A BRIEFING FOR JULY 9 TO JULY 23, 2009
By Joe Brancatelli
· Just Another Cash Crunch at United Airlines
· The Routes Are Beginning to Drop Like Flies Now
· Hotels Continue to Open at a Breathtaking Pace
· Strange Bedfellows on the Airline Alliance Front
· Delta Pulls Airport Clubs Out of Priority Pass
· San Francisco-Kansas City Nonstop...in an RJ
· TSA Agent Arrested for Skipping Security Check
Just Another Cash Crunch at United Airlines
U.S. airlines begin reporting their second-quarter earnings next week and the results are likely to be dreary. In the midst of all of the gloom, the "star," as usual, will be United Airlines. More than any carrier, it is in absolute freefall. Its stock price has declined about 70 percent since January, its revenue decline has been in the high end of the 15-20 percent range, the Continental Airlines alliance is in trouble with the Justice Department--and, oh, by the way, United is facing another cash crunch. A $175 million debt offering late last month was only completed at the usurious yield of 17 percent and needed to be secured with about $580 million in assets. "Paying 17 percent for debt is not where you want to be," deadpanned Fitch Ratings' William Warlick. (By contrast, American Airlines' parent managed to place $520 million of debt last month for 10.37 percent.) Worse, United only has about $1.1 billion worth of remaining unencumbered assets. The assets aren't particularly liquid, however, since they are largely aging Boeing 737s that do not have much real-market value. Worst of all, 2010 is when United must negotiate all of its union contracts and Chase, its credit card processor, ups the amount of cash United must have on hand to $2.5 billion. (United is expected to report that it had $2.5 billion on hand at the end of the second quarter.) If United's cash position falls substantially below that level, Chase begins "holdbacks" of United's credit card revenue.
The Routes Are Beginning to Drop Like Flies Now
The collapse of business travel that effectively began with the collapse of Lehman Brothers last September is really beginning to effect the global network of airline routes. Here's a brief list of what we know will disappear in the coming weeks. Along with the previously announced fall cuts at its once-mighty Cincinnati hub, Delta Air Lines will drop nonstops to Dayton, Ohio, and Birmingham, Alabama. Also taking the pipe are Delta's routes from Lincoln, Nebraska, to its hubs in Salt Lake City and Atlanta. Delta next month will also pull out of Dubuque, Iowa, and kill flights to Cincinnati and Atlanta from Cedar Rapids, Iowa. … Internationally, routes getting the axe are Tampa-Cancun on JetBlue Airways, Portland (Oregon)-Frankfurt on Lufthansa and Atlanta-Mumbai and Atlanta-Cape Town on Delta. Delta has also cancelled plans to launch a New York/Kennedy-Mumbai flight.
Hotels Continue to Open at a Breathtaking Pace
The hotel-development pipeline continues to gush forth new properties even as the lodging business is in a major downturn. With economic activity low, there are precious few markets that need new hotel rooms. But get out your scorecard and see if your favorite city and/or preferred hotel chain is represented in this week's tranche of openings. … From Hilton, there's the 190-room Embassy Suites in the Avant development in downtown Buffalo. There's also the 410-room Hilton Dalaman Golf Resort & Spa on Sarigerme Beach on Turkey's Mediterranean Coast and the 320-room Doubletree Qingdao in Shandong Province, China. … Marriott has added a 140-room Fairfield Inn near Buffalo Airport and a 109-room Residence Inn Escazu, near the Costa Rican capital of San Jose. … Radisson's new stands are the 100-room Radisson Mississauga near Toronto/Pearson Airport and the Badischer Hof hotel in the spa town of Baden-Baden, Germany. … Hyatt has opened a 142-room property in Jeddah, the business center of Saudi Arabia. Accor has opened a 203-room Novotel on Juhu Beach near Mumbai, India. And, finally, a 95-room Holiday Inn Express opened in Largo, Florida.
Delta Pulls Its Airport Clubs Out of Priority Pass
Delta Air Lines has pulled its recently renamed Sky Club lounges out of Priority Pass, the global network of about 600 airport clubs. The withdrawal is effective September 1 and affects Sky Clubs, Crown Rooms (rest in peace!) and any clubs that still bear the Northwest WorldClub designation. Meanwhile, Priority Pass has added new clubs in Puerta Plata and Santo Domingo, Dominican Republic; Terminal 1 at Barcelona; Terminal 2 at Moscow/Sheremetyevo and even the international terminal at Ulaanbaatar, Mongolia. Who needs Delta when you have a club in Mongolia, right? … Tourism to Hawaii may be sagging, but there are more car-rental options then ever. An Alamo Rent A Car branch has opened at the airport on Molokai and Enterprise Rent-a-Car offices have opened at the airports in Hilo and Kona on the Big Island and Lihue, Kauai. … A new operator has taken over the airport shuttle concession at St. Louis/Lambert and prices have risen. Go Best charges $21 one-way to/from downtown, up from the previous firm's $15. A roundtrip is now $37, up from $25. … The world's first Jack Daniels duty-free shop has opened in Terminal D of Houston/Intercontinental. It sells Jack Daniels (duh!) and Jack-branded merchandise. … Speaking of firsts, the first airport branch of The Palm steakhouse chain is due to open later this year at Terminal 4 of New York/Kennedy airport.
Business-Travel News You Need to Know
American Airlines and GOL Airlines of Brazil are linking frequent flyer programs. Effective August 1, American AAdvantage members will be able to earn miles on selected GOL flights. Travelers will be able to claim awards on GOL in the fall. … Delta Air Lines says it wants to form a joint-venture alliance with Virgin Blue, the Australian airline. The two carriers compete on the Los Angeles-Sydney route. … You can't make this stuff up: A Transportation Security Administration employee was arrested at Newark Airport last week. Her infraction? She boarded a Continental Airlines flight to Houston without passing through the security checkpoint. Meanwhile, all of the other passengers on the plane were required to disembark and pass through security again. … Avis has opened a car-rental station in Hanoi. A branch will open in Ho Chi Minh City (Saigon) later this year. … United Express, the commuter carrier of United Airlines, launches a San Francisco-Kansas City route on October 25. A 66-seat regional jet will operate on the 1,500-mile run.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.
This column is Copyright © 2009 by Joe Brancatelli. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.