Interestingly, what's a cover-your-behind move for Air Canada is a doubling-down of bets by PAR...



Monday April 10, 5:13 pm ET

MONTREAL, April 10 /CNW Telbec/ - ACE Aviation Holdings Inc.(ACE) said today that it has entered into an agreement to sell 1.75 million shares in US Airways Group Inc. (US Airways) to PAR Investment Partners LP.

The net proceeds from the sale transaction will amount to US$67.55 million which represents 90% of ACE's original investment in US Airways of US$75 million in September 2005. ACE still holds 3.25 million shares in US Airways.

http://biz.yahoo.com/cnw/060410/a_ace_sells_1_75mshar.html?.v=1

Interestingly, what's a cover-your-behind move for Air Canada is a doubling-down of bets by PAR...



Monday April 10, 5:13 pm ET

MONTREAL, April 10 /CNW Telbec/ - ACE Aviation Holdings Inc.(ACE) said today that it has entered into an agreement to sell 1.75 million shares in US Airways Group Inc. (US Airways) to PAR Investment Partners LP.

The net proceeds from the sale transaction will amount to US$67.55 million which represents 90% of ACE's original investment in US Airways of US$75 million in September 2005. ACE still holds 3.25 million shares in US Airways.

http://biz.yahoo.com/cnw/060410/a_ace_sells_1_75mshar.html?.v=1


Not surprised by this...both investors and formerly very frequent customers are abandoning ship.

Whatever Phoenix Flyer. You are aware that when investors abandon a company, the price falls, right? PAR paid $38.60/share.

martin33, you seem to have a good grasp of the airline industry. Care to hazard a guess as to why PAR is increasing their stake? This puts them at about 18%.

Not surprised by this...both investors and formerly very frequent customers are abandoning ship.

How can this be if PAR is investing more in LCC. I think Doug Parker is doing a great job with what he has to work with. And where are all the passengers leaving??? Load factor was up this past month.

How can this be if PAR is investing more in LCC. I think Doug Parker is doing a great job with what he has to work with. And where are all the passengers leaving??? Load factor was up this past month.
I'm more interested in where the proof is passengers are leaving. And forget the Elites vs. vacationers argument. This airline is in the business to make money and filling seats at a profitable price is how you do it.

I'm also interested in this so-called evidence that passengers are deserting US. This Easter period is the busiest since pre-9/11, and this summer is shaping up to be the busiest in years, with 3 new European routes to Stockholm, Milan and Lisbon coming on stream plus 5 extra seasonal routes to Dublin, Shannon, Glasgow, Barcelona and Venice. All are looking busy. I work in European Reservations and Sales, and we're turning passengers away because the flights over the next few weeks are overbooked. Cue mass uncertainty amongst employees... but only because travelling standby as employees will be a problem this summer! :mad: That aside, as an employee, I am pleased the company seems to be selling so well!

I'm also interested in this so-called evidence that passengers are deserting US. This Easter period is the busiest since pre-9/11, and this summer is shaping up to be the busiest in years, with 3 new European routes to Stockholm, Milan and Lisbon coming on stream plus 5 extra seasonal routes to Dublin, Shannon, Glasgow, Barcelona and Venice. All are looking busy. I work in European Reservations and Sales, and we're turning passengers away because the flights over the next few weeks are overbooked. Cue mass uncertainty amongst employees... but only because travelling standby as employees will be a problem this summer! :mad: That aside, as an employee, I am pleased the company seems to be selling so well!

From the HP side of the house, this customer is finding the same thing. Flights booked, been 5 weeks since there was availability at my preferred time. Luckily I have some flexibility in airports and times... but still pretty amazed and how the capacity has shrunk while the demand is growing.....

Glad to see they are going in the right direction!

How can this be if PAR is investing more in LCC. I think Doug Parker is doing a great job with what he has to work with. And where are all the passengers leaving??? Load factor was up this past month.

