9/14/05:
Delta & Northwest Fly Into Bankruptcy
PAUL KANGAS: Delta Airlines and Northwest Airlines late today joined the growing number of carriers throwing in the financial towel.
Both airlines have filed for chapter 11 bankruptcy protection after years of steep financial losses. Delta and Northwest are now the third and fourth major carriers to declare bankruptcy along with United and U.S. Airways.
That means almost half of the airlines capacity in the U.S. is now flying under chapter 11. As Stephanie Dhue reports, analyst say there could be other airlines heading down that path.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Soaring jet fuel prices and loss of revenue from Katrina swamped hope of an industry turnaround this summer.
Despite more people flying and slightly higher fares, the outlook hasn't improved.
ANALYST: Even at a reasonably robust pricing environment right now, the major airlines will lose billions of dollars this year and there's no end in sight to their losing money.
DHUE: Bankruptcies could actually help airlines lose less money by reducing capacity.
GUEST: One of the expected results of a Delta and /or Northwest Bankruptcy filing would be that each of those airlines would further reduce their flying capacity particularly in the domestic market, and that will be good news for the other carriers.
Pricing has been improving since February under the pressure of high fuel costs, and if there's more capacity withdrawn from the system, that would actually allow that to continue.
DHUE: Bankruptcies at large legacy carriers also trickle down and squeeze smaller regional airline partners.
GUEST: We've never in the history of the airline industry seen almost half of the industry in bankruptcy protection, but the carriers
continue to work to ensure that we can operate and provide service to small communities.
DHUE: Delta and Northwest have lobbied Congress to change the pension law to give the airlines more time to meet their pension obligations. That legislation is now
making progress in the senate. The indusry is also pushing Congress for an immediate one year holiday from the 4.3 cent a gallon tax on jet fuel.
GUEST: The airlines are integral to the overall successful economy in the United States, and fuel is the one factor keeping us from being profitable.
We've got to do something about the high price of oil.
DHUE: But many lawmakers are cool to the idea of giving airlines
tax breaks, and even by the industry's own estimates, the
tax break would add up to just $600 million a year, a smll
part of a $30 Billion fuel bill. Stephanie Dhue, NIGHTLY BUSINESS
REPORT," Washington.
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Business Report transcripts are available on-line post broadcast.
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are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
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09/14/05: Airline Outlook With Ray Neidl Airline Analyst For Calyon Securities
SUSIE GHARIB: Joining us now to talk more about Delta and Northwest, Ray Neidl, Airline Analyst with Calyon Securities. Hi Ray.
How are you doing? So how will Delta and Northwest survive?
RAY NEIDL, AIRLINE ANALYST WITH CALYON SECURITES: I think they'll survive. Their franchises are srong. Their management team, I think, in place now is capable of bringing them through this period.
They just have to get their cost structure down and clean up their balance sheets, especially in the case of Delta with te balance seet.
GHARIB: You heard our report, four of America's major airlines are in bankruptcy. And that means almost half of all U.S. capacity is in chapter 11.
What are the implications of that?
NEIDL: It has no implications. The consumer will not see a chance in schedules, the frequent flier programs will stay in place, and the airlines will do their thing in bankruptcy to try and make themselves more efficient.
From the consumer's point of view, they really won't see any changes.
GHARIB: What does this mean for other airlines? Is it just a matter of time that we're going to see Continental and American, which right now are considered the stronger airlines. Is it just a matter of time that we'll see them going to bankruptcy as well?
NEIDL: Well, American has a substantial cash reserve, and they have enough time to make reforms and cost cutting they need outside bankruptcy.
Continental has been in a shakier position, especially with the costs, but overall, this will speed up the process of reform and put pressure on the carriers to reform the models and reduce cost structures.
GHARIB: Let's talk about each one of these Delta, Northwest. First Northwest. What happens, for example, with the mechanics strike and what happens to those mechanics?
