Tuesday, February 20, 2007

Quality Time on the Tarmac

Courtesy Northwest Airlines (NWACQ: PK) I headed into the nation’s heartland for a business/personal trip. Like so many airline flights in recent weeks, it was almost a non-starter. “Unplanned maintenance” was the disclosure made by the airline spokesperson, whatever that means. I wondered as I milled around the gate area with my fellow passengers whether we would end up as fodder for the evening news. At least we were not on the airplane, strapped to our seats.

Once boarded, we were also delayed in taking off. The craft had missed its place in line for a runway. Then there was the scramble to adjust the schedules of those who had missed connecting flights. I was fortunate as my connecting flight also had “hydraulics failure” and took off late.

The exercise left me wondering about what airline management is thinking these days: more flights? tighter schedules? cost pressures on maintenance routines? uncooperative unions? Let’s hope these are the things that are “frontal lobe.” Northwest is in bankruptcy, so you can add debt renegotiation to its list of “things to consider.” Apparently, merger is also on CEO Douglas Steenland’s mind. According to documents filed by Delta Airlines (DALRQ: PK) for Northwest’s Chapter 11 proceeding, there was at least some discussion between the two companies in the last couple of months.

The air transportation industry is complex, with layers of issues piled one on top of the other. This is a phenomenon of large cap companies. It is not that small companies do not have complexity. Yet small cap issues tend to be company-specific and the solutions to their problems can be debated around one boardroom table rather than across an industry.

On the ground again and back from my large cap-small cap reverie, I have embarked on an extended due diligence trip in ethanol country. Look for future posts on biofuels.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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