AirGuide Business News

Where Are the Mile-High Hookups?

2009-11-11T11:41:00.001-05:00

I scream, you scream, we all scream for in-flight Internet. And a few domestic airlines are rushing to provide the sky-high WiFi service we demand. There's just one problem: We don't want to pay for it. Not even a little bit.
Almost 18 months after they first began wiring planes for WiFi, carriers have outfitted around 600 domestic aircraft with one of the two existing flavors of airborne Internet. But they're right back where Boeing and a passel of international airlines were in 2003: They've built it, but no one is coming. Or, to be more precise, very few passengers are putting their money where their Internet appetite is.
Passengers "want to be connected, [but] they want it to be free," Doug Murri, Southwest Airlines senior manager of technologies, told a group of airline and entertainment executives this past summer. Alaska Airlines, testing the same satellite-based WiFi system as Southwest, reports that passenger usage plummets when it charges a fee. The higher the fee, the faster the decline. "Even when we charge $1—and we did try $1—we see a drop-off in people willing to pay," Alaska Airlines executive Craig Chase recently told the Wall Street Journal.
If this gloomy scenario surprises you, it's probably because you've believed the relentless hype emanating from Aircell, which sells a ground-to-air WiFi service it calls GoGo Inflight. Aircell trumpets every airline it signs up, and a tech-obsessed and a less-than-skeptic mainstream media echoes the "news."
The reality is very much different, however. The "uptake" rate, industry jargon for the number of passengers using GoGo during a flight, is abysmal. Although hard numbers are nearly impossible to come by—neither the airlines nor Aircell will discuss them publicly—insiders admit that fewer than 10 percent of all of the people who step on a WiFi-equipped plane are logging on to the Internet.
And most passengers who do log on are doing so free of charge, thanks to an endless series of no-cost trials, sponsored promotions, at-the-gate coupons, and other gimmicks. At the moment, two airlines with a substantial number of GoGo-equipped planes (American and Delta) offer GoGo gratis to first-time users. AirTran Airways is offering a free in-flight WiFi session for each one you purchase. And Virgin America is gifting in-flight WiFi to all passengers during the holiday season, thanks to a promotion sponsored by Google.
For those few willing to pay, Aircell, which controls GoGo pricing, has cut tariffs furiously and repeatedly since the service went live last year. Aircell's first price sheet asked passengers to pay $12.95 a session on American Airlines, which only offered GoGo on flights longer than three hours. As the service began appearing on shorter flights, there was a lower price point ($9.95). Then came a $7.95-a-flight option for passengers using GoGo with BlackBerries, iPhones, or other WiFi-enabled mobile devices. A $5.95 price was introduced for the shortest (less than 90 minutes) flights. Then came a daily pass ($12.95) and a monthly pass (30 days of unlimited usage for $49.95, now reduced to just $24.95).
The skimpy intake from passengers wouldn't have been quite so hard for Aircell to swallow if it had a reliable revenue stream from the airlines. But Aircell has had to swallow some or all of the estimated $100,000-a-plane installation cost to induce cash-strapped carriers to hop on the WiFi bandwagon. That's lead to a mad dash for cash (Aircell claims it has raised $265 million), at least one round of staff layoffs, a change of chief executives, and even a request for $65 million in federal stimulus funds.
Things are even less rosy at Aircell's major competitor, Row 44. It scored a publicity coup during the summer when the nation's largest discount carrier, Southwest Airlines, announced it would offer Row 44's WiFi beginning next year. But as analyst Tim Farrar points out, the rollout is contingent on Row 44 raising money to fund the installations. And since its satellite-to-aircraft system costs upwards of $250,000 a plane, Row 44 will have to raise about $125 million to wire Southwest's fleet of 550 Boeing 737s.
"There won't be enough paying users of in-flight broadband for both network providers and airlines to make a profit on the cost of deploying equipment and running a network," he says. "Not in a million years."
Then there are the practical issues weighing on the long-term viability of in-flight Internet. Even if laptop-toting business travelers want to use it, the cramped quarters in coach make WiFi a dicey logistical proposition. After all, anyone who has ever wrestled a laptop onto a seat-back tray table knows the physical constraints. Mobile devices are easier to maneuver, of course, but they also have more limited functionality. Short flights aren't conducive to the Web, either, since federal regulations prohibit the use of electronic devices below 10,000 feet—and that leaves precious little time for working, surfing, or even updating your Twitter or Facebook sites.
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American says TPG could invest in struggling JAL

2009-11-11T11:40:00.002-05:00

Private equity firm TPG could partner with American Airlines on a minority investment in Japan Airlines to prevent its defection to a rival airline group, the chief financial officer of American parent AMR Corp said.
The emergence of TPG [TPG.UL] as a potential investor comes as the loss-making Japan Airlines seeks its fourth state bailout since 2001, saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable routes.
The Japanese government pledged on Tuesday to enlist a state bank to offer bridge loans to prevent the airline from running short of cash and said it may introduce legislation to cut a pension shortfall that hit $3.7 billion in March.
Even as it struggles to avoid bankruptcy, JAL is being wooed separately by American Airlines and Delta Air Lines, which are keen to gain access to JAL's network in Asia and a stronger foothold in Japan. JAL is Asia's largest carrier by revenues.
AMR's Thomas Horton said TPG, which helped fund Continental Airlines emergence from bankruptcy in 1993 and backed a failed takeover attempt for Australia's Qantas Airways in 2007, has agreed to potentially invest in JAL as part of any deal with American Airlines.
"As appropriate and if it were welcomed by Japan Airlines and the government of Japan, TPG could also be part of a comprehensive recovery plan," Horton told reporters in Tokyo.
"They have been active in the airline space over the years."
A spokesman for TPG in Tokyo declined to comment.
American partners JAL in the Oneworld alliance, which pools frequent flyer miles and feeds passengers between members, and is keen to block it from joining Delta in the rival SkyTeam group.
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Airline stocks fall