NEIDL: Probably nothing is changing. Northwest, from what I understand, is in the process of replacing these people with permanent replacements, and in bankruptcy, they would have basically done the same thing..outsourced most of their jobs which they did after the strike.
GHARIB: And Delta, you say you think it will survive when it comes out of bankruptcy. What will it look like?
NEIDL: I think it will be smaller and more oriented towards international. And I wouldn't be surprised if they are a bigger part of the operations and Ultimately down the road, I think there will be consolidation and merger with the extent of the justice department.
GHARIB: Who merges with who adn who is left?
NEIDL: Well I think probably we end up wtih two or three carriers. American and United certainly are survivors, and the third one, if there's a third one, maybe a combination of Continental, Northwest and Delta.
GHARIB: You said it is business as usual even though airlines are in bankruptcy court, who, what airlines benefit from this latest development of Delta and Northwest going into Chapter 11?
NEIDL: Well, people were thinking low-cost carriers competing with Delta would benefit, Airtran and Jet Blue. The only warning I would give on that if Delta comes out a leaner fighting machine, low-cost carriers will face heavier competition.
GHARIB: Let's talk a bit about stocks. Let's say you own shares of Delta and Northwest and they are really down very small amounts. What do you do?
And also, in terms of the other airlines, do you recommend putting in new money into the other airlines?
NEIDL: Well bankrupt airlines historically, the stocks eventually become worthless even though they trade during bankruptcy. You should keep that in mind.
Other carriers, people may perceive that the bankruptcies will be beneficial to them on a selected basis, and we may actually have a small rally in some of the other airline stocks.
Of course, a lot depends on the price of oil tomorrow. Today, the price of oil is up and most of the airlines, as a result were down.
GHARIB: Okay Ray. Thank you so much. Very informative. We've been speaking with Ray Neidl, Airline Analyst With Calyon Securities.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/14/05:
One on One With Senate Budget Chairman Judd Gregg
SUSIE GHARIB: Global insurer Lloyd's of London estimated today its net losses to Hurricane Katrina will run about $2.5 Billion.
That would make Katrina the second biggest single-event loss in Lloyd's history after the September 11th attacks. Damage estimates made right after the storm hit were all across the board, but analyst now say Katrina should be the global insurance industry's costliest ever disaster.
It will also be the costliest natural disaster ever for American taxpayers. To better understand the size of that challenge, Washington Bureau Chief Darren Gersh talked with Senate Budget Chairman, Judd Gregg today.
And Darren began by asking the Senator about Katrina's impact on the federal budget.
SENATE BUDGET CHAIRMAN JUDD GREGG: It will be significant. In the short term, it will mean the deficit goes up probably 150, maybe even more.
In the long-term it may have an impact in that this is a very prosperous part of our country which generates a lot of revenue with the Federal Government, and it will have an impact.
And then there will be a long-term build-out issue and I can't imagine lasting five, maybe ten years to reconstruct the area that will continue to pay for.
I don't know how much that will be.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: But clearly in the short-term it will spike the deficit clearly.
GREGG: There's speculation that this catastrophe is going to refocus these thrusts of government. There will be more of an activist government and more of an active government and that agenda will change and see the social security tax cuts, and other reforms, pushed off the table by Katrina.
GERSH: Do you think that's likely to happen?
GREGG: Well, I think it is clear somethings we were going to do this fall won't be done or hoped to do this fall, Social Security is one,
immigration reform would be another. Health Care reform, which I had hoped, I think that's on the floor and discussed, might be another. So yes, the practical
effect of the Hurricane is that the calendar has been overwhelmed by the need to address this region of the country which has been so devastated and the people need help down there and need federal assistance.
GERSH: You don't see this changing the orientation up here towards more of an act of government that might last for a number of years if some people are speculating?
GREGG: Not in the sense that there will be systematic change, no. I do think, and I do believe strongly that we need an on-the-ground identity in the gulf coast where there's a strong individual who has the authority to manage all the federal resources and core nature those resources with the state and regional government like hush either hoover after the floods.
