The U.S. Airlines industry has gone through several ups and downs in the past five years. Major negative influences on the industry included skyrocketing oil prices since 2005, economic recession in the U.S. since 2008, global economic downturn in 2009 and the "swine flu" outbreak. The airlines industry is cyclical and sensitive to a number of key drivers, the most prominent of which is the world price of crude oil. Since the beginning of 2009, prices of crude oil have been half of what they had been the year before, creating some relief for airlines. However, some industry operators hedged their fuel contracts at higher rates and are still paying the price. Many of the top airlines in the industry have responded by reducing services and aircraft fleet sizes, introducing new fees and higher fuel surcharges and reducing the number of people employed. Even with the price ...

Standard & Poor's Ratings Services has lowered its ratings on Southwest Airlines Co. (LUV), lowering the debt ratings to 'BBB' from 'BBB+’ and placing it with negative implications. However, Southwest has retained its investment grade rating. The downgrade reflects lower operating cash flow caused by record high fuel prices, low global demand for air travel and weak prices. The travel downturn has eroded the airline's flow of cash at a time when the airline faces substantial fixed obligations and declining cash balances. Southwest's cash balance fell to $902 million in the third quarter from $1.4 billion at the end of 2008. Recently, Southwest borrowed $124 million under a new term loan agreement secured by five Boeing 737-700 aircrafts. It also replaced its previous $600 million unsecured revolving credit facility with a new $600 million unsecured revolving credit facility that will expire in Oct. 2012. The rating ...

Moody’s Investor Services (MCO) has downgraded Boeing Co.’s (BA) rating outlook to "negative" from "stable". The major reason for the downgrade was the delay in the airplane maker's new 787 series, besides other setbacks that had hurt its financial flexibility.   Pitted against Airbus’s A319 aircraft, Boeing’s 787 series is plagued by delays. The inaugural test flight at the end of fiscal 2009 is more than two years behind the original delivery schedule. The company has already deferred the inaugural delivery of the 787 series aircraft five times.   Boeing has witnessed falling orders in the recent times for its commercial planes on account of tepid demand for air travel and cargo services. Already, a slew of commercial airlines have cancelled or deferred their fleet additions. Boeing has cut costs and announced reduction in its workforce along with scaling back production of some aircrafts. Moody's estimates a 20%

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The Boeing Company (BA) yesterday announced that it will record a $1 billion charge in the third quarter of fiscal 2009. The company attributed the charge from a delay in producing a new version of the 747-8 series freighter jet, leading to slow sales and late design changes. The aircraft competes with Airbus' A380 series aircraft. The goliath of commercial aerospace, Boeing has witnessed falling orders for its commercial planes in the recent times on account of tepid demand for air travel and cargo services. Already, a slew of commercial airlines have cancelled or deferred their fleet additions. Boeing has cut costs, reduced workforce and scaled back production of some aircrafts to cope with the changing market dynamics.   The $1 billion charge includes $640 million for higher estimated production costs consisting of late engineering design changes. This is besides the $360 million stemming from Boeing's decision ...

In yet another instance of increased airline industry access to financial markets, AirTran Holdings (AAI) announced that it has signed a couple of deals that will bolster its credit position. AirTran yesterday said that it has entered into separate agreements with The Bank of Utah, its principal credit facility lender, as well as with US Bank (USB), its largest credit card processor. The agreement with the Bank of Utah would allow the air carrier to borrow $125 million under the bank’s revolving line of credit. Previously, the limit was set at $90 million. The increased access to revolving line of credit would enable AirTran to decrease its cost of funds by reducing the more costly letter of credit facility by $50 million. The expiration date of its combined letter of credit and revolving line of credit has been extended to the end of 2010. Additionally, ...

Earlier this week, TAM S.A. (TAM) disclosed its operating data for August 2009. For the month, TAM gained a record 89.4% market share in the international market, representing a 15.5% growth year on year. However, the domestic market share was 43.8%, down 10.4% compared to the same period in 2008.   In the domestic market, TAM experienced a 5.9% increase in offered capacity but a 1.7% decrease in demand.  In the international market, the company obtained a 16.8% growth in demand when compared to the same period last year, while the supply grew 24.5%.   Currently, as the Brazilian real appreciates against the U.S. dollar, net income should grow in the following quarters. We believe that the combined effect of lower interest rates and a stronger Brazilian real will boost demand for international flights among domestic travelers in the country through the rest of the year.   A ...

Earlier this week, TAM S.A. (TAM) formed a partnership with Ipiranga and Wal-Mart Store Inc. (WMT) for its loyalty program network Multiplus Fidelidade. Ipiranga and Wal-Mart have customer loyalty and affiliation programs called Km de Vantagens and Bomclube, respectively.

Other than availing flights and tour packages with TAM Viagens, the tourism provider for TAM Airlines, Multiplus Fidelidade members will now be able to accumulate points by purchasing products and services at Ipiranga gas stations and by shopping at Wal-Mart stores. Members would also be able to redeem prizes at these partners' sales outlets.

Km de Vantagens and Bomclube will raise the customer base of Multiplus Fidelidade from 6 million members to nearly 12 million. Management believes that Multiplus will prove to be an efficient tool for establishing customer loyalty and retaining consumers at favorable costs for all the partners.

TAM is making use of every method to

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Standard & Poor's said on Friday that it is apprehensive about The Boeing Company’s (BA) risk in terms of order cancellations and deferrals for its commercial aircrafts. Pitted against Airbus’s A319 aircraft, Boeing’s 787 series is plagued by delays. The inaugural test flight at the end of fiscal 2009 is more than two years behind the original delivery schedule. The company has already deferred the inaugural delivery of the 787 series aircraft five times. Standard & Poor's is apprehensive this may force Boeing to scale back production of models 737, 747, 767 and 777 -- virtually everything other than its new 787 series in fiscal 2010. This viewpoint is shared by Fitch Ratings as well. As of now, Standard & Poor's has a Buy rating on Boeing’s shares while Fitch has an "A+" rating. The goliath of the commercial aerospace, Boeing has witnessed falling orders in ...

Recently, TAM S.A. (TAM) posted second-quarter results which were hurt by a 22.6% depreciation of the Brazilian real against the US dollar towards.

Domestic revenue fell 15.9% year over year in local currency, international sales declined 3.1% year over year and Cargo revenue was down 16.0%. However, cash flow generation was sound. The company reported a net income of R$788.9 million, up 134.1% year over year based on quarterly net financial income of R$1,283.9 million.

Currently, as the Brazilian real has appreciated against the US dollar, net income should grow in the following quarters. We believe that the combined effect of lower interest rates and a stronger Brazilian real will boost demand for international flights in the country through the rest of the year.

For the month of July, TAM set a record 88.3% market share in the international market, representing 15.8% growth year on year. However, domestic

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We are initiating coverage of Expedia, Inc (EXPE) with an Outperform rating. The stock has had a great run since the beginning of the year, with the share price increasing nearly 149%. Most of the increase has come on the heels of the company reporting better than expected results in the March quarter. This was followed by another stellar quarter, making the company look very good. Its closest competitors Orbitz Worldwide (OWW) and Priceline.com (PCLN) have also fared quite well, indicating a positive outlook for the sector. As one of the largest online travel companies in the world, Expedia has been impacted by the recession. However, management has come back strongly, with effective promotions that stepped up the conversion rate. The Summer Sale of 2009 was very big, with 5,000 hotels joining in, compared to 1,800 last year. Participating hotels saw a ...