Well, passenger numbers are down, strictly speaking. Load factor had *better* be up, because system capacity shrank. Unless the shrinkage is done on the highest-load parts of the system, the load factor of the remaining part has to go up.

Someone asked why is PAR increasing their stake (to roughly 18%)?
I am guessing it might entitle them to another seat on the Board (the seat which ACE had to give up with the sale of this latest stake).

To learn more, it would be helpful to know who are the partners behind PAR...the 8-K they filed does not have to reveal much.. http://www.secinfo.com/d12atd.z57w.htm

Well, passenger numbers are down, strictly speaking. Load factor had *better* be up, because system capacity shrank. Unless the shrinkage is done on the highest-load parts of the system, the load factor of the remaining part has to go up.

Someone asked why is PAR increasing their stake (to roughly 18%)?
I am guessing it might entitle them to another seat on the Board (the seat which ACE had to give up with the sale of this latest stake).

To learn more, it would be helpful to know who are the partners behind PAR...the 8-K they filed does not have to reveal much.. http://www.secinfo.com/d12atd.z57w.htm

I wasn't able to find out much about the GP at PAR (let alone the LPs).

But from their perspective... I don't know the deal well enough to know what their effective "in" price was, but PAR is looking at equity that started trading at 20.40 at the end of September and is now in the high 30s. Air Canada isn't exactly awash in capital, so for them to take some gains off the table and get some cash back on their balance sheet probably feels good right about now. The short term indicators here in terms of market sentiment is that Parker's strategy seems to be working and momentum is on their side - essentially that yes, it is possible to put the screws to loyal business travelers and have a good airline business at the same time. I'd point out that the most successful airline business in this country has very little by way of frequent biz traveler amenities and so on (LUV). If you believe that from a business perspective the airline industry has bottomed out and is on the rebound, this isn't a bad call.

For the record, I don't like Parker's approach to frequent/biz travelers, as I am one. But I don't think it's necessarily correct to extrapolate that because I'm unhappy, it's bad news for LCC stock.

Whatever Phoenix Flyer. You are aware that when investors abandon a company, the price falls, right? PAR paid $38.60/share.

martin33, you seem to have a good grasp of the airline industry. Care to hazard a guess as to why PAR is increasing their stake? This puts them at about 18%.

You might be, like many, confusing load factor with airline survival. When you look at the data surrounding the failures of Eastern, National, Vanguard, Pan Am, Branniff, and 4 others you will note that load factor never decreased prior to their liquidation. In nearly all cases, neither did their stock price or RASM, in comparison to other airlines at the time. Delta's RASM and load factors are very comparable (within .1 standard deviation) of all other U.S. airlines, and they are on the brink right now.

They all failed because of what employees and/or customers thought of them. Don't ever consider loads as an indicator of airline success, particulalarly when all other airlines have close to the same load factor.

ACE is closer to the daily business of the industry, and perhaps doesn't like the trends it is looking at. Also, the quid pro quo for their original investment was heavy maintenance work on Airbus aircraft, with emphasis on the new A350. Airbus has been told publicly, in the last few days, by two of the biggest customers for that plane, that even though it contains many upgrades over the 330, from which it is derived, it needs a redesign to compete with the new Boeing 787, which is eating its lunch on new orders. Airbus has indicated it will probably do something, making it less likely that aircraft will be delivered soon. As for PAR, these funds like that are literally awash in money invested by pension funds, etc., looking for higher yields in a low interest rate environment. Increasing their current holdings, probably made that paper the most attractive thing they could buy right now. In their business, they pay themselves 2 or 3 percent of the funds they manage, each year. If they don't spend it, they have to give it back. The new US has decided to run a business with controlled capacity. If Delta goes down, they will do well from that. Likewise, even now, those Delta pilots are surely scaring off business fares, paid by people who have to get where they are going. What none of these older carriers seem to fathom is the aggressive profile of the new guys. USAirways dumped most NYC to Florida nonstop services several years ago. I was looking at the JetBlue schedule the other day, and noticed that they fly over 15 times a day between various NYC airports, and West Palm. Ditto other major Florida cities. AirTran and Southwest, and even Spirit, are offering more and more point to point service into the former USAir strongholds in the Northeast (PVD, BUF, ROC, SYR, HPN, ISP, CAK, etc.) from Florida. That sort of stuff starts to whittle away your captive markets after a bit. I'm just watching.

