Reuters reports that Washington Mutual (WM) became the largest bank failure in US history. Many of its assets were sold to JP Morgan (JPM).

Reuters reports that RIM (RIMM) fell as it posted a weak forecast.

Reuters reports that central banks loaned out record amounts of cash as the credit crisis grows.

Reuters reports that HSBC (HBC) cut 1,100 jobs.

Reuters writes that the Fed loaned banks an average of $188 billion a day during the last week, a record.

Reuters reports that for Samsung Electronics to buy SanDisk Corp, it must convince U.S. regulators that merging the top flash memory chip maker and the biggest producer of memory cards would not hurt competition.

The Wall Street Journal writes that short-term money markets remain in turmoil as the credit crisis spreads.

The Wall Street Journal reports that Buffett’s decision to rescue Constellation Energy Group could reshape the future of the nuclear-power industry.

The Wall Street Journal reports that the government gave out bad news on housing, employment, and durable goods.

The Wall Street Journal reports the GE (GE) will cut the size of its credit unit.

The Wall Street Journal reports that the Yahoo! (YHOO) ad sales deal with Google (GOOG) is coming under additional scrutiny.

The Wall Street Journal reports that the credit crisis will hurt consumer credit and employment in the months ahead.

The Wall Street Journal reports that more and more companies want to be added to the government’s "no shorting" list of stocks.

The Wall Street Journal reports that former AIG (AIG) CEO Greenberg has begun selling shares.

The Wall Street Journal reports that GM’s (GM) sales fell in China.

The Wall Street Journal reports that shareholders approved the Northwest (NWA) merger with Delta (DAL).

The Wall Street Journal reports that Microsoft (MSFT) cut prices of its Xbox in Asia.

The Wall Street Journal reports that Toyota (TM) cut car production in Japan.

The New York Times reports that financial companies may continue to hold back capital and further lock up the flow of credit.

The New York Times reports that inflation is rising in China.

The FT reports that huge sums of money are being moved out of Morgan Stanley (MS) by customers.

Douglas A. McIntyre.

Northwest says that more than 98% of the shares outstanding were infavor of the merger.  Delta said that approximately 99% of the votescast were for the merger.  This leaves the Department of Justice tomake its approval decision.  The FAA recently accepted the Delta andNWA plans for a single operating certificate for the combined aircarrier.

The pilots of the carriers approved the merger.  There arediscrepancies on which other labor groups have approved the merger,although our most recent data indicates that deals have been reached inmost cases.  The International Association of Machinists and AerospaceWorkers is said to be protesting the deal.

Thisofficially takes the handcuffs off of Continental Airlines, Inc. (NYSE:CAL) to do a deal if it wants.  It has said it wants to go it alonemost recently after an initial search for a merger partner.  Thismerger of NWA-Delta removes the last internal hurdle over the codeshareagreement between NWA and Continental which had previously been inforce.  Whether or not Continental tries to do a deal is up inthe air.

The new company will be branded and named Delta and will be based inAtlanta. The combined air carrier will have 390 destinations in 67countries. It will have more than $35 billion inannual revenue, a fleet of nearly 800 aircraftand a workforce of about 75,000. 

It also claims that it will have one of the strongest balance sheets inthe industry.  Both companies on a standalone basis are expected tolose money in 2008, but estimates vary widely over this for 2009. Some analysts are looking for wide losses and some are expecting profits.Despite what fees can be passed on and what costs can be cut, oil isthe biggest variable and at $100+ hedging the entire projected oil tabwould likely still result in operating losses.  This industry is essentially still a work in progress.

Jon C. Ogg
September 25, 2008

The vultures have come to feed on the carrion. Investment groups and Air France have given indications that they would like to own a piece of the Italian carrier. They would like to have most of the debt go away first. If Chapter 11 has any consistent benefit for airliners it is that debt holders are obliterated.

Alitalia does not look terribly different from most of the US international carriers, especially AMR (AMR), Northwest (NWA), and UAL (UAUA), each of which operate substantial service outside America.

With oil falling from $140 a barrel to under $120, most airline stocks have made significant recoveries, but are still well down. UAL trades at $11 against a 52-week high of almost $52. Its long-term debt tops $7 billion.

