Air Midwest Latest Victim of Oil Prices...

Well, sort of. Today, Mesa Air Group announced they were beginning an orderly shutdown of their Air Midwest subsidiary, starting of next week. That segment of Mesa operates their Essential Air Service contracts to about 20 hotspots such as Kingman and Prescott AZ, Athens GA, Harrison AR, Ely NV, and Grand Island and McCook NE.

Don't feel bad if you can't locate a lot of those towns on a map. They're tiny markets that only had air service because of some poorly crafted language in the Airline Deregulation Act... Instead of allowing the market to dictate, these services have been long subsidized by federal funding. Until fuel prices started to climb, it was a fairly lucrative market to chase. Today, the subsidies don't cover the operating costs.

They'd announced their intention to exit the EAS markets in January, so this is not at all unexpected. DOT required them to continue operating the routes as long as they were in business, so as with Big Sky last month, the only option available for Mesa to stop the bleeding was for that operating subsidiary to cease operations.

The net effect is that Mesa's bleeding. And sadly, that actually warms my heart somewhat...

Oddly enough, Island Air (based in Hawaii) will be their replacement in four of the EAS markets. Island Air was the smallest player in the hotly contested interisland market that eventually claimed Aloha, and wound up returning two Q400 aircraft and laying off about 65 employees last year because of Mesa's Go! operation.

I'm not sure which move is the smarter one -- Mesa getting out of the EAS business, or Island Air getting into it.

Now That's Shelf Life...

I'm not a huge snack food eater, but there are a few things that I really do enjoy from time to time... Hostess HoHos are one of those.

Ever since I was a kid, I loved HoHos. And only Hostess HoHos...

Little Debbie Snack Cakes? Other brand Swiss rolls?

Fuhgeddaboudit... There's just no comparison in the taste or texture.

When I was a kid, they came wrapped in tin foil. Today, they're plastic wrapped, just like their cousin, Ding Dongs (also known as Big Wheels, King Dong's or King Don's depending on your age and where you might have lived. And yes, the last word refers to a bell..).

Today, I couldn't help but take notice of something. The expiration date...

I know that most snack foods are pumped full of preservatives. It's just really comforting to know that if I somehow become cryogenically frozen and get thawed out before the year 71107, I can still enjoy my HoHo's....

United-US Airways Redux

There's been a lot of talk the last couple weeks about United & Continental linking up, Continental deciding they want to stay independent, and now, United and US Airways linking up...

While there's been a lot of chat over Skyteam's involvement with the Delta/Northwest deal, what hasn't been talked about much is how United's membership in Star Alliance is going to figure into a potential merger.

UA/CO presents some serious issues for LH. My impression is that Wolfgang Mayrhuber is in Anschluss mode, given their takeover of Swiss, potential takeover of LOT, and last week's announcement that they plan to take over Michael Bishop's stake in BMI.

Given those actions, it shouldn't be a great leap of faith to believe LH wants UA to function as a puppet, and Tilton serves that role pretty well. If you put CO's management team in place at the operating company, LH's ability to manipulate gets minimized quite a bit. Kellner's team knows they don't have to use an alliance partner to expand internationally, and they know how to run an airline without strings attached.

Switch to Frankfurt's view... if CO exits Skyteam (which they've hinted at), they see Skyteam with one strong partner in the United States. oneworld has one strong partner in the United States. What Star really needs is one healthy partner in the US, and not two fractured partners.

So, taking labor out of the picture, UA/US might not be so dumb of an idea.

It gives me fits thinking abou merging the various employee cultures, but you have a more homogonous fleet.

Hubs?

Yeah, something's gotta give there. ORD and CLT seem to be far enough apart to stay as-is, but IAD and PHL have too much overlap to Europe. If I were UA, I'd concentrate on IAD given the better dependability of the airport, the profile, and the fact that PHL is smack dab in-between NYC and Washington.

