Under the Radar: Taking Another Look at AirTran

While the weather cooled off in the Big Apple this week, cooler heads apparently didn't prevail on Wall Street. It seems like bad news -- this week Ciena (CIEN), Hewlett-Packard (HWP) and Dell (DELL), among others -- seemed to speak for the week (or is that the weak?).

In an attempt to cheer an otherwise cloudy picture, let's look under the radar at the headlines for tidbits you may have missed. They could help you profit or avoid losses in the weeks and months ahead.

Anybody notice AirTran's (AAI) jump this week from the Amex to the New York Stock Exchange? Didn't think so. It was a quiet move, yet very symbolic. This is an airline that may be starting to grow up.

Chairman and CEO Joe Leonard gets a lot of the credit. He has the airline positioned to perform well even in tough times. Unlike most of its brethren -- most notably its Atlanta competitor Delta Air Lines (DAL) -- AirTran is making money. In fact, the company posted a record profit in the second quarter, marking its 10th-consecutive profitable quarter.

The ValuJet disaster is now only a distant jet trail, and the company has added nearly 30 new Boeing 717 aircraft to its fleet, creating one of the youngest fleets in the industry. In addition, labor relations appear civil, with AirTran's pilots recently inking a new contract.

AirTran has become Delta's major nemesis as the companies go head-to-head in Atlanta. Delta, with a significantly higher cost structure, recently matched AirTran's one-way unrestricted fares on many routes. Yet, AirTran continues to post strong traffic growth even as Delta attempts to increase the pressure.

While a long way from "major" status, the stock, currently around $8, may be worth putting on your radar screen. My best airline source tells me it still has to "show me" it can compete with the big boys. Yet, some insiders in the business are looking for big things from this fledgling carrier.

Speaking of airplanes, Boeing's (BA) announcement of more layoffs at its Long Beach, Calif., plant that builds the 717 aircraft may be a sign of things to come. While AirTran continues to take delivery of the planes, AMR (AMR) scrapped plans for 20 of the planes originally ordered by its Trans World Airlines subsidiary. And, Midwest Express (MEH) has tentatively spoken for 20 717s, but the deal has yet to be finalized. In fact, one source tells me Midwest Express simply can't afford the purchase, and it's likely to be scrapped.

While the 717 competes directly with the Airbus A-318, Boeing didn't expect the additional competition from small regional jets -- fuel-efficient aircraft that carry about 50 passengers -- which have become a focus for many airlines on short-haul routes. Although AirTran pilots tell me they are pleased with the way the plane flies, flight attendants are grumbling about the quality of the passenger space, complaining about everything from seat quality to water closet malfunctions.

As the narrow-body fleets of major airlines -- primarily DC-9s, MD-80s and older-model 737s -- age, Boeing has to be worried about capturing its fair share of the replacement market, especially given the aggressive competition from Airbus and the regional jetmakers.

The Aug. 15 deadline for a deal between Southern California Edison, the utility subsidiary of Edison International (EIX) and the State of California to keep the utility out of bankruptcy passed without any action. In an attempt to save face, California Gov. Gray Davis is trying to broker a plan in which the state would purchase the utility's transmission lines and issue bonds to help repay billions in back wholesale power bills.

Problem is, the California legislature, at least so far, can't agree on how to enact the governor's scheme. Plus, they decided to take their traditional summer recess in late July and leave investors hanging.

While the utility has said it's hopeful it can work things out with the state, it is skeptical. "Given the way time is running out here, we're really focused on these next few weeks," Edison International CFO Ted Craver said in a Tuesday conference call with investors.

The patience of creditors who have millions on the line is running thin. The legislature returns to work next week. If they can't agree on the bailout plan by the end of the month, look for a group of creditors to increase the pressure and possibly pursue involuntary bankruptcy for the utility.

Frankly, given Pacific Gas and Electric (PCG) is already in bankruptcy, that might be the best solution.

While Ames Department Stores' (AMES) announcement Thursday that it would close another 47 stores isn't terribly surprising, the impact it might have on a couple of real estate investment trusts shouldn't be ignored. Acadia Realty (AKR), a small-cap retail REIT, snares 5% of its rents from Ames. Although Glimcher Realty (GRT) is on the hook for only 1.5% of its rents from Ames and the company says it will have limited impact, analysts aren't so sure. "This would represent another hit to the company's weakening community center portfolio," says Salomon Smith Barney REIT analyst Jonathan Litt.

For Ames' sake, shop until you drop this weekend. Don't spend all this week's market profits in one place, although that might be pretty easy to do.

Enjoy your weekend. Next week is, well, another week!

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