Friday, September 6, 2019

Alaska Airlines will adjust to allay passengers' fears over 737 Max flights

Alaska Airlines says passengers anxious about flying on Boeing 737 Max jets once the global grounding is lifted will be able to rebook flights on other aircraft.

The SeaTac-based airline, the largest carrier on the West Coast, shared some details of how it will handle passengers with 737 Max anxiety a day after rival United Airlines said any of its fearful passengers will be allowed to rebook flights free of charge.

"We have a plan and will absolutely take care of our guests who have concerns," Alaska Airlines spokeswoman Bobbie Egan told the Business Journal.

Alaska had anticipated the delivery of three Boeing 737 Max jets this year. But deliveries have been delayed since Boeing's newest single aisle jet was grounded in March following two crashes that killed 346 people in Ethiopia and Indonesia.

Now, Alaska says it may only get one of the 737 Max jets it ordered delivered in 2019, with the rest in 2020. The airline expects to announce further details about it's handling of Max flights, including whether it will charge fees for rebooking, later this year after it takes delivery of its first Max.

"Other airlines will be resuming service with the Max with many more of the aircraft than us. Since we’ll begin flying the Max with only one plane after we receive our first delivery, we will have flexibility in making sure our guests are comfortable," Egan said.

Last month, Alaska revealed it can also acquire 37 additional 737 Max aircraft, with deliveries from 2021 through 2024, under aircraft option agreements with Boeing.

Alaska's situation is different than United's and Southwest's, which have both received and ordered dozens of 737 Max jets.

At a Cowen and Company investor conference this week, United Airlines Chief Commercial Officer Andrew Nocella explained what the Chicago-based carrier's position will be when the Max resumes flying.

"If you get to the gate and it's not an airplane you want to fly on for whatever reason, if it's a Max, we'll put you on another flight," Nocella said.

CNN reported that Dallas-based Southwest would also offer passengers full flexibility and rebookings without charge.

American Airlines told CNN it hasn't finalized any policy for dealing with customers who don't want to fly the 737 Max, other than to explain to passengers that the airline and its pilots would not fly a plane they felt was unsafe.

(Andrew McIntosh - Puget Sound Business Journal)

Southwest performance in Hawaii exceeding company expectations

Southwest Airlines flights to Hawaii continue to perform "tremendously successful right out of the gate," according to one executive.

The Dallas-based airline has been hyping service to Hawaii for years, but the level at which the market has responded to Hawaii flights has surprised even the company.

"We are performing, I would say, actually ahead of our expectations," Tammy Romo, chief financial officer of Southwest Airlines, told a crowd at the Cowen Global Transportation Conference on Wednesday.

Chief Executive Gary Kelly said in the company's most recent earnings call that load factors for Hawaii flights are exceeding network averages, and he pointed out Southwest is seeing historic load factors across the network.

Southwest's rollout of Hawaii flights was years in the making and delayed at the finish line because of a partial government shutdown. Then, once Southwest announced it was getting Hawaii flights finally up and running, the Boeing 737 Max crisis began.

Southwest is the largest operator of the Max with 34 in its fleet at the time of its March grounding, and it was scheduled to have 68 of the aircraft by year end, Romo said. The grounding means Southwest was dealing with a smaller fleet than anticipated.

The company announced in July it was done waiting for the Max to return to service and instead was axing service to some locations to make room for more Hawaii expansion. Notably, the airline announced it would stop flying to Newark Liberty International Airport, and locally suspended three routes out of Dallas Love Field.

Some in the industry area worried recent legislation which took some Airbnbs off the market on the island of Oahu, where Honolulu sits, would negatively impact demand for Hawaii travel.

"We haven’t seen really an impact," Romo said. "We’ll keep an eye on it."

(Evan Hoopfer - Dallas Business Journal)

Monday, September 2, 2019

Norwegian Air asks for more time to pay off bonds

* Seeks up to two more years to pay $380 mln of outstanding bonds

* Offers London Gatwick airport slots as guarantee

* Says not planning to fly Boeing 737 MAX aircraft this year

* Shares pare losses to trade down 0.9% Norwegian Air is asking bondholders for up to two more years to pay back $380 million of outstanding debt, in the loss-making airline's latest attempt to shore up its finances.

The company said on Monday it would pledge lucrative take-off and landing slots at London's Gatwick Airport as security.

Norwegian Air is Europe's third-largest budget airline by passenger numbers after Ryanair and easyJet and has shaken up the market with cut-price transatlantic fares. But its rapid expansion has left it with hefty losses and high debt.

It was forced to raise 3 billion Norwegian crowns ($335 million) from shareholders this year, and said on Monday its working capital had decreased in 2019, partly due to tighter industry rules on advance ticket payments.

It also said the worldwide grounding of Boeing's 737 MAX plane was lasting longer than expected, dealing another blow to its finances. Norwegian has 18 of the aircraft.

The company's bonds, which mature in December 2019 and August 2020, will be extended to November 2021 and February 2022 if bondholders accept the revised terms. A bondholders' meeting will take place on Sept. 16.

"What we are doing now is to make sure that we have sufficient liquidity for the next twelve months," interim Chief Executive Geir Karlsen told Reuters, adding he expected to repay bondholders with cash on hand.

Norwegian's shares pared early losses to trade down 0.9% at 1130 GMT.

"On the one hand, it is a bad sign that the company's funds are drying up, but we knew by looking at the financials that this could be an issue," said Sydbank analyst Jacob Pedersen.

"But it's a good sign the company is doing everything it can to mitigate the issue and the financial troubles ... It is a fine solution to the issue. We have to see whether the bondholders will think the same."

Co-founder Bjoern Kjos stepped down as CEO in July in a move some analysts said could make it easier to sell the airline after talks about a deal with British Airways parent IAG fell through in January.

Shares in IAG, as well as those of Ryanair and Wizz Air , rose on Monday on speculation there could be more consolidation in a sector that has for months struggled with overcapacity, traders said.

In May, Ryanair boss Michael O'Leary predicted four or five European airlines were likely to emerge as industry winners.


Another problem for Norwegian is the grounding of Boeing's 737 MAX jet since March following two deadly crashes.

"There is no visibility that we know of when the aircraft will be up in the air again. We are actually planning on not having the MAXs flying this year, in 2019," Karlsen said in the interview, echoing recent comments from peers.

Norwegian said in July it expected the grounding to end in October and to cost it 700 million crowns in 2019.

Overall, Norwegian's operating performance has improved since mid-July, but its working capital has decreased this year, the airline said on Monday.

It expects earnings before interest, taxation, depreciation, amortisation and aircraft ownership costs (EBITDAR) of 6-7 billion crowns ($670-$782 million) in 2019 and higher earnings in 2020, the company said.

"Right now it looks like we will end up in the middle of that window, which means we have doubled EBITDAR compared to 2018," Karlsen said. "So the underlying performance is definitely moving in the right direction."

Historically, the company has relied on advance ticket payments by credit card, but tightened industry terms have made this more difficult. It said working capital was down by about 4 billion crowns versus the second quarter of 2018 as a result.

(Terje Solsvik, Victoria Klesty, and Gwladys Fouche - Reuters)