AMR (NYSE: AMR) may have skipped key inspections of some of its planes to keep them in service. According toThe Wall Street Journal, "American made the procedural changes and revised its maintenance manual in an effort to prevent planes from being pulled out of service." The inspections were meant to look over planes that may have been hit by lightning.
American's defense for skipping the procedures is that, if a pilot reported that his plane was hit by lightning, mechanics will look into it. What if the pilot is napping? Further, the airline says no plane has crashed from a lightning strike in over 30 years. How convenient.
The airlines have one, weak reason for cutting back on inspections. They cannot afford them. The federal government has to deal with the fact that some carriers are near bankruptcy because of high fuel prices. The FAA may have to supply financial support for extra work by mechanics, or watch the industry fall apart.
Douglas A. McIntyre is an editor at 247wallst.com and the editor of Ten Stocks Under $10.
According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.
In reaction to surging fuel costs, several major airlines announced today that they were raising their fares in order to recoup some of their rapidly increasing flying costs.
The increase this time around is $20 and effects passengers traveling on UAL Corporation (NASDAQ: UAUA), Delta Air Lines, Inc. (NYSE: DAL), and AMR Corporation (NYSE: AMR)'s American Airlines. The $20 jump in prices will be added to the airline's fuel surcharges, and consequently, these charges are now running at $130 round trip on most flights that you will book through the airlines.
The current rate hike was first initiated by Delta, and marks the second time in just over a week that the airline has been forced to raise fares in order to combat record high fuel costs. Times are definitely tough for airlines, and they are doing everything they can to combat fuel prices, but regardless of the rate increases most analysts are still expecting to see huge losses this year from most, if not all, airline carriers.
Oppenheimer downgraded shares of Chelsea Therapeutics (NASDAQ:CHTP) to Perform from Outperform after their survey suggested physicians believe currently available generic treatments are adequate in neurogenic orthostatic hypotension, which could impact the company's lead drug Droxidopa.
Clearwire (NASDAQ:CLWR) was cut to Sell from Hold at Citigroup on valuation, as they estimate fair value at $13.
OTHER DOWNGRADES:
Goldman downgraded Kellogg (NYSE:K) to Neutral from Buy and Hershey Foods (NYSE:HSY) to Sell from Neutral.
According to The Wall Street Journal, Microsoft Corp. (NASDAQ: MSFT), attempting to avoid a huge hostile takeover bid, indicated it may be willing to raise its bid to as much as $33 per Yahoo Inc. (NASDAQ: YHOO) share. Microsoft's board had failed to reach a final decision on how to proceed with its bid for the Internet search group. Yahoo!, though, may want $35-37 per share. And I thought Ballmer said he would lower the bid ... Don't they know by now these negotiating tactics are well known? In any event, it's starting to look more and more like the deal is closer than ever and the parties are willing, despite each showing off some muscle first.
Starbucks (NASDAQ: SBUX) reported late Wednesday a 28% drop in second-quarter earnings to $108.7 million, matching market expectations. While the drop was expected, it doesn't mean the report showed any positive changes following Schultz coming back to the CEO role. Perhaps it's too early to see them manifested, but Starbucks, once such a darling, isn't showing improvement yet. Stock is up about half a percent in premarket trading.
Adobe Systems Inc., (NASDAQ: ADBE) estimated that fiscal second-quarter earnings and revenue would come in near the high end of its targets and affirmed its earnings outlook for the full year. That is about 45-47 cents, compared to analysts' estimates of 43 cents per share.
General Motors Corp. (NYSE: GM) reported a staggering $3.3 billion loss in its first-quarter, due in part to a weak U.S. market, a strike at a major supplier and plummeting sales of sport utility vehicles and pickups. While the loss amounted to $5.74 per share, GM's adjusted results are a loss of $350 million, or 62 cents per share, handily beating analysts' expectations of a $1.60 loss per share. Still, compared to last year, when the automaker had earned $62 million, or 11 cents a share, the results are far from stellar especially when considering that GM's revenue slipped despite being up 20% outside North America. GM shares are up about 3.5% in premarket trading.
Alcatel-Lucent (NYSE: ALU) also reported a loss Wednesday morning, its fifth straight quarterly loss and said it expected annual revenues to fall while scaling back its market forecast for 2008. Shares of ALU are down nearly 8% in premarket trading.
According to Fortune, AT&T (NYSE: T) is planning to cut the price by as much as $200 on Apple Inc. (NASDAQ: AAPL) iPhone when the new 3G model comes out this summer. Subsidizing the phone by that much will cut the price to $199 to for customers who sign two-year contracts, the Fortune source says.
After hitting a one-year high of $29.32 in July, the stock hit a one-year low of $6.81 last week. AMR opened this morning at $8.00. So far today the stock has hit a low of $7.95 and a high of $8.63. As of 12:20, AMR is trading at $8.50, up $0.76 (9.8%). The chart for AMR looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $6 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just seven weeks as long as AMR is above $6 at June expiration. American would have to fall by more than 29% before we would start to lose money. Learn more about this type of trade here.
20 Most Profitable Tech Companies Among Fortune 1000 techs, Microsoft remains on top, taking in $14.1 billion in earnings last year. IBM, Cisco, Hewlett-Packard and Intel round out the top five most profitable. 20 most profitable tech companies - FORTUNE
Eos was an improbably candidate for success in the airline industry. It flew one route, from New York's JFK to London. It was an all-business-class carrier.
Now, Eos is bankrupt. Having only one route, added to the rising price of jet fuel, cut the carrier down.
