T, which was the most widely held stock in America at the time. Most recently, I told my subscribers Continental Airlines will go bankrupt. And now I can even tell you when...

The company has $105 million of equity sitting under more than $12 billion worth of debt. It operates at a loss because its gross margins have fallen in half in only three years. Fuel costs and competition have rendered its full-service, high-cost, and unionized business model obsolete – much like what happened to General Motors. It has $900 million worth of lease and capital obligations coming due this year and only $2.7 billion worth of cash left. In 2011, 40% of its $6 billion in long-term debt will come due.

But the trigger for Continental's bankruptcy will be an obscure clause in its credit-card processing agreement with Chase Bank. The agreement requires Continental to maintain at least 25% of its current obligations in cash. Next year (2010), the portion of its long-term debt that's due in 2011 will become "current" – due within the next 12 months. That will cause Continental's current obligations to soar to nearly $7 billion. At the same time, its cash reserves will be falling. The collapse of the current ratio will trigger a cascade of debt defaults, pushing the airline into bankruptcy. Thus, Continental will go bankrupt at some point in 2010.

I know Continental can do nothing to avoid a default. It only has $105 million of equity left. That's simply not enough to restructure its debts. And it can't operate profitably enough to afford to repay its debts – it doesn't even have enough cash to pay for the planes it has already agreed to buy from Boeing. If you short the stock today, I'm 100% sure you will double your money in 12 to 18 months.

Very good post. There is a way out of this mess. The way to go is to return to the very basics of trade unionism. If you look at "unity" as the foundation, the answer of getting all the code on one list (or at least adopting that goal as long term policy) fixes both the representational DFR issue and the scope issue as that policy is implemented.

There is absolutely nothing wrong, or illegal, about the policy that "all Delta flying will be performed by Delta pilots."

To illustrate this point just a little further, when Compass is split from the Delta MEC they will have an independent MEC which an agenda that includes getting more, bigger, airplanes. By DIVIDING pilots we create a conflict of interest.

Of course unifying the pilots removes the conflict of interest and would return flying to mainline.

It makes sense, but they can restructure it.

His simplistic approach fails to realize that to some degree airplanes should be self financing assets.

There is a very tangible reason why the next generation jets need to have 25% lower operating costs and equal, or higher, productivity. Because that savings needs to equate to the $300,000 to $1,000,000 a month (or more) it costs to buy the things.

IF Delta decides to buy 777-300's to replace 747's, the savings in operating costs & maintenance have to AT LEAST equal the payments, or else there is no reason to do the deal. Now when Delta does this deal the analysts will all write OMG! DAL CAP EX! in their Blackberries. But, they forget that the capital expense is less than the cost savings or the deal would not be done.

This is particularly true with Delta, who doesn't care how new a DC9 , or MD88, or 757 is. It is the numbers.

It is no new news that cardiac arrest in the airline business is when American Express cuts off your account to do credit card sales. That is what drove Delta to sell ASA (the most profitable part of the operation on a percentage basis) and eventually what forced Delta into bankruptcy to preserve liquidity.

Delta plans more Cincinnati flight cuts
Business Courier of Cincinnati
Thursday, July 2, 2009

Delta Air Lines said that planned capacity reductions to take place in September will result in about 50 fewer daily flights out of Cincinnati.

Many of the cuts, such as direct flights to London and Frankfurt, already have been announced. Others, such as to Dayton, have not, but have been pulled from the schedule, spokeswoman Susan Elliott said.

In total, peak-day departures out of the Cincinnati/Northern Kentucky International Airport will decline to roughly 215 in September, from 270 in June, following a decline in demand. The carrier cited high fuel prices, the swine flu epidemic and the recession for the drop in leisure and business travel.

The tabulation followed a letter by Delta CEO Richard Anderson to Ellen van der Horst, CEO of the Cincinnati USA Regional Chamber. The chamber and dozens of business owners on June 23 sent a letter to the carrier asking it to reconsider plans to discontinue its direct flights to London and Frankfurt.

In his responding letter, Anderson said the London and Frankfurt routes experienced “disproportionate yield declines.”

“During the month of June, the Cincinnati-Frankfurt route experienced the largest yield decline of any major route in our European network. This has been a trend we have seen over the past few months as corporations in Cincinnati and elsewhere have reduced corporate travel,” he wrote.

While Delta made efforts to strengthen the markets, the trends continued, he wrote. Passenger revenue slipped by 20 percent in the first four months of 2009, compared with a year ago, while oil prices are up 20 percent.

In closing, Anderson said he remains committed to the airport, Delta’s seventh-largest

Is Bankruptcy Back on Airlines' Itinerary?
Ted Reed -- TheStreet.com
07/02/09

Bankruptcy chatter has resurfaced in the airline industry.

