J.P. Morgan US Airways Investment Report

[USA320Pilot]

US Equity Research - J.P. Morgan Securities Inc.

US Airways Group, Inc. (Overweight) - Estimates Reduced, Slightly

• 2Q Estimate Changes – This morning's quarterly guidance from LCC was largely unremarkable, though more detailed than usual. In order of importance: no change to ex-fuel cost guidance, slightly softer "other" revenue, slightly higher Q4 fuel expense, slightly better fuel consumption, slightly higher interest income, slightly less forecasted AMT expense, slightly higher share count. Net result is immaterial, in our view: 2Q $3.30 now $3.21 vs. consensus $3.13, 3Q $2.75 now $2.66 vs. consensus $2.30, 4Q $1.75 now $1.53 vs. consensus $1.15. We continue to envision softening consolidated RASM trends as the year progresses, 25% in 2Q (largely confirmed by monthly traffic releases), 20% in 3Q and 15% in 4Q.

• No change to fully-taxed 2007 $8.65, which continues to tower over a partially taxed (we believe) $5.90 consensus.

• Ex-fuel guidance implies potential upside – US Airways continues to endorse an unusually wide range of ex-fuel outcomes, given integration cost uncertainties. For 2Q, ex-fuel guidance of 7.50¢ to 7.75¢ implies $0.50 of untaxed earnings variance, with similar trends in 3Q & 4Q. Having embraced the mid-range of its guidance, 2Q results could well come in $0.25 better/worse than forecast, holding other inputs constant.

• Slightly Less Delta – Weekly schedule transmissions show a modest decline in planned Delta consolidated flying this fall, versus earlier schedules. Roughly 150 fewer daily departures in September & October, representing an approximate 5% decline in flight activity. Arguably a function of seasonally-diminished demand and the need to service aircraft after a busy summer, though welcome news nonetheless. Reductions slightly biased towards Connection operations, mostly in the east – implying a greater benefit for US Airways than for AirTran.

• The Margin Troika – We expect ALK, LCC & LUV margins to dwarf those of all others in 2Q, a trend we envision continuing into 2007. And yet LCC remains a valuation underdog, trading at a mere 4x forecasted 2007E EV/EBITDAR vs. 5x for AMR and 6x for CAL (and not to mention 14.5x for profit-challenged JBLU). This valuation disconnect suggests "A" we’re flat-out wrong about LCC, "B" we’ve materially underestimated competing Legacy profits, or "C" the market simply needs more time to digest US Airways’ much-improved relative position within the ranks. We obviously think the answer is C. While continued integration risk does argue in favor of some level of discount, we believe the market has unfairly penalized LCC for its need – sometime between now and the end of the decade – to move its pilots on a single contract. Or perhaps the market is simply reluctant to embrace a recent product of consolidation, twice baptized in the waters of bankruptcy – as was Continental’s situation a decade ago. In either case, there’s no change to our Overweight rating for LCC or our $100, mid-2007 price target.

Click here for the investment report.

Separately, according to the AP, US Airways said its second-quarter hedges are set at an equivalent price of $67.37 per barrel of oil. With the hedges, the airline expects to pay between $2.15 and $2.20 per gallon for jet fuel in the second quarter, including taxes.

Interestingly, a not-so-informed "naysayer" poster, who is not an employee of US Airways, indicated no airline could make money with oil prices at $70 per barrel.

US Airways' hedging program will provide the carrier with savings of more than $10 million per month in energy costs if crude oil prices traded at an average price of $70 per barrel from the hedged average price of $67.37 per barrel in 2Q. If the average price of oil and the corresponding jet fuel price increases over $70 per barrel of oil the savings will be even greater.

How could this not-so-informed poster be so wrong...again?

Best regards,

USA320Pilot

 

[Bear96]

What's this? No gratuitous swipe at UA somewhere in there?

 

[TheLarkAscending]

Perhaps, honorably, NOW would be a great time to address and respond to THIS query?

 

[EyeInTheSky]

USA320Pilot,
Interesting post. Alas, again, you ruin good information by bringing Y-O-U into it at the end. Perhaps, if you thought less about Y-O-U, you might get the respect you obviously so desperately crave. It's funny, I was flying out of LGA last Sunday and somehow your name was mentioned; the collective groans and rolled-eyes from agents to pilots was so universal that no literary play-by-play on here could do it justice.

