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Monday, March 1, 2004

Briefs

  • American Eagle, the regional airline of AMR Corp. [NYSE: AMR], and the Transport Workers Union have requested a federal mediator to assist in contract negotiations for the company's dispatchers. The two sides said "good progress" has been made in negotiations. The Transport Workers Union represents 90 dispatchers at American Eagle and Executive Airlines. In July, the company agreed to negotiate the dispatchers' contract separately from those covering fleet service and maintenance and related employees.
  • Also on the labor front, the pilots at US Airways [Nasdaq: UAIR] have agreed to sit down with management to talk about a new round of wage givebacks and workplace rules in an effort to save the airline. The flight attendants and mechanics have so far rebuffed management overtures. According to the pilots, the latest business plan calls for the carrier to become a hybrid with some continued hub operations and some point-to-point routes. Among other options, the carrier is considering is selling or reducing its regional operations.
  • Embraer [NYSE: ERJ] last month obtained three critical airworthiness certifications for its new Embraer 170 regional jet. Brazil's Technical Aerospace Center, the Federal Aviation Administration and the European Aviation Safety Agency have all cleared the new plane for commercial operation. Embraer is expected to deliver 11 planes this month to US Airways [Nasdaq: UAIR], Poland's LOT and Alitalia [Milan: AZPIa]. Embraer anticipates building 160 of the planes this year, which lists at $25 million apiece.
  • SkyWest Airlines [Nasdaq: SKYW] last month began flying its third aircraft type - and its largest. The regional airline is now flying the Bombardier [Toronto: BBDb] CRJ-700 between Denver and Wichita for United Express. Over the next 18 months, SkyWest will take delivery of 29 more of the 70-seat regional jet. All the planes will be used on its United Express routes. The Utah-based carrier currently flies 111 CRJ-200s and 74 of the Embraer [NYSE: ERJ] 120s.
  • Mesa Air Group's [Nasdaq: MESA] Air Midwest subsidiary had been selected by the U.S. Department of Transportation to provide subsidized essential air service to the communities of Manhattan and Salina, Kan., as well as Lewisburg, W.Va. Over the next two years, Mesa will be paid $1.7 million in federal funds to provide the flights to these three communities.
  • ATA Holdings [Nasdaq: ATAH], the parent of Chicago Express, said that it plans to be the first of the current crop of low-fare airlines to begin trans-Atlantic service. Its mainline carrier, ATA, will fly between U.S. tourist destinations and smaller European cities. Service could begin as early as this summer. The airline already has the planes and the experience as it generates 20 percent of its sales from international charters.
  • The U.S. Supreme Court last week issued a critical ruling that goes against the airline industry. In a case involving an Olympic Airways flight, the court ruled the carrier could be held liable for the in-flight death of an asthmatic passenger. The passenger had an asthma attack after flight attendants refused to move him away from the smoking section. The court said the death was an "accident," not a normal event as the airline argued.
Recent Wall Street Assessments of Regional Airlines
Airline
Brokerage
New Recommendations
Reason
Pinnacle Airlines [Nasdaq: PNCL] BB&T Capital Feb. 13 Buy (Initiating coverage) No commentary.
Atlantic Coast Airlines $125M Convertible Notes [Nasdaq: ACAI] Standard & Poor's Feb. 19 CCC The outlook is negative. The planned transition to an independent, low-fare airline entails significant risks. Failure to execute could result in a downgrade.
Atlantic Coast Airlines $125M Convertible Notes [Nasdaq: ACAI] Moody's Feb. 25 Caa3 While debt proceeds will be added to a $300M cash balance, future cash flow from operations is highly uncertain. These notes are subordinated to all claims against the operating company.
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