Airline Fanatic

The NYTimes blog DealBook is reporting that Lufthansa is in talks to buy a 20% stake in JetBlue Airways.  I for one never expected JetBlue to be open to a sale, even for a portion of the company, to any airline, but it looks as if I’ve been proven wrong.  An official announcement on the deal could be made as soon as the market closes on Thursday in New York.

JetBlue’s stock, which has been in the dumps as of late, was up as much as 35% on the news of the potential deal to almost $8.50.  Why make this bid now?  DealBook indicated it was because of the relative strength of the Euro against the Dollar, making the deal cheaper than ever before for Lufthansa.  All of this still remains a rumor until an official announcement, but it seems quite possibly real to me.

Because Lufthansa is only taking a 20% stake in the company, they stay way below the foreign-ownership requirements for US airlines, something Virgin America has to battle when they started operations earlier this year.  According to people familiar with the matter the investment would only be a passive one, but would not rule out some kind of partnership (read:code sharing agreement) in the future. 

 Via [DealBook]

UPDATE: The AP has confirmed this story.  Lufthansa actually purchased a 19% stake in JetBlue for $300 million.  This is based on a share price of $7.27 per share, or a 16% premium of JetBlue’s closing price Wednesday.  Even more important, the two airlines said they would seek “an operation cooperation.”  What this means was not elaborated upon, but more details will be forthcoming.

Maxjet Airways, one of the all-business transatlantic carriers trying to carve out their niche, requested that their shares stop trading on the London Stock Exchange today, pending the “clarification of its financial position.”  Yikes!  I’m no financial wizard, but when you ask for your stock to be suspended, it probably mean you are in a little bit of a financial pickle.

The numbers back this up, with Maxjet reporting major losses of $31.9 million during the first six months of this year.  For the full year 2006 Maxjet threw an amazing $79 million down the tubes, it was their first year of operation.  Most new airlines expect to make losses while they get their operations going and achieve some scale, but I doubt they expected to lose that much.

So what is their explanation for being so deep in the red?  From the Financial Times:

It has faced mounting losses in the face of surging fuel prices and lower than expected fare yields. Higher maintenance costs for its ageing fleet of Boeing 767 aircraft have also depressed financial performance.

Guess what guys, the rest of the world has had record fuel prices and aging fleets to deal with too.  It seems Maxjet may have overestimated the demand for discount business class service over the Atlantic, and are in big trouble because of it now.  If this were truly the case, you would think the rest of this category of airlines would be in trouble too.  Quite the contrary though, as Silverjet has just announced it will expand its current current fleet of 767s.

For the time being operations and reservations go on as normal while executives scramble to secure fresh financing.  I haven’t has the pleasure of trying Maxjet out myself yet, but here’s to hoping the airline will still be around when I do get that opportunity!

Breaking News: American Airlines announced this morning that they will divest themselves (investment speak for sell) their American Eagleregional subsidiary next year.  I think this is probably good news for them.  American Eagle has lots of old aircraft and probably runs a lot of American’s shortest and biggest money losing routes.  Cutting them out will definitely improve the financials at AMR.

Shareholders were pleased with the announcement – American Airlines stock (AMR) is currently up about 8% on the news.

[Via PlaneBuzz]

It’s been a long road for Singapore Airlines in their bid to take a combined 24% stake in China Eastern Airlines, but today they are one step closer to the final sale.  A date has been set for China Eastern’s many shareholders to take a vote on the sale to Singapore, on January 8th.  The ownership structure of China Eastern seems to be quite complex, with several state and private interests making up the biggest chunk of outstanding shares.  The way the vote is organized however (shareholders in Hong Kong and Shanghai will vote simultaneously, and state owned players are not allowed to vote) indicated the sale will proceed once the vote finally takes place.

After my post on JetBlue’s impressive quarterly results, the Wall Street Journal talks with Ray Neidl about United and JetBlue, as well as some general discussion about the airline sector going forward.  Its a worthwhile three minutes.

JetBlue airways had their 3rd quarter conference call this morning and announced a stunning swing back to profits.  Not only did they make money, but they almost doubled Wall Street’s estimates.  They posted earning of 12 cents a share for the quarter while expectations had them pegged at only 7 cents.

JetBlue also announced they would be dropping service to Columbus, Ohio, and Nashville, Tennessee, as well dropping one daily flight between Oakland, California and Ft. Lauderdale, Florida.  I’m not surprised that JetBlue would do this from their smaller hub in Boston, but to see them dropping service from their home airport of JFK piqued my interest.  I guess that unlike Delta’sold Song division they are focused on making money and staying efficient.  The E190s currently being used on this route look like they will be relocated to serve new routes starting three days later between the Northeast and Southeast and Florida.

One final note, JetBlue also announced they would sell at least two more Airbus A320 in early 2008, and possibly more if market conditions were favorable.  They’ve been doing this for a while now as a way to hold down the size of the fleet and slow growth.  As the pace of A320’s slows down a little, no announcement was made about E190 deliveries, which shows they continue to be a very efficient plane on which to run an airline.

All in all it was a pretty good quarter for the low cost carrier, which remained bullish and forecasted a strong holiday travel season.