2009-11-11T11:40:00.001-05:00

Airline stocks fell Tuesday as the broader market paused after big rallies in recent days.
The Amex Airlines Index dropped 1 percent, with 11 of its 13 components lower in midday trading.
An analyst for UBS said revenue trends for the largest airlines appear to be improving, with December looking better than November.
UBS analyst Kevin Crissey said fourth-quarter revenue for the largest airlines, the so-called legacy carriers, may be better than expected. He said revenue divided by capacity for November was likely to be slightly worse than a year ago, but that December was looking better.
The Dow Jones industrial average didn't offer any encouragement to airline investors. After 200-point rallies in two of the three previous trading days, the Dow fell 9.37, or 0.1 percent, to 10,217.57 at midday. Two out of three stocks fell.
Airlines didn't even get help from a modest dip in oil prices — down 11 cents to $79.32 a barrel at midday on the New York Mercantile Exchange.
In midday trading, shares of Delta Air Lines Inc. fell 15 cents to $7.74; American Airlines parent AMR Corp. dropped 24 cents, or 4.2 percent, to $5.54; and United parent UAL Corp. shares lost 18 cents, or 2.6 percent, to $6.82.
Southwest Airlines Co. lost 27 cents, or 3 percent, to $8.79; Continental Airlines Inc. fell 34 cents, or 2.6 percent, to $12.73; US Airways Group Inc. lost 16 cents, or 5 percent, to $3.04; and JetBlue Airways Corp. dipped 9 cents to $5.11.
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The Non-Travel Business

2009-11-10T12:10:00.000-05:00

“If you can’t beat ’em, join ’em,” may be the best maxim to explain why travel companies are getting into the virtual meeting business, actually helping clients avoid flying halfway around the globe.
Two of the world’s biggest hotel companies, Starwood Hotels and Resorts and Marriott International, are outfitting some of their meeting rooms with telepresence suites, a high-end system that leapfrogs typical videoconferencing technology. Their goal is to rent the rooms to customers who are already embracing virtual alternatives to travel, but do not have telepresence suites everywhere they would like to use them.
“Major multinational companies have this technology in their corporate headquarters,” said David Townshend, Marriott’s senior vice president for sales. “But it’s expensive, so they’ve looked to Marriott and some other providers to really extend their footprint into regional locations.”
Telepresence technology has been around for several years, but analysts say the business model for public rooms, which rent for about $500 an hour, is converging with tight travel budgets to create a more compelling reason for companies to give it a try. The technology itself has also improved, eliminating the delays that can make the typical videoconferencing experience awkward.
The telepresence suites are intended to make participants feel as if they are meeting face-to-face: when you walk into the room, there is half a conference table facing high-definition screens that project life-size images of people sitting in similar suites elsewhere in the world.
To enhance the feeling of being in the same room, the other half of the table appears on screen, participants’ eyes are at the same level and the walls are even painted the same color.
“With telepresence, you really feel like you can look people in the eye and get a real sense of what they’re about,” said Richard Redelfs, a general partner with Foundation Capital, a venture capital firm in Menlo Park, Calif., that has rented suites at a nearby Cisco Systems office to meet virtually with entrepreneurs in India.
“I’m a people person and that’s the nature of the venture business, so I was a little skeptical about the experience,” Mr. Redelfs said. “But it’s amazing. There’s no latency in the system — when you say something you get an immediate response. Psychologically, you really start behaving like you’re face to face.”
Although the company does not use telepresence often enough to buy its own suite, which can cost $200,000 plus charges for network services and support, renting one has turned out to be an efficient and economical way for all nine partners to size up the founders of far-flung start-ups before deciding on an investment. (A few partners still make the trip to meet in person before anyone writes a check.)
That is precisely the type of business Starwood and Marriott are hoping to capture, along with revenue from customers who travel to metropolitan markets to use the telepresence suites for recruiting interviews, legal depositions and other small meetings.
“There’s an opportunity for us not just to host a meeting but also to host room nights for people traveling to those hubs,” said Mary Casey, a vice president at Starwood, which plans to have at least two telepresence suites open by the end of the year, with more following in 2010.
Starwood locations in development include hotels in New York, Sydney, Toronto, Los Angeles and Chicago, while Marriott plans to open its first telepresence suite at the New York Marriott East Side in December, followed by hotels in San Francisco and Bethesda, Md.
Both hotel companies are working with Cisco, a leader in telepresence technology, with about 3,100 of its suites installed by customers worldwide.
There are other providers as well, among them Polycom, Teliris, Hewlett-Packard and Tandberg (which Cisco is seeking to acquire). And one of the challenges has been to link the technology of those various systems and getting network providers to talk to each other. Cisco, for instance, works with Tata Communications at Starwood’s properties and the Taj Boston hotel and has worked with AT&T at the Marriott hotels. “You’ve got to make it possible for all these various networks to hook up to each other,” said Scott Morrison, a vice president with the technology research company Gartner. “That will help grow the demand for these rooms.”
The telepresence providers are also seeking to expand the number of suites by introducing more that can be rented by the public.
“The value goes up every time somebody else gets connected,” said David Hsieh, a marketing vice president with Cisco, which hopes to have 50 public suites open by early next year.
In fact, some companies that have telepresence technology are incorporating it into their travel booking systems, Mr. Morrison said, so employees consider it as a choice in lieu of taking a trip.
Seizing on that trend, travel companies like American Express and Carlson Wagonlit Travel plan to help clients weigh whether to use a telepresence suite and then to reserve a room. The move is meant to expand, not chip away at, their core travel booking business.
“Travel is about connecting people with each other, and traditionally that means putting people on planes, on trains and in automobiles, but the recession has changed that environment considerably,” said Alicia Tillman, a vice president with American Express.
“Offering telepresence as a different option to still connect people with each other is a method that we fully expect our client companies are going to adopt and embrace.”
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DRS lays off 160 in Melbourne

