AirTran Holdings Inc. (NYSE: AAI)

AirTran Holdings Inc. (AAI) conducts the flight operations, through its wholly owned subsidiary, AirTran Airways Inc. The Company is engaged in operating scheduled airlines in the United States. As of February 2, 2009, the Company operated 86 Boeing B717-200 aircraft (B717) and 50 Boeing B737-700 aircraft (B737) offering approximately 700 scheduled flights per day to 56 locations in the United States (including San Juan, Puerto Rico). The entire fleet of the Company is comprised of B717 and B737 aircrafts. As of February 2, 2009, the Company had a combined total of 136 aircrafts. AII serves its customers through the Internet, travel agencies and its reservation call centers.

The Company was founded in 1992 and is headquartered in Orlando, Florida.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=AAI , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=ANN&symbol=AAI.N , http://www.airtran.com/Home.aspx

Financial Summary

During 2009, AAI has taken additional steps to enhance its liquidity, and its operating performance has substantially improved. In September 2009, its Credit Facility was amended to, among other things: extend the expiration date of the facility to December 31, 2010; increase the amount that may be borrowed under the revolving line of credit to $125 million; and reduce the maximum aggregate amount of outstanding letters of credit plus outstanding borrowing to $175 million. During October 2009, the Company completed a public offering of $115.0 million of its 5.25% convertible senior notes due in 2016 and a public offering of 11.3 million shares of common stock at a price of $5.08 per share. The net proceeds from the two offerings, which aggregated $166.3 million, are being used for general corporate purposes including improving AAI’s overall liquidity.

During the three and nine months ended September 30, 2009, AAI reported operating income of $37.0 million and $150.9 million, net income of $10.4 million and $117.6 million, and diluted earnings per common share of $0.08 and $0.86, respectively. Due to the pronounced reduction in jet fuel price levels during the first nine months of 2009 compared to the first nine months of 2008 and the actions that the Company has undertaken, its operating results for the three and nine months ended September 30, 2009 were substantially improved compared to the analogous periods of 2008. During the three and nine months ended September 30, 2008, AAI reported an operating loss of $47.4 million and $129.2 million, a net loss of $94.6 million and $144.7 million, and diluted loss per common share of $0.81 and $1.36, respectively.

The Company’s third quarter 2009 operating income improved by $84.4 million compared to the third quarter of 2008. The reduction in the average cost of jet fuel per gallon resulted in a $176.9 million decrease in aircraft fuel expense during the third quarter of 2009 compared to what fuel expense would have been had jet fuel prices been at the average level experienced during the third quarter of 2008. The favorable impact of the reduced average fuel cost per gallon was somewhat offset by the unfavorable impacts of adverse macroeconomic conditions and higher non-fuel unit operating costs. More specifically, AAI’s total unit revenue per available seat mile decreased by 10.5% to 9.68 cents and its non-fuel unit operating costs per available seat mile increased by 4.7 percent to 6.00 cents compared to the third quarter of 2008. Continuing a trend which started in September 2008, in the quarter ended September 30, 2009, the Company’s reduced capacity as measured by available seat miles. AAI believes that the 0.8% reduction in third quarter 2009 capacity compared to third quarter 2008 capacity had the salutary effect of partially mitigating the unfavorable impact of adverse macroeconomic conditions on its unit revenues. However, the capacity reduction was also a contributing factor to the increase in non-fuel unit operating costs.

As of September 30, 2009, AAI had aggregate unrestricted cash, cash equivalents and short-term investments of $408.2 million, and we also had $55.2 million of restricted cash. As of September 30, 2009, AAI had $125 million of borrowing outstanding under its revolving line of credit facility. During the nine months ended September 30, 2009, the Company’s primary sources of cash were cash provided by operating activities, borrowings under its revolving line of credit facility, and borrowings to finance aircraft acquisitions. Its primary uses of cash were repayment of long-term debt, repayment of borrowings under the revolving line of credit facility, and expenditures for the acquisition of two B737 aircraft. As of October 19, 2009, AAI had no borrowing outstanding under its revolving line of credit facility and a $50 million letter of credit had been issued under its letter of credit facility.

During the remainder of 2009, AAI will need cash for capital expenditures and debt and capital lease obligations. The Company anticipates that during the remainder of 2009, expenditures for acquisition of property and equipment, other than aircraft and aircraft parts, will be approximately $1.5 million. Additionally, during the remainder of 2009, it has scheduled payments of $6.8 million related to aircraft purchase commitments. Payments of current maturities of existing debt and capital lease obligations will aggregate $140 million during the fourth quarter of 2009, including payment of $125 million previously borrowed under the Company’s revolving line of credit facility and repaid as of October 19, 2009.

