Singapore announces first A380 commercial flight

Singapore Airlines has announced the day of the first commercial flight of the A380. The flight, SQ 380, will be on October 25, from Singapore to Sydney. ""Everyone at Singapore Airlines is keenly anticipating the delivery of this new plane, and our people are working hard on final preparation for its entry into service," said Singapore CEO Chew Choon Seng. "The first flight promises to be one of the most exciting occasions in aviation history."

All of the proceeds from ticket sales for the flight will go to charity. (Apparently, ExxonMobil is also donating fuel for the trip. ) If you're interested in purchasing a seat on either the first flight (or the first return flight the next day), you'll be able to bid for one on eBay starting August 25.

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AirTran isn't done with Midwest yet

Apparently AirTran isn't quite yet ready to give up on acquisition target Midwest Air, even though two days ago Midwest announced that it would go ahead with a deal led by TPG Capital. While the TPG offer was $16 a share, AirTran's latest offer, of $445 million in cash and stock, is valued at $16.25 a share. (Its old offer was $15.75 a share.) Midwest's board said earlier today that they would take the "revised offer under consideration".
Even though Midwest was expected to strike a formal agreement with the TPG-led group on Wednesday, AirTran might get its way in the end. Over half of Midwest shareholders were for the original AirTran deal, and Pequot Capital Management, the largest shareholder in Midwest, said today that they had "significant concerns" about a deal with TPG. Pequot's managing director said that in the long term, a deal with AirTran might be more valuable because the two airlines would be able to eliminate overlaps in their route networks - a move that would save a lot of money.

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Midwest CEO to employees about TPG offer

This was posted online, and I thought I'd re-post it here on The Airline Blog:

To: All Midwest and Skyway Airlines Employees
Date: August 12, 2007
From: Timothy E. Hoeksema
Subject: Board of Directors Update #4

The Midwest Air Group Board of Directors today said that it has unanimously determined to pursue an all-cash offer from TPG Capital, L.P. on behalf of an affiliate of TPG and one or more partners to acquire all of the outstanding shares of Midwest for $16.00 per share.

The board took this action after receiving a letter from AirTran Holdings that stated the airline was making its best and final offer to acquire all of the outstanding shares of Midwest common stock at $15.75 per share, valued at Friday's closing price of AirTran's common stock. In reaching its determination, our board concluded that the TPG offer presented greater value and certainty for Midwest shareholders than the AirTran offer.

Under the terms of the offer from TPG, the private equity investor indicated that its acquisition "would permit the Company to continue its rich legacy as a leading provider of customer oriented quality air service." The board expects that Midwest and TPG will execute a definitive merger agreement no later than August 15, 2007.

TPG is one of the largest private equity investors in the world and the most experienced in the airline sector. It has invested in Continental Airlines, America West Airlines, Ryanair, Hotwire and Sabre with the goal of helping management teams build long-term value for stakeholders. TPG's offer to Midwest is set forth in a letter that was received by the Midwest board on August 12. The letter is attached at the end of this memo for you to read.

This announcement is sure to result in intense media coverage. I will again remind you that news coverage is often highly speculative. Be assured that we will inform you of any developments as there is news to report.

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Northwest-backed group offers takeover bid for Midwest

photo: "Midwest N905ME", by Drewski2112

A group of investors, led by TPG Capital and which includes Northwest Airlines, said that it would buy Milwaukee-based Midwest Air for $400 million. The TPG-led bid was announced right after AirTran, which coveted a Milwaukee hub, said that it would no longer pursue its hostile takeover of Midwest. AirTran's final offer of $15.75 a share was less than TPG's $16.

Beyond the per-share figures, though, there might be another reason that Midwest might go for the TPG bid. The airline code-shares with Northwest, which is a key player at Milwaukee. Northwest didn't want another airline to move into the market, so Midwest's rejection of the AirTran bid is good news for them. However, Northwest said in a statement that they would not take part in managing Midwest (if the TPG bid is successful, of course).

