Bloomberg's Susanna Ray reports that United Airlines plans to order up to 150 aircraft. "The order will be mix of a wide-body and narrow-body planes," according to her source. "Boeing Co. has been invited to participate in an aircraft-replacement program by the UAL Corp. unit," according to Boeing spokesman, Jim Condelles.
Susan Carey tells us in the Wall Street Journal, "United Airlines has asked Boeing Co. and Airbus to propose dueling bids for up to 150 new airliners -- the latest example of major companies exploiting the recession to bargain-hunt.
"For the two aircraft makers, the deal could be worth more than $10 billion at a time when both are watching other customers cancel or defer orders. By staging a winner-take-all competition, United's parent, UAL Corp., is hoping to obtain better terms than otherwise might be available, according to people familiar with the situation.
"It's a notable move amid falling travel demand and a tight lending environment -- on top of UAL's recent heavy losses and poor credit rating."
If Boeing wins this all or nothing bidding, it will help our own Spirit.
Given United's financial condition, the current environment disproves the adage that "Beggars can't be choosers."
Wednesday, June 03, 2009
The Recovery Is On! Fair Dinkum!
By MarketWatch's Myra P. Saefong reports Australia's gross domestic product is up in the first quarter and in comparison with last year's first quarter.
She writes, "The nation's GDP expanded by seasonally adjusted 0.4% in the first quarter, both in comparison with the same quarter a year ago and with the fourth quarter," citing the Australian Bureau of Statistics.
The All Ordinaries gained 62 points going over 4,000 for the first time since November. Hallelujah!
The Aussie dollar is also up. Ms. Saefong reports "The Australian dollar also strengthened, with one Australian dollar buying 82.26 U.S. cents, up from the previous close of 82.07 U.S. cents."
In the fourth-quarter, Australia's GDP dropped 0.6%, the first drop in eight years. Apparently the Aussie national income accountants do not report growth rates in seasonally adjusted annual rates annualized. It makes the numbers less dramatic.
"The bureau said that growth on the expenditure side over the past four quarters was driven by household spending and by exports, offset by a fall in inventories."
Disclosure: your correspondent has shares in an Aussie closed end fund.
What does it mean?
Australia's economy is tied to Asia. When the Chinese dragon stokes up its furnace, Australia and Brazil feed the beast the inputs that fuel its exuberance. Thus Australia's economic growth and the Aussie dollar are leading indicators of the globalized economy.
This implies that the world economy is recovering. Further dramatic confirmation can be found in the Baltic Dry Index, an indicator of shipping prices. As trade picks up, it costs more to hire a ship to transport it. The index has increased four-fold since December returning to the boom levels of 2004-6 and soaring toward the bubble levels of mid-2008.
She writes, "The nation's GDP expanded by seasonally adjusted 0.4% in the first quarter, both in comparison with the same quarter a year ago and with the fourth quarter," citing the Australian Bureau of Statistics.
The All Ordinaries gained 62 points going over 4,000 for the first time since November. Hallelujah!
The Aussie dollar is also up. Ms. Saefong reports "The Australian dollar also strengthened, with one Australian dollar buying 82.26 U.S. cents, up from the previous close of 82.07 U.S. cents."
In the fourth-quarter, Australia's GDP dropped 0.6%, the first drop in eight years. Apparently the Aussie national income accountants do not report growth rates in seasonally adjusted annual rates annualized. It makes the numbers less dramatic.
"The bureau said that growth on the expenditure side over the past four quarters was driven by household spending and by exports, offset by a fall in inventories."
Disclosure: your correspondent has shares in an Aussie closed end fund.
What does it mean?
Australia's economy is tied to Asia. When the Chinese dragon stokes up its furnace, Australia and Brazil feed the beast the inputs that fuel its exuberance. Thus Australia's economic growth and the Aussie dollar are leading indicators of the globalized economy.