They all failed because of what employees and/or customers thought of them. Don't ever consider loads as an indicator of airline success, particulalarly when all other airlines have close to the same load factor.

They all failed because they were losing millions and were nowhere near to making a profit. As for the comment that loads that mean nothing, that is true if you don't know about CASM and RASM in the equation.

Since you have double posted this I know you are speaking as more of a spited elite rather than looking at US from an investor's point of view.

US prospects have greatly improved and if a lot of elites left because of the changes than one can argue that losing them was well worth it.

Load factors will usually increase with reduced capacity, be it created by fewer flights, or smaller aircraft. Theoretically, if demand remains high, then compression should cause average fares paid to go up. For the company's sake, let's hope it works that way. In any case, I know of no successful business model in this country, which has benefited from a loss of patronage, especially, if it comes out of the upper percentile of core customers. Yields may not have been what they would have liked, but they still had to be significantly higher than those derived from casual customers. There is also a cost involved in acquiring new customers, to replace what left.

You might be, like many, confusing load factor with airline survival. When you look at the data surrounding the failures of Eastern, National, Vanguard, Pan Am, Branniff, and 4 others you will note that load factor never decreased prior to their liquidation. In nearly all cases, neither did their stock price or RASM, in comparison to other airlines at the time. Delta's RASM and load factors are very comparable (within .1 standard deviation) of all other U.S. airlines, and they are on the brink right now.

They all failed because of what employees and/or customers thought of them. Don't ever consider loads as an indicator of airline success, particulalarly when all other airlines have close to the same load factor.
No, I'm not. I'm looking at their numbers, which show high LF, rapidly rising RASM, and falling CASM. High LF is not by itself a big deal. High LF + high RASM + low CASM is the only way to make money in the airline business. I'd think this is fairly obvious.

No, I'm not. I'm looking at their numbers, which show high LF, rapidly rising RASM, and falling CASM. High LF is not by itself a big deal. High LF + high RASM + low CASM is the only way to make money in the airline business. I'd think this is fairly obvious.

Agreed wholeheartedly, provided the unintended consequence of miserable customer experience does not kick in...which it arguably has. Managing the business to LF, RASM and CASM exclusively or nearly exclusively is what has created most or probably all of the commodity environment under which all of the majors in this country now operate.

The first U.S. carrier that injects a fourth, more important measure of customer satisfaction and retention, into that equation will not only change the industry but will also find that the LF/RASM correlation will optimize and improve dramatically while increasing CASM by an exceedingly minor amount.

I was hoping that US could have been that carrier, since they were the first to eliminate Saturday night stay requirements, which never had any impact on CASM for instance.

The first U.S. carrier that injects a fourth, more important measure of customer satisfaction and retention, into that equation will not only change the industry but will also find that the LF/RASM correlation will optimize and improve dramatically while increasing CASM by an exceedingly minor amount.


This I think is the most concise description of the "sticky wicket" issue here. You believe that customer satisfaction and retention will lead to increased RASM at a very low cost. Parker & crew apparently do not share that view. For the moment at least, a number on "Wall Street" appear to agree with Parker.

If you're right, the play would be to buy a ton of UAUA and short the heck out of LCC and LUV. Time will tell if you're right. (Fidelity appears to agree with you. - corrected, Fidelity, as they often do, is splitting their bets and own a large amount of LCC and LUV too... more of the outstanding float of LCC than of UAUA.)