earnings season
I hate "earnings season." Never heard of it? Good for you!
Basically, earnings season happens after every financial quarter (e.g.
three months). At PlaneBusiness, this means our regular pace becomes a
frenzy as we cover around 35 airline or airline-related companies and how
they did for the quarter.
Often times, this means Tuesdays are much longer than they would be
normally, while I await the copy from Holly (the editor/founder/CEO of
PlaneBusiness), clean it up, and put it in to HTML from Word.
And, for the past six or seven quarters, it's been even worse as there
have been next to no good news in the airline industry. About the only
good thing, from my perspective, is that US Airways and United went
bankrupt. "Good thing??" you ask. Yep. It means that, while they do still
have earnings to report, they often have a lot less to say about it
because of the bankruptcy proceedings are ongoing in court.
But, besides that, it's a lot of red. Red, red and more red.
One earnings that I did want to see was today's report by the Midwest Air
Group (n¿
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½e Midwest Expres Holdings) of Milwaukee. As a former stock holder and a
fairly frequent flier, I still have a special place in my heart, and list
of airlines I prefer to fly on, for Midwest despite all of their troubles
and changes of the past two years.
Since Sept. 11, 2001, they have cut in-flight service (no more of their
excellent free meals, though the $10 buy-on-board variety are actually
quite good), sold planes (34 jets a year ago, 29 today), cut cities (good
bye Raleigh, N.C.), cut frequencies (fewer filghts to destinations like
Philly), and created a ton of ill will with their employees (furloughs,
layoffs, benefits cut, longer working hours, and more).
The company said it nearly avoided Ch. 11 bankruptcy itself last week by
getting unionized employees (pilots and flight attendants) to agree to new
contracts that contain significant concessions, renegotiated lease rates
on older airplanes, slowed delivery on the new Boeing 717, and deferred
delivery of new Embraer regional jets for two years.
Then, today, they annouced a near-profitable quarter. The loss was just $1
million, before unusual items (like $11.4 million in U.S. government funds
to help cover the war-related downturn in airline traffic). So, actually,
they made a nice profit for the quarter, but fuel prices were up -- again
-- and the airline still reports fairly high costs and low yields (the
amount of money they make on a flight).
What does the future hold? Well, more crowded seating on a few routes for
one. Midwest's "Saver Service" launches on Aug. 1. Saver Service is
planned for Los Angeles, Las Vegas, Denver, Phoenix and several Florida
markets in the coming months. The airline will replace it's customary
two-by-two seating (now called "Select Service") on these routes with
three-by-two, a much more customary seating arrangement for coach
passengers on the MD-80 series aircraft that Midwest flies. Warm,
baked-on-board chocolate chip cookies will still be served.
The only thing that will truly help this airline, under its current
business model, is an upturn in the economy and a return of high-paying
business traveler. That is extremely unlikely. So, what Midwest really
needs is a new business model. One that includes significant changes to
its strategy. Whether that means becoming a low-fare airline and going all
"Saver Service" across its route system, or putting in a two-class seating
arrangement (i.e. two-by-two business and three-by-two coach), or what
else, is totally unknown to me. I don't have an MBA.
But, if changes aren't made, and soon, the airline will likely fade before
the economy picks back up. And that will be a real shame.
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