This implies that the world economy is recovering. Further dramatic confirmation can be found in the Baltic Dry Index, an indicator of shipping prices. As trade picks up, it costs more to hire a ship to transport it. The index has increased four-fold since December returning to the boom levels of 2004-6 and soaring toward the bubble levels of mid-2008.
Tuesday, June 02, 2009
The Kansas Economy Grew Above Average In 2008
Exports, world economic growth, and the aircraft industry helped make Kansas the eighth fastest growing state in 2008.
Tuesday, May 12, 2009
Jean-Claude Trichet sees the Bottom!
Jean-Claude Trichet, speaking on behalf of the world's central bankers, sees the Eurozone bottoming out and the world economy turning around. Chris Giles, Daniel Pimlott, and Ralph Atkins in the Financial Times report that "The global economy was 'around the inflection point', he said, with some countries 'being beyond the inflection point'." They report further that the OECD declares "there were signs of a 'pause' in the economic slowdown in France, Italy, the UK and China."
Friday, May 08, 2009
The April Employment Report
It is the first Friday and whether or not you do the First Friday devotions, the Bureau of Labor Statistics issued its employment report for April.
The employment report came out better than Wall Street anticipated, but it was still pretty awful. The establishment survey still showed a huge 539,000 job loss. Employment in the household survey was up. Perhaps not statistically significant, perhaps just noise, but I'll take it.
In the establishment data, services took the same hit as goods production (down 269,000 jobs vs 270,000). Private jobs in services fell even more dramatically (down 341,000) with the difference coming from the growth in government jobs.
The aircraft industry looks to have lost 4,700 jobs in April.
In terms of the Postal Service, printing etc. was down almost eight thousand, paper down three and a half thousand, and finance was down twenty five thousand.
The employment report came out better than Wall Street anticipated, but it was still pretty awful. The establishment survey still showed a huge 539,000 job loss. Employment in the household survey was up. Perhaps not statistically significant, perhaps just noise, but I'll take it.
In the establishment data, services took the same hit as goods production (down 269,000 jobs vs 270,000). Private jobs in services fell even more dramatically (down 341,000) with the difference coming from the growth in government jobs.
The aircraft industry looks to have lost 4,700 jobs in April.
In terms of the Postal Service, printing etc. was down almost eight thousand, paper down three and a half thousand, and finance was down twenty five thousand.
Thursday, May 07, 2009
Signs of A Recovery?
Australia's employment was up, unexpectedly, in March and the unemployment rate fell from 5.7 percent to 5.4 percent.
Rupert Murdock keeps pace of the world economy by monitoring revenues from his vast media enterprises around the world. These are heavily dependent on advertising which is cyclical like capital expenditures. At a News Corp. earnings call, he said, "I am not an economist…but it is increasingly clear that the worst is over….As you know, I have been uncharacteristically pessimistic in recent calls, though I would argue that it was a well-founded concern. But there are emerging signs in some of our businesses that the days of precipitous decline are done and that revenues are beginning to look healthier.” Peter Kafka's whole posting is worth reading.
Nina Koeppen and Jonathan House report in the Wall Street Journal, "More European indicators are beginning to show some tentative signs of the recession easing in the second quarter, with German business sentiment leading the way. "
Rupert Murdock keeps pace of the world economy by monitoring revenues from his vast media enterprises around the world. These are heavily dependent on advertising which is cyclical like capital expenditures. At a News Corp. earnings call, he said, "I am not an economist…but it is increasingly clear that the worst is over….As you know, I have been uncharacteristically pessimistic in recent calls, though I would argue that it was a well-founded concern. But there are emerging signs in some of our businesses that the days of precipitous decline are done and that revenues are beginning to look healthier.” Peter Kafka's whole posting is worth reading.