PHX and DEN are too big to go away, and could remain a decent size, but combined with LAS, you do have some serious hinterland issues similar to what legacy US had with PIT and PHL, and what will be made worse with MEM/CVG/DTW/MSP once DL/NW is consumated.

Control? Tilton could appear to stay in control at Chairman, Parker could run the show with his team of misfit toys, and Wolfgang can continue to pull the strings from Germany...

Now, you'll ask... Didn't LH just invest in Jetblue.... Yep. They did.

Again, they've got a homogonous fleet with both UA and US, and relative strength in an area where UA & US perhaps aren't as good -- Florida. The JFK hub isn't such a bad addition either (see above regarding PHL...).

As I said earlier, this is ignoring labor. From a labor standpoint, it would rival merging Texas Air's pile of crap in 1987, but drastic times call for drastic measures.

A friend and I were having this same discussion... and he pointed out something I managed to miss....

Despite all the crap that happened cobbling together People Express, New York Air, remnants of Frontier, and pieces of Eastern, look at how well that managed to turn out... it's the Continental we know today.

Eos files & shuts down

Not at all unexpected, Eos filed for bankruptcy on April 26th, and flew their last flights today.

Like Maxjet, they were trying to fit into a niche where just about every US airline trying the model has failed... all-premium.

Unlike Maxjet, they had the right fleet -- 757-200's outfitted with 48 seats. But the economics just didn't work.

A few months back, a former colleague contacted me about doing some contract work for them. I passed. Had I done the work, I'd probably be an unsecured creditor as well.

In the past weeks, it was said they had new financing lined up. Based on today's shutdown, it appears that financing fell thru, and their private investors decided to call a loss a loss.

April 2008 will no doubt go down as one of the more notorious months in airline history -- this marks the fifth airline bankruptcy and fourth shutdown this month, plus the announced merger of NW & DL, which will no doubt wreak havoc on employees despite assurances to the opposite by both companies management teams.

And there are still three business days left to go...

TV Returns...

You know what? I'm sick of airlines and their turmoil. I'm not even going to bother to discuss NW/DL because it's been discussed ad naseum in other blogs and forums. Instead, I'm just going to sprawl out on the couch and grab the TiVo remote....

The Writer's Strike has been over for what seems like months now, but it's only this past week that some of my shows have been returning to my dish.

Battlestar Galactica came back on April 4th... This will be the final season, or so they say. So far, it's off to an interesting start. Who will be the final Cylon? We find out in about 20 weeks or so...

Deadliest Catch returned April 15th (tonight) with two back to back episodes. This show takes a little getting used to, but it's good background entertainment while blogging... The idea of swapping out a crab pot with the hulk of a beat-up Ford F-150 is pretty funny. Then again, Honda is now a sponsor of Deadliest Catch, so perhaps this was poking fun at announcer Mike Rowe, who is the voice and sometimes on-camera spokesperson for Ford?? Dunno.

And yes, Emmy's favorite E.R. returned April 10th, and it's taken an even deeper dive into inappropriateness... It's definitely not the show that first came out 14 years ago, and stopped being decent family entertainment after Noah Wylie left three years ago. My wife and I correctly guessed that Maura Tierney and Goran Visnjic are calling it quits and will leave the cast later this year. They're the longest running headline cast members at this point (Season 6), followed by Mekhi Phifer (9). There are a few supporting cast who have been with the show since 1994, Amy Aquino (Janet Coburn), Yvette Freeman (Haleh Adams), Lily Mariye (Lily Jarvik), Laura Ceron (Chuny Marquez), Deezer D (Malik McGrath) , and Sam Anderson(Dr. Jack Kayson).

Next season will be the last, with NBC set to air the final episode in February 2009.

Somehow, we've managed to miss The Office for the past four years, so that's a new seasons pass as well. Even the kids think it's funny...

