United (UAUA) and Continental (CAL) announced a merger of equals on May 3. CAL shareholders will receive 1.05 shares of UAUA common stock for each CAL common share they own. UAUA shareholders would own approximately 55% of the equity of the combined company and CAL shareholders would own approximately 45%, including in-the-money convertible securities on an as-converted basis. UAUA overall option implied volatility of 56 is below its 26-week average of 73, according to Track Data, suggesting decreasing price movement.

Continue reading Options Update: United Volatility Low; Justice Department Reviews Merger with Continental

Options Update: United Volatility Low; Justice Department Reviews Merger with Continental originally appeared on BloggingStocks on Mon, 21 Jun 2010 08:30:00 EST. Please see our terms for use of feeds.

Early this morning, United Airlines (UAUA) and Continental Airlines (CAL) announced that they will join forces to create the world's largest airline in a $3 billion deal.

The new airline will be bigger than Delta Air Lines (DAL) and will send flights as far as Shanghai and South America. The companies believe that the span of destinations should attract more business travelers and their higher fares. The deal, which will need approval from shareholders and antitrust regulators, is expected to close in the fourth quarter. The new company will be known as United Continental Holdings and will be based in Chicago. The airline's largest hub will be located in Houston.

Continue reading United Continental Merger a Sign of Things to Come?

United Continental Merger a Sign of Things to Come? originally appeared on BloggingStocks on Mon, 03 May 2010 11:00:00 EST. Please see our terms for use of feeds.

United Airlines (NASDAQ: UAUA), US Airways (NYSE: LCC) and American Airlines (NYSE: AMR), according to an influential analyst, have run out of options. Jamie Baker of JPMorgan said in a July 20, 2009 report that these companies couldn't do anything to prevent a cash crisis. They only savior available to them would have to be an outside investor. To call the position grim would be optimistic. Unfortunately, it couldn't have come at a worse time.

As Baker was walking the bear into the airline industry, United was starting to celebrate its change in direction. The carrier has improved its on-time rate, according to a USA Today report, and its operations are coming around. Despite the fact that the airline industry has been brutalized by the global recession, the airline has made some progress. Through August, the company's share price doubled, and its ascent has continued in September. So, the company is locked in an ongoing struggle to manage its identity, cope with its past and shape how the world sees it today.

The operational "makeover" has resulted in a reduction of its fleet from 601 jets in 2000 to 386 as of the summer of 2009. In terms of passenger traffic, it's in the #4 spot in the United States - trailing Delta (NYSE: DAL), Southwest (NYSE: LUV) and American. With Q2 revenues off 25.2% year-over-year, however, drastic measures are still necessary.

Continue reading United's battle over its identity

United's battle over its identity originally appeared on BloggingStocks on Thu, 17 Sep 2009 17:00:00 EST. Please see our terms for use of feeds.

Continental Airlines (NYSE: CAL) just got the relief it needs to compete. Despite resistance from the Department of Justice (which can only recommend), the Department of Transportation has granted the airline immunity from antitrust laws. This clears the way for Continental to work with United Airlines (NASDAQ: UAUA) -- and other carriers -- on international routes. Now, the airline can join Star Alliance, which already has antitrust immunity.

At the same time, DOT approved a joint venture among Continental, United, Lufthansa (OTC: DLAKY) and Air Canada. This new relationship would involve trans-Atlantic routes.

Continue reading DOT overrides Justice, Continental Airlines wins antitrust relief

DOT overrides Justice, Continental Airlines wins antitrust relief originally appeared on BloggingStocks on Mon, 13 Jul 2009 14:20:00 EST. Please see our terms for use of feeds.

The new way they are starting to combat the high costs of flying is by cutting back, or postponing long international flights, in particular flights that are in excess of 12 hours.

Continue reading Airlines ditching long distance flights to combat fuel prices

Airlines ditching long distance flights to combat fuel prices originally appeared on BloggingStocks on Tue, 08 Jul 2008 14:52:00 EST. Please see our terms for use of feeds.

Continue reading Flying just got a little more expensive

Flying just got a little more expensive originally appeared on BloggingStocks on Thu, 08 May 2008 16:30:00 EST. Please see our terms for use of feeds.