Nina Koeppen and Jonathan House report in the Wall Street Journal, "More European indicators are beginning to show some tentative signs of the recession easing in the second quarter, with German business sentiment leading the way. "
Tuesday, May 05, 2009
Richard Pratt, R.I.P. 1934 – 2009
Australia in 1940-41 had its back to the wall. A country of maybe six million people spread out over an area almost as big as the lower 48 U.S. states, it faced imminent invasion from Japan. Documents released in the last twenty years indicate the government had concluded the defense of the continent was hopeless: it planned to concede 60% of the country and fall back on guerrilla war for the rest.
One lesson learned was that it needed a bigger population if it were to defend itself and preserve its culture. In the decades after the war, it encouraged immigration from Europe. One of these "New Australians" who did very well for himself, thank you very much, was Richard Pratt. The Wall Street Journal tells us, "Mr. Pratt was born Ryszard Precicki in Gdansk in 1934." Mr. Pratt built an enormous empire in the cardboard business (Visy Industries.) As former Primme Minister John Howard eulogized, "He combined all the positive elements that migrants successfully gave so much to our country.
"He became in many ways the example of things regarded as Australian - sport, success, family and commitment. "
Mr. Howard was not the only big wig to attend Pratt's funeral. Whoever was anybody in Victoria seemed to be there. You can read an account of his funeral in the Telegraph.
His fortune was estimated at 2.3 billion Aussie dollars. You can find a gallery of pictures on the Telegraph's site.
The Aussie media, ever ready for a bit of sensationalism, also made a big deal of his lady friend, a Shari-Lea Hitchcock.
On November 30th, 2005, Pratt Industries of Conyers, Georgia announced it had bought the Love Box Company here in Wichita. The Wichita Business Journal reported that Pratt Industries is controlled by Visy.
Sunday, May 03, 2009
Kansas Ranks #3 In MaintStreet.com's Financial Happiness Index
Based on our ranking in unemployment (#11), foreclosures (#17) and non-mortgage debt to income (#6), Kansas scored #3 in MainStreet.com's financial happiness index.
Good news for Jayhawks, even if the Cornhuskers came in first. They do have Warren Buffet, after all.
Good news for Jayhawks, even if the Cornhuskers came in first. They do have Warren Buffet, after all.
Thursday, April 30, 2009
Cessna: The Other Shoe Has Dropped
On April 24th, the Wichita Eagle's Molly McMillin reported a rumor of another possible 2,800 layoffs at Cessna.
Today, she writes, "Cessna Aircraft announced more production cuts and another 2,300 layoffs Wednesday as business jet cancellations continue to pile up during the down economy.
If the parent is sold, Cessna will be cut off from the defense end of Textron's portfolio.
On April 9 2009, the Financial Times' Justin Baer and Julie MacIntosh reported that, "Shares of Textron soared by 49 per cent amid speculation the industrial conglomerate could be broken up and sold to a consortium of Middle East and US investors.
"Al-Watan, a Kuwaiti newspaper, reported on Thursday that a United Arab Emirates group was close to a deal to acquire Textron, whose businesses range from Cessna aircraft and Bell helicopters to E-Z-Go golf carts, for $21 a share, or more than $5bn. The buyers would then find a US company to take over Textron’s defence division."
Before the price jump, the market was valuing Textron's shares at $2 billion. After the price rise, they were worth $3 billion. Textron has about $10 billion in debt.
Baer and Julie MacIntosh reported, "Industrial bankers have long held the view that there is no single buyer for Textron because of its incongruous mix of aerospace and defence assets, the struggling financial division and an industrial business that builds products including golf carts and tools."
Bob Tita in the Wall Street Journal notes, "Industry observers predicted that any purchase of Textron's civilian aircraft business by a foreign consortium would have to be accompanied by the acquisition of Textron's military business by a U.S. company at the same time."
Might Boeing wind up owning the military piece of Textron? Tata wrote, "Loren Thompson, a defense analyst for the Virginia-based Lexington Institute, said Boeing Co. would likely be the frontrunner for the military business. The aerospace giant is already a partner in the production of the Osprey. 'The military operations would be a good fit with Boeing.'"