And there has to be a parallel effort and audit and management so you are sure the dollars are used effectively and not wasted.
GERSH: Let me follow up on what you said about auditing and making sure money is spent wisely. You were a governor and now a senator.
You know how big events can be used by people to insert their spending into the government saying it is related to Katrina, everything from dredging your port to helping farmers,
worthy causes, perhaps, but not necessarily disaster-related. How will you keep this out of the budget and make sure the stuff that's really needed is in there?
GREGG: I have been pressing the administration very hard and leadership very hard to make sure we have a priority. As we move the programs quickly through the senate
or through congress, that those programs have at least met a threshold test of priorities. And one of the priorities has to be that it is Katrina-specific.
And that it is not to reimburse the farmers in the midwest who happen to have fertilizer price go up as a result of the Katrina event.
One of the standards should be everything is set. All programs put in place because of Katrina should have a date one or two years down the road to actually look at them again in order to keep them going.
It is a concern for me. We will end up spending alot of money on a lot of things that are not appropriate to this relief effort.
GERSH: Let's talk about using rebuilding as an effort to showcase conservative ideas. Tax cuts maybe vouchers, maybe other programs. Is that appropriate in this case?
Would you like to see the Republican leadership do something like that?
GREGG: What's appropriate is to come up with ideas that will help these people as quickly as possible and use tax dollars most effectively.
There have been ideas put forward which will work, whether they are conservative or liberal is not the issue, it is whether the programs work.
GERSH: All right. Senator Judd Gregg, thank you very much.
GREGG: Thank you.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
9/14/05: "Money File"-Be Penny Wise Not Mortgage Foolish When Buying A House
SUSIE GHARIB: In the money file tonight, some advice if you're in the market for a mortgage for a new house. Be sure to consider a "worst case scenario" as well as a "best case" one.
Here's Eric Schurenberg, Executive Editor of "Money Magazine."
ERIC SCHURENBERG, EXECUTIVE EDITOR OF "MONEY MAGAZINE." A few years ago, almost nobody needed a fancy mortgage to buy a house.
Now weird loans are everywhere. Interest only, option payment, no-doc. Overall, these nontraditional mortgage accounts for maybe a quarter of all new home loans written.
In expensive markets like the San Francisco's bay area and Washington, D.C., they make up more than half. If you wonder how the housing boom is going to end, this is what to watch.
Now, smoe of these new-fangled mortgages are riskier than others, but all share one goal: they make it possible to buy more house than you can afford.
Most of them make sense only if real estate prices keep going up. And if they don't, these morgages could convert a housing downturn into a cascade.
Say you have an interest-only adjustable mortgage. If rates go up at the same time your interst-only period ends. Your monthly payments could easily rise 50%
If you don't have enough equity, you won't be able to refinance; and if you can't refinance and you can't afford the payments, you probably have to sell, and you won't be too picky about the price.
Multiply that by thousands of overstretched homeowners and well, it's not a bull market anymore. If you're in the market for a home, talk to lenders before you shop and find out how large a traditional mortgage you'll qualify for.
You don't want to fall in love with a pricey house and then try to fit your mortgage to that. Buying a home with a high-risk mortgate is simply speculating on the real estate boom.
Every bubble eventually pops, and if this one goes while you're carrying an interest-only, option-payment, no-money down mortgage, it's going to hurt.
I'm Eric Schurenberg
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/14/05:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Blue chip stocks looked a little healthier earlier today as bargain hunters stepped in after yesterday's sell-off.
