I Say We Burn The Whole Industry Down

[Morning Wood]

Hey Wood-

You wanna talk short-sighted? I'm more concerned with being compensated in shuch a way that "little Johnny" can go to college. I'll work the damn t-ball out on my own.

PIPE

Fine. Then do it through your collective bargaining process, not by conducting illegal job actions.

 

[pipe]

Fine. Then do it through your collective bargaining process, not by conducting illegal job actions.

In case you hadn't noticed, legal job actions have been eliminated from the repertoire by the NMB.

PIPE

 

[Lear70]

This has reached pointlessness. I am, however, going to point out a few things to you for your continuing education in airline economics so you can debate better in the future:

Okay, so not record losses. How about disturbing? You think Delta’s $6.39 billion loss or NW’s $4.1 billion loss is as simple to turn around by raising ticket prices?

Remember those numbers.

American’s fuel costs increased 45% from the past quarter compared to the same quarter a year ago. Do you think a 45% increase in airfares is going to happen across the board?

THIS is why I know you don't understand the first thing about airline operations, revenue, and CASM.

An increase of 45% in fuel costs does not require a 45% increase in airfares. Why? Because fuel costs are not 100% of the total CASM. If it WAS, then Yes, yields would have to come up equal with the cost of increase in fuel, but fuel cost is only a part of CASM. A large part? Yes, but certainly not requiring a 1 for 1 increase in fares.

Now, let me give you some REAL WORLD numbers for you to go mull over your next trip, straight out of this quarter's 10k's (bear in mind your numbers above).

Delta's "loss" of 6.261 Billion included a ONE-TIME "good-will impairment charge due to market capitalization loss" of 6.1 Billion. In other words, they absorbed the hit their stock was going to take in their balance sheet. That leaves AN ACTUAL OPERATING LOSS of $161 Million. Certainly not good, but nowhere near as bad as it sounds on the surface.

Northwest's "loss" of $4.1 Billion DOES THE SAME THING. $3.9 Billion of that is a one-time stock writeoff, NOT an operating loss. Their ACTUAL operating loss was $191 Million. Again, not good, but numbers you can work with.

BOTH of those numbers above CAN be offset by improved revenue. Let's use airTran, because they've posted usable traffic numbers in their 10k's (again, this is straight out of the quarterly reports):

In the 1st quarter of 2008, airTran flew 5.72 MILLION passengers. If you were to charge an extra $10 per passenger, $5 each way, for "fuel surcharges", you would generate an extra $57 MILLION DOLLARS in revenue... just at airTran.

$10 bucks. That's it. Now... imagine how many more passengers NWA or Delta flies than airTran. Now imagine how much money that is and whether it offsets the ACTUAL OPERATING LOSSES of just shy of $200 Million.

Now imagine making the same fuel surcharge increases stick across the board... passengers can't just go to the next cheaper airline on priceline because EVERYONE'S prices have gone up. And only by $10 bucks, so people will STILL be flying.

Interestingly enough, (edit) Anderson came out and said as much today, so I don't think I'm off-base here.

There's a lot more to this industry than it looks. If you're going to be in the industry, you need to understand the industry.


Thus ends the lesson for today. I disagree with your assertions on an SOS but, like I said before, it's a moot point.