flyguppy
Well-known member
- Joined
- Sep 25, 2003
- Posts
- 130
Pretty much confirms my suspicion that just about every airline's business plan has UAL or UAIR liquidating. Now that it looks like they won't, managments have no idea what the hell to do.
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Airlines' world of hurt
Top CEOs sound alarm
Dawn Gilbertson
The Arizona Republic
Apr. 29, 2005 12:00 AM
You know the airline industry is in a heap of hurt when the CEOs of its two star performers offer a gloomy outlook.
Despite profits and prospects that are the envy of the industry, Southwest Airlines' Gary Kelly and David Neeleman of JetBlue Airways sounded the same alarms as other CEOs at an aviation conference in Phoenix on Thursday.
"I think it's as bad as it's ever been," Kelly said. advertisement
Neeleman, who joked that he felt like hanging himself after hearing his colleagues' dire predictions, said, "The situation where it stands today is not sustainable over the long term."
The industry's major woes are no secret: stratospheric oil prices and cheap airfares due to too many flights. Projections call for the industry to lose $5 billion this year, or $1 million an hour.
"Either the price of oil has to come down or fares have to go up," Neeleman said, echoing a refrain heard over and over from the executives and other industry officials at the 14th Aviation Symposium sponsored by Phoenix Sky Harbor International Airport.
Few expect much relief on the oil front. Indeed, Kelly said airlines just might have to adjust their businesses to an oil price of $50 a barrel or higher.
"No one is prepared" for that scenario at this point, including Southwest, he said. Airlines are going to have to drill down their costs even more and look for ways to boost revenue.
The executives acknowledge that it's hard for passengers to understand how the industry is losing its shirt when practically every flight is packed. Indeed, travel demand is the strongest it has been since before the devastating Sept. 11, 2001, terrorist attacks, especially among vacationers.
But "you can't be fooled (by full flights)," Frontier Airlines CEO Jeff Potter said.
Here's why: Airlines are filling the planes in part by offering a slew of cheap seats. Potter jokes that it's easy to "get people off couches" with low fares.
The problem is especially bad on the East Coast where low-cost carriers like Southwest, JetBlue and AirTran Airways are growing rapidly alongside entrenched carriers defending their turf. That means a lot of discount fares even at the last minute.
"The notion that the industry has unlimited ability to increase pricing is just flat wrong," Kelly said. He said the strong demand is "diluted among too many seats and too many carriers."
The fare picture is not as bad in Phoenix and on the West Coast, where competition is not as stiff and some airlines have cut back flights. America West Airlines posted some of the best revenue gains in the industry last quarter as a result. It is much less exposed in the East Coast than Southwest, which has been feverishly expanding in cities like Philadelphia and is adding Pittsburgh to its route map next week.
As they have since Sept. 11, industry officials are anxiously waiting for the other shoe to drop. All would like to see the number of flights cut back to better match demand, but none think they're the one who should do it.
The fingerpointing is heaviest at airlines in Chapter 11 or on the brink, such as US Airways, United and Delta. The wish of the stronger airlines is clearly that failing carriers would just go out of business.
"Somebody needs to liquidate and sell off assets," Kelly said.
That's easier said than done in the airline business, given bankruptcy laws, government and supplier support and, to everyone's amazement, deep-pocketed investors willing to plow money into the volatile industry.
"It's awfully tough to kill an airline," said Douglas Runte, managing director of Morgan Stanley.
That's why talk generally turns to consolidation in the industry. Many executives say merger deals are inevitable, with the talks under way between America West Airlines and US Airways underscoring the point.
That doesn't mean it or other mergers will work. Kelly called mergers a disaster, and he and others provided a laundry list of reasons why they're tough to pull off: labor integration, different cultures and, especially in this environment, lack of money.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Airlines' world of hurt
Top CEOs sound alarm
Dawn Gilbertson
The Arizona Republic
Apr. 29, 2005 12:00 AM
You know the airline industry is in a heap of hurt when the CEOs of its two star performers offer a gloomy outlook.
Despite profits and prospects that are the envy of the industry, Southwest Airlines' Gary Kelly and David Neeleman of JetBlue Airways sounded the same alarms as other CEOs at an aviation conference in Phoenix on Thursday.
"I think it's as bad as it's ever been," Kelly said. advertisement
Neeleman, who joked that he felt like hanging himself after hearing his colleagues' dire predictions, said, "The situation where it stands today is not sustainable over the long term."
The industry's major woes are no secret: stratospheric oil prices and cheap airfares due to too many flights. Projections call for the industry to lose $5 billion this year, or $1 million an hour.
"Either the price of oil has to come down or fares have to go up," Neeleman said, echoing a refrain heard over and over from the executives and other industry officials at the 14th Aviation Symposium sponsored by Phoenix Sky Harbor International Airport.
Few expect much relief on the oil front. Indeed, Kelly said airlines just might have to adjust their businesses to an oil price of $50 a barrel or higher.
"No one is prepared" for that scenario at this point, including Southwest, he said. Airlines are going to have to drill down their costs even more and look for ways to boost revenue.
The executives acknowledge that it's hard for passengers to understand how the industry is losing its shirt when practically every flight is packed. Indeed, travel demand is the strongest it has been since before the devastating Sept. 11, 2001, terrorist attacks, especially among vacationers.
But "you can't be fooled (by full flights)," Frontier Airlines CEO Jeff Potter said.
Here's why: Airlines are filling the planes in part by offering a slew of cheap seats. Potter jokes that it's easy to "get people off couches" with low fares.
The problem is especially bad on the East Coast where low-cost carriers like Southwest, JetBlue and AirTran Airways are growing rapidly alongside entrenched carriers defending their turf. That means a lot of discount fares even at the last minute.
"The notion that the industry has unlimited ability to increase pricing is just flat wrong," Kelly said. He said the strong demand is "diluted among too many seats and too many carriers."
The fare picture is not as bad in Phoenix and on the West Coast, where competition is not as stiff and some airlines have cut back flights. America West Airlines posted some of the best revenue gains in the industry last quarter as a result. It is much less exposed in the East Coast than Southwest, which has been feverishly expanding in cities like Philadelphia and is adding Pittsburgh to its route map next week.
As they have since Sept. 11, industry officials are anxiously waiting for the other shoe to drop. All would like to see the number of flights cut back to better match demand, but none think they're the one who should do it.
The fingerpointing is heaviest at airlines in Chapter 11 or on the brink, such as US Airways, United and Delta. The wish of the stronger airlines is clearly that failing carriers would just go out of business.
"Somebody needs to liquidate and sell off assets," Kelly said.
That's easier said than done in the airline business, given bankruptcy laws, government and supplier support and, to everyone's amazement, deep-pocketed investors willing to plow money into the volatile industry.
"It's awfully tough to kill an airline," said Douglas Runte, managing director of Morgan Stanley.
That's why talk generally turns to consolidation in the industry. Many executives say merger deals are inevitable, with the talks under way between America West Airlines and US Airways underscoring the point.
That doesn't mean it or other mergers will work. Kelly called mergers a disaster, and he and others provided a laundry list of reasons why they're tough to pull off: labor integration, different cultures and, especially in this environment, lack of money.