2009-11-04T12:56:00.000-05:00

About 160 full-time workers were laid off and sent home Tuesday from the DRS Technologies plant in Melbourne, a painful reminder that broader economic forces -- not just the pending retirement of the space shuttle -- will continue to hamper Brevard County's employment outlook.
The recession and reduced orders for military hardware necessitated the layoffs, according to the company, leaving about 900 employees.
With September's 11.1 percent unemployment the highest in Brevard since the 1970s, layoffs in the county's defense industry amplify continued job losses in the space industry. As the nation appears poised to recover from the recession, Brevard faces the prospect of escalating unemployment, with nearly 6,000 more space industry layoffs to come as the shuttle program ends in 2010 or 2011.
More than 1,200 space industry jobs have been lost this year.
DRS officials said they do not expect further reductions.
"I know of no plans past today," Richard M. Goldberg, DRS vice president of public affairs and communications, said.
Terry Murphy, president of DRS' RSTA group, which develops and makes electro-optical and infrared technologies such as sights for ground vehicles, aviation and maritime use, said production levels at the New Jersey-based defense company were elevated the last two years by supplemental government funding.
That's now changing.
"With supplemental funding to support the war being scaled back, the demand is returning to historical levels," Murphy said in statement.
With the winding down of the war in Iraq and the dependence of the war effort in Afghanistan on unmanned drones, equipment from DRS is in less demand.
"These are challenging times," Goldberg said. "The global financial crisis and federal budget constraints have put pressure on the defense and aerospace industry to operate more efficiently."
The cutbacks do not mean DRS is leaving Melbourne. The company recently initiated a long-term lease there and upgraded its facilities.
"We see these investments in Melbourne as an opportunity to support our competitiveness in these important markets and continue to support the warfighter," Murphy said.
Rome-based Finmeccanica, Italy's biggest defense contractor, acquired DRS for $5.2 billion in 2008.
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Southwest pilots approve new labor contract

2009-11-02T10:36:00.000-05:00

Pilots for Southwest Airlines have approved a new 5-year labor contract that the union president said has smaller pay raises than his members wanted.
The union said Monday that the vote for ratification was about 87 percent, with about 93 percent of Southwest's 5,900 pilots casting a ballot.
The new contract includes retroactive pay raises of 2 percent for 2007 and 2008, plus 2 percent in 2011, the union said. Raises for 2009 and 2010 will be based on Southwest's profitability — so far, the airline is losing money this year.
The contract also boosted retirement contributions and added more job protections, the union said.
The deal is the result of three years of bargaining between the nation's largest discount airline and the Southwest Airlines Pilots' Association.
Southwest CEO Gary Kelly said the contract rewarded pilots for helping the company earn a profit the past two years. But, he said, the deal was also "in keeping with the current uncertain economic outlook."
Southwest and other airlines are fighting a downturn in travel, especially among high-fare business customers. The Dallas-based airline is in danger of posting its first annual loss since 1972.
Union president Carl Kuwitzky said that while his group "never considered this a home-run contract, our members felt it contained enough positive gains in a short-term deal to constitute ratification."
The pilots narrowly rejected a company proposal in June. Kuwitzky said union negotiators went back to the table to address areas that pilots felt were lacking.
The union said the final deal provided for more scheduling flexibility and job protections if Southwest strikes so-called code-sharing partnerships with other airlines.
In code-sharing deals, an airline can sell tickets on a partner carrier and get some of the revenue. Unions fear that the deals can be used to shift work to employees at lower-paying airlines.
Kuwitzky said the union would try to improve issues of "higher priority," including pay, in future bargaining.
The Dallas-based airline and the Southwest Airlines Pilots' Association have been in negotiations since the contract became open for change in September 2006.
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Business travel pitched as economic engine

2009-10-29T09:56:00.002-04:00

The travel industry is working to redefine itself as a key player in the American economy: a means by which companies can improve profits, a source of tax revenue and a provider of jobs.
Geoff Freeman, U.S. Travel Association senior vice president, said factors that include the recession, a spurt of public anger over extravagant business travel and politicians who lashed out at the travel industry resulted in $2 billion worth of events and meetings being canceled when the rancor was at its peak early this year.
If over the years the industry had done a better job of articulating why it is a vital economic force, the damage likely would not have been so great, Freeman said Wednesday at a national marketing forum organized by the association.
"We had left ourselves exposed, terribly exposed. We were the folks that were an easy target," Freeman said.
Steve Moore, president and CEO of the Greater Phoenix Convention and Visitors Bureau, said hospitality groups focus too much on hotel and meal taxes, when they should tout their economic impact, including sales taxes and property taxes they bring communities.
The convention business can do more to paint a picture of the people who work in the industry and note that travelers don't drain city services, Moore said.
Citing research by Oxford Economics, a consulting firm that collaborates with Oxford University's business college, Freeman said that for every dollar companies spend on business travel, they get an average of $12.50 in revenue and $3.80 in profit.
Christine Duffy, president and CEO of Maritz Travel Co., a corporate meeting organizer, said meetings are a tool for keeping "employees engaged and motivated."
"Sales and marketing executives know they have to get back in front of their people," she said.
Bentonville-based Wal-Mart Stores Inc., the world's largest retailer, didn't hold back this year for its annual meeting, which is webcast and shown on TVs in its thousands of stores. Managers from Walmart properties around the world gather in June for a week of training, culminating with nearly 20,000 people packing a basketball arena for a celebrity-filled cheering session and business meeting/
But Moore said even groups like teachers unions whose bylaws require annual gatherings are finding turnout as much as 30 percent below normal.
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Price pressures ground airline sector recovery hopes