Delta (NYSE: DAL) is not wasting any time. It would like to have a merger deal in place before the end of the month. According to The Wall Street Journal, the airline is already in talks with both United (NASDAQ: UAUA) and Northwest (NYSE: NWA).

What's the hurry? In an industry where losses are more common than profits and Chapter 11 is not an unusual state of operation, consolidations may be a way to stay in business. Both oil costs and a weak economy could undermine financial results at big carriers.

That leaves open the question of whether mergers really help airlines make money. There are savings in personnel but they often involve difficult negotiations with unions. A combined operation does not help bring down oil prices.

Perhaps most important, merged airlines often have problems combining reservation systems and customer service. That means quality of service drops and consumers sometimes take their business elsewhere.

The math is not all that compelling.

Douglas A. McIntyre is an editor at 247wallst.com.

Delta seeking quick merger, but why? originally appeared on BloggingStocks on Tue, 15 Jan 2008 08:24:00 EST. Please see our terms for use of feeds.

After airline stocks took a nearly unprecedented beating during the last few weeks on concerns about higher fuel costs and a falling economy, they rallied this week. Some of it may be that the selling was a bit overdone. But the biggest cause was news that Delta (NYSE: DAL) is considering a merger with Northwest (NYSE: NWA) or United (NASDAQ: UAUA).

According to Reuters, "most of the largest U.S. airlines are likely to post fourth-quarter losses, possibly signaling the end of an industry recovery that began in 2006 and further building a case for mergers."

Mergers in the airline industry are often used to keep one or the other carrier out of Chapter 11. The courts have been the refuge of the flying business for decades. If a carrier can't pay its bills, it goes into bankruptcy. When things get better, it comes out again. Creditors and unions usually get the short end.

The assumption that putting two big airlines together will save money is undoubtedly true. But compared to overall costs, those savings are probably very, very modest. Running Northwest costs about $12 billion a year. So much of that goes into fleet costs, fuel, and labor that there is not much to cut. Employees can be pushed out over time, but the unions are sensitive about it.

Continue reading Airline mergers are no solution

Airline mergers are no solution originally appeared on BloggingStocks on Sat, 12 Jan 2008 16:10:00 EST. Please see our terms for use of feeds.

Continue reading Northwest cancellations: Will NWA be grounded?

Northwest cancellations: Will NWA be grounded? originally appeared on BloggingStocks on Tue, 24 Jul 2007 18:10:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• Netflix (NASDAQ: NFLX) was cut to Hold from Buy at Needham to reflect the lowered subscriber guidance and their belief that things can get worse before getting better. Shares were also downgraded at Cowen, to Neutral from Outperform, and Lehman, to Equal Weight from Overweight.

• NiSource (NYSE: NI) was cut to Underweight from Equal Weight at Lehman based on the expected increases in interest expense and taxes.

• TiVo (NASDAQ: TIVO) was downgraded to Short from Sell at SMH Capital and believes the current valuation now reflects 20% penetration of the Comcast Corp (CMCSK)-owned digital sub base for the joint venture product bundle, which the firm considers aggressive. In addition, the firm believes TiVo's new pricing structure doesn't add much value.

• Matrix cut Williams-Sonoma (NYSE: WSM) to Sell from Hold on valuation and deteriorating operating results.

• Citigroup downgraded shares of KLA-Tencor (NASDAQ: KLAC) to Hold from Buy on valuation as they see risk to 2H07 estimates due to slower near-term cost savings and higher integration costs...

• Friedman Billings downgraded American Express (NYSE: AXP) to Market Perform from Outperform.

• Piper Jaffray cut Atheros Communications (NASDAQ: ATHR) to Market Perform from Outperform.

• Jefferies downgraded United Rentals (NYSE: URI) and GlobalSantaFe (NYSE: GSF) to Hold from Buy.

• Merrill downgraded Wyeth (NYSE: WYE) to Neutral from Buy.

Analyst downgrades 7-24-07: AXP, GSF, NFLX, TIVO and WSM originally appeared on BloggingStocks on Tue, 24 Jul 2007 11:03:00 EST. Please see our terms for use of feeds.

Continue reading Virgin America enters U.S. airspace -- What does that mean for U.S. airlines?