Perhaps that is to be expected. Airlines benefitted from a round of bankruptcy filings in the middle part of the decade. Now, despite cutting costs by significant margins, they are caught in a vicious cycle of low business travel demand, intense pricing competition for leisure passengers and rising fuel prices.

Today, shares of the seven biggest airlines are all priced in the single digits. Among the three lowest priced airlines, US Airways(LCC Quote) closed Thursday at $2.46, down 68% this year. United(UAUA Quote) closed at $3.31, down 70%. And American(AMR Quote) closed at $4.22, down 60%.

"Airlines are trading as if headed for bankruptcy this year," Avondale Partners analyst Bob McAdoo wrote in April, when the shares were higher than they are today.

It should be noted that at the end of the first quarter, all three carriers were holding cash. US Airways had $2.1 billion. United had $2.5 billion. American had $3.3 billion.

Nevertheless, in a recent report, Fitch analyst Bill Warlick wrote that "a bankruptcy filing by any of those (three carriers) could occur as early as the winter if operating trends fail to stabilize." The observation was included in a report last week on Delta(DAL Quote), which Fitch expects will "report another year of substantially negative free cash flow in 2009 as (it) struggles to adjust capacity to a diminished level of demand."

Delta's $5 billion in liquidity, and lower costs, provides the carrier with a bigger margin of safety than most of its legacy carrier competitors, Warlick wrote.

Standard & Poor's analyst Phil Baggaley says bankruptcy concerns are justified, given the combination of weak revenue and rising fuel costs, but "It's too early to sound the alarm definitively." Baggaley said a key question is whether the capital markets will be receptive to airlines in need of refinancing debt. "Both United and American have substantial debt maturities," he said.

Baggaley noted that today's airline economy bears little resemble to the situation 20 years ago, when Eastern and Pan American World Airways filed for bankruptcy protection and subsequently shut down. "The difference is that Eastern and Pan Am were in long-term decline and pretty much hopeless cases," he said.

Eastern Airlines, a throwback that never made it out of bankruptcy.

Today's carriers are far stronger, but face an extremely challenging environment. Because they completed another round of bankruptcies and cost-cutting in the middle of the current decade, opportunities to further reduce costs are limited, but "they could probably bargain down some aircraft debt," Baggaley said.

It is conceivable that airport charges, which have been steadily rising in spite of industry weakness, could also be addressed were bankruptcies to occur.

FTN Equity Capital analyst Mike Derchin forecast this week that American and United will lose around $1 billion each this year, but he notes "I don't see bankruptcy as a reasonable near-term issue."

Derchin says questions remain: "Will international business travel resume? What impact will the swine flu have on travel in the coming flu season? How high will jet fuel prices go over the coming months?"

But he also sees "recent green shoots among the garden of weeds," including two domestic fare increases in June, strong leisure demand, and a balance between domestic supply and demand, helped by "late booking strength for June and July."

Despite the sector's weakness, Credit Sights analyst Roger King says: "It's hard to talk about airline bankruptcies. Two variables -- demand and oil -- affect cash flow, and they are basically imponderables right now. No one knows where demand is going, and no one knows where oil is going.

"Airlines have been on bankruptcy watch for the past 50 years," King adds. "There's really nothing new there."

In the past week, both United and American have issued public debt, to sharply different market receptions.

On Monday, United announced pricing for $175 million of senior secured notes due in 2012. The notes were issued at a discount to face value and will carry a coupon rate of $12.75% annually: S&P rated them B+. In a report, King said that with the discount, the yield on the notes is 17%.

"The pricing indicates a lack of investor interest and management desperation," King wrote. "This type of issuance is frequently a few steps from the grave - it signifies that sources of liquidity are drying up."

However, in an employee publication, United CFO Kathryn Mikells said "the credit rating on our transaction was relatively low, driving up the cost" because the issuance was secured by spare parts, and "over 50% of the collateral in the transaction is not eligible for Section 1110 bankruptcy protection." Additionally, she said, "our transaction did not have any type of structural credit enhancement."

By contrast, on Monday, American sold $520 million of notes, with a yield of about 10.375%. The debt is backed by aircraft, some in the carrier's fleet and some scheduled for delivery. Analyst King said American "did a deal for airplanes, which are better collateral" than the airplane parts backing the United debt. Additionally, unlike the United debt, American's debt had a provision that a third party would protect interest payments for 18 months.

S&P analyst Betsy Snyder assigned an A- rating to the American issue, but noted in a report that the carrier's outlook is negative, saying that "liquidity could face pressure" given current conditions and that "we could lower ratings if such conditions (led) unrestricted cash to consistently fall below $3 billion."