2009-10-29T09:56:00.001-04:00

Germany's Lufthansa and the airline industry's representative body provided a gloomy outlook for the sector as carriers around the world struggled to make a profit amid a fierce battle for business.
"Initial signs of a stabilization in volumes are far away from making up for the enormous and unrelenting pressure stemming from the massive fall in price levels," the German flagship carrier said on Thursday.
Industry body IATA echoed Lufthansa's warning, saying it was still too early to talk about a recovery. IATA has said it sees the world's airlines losing $11 billion this year as consumers tightened their purse strings and companies cut travel budgets.
"The worst may be over in terms of the fall in demand, but yields continue to be a disaster and costs are rising," IATA said.
Airlines around the world have been crippled by a toxic mixture of reduced spending on travel, a drop in global trade and rising oil prices. To cut their bloated cost bases, many have grounded planes and canceled or deferred plane orders.
Lufthansa has rescheduled some aircraft deliveries to save 1 billion euros ($1.5 billion) over the next three years. Plane makers Boeing and Airbus are headed for their worst annual order tally in at least 15 years.
Demand has suffered especially this year in the highly profitable business class segment as companies ask staff to book cheaper seats.
Finnish national carrier Finnair earlier said it saw third-quarter sales fall sharply due to declining demand for business travel, adding it would continue to make losses during the rest of the year.
Air cargo is in even worse shape than passenger demand as global trade remains at low levels, IATA said. Lufthansa, which operates Europe's biggest air cargo fleet, said revenue in the sector was still falling steeply due to declining prices.
Lufthansa shares were up 2.2 percent at 10.60 euros by 1119 GMT (7:19 a.m. EDT), while Finnair was down 1.3 percent.
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U.S. labor agency mulls new airline union proposal

2009-10-29T09:55:00.002-04:00

National Mediation Board, a U.S. federal labor-management relations agency, is considering a proposal to allow airline workers to form unions with the majority approval of those voting, Bloomberg news agency said, citing people familiar with the matter.
AFL-CIO, the largest U.S. labor federation had asked the board for a rule change that would base the outcome of union elections at airlines on the number of votes cast instead of on the majority of eligible members of a worker group.
Delta Air Lines Inc, which bought Northwest Airlines in October 2008 to form the world's biggest carrier, has opposed the AFL-CIO's request for a rule change.
"It's been our sincere hope that the National Mediation Board would look at our recommendations favorably," Edward Wytkind, head of the AFL-CIO's transportation trades department, told Bloomberg.
The National Mediation Board could not be immediately reached for a comment by Reuters outside of U.S. business hours.
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US Airways, American Airlines cut 1,700 jobs

2009-10-29T09:55:00.001-04:00

US Airways and American Airlines said Wednesday they were cutting a total of 1,700 jobs as they face turbulence amid prolonged recession.
US Airways said it would cut about 1,000 jobs during the first half of 2010 and reduce service to Europe as it hunkers down to battle weak demand.
The airline will focus on the key network strengths at its three hubs in Charlotte, North Carolina; Philadelphia, Pennsylvania; and Phoenix, Arizona; as well as in Washington and its shuttle service, the company said in a statement.
"By concentrating on our strengths we will be better-positioned to return US Airways to profitability," said Doug Parker, chairman and chief executive.
The Tempe, Arizona-based airline said it would suspend five European destinations served from Philadelphia, "given the weakness in trans-Atlantic revenue": Birmingham, England; London Gatwick; Milan, Italy; Shannon, Ireland; and Stockholm, Sweden.
Among other realignment moves, the company said it would give back its Philadelphia-Beijing flight authority to the government and slash flights to Las Vegas from 64 to 36 daily departures by February.
The announcement came after the airline reported last week a net loss of 80 million dollars in the third quarter as air travel slumps amid the recession and fuel prices rise.
Separately, AMR, the parent of American Airlines, said it was slashing up to 700 management and union jobs in its maintenance and engineering operations to respond to restructuring changes undertaken to cope with the market turbulence.
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AMR Said to Seek Deeper Alliance Ties With Japan Airlines

2009-10-28T10:33:00.001-04:00

AMR Corp.’s American Airlines, the world’s second-largest carrier, has proposed a deepening of its tie-up with Japan Airlines Corp. as it seeks to keep the Asian company in the Oneworld alliance, a person with knowledge of the plan said.
Fort Worth, Texas-based American Airlines has urged Japan Air to seek antitrust immunity to collaborate on schedules and pricing as soon as an “open skies” treaty between the two countries is concluded, according to the person, who asked not to be identified because the discussions aren’t public.
The new alliance could be approved as early as June, assuming completion of the treaty in December and an application for regularity approval in January, the person said.
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Continental Airlines joins Star Alliance

2009-10-28T10:32:00.000-04:00

Continental Airlines on Tuesday officially joined the Star Alliance, a move it says will give passengers more options and the airline more places to expand.
The Star Alliance is the world's biggest airline grouping, with 25 members; including United, US Airways, Lufthansa and Air Canada. Continental was a member of the SkyTeam alliance, but left over a year ago when two other major carriers in the alliance — Delta and Northwest — said they would merge.
Speaking to a group of reporters in midtown Manhattan Tuesday, President and Chief Operating Officer Jeff Smisek said the merger relegated Continental to "junior partner status" and prevented it from having the kind of input it wanted in an alliance.
Smisek said that with the Star Alliance's wide reach, the change will give passengers many more destination options through connections with other carriers. He estimated that the move to Star will bring in about $100 million a year in added revenue.
Continental is the only major carrier ever to switch membership in an airline alliance. Most airlines join these groups to share pricing and scheduling information. Carriers can also sign agreements, called code shares, within these teams to cooperate on route schedules and to combine some marketing and operations.
Continental on Tuesday signed code-sharing deals with four Star members — United, Lufthansa, Air Canada and UK-based bmi (also known as British Midland Airways.) It plans more deals with other Star partners in the coming months.
Smisek also said again that business travelers, which Continental focuses on, will eventually come back in greater numbers. He shot down the assumption that passengers will never again want to spend more money to fly in the front of the plane, but acknowledged that he's still not sure whether the market will return to what it was before the recession.
Continental, based in Houston, is the fifth largest airline in the world.
In morning trading, Continental shares rose 40 cents, or 3.3 percent, to $12.43.
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Textron Net Falls 98% as Aircraft Production Slumps