Virgin America enters U.S. airspace -- What does that mean for U.S. airlines? originally appeared on BloggingStocks on Thu, 19 Jul 2007 18:00:00 EST. Please see our terms for use of feeds.

Yapta yanks $2.3 million in venture capital originally appeared on BloggingStocks on Tue, 10 Jul 2007 19:40:00 EST. Please see our terms for use of feeds.

Correction in UAL leads to good buying opportunity originally appeared on BloggingStocks on Tue, 08 May 2007 11:10:00 EST. Please see our terms for use of feeds.

Airline stocks received little favorable attention from the newsletter world as oil prices were setting new highs. However, with the recent decline in fuel costs, the airline sector is now gaining favor, and two particularly astute industry observers have both added UAL Corp. (NASDAQ: UAUA ), parent of United Airlines, to their buy lists.

According to Elliott Gue, editor of The Energy Strategist, UAL has been "somewhat of a laggard and is due to play catch-up." And while some investors might be uncomfortable buying a stock that was in bankruptcy until last February, Elliott sees this is a significant plus.

He explains, "Almost all the big players have been bankrupt on multiple occasions. Basically, without being too sarcastic, here's how the airline bankruptcy game works: an airline racks up huge debts, and when the industry turns down they can't services their debt, so they declare bankruptcy, wipe out the shareholders, and hand control to the debt (bond) holders."

Setting aside the obvious unfairness of this business model to those who suffer from the bankruptcy, from a stock trader's standpoint Gue notes, "Under bankruptcy carriers are able to cut their costs, eliminate much of their debt and even secure new financing and cash to begin anew. As a result, carriers that are just emerging from a major bankruptcy restructuring can also be highly competitive players."

Such has been the case with UAL; during its bankruptcy, he notes, UAL renegotiated labor contracts, dumped its underfunded pension plays and reduced its debt by almost half.

Now, he says, "The only thing holding UAL back has been high oil prices. With oil now at more moderate levels now, the sector and this stock have room to run." He emphasizes, however, that this is a trade - not a long term investment.

UAL has also shown up among the stocks being bought by the "best" stock pickers on Marketocracy, a site developed by Ken Kam who monitors the buying and selling of some 70,000 investors who operate virtual model portfolios. For his top stock picks he looks for stocks that are being bought by those with the best trading records while concurrently being sold by those with the poorest records.

Ken first saw buying by the top performing stock pickers when UAL emerged from bankruptcy last February, and has watched them increase and decrease their positions along with moves in oil.

According Ken, the 'best' just added 12% to their UAL positions, while the 'rest' -underperformers - have been selling, recently reducing their positions by 13%. This divergence between the "best and the rest" has led Ken to select UAL as his latest featured stock idea.

Steven Halpern is the editor of TheStocksAdvisors.com, a daily digest covering the favorite investment ideas from the financial newsletter community.

Clearer skies for UAL originally appeared on BloggingStocks on Tue, 24 Oct 2006 11:36:00 EST. Please see our terms for use of feeds.

One thing about airline stocks: it's usually very good or very bad. Now, according to a cover story from Barron's, the sector may be very good.

Ironically, a big part of the puzzle is the wrenching problems over the years - such as union strife, security threats, rising energy costs, and intense competition from low-cost carriers. It's by going through restructurings - and bankruptcies - that airline companies end up in fairly good shape.

According to Barron's, the best values for shareholders may actually be the legacy carriers: US Airways Group, Inc. (NYSE:LCC), United (UAL Corporation, NASDAQ:UAUA) and American (AMR Corporation, NYSE:AMR). In fact, it looks like 2007 could see the highest profits in the industry's history -- as energy prices fall, travel continues to grow and capacity is stagnant.

There is also the potential for M&A activity. One scenario is a merger between Delta Air Lines, Inc. (OTC:DALRQ) and Northwest Airlines Corporation (OTC:NWACQ). And, as I wrote about in BloggingStocks, there may be a deal with United.

True, if the economy slips into recession, things are likely to turn negative for the airlines. But, so long as this does not happen - and energy prices remain stable - investors may get a pleasant surprise.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

Barron's: airline stocks ready for takeoff? originally appeared on BloggingStocks on Mon, 02 Oct 2006 08:10:00 EST. Please see our terms for use of feeds.