Eye

 

[USA320Pilot]

The comments above were written in “jest†and a “sarcastic†message, which BoeingBoy knows. It was delivered due to the insanity of the RC4 for being the first group of people to make decisions against every ALPA official and financial and legal advisor to give management a concession greater than the “askâ€.

What’s interesting is that BoeingBoy continues to “twist†and misrepresent information, which is a normal act of the ALPA PA Representatives according to both Bill Pollock and Jack Stephen. If my memory serves me correctly, both Stephan and Pollock publicly indicated 5 times during the past couple of year’s that the PA Reps, who BoeingBoy supports, misrepresented information.

I find it interesting that BoeingBoy needs to twist a comment that was sarcastic to try and discredit others, which is a normal type of action used by the so-called “darksiders†and thier supporters.

I believe in listening to the ALPA president, the ALPA director of representation, the ALPA outside legal council, the ALPA professional negotiator, ALPA Economic & Financial Analysis, the ALPA economist, the ALPA investment banker, the ALPA contract administrator, all 3 MEC Officers, and 2/3 of the MEC versus four people who held the “roll call†to provide an airline management the first concession greater than the “askâ€.

If it takes sarcasm to try and drive a point home so be it, but man’s character is truly shown when they purposely misrepresent a comment when they know it’s sarcastic.

BoeingBoy and his so-called ALPA PA Representatives are directly responsible for the pilot contract disaster. They were in charge of the MEC and NC and delivered the contract…now they are trying to hide behind their failure because their gamble to “just say no†miserably failed. After all the Advisors and most of ALPA were wrong and the RC4 and their supporters were right…

In conclusion:

Watch your thoughts; they become words.
Watch your words; they become actions.
Watch your actions; they become habits.
Watch your habits: they become character.
Watch your character; it becomes your destiny.

Unfortunately you cannot fix stupid and purposeful misrepresentation!

Best regards,

USA320Pilot

 

[700UW]

I believe in listening to the ALPA president, the ALPA director of representation, the ALPA outside legal council, the ALPA professional negotiator, ALPA Economic & Financial Analysis, the ALPA economist, the ALPA investment banker, the ALPA contract administrator, all 3 MEC Officers, and 2/3 of the MEC versus four people who held the “roll callâ€￾ to provide an airline management the first concession greater than the “askâ€￾.

Wrong again, Your GAG/MEC under Pollack in the first chapter 11 case gave your pension to the company without a membership vote after two concessionary contracts. That was the first union to give greater then the "ask", ironic you keep posting misinformation.

You are the master of misinformation, twisting and insulting posters, your Charlotte Observer OP-ED piece was a prime example.

Once again, don't let the facts get in your way.

 

[ClueByFour]

The comments above were written in “jestâ€￾ and a “sarcasticâ€￾ message, which BoeingBoy knows. I

So post the whole message and clear things up.

Basically, due to the massive spin historically applied to everything from a certain corner of the LGA crew room, it's impossible to judge without seeing the entire message.

Having seen it, I'm pretty sure you won't post the whole thing--but here is your big chance to prove someone wrong again--post the entire message.

 

[USA320Pilot]

ClueByFour & 700UW:

The whole ALPA thread and all of the information from months-and-months ago, maybe even year's and year's ago, is most likely no longer on the ALPA message board and has been purged due to normal EIS Committee work.

I believe BoeingBoy cut and pasted this information, saved it, and then re-posted it in another attempt to "twist" information and "shoot the messenger".

What I find interesting is that a person would post part of a comment from another person, from a very small part of a topic, from a private message board, which is password protected, without his permission and then place it in a public forum.

I believe that speaks loudly about a person's character. In fact, most people are afraid to post their identity and are cowards, but yet BoeingBoy tries to link posts by posting a small part of a sarcastic message from a private message board.

Moreover, I believe this may be a violation of ALPA policy.

Separately, ClueByFour...what did you say about no airline being able to post a a profit with oil at $70 per barrel? How can you be so wrong again?