2009-10-27T10:05:00.000-04:00

Textron Inc., the maker of Cessna airplanes and Bell helicopters, said third-quarter profit fell 98 percent as the company reduced production to cope with slumping demand.
Net income declined to $4 million, or 1 cent a share, from $206 million, or 83 cents, a year earlier, Providence, Rhode Island-based Textron said today in a statement. Profit from continuing operations excluding some costs was 12 cents a share, beating the average estimate for a 4-cent loss by nine analysts in a Bloomberg survey. Sales fell 27 percent to $2.55 billion.
Chief Executive Officer-elect Scott Donnelly last month said Textron was ahead of plan in winding down most of its unprofitable financing operations, while demand is starting to recover for Cessna aircraft. Textron, which also builds E-Z-GO golf carts, has slashed production and jobs and shuttered a factory as sales dropped during the recession.
“Cessna remains a question mark for the near and intermediate term,” Stephen Levenson, a New York-based analyst with Stifel Nicolaus & Co. Inc. with a “hold” rating on Textron shares, wrote in an Oct. 26 note. “The success of the plan and the overall demand for business jets is critical to improved Textron overall growth.”
The company said full-year earnings from continuing operations will be at the upper range of its previous forecast of 33 cents to 63 cents a share on sales of $10.6 billion, excluding special charges.
Analysts’ average prediction was for third-quarter sales of $2.52 billion. Textron fell 77 cents to $18.36 yesterday in New York Stock Exchange composite trading. The shares have gained 32 percent this year.
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Vueling Profit Up 175 Percent, Q4 Demand Stable

2009-10-27T10:04:00.000-04:00

Spanish airline Vueling on Tuesday reported third quarter operating profits up 175 percent from a year earlier and said it expects demand to remain relatively stable in the fourth quarter of 2009.
Operating profits for the low-cost company, which merged with Iberia's subsidiary Clickair in July, reached EUR68.1 million euros, as revenues rose 69 percent from a year earlier to EUR259.2 million.
"In current circumstances, Vueling expects to report even better results in 2010 than in 2009," the company said, adding that more than 60 percent of the merger synergies will be felt next year.
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Gulf Coast states push European defense bid

2009-10-26T10:03:00.000-04:00

Politicians along the nation's Gulf Coast are teaming up with other southern lawmakers to promote a bid by European defense giant EADS to build a new aerial refueling tanker for the Air Force.
Republican governors Bob Riley (Ala.), Haley Barbour (Miss.), and Bobby Jindal (La.) joined Monday with executives from Northrop Grumman and the European Aeronautic Defence and Space Co. to boost the Aerospace Alliance -- an advocacy group that is pinning its hopes for a new multi-state aerospace corridor on a successful bid by those companies against Boeing in the looming $35 billion tanker competition.
Riley sought to put an American stamp on the bid by EADS bid, which plans to manufacture the tanker in Mobile, Ala.
"Our first initiative is to win the KC-45 tanker; our first lesson is geography -- Mobile, Alabama and the Gulf Coast States are part of the U.S., and our jobs are American," Riley said.
Members of the Florida congressional delegation, including Sen. Bill Nelson (D) and Rep. Allen Boyd (D), who is on the House Appropriations Defense Subcommtitee, touted the importance of the aerospace industry to Northwest Florida as well, but they stayed away from talk of tankers.
"Coupled with the recent announcement by Southwest Airlines of service to the new international airport in Northwest Florida, the formation of this alliance demonstrates a growing momentum that places the region and its assets center stage," said Nelson, a member of the Senate Armed Services Committee.
The Aerospace Alliance scored lobbying representation from DC Navigators in Washington, ccording to Senate lobbying records. The firm is organized as a 501(c)(6) -- a type of nonprofit group that, like chambers of commerce, does not have to disclose its donors and has no limits on lobbying, according to Brett Kappel, counsel for Arent Fox LLP.
EADS, the parent company of Airbus, won the tanker competition last year, but the Air Force's decision was overturned after the Government Accountability Office upheld a protest by Boeing; a new competition restarted in September.
It took the government months to finally release a draft of its bid specifications, and the companies are just beginning to present more details about their reactions to the new specs.
The Alabama congressional delegation, which supports the EADS bid, shot out a blistering letter to Defense Secretary Robert Gates on Monday, outlining several concerns with the new competition.
The lawmakers, led in the Senate by Republicans Richard Shelby and Sen. Jeff Sessions, said the new draft specifications for the tanker indicate that the Pentagon won't assess how risky the bids are in terms of past performance or price. During the last competition, Northrop and EADS beat Boeing in the risk category.
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UAL posts 3Q loss, sees business travel improving

2009-10-26T10:02:00.000-04:00

United Airlines said on Tuesday that it's seeing early signs of a recovery in business travel as it reported a smaller-than-expected quarterly loss.
The recession has hurt business travel at all the big airlines, and United and other carriers have used discounts to fill seats. So while airlines would welcome the return of the business traveler, what they really want is the return of that traveller's willingness to pay top dollar to fly around the world.
Even though United third-quarter traffic fell only 2.9 percent during the quarter, revenue dropped by 20.3 percent to $4.43 billion.
"There's no opportunity here for a full revenue recovery until we get premium cabin pricing back," said United President John Tague on a conference call with analysts.
He said it's not clear how long that will take, "but we are seeing progress, which is quite encouraging from where we were just three, four, five months ago."
Meanwhile they're losing money.
United parent UAL Corp. said it lost $57 million during the quarter, or 39 cents per share. Not counting fuel hedges and accounting issues it said the loss would have been 43 cents per share. That was far better than the loss of 94 cents per share expected by analysts polled by Thomson Reuters.
The third-quarter loss also was much smaller than the $792 million loss during the same period last year that was driven by accounting for fuel hedges.
UAL shares rose 64 cents, or 8.8 percent, to close at $7.90.
As one of the two big U.S. carriers to Asia, United's route network is skewed toward business travel. That has hurt United during the recession but the Chicago-based airline hopes it will help it during a recovery.
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Starwood Reports Third Quarter 2009 Results

