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| Southwest Airlines Q3 2009 Earnings Call Transcript Southwest Airlines (LUV)Q3 2009 Earnings CallOctober 15, 2009 11:30 pm ETComplete Story » seekingalpha.com |
Green Vehicle Deal Stalls Out Toby Shute submits:You've no doubt seen the bumper sticker "My karma ran over your dogma." Well Fisker Automotive's Karma just ran over battery maker Ener1 (Nasdaq: HEV). The Karma is Henrik Fisker's attempt at bringing the first luxury plug-in hybrid vehicle to market. Fisker has designed some classy cars over the years, including the Aston Martin V8 Vantage and the short-lived BMW Z8. Fisker Automotive has also received a huge DOE loan to, in part, retool an old GM plant and begin production of an affordable plug-in sedan, but the Karma's coming to market first, with an expected rollout in the third quarter. Tesla Motors is following a similar strategy.Complete Story » seekingalpha.com |
Boeing Wins $1.6 Billion Turkish Deal Zacks.com submits: Boeing Company (BA) has won a $1.6 billion order from Turkish Airlines. The company will supply 20 airplanes of the 737 series. Half of this would be 737-800s and the other half 737-900ER (Extended Range) airplanes. Based in Istanbul, Turkish Airlines currently operates a fleet of 66 Boeing airplanes, including 58 Next-Generation 737s. It ferries approximately 25 million passengers a year, with direct flights to 120 international and 37 domestic destinations. Boeing’s 737-900ER airplane is the newest member of the 737 family, combining aerodynamic and other design changes to accommodate up to 215 passengers comfortably while retaining the flexibility and efficiency of the Next-Generation 737 family. The airplane is pitted against Airbus’ A321 series. Headquartered in Chicago, Boeing is the world’s largest manufacturer of commercial jet liners and military aerospace products (based on total sales). Boeing designs and produces commercial airplanes, defense systems and civil and defense space systems. Boeing is also the largest NASA contractor. Non-airplane products include helicopters, electronic and defense systems, missiles, satellites, rocket engines, launch vehicles, and advanced information and communication systems. Boeing is one of the best-positioned companies among its defense peers by virtue of its balanced exposure to commercial aircraft and defense equipment. Peers such as Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC) dabble only in defense equipment. Going forward, we believe a $316 billion order backlog, strong order booking and a globally diversified customer base will help maintain Boeing’s growth momentum. However, the momentum could see meet headwinds from a bearish commercial aerospace market, fears over growth in defense spending and delays in the launch of 787. Thus we are Neutral on the stock at this time.Complete Story » seekingalpha.com |
DryShips Sailing Against a Downgrade Current Ockham Research submits: There are few industries more tied to global growth than dry bulk shipping, as these ships are responsible for carrying the materials required in economic expansion. DryShips (DRYS), a key player in this industry, was downgraded today by Greg Lewis shipping analyst at Credit Suisse because on near-term uncertainty in its Drillships business, geared towards transporting deepwater drilling rigs. Obviously, the future of this business is in question as the BP debacle continues to leak crude into the Gulf of Mexico at an alarming rate. This would not be such a huge headwind if DryShips had not already committed to pursuing growth in this business by investing in 4 new drillships. Furthermore, the company is still seeking about $1 billion in financing for the rigs currently being built in South Korea, and perhaps more troubling is that the company does not yet have long-term contracts for any of the four drillships. There is reason to believe that global shipping could continue its improvement after slowing dramatically during the Great Recession. Recent data on Chinese exports showed resiliency against a perceived slowdown, and even European goods will now become more competitive on the global market as the Euro has declined in value precipitously of late. Indeed, Lewis estimates the value of that portion of DryShips to be worth about $4 per share, while the stock is currently trading for just $4.05 as of the time of writing. In total, Lewis has lowered his price target for the firm from $8 to $5, implying he thinks uncertainty in the drillships business has brought its value down to just $1 per share. DryShips does have operating contracts for its two existing drillships transporting drilling rigs in the Black Sea and the other off the coast of West Africa, and these two vessels are responsible for more than 40% of DRYS revenues in the first quarter. However, since the Deepwater Horizon rates on such rigs have weakened considerably.Complete Story » seekingalpha.com |
Regional Airlines Mimic Major Counterparts Davide Pavone submits: Major air carriers have obtained an interesting benefit through recent consolidation: greater bargaining power in the upcoming renegotiation of regional airline capacity purchase agreements. The greater bargaining influence is due to:an excessive supply of capacity in regional markets (brought about by consolidation)reduced counterparty risk. Delta (DAL) and the post-merger United (UAUA) will play one regional airline off against another, and seek to obtain lower rates. However, recent developments in the regional sector suggest that regional air carriers are positioning themselves for the forthcoming round of negotiations.Pinnacle Airlines Acquires Mesaba Airlines Due to the somewhat high interest rate on the note (12.5%), analysts have questioned the profitably of Pinnacle’s (PNCL) acquisition of Mesaba Airlines, a $62 million transaction. Management has claimed that the acquisition enables Pinnacle to achieve a more efficient cost structure, and may lead to greater labor productivity. Delta’s planned discontinuation of turboprop operations also presents Pinnacle with the opportunity to replace its fleet of 30-seat turboprops with relatively newer aircraft. Ultimately, the turboprop operations of Colgan Air and Mesaba Airlines will be consolidated, and should be positioned nicely to compete with SkyWest (SKYW) in the small turboprop sector. ExpressJet Airlines to Merge with Atlantic Southeast Airlines The current offer of $6.75 (in cash) per share of ExpressJet Holdings ((XJET)) is more than double the amount SkyWest bid in April 2008. A renegotiation of the Continental Airlines (CAL) capacity purchase agreement ((CPA)), which will take effect once the merger is complete, explains the higher bid. The new CPA is scheduled to expire in 2020, and places SkyWest in pole position to benefit from the renewal and possible expansion of the Continental Express fleet. Continental also benefits from the new agreement as the major airline may take advantage of SkyWest’s balance sheet to acquire regional aircraft, and utilize the regional aircraft owned by SkyWest. Moreover, the new CPA puts an end to the uncertainty surrounding ExpressJet operations at Hopkins International Airport. Due to the merger, it was suggested that service at Hopkins International Airport (Cleveland), a hub for Continental and ExpressJet, would be reduced drastically. Given that the new United will have hubs at O’Hare International Airport (Chicago) and Dulles International Airport (Washington), it was argued that major operations at Hopkins Airport would be redundant. Passengers who currently use Hopkins Airport to connect with another flight would be directed through either O’Hare Airport or Dulles Airport. A scaledown of operations at Hopkins Airport was permitted by the Continental CPA as it only required ExpressJet to operate a minimum of 190 aircraft on behalf of Continental, 16 aircraft less than the current 206 in operation. Under the new CPA, a minimum of 206 aircraft will be operated on behalf of Continental, a number which suggests that regional operations at Hopkins Airport will not be cut significantly. ConclusionConsolidation amongst major airlines has spurred regional operators to merge. Three competitors have been eliminated from the sector to date (in addition to the abovementioned acquisitions, privately-owned Trans States Holdings has purchased Compass Airlines from Delta), and the sales of American Eagle and Comair, as well as the bankruptcy proceedings of Mesa Air Group, are wild cards. Lastly, consolidation should lessen major airline bargaining power in the upcoming renegotiation of capacity purchase agreements.Disclosure: No positionsComplete Story » seekingalpha.com |