February 4, 2004
U.S. Airline Pricing Power Weak
U.S. airlines are still finding it hard to raise air fares, Wall Street
analysts said on Tuesday, as stocks of major U.S. carriers slipped the
morning after a monthly air traffic report from Continental Airlines,
Reuters reported. Airline shares were led lower at midday by a 6 percent
drop at Delta Air Lines, which said on Monday it sold $325 million of
convertible bonds.
Winter revenue performance for airlines is usually weak. But for major
carriers that have been losing billions of dollars, analysts had been
hoping for an improvement in yields, which measures the average level of
airfares. 'Another month lacking yield progress,' said J.P. Morgan
analyst Jamie Baker in a research note. 'This is the fifth consecutive
month of weakening year/year yields, suggesting that the evidence of
pricing power remains nonexistent,' he added, reported the newswire.
Appeals Court Lifts Ban on US Airways Outsourcing
A federal appeals court on Tuesday overturned an injunction preventing
US Airways from outsourcing heavy maintenance on some of its Airbus
aircraft, Reuters reported. The 3rd U.S. Circuit Court of Appeals in
Philadelphia said the disagreement between the International Association
of Machinists (IAM) and the airline was a 'minor' one, and therefore the
district court that had issued the temporary injunction lacked the
jurisdiction to do so.
The appeals court did not rule on whether outsourcing the maintenance
work violated the IAM's labor agreement with the company. Instead, the
court said the issue must be resolved through binding arbitration, under
rules in the Railway Labor Act governing minor disputes. IAM spokesman
Joe Tiberi said the union's attorneys were reviewing its options. The
union could decide to seek arbitration on the matter or it could choose
to appeal Tuesday's ruling, reported the newswire.
US Airways emerged from bankruptcy 10 months ago and is still struggling
to cut costs to survive. It is reportedly considering the sale of some
of its assets, and four U.S. airlines have bid on various pieces of the
airline, according to banking sources.
California Assembly Panel Clears PG&E Bond Bill
A California Assembly committee approved a bill to allow utility Pacific
Gas & Electric Co. to move ahead with its reorganization plan to get
out of bankruptcy by March 31, Reuters reported. The Assembly Utilities
and Commerce Committee passed the bill 10-0 on Monday, and it now goes
to the Assembly's Appropriations Committee. The measure would allow the
PG&E Corp.-owned utility to tap electricity rates to repay state
bonds to refinance a $2.21 billion 'regulatory asset,' an accounting
tool that raises the utility's equity and enhances its credit rating.
Under the plan, a key part of its reorganization effort, the refinancing
would save Pacific Gas & Electric's customers $1 billion through
lower interest costs and tax savings. Pacific Gas & Electric sought
federal bankruptcy protection in April 2001. The utility's
reorganization plan, approved in December by a U.S. Bankruptcy Judge and
the California Public Utilities Commission, aims to end the bankruptcy
by the end of the first quarter and repay creditors about $12
billion.
In a separate bankruptcy issue, Pacific Gas & Electric said in an
8-K filing Tuesday at the Securities and Exchange Commission that it
expects to receive an after-tax credit of about $90 million in a
settlement with five subsidiaries of bankrupt Enron Corp., reported the
newswire.
Hawaiian Airlines Trustee Tells Flight Attendants More Concessions
Needed
The trustee of the Hawaiian Airlines bankruptcy outlined a plan at a
meeting in Los Angeles, Calif., on Jan. 27 that includes a demand for
more concessions from the flight attendants, the Association of Flight
Attendants-CWA, AFL-CIO, announced in a press release yesterday. 'We
will review the airline's finances and the trustee's business plan to
determine whether more concessions are essential,' said AFA Hawaiian
Airlines Master Executive Council President Sharon Soper. 'There has to
be a better plan for Hawaiian Airlines to survive in the long-term than
more sacrifices from its employees.'
In the Jan. 27 meeting, Hawaiian's bankruptcy trustee said that if the
workers don't agree to more concessions, he will file a Section 1113
motion with the bankruptcy court to force concessions on the workers.
'Forcing concessions through the bankruptcy court would be like
declaring war on Hawaiian's employees,' Soper said, according to the
press release.
Gadzooks Seeks Bankruptcy Protection, To Close 125 More
Stores
Dallas-based juniors apparel retailer Gadzooks Inc. on Tuesday filed for
chapter 11 bankruptcy reorganization and announced it will close another
125 stores, reported the Austin Business Journal. Already,
Gadzooks was in the process of closing 31 stores by the end of April.