2009-10-22T09:02:00.003-04:00

Starwood Hotels & Resorts Worldwide, Inc. today reported EPS from continuing operations for the third quarter of 2009 of $0.22 per share compared to $0.62 in the third quarter of 2008. Excluding special items, which net to a benefit of $15 million in 2009 and a charge of $16 million in 2008, EPS from continuing operations was $0.14 for the third quarter of 2009 compared to $0.71 in the third quarter of 2008. Excluding special items, the effective income tax rate in the third quarter of 2009 was a benefit of 7.1% compared to a charge of 29.7% in the same period of 2008 primarily due to a $10 million tax benefit for the reversal of deferred taxes related to interest which is no longer deemed necessary.
Special items in the third quarter of 2009 totaled $15 million of net benefits ($0.08 per share) and included impairment charges of $27 million and restructuring charges of $2 million which were more than offset by a $44 million tax benefit primarily related to hotel sales.
Income from continuing operations was $41 million in the third quarter of 2009 compared to $113 million in 2008. Excluding special items, income from continuing operations was $26 million in the third quarter of 2009 compared to $129 million in 2008.
Net income was $40 million and EPS was $0.22 in the third quarter of 2009 compared to $113 million and EPS of $0.62 in the third quarter of 2008.
Frits van Paasschen, CEO said, “Over the past twelve months we have focused on cost containment and debt reduction, which positions us well to ‘Own the Upswing’. Our increasingly fee-based, capital-efficient business model will grow as REVPAR recovers and as our pipeline translates into unit additions. Our owned hotels are skewed towards the high end and have been particularly hard-hit over the past twelve months, implying they are poised for a strong rebound as the world economy recovers. And with half of our hotels outside of the United States, we will benefit from secular growth in international markets.”
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BAA Sells London Gatwick Airport For GBP1.5 Bln

2009-10-22T09:02:00.001-04:00

Spain's Ferrovial, under pressure to reduce its dominance in UK airports, has agreed to sell London's Gatwick airport for GBP1.51 billion pounds (USD2.46 billion) to a consortium involving Credit Suisse and General Electric.
Ferrovial said on Wednesday that it expected to make a capital loss of around EUR142 million euros (USD212.6 million) against its consolidated earnings following the sale by airport operator BAA, majority owned by the Spanish group.
It comes three years after it paid GBP10.1 billion (USD16.6 billion) for BAA, which operates seven UK airports as well as international operations.
It put Gatwick up for sale last year after UK authorities said the company should reduce its UK airport portfolio, though BAA is currently appealing a UK Competition Commission ruling ordering it to sell Gatwick and two other airports, alleging that the decision was biased.
Buying Gatwick, London's second-busiest airport, is Global Infrastructure Partners (GIP), a consortium which already owns London City Airport.
"Head-to-head competition with Heathrow will be limited but a more focused approach on Gatwick will help to attract passengers," said GIP partner Michael McGhee.
"The upgrade of facilities to make it more pleasant in terms of an experience, that's a bit of a longer haul," he said, adding that some of the improvements could be done within two to five years.
The sale price is lower than the airport's GBP1.57 billion Regulated Asset Base (RAB) value but higher than offers BAA received from bidders before the summer.
Analysts said that after taking into account BAA's selling costs, the deal could represent a discount of up to 14 percent of the RAB.
The deal will be closely watched by governments looking to sell airports across Europe, including those in Lisbon and Prague, after the financial crisis forced many to shelve privatisations as asset values fell.
The UK's Competition Commission has ordered BAA to sell Gatwick, London Stansted and either Edinburgh or Glasgow airports.
BAA moved quickly to launch the sale of Gatwick early to ensure it would not have to put more than one of its major airports on the market at the same time, a source close to the firm said. The person said that it was also reacting to negative public opinion of its dominance over London's airports.
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Delta Posts $161 Million Loss as Recession Cuts Sales

2009-10-22T09:01:00.001-04:00

Delta Air Lines Inc., the world’s largest carrier, posted a third-quarter net loss of $161 million as passenger revenue fell in the recession.
Excluding some costs for employee severance and the acquisition of Northwest Airlines, Delta posted a profit of 6 cents a share, beating the average estimate for a 6-cent loss based on 10 analysts surveyed by Bloomberg.
Delta was among the U.S. airlines relying on keeping fares low to lure vacationers, which contributed to a 21 percent drop in revenue to $7.57 billion. The Atlanta-based carrier said it will be about breakeven this quarter as it shrinks available seating.
“The global recession drove a significant revenue decline for the quarter, but we see improving trends in load factors, yield and business traffic,” President Edward Bastian said in a statement. “We will continue to exercise capacity restraint, coupled with strong cost control.”
The quarterly net loss of 19 cents a share compared with a loss of $50 million, or 13 cents, a year earlier, Delta said.
Delta fell 69 cents, or 7.7 percent, to $8.33 yesterday in New York Stock Exchange composite trading. The shares tumbled 27 percent this year before today, making it the fourth-worst performer among 12 carriers in the Bloomberg U.S. Airlines Index.
Analysts projected an operating loss of 29 cents for the current quarter, based on the average of 10 estimates. Delta said it is preparing to reduce seating capacity on its main jet operations by as much as 11 percent, with a reduction of up to 16 percent on overseas routes.
Delta said it ended September with $5.5 billion in cash and cash equivalents and a $300 million undrawn revolving credit facility.
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Airlines still looking for business travelers

