The airlines are now in such great trouble that they are going to their lenders and asking for better terms on their debt. It seems to be working. UAL (NASDAQ: UAUA), parent of United, says it has gotten an improved deal from some of its banks.
According toThe Wall Street Journal, "The company said this week its lenders approved a waiver of the so-called fixed-charge coverage ratio covenant on its credit line through the first quarter of 2009." The ratio requires cash flow to stay at certain levels.
The banks are damned if the do and damned if they don't. Other large airlines will likely ask for similar deals. Banks have little options but to agree to improve lending terms.
The debt-holders at the major airlines know that high fuel prices make losses likely and those losses could go on for several quarters. Loan restrictions could cause the companies to move into default.
But the risk of changing loan terms is that the airlines will move into Chapter 11 anyway. Fuel costs could cripple them that much. The banks would have given better deals and have nothing to show for it but worthless paper.
In reaction to surging fuel costs, several major airlines announced today that they were raising their fares in order to recoup some of their rapidly increasing flying costs.
The increase this time around is $20 and effects passengers traveling on UAL Corporation (NASDAQ: UAUA), Delta Air Lines, Inc. (NYSE: DAL), and AMR Corporation (NYSE: AMR)'s American Airlines. The $20 jump in prices will be added to the airline's fuel surcharges, and consequently, these charges are now running at $130 round trip on most flights that you will book through the airlines.
The current rate hike was first initiated by Delta, and marks the second time in just over a week that the airline has been forced to raise fares in order to combat record high fuel costs. Times are definitely tough for airlines, and they are doing everything they can to combat fuel prices, but regardless of the rate increases most analysts are still expecting to see huge losses this year from most, if not all, airline carriers.
Oppenheimer downgraded shares of Chelsea Therapeutics (NASDAQ:CHTP) to Perform from Outperform after their survey suggested physicians believe currently available generic treatments are adequate in neurogenic orthostatic hypotension, which could impact the company's lead drug Droxidopa.
Clearwire (NASDAQ:CLWR) was cut to Sell from Hold at Citigroup on valuation, as they estimate fair value at $13.
OTHER DOWNGRADES:
Goldman downgraded Kellogg (NYSE:K) to Neutral from Buy and Hershey Foods (NYSE:HSY) to Sell from Neutral.
Higher oil prices and the surging aviation fuel costs they imply may reduce the benefits of an airliner merger, such as the potential deal between United Airlines and U.S. Airways, but they don't eliminate a merger's long-term positives, an analyst argued Tuesday.
Further, C. Leonard Bauer, independent stock analyst, told BloggingStocks Tuesday the potential United-US Airways union would benefit the sector in that it would be the second merger this year among major airlines in the United States, also known as the legacy carriers.
Shares of UAL Corp. (NYSE: UAUA), parent of United Airlines, are down 88 cents to $14.10, while US Airways (NYSE: LCC) are down 55 cents to $7.79 in Tuesday trading.
Sector right-sizing
"The deal would take another legacy carrier off the table, after the Delta-Northwest merger, and that can only help the sector from an earnings standpoint," Bauer said. "The United States airline sector leads the league in airline route redundancy and duplicate hubs. This second deal would further tighten the sector."
Reading the paper everyday means seeing a headline that another airline merger is in the offing. The most recent wave of articles is on a United Airlines (NASDAQ: UAUA) merger with US Air (NYSE: LCC). It is yet another example of two carriers hoping that they can get together and save costs, without alienating customers in the process.
According toThe Wall Street Journal, "The companies have identified more than $1.5 billion in potential cost savings and revenue enhancements from joining forces." The word "potential" is the key.
Airline employees who are in unions have a good chance of shutting down a merged airline if they think they will loss a ton of jobs. Pilots, flight attendants, and mechanics all have plenty of leverage. A combination of United and US Air would have almost $10 billion in revenue a quarter. It would not take a very long strike to eat through $1.5 billion of that.
The number of pending mergers is also almost certain to get some of them canceled by The Justice Department. Members of Congress who have employees on airline payrolls are also likely to take a position. Today, the US has at least five major carriers. If Delta (NYSE: DAL) and Northwest (NYSE: NWA) get married, that cuts consumer choice down by a lot.
Don't count on a United hook up with US Air. It is not likely to happen.
Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported a 64% drop in quarterly profit late Friday. At the company's annual meeting this past weekend, the legendary investor said that while a Berkshire unit has bought portfolios of subprime mortgages (and has frozen resets that were due to send interest rates on those loans higher) he warned investors that housing-market weakness isn't over yet and predicted more losses for banks. At the same time, Buffett said Sunday he will consider investing in the insurance business of U.K. banking giant Royal Bank of Scotland (NYSE: RBS) and is close to buying a medium-sized company in the country.
Hovnanian Enterprises Inc. (NYSE: HOV) estimated on Monday it would take $225 million to $275 million of land-related charges for the that fiscal second-quarter and said that home deliveries dropped 21% to 2,494 homes in the period. The company also turned cash-flow positive faster than it expected and tripled its full-year estimate of cash flow.
After being rejected by Continental Airlines Inc. (NYSE: CAL) last month, United Airlines parent UAL Corp. (NYSE: UAUA) is intensifying merger talks with US Airways Group Inc. (NYSE: LCC), according to The Wall Street Journal. A deal is said could emerge in as soon as 10 days. In light of rising fuel costs, the more than $1.5 billion in potential cost savings and revenue enhancements the companies see from joining forces is no doubt appealing more and more.
