TOP 100 TRANSPORTATION AND LOGISTICS SITES
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| JAL's High-Stakes Game with American and Delta Vaughn Cordle submits:Regarding the proposed joint venture between Japan Airlines (JALSY.PK) and Delta (DAL), American's reply to Virgin highlights WHY they are so desperate to hang onto JAL. If JAL goes with Delta/Air France, the new grouping, when combine with United/ANA/Continental, will control 60% of the US-Japan market, which leaves oneworld with just 6%. Given the change in seat market share – based on American's (AMR) numbers and our own work – this suggests that JAL benefits more with a DAL/AF matchup. Of course, the benefits must be weighed against switching costs, which include management in addition to financial costs. Reuters reported today that Japan Airlines President Haruka Nishimatsu said that it looks more natural to stay with the Oneworld airline alliance at the moment rather than defect to a rival group. Of course, Nishimatsu's statement makes perfect sense; however, it also helps in negotiating with DAL/AF, which could make a hefty equity investment. AMR is smart to partner with [private equity firm] TPG, but I'm not convinced that TPG will choose to risk too much equity given what Japan-US open skies will likely do to fares and earnings. The only way to save JAL is to reduce underfunded pension plans (over USD $3 billion) and the cost of debt. Without a labor cost reduction, the company is a big, black sinkhole that will destroy any equity investment. Reports suggest that the retirees are willing to accept some level of cuts. Therefore, the government will either have to force the issue and make changes to current funding requirements or subsidize payments to ease the JAL's financial burden. It's an open question whether or not the government will go far enough with the restructuring of JAL, and it's tough to value an equity stake without knowing the details of the restructuring, especially as it relates to pension funding. For this reason, TPG will likely not make a commitment until the restructuring is complete, which should occur within 60 days, or so the press reports say. In terms of a Delta (DAL) or AMR equity stake in JAL, it must first make financial sense, and the financial case cannot be made without knowing what the labor and debt costs will be in the future. Hence, the need to know how deep the restructuring goes before a proper valuation of JAL can be made. Air France/KLM and other SkyTeam members also have a strong incentive in bringing JAL into the Skyteam network. The financial and network benefits cannot not be ignored, especially if JAL equity can be bought at an attractive price. If I were in the shoes of JAL executives and government officials, I would pit AMR against DAL to get the highest EQUITY investment. Why? Because this reduces the amount of government subsidies and increases the riskiest component of capital to non-Japanese entities, entities that have a significant incentive to control feed into Japan and throughout Asia from gates at Narita and Haneda. It's a high stakes poker game for United (UAUA), All Nippon (ALNPY.PK), JAL, AF/KLM (AFLYY.PK), AMR, and DAL. Each has a different hand to play and the stake is a function of JAL's restructuring and whether or not it decides to jump to Skyteam. Complete Story » seekingalpha.com |
General Maritime Corporation Q4 2009 Earnings Call Transcript General Maritime Corporation (GMR)Q4 2009 Earnings Call TranscriptFebruary 25, 2010 10:00 am ETComplete Story » seekingalpha.com |
Increased Rail Traffic Sends GATX Past Estimates Zacks.com submits: GATX Corporation's (GMT) first-quarter earnings of 42 cents per share were well ahead of the Zacks Consensus Estimate of 33 cents.A year ago, the company reported a profit of 79 cents. GATX, which provides transportation assets to the rail companies, witnessed an earnings miss due to a gradually improving rail market, though revenues will remain choppy in the near term until the economy stabilizes.Complete Story » seekingalpha.com |
General Dynamics Dividend Stock Analysis Dividends4Life submits: Linked here is a detailed quantitative analysis of General Dynamics (GD). Below are some highlights from the above linked analysis: Company Description: General Dynamics is the world’s sixth largest military contractor and also one of the world’s biggest makers of corporate jets. Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:Complete Story » seekingalpha.com |
Thursday’s ETF to Watch: iShares DJ Transportation ETF Database submits: Although the American economy is still stuck in a low growth environment, transports have been surging ahead as of late. Rail and air freight firms have managed to grow their businesses thanks to booming demand in Asia and rising commodity prices around the globe. Just last week, major railroad company CSX reported that profits soared by 43% and reached a record for the Q3 period. However, it remains to be seen how extensive these gains have been and if this trend will carry over into the rest of the transportation sector. For investors concerned about the health of the transports, today looks to be a pivotal trading session. Both railroad giant Union Pacific and package delivery firm UPS will report earnings before the bell, giving investors plenty to digest before the market opens. Union Pacific will seek to match the solid gains posted by fellow railroad operator CSX and hopes to show investors that it too has rebounded from the demand slump. UNP is projected to post earnings of $1.5 a share, which would be a substantial increase from the year-ago period in which the company delivered earnings of $1.02. Additionally, analysts are looking for revenues to surge by close to $700 million when compared to the prior third quarter period.Complete Story » seekingalpha.com |