2009-10-22T09:00:00.002-04:00

Airlines value premium travelers above other customers, letting them board first, eat a meal, and order a cocktail without whipping out a credit card.
Many of them are business travelers who fly frequently and often pay higher last-minute fares than the jeans-and-T-shirt crowd on the way to see grandma. Anyone who questions why airlines treat business travelers nicely only needs to look at the carriers' third-quarter financial reports.
On Wednesday, American Airlines parent AMR Corp. reported that it lost $359 million in the third quarter, and Continental Airlines Inc. posted an $18 million loss. Those results followed losses in the last few days reported by Southwest Airlines Co. and United parent UAL Corp.
That news, and oil prices above $81 a barrel, dragged down airline stocks. Continental and AMR shares fell more than 11 percent in afternoon trading.
Overall traffic is picking up. Planes were mostly full over the summer vacation period and through September.
But revenue at the biggest airlines plunged about one-fifth from the levels of summer 2008, largely because business travelers stayed home, grounded by cutbacks in corporate travel during the recession.
Airline executives refused to predict when demand for travel — and higher prices — might come back.
"We are bumping along the bottom," Continental President Jeff Smisek said Wednesday. "I can't tell you when the recovery will come or how quickly or at what rate business travel will return ... the recovery seems to be quite slow."
The day before, United President John Tague said there was no chance airlines could return to earlier revenue levels until they can recapture high-paying customers.
Basili Alukos, an airline analyst at Morningstar, said United is the most heavily dependent on premium passengers — business travelers and international customers — but that many airlines are feeling the effect. He said there has been a permanent change in travel habits, including more business travelers buying cheaper tickets in coach.
Alukos said some premium passengers will return as the economy improves and companies employ more people who need to travel, "but everyone is going to try to hold down their costs."
It's hard to know how many passengers are flying for business versus pleasure. Southwest has said that in good times, at least 40 percent of its customers are business travelers. It may be higher at other airlines. Alukos estimates that a little more than half of U.S. passengers are traveling on business.
At AMR, traffic in the third quarter fell about 6 percent, but revenue plummeted 20 percent. The company blamed a drop-off in business travel and low fares to entice leisure customers to American, the nation's second-largest carrier.
AMR's $359 million loss compared with profit of $31 million in the third quarter of 2008, when the Fort Worth-based company sold its investment business.
Houston-based Continental, the No. 4 U.S. airline, lost $18 million, which was a big improvement over the $230 million loss a year earlier, when jet fuel prices were roughly 50 percent higher.
Revenue plunged 20.2 percent, to $3.32 billion, despite a traffic downturn of less than 1 percent. Weak sales cut across all of Continental's markets, with trans-Atlantic business particularly sluggish.
However, Continental is betting on improvement next year. After two years of cutting capacity by eliminating flights or using smaller aircraft, the airline expects to increase capacity next year by between 1.5 percent and 2.5 percent, with all the extra flying on international routes.
While larger carriers posted losses for the quarter, low-fare AirTran Airways said Wednesday it earned $10.4 million, although revenue fell 11 percent, to $597.4 million. A year ago, the company lost $94.6 million.
AirTran has been dropping unprofitable routes and executives of the carrier, based in Orlando, Fla., said they expect to increase capacity between 2 percent and 4 percent next year.
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Sprint to Buy iPCS Affiliate

2009-10-21T17:40:00.001-04:00

Sprint Nextel, the third-largest U.S. wireless carrier, announced the acquisition of its wireless affiliate iPCS Inc., which is expected to end the long legal battle between the two entities. Based in Schaumburg, Illinois, iPCS exclusively markets wireless services under the Sprint brand across 81 markets in several Midwestern states
The deal represents the latest in a series of acquisitions of its affiliates by Sprint. Acquisition of iPCS leaves just two remaining affiliates (out of the original ten), Swiftel and Shentel. Both of them are small privately-held operators with limited subscriber base.
Under the agreement terms, Sprint will commence a cash tender offer to acquire all outstanding shares of iPCS Inc for $24 per share, representing a 34% premium to iPCS’s closing price on Oct 16. Sprint will make a cash payment of approximately $426 million for the acquisition, and will assume $405 million in iPCS net debt. The acquisition is subject to regulatory approvals and other closing conditions and is expected to complete in fourth quarter this year or early 2010.
Since 2005, iPCS has been in litigations as it continued to sue Sprint on the carrier’s acquisition activities including the purchase of Nextel’s business, 51% stakeholding in Clearwire Corp. and the impending acquisition of Virgin Mobile USA.
iPCS Inc has argued that these investments have violated its affiliate agreements with Sprint. The company has also demanded the divestiture of Nextel’s iDEN wireless networks in specific iPCS markets. The acquisition, if successfully consummated, is likely to end all the pending litigations between the two entities and Sprint will no longer be required to divest any of its network assets.
Sprint remains significantly challenged by the dismal economic environment which has contributed to the precipitous decline in the subscriber base and associated revenues. In contrast, its larger peers Verizon and AT&T continue to expand their respective customer bases.
Acquisition of iPCS will expand Sprint’s service territories by providing access to a potential subscriber population of 12.6 million, which falls under the affiliate’s netwok coverage. Moreover, Sprint will expand its direct customer base with iPCS’s more than 700,000 wireless subscribers and 270,000 wholesale customers. The transaction is also expected to offer Sprint approximately $30 million in annual synergies and will be accretive to free cash flow in 2010.
While Sprint’s cash resources (approximately $4.6 billion) are adequate to fund the acquisition, assumption of iPCS related debt will further stretch the company’s balance sheet considering its current high debt level.
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Boeing posts $1.6B loss in 3Q on plane charges

2009-10-21T17:39:00.000-04:00

Boeing Co. lost $1.6 billion in the third quarter, hurt by growing costs from two troubled plane programs that forced the airplane maker to slash its profit forecast.
The world's second-largest commercial plane maker after Europe's Airbus, Boeing has struggled to launch its new 787 passenger plane and a revamped version of its classic 747 jumbo jet. Production delays, parts shortages and last-minute fixes have cost the company billions in write-downs along with additional design and manufacturing expenses.
While sales edged up 9 percent during the quarter, profits took a big hit because Boeing booked charges of more than $3.6 billion for its two plane programs.
They "clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business," Boeing Chief Executive Jim McNerney said in a statement following the results announcement Wednesday.
They also led the Chicago-based company to cut its 2009 profit forecast to $1.35 to $1.55 per share from $4.70 to $5 per share.
Boeing's quarterly loss amounted to $2.23 per share, compared with earnings of $695 million, or 96 cents per share, a year earlier.
Quarterly revenue rose to $16.69 billion from $15.29 billion a year earlier. But the comparison was made easier by a labor strike and supplier problems last autumn, which sliced $2.1 billion off revenue.
Sales from Boeing's defense business, which makes fighter jets, satellites and security systems, rose 3 percent. The business accounts for about half the company's overall revenue. Commercial aircraft revenue rose 13 percent.
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AirTran swings to quarterly profit

