AT&T, UAL Could Be Buyers if AMR Sheds Sabre

Plus, the Wing Tips Shuttle touches down in Phoenix for a look at America West, and will December be grim for airline stocks?
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Thanks to all the goings-on in the wacky industry we know and love so well, consider this a Wing Tips Shuttle -- the point-to-point version, vs. the normal, long-haul column.

First stop today is Wall Street, where the speculation camp is buzzing about

AMR

(AMR)

and

Sabre Holdings

(TSG) - Get Report

.

The rumors have been running for several days that AMR, parent of

American Airlines

, will finally shed its 82% stake in Sabre -- soon. In fact, we understand that the Sabre board of directors met on this issue Wednesday.

As we understand it, the proposed deal would have

AT&T

(T) - Get Report

purchase 60% of AMR's stake in Sabre, while

UAL

(UAL) - Get Report

, parent of

United Airlines

, would take 20%. The AT&T investment angle makes sense -- the telecom company wants Sabre's wireless technology services. United would probably be interested in the investment as an insurance policy, because it uses Sabre products and is debating whether to use other Sabre programs.

We have not heard, however, whether such a deal would have any impact on the proposed merger of Sabre's

Travelocity.com

with

Preview Travel

(PTVL)

, a pact scheduled to be finalized early next year.

We have not been able to get a definitive confirmation from any of our usual suspects on this, but the flurry of information regarding a possible deal has been rather intense. Sabre, which was holding at around 42 until Nov. 10, climbed about 10 points in the last week, to 52 on Wednesday. Meanwhile, trading volume has also been heavier than normal.

As we said, those Wall Street birds are a singin.' Not sure if the notes are on key -- but they are singin.'

Why would AMR do this now? It wants the money.

Next Stop: Phoenix

As longtime readers are aware, we were somewhat surprised at how well

America West

(AWA)

performed this last quarter. During the summer, the airline experienced high numbers of flight cancellations, along with other flight-related delays. In addition, America West continued to post some of the worst on-time performance figures in the industry. In fact, through September, the airline now holds the worst on-time record for the year, based on results tabulated by the

Department of Transportation

and released Wednesday.

When this type of activity continues for any period of time, it is only a matter of time before high-paying customers -- along with other passengers -- begin to go elsewhere if they have the choice.

Today, Peter Corbett writes in the

Arizona Republic

that the situation at America West is so bad that some 400 flights have been canceled over the last two weeks alone. While half of those flights were cancelled for "normal" reasons, the other half were canceled because the airline was forced to take three of its 757 aircraft out of service for scheduled maintenance.

Readers will recall that last year, America West negotiated a settlement with the

FAA

on a wide range of maintenance issues. Settlement or not, the FAA has stayed in the airline's face. Sources tell us that America West had hoped to persuade the agency to grant an extension allowing planes to be serviced at a later date. The FAA said no.

I know, I said we would see this reliability issue affect America West's earnings for the third quarter, and through some kind of miraculous means, we did not. There is no doubt, however, that with this number of flight cancellations, we

will

see this reflected in the airline's fourth-quarter numbers.

Meanwhile, across the concourse in Phoenix,

Southwest Airlines

(LUV) - Get Report

continues to increase its long-haul flights in and out of Phoenix.

Next Stop: Saudi Arabia

As most of you are aware, the price of a barrel of West Texas crude hopped over the $26-a-barrel level Wednesday. Today, Susan Donofrio, analyst at

Deutsche Banc Alex Brown

, chimed in, saying that fourth-quarter estimates for the airline sector may have to be revised downward as a result of rising oil prices. (As we all know, airlines drink a

lot

of jet fuel.)

Mirroring the uptick in the price of oil, airline stocks took it on the chin Wednesday.

Adding to the rosy news, the feedback we are getting from the airlines -- universally -- is that December looks downright bleak. Bookings are

very

weak, and, as

PaineWebber

analyst Sam Buttrick said in a research note last week, we may see airline stocks revisit the lows they hit earlier in the quarter. Soon.

And here I thought "between the hedges" was a term used to refer to the playing field at the

University of Georgia

.

You think we heard a lot about who was hedged and who wasn't this last quarter? We are going to hear a whole lot more about hedges -- who's caught between them and without them -- in the next few weeks as a result of this unexpected spike in the price of oil.

Full Circle

Our last stop? Back to New York, where this morning we hear that while domestic unit revenue for the industry last month posted its first increase in a year, as expected, the bad news is that the increase was only 0.1% -- much less than most analysts had expected.

As a result of that RASM news, Brian Harris at

Salomon Smith Barney

lowered fourth-quarter estimates today for

Alaska Airlines

(ALK) - Get Report

, AMR,

Continental

(CAL) - Get Report

,

Delta Air Lines

(DAL) - Get Report

,

Northwest

(NWAC)

, Southwest,

TWA

(TWA)

and

US Airways

(U) - Get Report

.

Next? We'll shed some light on TWA's cutback in European service, along with a few other surprises.

We know you have a choice when you click that mouse, and we thank you for flying the Wing Tips Shuttle.

Oh, and we don't want to hear any complaints about the food.

Holly Hegeman, based in Barrington, Rhode Island, pilots the Wing Tips column for TheStreet.com. At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at

www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at

hhegeman@planebusiness.com.