Then that drop in retail sales made buyers cautious. At noon the Dow was up 13 points, the NASDAQ down three points. Investor disappointment over the market's tepid rebound and a 3% surge in oil prices led to a broad
afternoon decline. The Dow Jones industrial average closed down 52.5 points at 10, 544.90. The NASDAQ ended off 22.42 points at 2,149.33. The S&P
500 lost four points to 1,227.16. In the bond market, the ten year note fell 9/32 to 100 22/32, putting the yield at 4.17%
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/14/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10544.90 -52.54 - .5
HIGH 10633.19
LOW 10536.62
NASDAQ COMP. 2149.33 -22.42 -1.0
HIGH 2174.01
LOW 2149.19
VOLUME 1,491.1
PREVIOUS 1,499.8
UP VOLUME 592.6
DOWN VOLUME 881.8
DOW TRANSPORTS 3584.04 -7.17 - .2
DOW UTILITIES 419.78 +2.66 + .6
CLOSING TICK +577
S&P 500 1227.16 -4.04 - .3
S&P 100 567.41 -2.10 - .4
MIDCAP 400 712.60 -3.05 - .4
REUTERS/CRB 321.66 +3.66 + 1.2
NYSE COMPOSITE 7577.29 -.96 - .0
VALUE LINE 412.00 -2.57 - .6
RUSSELL 2000 666.35 -6.78 - 1.0
DJW 5000 12270.72 -51.59 - .4
U.S. TREASURIES
5-YEAR NOTE 3.875%
Sept. 15,2010 99 20/32 -4/32 + 3.96
10-YEAR NOTE 4.25%
Aug. 15,2015 100 22/32 -9/32 + 4.17
30-YEAR NOTE 5.375%
Feb. 15, 2031 113 31/32 -17/32 + 4.45
LEHMAN BROS.
LONG BOND INDEX 1807.54 -7.40
DOW CLOSE 10544.90 -52.54 - .5
ADVANCES 1217
DECLINES 2078
NEW HIGHS 79
NEW LOWS 39
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
MOT Motorola 23.87 +.42 +1.8
LU Lucent Tech 3.14 +.04 +1.3
MU Micron Tech 13.23 +.55 +4.3
TWX Time Warner Inc 17.92 -.06 -.3
WMT Wal-Mart Stores 44.70 -.37 -.8
GE GE 34.05 -.23 -.7
EMC EMC Corp 12.80 -.29 -2.2
C Citigroup 44.98 -.12 -.3
NOK Nokia 16.78 -.03 -.2
GLW Corning 20.81 -.93 -4.3
NASDAQ CLOSE 2149.33 - 22.42 - 1.0
VOLUME 1,734.8
PREVIOUS 1,805.5
ADVANCES 984
DECLINES 2017
NASDAQ ACTIVES
GOOG Google 303.00 -8.68 -2.8
INTC Intel 24.49 -.41 -1.7
MSFT Microsoft 26.31 -.17 -.6
BIDU Baidu.com 81.32 -32.27 -28.4
CSCO Cisco Systems 17.84 -.41 -2.3
AAPL Apple Computer 49.61 -1.21 -2.4
EBAY eBay 37.66 -.62 -1.6
ORCL Oracle 13.44 -.20 -1.5
SNDK Sandisk 43.25 +.61 +1.4
CELG Celgene 54.77 +1.86 +3.5
AMEX CLOSE 1708.88 + 18.55 + 1.1
INDEX SHARES
DIA DIAMONDS TRUST 105.57 -.60 -.6
QQQ NASDAQ 100 39.18 -.45 -1.1
SPY S&P DEP.RECEIPTS 123.21 -.44 -.4
STOCKS IN THE NEWS
LEH Lehman Bros 112.41 +.13 +.1
LIN Linens 'N Things 28.25 +2.31 +8.9
PLL Pall Corp 28.20 -1.76 -5.9
CEC Cec Entertainment 31.28 -3.20 -9.3
AW Allied Waste 8.38 -.78 -8.5
KR Kroger Co 20.51 +.54 +2.7
NEM Newmont Mining 43.94 +2.20 +5.3
BRC Brady Corp 31.16 -2.14 -6.4
DISK Image Entertain 4.42 +1.42 +47.3
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