The Company believes that its existing liquidity and forecasted 2009 cash flows will be sufficient to fund its operations and other financial obligations for the remainder of 2009. While AAI believes its 2009 forecast is reasonable, a combination of one or more material and significant adverse events, most of which are outside of the Company’s direct control, could, depending on the severity and duration thereof, have significant unfavorable impacts on its future cash flows. Such adverse events could include significant increases in fuel prices for an extended period of time; significant sustained declines in unit revenues as a consequence of unfavorable macroeconomic or other conditions; or an increase in the percentage of advance ticket sales held back by credit card processors.

Source: http://investor.airtran.com/phoenix.zhtml?c=64267&p=irol-secSplash

Analyst Consensus

This is the consensus forecast amongst 12 polled investment analysts. Against the AirTran Holdings Inc. company.

The 10 analysts offering 12-month price targets for AAI have a median target of 9.00, with a high estimate of 14.00 and a low estimate of 6.00. The median estimate represents a 112.77% increase from the last price of 4.23.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=AAI.N

Investment Highlights

AAI and the NFL’s Baltimore Ravens last week unveiled a custom-painted, purple and black Boeing 717 dubbed, Ravens 1. Millions of people will see the plane as it serves cities on AirTran Airways’ route network of more than 60 destinations. To celebrate the unique livery, AirTran Airways and the Ravens challenged staffers from Franklin Square Hospital, which is supported by Ravens tight end Todd Heap, to pull the aircraft for charity. The airline rewarded their successful attempt with a $10,000 donation to the hospital. Ravens 1 is the second team-themed aircraft in the AirTran Airways fleet. Two weeks ago, the airline unveiled Falcons 1 and will introduce Colts 1 in the coming weeks.

AAI and the International Brotherhood of Teamsters, Local 528 (“Local 528″), today announced the successful membership ratification by an overwhelming margin of a new 48-month collective bargaining agreement. The agreement covers approximately 400 AirTran Airways mechanics and inspectors in Atlanta, Orlando, Baltimore/Washington, Boston, Dallas/Fort Worth, Fort Lauderdale, and Milwaukee. The agreement includes improved wages, benefits and working conditions and became effective October 1, 2009, which was the amendable date of the previous four-year agreement. AirTran Airways and Local 528 have now negotiated four successful collective bargaining agreements on or before the amendable date of the previous agreement — an accomplishment rarely achieved in airline collective bargaining agreements.

AAI last month reported traffic for the month of September. The airline reported that revenue passenger miles, (RPMs), load factor and enplaned passengers represent a new all-time record for the month of September. For September, traffic grew by 11.0% to more than 1.3 billion RPMs. The Company’s load factor for the month was 77%. The airline enplaned more than 1.79 million passengers for the month, a 7.1% increase from September 2008.

AAI and the Atlanta Falcons last month launched a one-of-a-kind, custom-painted Boeing 717 in Falcons colors. The plane, dubbed Falcons 1, will operate across the Company’s network of more than 60 destinations. The partnership, announced in September, includes joint promotions, prominent signage at the Georgia Dome and billboards and other advertising featuring Falcon players in full uniform in addition to Falcons 1. To commemorate the unveiling of Falcons 1 and to mark breast cancer awareness month, members of the Atlanta Falcons cheerleaders and drumline pulled the 100,000 pound aircraft for the charity, Breast Friends Inc. AirTran Airways responded with a $10,000 donation to the charity.

AAI in late September announced today that is has become the official airline of the Orlando Magic. The Orlando-based airline is also a “Champions of the Community” partner for the new Amway Center. The multi-year partnership begins this season and includes: unparalleled team and facility access, brand recognition visibility, and category exclusivity. Additionally, AirTran Airways will also support Orlando Magic community programming, which focuses on literacy, health and wellness, and the arts, with a special emphasis on the Parramore neighborhood surrounding the new Amway Center.

Source: Scottrade.com, Reuters.com, http://www.airtran.com/

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

AAI is below its 50 day moving average. This bearish sign is even more significant because the moving average is also trending lower.

Bollinger Bands

AAI’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, AAI is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.

MACD

The MACD for AAI currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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