700UW, if my memory serves me correctly the MEC voted to change the DB pension to a DC pension plan, which would have paid a 3-year Captain about $1 million because ALPA's Financial and Legal Advisors said the company would most likely liquidate if the pension plans did not change.

Do you think I like losing a pension that could have paid pilot's up to $2 million? If you do...can we conduct a business transaction together.

The ALPA president, the ALPA director of representation, the ALPA outside legal council, the ALPA professional negotiator, ALPA Economic & Financial Analysis, the ALPA economist, the ALPA investment banker, the ALPA contract administrator, all 3 MEC Officers, and majority of the MEC believed the pension change was necessary to save the company, just like at United and Delta.

Best regards,

USA320Pilot

 

[ClueByFour]

ClueByFour & 700UW:

The whole ALPA thread and all of the information from months-and-months ago, maybe even year's and year's ago, is most likely no longer on the ALPA message board and has been purged due to normal EIS Committee work.

So you won't mind if somebody posts it?

What I find interesting is that a person would post part of a comment from another person, from a very small part of a topic, from a private message board, which is password protected, without his permission and then place it in a public forum.

It made it to at least one other public website--google it and you will find it (or, I did, anyway).

But you surely can't object--I'm only aware of one person on these forums who has PM'd people asking for names and bases and such--surely you are not going to say one thing here (or represent one thing here) and then be suprised when someone cites source material from somewhere else? If you think it's going to be that easy, I'd consider a change of spin tactics.

You can clear this up by posting (or allowing it to be posted). We all know why that won't happen, but it sure is entertaining to watch the spin machine working overtime.

 

[700UW]

Why can't you just admit the GAG/MEC during the first bankrupcty gave more then the ask?

Is it that hard to comprehend that you pilots gave two rounds of concessions and met the "ask" and then your MEC/GAG gave away your pension without a vote which was more then the "ask"?

Pretty simple to understand.

 

[whlinder]

Interestingly, a not-so-informed "naysayer" poster, who is not an employee of US Airways, indicated no airline could make money with oil prices at $70 per barrel.

US Airways' hedging program will provide the carrier with savings of more than $10 million per month in energy costs if crude oil prices traded at an average price of $70 per barrel from the hedged average price of $67.37 per barrel in 2Q. If the average price of oil and the corresponding jet fuel price increases over $70 per barrel of oil the savings will be even greater.

How could this not-so-informed poster be so wrong...again?

Best regards,

USA320Pilot

Talk about not-so-informed posters...

Why weren't you on here telling us what a bad decision it was to hedge since you think (thought?) oil prices will recede?

And which would you rather Mr. A320, US make money at $75/barrel in part because of hedging, or you be right and oil declines to $50, putting US in the red because of hedges above market price, but allowing you to go 'nyah nyah nyah, I was right, oil was overpriced'?

 

[700UW]

Way to go Whlinder, just shows you he does not have any idea of what he talks about!

 

[EyeInTheSky]

ClueByFour & 700UW:

I believe that speaks loudly about a person's character. In fact, most people are afraid to post their identity and are cowards, but yet BoeingBoy tries to link posts by posting a small part of a sarcastic message from a private message board.

Moreover, I believe this may be a violation of ALPA policy.

USA320Pilot

Whoa there Trigger,
BoeingBoy has never been banned from the ALPA board but YOU have. Why? Because YOU violated ALPA policy by talking to the press. Again, another fine example of your self-serving quest to be noticed at the expense of others.

Buh Bye
Eye

 

[700UW]

ClueByFour & 700UW:
I believe that speaks loudly about a person's character. In fact, most people are afraid to post their identity and are cowards,
Best regards,

USA320Pilot

Then why did you change your screen name and why don't you post your name?

Guess you are talking about yourself.

 

[TheLarkAscending]

Watch your thoughts; they become words.
Watch your words; they become actions.
Watch your actions; they become habits.
Watch your habits: they become character.
Watch your character; it becomes your destiny.

Ralph Waldo Emerson should be given the necessary props for the quotation above.

Your definition of a coward differs greatly from the vast majority of internet users. No one should be asking for private information from anyone on the internet, and expecting anyone to provide such, freely, is moronic.