The only show I'm still awaiting to return is Ice Road Truckers. No idea when it comes back on the air, but they ran into some problems with production. Some of the mining companies featured in the first season weren't too thrilled with how they were portrayed, so they worked with the local tribal government and the operators of the ice road to ban History Channel from being able to film on their roads. So, they had to find another road...

For now, I've got more than enough spooled up on my Tivo to keep me busy... until the next airline fails or we get into full-blown merger mania.

The week ahead...

After a couple of rollercoaster weeks, it looks like this coming week will be no better.

News reports coming out of ATL and MSP have a potential announcement for the DL/NW merger. Getting anti-trust approval last week didn't hurt things.

As I've said a few times, DL/NW has some serious impact potential for both Airtran and Midwest. Right after the Frontier filing, Airtran stock fell over 30%, and management had to go to the extent of issuing a press release confirming that they had no similar exposure for their credit card agreements, and that yes, they had about $250M in unrestricted cash at the end of 1Q08.

That was quickly followed up by reports from Virgin America that they'd received an additional $100M from their investors, which will certainly buy them some time.

Midwest? They announced they're pulling down capacity at MCI...

As Meatloaf sang, two out of three ain't bad...

Unfortunately, if DL/NW goes forward, Airtran's got much bigger problems. Combine NW's ruthlessness with DL's gorilla status at ATL, and things could get ugly really quickly.

And, as I've said a few times, it's yet to be determined what DOJ would say about NWA's passive investor status at Midwest.

Worst case? Midwest gets cut loose and collapses on their own.

Almost worst case? Airtran gets to take another run at Midwest, but that's unlikely given their cash position... TPG paid $450M in cash not even a year ago, and I just don't see them giving it away.

The new elephant in the room is what will UA & CO do in response to DL/NW.


Then there's Mesa...

Remember the convertible offering? And Mesa's stock price of $1.23...

Last week the stock tanked, and closed Friday at $0.67/share. That almost 30M shares that Ornstein was counting on to raise cash for the conversion is now somewhere around 50M shares. Or more, depending on what happens this week...

Now, if you're a shareholder, would you willingly allow your stock to be devalued by the issuance of almost 100% the current equity?

Probably not. That was the scenario a week ago. Now, shareholders will be asked to dilute their shares even further.

Second impact of the stock price, as mentioned before, is delisting by Nasdaq. If they spend another couple weeks, they're going to get the formal letter, and then another 90 days later, they become a pink-sheet stock.

I think they're done, but I've been wrong before...


So... what's going to happen this week? No fracking idea. But it's certain to be interesting.

Frontier Files.... still operating

As anticipated, Frontier Airlines filed for bankruptcy late on Thursday, and said it planned to keep operating its schedule.

The reason cited?

Credit card holdbacks.

Credit cards make up the majority of ticket purchases, and banks decide how much of the funds for advance ticket sales (also called float) get sent to the airline based on their credit-worthiness. Stable airlines get the benefit of low holdbacks and higher float from those sales. They then use that cash for operations, or hoard it and get the interest....

What happened with Frontier is the banks decided they were a risky proposition, so they increased their holdbacks. That way, if Frontier did go under, the banks would still have the funds with which to be able to refund credit card holders. If holdbacks were left alone and they shut down like other carriers did, they'd be an unsecured creditor for the funds already advanced to the airline which they'd then have to refund to cardholders.

Holdbacks are what pushed ATA into their 2004 filing, and I was commenting to some friends the other night that it wouldn't surprise me if some of the more questionable carriers are seeing some increases in their holdbacks all of the sudden...

That seems to have happened. And I don't think Frontier will be the only one impacted. This could be a triggering event for Virgin America, Midwest Express, Airtran or even Jetblue. Since regional carriers don't typically issue tickets, it's less of an issue for Mesa, but definitely a concern for ExpressJet's private label operation.

Based on the track record so far of airlines who have filed for bankruptcy this year, it doesn't look good for Frontier right now. They could beat the odds and be the first to survive and actually restructure, or they could shut down and liquidate.