Business Travel News - October 12, 2009 - (Page 4)

NEWS Airlines Better Cash Stances BY JAY BOEHMER certain circumstances.” Several major U.S. airlines spent Delta completed financing transthe final days of September build- actions that totaled $2.1 billion, ing cash reserves as they braced for “marking a significant step toward the seasonally weak fourth quarter. addressing the company’s 2010 debt Through several separate deals, maturities and further strengthenAmerican Airlines, Delta Air Lines, ing its liquidity position,” the compaUnited Airlines and US Airways ny said in a statement. Delta said it pulled a number of levers to build ended the third quarter with $5.6 their liquidity positions. billion in unrestricted liquidity. The cash-raising efforts further Meanwhile, US Airways in the final suspended the already distant pos- days of September raised $137.3 milsibility of bankruptcies, analysts said, lion through a common stock offerthough revenue trends and sus- ing, and United parent company tained demand weakness present UAL Corp. on Sept. 30 also offered yet another challenging quarter. new common stock shares. UBS analyst Kevin Before late SepCrissey in a Sept. 24 tember’s cash grab, research note said, International Air “U.S. airlines have Transport Associabeen busy capitaltion director general raising bees. Particand CEO Giovanni ularly active has Bisignani said the been AMR,” Amerilarger airlines had can Airlines’ parent built cash reserves of company. American $15 billion in the past expects to end the 10 months, of which third quarter with $12 billion is in debt $4.4 billion in cash, and $3 billion is in thanks in part to fiequity. He likened AA CEO GERARD ARPEY nancing deals anthe increase in liqnounced on Sept. 17 uidity to a “war chest totaling $2.9 billion and $830 million to fight the crisis,” but added that in cash from the sale of common “some airlines have not been able to stock the following week. build up their reserves. They’ve re“There’s no denying that the crises lied on banks, and banks are not of the past two years have taken a lending. We could see some more toll on our earnings as well as our casualties in the coming months.” balance sheet,” CEO Gerard Arpey U.S. legacy carriers likely won’t said last month. “It’s fair to say that be among those casualties.“We didthe same could be said for every air- n’t previously expect any of the U.S. line. While you can never borrow majors to file Chapter 11 soon,” your way to success, the financing UBS’s Crissey said, “and these capannouncements are very important ital raises provide more support for and positive developments.” this view.” Still, he noted that not all The carrier immediately gained of the new liquidity “lowers the risk nearly $1.3 billion in cash through a of bankruptcy in our models,” since $1 billion advance mileage sale to UBS already had assumed some of Citi and a $280 million loan from GE the carriers’ capital-raising efforts. Capital Aviation Services—the firms Crissey concluded, “The rally in “topping AMR’s friends and family the U.S. airline stocks and the apspeed-dial list,” said JP Morgan avi- petite for airline secondary issuances ation analyst Jamie Baker. Though has meant that more capital is availBaker said the moves put to rest any able to the airlines than we modeled concerns about short-term bank- a quarter ago. Therefore, near-term ruptcy scenarios, “longer-term, AMR bankruptcy risk has diminished.” still could justify bankruptcy under ■ jboehmer@btnonline.com ■ REGISTERED TRAVELER FIRMS SEEK TO RELAUNCH Investment firm Henry Inc. last month signed a letter of intent with Verified Identity Pass and its primary debt holder, Morgan Stanley, to purchase some “assets and liabilities” of the dominant Registered Traveler provider, which abruptly folded this summer and took much of the industry down with it. Since VIP, which operated the Clear program at 18 of the 21 airports in the United States that hosted Registered Traveler lanes, halted operations, one of its competitors, Vigilant Solutions, also folded, and the sole survivor, Flo Corp., suspended operations at the only airport where it operated (BTNonline, July 27). None of those operations has yet to resume, though Flo Corp. principal and managing partner Fred Fischer in congressional testimony on Sept. 30 said the firm “has secured significant financing since Clear’s failure and plans to relaunch a national program, with or without the U.S. Transportation Security Administration, at multiple airports in the next 30 days, with former RT airports and others eagerly awaiting relaunch of the program.” Airports slated to relaunch were not disclosed. Without TSA support, “it was only a matter of time before service providers ran into trouble,” said Rep. Charlie Dent (R-Pa.), noting, “TSA has never embraced the RT program, though Congress intends for the Registered Traveler program to move forward.” INSIDE TRACK IATA UPS ANNUAL AIRLINE LOSS FORECAST TO $11 BILLION Global airlines are on pace to lose $11 billion in 2009 amid declining passenger numbers, decimated yields and fuel costs that have crept back upward, the International Air Transport Association said in its latest financial forecast last month. IATA’s updated projection plunges the industry $2 billion deeper in the red than its previous forecast, released in June. Though IATA noted some improvement in passenger volumes as the year wore on—from a low of negative 11 percent in March—the airline association projected that overall passenger traffic this year would decline 4 percent. However, deeply discounted fares and depressed premium demand put airline yields on pace to fall 12 percent. As such, airline revenue is expected to fall 15 percent, or $80 billion, IATA projected. IATA director general and CEO Giovanni Bisignani said, “We are in intensive care, and the crisis for us is not over.” PREFERRED HOTEL GROUP READIES MIDPRICE REVAMP Preferred Hotel Group—a company that provides sales, marketing and technology support to independent hotels around the globe— is relaunching its midprice Sterling Hotels brand over the next few months, the company said. The relaunch will include a new directory, Web site and a sub-brand: Sterling Design, which will feature hotels with contemporary design flourishes. Sterling is one of Preferred’s brands that is marketed in particular to corporate travel buyers. STARWOOD TO ACCELERATE ALOFT DEVELOPMENT Starwood Hotels & Resorts this month said it plans to double the pace of openings for its select-service Aloft brand, opening one hotel per week in North America during October. “Even in a tough economy, owners and developers have embraced the Aloft hotel concept in North America and beyond,” said Paul Sacco, Starwood’s senior vice president of development in North America. “By the end of the year, we will have opened 40 Aloft hotels worldwide.” Upcoming Aloft openings include properties in Charlotte, N.C.; Mount Laurel, N.J.; Bolingbrook, Ill.; and Phoenix. Monday, October 12, 2009 www.BTNonline.com Business Travel News http://www.BTNonline.com

Table of Contents for the Digital Edition of Business Travel News - October 12, 2009

Business Travel News - October 12, 2009
Contents
Inside Track
Profiles in Travel Mgmt.
Forum
Aviation
Lodging
Payment & Expense
Travel Management

Business Travel News - October 12, 2009