The news raises the question, once again, whether small and large airlines alike can make it though the current increase in fuel prices and a recession without having to file for Chapter 11. It was only four years ago that most U.S. carriers had to seek protection in the courts. AMR (NYSE: AMR) was one exception. That hurts it now because it did not use bankruptcy to cut its debt and the costs of its workforce. That may make it the most likely candidate of any American carrier to hit the air pocket of insolvency.
The oil price crisis my be so bad that, coupled with falling passenger revenue in a sharp and prolonged downturn, even mergers like the one planned by Delta (NYSE: DAL) and Northwest (NYSE: NWA) will not save them.
That will leave the banks, who hold most of the debt on airline balance sheets, holding the bag.
Douglas A. McIntyre is an editor at 247wallst.com.
Fort Worth-based AMR Corp. (NYSE: AMR), parent of American Airlines, was the first major U.S. airline company to report first-quarter results, and it posted a loss of $1.32 per share. Revenue rose 5% to $5.7 billion. Analysts surveyed by Thomson Financial had expected a loss of $1.34 per share on revenue of $5.73 billion.
Filling seats wasn't American's problem -- average occupancy hit a record 79.1% percent in the quarter. Average fares paid rose 5.1%, as airlines raised ticket prices. But executives said they were concerned about the weakening economy and even more worried about skyrocketing fuel costs. American's fuel spending jumped 45%, offsetting further increases in revenue.
American announced that it will be cutting U.S. capacity by 3.6% this year and selling 90% of its investment arm, American Beacon Advisors. The company also expects to sell or spin off its American Eagle regional airline this year to raise additional cash.
American is also speeding the replacement of its fleet with more fuel-efficient Boeing (NYSE: BA) 737-800s, taking delivery of 30 new planes in 2009 and 2010 instead of the previously planned 23.
AMR shares rose 35 cents, or 4.1%, to $8.92 in trading Wednesday.
What works for two airlines should work for two others. At least that is the thought process behind a possible merger of United (NASDAQ:UAUA) and Continental (NYSE:CAL). They believe that if there are financial and marketing advantages to the Delta (NYSE:DAL) merger with Northwest (NYSE:NWA) that they should go next.
According toReuters the two carriers "have laid most of the groundwork for a merger, two people briefed on the matter said, and could have a deal ready "pretty quickly" if Delta Air Lines and Northwest Airlines announce a tie-up." Now that the Delta/Northwest deal is done, they are likely to speed up that process.
While the value of airline mergers is dubious, two big mergers could cause regulators to turn down both. The marriages are based on the idea that airlines can cut costs in personnel, marketing, and route consolidation. If the is true, it means lay-offs and service to fewer cities. It also could help an airline to raise ticket prices as it becomes the sole providers to air travel out of some cities.
Two big airline mergers have to make the US government looks at whether it is good to have only three large airlines in the US, including AMR (NYSE:AMR) instead of five.
Douglas A. McIntyre is an editor at 247wallst.com.
Why Starbucks' Logo Changed The coffee chain is temporarily using a retro brown look to evoke its beginnings and restore some goodwill for the brand. Starbucks' Retro Logo - BusinessWeek
Big Names Owe Big-Time on Taxes The IRS estimates that 21% of federal individual income taxes go unpaid each year - about $300 billion last year. As Tuesday's tax deadline approaches, Americans are settling accounts on $1.5 trillion in federal and state income taxes for 2007. But what about those who don't pay? Who are they? Do they get away with it? Hundreds of seemingly wealthy people - company presidents, former soap opera stars, top-selling real estate agents - live in multimillion-dollar homes yet have huge tax problems. Many tax delinquents live openly and prosperously for years, even decades, while owing millions of dollars in taxes. These include singer Dionne Warwick, comedian Sinbad, Bill Clinton's former political advisor, Dick Morris, former U.S. treasurer Catalina Vásquez Villalpando and infamous celebrity OJ Simpson to name a few. Big names owe big-time on taxes - USATODAY.com
American Airlines, a subsidiary of AMR Corp. (NYSE: AMR), has announced that it received the green light from aviation officials to return all of its 300 grounded jets to service. The jets were temporarily grounded as the Federal Aviation Administration surprised the airlines as officials thought the required repairs had been made weeks ago . Officials said that "the wiring still was not secured and stowed properly in wheel wells."
American, the U.S.'s largest airlines, resumed flying the MD-80s today after canceling more than 3,000 flights this week. The AP story linked to above quoted an S&P analyst who reckoned the cancellations cost the struggling airlines at least $30 million.
There is quite a row going on at SeekingAlpha (warning: foul language) where top media blogger, Jeff Jarvis, has recently turned his sights on the airline industry as a whole. Jarvis, well-known for his views on the death of old media, Jarvis augers that without change the whole industry is in a death-spiral.
Says Jarvis, "I think the essence of their future is: They [the airlines] have to explore new value by having a decent relationship with us, using that new value to improve the experience so they can have a decent relationship. Screwing your customers is the least sustainable business model."
Them's fightin' words...
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
As you know, American Airlines -- AMR Corp (NYSE: AMR) has been having a tough week. The company started running a new round of inspections on Tuesday which has led to large cancellations for the past 4fourdays.
Today, once again there were more cancellations, with another 595 flights being grounded. It can be very frustrating to find out your flight has been canceled, but some airports are upping their efforts to accommodate the unlucky passengers. All combined, the airliner has been forced to cancel in excess of 3,000 flights this week, impacting some quarter of a million travelers.
We have all had to deal with canceled, or delayed flights... and one thing is for sure, it is never a pleasant feeling, so you can just imagine the mood in airports all across America in reaction to this week's mess. Well, according to a story from MSNBC, some airports are taking extra steps to help make American passengers as comfortable as possible.
.gif){kind=logo}
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