2009-10-20T17:39:00.001-04:00

Orlando, Fla.,-based AirTran Holdings Inc. said it swung to a third-quarter net profit of $10.4 million, or 8 cents a share, compared to a loss of $94.6 million, or 81 cents a share, in the year-ago period.
Analysts had been expecting earnings of 8 cents a share, according to data compiled by FactSet Research.
Revenue fell to $597.4 million from $673.3 million last year. Passenger revenue fell nearly 17% to $529 million, while other revenue rose 79% to about $68 million.
AirTran's (AAI 5.02, -0.38, -7.04%) fuel bill fell 47.7% to $190 million.
Shares of AirTran fell 2.5% at last check to $5.26. The stock is up about 16% for the year.
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Continental loses $18 million in third quarter

2009-10-20T17:39:00.000-04:00

Continental Airlines Inc. lost money in the third quarter as business travelers stayed home, causing a nosedive in airline revenue.
But not everything was bleak for Continental. Traffic picked up in September, even if it took cheap fares to get them on board.
And the financial results were much better than a year ago.
Houston-based Continental said it lost $18 million, or 14 cents per share.
In the same quarter last year, Continental lost $230 million as it struggled with soaring jet fuel prices.
Excluding charges for severance payments and write-downs, the company said it would have earned $2 million this summer, or 2 cents per share.
Analysts, who exclude such items from their forecasts, had predicted Continental would lose 6 cents per share.
Revenue plunged 20.2 percent, to $3.32 billion.
Continental blamed the revenue downturn on business travelers, who were flying less and buying cheaper coach tickets due to the recession.
Overall traffic declined less than 1 percent compared with the same period last year, and planes were more full than last year. But many of those passengers only responded to cheap fares, and they weren't buying high-priced tickets in first or business class.
The weak sales cut across all of Continental's markets, with trans-Atlantic business particularly sluggish.
Continental caught a break from falling jet fuel prices. The average price of a gallon of fuel fell 48.4 percent from a year ago, and with fewer flights, the airline burned 5.1 percent less fuel.
Continental said the percentage of seats booked over the next six weeks is flat to up 1 percentage point compared with last year for most of its routes, and up 4 to 5 points on trans-Atlantic routes. In other words, things aren't getting worse, but there's not much evidence of an impending rebound in travel either.
The airline expects fourth-quarter passenger-carrying capacity to be 0.8 percent below a year ago — it's not cutting flights as often as it was earlier in the year.
President Jeff Smisek, who is set to become CEO in January, called the financial results disappointing, but said the airline had performed well. Nearly 83 percent of its flights arrived on time, and in one stretch the airline went 32 days without a flight cancellation.
Like other airlines, Continental also raised cash over the summer to prepare for the slower winter season, when carriers usually spend more money than they take in. Continental had $2.54 billion in unrestricted cash as of Sept. 30 after raising money by issuing new stock and mortgaging aircraft.
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Lockheed's 3Q profit rises; outlook weak in 2010

2009-10-20T17:38:00.000-04:00

Lockheed Martin Corp. said Tuesday its third-quarter earnings rose amid a flurry of sales of military aircraft, including the C-130J transport plane and Joint Strike Fighter, and delivery of one commercial satellite.
But its shares tumbled more than 6 percent as the nation's largest defense contractor warned that trend may not last as sales of fighter jets dwindle and pension costs rise next year. The Bethesda, Md., company issued weak 2010 earnings guidance, as had been predicted by Wall Street in recent weeks.
Lockheed and its suppliers are feeling the pinch of Defense Secretary Robert Gates' decision earlier this year to cap production of the F-22, a Cold War fighter jet at a cost of $140 million each, at 187 jets, said Bruce Tanner, Lockheed's chief financial officer, in an interview with The Associated Press. Cancellation of the F-22 is part of the Pentagon's plan to shift military spending to programs more suitable to modern warfare.
The Pentagon also terminated the Bethesda, Md., company's contract to build new helicopters to carry the president and a communications satellite earlier this year.
"These customer actions have resulted in a loss of revenue and profitability that cannot be made up in the near term," said Lockheed CEO Bob Stevens on a call with analysts.
In afternoon trading, shares of Lockheed fell $4.69, or 6.1 percent, to $72.30, after hitting an earlier low of $72.10.
Lockheed, the first of the major defense contractors to report results, is bracing for restrained U.S. defense spending as the Obama administration cuts traditional weapons programs and puts more money toward fighting insurgents and beefing up security networks.
The company expects a 2010 profit between $7.05 and $7.25 per share on sales between $46.25 billion and $47.25 billion. Analysts surveyed by Thomson Reuters, on average, are predicting earnings per share of $7.89 on revenue of $47.60 billion.
"Near term we are seeing some pressure, but we still remain bullish about our outlook," said Tanner. He said Lockheed still expects revenue will grow next year, and even stronger revenue in excess of 5 percent in 2011 and 2012 led by strong expansion of the Joint Strike Fighter program.
While uncertainty has swept across the U.S. defense industry under the new administration, there are several long term opportunities that Lockheed is actively pursuing as it seeks to rebalance its portfolio to meet the new global security environment, said Stevens.
That includes a coveted multibillion-dollar hybrid tactical vehicle program for the Army, as well as a contract to build a fleet of small, speedy Littoral Combat Ships that operate in shallow waters for the Navy.
Stevens said Lockheed will be redoubling its efforts to make programs more affordable, reduce costs and deliver on schedule as the U.S. government is forced to work with tighter budgets during such difficult economic times.
Lockheed said earnings rose nearly 8 percent to $797 million, or $2.07 per share, for the period ended Sept. 27. That compares with $782 million, or $1.92 per share, last year. Revenue grew nearly 5 percent to $11.06 billion.
Pension expense was $113 million, which lowered earnings by 19 cents per share. The company said in January that pension expenses would be higher each quarter this year because of a drop in the retiree fund's value during the stock-market collapse last year.
Lockheed plans to contribute $1 billion to its pension trust during the fourth quarter, and another $1.4 billion in 2010 to address the shortfall.
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