It is a sucker’s bet to think that airlines can do well with oil at $120. Even if carriers were debt-free and passenger demand robust, there is nothing to offset hundreds of millions of dollars in extra fuel prices.

Alitalia differs from other airline bankruptcies because it is so large. Carriers have used Chapter 11 to cleanse balance sheets before. The next stop for that practice may well be the US.

Douglas A. McIntyre

Reuters writes that two large bond investors may get involved in raising capital for Fannie Mae (FNM) and Freddie Mac (FRE), if the Treasury is involved.

Reuters reports that Deltal (DAL) has tapped a $1 billion loan ahead of its merger with Northwest (NWA).

..

Reuters reports that MGM says it is not for sale.

Reuters reports that a successful debt sale by Freddie Mac has eased concerns about nationalization of the company.

Reuters reports that JP Morgan (JPM) has taken a hit of $500 million on its investment in Freddie Mac and Fannie Mae.

Reuters writes that bank regulators have put a number of firm on notice to fix their problems or face failure.

The New York Times writes that several cities are buying foreclosed homes to maintain them in good condition.

The New York Times reports that Honda (HMC) is remaining true to its fuel-efficient roots.

The New York Times writes that Gulf states will keep their currency pegs with the US dollar.

The New York Times reports that first half profits at PetroChina (PTR) are expected to fall by a third on the rising price of oil.

The FT writes that HP (HPQ) has renewed it challenge to IBM (IBM) with its buy-out of EDS.

Bloomberg reports that Bank of England may cut interest rates by the end of the year.

Douglas A. McIntyre

There should be no argument the US airline industry is facing unprecedented challenges as they restructure their business models to survive with record high fuel costs and a questionable forward looking Global economy.

In reviewing recent 2nd quarter financial reports, it is obvious cash liquidity has become a very high priority for airline management going into the future.

Using various types of financing initiatives and asset sales, five of the eight largest US Airlines increased their unrestricted cash positions by significant amounts.

   (billions)                                    AA      UAL     DAL    CAL     NWA   SWA   USAir   JBLU
Cash 3/31/2008                            $4.41   $2.92   $2.60   $2.52   $3.23   $3.12   $2.07   $.753
Projected cash available 6/30         $5.93  $4.40    $3.34   $4.31   $3.26   $5.84   $2.29   $1.35

In consideration that DAL and NWA will acquire approval for their merger by year end, only USAir appears to have a potential cash liquidity problem in the near-term. (See table)

In my opinion, the increased cash liquidity and upcoming capacity cuts combined with recent fare increases make -predictions- of airline failures very pre-mature.

Robert Herbst has been a commercial pilot since 1969. His aviation experience and financial background provides a unique analytical perspective into the airline industry. His website: Airlinefinancials.com provides airline industry analysis and commentary for major US carriers.

All of that is a bit thin as a defense for such rabid buying.

It only took AMR three days to gain back what its share price had lost over a two-month period. The figures for Delta (DAL), United (UAUA), Continental (CAL), and Northwest (NWA) are not terribly different.

Oil did sell off 11% last week. Many experts think that is temporary.

The demand for oil in the US dropped slightly in the first half, but there is no evidence that the use of crude in nations including China and India is likely to falter. Oil-producing countries continue to keep a larger and larger portion of their yield at home to build out infrastructure and provide fuel for a growing number of cars and trucks.

If the recession continues to deepen, the number of people flying, both for business and pleasure, is likely to drop sharply from present levels.

Airlines may have benefited from good news last week, but oil is still rising along with the odds of a deep recession.

A 50% increase in the stocks is likely to mean a lot of that gain will be given back in the coming months.

Douglas A. McIntyre

Delta sees Q3 operating margin of -1.3% ex-items and sees Fiscal 2008 operating margin of 0% to -2%. Delta also expects to cover approximately $3 Billion of the estimated $4 Billion raw impact of higher fuel input costs in Fiscal 2008 and expects to end  2008 with a liquidity position of about $3.2 Billion.