Once the 156 stores are closed, 252 stores will remain open, according
to a Gadzooks news release. Gadzooks currently operates more than 400
stores in 41 states. The company also is eliminating 65 corporate and
field jobs, the news release states. In the third quarter, Gadzooks
reported a $22.1 million net loss, or $2.42 per share, compared with a
net loss of $856,000, or 9 cents per share, for the same period a year
earlier. Net sales for the quarter ended Nov. 1 were $49.2 million, down
sharply from $73.7 million for the same period a year earlier.
Corporate Layoffs Up 26 Percent
Announcements of job reductions by U.S. corporations surged 26
percent in January to 117,556, the highest since October, according to
outplacement firm Challenger, Gray & Christmas, CBS
MarketWatch reported. 'We typically see higher job cuts in January
as companies set into motion business plans and employment needs for the
new year,' said John Challenger, CEO of the outplacement firm. However,
January 2004 layoffs were 11 percent lower than January 2003's 132,222
and 53 percent lower than January 2002's 248,475. Challenger said
outsourcing jobs overseas and increased merger and acquisition activity
could boost the number of layoffs this year, even as the economy
improves. 'This could be a big year for such transactions as companies
try to strengthen their position in the marketplace as the recovery
builds momentum,' he said. In January, consumer product companies cut
22,775 jobs, the most of any sector last month and the largest month of
cuts in that sector since the survey began. Financial services announced
15,157 cuts while retail planned to cut 14,016.
Recusal Refusal
The New Jersey federal judge overseeing five massive asbestos bankruptcy
cases has refused to disqualify himself, insisting in a decision this
week that he is 'free of outside influence' and directly urging an
appeals court to allow him to continue, the Legal Intelligencer
reported. The opinion by Senior U.S. District Judge Alfred M. Wolin in
In re: Owens Corning, et al. denied motions by asbestos company lawyers
asking him to recuse himself due to the appearance of bias. Read the
href='http://www.law.com/jsp/article.jsp?id=1075219887220'>full
article.
Home Decor, Garden Retailer Seeks Bankruptcy Protection
Lawyers for home decor and crafts retailer Garden Ridge have filed for
bankruptcy court protection as company officials announced they are
closing three area stores, the Associated Press reported. The
Houston-based company seeks to renegotiate store lease agreements
through its chapter 11 filing, spokesman Joel Weiden said on Monday.
Garden Ridge has 44 stores in 13 Midwestern and Southeastern states,
including eight in Houston. Officials say the company will close four
stores within the next 45 days, including two in Houston and one in
Humble. Garden Ridge, which faces tough competition from Wal-Mart and
Home Depot, is also considering closing more locations across the
country and opening new stores in more promising sites, reported the
newswire.
Proposed Changes in Bankruptcy Law Twist Meaning of 'Reform'
(Washington Post)
An article in the Washington Post addresses the
'disinterestedness' provision of investment banks representing bankrupt
companies. Read
href='http://www.washingtonpost.com/wp-dyn/articles/A7276-2004Feb2.html'>the
article.
Fleming Vendors to Have Special Panel in Bankruptcy Case
The court overseeing Fleming Cos.' bankruptcy case ordered the
appointment of a special committee on Monday to protect the rights of
some of the grocery distributor's vendors, the Associated Press
reported. Chief Judge Mary F. Walrath said so-called 'reclamation
claimants' couldn't be adequately represented by the official unsecured
creditors' committee in the case because the interests of the two groups
clash.
Many companies in food, cleaning products and health and beauty care,
including Hershey Foods, GlaxoSmithKline and Frito-Lay, are asserting
priority claims against Fleming. Reclamation rights have been the
subject of much litigation in the case. Vendors have said they are owed
as much as $280 million. Fleming, which is based in Lewisville, Texas,
has said it owes them nothing, or at the most, $50 million to $100
million. The exact amounts at stake in the reclamation claims are to be
determined in 572 lawsuits that have been filed within the chapter 11
case. Fleming attorney James Sprayregen said the plan will pay
reclamation claims in full. Attorneys for vendors said it gives them
only a stake in a litigation trust that may never be funded. A court
hearing has been set for Feb. 17 to consider the adequacy of the
disclosure statement explaining Fleming's plan, which looks to
restructure around the company's sole remaining business, a convenience
store distribution operation, reported the newswire.
Bankruptcy Judge Awards Cart Inc. Assests to Open Wheel Racing
Series
Judge Frank J. Otte ruled that the bid submitted by Open Wheel
Racing Series LLC (OWRS) partners Paul Gentilozzi, Kevin Kalkhoven, and
Gerald Forsythe was the best option for all concerned parties, the
Racesite.com reported. According to the ruling, OWRS acquires all assets
of the Champ Car World Series, including all race-related equipment as
well as the race contracts with various promoters.
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