The deal still needs to clear the anti-trust regulators, and AirTran CEO Joe Leonard has voiced, unsurprisingly, pessimistic views about this, saying that the "Midwest board has chosen a path that will benefit current senior management by selling out to a private equity firm and a so-called 'passive' investor whose involvement will surely raise antitrust concerns, casting doubt for shareholders on whether a transaction can, in fact, close." But a Midwest spokesperson was more upbeat, saying that the airline expected the deal to go through.

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United international route rumors

photo: "N646UA", by Drewski2112

There have been a few rumors floating around that United Airlines might start some new international routes. Among them:

• Chicago - Moscow. Aeroflot used to fly this route but stopped in 2001, and United holds the dormant route authority for the route, which it obtained in a deal with Pan Am back in 1991. (If United did fly this route, it would probably skip Moscow's Sheremetyevo Airport (SVO) and instead fly to Domodedovo Airport (DME) because its fellow Star Alliance carriers fly there.) But the US-Russia market is currently served by a lot of routes - Delta flies Moscow - Atlanta and Moscow - New York (JFK), and Aeroflot flies Moscow - New York (JFK), Los Angeles, and Washington (IAD).
  
• Chicago - Milan. If United did fly this route, it would compete with Alitalia.
• Chicago - Düsseldorf. United used to fly this route but stopped in 2001. Star Alliance partner Lufthansa flies it with an Airbus A319, but is supposed to upgrade the route to an Airbus A330 in May.

It has also been rumored that United would upgrade some of its Boeing 767-300s, including a switch from a two-class domestic configuration to a three-class international one, and an engine upgrade. These upgraded 767s would be used on the route.

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Air France and Delta might become closer

photo courtesy of caribb

The AFP and the French newspaper Les Echos are reporting that Air France is in joint-venture talks with Delta Air Lines, which is a fellow SkyTeam partner. A spokeswoman for Air France said that it "is still in negotiations with Delta, but nothing has been finalized". She also said that "the agreement being negotiated should be signed in the autumn."

The joint venture would happen in two stages - the first would start in April 2008 and include New York - Paris flights, as well as flights from Heathrow airport in London to cities in the US. In 2010, the second stage would cover the rest of Air France and Delta's trans-Atlantic flights. Les Echos reports that both airlines would split their profits from their main trans-Atlantic routes 50-50.

Air France-KLM, Northwest, and Delta have also applied for a joint venture agreement. Northwest and KLM have been close partners for more than 15 years, and this venture, if successful, will bring the four much closer together than they already are (all are SkyTeam members).

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United stock buyback plan raises controversy

photo courtesy albspotter

Executives at United Airlines have been talking about the possibility of the airline buying back stock or paying dividends to shareholders. “We realize the importance of doing something for shareholders," said CFO Jake Brace.

But the idea has not gone over well with the unions, who claim that the airline should be doing more for its employees, who had to sacrifice a lot during the airline's extensive stint in Chapter 11 bankruptcy. To be fair, United might want to consider setting up a fund for employees that have faced personal crises - rather like jetBlue and Delta have. The bankruptcy process adversely affected employee morale (and pay) - if United has a little cash left over, at least some of it should go back to employee's pockets.


But personnel issues aside, there's another issue for United management to consider: fleet renewal. Crain's Chicago Business quoted a United spokesperson as saying, “We have one of the industry’s youngest fleets, and the likely availability of next-generation narrow-body aircraft fits well with our timing for replacement planes, giving us a competitive advantage.” United's average fleet age is 12 years, which is pretty average but still on the older end of the spectrum. And with its rivals buying newer planes - Northwest, for example, has ordered the 787 and there are rumors that American and Delta will do the same - United should tuck away some cash when this issue arises in a few years.

And last, but not least, there's the airline industry itself, which is notoriously cyclical. Right now might be a time of (relative) prosperity for the industry, but like it has always done in the past, it will eventually take a dive. United needs to make sure that it has enough cash on hand to weather any downturns.

This isn't to say that a stock buyback plan isn't a bad idea, but United's management needs to get its priorities straight first. Work on clearing away debt and do something to help out employees. This doesn't mean to necessarily cave in to every demand, but if the airline is making a little extra cash, maybe give some of it back to employees - after all, they're the ones that have the potential to satisfy customers, who will then (hopefully) reward with repeat business.

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