20 Most Profitable Tech Companies Among Fortune 1000 techs, Microsoft remains on top, taking in $14.1 billion in earnings last year. IBM, Cisco, Hewlett-Packard and Intel round out the top five most profitable. 20 most profitable tech companies - FORTUNE
Another day. Another merger of two struggling airlines.
This time it''s UAL Corp.'s (NYSE: UAUA) United Airlines and US Airways Inc. (NYSE: LCC), which together lost more than $773 million in the first quarter are reportedly in are "advanced" merger talks, two sources familiar with the situation told The Associated Press. These "sources" may be public relations people who are leaking details of the deal at the direction of the investment bankers and the companies themselves.
Wall Street is reacting positively to the news sending shares of US Airways in mid-afternoon trading. I am not so sure a celebration is in order. For one thing, as Reuters and the Associated Press both have noted this is a marriage of necessity.
"The discussions intensified over the weekend after Continental Airlines Inc, which had been in negotiations with United, pulled out to explore a potential marketing alliance with AMR Corp's American Airlines and British Airways Plc," according to Reuters.
Biggest Stock Losers Since the market slump began six months ago, U.S. companies have bled away trillions of dollars in value. 80% of companies in the Standard & Poor's 500-stock index have fallen in value, according to data provider Capital IQ. Here's a damage report. The biggest loser is Bear Stearns which lost $16.7 billion in value. Other big losers include National City Bank, Ambac, CIT, Countrywide, E*Trade, WaMu, Sprint Nextel & Freddie Mac. The Stock Market's Biggest Losers
6 Ways to Buy Checking 'Float' Time Is your bank speeding money out of your checking account faster than you can put it in? Do you feel like someone just set your financial hamster wheel on fast-spin? Welcome to the new reality of check "float" -- or lack thereof. Float refers to the time it takes for money to leave your checking account. Nowadays, it's harder to buy extra time to pay your bills. Here are six moves you can make today to reclaim some lost "float" time. 6 ways to buy checking 'float' time -Bankrate.com
Stock futures got a boost this morning from a possible $22 billion deal as Buffett's Berkshire and Mars consider buying Wrigley. Also in on investors' mind is this week's Federal Reserve meeting and rate decision as well as oil nearing $120 a barrel again.
U.S. stocks finished mixed on Friday, with the Dow industrials rising 42 points, or 0.33%, and the S&P 500 up 9 points, or 0.65%. The Nasdaq composite, however, found itself in the red following a cautious outlook from Microsoft the day before, and finished the day down almost 6 points, or 0.25%.
Without much economic news today, investors will focus on the Federal Reserve Open Market Committee two-day meeting starting Tuesday. On Wednesday, Fed chairman Bernanke will announce the policy decided and most economist expect a quarter point rate cut, but also for the Fed to halt the cuts after that as inflationary pressures have been rising.
Also, attention will be on oil prices, which once again hit an all-time high of $119.93 a barrel Monday. A refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K. as well as supply outages in Nigeria have caused oil to climb again despite the strengthening dollar.
Another big new item this morning, and one that helped boost sentiment is that of Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) nearing a deal to buy chewing gum giant Wm. Wrigley Jr. (NYSE: WWY) for more than $22 billion, according to The Wall Street Journal and The New York Times. Wrigley, which has a market capitalization value of roughly $13.6 billion, is seeing its shares climbing over 23% in premarket trading.
United Airlines, the second largest U.S. carrier, increased almost all domestic airfares by 3-5%, due to surging fuel costs, The Associated Press reported Friday.
It was the third increase in the past two weeks, The AP reported, for United (NYSE: UAUA), which like the U.S.'s other major carriers, is struggling to maintain a viable business model amid the largest increase in aviation fuel costs since the world's second oil shock in 1979-80.
Shares of United fell 82 cents to $14.58 on the news in Friday afternoon trading.
United's latest fare hike takes place just two days after Delta Air Lines (NYSE: DAL) CEO Richard Anderson said domestic carriers will need to raise tickets 15-20% just to break even at existing fuel prices, The AP reported. Surging fuel costs
Independent stock analyst C. Leonard Bauer, formerly of Prudential, said cost factors affecting aviation will create a stark travel choice for business and leisure travelers, at least for the immediate future, including this summer: if you're flying a few months from now, there's an 80-90% chance you'll pay considerably more, he said.
The Biggest Losers The mortgage meltdown and slumping auto sales hurt many Fortune 500 firms last year. In fact, 16 posted losses of at least $1 billion. Topping the list is General Motors which lost almost $38 billion over the past year. Other losers include Sprint Nextel, Merrill Lynch, AMD, Freddie Mac, Delphi and Ford Motor. The Fortune 500's biggest losers -FORTUNE The Midas of Misery Vulture investors are a changing breed. The new opportunists, with Harbinger's Phil Falcone in the vanguard, have more clout and more imagination. And they just might kick-start the economy. The Midas of Misery - BusinessWeek Serious Scavengers: These People Are Looking to Profit From the Misery of Others
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Reading the paper everyday means seeing a headline that another airline merger is in the offing. The most recent wave of articles is on a 
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Stock futures got a boost this morning from a possible $22 billion deal as Buffett's Berkshire and Mars consider buying Wrigley. Also in on investors' mind is this week's Federal Reserve meeting and rate decision as well as oil nearing $120 a barrel again. 
Here are some highlights from this past week's 
The Wal-Mart Weekly: Examining shareholder resolutions, Part 2
Earnings expectations for JC Penney, Nordstrom, Macy's, Abercrombie and others
Comfort Zone Investing: Financial stocks: Is the worst over yet?