And what about the Wichita economy?
Wichita State's forecast of higher employment in 2009 than 2008 looks wildly optimistic. WSU's Center for Economic Development and Business Research (CEDBR) in its Barton School wrote "Employment in 2009 is expected to remain relatively flat with a gain of 0.3 percent, adding 3,829 jobs."
Cessna is no longer our number one employer: Spirit now is.
And yes, management makes a difference.
Today, she writes, "Cessna Aircraft announced more production cuts and another 2,300 layoffs Wednesday as business jet cancellations continue to pile up during the down economy.
The great general aviation bubble of 2007 has burst with a nasty splash. Earlier McMillin had written that business jet usage is down dramatically quoting UBS Securities analyst David Strauss, "Domestic and international business jet usage was down 30 percent in March and 30 percent for the first quarter of 2009."
Thus the accelerator's vengeance is visiting the industry. Moreover, cancellations are eating into the general aviation industry's backlog as the corporate jet has become the leprosy bell of gray flannel America.
Why is Textron so keen on cutting jobs at Cessna?
First, as I have written previously, 2007 is looking like it was a bubble year for the aircraft industry and specifically for the general aviation industry. The industry seems to have over expanded in 2008. Boeing, Spirit's biggest customer, in contrast, expanded production more cautiously in 2008. Spirit has used various strategies to preserve its talented workforce with considerable success.
Textron, Cessna's owner, says it has no plans to sell Cessna. McMillin quotes CEO Lewis Campbell: "Given the success we have had with the Textron Financial liquidation so far, and given the recent sale of two high-value assets and other cash-production opportunities, I feel now that it's highly, highly improbable and unlikely that we'll ever have to divest of any more assets."
Yet Textron itself is in play. Cutting jobs and costs is one way to try and boost profits in a lousy market and try to get the stock price high enough to keep the wolves at bay. I suspect Textron management may more worried about keeping their jobs than the state of their shareholders' wealth.If the parent is sold, Cessna will be cut off from the defense end of Textron's portfolio.
On April 9 2009, the Financial Times' Justin Baer and Julie MacIntosh reported that, "Shares of Textron soared by 49 per cent amid speculation the industrial conglomerate could be broken up and sold to a consortium of Middle East and US investors.
"Al-Watan, a Kuwaiti newspaper, reported on Thursday that a United Arab Emirates group was close to a deal to acquire Textron, whose businesses range from Cessna aircraft and Bell helicopters to E-Z-Go golf carts, for $21 a share, or more than $5bn. The buyers would then find a US company to take over Textron’s defence division."
Before the price jump, the market was valuing Textron's shares at $2 billion. After the price rise, they were worth $3 billion. Textron has about $10 billion in debt.
Baer and Julie MacIntosh reported, "Industrial bankers have long held the view that there is no single buyer for Textron because of its incongruous mix of aerospace and defence assets, the struggling financial division and an industrial business that builds products including golf carts and tools."
Bob Tita in the Wall Street Journal notes, "Industry observers predicted that any purchase of Textron's civilian aircraft business by a foreign consortium would have to be accompanied by the acquisition of Textron's military business by a U.S. company at the same time."
Might Boeing wind up owning the military piece of Textron? Tata wrote, "Loren Thompson, a defense analyst for the Virginia-based Lexington Institute, said Boeing Co. would likely be the frontrunner for the military business. The aerospace giant is already a partner in the production of the Osprey. 'The military operations would be a good fit with Boeing.'"
And what about the Wichita economy?
Wichita State's forecast of higher employment in 2009 than 2008 looks wildly optimistic. WSU's Center for Economic Development and Business Research (CEDBR) in its Barton School wrote "Employment in 2009 is expected to remain relatively flat with a gain of 0.3 percent, adding 3,829 jobs."
Cessna is no longer our number one employer: Spirit now is.
And yes, management makes a difference.
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