The company claimed 49% of its fuel consumption was hedged at $3.13 per gallon and said it realized a $313 million gain from its hedges.  Here is its fuel hedge position:
Q3 2008        48%         $2.94
Q4 2008        46%         $3.42
FY 2009        21%         $3.48
FY 2010        5%          $3.05

Delta said it plans to close its merger with Northwest (NYSE: NWA) by the end of 2008.  Shares of Delta are up nearly 5% at $4.90 in pre-market trading since the company is not sounding off the death of itself.  This also has Northwest shares up about 2.2% pre-market at $5.51.

Jon C. Ogg
July 16, 2008

Reuters writes that the Blue Chip Economic Indicators survey shows more economists think the economy will enter a recession.

Reuters reports that the reputation of JPMorgan (JPM) CEO Jamie Dimon is rising as Wall St falls.

Reuters writes that the Pentagon has reopend bidding for the Air Force’s large refueling plane.

Reuters reports that Yahoo! (YHOO) will offer its search services to outside firms.

Reuters reports that shares in Fannie Mae (FNM) and Freddie Mac (FRE) fell again on capital concerns.

The Wall Street Journal writes that Apple (AAPL) will open its Apps Store to outside developers.

The Wall Street Journal reports that gasoline use is at a five year low.

The Wall Street Journal reports that Merck (MRK), Eli Lilly (LLY), and Pfizer (PFE) will form a joint venture to speed drug discovery methods.

The Wall Street Journal reports that the FDA has approve the Intel (INTC) home care tools.

The Wall Street Journal writes that export growth in China slowed in June.

The Wall Street Journal writes that the US government is considering the future of Fannie Mae and Freddie Mac.

The Wall Street Journal writes that the EU is considering regulation to force banks to set aside more capital.

The Wall Street Journal writes that US websites are getting more traffic from overseas but have not figured out ways to make money on it.

The New York Times writes that foreign investors are buying more and more American assets.

The New York Times reports that Northwest (NWA) will cut 2,500 more jobs.

The FT writes that investors are bracing for more US earnings gloom.

Bloomberg writes that history shows the S&P 500 could lose another 12% before the bear market ends.

Bloomberg reports that a former Fed president says Fannie Mae and Freddie Mac are "insolvent."

Douglas A. McIntyre

Circuit City  (CC) Still selling off after big loss. Down to $3.41 from 52-week high of $16.01.

MBIA (MBI) Analyst says bond insurance firm could lose another $7.5 billion. Falls to $4.71 from 52-week high of $68.98.

Northwest (NWA) Oil up. Airlines down. Sells off to $5.64 from 52-week high of $24.25.

Officemax (OMX) Small business spending falling off. Runs off to $14.67 from 52-week high of $40.97.

GM (GM) Oil up. Car stocks down. Pounded to $12.78 from 52-week high of $32.20.

Douglas A. McIntyre

Reuters writes that DreamWorks is in conversations with India’s Reliance. The deal would allow top management at the studio to leave Viacom (VIA).

Reuters writes that Mircosoft (MSFT) has bought TV ad tech company Navic.

Reuters writes that Google (GOOG) sees value in its "experiment": with Yahoo! in the ad business.

Reuters reports that Northwest Air (NWA) has further cut its capacity.

Reuters reports that the former CEO of AIG (AIG) may get as much as $68 million in severance.

The Wall Street Journal reports that floods in the Midwest could add to the price of ethanol.

The Wall Street Journal writes that Hershey laid out a plan to stay competitive in the candy market.

The Wall Street Journal writes that results from Fedex (FDX) could jolt the market.

The Wall Street Journal reports that Ford (F) will increase exports to China.

The Wall Street Journal reports that Wal-Mart (WMT) will cut capital outlays this year.

The New York Times writes writes that regulators may not force AIG (AIG) to shore up one of its key units with $900 million in new capital.

The New York Times writes that the US may lag the emerging world in tech growth.

The FT writes that LinkedIn raised capital valuing it at $1 billion.

The FT reports that SUV sales are still gaining in China.

Bloomberg writes that newspapers could face defaults as their ad revenue falls.

Douglas A. McIntyre